Issues covered by the WTO’s committees and agreements

TRADE POLICY REVIEWS: FIRST PRESS RELEASE, SECRETARIAT AND GOVERNMENT SUMMARIES

PRESS RELEASE
PRESS/TPRB/154
26 January 2001

Mozambique: January 2001

Trade liberalization and economic reform have shown significant signs of success in Mozambique since the late 1980s and accelerated after the end of the civil war in 1992, according to a new WTO report on the trade policies of Mozambique. The country's GDP growth has been among the highest in the world since 1996; the economy has grown at over 10% a year over the past few years and fast growth is forecast through 2002, says the report.

However, the report also notes that the country needs continued reform to improve its international competitiveness.

Back to top

Trade liberalization and economic reform have shown significant signs of success in Mozambique  

The new WTO Secretariat report, along with the policy statement by the Mozambique government will serve as a basis for the trade policy review of Mozambique by the Trade Policy Review Body of the WTO on 24 and 26 January 2001.

The report notes that Mozambique's programme of economic reform, launched in the late 1980s, has focused on macroeconomic stabilization supported by international financial institutions.

In spite of high economic growth of over 10% a year over the past few years, Mozambique is still one of the world's least developed countries, with a per capita GNP of US$210 in 1998, says the report. The country is one of the most heavily indebted in the world and its large debt burden has been an obstacle to economic development as costs associated with debt servicing prevent the allocation of resources that could improve economic capacity and competitiveness, and increase investment.

Mozambique's economy is essentially dependent on agriculture (more than two fifths of GDP and the bulk of merchandise exports), the manufacturing sector is small, accounting (together with the mining sector) for some 19% of GDP, and the mining sector has potential but remains underdeveloped, the report stresses.

Mozambique's main trading partners are South Africa, the European Union, Japan, and Zimbabwe. Mozambique's exports are primarily agricultural commodities, especially food products. On the other hand, transportation equipment, machinery, mineral products, and foodstuffs constitute the major imported products.

Mozambique has various statutes that govern trade and trade-related issues. The Government's economic reforms seek to create an attractive commercial environment, and to provide incentives for inward investment. With few exceptions (e.g. public utilities), 100% foreign ownership is permitted in economic activities.

The report says that as a least developed country, Mozambique benefits from the special and differential treatment afforded to developing countries in the form of exemptions or delayed implementation of certain provisions. Mozambique has already received technical assistance from international organizations that are part of the Integrated Framework, including the WTO. Mozambique is still in need of substantial technical assistance in a wide range of trade-related areas.

Mozambique has been making a determined effort to create an environment that is conducive to private investment, both domestic and foreign. The reforms have significantly liberalized Mozambique's trade regime that is essentially based on tariffs. Mozambique has recently simplified the structure of its customs duties; the tariff rates currently range from 0 to 30%. The tariff structure is modestly escalatory. The simple average applied MFN tariff is 13.8%, among the lowest import duties in southern Africa.

In 1999, Mozambique introduced a 17% value-added tax (VAT). The Government expects the VAT to improve public revenue; this will facilitate a future reduction of the maximum tariff to 20%. Excise are levied on automobiles, luxury goods, alcoholic beverages, and tobacco products. Like other WTO Members, Mozambique has bound customs duties on all agricultural products; the tariffs are bound at a ceiling rate of 100%. In addition, rates on 17 HS eight-digit tariff lines for non-agricultural products have been bound at either 5% or 15%.

Most export restrictions have been eliminated, as have foreign exchange controls. The Government has shown a strong interest in expanding exports, particularly of agricultural and fisheries products, but limited export capacity has hindered significant export-led growth.

The WTO report explains that the services sector, like the rest of the economy, has undergone significant liberalization. All banks and insurance companies, previously state-owned, have been privatized, and foreign participation is commonplace. Privatization efforts are envisioned in the telecommunications and transportation subsectors. Tourism has lagged its potential and compares unfavourably with that of neighbouring countries. Mozambique's commitments under the GATS are limited to financial services (excluding insurance).

The report concludes that trade liberalization is integral to the economic reform being implemented by Mozambique, which to date has shown significant signs of success. Nevertheless, Mozambique's commitments in the WTO fall short of its trade reforms. Indeed, ceiling bindings on agricultural products leave considerable margins for modifications of applied tariffs.

The WTO report says that continued reform in the services sector, mainly in areas such as telecommunications and transportation services, will help to improve the international competitiveness of Mozambican products by reducing costs. Such reforms will also contribute to the development of other branches, including tourism. Continued implementation of the privatization programme, mainly in the services sector, together with the improvement of Mozambique's commitments under the GATS, will help to bolster confidence and contribute to attracting the foreign investment needed.

Notes to Editors

Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member countries’ trade and related policies are examined and evaluated at regular intervals. Significant developments which may have an impact on the global trading system are also monitored. For each review, two documents are prepared: a policy statement by the government of the member under review, and a detailed report written independently by the WTO Secretariat. These two documents are then discussed by the WTO’s full membership in the Trade Policy Review Body (TPRB). These documents and the proceedings of the TPRB’s meetings are published shortly afterwards. Since 1995, when the WTO came into force, services and trade-related aspects of intellectual property rights have also been covered.

For this review, the WTO’s Secretariat report, together with policy statements prepared by the Government of Mozambique will be discussed by the Trade Policy Review Body on 24 and 26 of January 2001. The Secretariat report covers the development of all aspects of Mozambique's trade policies, including domestic laws and regulations, the institutional framework, trade policies by measure and by sector.

Attached to this press release is a summary of the observations in the Secretariat report and parts of the governments policy statements. The Secretariat report and the governments' policy statements are available for the press in the newsroom of the WTO internet site (www.wto.org). These three documents and the minutes of the TPRB’s discussion and the Chairman’s summing up, will be published in hardback in due course and will be available from the Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.

Since December 1989, the following reports have been completed: Argentina (1992 and 1999), Australia (1989, 1994 and 1998), Austria (1992), Bahrain (2000) Bangladesh (1992 and 2000), Benin (1997), Bolivia (1993 and 1999), Botswana (1998), Brazil (1992, 1996 and 2000), Burkina Faso (1998), Cameroon (1995), Canada (1990, 1992, 1994, 1996, 1998 and 2000), Chile (1991 and 1997), Colombia (1990 and 1996), Costa Rica (1995), Côte d’Ivoire (1995), Cyprus (1997), the Czech Republic (1996), the Dominican Republic (1996), Egypt (1992 and 1999), El Salvador (1996), the European Communities (1991, 1993, 1995, 1997 and 2000), Fiji (1997), Finland (1992), Ghana (1992), Guinea (1999), Hong Kong (1990, 1994 and 1998), Hungary (1991 and 1998), Iceland (1994 and 2000), India (1993 and 1998), Indonesia (1991, 1994 and 1998), Israel (1994 and 1999), Jamaica (1998), Japan (1990, 1992, 1995,1998 and 2000), Kenya (1993 and 2000), Korea, Rep. of (1992, 1996 and 2000), Lesotho (1998), Macau (1994), Malaysia (1993 and 1997), Mali (1998), Mauritius (1995), Mexico (1993 and 1997), Morocco (1989 and 1996), New Zealand (1990 and 1996), Namibia (1998), Nicaragua (1999), Nigeria (1991 and 1998), Norway (1991, 1996 and 2000), Pakistan (1995), Papua New Guinea (1999), Paraguay (1997), Peru (1994 and 2000), the Philippines (1993), Poland (1993), Romania (1992 and 1999), Senegal (1994), Singapore (1992, 1996 and 2000), Slovak Republic (1995), the Solomon Islands (1998), South Africa (1993 and 1998), Sri Lanka(1995), Swaziland (1998), Sweden (1990 and 1994), Switzerland (1991, 1996 and 2000 (jointly with Liechtenstein), Tanzania (2000), Thailand (1991, 1995 and 1999), Togo (1999), Trinidad and Tobago (1998), Tunisia (1994), Turkey (1994 and 1998), the United States (1989, 1992, 1994, 1996 and 1999), Uganda (1995), Uruguay (1992 and 1998), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).

 

The Secretariat’s report:  Back to top

summary 

TRADE POLICY REVIEW BODY: MOZAMBIQUE
Report by the Secretariat — Summary Observations

The Economic Environment

Mozambique is situated on the south-east coast of Africa. Following its independence in 1975, Mozambique implemented a socialist model of economic development that resulted in centralizing government control of the economy, including banking and agriculture. The failure of this strategy became apparent as the economy stagnated and suffered significant setbacks. In the late 1980s, Mozambique embarked on a programme of economic reform, but progress was slow until after the end of the civil war in 1992. Since the mid 1990s, the pace of reform has accelerated, and Mozambique has focused on macroeconomic stabilization and fiscal reform supported by international financial institutions.

Mozambique's GDP growth has been among the highest in the world since 1996; the economy has grown at over 10% a year over the past few years and fast growth is forecast through 2002. However, Mozambique is still one of the world's least developed countries, with a per capita GNP of US$210 in 1998. Mozambique is one of the most heavily indebted nations in the world. Its large debt burden has been an obstacle to economic development as costs associated with debt servicing prevent the allocation of resources that could lead to improved economic capacity, competitiveness and increased investment. Mozambique has qualified for debt relief under the IMF and World Bank Heavily Indebted Poor Countries (HIPC) Initiative.

The Mozambique economy is essentially dependent on agriculture (more than two fifths of GDP and the bulk of merchandise exports). Traditional export crops include seafood, sugar cane, cashew nuts, tobacco, and cotton. The manufacturing sector is small, accounting (together with the mining sector) for some 19% of GDP; the major manufacturing branches include food processing, tobacco, beverages, textiles, and footwear. The mining sector has potential but remains underdeveloped. Mozambique is a net importer of services. The services sector is dominated by construction, tourism, transport, and communications.

Mozambique's main trading partners are South Africa, the European Union, Japan, and Zimbabwe. Mozambique's exports are primarily agricultural commodities, especially food products, such as non-frozen crustaceans, and fresh and dried nuts. Transportation equipment, machinery, mineral products, and foodstuffs constitute the major imported products. Due to climatic conditions, domestic agricultural production has decreased during the past few years, causing sharp increases of food imports.

Institutional Framework

The Constitution of the Republic of Mozambique was adopted in 1990. A multi-party system was introduced in 1994. The Constitution calls for a parliamentary regime with a separation of powers among the executive, legislative, and judicial bodies.

Mozambique's President and members of the Republic Assembly are elected by direct popular vote for five-year terms; they may serve only two consecutive terms. The President serves as Head of State and appoints a Prime Minister. The President selects his Cabinet on the advice of the Prime Minister. The Cabinet is responsible for planning and formulation of government policy. The Republic Assembly, a unicameral body, exercises legislative power.

Mozambique has various statutes that govern imports, customs duties, investment, petroleum and mineral-resource extractive industries, business licensing, intellectual property, exports, and other trade-related matters. The Government's economic reforms seek to create an attractive commercial environment, and to provide incentives for inward investment. With few exceptions (e.g. public utilities), 100% foreign ownership is permitted in economic activities.

Mozambique became a member of the WTO on 26 August 1996, having signed the Final Act of the Uruguay Round and the Marrakesh Agreement on 15 April 1994. Mozambique grants at least MFN treatment to all its trading partners. As with other WTO Members, Mozambique has adopted the results of the Uruguay Round in their entirety. As a least developed country, Mozambique benefits from the special and differential treatment afforded developing countries in the form of exemptions or delayed implementation of certain provisions. Mozambique is not currently involved in any dispute settlement proceeding under the WTO.

Mozambique has participated in the Integrated Framework for Trade-Related Technical Assistance to Least Developed Countries (IF) by preparing an assessment of its needs for trade-related assistance. In this context, Mozambique has already received technical assistance from international organizations that are part of the IF, including the WTO. Mozambique is still in need of substantial technical assistance in a wide range of trade-related areas.

Mozambique is a member of the Southern African Development Community (SADC), and the Cross-Border Initiative (CBI). Under the Cotonou Agreement (successor to the Lomé Convention), Mozambique receives aid made available to ACP countries by the European Union, and non-reciprocal preferential treatment in the form of exemption from import duties for certain exports. Likewise, Mozambique's exports enjoy non-reciprocal preferential access to the markets of other developed countries through the Generalized System of Preferences. Due to its limited export capacity, Mozambique has not benefited significantly from these preferential arrangements.

Trade Policy Instruments

Mozambique has undertaken important reforms since 1987 — and at a more accelerated pace in the past few years. The reforms have resulted in a significantly liberalized trade regime that is essentially based on tariffs. Most export restrictions have been eliminated, as have foreign exchange controls. Mozambique has been making a determined effort to create an environment that is conducive to private investment, both domestic and foreign. The Government has shown a strong interest in expanding exports, particularly of agricultural and fisheries products, but limited export capacity has hindered significant export-led growth.

Mozambique has recently simplified the structure of its customs duties; the tariff rates currently range from 0 to 30%. The tariff structure is modestly escalatory. The simple average applied MFN tariff is 13.8%, among the lowest import duties in southern Africa. In 1999, Mozambique introduced a 17% value-added tax (VAT). The Government expects the VAT to improve public revenue; this will facilitate a future reduction of the maximum tariff to 20%. Excise taxes are levied on automobiles, luxury goods, alcoholic beverages, and tobacco products. Like other WTO Members, Mozambique has bound customs duties on all agricultural products; the tariffs are bound at a ceiling rate of 100%. In addition, rates on 17 HS eight-digit tariff lines for non-agricultural products have been bound, at ceiling rates of either 5% or 15%.

In January 1997, the authorities entered into a contract with Crown Agents for the management of Mozambique's customs. The Government also has an agreement with Intertek Testing Services to perform preshipment inspections and, for goods not subject to preshipment inspection, post-shipment inspections. Mozambique still uses the Brussels Definition of Value. Mozambique did not notify the WTO of deferred application of the WTO Agreement on the Implementation of Article VII of GATT 1994. It has no national legislation regarding anti-dumping, countervailing, or safeguard measures.

The National Institute of Normalization and Quality (INNOQ) is charged with the administration of standards. INNOQ is also developing new standards on the basis of foreign or international ones: 17 are in the final stages of development and 25 are in process. Mozambique maintains certain controls for sanitary and phytosanitary purposes. The related regulations are the responsibility of the Ministry of Agriculture and Natural Resources.

Mozambique is neither a signatory nor an observer to the WTO Plurilateral Agreement on Government Procurement. The Ministry of Planning and Finance supervises all government procurement activities in Mozambique, and its guidelines govern all public procurement, except large projects involving international funding. In such cases, the procurement regulations of the donor organization are followed. Preferential margins of 10% are granted for “national products” (locally processed goods). Only companies registered in Mozambique are allowed to tender for public procurement under US$750,000.

The Government of Mozambique implemented a privatization programme over the period 1989-99. The vast majority of state-owned companies have been privatized. However, the Government has maintained control over companies considered “particularly important”, primarily public utilities, including telecommunications, ports and railroads, where government policy has not yet been formulated, (but is expected to be announced soon) and certain mining companies.

Responsibility for intellectual property matters is divided between two departments, one responsible for patents and other "industrial" matters, and the other for copyrights. The country's first law on industrial property protection came into force only in 1999. No law yet exists on copyright matters. Enforcement of the current intellectual property laws is minimal.

Sectoral Trade Policy Developments

The agriculture sector has been substantially liberalized since 1997. Except for the sugar and cashew nut subsectors, the Government has withdrawn from direct involvement in production, processing, and marketing activities, and has retained only its role in setting policies. Various factors have led to an increase in the price of fertilizers and thus to a decline in their use. As a result, the Government has identified domestic production of fertilizers as an activity in urgent need of foreign investment. A variable surcharge is levied on imports of sugar and an export tax is collected on raw cashew nuts. The average applied MFN tariff for the agriculture sector (including hunting, forestry and fishing) is 16.8%.

The mining sector is not well developed, but is expected to expand rapidly in the next few years. Important possibilities include titanium, coal, and natural gas. The natural gas is likely to be partially utilized to expand production of electrical energy, already an important export commodity. A new law is to be promulgated in 2001, to further promote private investment in the sector. In Mozambique, natural resources, including minerals, are the property of the State. Mining activities are subject to five types of licence. In addition, a licence is also required for trade in gemstones, gold and other precious metals. Because production is largely exported, the eligibility of mining companies for the export processing zone regime further improves the incentive schemes already available for investments in the sector.

The Government has reduced tariffs on industrial inputs, and privatized virtually all state-owned manufacturing companies. An industrial strategy policy was formulated in 1997 to, inter alia, promote local processing of natural resources and the development of export —oriented labour — intensive manufacturing activities. The export processing zone regime and the newly developing Maputo-Johannesburg corridor are to contribute to the achievement of these goals. Applied MFN tariffs average 13.8% in the manufacturing sector.

The services sector, like the rest of the economy, has undergone significant liberalization, but has only recently received serious attention. All banks and insurance companies, previously state-owned, have been privatized, and foreign participation is commonplace. Privatization efforts are envisioned in the telecommunications and transportation subsectors. Tourism has lagged its potential and compares unfavourably with that of neighbouring countries. Mozambique's commitments under the GATS are limited to financial services (excluding insurance).

Trade Policies and Trading Partners

Trade liberalization is integral to the economic reform being implemented by Mozambique, which to date has shown significant signs of success. Nevertheless, Mozambique's commitments in the WTO fall short of its trade reforms. Indeed, ceiling bindings on agricultural products leave considerable margins for modifications of applied tariffs.

Continued reform in the services sector, mainly in areas such as telecommunications and transportation services, will help to improve the international competitiveness of Mozambican products by reducing costs. Such reforms will also contribute to the development of other branches, including tourism. Continued implementation of the privatization programme, mainly in the services sector, together with the improvement of Mozambique's commitments under the GATS, will help to bolster confidence and contribute to attracting the foreign investment needed.

Mozambique would like the WTO rules to be more widely known domestically; it needs technical assistance to come into full compliance with its WTO obligations.

 

Back to top

Government report  

TRADE POLICY REVIEW BODY: MOZAMBIQUE
Report by the Government — Part III and IV

Trade policy

1. Mozambique has immense agricultural potential, with an estimated 36 million hectares of arable land, with only 9 million currently in productive use. It is the backbone of the Mozambican economy, providing employment for 80% of the workforce, and contributing 25% to the GDP. The main exports are copra, cashew nuts, sugar cane, cotton fibre and tea. Other products include sisal, tobacco, mafurra and sunflower. In addition to the vast areas of arable land there are large tracts suitable for livestock. Following the war, livestock farming is very underdeveloped, with much of the present requirements having to be imported.

2. On particular needs are investments in poultry and pig production, and in the supply of feedstock to these industries.

3. Rehabilitation of the existing agriculture-related investments including roads, rail, ports and irrigation systems is a priority for the Government. This should facilitate new investments, and provide viable opportunities. Key areas of development of commercial farming include Chokwe, Massingir and Corumana which all have an existing network of irrigation.

B. MANUFACTURING

4. A vigorous privatization programme, combined with strong foreign investment is having its impact on the manufacturing sector. Long neglected, there is a tremendous need for the upgrading of old plants, and investment in new sectors. The strong growth in the domestic economy, and not inconsiderable market of 18 million is currently under-served, and consumer goods industries should blossom.

5. The low cost electricity, combined with highly competitive wage ranges should act as a major catalyst for industrialization. To support this process generous investment incentives exist and the Government has introduced legislation allowing the establishment of free zones for exports oriented investments. Mozambique's preferential access to major markets in the U.S. and EU should act as a powerful magnate for many labour intensive industries. Manufacturing currently accounts for some 10% of the total, but with the Mozal Aluminium Smelter Project, the contribution of the manufacturing sector will rise significantly and should lay the platform for a massive downstream industry completely altering the structure of the Mozambican economy.

6. Priority sectors identified for development include:

(i) food processing and agro-industries (high priority — salt, sugar, copra, processed fish, processed fruits and cashew nuts; lower priority — milling, sisal, tea, bakery products, pasta processed meat, tobacco, animal feed, dairy products and liqueurs);

(ii) textile and clothing industries (which do not face any quota restrictions);

(iii) soaps and oils;

(iv) chemical industry;

(v) metallurgy (downstream of Mozal, and other products);

(vi) metal working industry (construction materials, heavy equipment, furniture, structures, tools and parts);

(vii) packaging industry (wooden boxes, glass bottles, corrugated board, flexible packaging).

C. TRADE POLICY IMPLEMENTATION

7. Mainly the Ministry of Industry and Trade carries out trade policy implementation in Mozambique under approval by the Mozambican Government. However, there are also a number of government departments or agencies, which play a role in the implementation of trade laws in Mozambique. The Government, in its revitalization programme, is committed to a policy of broad-based liberalization as well as price liberalization to encourage investment.

D. MULTILATERAL, REGIONAL OR PREFERENTIAL TRADING AGREEMENTS

8. Mozambique's external trade policies are designed to create an environment conducive to promoting its products in international markets, especially those of the developed countries of Europe, America, and Asia without prejudice to the promotion of intra-African trade. Trade policies are formulated with view to speeding up Mozambique's industrialization process, and in such a way to make access to foreign markets easier for Mozambican products. In pursuing these objectives, Mozambique has entered into multilateral, regional bilateral and preferential trade agreements as mentioned below. Mozambique is a signatory of the WTO — World Trade Organization, World Bank, IMF— International Monetary Fund, Lomé Convention, SADC- Southern Africa Development Community, IOR- ARC Indian Ocean Rims Association For Regional Cooperation, AGOA- African Growth and Opportunity Act, GSP- Generalized Systems of Preferences and Trade Preferential Agreement with South Africa.

E. BILATERAL TRADE AGREEMENTS

9. Mozambique is currently in a process of negotiations for bilateral trade agreements with the following countries: Algeria, Cuba, Egypt, India, Kenya, Malawi, Mauritius, Russia, Zambia and Zimbabwe.

10. Under these agreements, Mozambique and its contracting partners accord each other the MFN- Most Favoured Nation treatment in all matters with respect to their mutual trade relations. These agreements have been used as instruments for promoting trade and improving economic relations between Mozambique and these countries.

External trade relations

F. EXPORTS

11. Mozambique's export earnings, continue to be generated mainly from exports of primary agricultural products and seafood, including cashew nuts, prawns, cotton, sugar, timber, citrus and others. The major trading partners are South Africa, Portugal, Spain, the United States of America, and Japan.

G. IMPORTS

12. The main imports are intermediate goods and capital goods. Energy imports, which include mainly electricity and petrol products, have ranged US$85-90 million a year in the period 1996-1999, and are expected to increase in 2000 as a result of the oil price increase.

13. In 1999, there was a general increase in the values of most categories, although imports of non-food industrial supplies were reduced in the previous years (1998 and 1999). This was mainly due to:

(i) the liberalization of trade, through the removal of import licensing, quantitative import restrictions and foreign exchange controls; and

(ii) implementation of Mozal Smelter Project.

H. BALANCE OF TRADE

14. Mozambique's balance of trade has been relatively stable, with a deficit of about US$550 million a year, during the period of 1995 to 1998. In 1999, the balance of trade deteriorated somewhat as a result of the construction for the Mega Aluminium Smelter Project, Mozal.

15. It should, however, be noted that even though liberalization has increased the volume of imports, exports have also grown but at a lower rate than imports.