1. Mozambique: Political Economy Mozambique: Political Economy Nick Dubaz Naval Postgraduate School Monterey, California

2. Agenda 1.Overview 2.Data Macro Trade 3.Analysis Poverty Agriculture FDI/China 4.Prescriptions 5.Assessment 6.Questions

3. Mozambique Overview Population: 27.1 million (13 th ) ↑ 2.44% (T d = 26) GDP: $15.63 billion (USD) (112/189) GDP (PPP) per Capita: $1,105 (179/185) History Portuguese colony (1498-1975) Civil war from 1981 to 1992 1 million dead; 1/3 fled homes Transition from Communist system 1987 - move towards markets One of world’s fastest growing economies (4 th )

4. Comparative Data GDP Growth: GDP per Capita (PPP): GDP:

5. Macroeconomic Stability

6. Imports and Exports "Mozambique treemap" by R Haussmann, Cesar Hidalgo, et. al. - Electronic Complexity Observatory, MIT Media Lab and the Center for International Development at Harvard University. http://atlas.media.mit.edu. Licensed under CC BY-SA 3.0 via Wikimedia Commons - https://commons.wikimedia.org/wiki/File:Mozambique_treemap.png#/media/File:Mozambique_treemap.png

7. Poverty Poverty Statistics: 70% live on less than $2 a day Declined 22% from 1997 – 2003 Decline has slowed since Human Development: Mozambique’s 2013 HDI is 0.393 184/187 countries below the average of 0.493 for low human development group below the average of 0.502 for countries in Sub-Saharan Africa Inequality: Does well regionally, but getting worse The poorest 60% receive 30% of the country’s income Richest 10% had over 36% Inequality concentrated in cities

8. Agriculture & Anti-Poverty State of Agriculture: Strong potential 36 million hectares of arable land network of 60 rivers wide diversity of soil types Not contributing to rural development and poverty reduction 90% of cultivated land is subsistence level outdated techniques, low yields ProSAVANA: Brazilian-Japanese plan to introduce large- scale farming of soybeans in Nacala corridor Value chains & diversification 35 million hectares (size of North Carolina) Heavily criticized as a land grab Reality - Couldn’t meet investor expectations Domestic politics; poor public relations

9. FDI Investment Incentives New law in 2011 Incentives offered Megaprojects: Accounted for most FDI 4% of GDP growth Dams, Mining & Gas Crowding smaller investments

10. China Bilateral Trade: Doubled from 2013 to 2014 $1.64 billion to $2.94 billion Just $70 million in 2004 Fueled by coal and NG Infrastructure Development: 26 infrastructure projects and 17 loans underway 1/3 of all roads constructed by China 50 new stadiums FDI: 60 new Chinese companies established presence in 2014

11. Economic Challenges/Opportunities Coal and other extractive industries: Large investments coming online Global slowdown in coal; low oil costs Biofuel potential External Debt Levels: Increasing due to NG investment Vulnerable to global demand Business Environment: Poor overall; reforms underway High corruption; improving Poor property rights protection No private land ownership

12. Prescriptions Diversification: Risks from coal and natural gas Agriculture investment Different model from ProSAVANA Regulatory Reform: Incentives for small/medium business Corruption Land and property rights Macroeconomic Stability: Transition to resource economy Balance of payments Inclusive Growth: Current trends risk future conflict

13. Political Economy Assessment Aid State: Declining aid contribution to budget 2014: 33.5%; 2010: 51.4% Rentier Society: Oil and gas boom; unequal distribution “Megaprojects” not reducing poverty HIV/AIDS/Malaria: Public health spending lagging growth HIV and malaria increasing despite programs to combat – 8 th globally Food Security: Food security investment is severely lacking – disasters common Paradox of chronic child malnutrition despite growth – 43% stunted

14. 14 Questions?