Despite an annual GDP growth rate of 7.5 percent and a drop in the poverty rate from 69 percent in 1997 to 54 percent in 2008, more broad-based, rapid and sustainable economic growth is needed to help create more jobs and continue to reduce widespread poverty. Mozambique is still among the world’s poorest countries, with over half of the country living below the poverty line. Rural populations experience higher poverty rates, as well as the central and southern regions.
Although progress has been gradual, Mozambique has been implementing much-needed reforms in its regulatory and investment frameworks. Private-sector economic activity has increased, but privatization of state-owned enterprises has slowed. Foreign and domestic capital are treated similarly in most cases, and trade liberalization has progressed despite the persistence of non-tariff barriers.
Private Sector Development
High transaction costs negatively affect business and trade competitiveness. In a 2012 World Bank report, Mozambique ranked 139 out of 183 countries worldwide for ease of doing business. USAID is working to help private sector businesses become more competitive, thus generating more trade and investment opportunities. USAID programs support policy reforms to make it easier to start a new business, thus increasing the number of small- and medium-sized enterprises and increasing new foreign investment. Over the long term, investments by Mozambique’s private sector will be key to catalyzing economic growth and alleviating poverty.
USAID is focused on increasing growth in the agriculture and tourism sectors, which show strong potential to attract private investment and create jobs. USAID’s programs provide business development services and access to financial services that help small- and medium-sized enterprises become more efficient and productive. In turn, they become more competitive in local, regional and international markets, and better able to attract private investment to help their businesses grow.
Trade and Regulatory Reform
Creating a business and investment climate that is open, transparent and competitive is critical to long-term economic growth. USAID’s trade program works with the Ministry of Industry and Commerce to strengthen its ability to implement reforms conducive to a better business environment and to negotiate and implement regional and bilateral trade agreements. This helps Mozambique become a viable trading partner as it seeks permanent partnership in the Southern African Development Community Free Trade Area, which is essential to increase trade with regional partners. USAID also supports Mozambican business associations to help the private sector’s push to improve the investment environment, reduce obstacles to registering new small- and medium-sized businesses, and decrease business costs and risks. Under the Partnership for Trade Facilitation, USAID will support more transparency and faster clearance times at Mozambique’s borders.
Last updated: January 27, 2014