MOZAMBIQUE

	FY 1998 Actual	FY 1999 Estimate	FY 2000 Request
Development Assistance	$28,800,000	$29,300,000	---
Development Fund for Africa	---	---	$37,300,000
Child Survival and Disease	$10,596,000	$11,420,000	$8,400,000
Economic Support Funds	$650,000	---	---
P.L. 480 Title II	$24,231,000	$20,930,000	$18,438,000
P.L. 480 Title III	$5,000,000	$6,000,000	---

Introduction.

Given Mozambique’s importance in providing ocean access for several landlocked countries and its proximity to the Republic of South Africa, political stability and economic growth in Mozambique contribute to U.S. national interests of peace, stability, and economic growth throughout southern Africa. Mozambique is a growing market for U.S. exports, and continues to attract significant U.S. investment in agriculture, fisheries, minerals and natural gas reserves.

Mozambique is the major success story in war-to-peace transition in sub-Saharan Africa. USAID support was vital to this process, which began with a Peace Accord in October 1992, and encompassed demobilization, resettlement of almost five million displaced persons and refugees, democratic elections, and the installation of a new government that has subsequently managed a stellar economic revival. Mozambique's transition from crisis to growth is nearly complete.

The economy grew at over 12% in 1997, and between 10%-12% in 1998 with no inflation; similar growth is expected in 1999. Legal and regulatory reforms continue, making the country increasingly attractive to domestic and foreign investors. During 1999, significant simplifications in procedures for business registration and operations, including imports, are underway, and a Value-Added Tax was introduced to replace complex and outdated taxes. In addition, new regulations will simplify the process of legalizing small informal rural businesses, improving the broad-based employment and income benefits these businesses create. Business, civil society, and the media play an important role in these changes. In mid-1999, Mozambique's benefits under the Highly-Indebted Poor Countries debt forgiveness program will come into full force. Finally, Mozambique's second national elections, scheduled for late 1999, will be an important mark of the country's increasingly democratic governance.

The Development Challenge.

Despite a successful transition, Mozambique still has far to go to eradicate poverty, reduce mortality, increase incomes, and establish democratic traditions. Eighty percent of the population is rural, two-thirds of whom live in absolute poverty; dependence on rainfed subsistence agriculture leaves this population vulnerable to recurring natural disasters. The average daily caloric intake is just 77% of requirements and chronic malnutrition affects 30%-40% of children. Slash-and-burn agriculture and indiscriminate logging are leading to erosion and soil loss, sedimentation of waterways, and destruction of the marine ecosystem. The population growth rate of 2.7% per annum erodes improvements in the standard of living. Although health facilities lost during the war have been replaced and new ones constructed, much of the population still lives without access to health services. Fifty percent of child deaths in Mozambique result from common treatable diseases. HIV infection is estimated at 8%-10% and growing. The illiteracy rate is 25% higher than the sub-Saharan Africa average.

Good policies are essential for both rapid economic growth and democratization, and USAID has been influential in supporting Mozambique's reforms. The Government of the Republic of Mozambique (GRM) has achieved ambitious financial sector reforms and promoted privatization and decentralization. Mozambique's external debt was $5.6 billion at the end of 1996. However, even with an economy that averaged 8.9% growth annually during 1993-98, a stable currency and declining inflation, sustained economic growth is vulnerable to debt problems, and domestic revenue increases achieved to date are still insufficient to make many needed development investments.

Mozambique's transition to democracy is still fragile. The executive branch's sensitive relationship with an increasingly strong legislature will require patience and continued political commitment. Municipal governments created following the 1998 local elections are extremely weak. Appropriate regulations to implement recently enacted laws in the areas of land tenure, business, and environmental management are still needed, to support the pace and sustainability of economic growth.

Other Donors.

Overall development assistance to Mozambique totals about $800 million per year, excluding debt relief. The United States is the largest bilateral donor in Mozambique, providing over $68,000,000 in grants and food aid in FY 1998. Major contributors include the World Bank, the International Monetary Fund (IMF), the United Nations agencies, the European Union, the Netherlands, Sweden, Denmark, Switzerland, Italy, France, and Norway. Portugal and South Africa are major investors in Mozambique, demonstrated by the Cahora Bassa hydro-electric and the Maputo Development Corridor projects, respectively.

FY 2000 Program.

Much of the USAID program will continue to focus on Mozambique's center-north provinces, which were most affected by war, have 55% of the country's population, and have the greatest agricultural potential. Democracy, private sector, and environment programs are national in scope.

Income growth will stimulate on-farm investment and expand rural enterprises. USAID will participate through the Africa Food Security Initiative in the rehabilitation of farm-to-market roads, expansion of farmer business associations, and increased capacity of the Ministry of Agriculture to promote sound sector policies. In FY 2000, USAID will continue support for a multi-donor sector investment program to enhance the effectiveness of public sector support for private sector-led agricultural development.

In the democracy/governance area during FY 2000, USAID will continue to support capacity building of the national legislature, civil society development, development of more effective judicial processes, and activities to strengthen newly elected municipal governments.

In the health sector, USAID will focus on building the local capacity of public and nongovernmental institutions to provide sustainable access to basic services, especially those related to child survival, malaria, and polio. The program to combat HIV/AIDS will expand throughout the country.

USAID will continue to support private initiatives to protect the environment, through a program established in FY 1999 to increase the technical and institutional capacity of Mozambicans to address environmental concerns related to new investment, legislation, conservation, and business decisions.

In conjunction with the Africa Trade and Investment Program, USAID will continue to support private sector-led growth and development, building the capacity of business associations to work with government and the legislature to develop trade and investment-friendly regulations. This program advocates major tax, tariff, and trade reform. Activities to improve communications and access to information in Mozambique will continue through the Leland Initiative.

MOZAMBIQUE

FY 2000 PROGRAM SUMMARY
(in thousands of dollars)

Mission Director, Cynthia F. Rozell

USAID Strategic and Special Objectives	Economic Growth & Agriculture	Population & Health	Environment	Democracy	Human Capacity Development	Humanitarian Assistance	TOTALS
S.O. 1. Incr Rural Hsehold Inc in Target Areas - DFA - P.L. 480/II	19,000 ---	--- ---	4,000 ---	--- ---	--- ---	--- 15,672	23,000 15,672
S.O. 2. Govt, Civ Soc are Effective Partners in Dem Gov - DFA	---	---	---	2,400	---	---	2,400
S.O. 3. Incr Use of Essential Mat/ Child Health, Family Plng Services in Focus Area - DFA - CS - P.L.480/II	--- --- ---	6,100 8,400 ---	--- --- ---	--- --- ---	--- --- ---	--- --- 2,766	6,100 8,400 2,766
S.O. 4. Incr Sustain Envir Prot and Natl Res Mgmt - DFA	---	---	4,500	---	---	---	4,500
SP. O. Impr Enabling Envir for Private Sector-Led Growth and Devt - DFA	1,300	---	---	---	---	---	1,300
Totals - DFA - CS - P.L.480/II	20,300 --- ---	6,100 8,400 ---	8,500 --- ---	2,400 --- ---	--- --- ---	--- --- 18,438	37,300 8,400 18,438

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ACTIVITY DATA SHEET

PROGRAM: MOZAMBIQUE
TITLE AND NUMBER: Rural Household Income Increased in Targeted Areas, 656-SO01
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000: $23,000,000 DFA; $15,672,000 P.L. 480 Title II
INITIAL OBLIGATION: FY 1996 ESTIMATED COMPLETION DATE: 2001

Summary: Eighty percent of the population of Mozambique live in rural areas and depend upon agriculture and related rural businesses for their livelihood. In 1996, the first year of the current strategy period, annual per capita income in rural areas where USAID is concentrating activities was only $50 per capita. The depth of poverty of the vast majority of Mozambicans is of growing concern among Mozambicans in both the public and private sectors. Unless substantial efforts are made to alleviate poverty in rural areas, the majority of Mozambican citizens could remain below the poverty threshold, even though the country and economy as a whole are experiencing significant growth. The purpose of this program, therefore, is to increase incomes of rural households, primarily from the production and sale of agricultural commodities. The targeted areas in the center-north of the country are where the needs have been greatest due to the effects of civil war, and where rainfed agriculture has potential to produce surplus crops for domestic consumption and export. About 9,000,000 people, 55% of Mozambique’s population, live in the targeted areas and are direct beneficiaries of the program. Virtually the whole country benefits from improved access to more affordable food.

Key Results: USAID expects to achieve these conditions, which are necessary to increase household income of the rural poor: (1) increased access to markets by rehabilitating key roads and expanding market information; (2) expanded rural enterprises, through better access to financial and other business advisory services, and (3) increased agricultural output of marketable surpluses on a sustainable basis.

Performance and Prospects: The rural economy continued to grow in FY 1998. The pace of recovery for agricultural production and marketing, and growth of the private commercial sector, exceeded expectations. In the past three years the country has increased coarse grain production from 72% to surpass 100% of requirements. The production of other important food crops such as cassava, beans, and peanuts grew for a fourth year in a row. Production of cashews, the principal smallholder cash crop, increased from 22,000 tons in 1995 to 43,000 tons in 1997. Between 1995 and 1997, income per household from sales of agricultural produce rose by 51% in districts with USAID-financed field activities. Exports of maize rose from almost none in 1995 to 40,000 tons in 1996, to 50,000 tons in 1997. Rural-based marketing associations in targeted provinces expanded dramatically, from 65 to 255, and from 2,740 to 18,657 members. Twenty-seven associations are exclusively woman-owned and managed. Farmer associations carried out 371 economic ventures in 1997, over 50% more than planned. Gross sales of four principal products by 96 of these associations exceeded $300,000 -- almost three times the previous year's sales. For the first time, six marketing associations opened bank accounts and accessed $60,000 in commercial credit, with repayment rates averaging 98%.

In FY 1997, several activities financed with P.L. 480 Title II and DA resources were initiated to increase agricultural output for household consumption and sales. Over 210,000 farm households were directly involved in field activities in the first year. According to data in one area, agricultural production volume increased over a 1991-95 average by approximately 47 percent in 1997. Gross value of farm production has consistently increased, from $186 per household in the 1991-95 period to $279 in 1997. Over 68,000 smallholders introduced improved crop varieties in 1997, which resulted in higher yields of 12% overall and 15% in the case of maize, the principal staple. Of farmers in selected areas with many years' experience, 62% now practice some form of soil conservation to sustain fertility and productivity; 82% report controlled burning of crop fields, while nine percent reported no burning. In the same areas, 28% followed sound agroforestry practices, including improved cashew production.

The rapid recovery of the rural economy and the movement from subsistence to commercial agriculture has implications for activities over the remainder of the strategy period. USAID will place more emphasis on fostering Mozambican private sector capacity to: (1) develop more sophisticated markets and market mechanisms for agricultural products; (2) establish rural financial services and institutions; and (3) improve delivery systems for technologies to increase agricultural productivity and post-harvest processing. Accelerated activities in these areas, coupled with expected progress in policy dialogue, road rehabilitation and maintenance, group enterprise development, and the adoption of sustainable agricultural production technologies, will permit the program to meet or exceed targets established through 2001.

Possible Adjustments to Plans: Mozambique's institutional and private sector capacity to address many of its development problems is improving rapidly. An important transition toward sustainable development is underway: from dependence on international relief and rehabilitation to a greater reliance on indigenous human, institutional, and financial resources. USAID will promote this transition by encouraging the development of appropriate partnerships among international organizations, Mozambican government institutions, and private sector entities. As USAID continues to help reinforce host country capacity, assistance will be programmed to improve the effectiveness of both the public and private sectors to address the development needs of the rural population.

Other Donor Programs: Key donors and the Mozambican government regularly consult on policy and implementation issues. Other donors involved in areas addressed under this program include the World Bank, Sweden, Denmark, Germany, Great Britain, European Community, and UNDP. The Ministry of Public Works and Housing coordinates donor assistance for rehabilitation of rural roads. The Ministry of Agriculture and Fisheries and key donors are beginning in 1999 the implementation of a sector investment program. Donors also are active in macroeconomic and sectoral policy dialogue with the Mozambican government.

Principal Contractors, Grantees or Agencies: U.S. PVO implementers of USAID activities include World Vision, CARE, Africare, Food for the Hungry, National Cooperative Business Association, Save the Children, the Adventist Development and Relief Agency and Technoserve. U.S. university partners include Michigan State University and the University of Wisconsin.

Selected Performance Measures:

	Baseline	FY 2000	Target (2001)
Increased rural per capita income	$50 (1996)	$62	$98
Change in volume of marketed goods (tons)    (corn)    (beans)    (cashews)	83,000 (1995) 12,500 (1995) 22,000 (1995)	124,000 18,600 44,700	134,000 20,100 49,000
Average annual value of transactions per household having micro or small enterprises	$48.55 (1996)	$60.00	$64.00
Increased crop production (tons) (corn)	346,500 (1995)	428,000	449,000

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ACTIVITY DATA SHEET

PROGRAM: MOZAMBIQUE
TITLE AND NUMBER: Government and Civil Society Are Effective Partners in Democratic Governance at National and Local Levels, 656-SO02
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $2,400,000 DFA
INITIAL OBLIGATION: FY 1996 ESTIMATED COMPLETION DATE: 2001

Summary: Mozambique represents one of the few "transition-to-democracy" success stories in Africa. USAID played a key role in this by providing crucial support for the 1994 national elections, considered a model by international observers. More recently, USAID activities have supported the consolidation of democracy in Mozambique through assistance to both government institutions and civil society organizations. While political stability and significant progress in democratic processes have been achieved since 1995, spurring economic investment and social improvements, challenges remain. Many weak institutions inhibit the effective provision of public services, and some of the institutions most fundamental to the development and preservation of democracy are weak. A multi-party legislature acting as a separate arm of government is new. The rule of law exists in the abstract; with the exception of the Supreme Court, the judicial branch is widely considered dysfunctional. Businesses, for example, go to great lengths to avoid using the legal system to resolve disputes, while to the average citizen redress through the courts is rarely an option. A growing civil society is viewed positively by government, but too often civil society organizations must still fight to be heard. Electoral processes, while generally effective, still require donor funding, although the level of Mozambican financing has increased substantially. Local municipal governments are new and still managed from the capital, Maputo. In many rural parts of the country, "democracy" has significance largely in terms of expectations for improved living standards and welfare.

Key Results: The purpose of this program is to promote citizen participation and increase the effectiveness of both government and civil society in democratic governance. Two results are being achieved: (1) Increased citizen participation in governance at national and local levels; and (2) More effective and accountable key democratic institutions.

Performance and Prospects: USAID activities help create the environment for improved public debate on key issues by developing fora for discussion and improving the substantive content of debate. USAID support for public hearings on proposed legislation and on proposed constitutional amendments has led to the incorporation of citizen viewpoints into final legislation. Activities also improve the capacity of civil society organizations to effectively and constructively participate in public policy debates.

In conjunction with Mozambique's first-ever local elections, held in June 1998, USAID supported civic and voter education programs, and the training of voter registration and electoral monitors. USAID supported the development of a comprehensive voter education program to increase voter registration, and trained over 300 political party representatives responsible for monitoring the registration process. At the conclusion of the registration period an estimated 90% of the country's eligible voters were registered, a remarkable feat given the many isolated rural areas throughout Mozambique.

With USAID assistance, the national legislature is making real progress, seriously analyzing and debating, rather than rubber-stamping, legislation. Through the legislature's public debates and an increasing number of other fora, civil society is presenting its views to the national Assembly and seeing them incorporated into the laws of the land. Working committees of the Assembly have been established and are operating with analytical support provided by a newly-created committee staff unit. Assistance to the judiciary has achieved procedural improvements in the Maputo court system and contributes to the development of alternative dispute resolution (ADR) facilities for handling commercial and other disputes. ADR legislation, drafted with USAID assistance, will be enacted in 1999. In the wake of Mozambique's first municipal elections, USAID-financed activities supporting administrative decentralization and improved local decision-making are underway in a few locations. Another effort is strengthening the institutional base of political groups in Mozambique.

Prospects are excellent for achieving performance targets through FY 2001. The environment is highly favorable as Mozambique approaches its second presidential and parliamentary elections in 1999. USAID expects that the substance of the political debate will change dramatically in 1999, but the rapid pace of political reform will continue.

Possible Adjustments to Plans: There are no planned adjustments to this objective.

Other Donor Programs: The United Nations Development Program, the European Union, and other bilateral donors have programs in the democracy/governance (D/G) sector, which are highly complementary to USAID efforts. USAID coordinates closely with other donors through the Development Partners Group, as well as through several technical level working groups. USAID chairs the group on parliamentary assistance.

Principal Contractors, Grantees, or Agencies: USAID-funded activities are implemented primarily through U.S. non-governmental organizations, which provide assistance to local non-governmental and government entities. U.S. grantees include the National Democratic Institute for International Affairs, the State University of New York Research Foundation, the Educational Development Center, America's Development Foundation, and the U.S. PVO PACT.

Selected Performance Measures:

	Baseline	FY 2000	Target (2001)
Citizen perception of influence on public decisions (percent of public surveyed that agree that citizens influence public decisions)	37% (1997)	41%	45%
Citizen perception that government works for citizens (percent of public surveyed)	15% (1997)	29%	33%
National Assembly provides substantive input into legislation proposed by the Executive Branch (percent of legislation)	0% (1995)	75%	90%
Number of times non-governmental political actors testify before various Parliamentary committees	0 (1995)	8	10

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ACTIVITY DATA SHEET

PROGRAM: MOZAMBIQUE
TITLE AND NUMBER: Increased Use of Essential Maternal/Child Health and Family Planning Services in Focus Areas, 656-SO03
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000: $6,100,000 DFA; $8,400,000 CS; $2,766,000 P.L. 480 Title II
INITIAL OBLIGATION: FY 1996 ESTIMATED COMPLETION DATE: 2001

Summary: USAID and other donors provided substantial emergency health assistance in the years following the 1992 Peace Accord, much of which opened immediate access to health services in areas hardest hit by civil strife and drought. Mozambique is now re-establishing its rural primary health care network in an ambitious effort to improve the health status of the general population. Improved health remains constrained by high rates of infectious disease and malnutrition, the growing prevalence of HIV/AIDS, inadequate access to potable water, and limited capacity to deliver basic health services. While 60% of Mozambicans (compared to 30% in 1992) now have access to health services, quality remains a concern, since staff in many rural facilities have only rudimentary training, skilled managers are rare, and basic equipment and supplies are scarce at all levels.

USAID activities under this program focus on the rural areas where health conditions are the worst. USAID has helped supply essential drugs to rural health facilities; helped improve management skills at Ministry of Health (MOH) clinics; and provided technical assistance to support decentralized planning and management in three provinces. As a result, MOH capacity for provincial level planning, human resource management, and improved budgeting and financial management has been significantly strengthened.

USAID also supports U.S. and international private voluntary organizations (PVOs) working with the MOH to improve the health of mothers and children through community-based delivery of basic health information and services. Eight PVOs work in 70 districts with an estimated population of 9.5 million; about 1.9 million women of childbearing age and 665,000 children under five benefit directly.

Key Results: This program is increasing the use of essential maternal/child health and family planning services through increased access to and demand for community-based services, and through strengthened policy and management of decentralized services. USAID activities contribute to increased immunization coverage; prevention and treatment of diarrheal disease; malaria prevention and treatment; improved reproductive health (family planning, prenatal care, care during labor and delivery, breast-feeding and weaning, maternal nutrition); HIV/AIDS awareness and social marketing of condoms; and prevention and treatment of acute respiratory infections.

Performance and Prospects: USAID activities have made a significant difference in child survival and maternal health in target areas. In Zambezia province, diphtheria-pertussis-tetanus (DPT3) coverage increased from 20% to 62%, oral rehydration therapy (ORT) use from 54% to 82%, and exclusive breast-feeding from 67% to 82%. In Gaza province, DPT3 coverage increased from 37% to 80%, ORT use from 47% to 64%, and exclusive breast-feeding from 16% to 30% over two years. In Manica province, DPT3 coverage increased to 86% in 1997, while births assisted by trained personnel increased from 41% to 60% (compared with national estimates of less than 40%). At the national level, USAID support for National Immunization Days helped increase coverage from 70% in 1997 to 95% in 1998.

USAID's community-based orientation uses a strong outreach program to bring health care services closer to the people in the focus provinces. The MOH is emphasizing outreach from fixed facilities and the placement of health volunteers in communities. USAID's strategy also recognizes the need to improve the quality of clinic-based health services, and helps ensure the availability of essential commodities, while expanding and improving the human resource base to build the capacity to provide basic health care. This also includes the development of functional referral systems, which are an essential component of an effective health system.

HIV/AIDS prevalence is increasing rapidly, and knowledge and use of safe child spacing is very limited. Increased awareness of and demand for reproductive health services is clearly needed to improve the health of Mozambicans. USAID works with the MOH to expand family planning services into all basic health programs. Efforts are also underway to build provincial level capacity to implement education campaigns aimed at producing changes in sexual behavior. USAID supports a social marketing activity to increase condom use in an effort to slow the spread of HIV/AIDS; this activity has established 1,800 commercial sales outlets, trained over 100 sales agents, and sold 10,120,320 condoms in 1998.

USAID supports provincial health management, pharmaceutical management, and systems for data collection and analysis, and at the central level supports the development of a national health care financing strategy. These activities strengthen government capacity to develop and sustain health policies that expand effective and efficient public and private health service delivery.

Possible Adjustments to Plans: There are no planned adjustments to this objective.

Other Donor Programs: Mozambique relies heavily on donors for health sector support. An estimated 90% of the investment budget, and over 70% of the recurrent budget, comes from donor resources. The GRM plans to increase allocation of its own budgetary resources to the health sector to $1.48 per capita by the year 2002 (from $1.19 in 1993), but heavy reliance on donor resources is anticipated through 2002. Donors participate in an active sectoral working group. In addition to USAID, major donors include Canada, Denmark, the Netherlands, the European Union, Finland, Ireland, Italy, Norway, Spain, Switzerland, UN agencies, and the World Bank.

Principal Contractors, Grantees, or Agencies: USAID works closely with the Ministry of Health and U.S., international, and local PVOs and contractors to implement activities in support of this strategic objective. U.S. PVOs, such as World Vision, Save the Children, CARE, Medical Care Development International, and Project HOPE are particularly effective in supporting community outreach activities and in helping the MOH train health workers. Other U.S. PVOs, such as Pathfinder, Population Services International, and Health Alliance International, have formed partnerships with Mozambican NGOs to build indigenous capacity. USAID also works with U.S.-based contractors and cooperating agencies such as John Snow International, Management Sciences for Health, and the University Research Corporation to provide technical assistance for health care financing strategy development, health education programs, logistics management, data collection and analysis, and specialized reproductive health services.

Selected Performance Measures:

	Baseline (1997)	FY 2000	Target (2001)
Children 12-23 months of age vaccinated with diphtheria, pertussis and tetanus (third dose)	39%	55%	65%
Infants fed exclusively on breast milk	35%	40%	42%
Cases of diarrhea in children treated with oral rehydration therapy	37%	47%	50%
Children under 2 years of age whose birth was attended by a trained health worker	41%	47%	50%
Women using a modern contraceptive method	6%	11%	13%
Condom use with last non-regular sexual partner	28%	50%	60%

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ACTIVITY DATA SHEET

PROGRAM: MOZAMBIQUE
TITLE AND NUMBER: Increased Mozambican Capacity to Address Environmental Concerns in Investment Decisions, 656-SO04
STATUS: Proposed
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $4,500,000 DFA
INITIAL OBLIGATION: FY 1999 ESTIMATED COMPLETION DATE: 2001

Summary: In the wake of Mozambique's war-to-peace transition, USAID's environment and natural resources (E/NR) strategy integrated environmental protection into activities supporting sustainable agricultural and rural enterprise development. The focus has been on increasing rural incomes through environmentally sustainable rehabilitation of Mozambique's agriculture sector, which employs about 80% of the population. Ongoing activities include rehabilitation of an economically important agroforestry crop (cashews), extension of improved, environmentally sound farm practices through community groups, and provision of technical assistance to improve land access and tenure security for smallholder farmers. In addition, USAID activities have strengthened Mozambique's capacity to monitor and analyze environmental impacts in areas where USAID is financing major road rehabilitation.

As environmental awareness is a function of income and education, it is no surprise that concern for the environment is limited in Mozambique, one of the poorest countries in the world with a literacy rate of 30 percent. Increasing this awareness has become an urgent challenge in light of Mozambique's rapid post-war economic revival, which is bringing significant new investment and expanding activities in industry, mining, and tourism. To help Mozambique ensure that such investments take into account the need for sustained improvement and protection of the environment, conservation of natural resources, and biodiversity concerns, USAID will begin in FY 1999 to provide assistance to increase private sector capability to analyze investments for environmental risks and benefits.

Key Results: The program objective is increased technical and institutional capacity of Mozambicans to address environmental concerns in new investments, legislative actions, conservation initiatives, and business decisions. Activities will focus on increasing the awareness of the private business sector as well as its capacity to assess and address environmental concerns as an integral part of investment planning. The program will work with private business organizations to improve their knowledge and strengthen their capacity to promote and make investments that protect the environment and conserve resources. The program also will increase public sector effectiveness and outreach on E/NR concerns by supporting an expanded dialogue with the private sector.

Activities will support four key results: (1) Strengthened membership and leadership capacity of private business associations or similar groups to contribute to the improvement and protection of Mozambique's environment, natural resources, and biodiversity. (2) Developing and promoting profitable investment opportunities in environmental enterprises. Such opportunities might include green certification logging, investments to meet international standards for export industries, and a variety of ecotourism investments. Activities supporting this result also will examine the policy framework for private provision of traditionally public services such as water and solid waste removal and management. (3) Enhanced capacity of the public sector to conduct independent technical reviews of environmental impacts, policies, programs, laws, and regulations, by contracting services from qualified private companies and individuals. (4) Establishment of an information center and network to increase the investment community's awareness of and access to E/NR information, investment opportunities, international standards, and related resource conservation and management issues. Activities supporting this result will include short-course technical training and scholarships for advanced training in environmental sciences.

Performance and Prospects: This program will use innovative approaches to achieve, in a short time frame, key improvements in environmental awareness and the environmental soundness of private investments. Given the significant leadership role played both politically and economically by private investors in Mozambique, and in light of the positive experience to date with public-private dialogue on other aspects of investment, USAID believes the prospects are excellent for achieving these short-term results, thereby laying the foundation for broader and longer-term environmental improvements.

Possible Adjustments to Plans: There are no planned adjustments to this objective.

Other Donor Programs: USAID coordinates closely with other donors involved in E/NR activities in Mozambique through the Development Partners' Environmental Working Group. The Netherlands is the largest donor, directly strengthening the capacity of the Ministry of the Environment and other public sector agencies. The World Bank supports coastal zone management through the Global Environmental Fund. Other donors supporting government programs in the sector include U.N. agencies, Denmark, Finland, Sweden, Portugal, Ireland, the European Union, Canada, and the United Kingdom.

Principal Contractors, Grantees, or Agencies: Because this is a new program, decisions on grantees and contractors have not yet been made. USAID anticipates that local associations and private environmental organizations will play a significant role in managing activities. Examples of the types of organizations that may be involved include industrial and business associations, such as the recently created Entrepreneurs Forum on the Environment, as well as local and nationwide hotel and tourism associations. Private technical consulting firms (local, regional, or international) will be involved in providing services related to building a Mozambican capacity for independent environmental impact assessment review.

Selected Performance Measures:
Indicators and baselines are still being finalized, but are likely to include:

• Growth in the membership of private business organizations concerned with the environment
• Businesses adopting industry-established environmental standards and codes of ethics
• New investments directed at improving or protecting the environment
• Environmental impact assessments independently reviewed
• Investments in new environmental enterprises initiated

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ACTIVITY DATA SHEET

PROGRAM: MOZAMBIQUE
TITLE AND NUMBER: Improved Enabling Environment for Private Sector-Led Growth and Development, 656-SPO1
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000: $1,300,000 DFA
INITIAL OBLIGATION: FY 1998 Estimated Completion Date: 2002

Summary: As a result of the GRM's successful program of economic restructuring, Mozambique has achieved exceptional gross domestic product (GDP) growth while maintaining a stable currency, dramatically lowering inflation and interest rates and increasing fiscal allocations for social sector investments. GDP growth has been strong since 1993, with exceptionally high rates of 12% and 10-12% (estimated) achieved in 1997 and 1998, respectively. Preliminary 1998 figures also indicate no inflation (0%), down from 6% in 1997. Economic stability has generated great investment interest: a total of $8 billion in first-round foreign investment between 1998-2001, including significant U.S. investment. Nevertheless, more reforms are needed before Mozambique can sustain the benefits of growth through a truly open economy. An outdated tax system, trade barriers, inadequate telecommunications and transport infrastructure, and underdeveloped capital markets all urgently require attention before Mozambique can attract the levels of foreign and domestic investment required for fast-track growth. The active leadership of an informed private sector is crucial to ensuring that the government's reform agenda best promotes trade and commercial interests.

Key Results: The overall objective of this program is to improve the enabling environment for private sector-led growth and development. To achieve this, USAID will focus on two results: (1) increasing the role of the private sector in the development of economic policy, legislation and regulations; and (2) improving policies and facilities to encourage trade and investment. Specific interventions under the first area includes institutional and analytical support to the Working Group of Business Associations (CTA), the private sector group dedicated to improving policy and eliminating red tape, as well as expansion of Internet services throughout the country by the private sector. Under the second major result, USAID will support: (a) reforms to the tax system, including the introduction of a value-added tax; (b) reduction of red tape (including processing times for imports and exports); (c) more openness to trade, both regional (under the Southern Africa Development Community [SADC] trade protocol) and international (under the World Trade Organization); and (d) the completion of the privatization of the three main rail lines, which serve much of the eastern area of Southern Africa. To achieve these results, USAID will provide a combination of technical assistance resources to the private and public sectors and nonproject assistance to the GRM to compensate for temporary revenue shortfall resulting from tax and tariff reforms.

Performance and Prospects: While this is a new program, many of the activities began on a pilot basis in 1997-98. In late 1997, USAID introduced commercial Internet services to Maputo through the Leland Initiative, and began support to CTA, subsequently chosen by the government to serve as its private sector interlocutor on policy and reform issues. Throughout 1998, USAID provided a U.S. trade specialist to CTA to help business and government leaders understand the implications of opening up the economy to trade. In early 1998, USAID provided CTA with a labor economist to review the labor law then under debate in parliament. As a result of this support, Mozambique is now fully committed to the regional free trade area envisaged by the SADC protocol; the government, spurred by the private sector, has made considerable progress in reducing "red tape" constraints to investment and the day-to-day operation of business.

This program provides a systematic approach to the problem of effectively improving the climate for business and investment in Mozambique. USAID will provide institutional support to CTA to establish an analytical capacity to track policy, legislation and regulation affecting business and investment; to develop (as was done for trade) a consensus between the public and private sectors on reforms and, where appropriate, to assist the government to implement policy change where it lacks the capacity to do so on its own (notably in trade negotiations). In 1999, Mozambique will ratify the SADC trade protocol and put forward its proposal at a regional negotiating forum. It will introduce a value-added tax to replace certain trade and sales taxes that distort economic incentives. It will further reduce red tape, particularly where it impedes investment and small business establishment and growth. Internet services will spread outside Maputo, through competitive private sector providers. Two of the three main regional rail lines will be privatized.

Possible Adjustments to Plans: There are no planned adjustments to this objective.

Other Donor Programs: The IMF supports the introduction of a value-added tax. USAID will be the largest source of direct assistance to CTA. Sweden is assisting CTA and other businesses on revenue generation through member fees. The World Bank was the main catalyst for the successful privatization of the banking sector, completed in 1997; the Bank also provides on-going support to the Private Sector Unit of the Ministry of Industry, Commerce, and Tourism, which is responsible for working with CTA and other ministries on red tape reduction. The United Kingdom has provided a modest level of support to CTA for analysis of trade and informal sector issues.

Principal Contractors, Grantees or Agencies: A long-term U.S. institutional contractor for policy and tax reform will be selected.

Selected Performance Measures:

	Baseline	FY 2000	Target (2001)
World Economic Forum Competitiveness index: (survey of 23 African countries, -1 to 1)	Rank 18 Index -0.32	Rank 12 Index -0.1	Rank 10 Index 0
Time required to register a business	up to 1 year	10 weeks	8 weeks
Number of Internet users	2,000	3,000	4,000
Trade openness (IMF index, 1=open, 10=closed)	6	5	4
Specific indicators related to the tax regime are to be developed in 1999.

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