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PRESS/TPRB/154
26 January 2001
(01-0357)
TRADE LIBERALIZATION AND ECONOMIC REFORM HAVE SHOWN SIGNIFICANT
SIGNS OF SUCCESS IN MOZAMBIQUE
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 ha s 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.
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 hasbeen 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.PRESS/TPRB/154
Page 2
MOREMozambique'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 provideincentives 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 c ountries 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 fore ign. The reforms have significantly liberalized
Mozambique's trade regime that is essentially based on tariffs. Mozambique has recently simplifiedthe 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 cust oms 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'scommitments under the GATS, will help to bolster confidence and contribute to attracting the foreign
investment needed.PRESS/TPRB/154
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MORENotes 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 stat ement by the government of the member under
review, and a detailed report written independently by the WTO Secretariat. These two documents arethen discussed by the WTO’s full membership in the Trade Policy Review Body (TPRB). These
documents and the proceedings of the TPRB’s meet ings 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 ofJanuary 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 (19 92), 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 and1997), Colombia (1990 and 1996), Costa Rica (1995), Côte d’Ivoire (1995), Cyprus (1997), the Czech
Republic (1996), the Dominican Republic (1996), E gypt (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), Keny a (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 a nd 1996), Namibia (1998),
Nicaragua (1999), Nigeria (1991 and 1998), Norw ay (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), Si ngapore (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 (1 996), Zambia (1996) and Zimbabwe (1994).PRESS/TPRB/154
Page 4
MORETRADE 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 afterthe 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 HeavilyIndebted 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 themining 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 fo r 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.  TheRepublic Assembly, a unicameral body, exercises legislative power.PRESS/TPRB/154
Page 5
MOREMozambique has various statutes that govern imports, customs duties, investment, petroleum
and mineral-resource extractive industries, business licensing, intellectual property, exports, and othertrade-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 isconducive 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-agriculturalproducts 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 preshipmentinspection, 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 thePRESS/TPRB/154
Page 6
MOREImplementation of Article VII of GATT 1994.  It ha s 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 deve loping 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 theresponsibility 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" (locallyprocessed 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, theGovernment has maintained control over companie s 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 onindustrial 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 a nd 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 foreigninvestment.  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 furthe r 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 alreadyavailable for investments in the sector.
The Government has reduced tariffs on industrial inputs, and privatized virtually all
state-owned manufacturing companies.  An indust rial strategy policy was formulated in 1997 to,
inter alia, promote local processing of natural resources and the development of export-orientedlabour- 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.PRESS/TPRB/154
Page 7
MOREThe 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 servicessector, 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.PRESS/TPRB/154
Page 8
MORETRADE POLICY REVIEW BODY
MOZAMBIQUE
Report by the Government of Mozambique (Parts III amd IV)
TRADE POLICY
A. AGRICULTURE
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 tractssuitable 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 a nd 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. M
ANUFACTURING
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 themanufacturing 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;PRESS/TPRB/154
Page 9
MORE(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 asmentioned below.  Mozambique is a signatory of  the WTO- World Trade Organization, World Bank,
IMF- International Monetary Fund, Lomé C onvention, 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. B
ILATERAL TRADE AGREEMENTS
9. Mozambique is currently in a process of negoti ations for bilateral trade agreements with the
following countries:  Algeria, Cuba, Egypt, Indi a, 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 Afri ca, Portugal, Spain, the United States of America,
and Japan.PRESS/TPRB/154
Page 10
ENDG. 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.