07 February 2007

06 February 2007 Minutes

Minutes, Private Sector Working Group, February 6, 2007

Agenda

The agenda for the meeting was as follows:

1. Presentation on IVA reimbursements -- ACIS – Carlos Henriques (Ministry of Finance?)

2. Update on competitiveness work, including competition law – MIC – Olga Gomes

3. Discussion of SoW for obtaining PSWG assistance --- Various

4. Presentation of the Terms of Reference of the USAID-funded Financial Sector Study that will be beginning on February 5, 2007 -- Bruce Bolnick, Nathan Associates

5. Presentation of Terms of Reference for a regional survey on non-governmental actors in the private sector (document will be sent in a separate e-mail next week) -- Pascoa Themba

6. AOB

Minutes

Agenda Item: Update on Competitiveness Work from MIC

The meeting began with agenda item 2, an update from Olga Gomes on the MIC’s efforts to improve the business environment. She said that three major steps forward will be taken this year in regard to licensing:

1. By the end of this month 400 types of activity will be exempted, by decree of the Council of Ministers, from licensing requirements;

2. Deferimento tacito will be introduced some time in the next few months. Deferimento tacito means that licensing or registration requests will be automatically approved if no response is received from the approving entity within stated time limits.

3. By the end of the year, “negative licensing" will be introduced. This means, in principle, that only those activities determined to require licensing (with public health implications, for example) will need to get licenses. Also in principle, government agencies will have to prove a legitimate need to license before being authorized to do so.

She also said that MIC had prepared for presentation to the Council of Ministers a five-year plan for the business environment. This is attached in draft for PSWG comment. Please note that MIC will send the paper directly to other GRM agencies for comment.

There was also further discussion of an appropriate mechanism for ensuring good coordination of economic policy issues. Olga said that the Conselho Economico was that right forum for vetting new policies before they are sent to the Conselho de Ministros. This is a national director level forum, with private sector participation, that has a mandate for such review. The Conselho de Relações Económicas Externas (CREE), on the other hand, although a ministerial level group, has a more limited mandate related to external financing – for example, they must approve donor-funded contracts over $5,000,000.

Agenda Item: VAT Reimbursements

Carlos Henriques, representing ACIS, then gave a presentation of the VAT problem, with particular reference to six member companies owed a total of $10,000,000. His presentation is attached. He repeated the main themes presented in Chimoio – that there is a severe problem with VAT reimbursements which falls mainly on investors, exporters, and SMEs, three priority categories for economic growth. His presentation’s main conclusions were, in summary:

In the short term, independently determine what is now owed, GRM develops schedule to repay, and compliance with schedule is independently confirmed.
In the medium term, conduct an independent study to determine where the problem is – private sector, GRM, or both – and develop a program to resolve it.

Carlos Henriques also said that companies were extremely reluctant to come forward with complaints about VAT claims or disputes, because they were invariably subject to retaliation in the form of inspections and audits, resulting in large fines for minor infractions. He also complained that ATM is unwilling to discuss specific VAT dossiers, with groups of businessmen, insisting on working one-on-one. This makes it difficult to resolve common problems.

Victorino Chirindje from ATM, Ministry of Finance, noted that ATM was working closely with CTA on all of these issues, and that ATM was flexible about the way forward. He said that his office was severely understaffed and now recruiting for 50 accountants to work on VAT claims. In response to a question from the chair, he estimated that there are perhaps $200 million in outstanding VAT claims pending.

Conclusion: The main recommendations of the study, as summarized above, were not disputed by the PSWG or the Ministry of Finance. It is therefore recommended that CTA, ACIS and ATM agree on the details and implement the recommendations. Certainly, the PSWG would support any donor effort (GTZ is apparently a possibility) to help resolve the VAT situation, which clearly remains a major problem for the private sector in Mozambique.

Agenda Item: Enterprise survey

Channing Arndt presented (attached) an annual enterprise survey to be conducted beginning in 2007. The survey will interview a sample of 1,500 to 2,000 firms selected randomly from the pool of all formal enterprises with over 30 employees. The information will be useful for:

  • National accounts
  • Policy analysis
  • Business environment
  • Formal sector employment
  • Investment and capital stock
  • Trends through time

The cost of the survey in the first year is estimated at $378,000, and funding is welcome.

Two issues arose during the discussion:

Does INE now have the capacity to deliver the results of the survey in a timely way – their record is of long delay?

Why isn’t the informal sector included?

Channing said that INE was better prepared for this survey than for the last, and that their recent performance has been encouraging. He also said that the current sample size of 1,500 to 2,000 was pushing capacity limits; it would be a mistake to add the burden of more firms of a different type.

Agenda Item: Non-governmental actors in the private sector.

Pascoa Themba briefly described her efforts to identify non-state actors that could usefully get involved in discussions affecting the private sector. She specifically mentioned EPA negotiations, but the review covers all trade and other areas.

Agenda Items Not Discussed: A financial sector review (SOW attached) is being conducted by a team led by Bruce Bolnick this month. The terms of reference are attached, and a briefing has been scheduled for Thursday, February 22nd at 9 am at the Polana. Confirmation will follow.

Discussion of the SOW for an assistant to the PSWG was shelved until next meeting.

AOB:

Andrea Cilloni raised the question of the whether a separate trade group was a good idea, something floated by the EU some time ago. Tim Born recalled that the earlier discussion came up with three options: (a) a new trade group, perhaps under the G-18; (b) better integration of trade issues into the PSWG; or (c) tweaking the Integrated Framework group to cover the desired range of issues – this group already meets about once a month and brings together donors, government and civil society.

A group was formed to look into this and report back – Carlos Mate (SIDA), Andrea Cilloni, Tim Born, Eneida Monteiro, and Ramón Ynaraja.

Links

PSWG List of Participants for 06 Feb 2007 Meeting

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