11 October 2005

11 October 2005 Minutes

Below, using the order adopted by the Chair, Jay Knott, are the highlights by agenda item.

1. Read-out of CTA meeting with the Prime Minister, Sergio Chitará. The meeting was the first with the new government, and achieved two objectives. First, it introduced the 14 sectoral commissions (“pelouros"; increased in number from formerly 9), and showed CTA is a serious and capable interlocutor, and second, it raised the major issues of the overall environment for business and of each sector. CTA gave an overview, followed by a presentation of the agendas of each of CTA’s 14 sectoral commissions. Main points highlighted were the ones already raised at the 2004 Private Sector Annual Conference. The prime minister and CTA president chaired, with six ministers (Justice, Energy, Agriculture, Transport, Tourism, Industry and Trade) and several Vice Ministers (Finance, Labor) plus the head of NAC. Conclusions: consultation now to be included in all ministries’ programs + CTA is the interlocutor for private sector policy issues + CTA has a better structure for implementing the dialogue. The annual CTA conference is to be postponed to March 2006.

2. Mid Year Review and PARPA II Update, Ramón Ynaraja (EC). Ramón indicated that the progress is very slow on both documents (text + action plan), with some confusion over what indicators and targets are, and how they need to be formulated. The deadline for submission of the 1st sector contribution was Monday (October 10th) and Macaringue had submitted a draft. All involved are awaiting a revised PARPA-II schedule. Update as of October 19: the draft was submitted on Thursday October 13th. There is an initial discussion among GRM participants, plus some academics, tomorrow; to be followed by a review by the GRM officials responsible for each sector and the cross-cutting issues. Following that meeting, which may shift some actions from cross-cutting to specific sectors (as was done with fines and inspections), there will be a costing exercise, followed by another poverty observatory in 17th November. Luis Sitoe believes the PARPA-II private sector and trade issues will survive without too much watering down.

3. Labor Presentation, Sam Levy. CTA has put a draft law on the negotiating table (CTA, unions, government are at the table). Mr Levy delivered a presentation stating that the main objectives of the proposal are based squarely on employers’ daily experience of the Mozambican labor environment. Those objective are to: (i) make labor relations more flexible; (ii) reinforce the role of collective bargaining in regulating the labor environment; (iii) make Mozambique competitive in attracting labor-intensive investment; (iv) ensure rights to a larger number of workers, and thereby; (v) create more jobs.

The full presentation will be available at www.tipmoz.com in about a week.

4. Tobacco: Dimon and Stancom. Sergio Chitará explained that Dimon/Stancom, now a joint US company registered as Alliance One, one of the two big buyers of tobacco in Mozambique, had had its Tete concession taken away by the Ministry of Agriculture and Governor of Tete. The Ministry has since recalled its decision on the grounds that the proper authority is the Governor. Chitará pointed out that although the government alleges a failure to abide by the terms of the concession, they have not formally charged the company with a failure to abide by the concession. In any case, tobacco concessions are granted annually (this one in April) and are irrevocable. Sanctions under the rules are in the form of fines, and no fines have been levied. Dimon/Stancom has indicated its intent to take the case to international arbitration, and also to collect on the risk insurance they took out on their Mozambique investment. At the same time, the decision has been appealed, a joint MinAg/CTA fact-finding mission is scheduled for the week of October 17.

Ramon (EC) expressed concern at the absence of transparency and at the apparent increase in arbitrary and sometimes unlawful decisions by government and suggested to discuss the possibility of implementing a kind of “Investment Ombudsman" that UNCTAD has supported in other developing countries upon request. Hipolito cited a similar (though less publicized case) of a Zambeze Hunters, a Niassa concession that was revoked in the middle of the season and handed over to a big South African group with more resources. Jay Knott noted that this sort of thing would make Mozambique even less competitive. Pierre-Henry noted it would send a bad signal to potential investors in JFS.

It was agreed that this and similar instances of arbitrary action were a cause for considerable concern, and that the government should be made aware of donor concern on a bilateral basis. So we would all make an effort to communicate our concerns with the appropriate Ministries, especially agriculture. Any joint intervention to await the conclusion of the Stancom/Dimon case.

5. EPA (the EU Economic Partnership Agreement) and TIFA (the US Trade and Investment Framework Agreement). Tim (USAID) reported that a team from the US Trade Representative’s office, led by Assistant US trade representative for Africa, Florie Liser, had had been to Maputo. The visit had focused on areas for further discussion, and on the possibility of opening negotiations for a Free Trade Agreement in a year or two. Tim pointed out that USTR’s approach to both TIFA discussions and FTAs was to start with “everything on the table" -- labor, environment, Singapore Issues. Ramón (EC) described progress on the EPA, which is being negotiated with seven SADC countries (RSA being observer, as it has already its own EU- RSA trade agreement). Within the division of tasks in the SADC-EPA, Mozambique is leading the negotiations for NAMA and for Fisheries (Industrial aspects). The goal is to have an agreement in force by 1st January 2008. Ramon pointed out that the EU also starts with “everything on the table" (goods, services, competition, investment and government procurement). There are frequent technical meetins, Senior Officials consultations every two months in Brussels, and a Ministerial meeting once or twice a year.

6. Other issues: Sonia Cumbi said the Danish prime minister will be here from October 12 to 17th, visiting Cabo Delgado, Tete, and Maputo.

7. Aviso 5: Sergio Chitará said that CTA had met with the Governor of the Central Bank on Friday, October 7th, and that Administrator Abreu had been named to work with CTA on their concerns (tourism and construction were cited as hard-hit sectors).

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