24 January 2006

24 January 2006 Minutes

Minutes of the Private Sector and Economic Growth Working Group Tuesday January 24, 2006

Agenda

1. Labor law update (Fumane)

2. Private Sector Conference -- call for themes and assistance (Fumane)

3. Status of Industrial Policy (Olga Gomes)

4 Land -- what next? (Born)

5. Commercial Code

6. AOB

Minutes

Labor Law negotiations are still under way. It is a process of give and take, and some 130 articles of the proposed UTREL draft have been covered out of the 300 or so in that draft. They expect to complete negotiations in March, conduct further (but short) public consultations, allow UTREL a few more days to incorporate changes, and submit to the Council of Ministers through the CCT . Fumane noted that although the draft on the table is the UTREL version, the negotiators keep going back to the CTA draft to clarify concepts. CTA is pleased with reductions in costs achieved so far, especially regarding severance costs (severance will be 7 days per year served if layoff is not the fault of the employer, or 20 days when the employer is at fault ; compared to the 30 days now ). They are now seeking a reduction in administrative days off. Negotiation of sections dealing with foreign labor are still pending. The World Bank has agreed to do an economic and financial analysis of the final version after the law has passed .

The Private Sector conference will be held during the last week in March. It will be between a day and a half and three days long and be similar to previous year’s conferences in format. This year CPI and PODE will be asked to participate as partners as well. Fumane asked PSWG members to contribute ideas and suggestions for themes , as well as proposals for experts. UNIDO suggested the Labor Law. EU, Trade and Hong Kong. Some embassies will bring potential investors. The President and economic ministers are expected to participate.

An Industrial Policy update of the current policy is under study by various ministries based on the draft document authored by Ernst and Young (Castelo Branco). Olga Gomes thought the revision would not be ready for the private sector conference. A question was raised about CTA’s position. Gomes reported that CTA was in general agreement with the study. Fumane said CTA regards the Castelo Branco draft as a guide for MIC, not an industrial policy. Schlotthauer observed that industrial policy and other issues (land, labor law, etc.) would be discussed by the G-17 in the Joint Review which is scheduled to wind up on the 13th of April, whether or not they are in final document form.

Land was discussed at some length. Knott reported on a high level meeting where government concerns about the PSIA, first promised by the GoM Letter of Intent to the IMF in June, 2004, were expressed, namely that the GoM wanted to avoid scary land outcomes such as in Zimbabwe and Kenya, (and perhaps RSA). The Minister of MPD also feels that the poor will be fleeced if land is marketable. Minutes of a small meeting called by the World Bank on January 18, 2006, are attached for background. Briefly, the World Bank plans to do a concept note on land, focused on urban land issues. The WB seeks moral and/or financial support from the other donors, and invited DFID, the Dutch, and USAID to their meeting. They feel that the current system is non-transparent, does not help the poor, nor does it make the market fluid. The invited donors were supportive: DFID and others are starting a land fund to enable communities in Cabo Delgado, Manica, and Gaza register their lands. USAID will work on tourism land issues. The MCC is exploring assistance to digitize land data for the four northern provinces and do various institutional development activities. Dils observed that FAO has also done some land titling. Celloni observed that urban land (and tourist land) involves some pretty large opportunities for ‘rent-seeking’. Born wondered if urban land included land within municipal boundaries.

Regarding the Commercial Code, Born said that Macaringue would come to the next PSWG meeting to review the newly (December 13, 2005) regulation. On a related subject, the recently passed procurement code, Schlotthauer reported that at the Economists meeting earlier in the day, Carsten Sandhop said that each donor country should look at the new regulation to see if it met their criteria of a modern, transparent, and best practices. He pointed out that CTA called it the greatest gift from the Government. Others were not so sure. Sections 24 and 88 substantially increased the limits of procurements reserved for Mozambican nationals. The US bilateral investment treaty calls for US firms to receive ‘national’ treatment in procurements. The World Bank is preparing a comparison of the new regulation with Bank norms for host country procurement. Since general budget support accounts for about a half of the GoM budget, the new code will affect how donor money is used in procurements. Sandhop said that some aspects of the new Code will need to be further discussed. He also said that a substantial effort of institution building is required for the new Code to work.

In AOB the following points were raised:

a. The World Bank “Doing Business team will do a presentation on February 21, 2006 on the results for Mozambique.

b. New tourism regulations were described by Dils as much too complicated. It was agreed that this would be followed up on at the next PSWG meeting.

c. Ynaraja reported Integrated Framework project approvals for TA to MIC, and for equipment for 3 labs to do Sanitary and Phyto-sanitary work aimed at meeting EU market access requirements for fish . Also a grant to INNOQ to develop 16 new norms and for capacity building is in process.

The next meeting will be February 14 at 10.00 a.m. at USAID.

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