Assessing the Competitiveness in Mozambique

University essay from Lunds universitet/Nationalekonomiska institutionen

Abstract: Mozambique has benefited from very high economic growth the last decade and is a large receiver of foreign aid. In spite of these high growth rates and foreign aid the population living in absolute poverty is still extremely high. The reason for this is that the growth rates have been driven by capital intensive foreign owned megaprojects that do not provide many jobs for the Mozambicans. This study was conducted through a series of interviews combined with individual research and analysis. It discusses the competitiveness of Mozambique by focusing on eventual obstacles, what measures to increase the competitiveness that already have been taken and what more could be done to further increase the competitiveness. The focus on competitiveness is motivated by the fact that an increased competitiveness will lead to a more efficient private sector and more jobs provided for the Mozambicans. When examining Mozambique’s Revealed Comparative Advantage (RCA) Mozambique is competitive in primary products but is poorly diversified beyond that. A recent devaluation of the Mozambican currency towards its major trading partners may positively influence Mozambique’s comparative advantage; however, the country’s inefficient institutions and high transportation costs will continue to cause significant harm to Mozambique’s competitiveness. The low education and knowledge of many Mozambican officials, high levels of corruption, and an inefficient bureaucratic process combined with a highly insufficient transportation infrastructure make doing business in Mozambique very expensive. Overcoming these obstacles requires a diverse investment strategy. Investments in education could, in a long term perspective, improve the effectiveness of institutions, reduce corruption, and increase product sophistication. Investments in infrastructure would reduce transportation costs and the opportunity for Mozambique to function as a transport hub to its several landlocked neighbouring countries.

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