Supporting the Policy Environment for Economic Development

Doing Business

a. Business Environment Annual Strategy – PAMAN

SPEED, in collaboration with the Ministry of Industry and Commerce (MIC), Confederation of Business Associations (CTA) and International Finance Corporation (IFC), drafted the Business Environment Action Plan (PAMAN) in December 2011. It comprises a list of the key policy reforms to be implemented in 2012 by the GOM. The plan was submitted to and approved by the Council of Ministers in February 2012.

Implementation of the plan began in March/April 2012. SPEED agreed to support the implementation of five policy reforms with direct impact on the DB ranking: obtaining construction permits, paying taxes, getting electricity, trading across borders and resolving insolvency. Comprehensive work toward streamlining the process of getting construction permits has been ongoing (see “Streamlining the construction license process in Maputo” above). SPEED has finalized the scopes of work and started the process of hiring consultants for implementing PAMAN activities on paying taxes and trade across borders. All work on resolving insolvency has been put on hold waiting for approval of the legal package submitted to the parliament. On the other hand, SPEED conducted a study aimed at reviewing: (i) the description of the procedures reported by the 2012 DB report, (ii) the time, cost, and documents requested to complete a procedure, (iii) the data behind the indexes; (iv) the legal framework (see “Doing Business data validation” above).

Currently, SPEED is implementing the projects on paying taxes, getting electricity, and trading across borders. Follow up the debate on the insolvency law and support its implementation once approved.

b. Streamlining the construction license process in Maputo
has been identified by the private sector as an important obstacle impeding the easing of doing of business in Mozambique.  According to the Doing Business report, it currently takes the average business person 380 days to obtain a construction permit. Currently, Mozambique ranks 126th in obtaining a construction permit among 183 economies.  There is evidence that relatively simple improvements in streamlining construction permits processes could improve the country’s ranking to the 72nd position.

SPEED began working with the Municipality of Maputo (CMM) on simplifying the process of obtaining construction permits in October, 2011.  This earlier work< identified a series of recommendations divided into two categories:  short-term (low-hanging fruit) and long-term.

In the second phase of the project, SPEED is supporting the CMM to implement the reforms recommended in the earlier report. First, building on the short-term recommendations, a set of detailed proposals for how to re-design the process for obtaining a construction permit were discussed with and approved by the Municipal Assembly. Following this approval, SPEED helped CMM staff to develop technical (justificativa tecnica) that form basis for actual implementation, which has now begun.  Full implementation awaits only formal approval by the Mayor of Maputo.  In tandem with the administrative procedures outlined in the justificativa tecnica documents, SPEED is supporting a review of relevant ordinances and decrees to ensure consistency between proposed changes and the legal framework.

c. Diagnosis of construction license process in Quelimane
Following on SPEED’s success with the Municipality of Maputo, the Municipality of Quelimane requested that SPEED conduct a preliminary assessment of its construction permits process. The Quelimane mayor wants to improve the delivery of this service to the local community and its entrepreneurial base.

SPEED conducted a review of the Quelimane municipality’s construction permit process.  SPEED began by financing a workshop for twenty-five municipal staff and private sector representatives in Quelimane to disseminate the proposed Maputo reforms, as well as discuss the relevance of the recommendations for all municipalities.  At the end of a 10 day analysis, SPEED presented a preliminary report to the mayor of Quelimane regarding the reforms and recommendations.

The mayor has expressed his interest and intent to implement proposed changes over the next quarter.

d. Doing Business data validation
Very often Government representatives raise concerns about Doing Business (DB) data, pointing to some discrepancies between these data and reality on the ground. Senior government officials raised these concerns again during the retreat funded by SPEED in December 2011, aimed at drafting the government’s business environment action plan. The Ministry of Industry and Commerce, on behalf of the inter-ministerial group for the removal of investment barriers (GIRBI) requested that SPEED conduct a survey to assess the validity of these concerns.

Thus, SPEED carried out an independent survey focusing on five out of the ten DB indicators. SPEED’s independent consultant studied the following time and motion indicators: starting a business, getting electricity, international trade and paying taxes. In addition, the study included Mozambique’s worst-ranking legal indicator: getting credit. The country’s ranking and the potential for changes were the criteria used for selecting the indicators. The survey examined the description of the procedures reported by the 2012 DB report; time, cost, and documents requested to complete a procedure; the data behind the indexes; and the legal framework.

The study confirmed the government’s concerns about the DB data on three indicators:

  • Getting credit: the depth of legal rights index is 100% higher than the one reported by DB while the number of companies and people registered in the public credit bureau is 22% and 30% higher, respectively;
  • Getting electricity: the number of procedures and days for getting electricity are 2 and 4 times lower than the DB data;
  • Paying taxes: the time reported by DB is 2 times higher than the reality in the ground.
  • If these findings had been taken into account in the 2012 DB report, the country’s ranking would be at least 30 positions above the current one.
  • In order to ensure that the next DB report takes these changes into account, MIC submitted a memo to the DB team in Washington in late June. The memo includes reforms implemented over the past twelve months, ongoing reforms, and recommendation from the data review analysis conducted by SPEED.