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Viewing cable 07MAPUTO1346, FY 2007 CARRY-OVER ESF FOR STATE AFRICA REGIONAL

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Reference ID Created Released Classification Origin
07MAPUTO1346 2007-11-16 10:00 2011-08-25 00:00 UNCLASSIFIED Embassy Maputo
VZCZCXYZ0006
RR RUEHWEB

DE RUEHTO #1346 3201000
ZNR UUUUU ZZH
R 161000Z NOV 07
FM AMEMBASSY MAPUTO
TO SECSTATE WASHDC 8204
UNCLAS MAPUTO 001346 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: AFIN AMGT EAID ECON PGOV PHUM PREL MZ
SUBJECT: FY 2007 CARRY-OVER ESF FOR STATE AFRICA REGIONAL 
PROGRAMS:  MOZAMBIQUE PROJECT PROPOSALS 
 
REF: SECSTATE 151653 
 
 1.  SUMMARY.  Embassy Maputo proposes two projects for FY 
2007 ESF carryover funding: (1) $1,000,000 for political 
competition and consensus-building under the elections and 
political processes (2.3.2) element and (2) $500,000 to 
structure a program aimed at improving the Doing Business 
"taxes" component in Mozambique by reducing the steps and 
costs to businesses of paying taxes, under the trade and 
investment enabling environment (4.2.1) element. END SUMMARY 
 
-------------------------------------------- 
Democracy: Elections and Political Processes (2.3.2) 
-------------------------------------------- 
 
2.  Just 15 years after the end of its civil war, Mozambique 
is, in many ways, a model of post-conflict reconciliation, 
stability, and rapid economic growth.  However its political 
system development has yet to attain the same level as the 
impressive improvements in its economy and stability.  The 
governing party, FRELIMO, retains near total control of all 
government institutions at both the national and local 
levels, as it has since independence in 1975, allowing little 
room for opposition parties.  This concentration of political 
power, and the resulting weakness of political party 
structures, hinders the development of democracy and genuine 
political dialogue.  The US Mission to Mozambique proposes 
that FY 2007 ESF carryover funding in the amount of 
$1,000,000 be allocated to the Mission for the political 
competition and consensus-building, elections and political 
processes (2.3.2) element.  The Mission, through USAID's 
Democracy and Governance program, will develop a new activity 
to expand political freedom and enhance the competitive 
political process, thus strengthening the foundations of 
democracy in Mozambique.  This activity will focus on 
assisting political parties with training and technical 
assistance on campaign techniques, researching public 
attitudes, setting party platforms, strengthening internal 
structures and capacity. 
 
3.  Currently there are seven political parties represented 
in parliament; FRELIMO controls over two-thirds of the 
members and rarely engages the opposition.  The proposed 
political party capacity building activity will likely flow 
through the CEPPS mechanism in order to bring an American 
non-governmental organization such as IFES, IRI, or NDI to 
Mozambique to work with the political parties.  This team of 
professionals would work on identified needs of the political 
parties.  It is envisioned that the funds would be spent on 
political party training across the country and would 
effectively work in at least three of the ten provinces. 
 
--------------------------------------------- -- 
Economic Growth: Trade and Investment Enabling Environment 
(4.2.1) 
--------------------------------------------- -- 
 
4.  Economic growth is one of the USG focus areas.  Recently 
Mozambican President Guebuza challenged the country to 
improve its World Bank's Doing Business Indicators rating; in 
2007 Mozambique ranked 134 out of the 175 countries included 
in the ranking.  The US Mission to Mozambique requests 
$500,000 in FY 2007 ESF carryover funding to work to improve 
the Doing Business "taxes" component in Mozambique.  The 
funding, from the "trade and investment enabling environment" 
(4.2.1) element, would structure a program to reduce the 
steps and costs to businesses of paying taxes. 
 
5.  Mozambique has a large informal sector, accounting for an 
estimated 40% of GDP and employing over 90% of the workforce 
(this includes traditional agriculture).  Although Mozambique 
rates poorly on several of the Doing Business indicators, one 
of the major constraints to growth for smaller informal 
sector firms is the highly complex tax system that is 
dismally administered and poorly understood.  In 2004, USAID 
helped design a single simple tax for the informal sector, 
and in 2006 conducted a major study of how the tax system 
could be made more business and investment-friendly.  The 
study confirmed that this was a priority for business and, 
consequently, it has been included in an IMF list of actions 
that the government has agreed to complete for 2008.  The 
Mission proposes to use ESF carryover funding to assist with 
the design of a similar simplified system for small 
businesses.  This should widen the tax base without 
increasing the burden on the informal sector.  The focus 
would be on ensuring implementation, improving the prospects 
for small and medium enterprises to thrive and grow.  The 
funding would be added to an on-going USAID activity funded 
through Nathan Associates under the same program element. 
Chapman