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Denmark’s partnership with Mozambique 2016-2020: The Country Policy Paper: Synopsis – draft 10/2/15. 1. Overall vision and its rationale. To support Mozambique in its efforts to build a nation based on stability and equality through reconciliation and a continuous expansion and deepening of opportunities for the poor to increase their incomes, access quality services and exercise their political and civil rights, whilst safeguarding the carrying capacity of the country’s ecosystems. Mozambique emerged from conflict in 1992 as the poorest country in the World in economic terms and one of the poorest in Human Development Index (HDI) terms. 22 years of stability and a continuous development effort funded to a significant extent by external donors such as Denmark has enabled Mozambique to deal with some of its human and institutional development backlog. But enormous challenges remain. After 20 years of rapid per capita growth an estimated 50 % of the population are still absolute poor and inequality is escalating. And despite stability a conflict mind-set continues to dominate political and public life, with a tendency to exclude “the other” – particularly the opposition and its supporters – from power and economic opportunities. A resurgence of armed clashes between the army and armed guards of Afonso Dhlakama, the leader of the former national resistance movement and now opposition party Renamo, ending with an agreement before the general elections in October 2014, is a stark reminder of the tenacity of peace. The discovery of significant mineral resources in Mozambique has led to an understandable euphoria. Yet experience shows that there is no guarantee that income from mineral wealth will benefit the majority of a country’s population. Today, Mozambique funds the bulk of its public expenditure through internal revenue. At the same time the country has gained access to the international capital markets and the scramble for position in relation to the exploitation of the country’s mineral resources is fierce. Commercial interests are also affecting the behaviour of traditional donors, dampening their appetite for engaging Government in discussion of sensitive issues, such as good governance and the fight against corruption. Mozambique is at a cross-road. Difficult decisions need to be taken. The foundations of an inclusive society must be strengthened and put in place where they do not already exist. Lifting the constraints that prevent the poor from raising their incomes through entrepreneurship and employment is one cornerstone. Changing the logic and attitude that tend to exclude the opposition and their supporters from decision making, public positions and economic opportunities is another. To secure prosperity and stability, these foundations have to be built now. Once revenue starts to arrive from the mineral industry in volume, it may be too late. Denmark can make a fundamental contribution to a prosperous Mozambique for all. Having accompanied the country in its development since Independence, Denmark is considered a dependable, predictable and committed partner and one that insists that a good partnership has a frank dialogue as an essential ingredient. With a track-record of work in many sectors, at all administrative levels, and including the public and the private sector as well as civil society, Denmark has accumulated knowledge and contacts that will be an enormous strength going forward. We are also a 1
partner where private companies, civil society organizations and individuals have been intensively engaged over the years. Because of these characteristics Denmark is also a unique partner. Denmark believes that its contribution to development and stability in Mozambique in the coming 67 years should have the building of Mozambique as an inclusive society in economic, political and social terms as its overall point of orientation. The creation of job and business opportunities is essential to enabling the poor to move out of poverty and emerge as a force capable of influencing decision-making in the country. Addressing social, economic and territorial inequality are the main overall challenges. Lifting the physical, financial and human constraints that bind growth, productivity and diversification in family farming and small and medium-scale enterprises where the majority of the poor find their income requires a range of interventions, a strong and comprehensive government programme and intensive collaboration and a division of work among stakeholders. Denmark will support these processes and make its choice of interventions accordingly. Denmark will also help strengthen the institutions that enable citizens to enjoy their political and civil rights, including access to seek redress through the formal and community justice system. And Denmark will continue to support reforms aimed at strengthening accountability in government, such as in the area of public financial management and taxation, including of the extractive industry. In addition Denmark will support the greening of growth and national and local efforts to safeguard the carrying capacity of Mozambique’s environment, including through sustainable production and consumption, and in preparing for climate change. Denmark’s political and commercial collaboration with Mozambique will be complementary to and supportive of this overall vision of our development role. A stable and inclusive Mozambique that offers opportunities for everyone and with growth encompassing all relevant sectors and geographical areas is also in line with our political goals. Likewise opportunities for commercial collaboration will be multiplied with a broadly growing and diversified economy. In the context and changing circumstances characterizing Denmark’s engagement in Mozambique we propose the aforementioned overall programme thrust and combination of interventions as the most effective articulation of Denmark’s priorities as described in The Right to a Better Life. With its emphasis on human rights, including economic, civil and cultural rights as well as gender equality it is also a credible proposition in pursuit of development through the human rights approach that informs the overall strategy. We expect to use foreign and security policy, development policy, commercial policy as well as climate change policy instruments as the means of achieving the overall vision and strategic objectives. These instruments will be employed complementarily to contribute to the emergence of Mozambique as a stable, prosperous and just society with opportunities for everyone, increasingly integrated in the world economy and participating as a force both regionally and globally in efforts to resolve issues that hamper international collaboration, as well as a significant political, economic and cultural partner for Denmark.
2. Analysis of the national context. In 1992 Mozambique finally managed to extricate itself from a conflict that had shattered what little economic and social infrastructure the country had when it broke out 16 years earlier and left it the poorest country in the world, with at an annual per capita income of 90 US $. While Mozambique is 2
often hailed as an example of a country that has managed the transition from conflict to peace and stability, the massive destruction of social capital and set- back for the human perspective provoked by the conflict continues to frustrate nation building and development efforts. In the absence of genuine and broad based reconciliation, old animosities continue to shape the political and social landscape with exclusion of the opposition and its supporters from political power, public office and economic opportunities. Moreover, the conflict left many people traumatized and in a confidence deficit with little trust in institutions and appetite for risk taking, including in the economy. 40 years of cooperation between Mozambique and its development partners has been premised on the twin goals of assisting the country to transit from conflict to peace and supporting the development of Mozambique into a stable and prosperous nation with its people enjoying considerable improvement in their living conditions. While Mozambique has achieved steady improvements in health, education, water supply and sanitation since the Peace Agreement in 1992, the income of poor households stagnated between 2003 and 2009, with subsequent trends not yet documented. Available data suggest that growth has been much less pro poor than the average for Sub Saharan Africa, and that the difference is primarily explained by the fact that some regions trail far behind others in terms of growth in income in poor households. The large revenues to be generated from the exploitation of Mozambique’s vast resources of coal, gas and other mineral deposits could help catapult the country along the way towards an inclusive growth model where the majority of people have opportunities for both contributing to and benefitting from economic growth. But as experience from other countries wealthy in mineral resources shows, there is also a real risk of setting in motion a negative spiral where the economic interests of the elite prevails to the exclusion of the majority of the population, economically as well as socially and - by implication - also politically. Over the years Mozambique has managed to increase its internal resource mobilization considerably. It now stands at around 26 % of Gross Domestic Product (GDP) on par with the Southern Africa Development Community (SADC) average. Despite strong performance on revenue collection, Mozambique also faces problems with tax evasion including through mispricing practised by companies operating in the extractive sector. It is a particular challenge for the tax authorities in a low income country to see through the sophisticated price and accounting structures of big internationally integrated companies. While development aid has grown in absolute terms, it dropped from around 70 % in the 1990’s to just below 30% as a percentage of public spending today, with internal revenue accounting for most of the balance. A consistently strong macro-economic performance, a high growth rate and the prospects in the mineral sector have led to a surge in interest in investing in Mozambique. Incoming FDI is high and particularly directed at extraction of mineral resources. The Mozambican elite is jockeying for positions in relation to these investments and a considerable part of public or publicly guaranteed investments are sucked into the creation of infrastructure around the extractive complexes. Corruption and misuse of public office is a widespread and serious problem in Mozambique. Comprehensive reforms of public financial management carried out over many years, with support also from Denmark, has significantly reduced the space for misuse of funds on the state budget, although petty corruption in contacts between civil servants and citizens is widespread. With the investment boom, however, grey areas have spread around the state’s participation in economy through State Owned Enterprises, Public Private Partnerships and guarantees.
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The boom associated with the extractive industry, first and foremost coal and natural gas, has raised the expectations of people in general and the business/political elite in particular. The tasks is now to turn the dynamics around the mineral sector into a virtual spiral creating jobs and improvements in living conditions for everyone and preventing the country from spinning into a negative spiral fuelled by the exclusive interest of the few in maintaining privileged access to the returns from the extractive industry. Because of its highly specialized nature this industry will constitute an enclave without significant links to the wider Mozambican economy and employment potential for some time to come. Indeed, the main task wills be to manage its Dutch disease effects and avoid negative impact on directly affected populations and ecosystems. Revenue from extraction is not expected to flow to the state in significant volumes until round 2022, although significant windfalls have already been collected through taxation of capital gains. The recent drop in world market prices on coal and hydrocarbons have tempered expectations and led to a more realistic appreciation of the potential. In this situation, the need to invest in broadening the economy through enhanced productivity and diversification is attracting attention as a means of countering the price volatility of minerals and sustaining growth in the long run by turning the growth pattern more inclusive. As of January 2015 a new government has just been installed following the general elections held in October 2014. The elections were marked by irregularities. Although it is difficult to say whether the irregularities changed the outcome, this is certainly the interpretation of the opposition. The former rebel movement Renamo made significant gains and Frelimo lost its qualified majority. Prior to the elections, the country had been through a period of clashes between the army and the armed guards of the Renamo leader Afonso Dhlakama. These low-intensity skirmishes led to losses of lives and disrupted transport on the only highway connecting the North with the South of the country. The spectre of resurgence of civil war created considerable fear in the population and provoked several widely participated manifestations in favour of peace. The new president Felipe Jacinto Nyusi from Frelimo (Front for Independence of Mozambique - the governing party) made an unexpectedly conciliatory speech at the swearing in ceremony with a general invitation to the opposition and others who might feel marginalised to work with the government on the basis of his commitment to listen to, respect and integrate the views, ideas and concrete proposals of others. The speech contained a range of pronouncements on key governance and development issues which went a long way towards encouraging those – including the donors – disenchanted with the performance of the outgoing government. However it remains to be seen to what extent Nyusi has the power and independence from the former administration to put his laudable ambitions into concrete action. The new government appointed by the President did not constitute a break with the past in that all ministerial and provincial governor nominations went to Frelimo members, including a not negligible number of members of the former government. Yet, with 43 % of the seats in Parliament Renamo and the other opposition party Movement for a Democratic Mozambique should be able to challenge the initiatives of the executive and contribute to a real transition from a one-party to multi-party democracy. Unlike some other countries Mozambique has the advantage of a vibrant civil society and a relatively independent and critical press although particularly people in rural areas are insufficiently organized and have little voice. Mozambique’s winner-takes –all electoral system has contributed to consolidate Frelimo’s hold on power since 1992. Retaining a parliamentary majority the party has pursued its own political 4
programs with little involvement of the opposition. With the President’s prerogative on nomination of the heads of all key institutions in the public sector and the judiciary as well as provincial governors, and an informal system that ensures that only people with party membership get appointed to managerial posts in the public sector, including the army, there is no effective separation of party and state. This bias is mirrored to a considerable extent in the economy where favours and contracts are often granted on the basis of party affiliation or personal relations. And the stakes in being able to manipulate the means of the state for private and clientelistic purposes have only increased with the discovery of huge deposits of natural gas and the exploitation of coal. Throughout the 10 year reign of the former government the exclusive nature of decision making and benefit sharing has been reinforced by a centralization of power. The only de-central bodies with real electoral and some decision making autonomy are the municipalities, now ruling 53 cities around the country with some support from a small group of donors including Denmark. In this situation of marginalisation, the grievances of the opposition and their supporters have reached alarming levels and raised concern far into the ranks of the ruling party. Looking ahead development may take the direction of any one of a range of potential scenarios. At one extreme, the elite’s hold on political and economic power will be further consolidated based on a reinforcement of state capture to the exclusion of the opposition and communities who support it. A slightly different configuration of people in the elite may emerge to benefit and a certain level of public expenditures upheld to try to avoid revolt and legitimize the party’s hold on power in a de facto one-party-state. In this scenario the extractive industry is likely to remain as an enclave with few positive linkages and considerable risks to the wider economy. This exclusive model can only be upheld in the face of the growing opposition it is likely to create, by using the coercive means of the state. This will require excessive defence and security spending and may not prevent low intensity conflicts and bids for cessation coming from the Centre of the country. At the other extreme, the moderate and development oriented forces within Frelimo will prevail and succeed in attracting support for a more conciliatory approach to the opposition and its supporters and for a government program with a much stronger focus on bringing poor people and marginalized regions into the mainstream of growth and development. Here, the multi-party democracy stands a much better chance of succeeding. Between these two extremes – the exclusive economic and political model and its inclusive opposite – stretches a continuum of more probable intermediary outcomes. Mozambique’s external partners and perhaps most notably the G19 continues to wield sufficient power to be able to influence the direction the country will take, both through the political dialogue and the investments it makes to improve people’s lives. However, it will be hard work to overcome the resistance from some G19 members to maintain a critical dialogue in support of an inclusive outcome because of conflicting donor interests and ideas about the level of influence the donors should seek. To pave the way for a more inclusive growth pattern in Mozambique it is necessary to strengthen the institutions for accountability and to invest in a growth pattern, where the majority of the population including today’s poor come within reach of real opportunities for increasing their income through better jobs and business activities. This in turn will generate demand for effective development spending also of the future income from the extractive industry, as well as capacity to absorb revenue effectively to this end.
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Today, a sizeable share of the population is engaged in low productivity and poorly remunerated occupations in agriculture and micro enterprises. While this is certainly better than unemployment, poor households will only be able to raise their income if they can respond effectively to market opportunities and access better paid jobs. Investments in human development continue to be of key importance also to this agenda, but other constraints – physical as well as human - seem to be binding growth and productivity development in parts of the economy with potential for creating jobs. These constraints need to be much better understood, and addressed. While the financial importance of external aid is declining due to growing revenue collection, it is expected that development partners can continue to make a strong contribution to progress in the country for another 10 years or so, particularly if they focus on strategic areas where they can add value. Over the years, the Government and donors have developed a robust framework for development cooperation based on mutual accountability over development results and aid effectiveness. This is the so-called G19 partnership which provides the only comprehensive framework between donors and the Government for political dialogue, negotiation of performance targets and monitoring of results. Built by donors providing general budget support starting in 2003 with Denmark as one of the founding members, the partnership also monitors the other aid modalities and the total portfolio is around 2 billion US $ a year. Countries not providing budget support can be associate members of the G19, provided that they agree to respect the principles of mutual accountability and alignment of their portfolio to the Government’s plans and procedures as well as financial and monitoring processes. The G19 partnership is now being tested in several ways. Growing commercial interest on the part of some traditionally like-minded donor countries have tended to cool their interest in pursuing the frank dialogue with Government on sensitive issues which has been one of the hallmarks of the partnership. The declining relative importance of aid as a source of financing the Government’s programme combined with its access to new partners such as the BRICS (Brazil, Russia, India, China and South Africa) and new sources of finance have encouraged the Government to take a more assertive stance vis a vis the donors. And declining interest from donor headquarters in the aid effectiveness agenda following the Busan Conference on International Development means that it is a much more uphill battle for embassy staff and their government counterparts to secure a desirable degree of alignment and harmonization of external aid. Through its foreign policy Mozambique contributes constructively to the resolution of international tensions and some of the other collective action problems that beset the region and the World community. Notwithstanding the political tensions, Mozambique cherishes its own rich and diverse culture and history as an important factor of national strength and unity. In many areas Denmark and Mozambique share important values, and there will be opportunities for working together, including on human rights issues such as Sexual and Reproductive Health and Rights (SRHR), gender equality and the elimination of torture in the United Nations and elsewhere. As Mozambique develops further we expect it to play and increasingly strong international role, both commercially and as a positive force for stability and other global goods benefitting the world community. As long-standing partners, Denmark expects to see its relationship with Mozambique grow still stronger with time, in political, cultural and commercial terms. Denmark has been engaged in Mozambique since independence and many Danes have spent considerable time in the country as volunteers, development workers or in business positions. A considerable number of these “friends of Mozambique” have chosen to settle in the country and now run a variety of businesses. They – in their turn – have contributed to attracting others. These are all 6
important ambassadors for the close relationship between Denmark and Mozambique as are the many Mozambicans who have come into contact with Denmark and the Danes over the years. Several Danish Non-Governmental Organizations (NGO) are operating in Mozambique and some have been active for very many years. They continue to make a fundamentally important and complementary contribution to development in the country, through mobilization of local communities around key development challenges and advocacy. This also applies to the Mozambican private organizations which Denmark supports in all areas of the programme. Some of these have turned into prominent watchdogs and as such play an indispensable role in calling for and at times succeeding in securing a higher degree of transparency and accountability in government action, also in relation to the development of the mineral industry. Because of the recent political transition, the new government’s short and medium-term plans are not yet in place. But the budget, the Five Year Plan covering 2015-2019 and the Poverty Reduction Strategy (PRS) or its successor are anticipated in March and April whence they can be used to influence the formulation of the country policy paper and the country program. As described above Denmark will encourage Government to develop these plans and strategies on the basis of the priorities indicated in this paper and in collaboration with the other donors in the G19. More elaborate analysis of the economic, political and social development in Mozambique, assessment of major risks and review of Denmark’s work in Mozambique will also be prepared in support of the formulation of the full country policy paper and the country program.
3. Strategic choices As described above, Mozambique is at a cross- road where hard decisions need to be taken to provide the foundations of an inclusive society. There is a window of opportunity right now for influencing decision making, but it is closing fast. Once revenue starts to arrive from the mineral industry in volume, it may be too late. Denmark has accompanied Mozambique as a development partner and through interaction between companies, organizations and people since Independence. It is considered by many as a dependable and predictable partner and one that at times has gone to great lengths to meet the country’s needs in desperate situations. We have also taken on the task of providing support in some of the least popular and most difficult areas such as justice and we have worked both centrally and de-centrally to enhance the capability to deliver services to the poor in education, health, water supply and sanitation, energy, agriculture, fisheries and road construction in a public sector that was rudimentary at the outset. We have accumulated experience and contacts over the years from working with the private sector and civil society in numerous configurations and always with a keen eye on what works for the poor. Denmark is also known for keeping up a frank dialogue including on sensitive issues that beset the political environment and development work in the country - to the grief of some and recognition of others. This track record and our top ranking in international integrity indices provides us with sufficient legitimacy to continue the open and direct dialogue on sensitive issues like corruption and misuse of power without which external aid would be little more than free money. Despite this vantage point, the ambition to continue Denmark’s engagement in Mozambique with the overriding goal of helping the country maintain peace and emerge as an inclusive society in political, social and economic terms has considerable implications. It will require ability to stay focused on important things, remain involved despite set-backs and to respond to new challenges with flexibility.
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It will take investing in research to generate knowledge on the constraints that hold back the creation of jobs and business opportunities for the poor and engaging with the government, the private sector and other partners in systematic efforts to deal with them. A strong program aimed at improving the business environment for small scale farmers and entrepreneurs through a selective set of interventions should be a main pillar of Denmark’s engagement in the future. We will need to work hard and determined in the G19 to be able to collectively encourage the Government to design and implement a pro-poor medium term program. This program must reverse the biases in territorial spending, put the development of small scale agriculture and enterprises at the center of attention and deal effectively with the quality aspects that hold back improvements in health, education and other services. With continuous government support for system-wide reforms of the civil service and public financial management Denmark could provide support in these areas and also look for ways of strengthening fiscal management of the extractive industry. The provision of direct budget support is the most effective modality supporting dialogue with Government on overall policies and reforms as well as debate and follow-up on issues such as human rights, gender and environment that cut across all spheres and pillars of government. However, this requires a government program clearly directed at these challenges and a demonstrated will to deal with issues of integrity and accountability. In the absence of that, Denmark may opt for more peacemeal support for reforms in areas with a good track record and put more emphasis on alternatives means of ensuring that resources get to the people who need them most. Access to justice is essential for reconciliation and building people’s trusts in the ability of society to resolve conflict and rigorously enforce the law. As the only long-standing partner in this area, Denmark is in a privileged position to continue her work. In a reinvigorated reform environment there is an option for supporting both the formal justice system in combination with assistance to traditional justice. In the absence of that, it might be more effective to focus on informal justice and advocacy. Providing access to quality services in health is essential to raising the living conditions of the poor including their ability to earn a living. Denmark has been engaged booth at the central level and with a particular emphasis on Tete - the province now home to big investments in coal and agro-processing – and has a keen sense of how centrally planned reforms and interventions actually play out on the ground. We have also been in the forefront calling attention to the huge challenges associated with securing appropriate nutrition for people in many parts of the country and we have taken the lead as donors in supporting government in its efforts to deal with this cross-sectorial question. Denmark is committed to working for gender equality in all its dimensions and finds in Mozambique a strong partner in this respect. Mozambique has a well-articulated policy on gender equality and has made notable progress in a number of areas. Yet the backlog is considerable and efforts to address the many and serious outstanding forms of gender inequality are central to putting the country on a sustainable development path and Denmark will help Mozambique respond to this. Denmark is also in the forefront in efforts to tackle environmental disruption resulting from unsustainable production, consumption and human settlement patterns. Ironically the Mozambican economy is relatively green, because of the still underdeveloped state of its industry and agriculture. As the country addresses the overriding priority of reducing poverty through the creation of jobs and productivity development its ecosystem and natural resources will come under increasing pressure. Denmark stands ready to assist Mozambique prevent and mitigate environmental degradation resulting from industrialization, mechanization and urbanization as well as in the endeavour to adapt 8
to the impact of climate change. Denmark will actively pursue the possibilities for greening the Mozambican economy, including by tapping its own domestic knowledge and entrepreneurial capacity and with a keen eye on export opportunities for Mozambican companies. Conflicts over land are also becoming more frequent and acrimonious, including in the extractive industry. Helping farmers and local communities defend their rights to land and other natural resources goes hand in hand with the inclusive growth agenda and is also indispensable to finding lasting solutions to environmentally disruptive land use practices. There is a growing interest in investing in or doing business in Mozambique from Danish companies. These interests cover a variety of business areas and several ventures have been established with Mozambican partners. As Mozambique develops, it is natural that commercial and business ties between our two countries will become more prominent and relevant to the country’s emerging requirements, and Denmark will work to help ensure that these develop in a direction that are beneficial to both. Danish companies are already engaged in a range of sectors such as infrastructure, transport, energy, including the hydrocarbon sector, agriculture and services. Depending on the direction of growth of the Mozambican economy, this range may expand or stay largely the same. We will step up our work on commercial opportunities and keeping a watchful eye on aspects of our development work that may benefit from involvement of Danish companies. Involvement of Danish public institutions might also be relevant in areas such as taxation, green growth and geoscience related to the extractive industry. Building interventions on a thorough understanding of the political economy of growth and the constraints and opportunities facing particularly small-scale economic agents in the different parts of the economy is the key to achieving results both in development spending and private enterprise, and to avoiding costly mistakes. Strengthening the knowledge base for development is also indispensable to taking decisions that maximize the public and private returns to public spending and investment, and Denmark will continue to support Mozambican research institutions to this end. Support to civil society organisations working on advocacy and mobilization of people around common interests, including in farmer’s and business associations as well as trade unions, is a key element of the current program and one that is expected to play an even more prominent role in the future. The role of civil society is indispensable to keeping government accountable, providing voice and means of organization for the poor and others who are marginalized and to building bridges between communities and groups, the governed and the governing, in the spirit of reconciliation and dialogue. The staggering number of new jobs and business opportunities that are needed in Mozambique can only be created with a much stronger involvement of the private sector, both generally in the country and more specifically also in the Danish programme. Hitherto, development cooperation has been the main platform of collaboration between Denmark and Mozambique. With around 50 % of Mozambique´s populations still struggling to get by in absolute poverty, this is likely to continue to be so also in the next program cycle. However, as Mozambique develops, other aspects of this relationship will become more prominent – such as the commercial and political collaboration between our two countries – and eventually take over the role of prominence. On current trends, and assuming continued peace and reconciliation, Mozambique is expected to transit to middle income status within the next 10 to 15 years. While unforeseen changes influencing growth in the mineral and hydrocarbon sector could impact on the pace of transition, the important 9
thing to remember here is that Mozambique could reach the middle income average per capita income based on very different patterns of real distribution of wealth, including extreme scenarios of inequality with little change for the majority of the poor. The country policy paper should provide an analytically solid, politically robust and strategically consistent framework for our work in Mozambique in the next programme cycle leading towards that transition. Denmark believes that working together with Mozambican and development partners to define and achieve common goals and aligning external aid to government and partner systems are the keys to achieving results. A strong commitment to harmonization and alignment will therefore also guide Denmark’s approach in the partnership in the coming program period but we should expect to have to work harder to achieve this in the somewhat less amenable environment. We will continue to work closely with partners and particularly likeminded donors from within and outside the Nordic+ (the Nordic countries, UK and Ireland), configuration in the G19 to ensure that current efforts to reform the partnership results in its maintenance as an effective platform of dialogue and results monitoring. And we will work with the EU and relevant MS, particularly on political governance but also around joint programming if this emerges as a viable option. Inequality and exclusion has attracted attention worldwide at the highest level because of the disquieting growth in inequality in many countries – both and rich and poor – and the extreme accumulation of wealth in the richest centile of the world population over the last 15 years. In Mozambique this debate has helped underscore concerns over the weak impact of growth on the income of the poor and a consensus appears to be emerging amongst the country’s external donors that inclusive growth with its emphasis on job creation and growth in the labour intensive parts of the economy is the appropriate response to the problem. While this is shared by some in Government including the new President -there are opposing forces and it will take a concerted effort to firmly embed this approach in the new administration. The International Monetary Fund has come out vocally in favour of this approach and Denmark will work closely with the IMF, the multilateral development banks, the EU and others who share this view and have the advisory and financial wherewithal to act on the agenda. The following strategic objectives are suggested for Denmark’s engagement with Mozambique in the period 2016-2021: 1. To secure peace, reconciliation and continuously improving livelihoods for the majority of the population by strengthening the ability of people to engage in productive and profitable economic activity in small-scale agriculture and in small and medium scale enterprises and by addressing market and policy failures that may prevent them from doing so. 2. To enhance the individual’s access and ability to exercise her rights and strengthen the contract between the governed and the governing for political, social and economic outcomes that benefit the many, through: a. Improved transparency, accountability and efficiency in the public sector; b. a justice system responsive to the needs of ordinary citizens; and, c. a civil society effectively influencing policy and outcomes for the poor. 3. To enable Mozambique to safeguard it-self against climate change and protect the carrying capacity of its ecosystems including through adoption of environmentally sustainable forms of production and consumption. 4. To help build stronger commercial, political and cultural ties between Denmark and Mozambique in support of the achievement of objectives 1-3.
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4. Suggested thematic areas for the country programme. There are many dimensions to an inclusive and sustainable economic, social and political outcome of development. Denmark cannot address them all but we will make our choices based on the considerations explained in the preceding chapter and in the spirit of ensuring a reasonable distribution of donor funding across the many areas in need of this. Looking ahead, we need to adjust the country programme so that it contributes effectively to the global and strategic objectives, reflects changing circumstances and so that it fits the requirement that Denmark should be working within a maximum of three thematic areas plus general budget support in any partner country. The following thematic areas appear as an effective choice for structuring the programme along the strategic objectives while securing a degree of internal coherence with the overall objective of the country programme:
Governance, peace and reconciliation: Support to public financial management, taxation, decentralisation, justice, civil society organisations and reconciliation. Human Development: Continued support to the expansion and quality improvement of health services and a stronger support to efforts in the area of nutrition. Inclusive and green growth: Through a value chain approach and based on strong growth diagnostics, the programme will help: 1.Strengthen the business environment and lifting constraints to growth in family farming and amongst Small and Medium-scale Enterprises (SME); 2. Strengthen the ability of economic agents to engage in domestic and international trade; 3. Supporting the capacity for environmental regulation and sound natural resource management as well as climate change adaptation. Budget support.
Human rights, gender equality and environmental sustainability will be tackled as transversal concerns as relevant in all these categories. The suggested developmental, political and commercial interventions have been identified to provide maximum synergy with ongoing efforts in the country. However there is also a clear element of internal synergy amongst the various components of the programme. Thus investments in human development and in physical and institutional infrastructure are supplemented by political dialogue and attention to governance. The approach is furthermore premised on a balance between support for central government and decentralization, with support to municipalities and districts seen as tools for furthering inclusion and strengthening local autonomy in a society still plagued by unequal distribution of power and resources. Support to the public sector will be balanced with strong support to both civil society organisations working with advocacy and mobilization of local communities and to the private sector, including to improvement of both the soft and hardware elements of the business environment as well as to mobilization and organization of small-scale farmers and entrepreneurs in associations. And support to the executive arm of government will be complementary with support to the rule of law through a continuation of the long-standing collaboration in the area of justice. Last, but by no means least, a continuation of general budget support allows us to participate in the political dialogue and discussion and monitoring of government-wide performance, that help secure finance of underfunded sectors and maintain a bird’s eye perspective on trends and challenges.
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With limited staff and budget, we need to make intelligent choices within these broad areas that will enable us to maximise the contribution, facilitate learning and avoid an unmanageable programme where the administrative burden prevents us from paying attention to strategic questions and dialogue. We will screen the elements that will eventually be suggested for inclusion in the programme very carefully, both for their overall relevance, effectiveness, efficiency and sustainability and from the perspective of our ability to manage the programme.
5. Results We expect both higher order objectives related to poverty reduction and nation building as well as objectives related to more intermediate development outcomes and indicators of individual activities included in and monitored as a basis of the programme.
6. Monitoring and evaluation. The country programme will be based on a strong and coherent results framework to be drawn from Government’s and partner’s own performance matrices and monitored, as far as possible, through partner accountability processes and jointly agreed donor mechanisms.
7. Process Action Plan. The process action plan for the preparation of the country policy paper is attached.
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