New diagnostic exercise provides first steps to building a comprehensive analytical framework that identifies institutional constraints to growth.

Read the Mozambique Institutional Diagnostic here.

Following Tanzania, Benin and Bangladesh, Mozambique joins the series of in-depth country studies aimed at developing an ‘institutional diagnostic’. This methodology, developed under the EDI project, enables policymakers to identify obstacles to sustainable and inclusive development and proposes institutional reforms to overcome them. While previous approaches drawing mainly on the analysis of existing indicators have provided evidence on the importance of institutions, they offered limited insights into how they matter and how they might be reformed. The diagnostic tool aims to fill this gap in the literature.

This diagnostic exercise comes at a crucial point in time for the land where the sunny sky is aqua blue, as described by Nobel Laureate Bob Dylan in 1975. Despite the gains achieved across many metrics over the years, the development history of Mozambique since independence in 1975 has also been characterized by unfulfilled hopes, continued conflict, calamities, and misguided policies. The discovery of some of the largest natural gas fields in the world has placed the country at a fork in the road, facing a choice between using the revenues effectively to tackle poverty and to promote inclusive development, or continuing on the present not sustainable and non-inclusive path.

According to the diagnostic, the existing institutional weaknesses and their socio-economic consequences can be traced back to a series of proximate causes. A step further is then taken to uncover the underlying deep factors, which condition the potential for institutional reform. The establishment of this chain of causation and the different elements of the political economy analysis are key contributions and highlight the policy relevance of the study.

Professor Finn Tarp, Principal Investigator of the Mozambique study and Coordinator of the Development Economics Research Group (DERG-UCPH) as well as UNU-WIDER Non-Resident Senior Research Fellow, says:

“The present study has been carried out under difficult circumstances. I am deeply grateful to all those colleagues and friends, who have contributed to helping bringing us this far. It is my sincere hope that this study will help generate reflection, debate and more informed policy decisions in a country that is close to my heart, and whose population deserves a brighter future than what they have experienced since I first arrived in the country in 1980.”

The step-wise nature of the diagnostic exercise is mirrored in the different parts of the study. It starts with a general reflection on the economic and political history of Mozambique, combined with an analysis of the institutional performance of the country based on existing indicators, a quantitative questionnaire and qualitative interviews with key informants. They highlight the lack of a single domestic driver of growth and economic transformation and the limited time available to build the institutions needed to support inclusive development. Furthermore, they point to the need to delve more deeply into determinant sectors and key areas for development, which is done through a series of thematic studies written by a selected group of experts, who have first-hand experience from work in policy-making and research. The thematic studies aim at identifying the way in which institutional weaknesses are obstacles to sectoral or general development and discuss how to remedy them given the political economy context.

The different elements of the diagnostic are combined in the final synthesis, which starts by distilling the basic institutional weaknesses. These include problems in the implementation of formally approved plans and strategies, different elements of weak state capacity, the dependence of the judicial power on the executive and the pernicious effects of corruption and lack of transparency. It then extends the analysis by establishing different causal links with proximate causes and deep factors. These include the physical and human geography of the country and the consequent lack of integration and a diminished sense of unity, as well as the legacy of the colonial and socialist periods. Geopolitical factors, such as the neighbourhood with South Africa and the dependence on external finance, had crucial impacts, namely on the lack of agency of the country and the instability in development strategies. Of central importance are the imbalance in the distribution of political power and the merging of political and economic powers, as well as the protracted effects of armed conflict and political violence. Finally, the diagnostic points to the role of the natural resource sector and associated risks for rent-seeking and elite capture.

In closing, the study reflects on key areas for institutional reform, suggesting a way forward at the fork in the road. Highlighting the uniqueness of this moment for a country with a complex but extraordinary history and development path, the diagnostic proposes a series of measures deemed critical for pro-poor structural transformation and broad-based development. Even if some may be difficult to implement and require fundamental challenges, they are a first step to stimulate informed national reflection and debate.