Natural resource management and FDI: Challenges for Mozambique

Mozambique made a transition from a resource-poor economy at the end of the 1990s, when over 60% of export revenue was derived from agriculture and fisheries, to a resource-rich economy today, with natural resources accounting for over 60% of export revenue. The importance of natural resources is set to expand much further during the next decade, with the discovery of large amounts of natural gas in the northern province of Cabo Delgado. The commercial development of these gas fields will profoundly impact the Mozambican economy and society. In this context, there is a wide range of policy issues that merit close reflection and analysis.

How can Mozambique maximise the benefits generated by natural resource discoveries and how can it avoid the pitfalls that some other natural resource-rich economies have fallen victim to?

During this IGC workshop, co-organised with the Mozambican Ministry of Economics and Finance, these issues were discussed through the presentation of preliminary results from two studies.

• By examining large natural resource discoveries and FDI flows worldwide, Gerhard Toews (Centre for the Analysis of Resource Rich Economies, University of Oxford) and Pierre-Louis Vezina (King’s College) find that such discoveries are typically followed by a boom in FDI inflows in non-resource sectors, possibly driven by expectations of future developments. Furthermore, for the case of Mozambique, they find that the surge in FDI that immediately followed the gas discovery had a positive impact on job creation, suggesting that openness to FDI is crucial.
• The other study, by Pedro Vicente et al., evaluated the impact of the provision of information to local communities about the natural gas developments, while also distinguishing between the impact of different forms and channels of information dissemination. The baseline survey revealed that more than half of the people of Cabo Delgado have never even heard of natural gas, suggesting that there is a lot of work to be done in this area.

The final agenda of the workshop can be found below.

For more information, please contact the IGC Mozambique team: [email protected]