Moçambique on-line

Paper submitted to the conference
Towards a New Political Economy of Development
Sheffield 3-4 July 2002

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Are donors to Mozambique promoting corruption?
Joseph Hanlon, Open University

"Corruption", elite predation, and the "criminalisation" of the African state have become fashionable topics. "Africa remains unproductive and … the pursuit of rents or unearned fees is becoming ever more extensive," writes Béatrice Hibou (1999:100-102), adding that the bureaucratic apparatus, including the courts, is being privatised and criminalised; bank and company frauds burgeon; and drug trade and money laundering are becoming ubiquitous.

But World Bank researchers find that "foreign aid can induce corruption" (Pradhan 2000: 35) and that there is "no evidence that donors systematically allocate aid to countries with less corruption" (Svensson 2000: 437).

Mozambique seems to fit the pattern. From having been a paragon of integrity in the late 1970s, a study by the South African Institute of Security Studies (ISS) "clearly shows … that Mozambique is very close to becoming a criminalised state." The legal system has collapsed and court rulings are available to the highest bidder. Money laundering is common, and Mozambique has become an important drug warehousing and transit centre, with senior figures involved (Gastrow & Mosse 2002). In two major bank scandals, at least $400 million was stolen, partly by senior figures in Frelimo, the ruling party. Two people who tried to investigate the bank frauds, newspaper editor Carlos Cardoso and the government's head of banking supervision, Siba-Siba Macuácua, were both publicly assassinated and the investigations of the killings blocked at high level (Hanlon 2001, 2002a, summarised in 3.4 below).

Donor support seems to grow in tandem with criminalisation. At its donor Consultative Group meeting in October 2001, just two months after the murder of Siba-Siba Macuácua, Mozambique asked for $600 mn in aid and was given $722 mn. Sérgio Vieira, a former security minister, wrote that the pledge of more money than Mozambique requested shows that the international community recognises "the good performance of the government" and that this "overrides the bank scandal and the assassinations of Siba-Siba Macuácua and Carlos Cardoso" (Domingo, 2 Dec 2001).

In this paper I will argue that Vieira's statement is correct - that donors are rewarding what they see as "good performance" by allowing, and thus effectively encouraging, corruption and state capture. Furthermore, I will argue that donors are rejecting appeals from honest Mozambicans to do more than simply pay lip service to the need to curb corruption because they need the myth of the Mozambican success story.

In the following four sections we will look at: 1) the highly conflicting views of Mozambique, as a development success story or a criminal state, 2) theories of corruption and how that affects donor response, 3) long term perverse effects of aid policies, and 4) conclusions.

1. Looking for what you want to see

On the issues of both corruption and development, donors and some Mozambicans seem to see totally different countries.

1.1 'Criminal state' or 'corruption not institutionalised'?

"Corruption, though not non-existent, is not institutionalised and the possibility for controlling funds earmarked for Mozambique is easy and transparent," said Guido van Hecken, Belgium's Chief of Cabinet for the State Secretary for Development Co-operation (IRIN 2002a).

"We live in a kingdom where those who lead are gangsters," said one of the country's foremost writers, Mia Couto, last year (Mosse 2001). On 24 May 2002, Couto added that in Mozambique an elite is using power "in order to enrich itself. They don't think of Mozambique, they think of themselves" (AIM 2002a). ISS says "there is a lack of political will to fight organised crime and corruption" and that "the relative impunity with which some of the successful [drug] traffickers operate is often a result of their close connections with individuals at the highest levels of government or the Frelimo party." (Gastrow & Mosse 2002)

In a brave statement to parliament on 6 March 2002, Attorney-General Joaquim Madeira pointed to "the growing tendency for illegality to gain supremacy over legality, the dishonest over the honest. He said that "the culture of legality is still a dream, even among leaders who believe they are free or not to respond to requests by the Attorney General's office." As part of corruption investigations, Madeira sent requests for information to four ministers - one sent the material requested, one telephoned to say he would not respond, and two did not respond at all. (Madeira 2002)

Madeira pointed out that foreign investors have told researchers "about the extra-legal conditions that are habitually imposed on them by Mozambican government leaders, ranging from demands for enormous commissions to a partnership in the undertaking."

Corruption in the Criminal Investigation Police (PIC) comes in for special attack from Madeira. PIC does not process and even destroys the files on money stolen from banks and government. It has even blocked investigation of cases brought by the central bank, Banco de Moçambique. Judges and state attorneys are also corrupt, Madeira told parliament, adding "we had no idea of the scale of the involvement of judges and even lawyers in business deals. Even the fees of lawyers are fixed by a sentence outside the law, to be shared with the judge in question." Magistrates and justice officials "accumulate fortunes through illegality." (Madeira 2002)

1.2 Best economy or increasing poverty?

Mozambique continues to be one of the best performing economies in Sub-Saharan Africa, according to the World Bank economist in Maputo, Dipac Jaiantilal (Mans 2001). "Mozambique over the last decade has emerged as an example of successful reform," notes the World Bank. "GDP has grown at an average rate of 8.4%" (Stern 2002: xvi,39).

"Ordinary Mozambicans have yet to see any real changes in their daily lives, despite official World Bank figures," according to an article published by the United Nations Office for the Coordination of Humanitarian Affairs Integrated Regional Information Network (IRIN 2002b). This is confirmed by a public opinion survey which showed people do not feel their standards of living are improving. In a survey of 13,790 households undertaken by the National Statistics Institute (INE) between October 2000 and May 2001, people were asked to compare their situation with what it had been a year earlier; 35% said they were in much the same situation as a year previously while 38% said they were worse off (AIM 2001).

"The declared successes have not yet produced tangible results for the majority of the population. Rising unemployment and extremely high levels of absolute poverty are producing, among other aspects, adverse social effects and rising crime," writes Prakash Ratilal (2001a), a former governor of the Bank of Mozambique.

Although GDP is supposedly growing rapidly, it is concentrated in Maputo and in mineral-energy enclaves like the billion-dollar Mozal aluminium smelter. The latest UNDP National Human Development Report for Mozambique (UNDP 2001) shows that in the 2 years 1997-1999, "real GDP per capita" in Maputo rose from $1076 to $1189, but in the same period "real GDP per capita" in Zambézia fell from $106 to $96 - in just two years the ratio between the richest and poorest provinces increased from 10:1 to 12:1. Regionally in those two years, "real GDP per capita" fell in both the centre and north, rising only in the south.

Unpublished preliminary data for 2000 shows a dramatic fall in GDP per capita throughout the country, to below 1996 levels. The fall is not just in the south, which was affected by a major flood in 2000, but also in the north. "Real GDP per capita" in Zambézia fell to $78, and two northern provinces fell below $100 for the first time. In Maputo, "real GDP per capita" also fell, but not nearly as much, and the ratio of the richest to the poorest province increased to 14:1.

1.3 The donors see what they want to see

Are van Hecken and Madeira talking about the same government? Are the World Bank and UNDP talking about the same country? Yes they are, because it all depends where you look.

"It is possible to work with Mozambican authorities," said van Hecken. That is the key point. Mozambique has become a donor playground, and the Mozambican elite has become highly skilled at giving the donors what they want. Thus management of donor money is transparent and clear. The predatory elite do not steal donors' funds; instead they rob banks, skim public works contracts, demand shares in investments, and smuggle drugs and other goods - and they ensure that the justice system does not work so they cannot be caught.

Similarly, donors see rapid GDP growth, growing exports, increasing enclave foreign investments, growth in the areas of Maputo that they frequent, and a government which does the bidding of the international financial institutions (IFIs) and can manage donor projects. They choose not to see that poverty is worsening in rural areas.

Indeed, they reject what they are being told by Mozambicans. The donor's annual Consultative Group (CG) meeting was held in Maputo 25-26 October 2001. After meeting with each other and the government, and heaping praise on the government for following IFI economic policies so closely, they met civil society. "Several civil society organisations (CSOs), in a consolidated statement, stated their belief that structural adjustment and high growth had not resulted in poverty reduction in Mozambique", according to the meeting chair Darius Mans, World Bank Country Director for Mozambique (Mans 2001b). The report indicated no donor reply; they seem not to have heard.

The Poverty Reduction Strategy Paper (PRSP, known in Mozambique as the Plano de Acção para a Redução da Pobeza Absoluta (PARPA), Action Plan for Reducing Absolute Poverty), show the differences of opinion starkly. In his report on the CG meeting, Mans (2001b) reported that "there was widespread agreement [of the donors present] that the most significant achievement of the last 12 to 18 months has been the completion of the PARPA." Mans went on to note, without comment, that "a number of CSOs expressed concerns about health and education spending, which they claim is projected to decline as a percentage of GDP after 2002." Indeed, the PARPA shows that spending on "priority areas" for poverty reduction falls from 19.4% of GDP in 2001 to 17.0% of GDP in 2005. Education spending falls in cash terms as well as percentage terms, from approximately $247 mn in 2001 to $218 mn in 2002 (a savage 12% cut), rising slowly after that to $244 mn in 2004 and finally to $262 mn in 2005. Despite the admitted need for more teachers, not only to expand primary education but also to replace teachers dying of AIDS, teacher training expenditure is kept constant (República de Moçambique 2001: tables 7.4, 7.5, 7.6).

How can donors praise a "poverty reduction" paper that cuts spending on education and other areas of poverty reduction? The answer is that it satisfies other donor demands, and this is made clear in the arcane language of the international financial institutions. In his report on the CG meetings, Darius Mans cites the World Bank economist Dipac Jaiantilal noting that poverty reduction requires "creating and maintaining a sound economic environment, including low inflation." (Mans 2001b) The World Bank praised the government for including in the PARPA tight monetary policies to "slow inflation" (World Bank 2001).

Reporting on the statement of the IMF Resident Representative Arnim Schwidrowski, Mans says "Mr Schwidrowski observed that, in line with the PARPA's fiscal targets, the framework aimed for a reduction in the domestic primary deficit, excluding bank restructuring costs, to under 5 per cent of GDP." (Mans 2001b) This sentence makes two very different points. First, to meet tight monetary policies, PARPA does indeed involve a cut in spending. Second, so long as the cap is met, the IMF will allow the government of Mozambique to plug the hole in the banking system created by high level people plundering the banks instead of increasing anti-poverty spending.

Taken together, the donors are making three points about their own priorities:

1. That writing a document, rather than any concrete action, was "the most significant achievement of the last 12 to 18 months";
2. That the priority for "poverty reduction" is inflation reduction and a tight monetary policy, even though it requires a cut in education and other poverty related spending; and
3. That the government is free to use money to cover the costs of gross corruption, so long as it is done transparently and without breaking the spending limits.

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Moçambique on-line - 2002

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