Accelerating Inclusive Growth

1. Accelerating Inclusive Growth John Panzer World Bank

2. Bottom Line Principles • Focus and support the rural economy and self-employed in urban areas through both general as well as specific active polices • Exploit and take advantage of natural resources. They are central. But, they need to pay their share and be taxed • Social Protection

3. Motivation • Mozambique has enjoyed rapid sustained growth • But clear indications on limitations in building national industry and agriculture that create jobs and reduce poverty • Need lots of growth even to reduce poverty moderately • Business as usual is not an option: dual challenges • Sustain High Growth • Have Growth that is more inclusive & successful in reducing poverty

4. Structural Issues to Consider • Expectations need to be realistic and account for structural issues that condition how to meet the challenge • Still in early stages of economic and demographic transition from a rural economy; Increase productivity in agriculture • Despite recent achievements, people enter the labor force with very low levels of education; Condition job opportunities on the supply side

5. Structural Issues: Implications • Agriculture and rural development are critical →Increase productivity, move up in value chain, rural enterprises • “Informal jobs” or household production are critical for growth and poverty reduction →Increase productivity • Coexist with a growing modern sector that has its own dynamic • “The Sandton Economy”. Fast growing modern businesses anchored on the development of natural resources

6. Structural Issues: Role of the State • Mozambique needs “both economies” to do well to grow and reduce poverty • Different role of the State • Rural and Informal State that facilitates public goods and has proactive policies to help increase productivity • “Sandton Economy” needs a contribution from the revenue side to help finance the modernization or transition of the “less developed economy”

7. Structural Issues: Tensions • Inevitable social and political tensions as transition will probably lead to increased inequality • Need Safety Nets • Development will not be harmonious. Geographical distribution will be determined by pull from natural resource development • Need to tax and redistribute

8. Policies For Growth And Jobs In Less Modern Sectors • Much can be done with good Results • Combinaton of Passive and Active Policies • Passive (Red Tape, Education, Labor Legislation, Trade Facilitation, Land into Production) • Active • Focus on accelerating economic activity in promising areas • Requires choices and risk-taking

9. Active Policies • Choices: Impact, Chance of Success, Endowment, Opportunities, Signs of Emerging Issues • Areas: Knowledge Transfer Bundle Assistance / Coordination • Public • Private • Essential: Accountable Institution To Lead • Small Office Under Prime Minister or President • Convening Power, Solve Problems, Brief PM

10. Policies for Natural Resource Based Sector • Avoid regulatory capture (BP-ENV) • Rigorous cost-benefit • Fair, efficient, and transparent taxation • Social Accountability

11. Conclusion • Few countries blessed with initial conditions of equity leading to harmonious development • Not the case for Mozambique • Great opportunities, navigate choppy waters • Avoid capture • Strengthen focus on less modern sectors • Social protection • Can be done incrementally & needs to be sustained • Needs focus and your leadership