Mozambique and the Mozal Aluminum Project: perils of megaproject-led economic development
Wood, Colin H.
- Submitted in partial fulfillment of the degree of Master of Arts in Law and Diplomacy at the Fletcher School of Law and Diplomacy. Abstract: Macroeconomic trends and micro-level econometric impact evaluation analysis of Mozambique's industrialization strategy reveal the potential perils of 'megaproject'-led growth. Beginning in the early 1990s, Mozambique adopted a wide range of economic policy ... read morereforms advocated by the multilateral donor community under the umbrella of the Washington Consensus and with a particular emphasis on large industrial projects. The $1.4 billion Mozal aluminum smelter kickstarted this approach in 2000, when the country's GDP was $1.7 billion. Mozambique subsequently attracted large amounts of foreign investment in the form of megaprojects, which served to offset a long history of external imbalances. While these projects improved Mozambique's balance of payments, the progression towards heavy foreign investment in extractive industries has created a vicious circle of deteriorating governance, declining foreign aid, and further reliance on extractive industries. The development implications of this shift are growing income inequality and chronically high unemployment for the bulk of Mozambique's citizens. The strongest evidence of the perils of Mozambique's megaproject-led growth to achieve development goals can be found at the microeconomic level. The International Finance Corporation was one of the main sponsors of the Mozal plant on the premise that it would aid Mozambique's economic development both in terms of job creation and backward linkages to other industries but also through sponsorship of a trust focused on educational and health programming in the vicinity of the plant. Survey data conducted by Demographic and Health Surveys of 1,968 individuals in 1997 and 2,774 individuals in 2003 allow for a difference-in-differences econometric analysis of the impact of industrialization on a range of development indicators around Mozal compared to neighboring Gaza province. This analysis shows development indicators related to educational attainment declined in relative terms, as did access to running water and the share of female employment. Improvements came mainly in the form of purchased assets such as phones and refrigerators. The impact on health indicators is mixed, although it appears knowledge of AIDS declined relatively in the industrialized areas. Possible explanations for these findings are both a rise in slum living conditions and migration of less educated individuals in search of work but also higher incomes.read less