Dynamics Of Natural Gas Industry And Economic Growth In Mozambique

In Mozambique,the first large-scale commercial production of natural gas was implemented in 2004.The recent discoveries of natural gas in Rovuma Basin place Mozambique in the top ten countries with the most natural gas reserves in the world.It is bringing high expectations among Mozambicans that it would lead to contribute to the socio-economic development of the country alleviating Mozambique's economy hardship and consequently raise the population's standard of living.The use of natural gas is increasing in the world and it is motivated by climate change policy regarding its CO₂ less emission and for having fewer pollutants.This is an empirical study which investigates dynamics of the natural gas industry and economic growth in Mozambique for the period of 1999 to 2015.Times series data is collected from Index Mundi,produced by World Bank and it includes export and labor.This study employs Error Correction model using Eviews 7.2 software.Results report that the natural gas industry,export,and labor are positively cointegrated with economic growth,and they have a long-run relationship.In a short-run relationship,results revealed that the natural gas industry has a positive effect and it is significant to influence economic growth in Mozambique.However,export and labor contribution to economic growth is small.On the other side,export and labor affects each other: an increase in export will expand labor and vice-versa.The implication of these results is that government should implement a growth policy for the natural gas industry because it would stimulate economic growth.Therefore,the increase of economic growth will boost export and create more employment opportunities in the country.In Mozambique,the natural gas industry will experience foremost dynamics with the production of natural gas in Rovuma Basin scheduled to start by 2022 and it will play a great role to promote the economic growth of the country in the upcoming future.Therefore,the government should strictly observe the principle of transparency when assessing the natural gas industry;not only to ensure that this natural resource will contribute significantly to economic growth,but also make sure that its exploration will be sustainable.Transparency is completely necessary for all stages of the process when assessing natural gas industry such as bidding,licensing, negotiating,contracting,signing of agreements including information of volumes extracted,prices of the products,and revenue collected;because it will easily lead to the process of accountability,and thus prevent occurrence of internal conflicts.For the development of the natural gas industry in Mozambique,this study presents following recommendations:?i?Create a favorable environment for the natural gas industry development that would lead to investors' confidence,which includes a reduction of regulatory barriers;?ii?Promote the participation of local SME in the Rovuma Basin natural gas project as a way for them to gain business opportunities;?iii?Improve the legal and institutional framework suitable for the development of natural gas industry in Mozambique;?iv?Support a policy of zero tolerance to possible actions of corruption;?v?Promote sustainable exploration of natural gas in compliance with environmental rules.This study fills the gap in the literature on dynamics of the natural gas industry and economic growth in Mozambique.Future research should focus on natural gas demand and supply;price regulation and the role of stakeholders in Rovuma Basin natural gas project.