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Mozambique should revisit the terms of its mega project contracts with a view to ensuring that the country's citizens derive more benefits, the new CEO of Millenium bim, Mozambique's largest bank, said in a recent interview.

"I think the mega projects have to be revised for the (benefit of the) people of this country," Manuel Marecos Duarte told Dow Jones Newswires Thursday. "There's a need to review these great projects."

A debate is currently being disputed in local media regarding whether mega projects such as the Mozal aluminum smelter, the largest single contributor to the country's gross domestic product, contribute enough taxes to the country.

The Governor of Mozambique's central bank Ernesto Gove said earlier this month that the economic and social conditions now exist for the government to renegotiate contracts signed with some of the mega projects, according to a report from the Agencia de Informacao de Mozambique.

The early mega projects, including BHP Billiton Ltd's (BHP) Mozal joint venture in Maputo and the processing of natural gas in Inhambane province by the South African petrochemical giant Sasol (SAS.JO), have come under frequent criticisms for the generous tax exemptions granted by the government.

A new slate of mega projects such as Brazilian miner Vale SA's (VALE) $1.66 billion Moatize coal project have also come under fire for tax schemes that favor lower payments at the beginning of a project and higher tax payments later on.

Fiscal incentives were granted to Mozal in order to attract the flagship investment to the country. The plant was built in 2000 and was seen as a showcase to the world that Mozambique was a safe place to invest after nearly a decade and a half of civil war. In Vale's case, such tax regimes are routine fiscal incentives use by governments around the world to attract investors; they allow investors to recoup their return on investment more quickly.

Duarte, who assumed the helm of Millenium bim in early February, said he didn't dispute the overall benefits of mega projects but noted that the terms of the contracts could be revised in order to provide greater benefits to Mozambique.

He said the mega projects are a boon to the economy because of the commerce that emerges around these projects. "It is this business around the mega projects that (we) want to have. This is (our) market," Duarte added.

Millenium bim, a unit of Portugal's Millenium bcp or Banco Comercial Portugues SA (BCP.LB), is Mozambique's largest retail bank accounting for almost 40% of the country's bank credit and 35% of its assets. The bank has the largest retail network in the country with 126 branches spread throughout the country. It wants to increase its number of retail bank accounts in a country of more than 22 million people to more than 1 million accounts in 2011, up from about 900,000 accounts in 2010.

Duarte said the bank's expansion strategy is closely aligned with the government's desire to see financial services expand into rural areas. The bank plans to open 13 new branches in 2011, up from 10 openings in 2010. Three of the new openings will occur in urban areas and 10 will be in sub-urban areas.

In the western province of Tete, the bank is adding three new branches to its existing network of six branches. The new branches will cater to the growing number of people and capital flocking to Tete as large mining companies such as Vale and Australia-based Riversdale Mining Ltd (RIV.AU) begin to exploit the province's vast coal reserves.

Millenium bim is also reaching out to more inaccessible customers via mobile phone banking. "We want to be the bank of the Mozambicans," Duarte said. He noted that the bank was solely focused on retail banking and had no ambition to expand into corporate or investment banking in Mozambique.

When asked if there was room for consolidation in Mozambique's banking sector, Duarte said there wasn't much interest on Millenium bim's part to take part in that consolidation. He noted that the top four banks already account for about 90% of the retail market while the remaining 18 banks are mostly micro-credit banks that charge very high rates for their loans.

-By Alex MacDonald, Dow Jones Newswires; +44(0)7776 200 924; alex.macdonald@dowjones.com

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