BUSINESS ENVIRONMENT IN TANZANIA PRACTICAL ASPECTS

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BUSINESS ENVIRONMENT IN
TANZANIAPRACTICAL ASPECTS
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INTRODUCTION

• The Government of the United Republic of Tanzania
  is committed to the continued development of a
  liberalised market economy with the private
  sector as the engine of growth.
• Objective becoming a middle class country by
  2025 (Vision 2025),
• Role of State in developing market economy
• Various strategic reforms are implemented to
  create an enabling environment for the private
  sector to grow and become the engine of
  sustainable economic development.(1960s, 1970s,
  1980s, 1990s to 2009)

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Various Reforms Implemented

• Reforms implemented to strengthen Business
  Environment by GoT with support of DPs
• -Privatization(PSRP)- World Bank and others
• -BEST- DFID, Netherland, SIDA, CIDA, World
  Bank(Since 2002 to date)
• -SELF- (ADB)
• -USAID

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BEST -PROGRAMME

• Specifically aimed at strengthening Business
  Environment in Tanzania.
• BEST is facilitating ongoing reforms in the
  following Components( USD 157 Millions)
• (a)Achieving Better Regulations
• Business Licencing Reforms, Land Law Reforms
  , Labour law reforms, Taxation Reforms,
  Agriculture Reforms, Import/Export

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BEST -PROGRAMME

• (b)Commercial Dispute Resolution
• Capacity Building, Reforming Courts and
  Legal Procedures, Clearing Case Backlog,
  Alternative Dispute Resolution Mechanism
• (c)Change of Government Culture
• Intervention to improve Service Delivery the
  Public to the private sector.
• (d)Tanzania Investment Centre
• Support to strengthen the Tanzania Investment
  Centre
• (e) Private Sector Advocacy
• Enhance Private sector participation in
  Government policy and legislation reforms

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Specific BEST I-Programme Challenges

• Some achievement but still some challenges
• The programme did not adequately detail the
  sequencing and institutional arrangements for
  required specific reforms
• BEST phase I was designed n 2002, and remained
  static hence failed to address new challenges
  emerging
• Scope and administrative processes were not
  clearly documented and well introduced.

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Tanzania Doing Business Ranking
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Tanzania Ease of Doing Business Ranking

• Despite the macroeconomic achievements and strong
  growth in recent years, cost of doing business in
  the country remains high as observed by the
  private sector. This has been reported via
  different reports locally and internationally.
• Tanzanias record against the continents top
  performers shows a downward trend over the last
  three years

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Tanzanias record against the continents top
performers
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General Problems in Various Reforms

• Did not address key issues but addressed
  secondary issues
• Lack of proper sequencing (Critical path)
• No ownership in program Design
• Effective use of Business for Reform
• Capacity Gaps
• No Linkages with main Public Sector and Local
  Government Reforms
• Parallelism

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Performance of the Other Former Best Reformers

• Why this situation for the whole group of former
  Best Performers?

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Performance of the other former best reformers
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TANZANIA TRADE WITH EAC

• Tanzania Export to EAC has increased from 106.5
  million in 2007 to 315.5million in 2008.
• Tanzania Export to Kenya has increased from
  101.1 million in 2007 to 235 million in 2008
• Tanzania Export to Uganda has increased from
  46.1 million in 2007 to 53.8 million in 2008
• This shows a favorable Balance of Trade
• (Source BOT)

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TANZANIA TRADE WITH EAC(Source BOT)
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TANZANIA TRADE WITH KENYA

• Tanzania Export to Kenya has increased from
  101.1 million in 2007 to 235 million in 2008
• Tanzania import from Kenya was 100.1 million in
  2007 and 197.9 in 2008
• This shows a favorable Balance of Trade with
  Kenya in 2007 and 2008
• (Source BOT)

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TANZANIA TRADE WITH KENYA(Source BOT)
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Balance of Trade with Kenya (Source BOT)
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Historical Look at FDI in the NeighborhoodFDI
Inflows 1990s and 2004-07

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Historical Look at FDI in the NeighborhoodFDI
Inflows 1990s and 2004-07 Cont..

• NOTE The figure above compares historical FDI
  inflows for our neighbors. FDI Flow of Kenya in
  2007 reflects French Telecoms acquisition of
  majority share of Kenya Telecom.
• Tanzania is doing better than other East African
  Countries in FDI inflow (FDI Inflows in the
  1990s and 2004-07 data from UNCTAD, World
  Investment Report 2008).
• This situation has direct relationship with
  reforms on business environment that Tanzania has
  been implementing

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Historical Look at FDI in the NeighborhoodFDI
Inflows 1990s and 2004-07 Cont..

• Though Tanzania is leading in FDI inflow in EAC,
  Doing Business 2010 report on ease in doing
  Business has ranked Tanzania 131 while Kenya 95
  and Uganda 112

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Historical Look at FDI in the Neighborhood(2)Stoc
k of FDI in 2007(US millions)
Tanzania occupies 54.2 of total FDI flow to
East African Region. As Tanzania has seen a
longer period of political stability, its success
in attracting FDI is line with a number of
studies that have concluded that political
stability is the most prominent element to decide
FDI.
Rwanda 170
Burundi 48
Kenya 1,892
Tanzania US 5,942 Mil
Uganda 2,909
Data UNCTAD World Investment Report 2008
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Example of SME Contribution in Investment

• Growth in SMEs is an indication of the increase
  of local participation in investment.

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Micro Manufacturing Enterprises (Oil Extractors)
are growing(Example of SME contribution in
Investment)

SMEs Production of Sunflower oil has increased,
and this has attracted the production of
sunflower seeds which has increased by 500 in
last 4 years.
Sunflower Production Jumped since 2006
Source MAFSC
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TO SUMMARIZE THE INTRODUCTION

• Tanzania with support from her DPs has been
  implementing a number of reforms.
• Tanzania is doing better than other East African
  Countries in FDI inflow
• Tanzania is currently enjoying increase in export
  to its neighbours with favourable balance of
  payments.
• However, Tanzania is dropping in the Ease of
  Doing Business rankings.

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To improve Business Environment Tanzania in
a Practical Way

• Need for a well focused strategy
• To deal with primary issues
• To create ownership by all stakeholders
• To Streamline the programme with clear
  definition of roles
• To provide Capacity building to all stakeholders
• Linked to Sector strategic plans/MTEF
• Linked to all institutional levels (LGAs)

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STRATEGY FOR IMPROVING THE DOING BUSINESS
ENVIRONMENT

• The Government has read and discussed the recent
  trend of Tanzania ranking in various ease of
  doing business reports
• In order to improve the Business Environment, a
  comprehensive strategy is being developed.
• Task Teams have been formed to diagnose the core
  causes and come up with recommendations on how to
  improve Business Environment
• Each Task Team is lead by a Permanent Secretary
  from a lead Ministry and draw members from
  related institutions and the private sector.

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REFORM AREAS AND RESPONSIBLE INSTITUTIONS

• Starting Business and Closing Business
• Dealing with Construction Permit
• Employing Workers
• Registering Property
• Getting Credit
• Protecting Investors
• Paying Taxes
• Trading Across borders
• Enforcing Contracts

• PS-MITM
• PS-PMO RALG
• PS-ML
• PS-MLHHS
• Governor-BOT
• PS-MOCAJ
• PS-MOFEA
• PS-Home Affairs
• PS-MOCAJ

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CONCLUSION AND WAY FORWARD

• As observed by the private sector cost of doing
  business in the country remains high
• In response to that, the Government has set up
  task forces to review public business support
  policies, regulations and administrative
  procedures.
• Recommendations will be used to formulate a
  comprehensive Government led programme to ensure
  that Tanzania Doing Business Environment is
  ranked favourably locally and internationally in
  the near future.

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The Expected output will be as follows
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Next Steps

• Lead by Government and involve all other Key
  Stakeholders including Private Sector and LGAs.
  Civil Society will be invited to comment
• To be finalized in march, 2010 with clear short,
  medium and long term measures
• Will be streamlined to Government operations to
  avoid parallel structures
• Some required actions may demand reviewing
  and/or harmonizing some policies
  regulation/procedures.

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Next Steps Cont

• Will guide future sector strategic plans/MTEFs
  and budget allocations
• Capacity Building in all Government and LGAs to
  facilitate DB.
• Work in progress with Great ownership.
• Since the new strategy is institutionalized and
  mainstreamed, it call for more GBS financing
• More resources
• Create Independent Monitoring Group (Helleina
  kind)

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ASANTENI