SOURCEsOURCE bUSINESS tIMESDate: Fri, 24 Jun 2011 17:09:20 +0100 Subject: Legitimacy crisis mounting over Tanzania's undisciplined regime (BT) Written by Times Reporter Friday, 24 June 2011 05:30 TIMES REPORTERS THE Tanzania economy recorded relatively good economic growth over the last decade; but it could have done much better than that... A new study on Dar's investment climate indicates that the countrys rent-management remains largely decentralized and undisciplined, with deleterious consequences for investors. Economic rent is a term used to describe returns to a factor of production (land, capital and labour) over and above what is required to retain that factor in current use. In previously fast-growing sectors like mining, investors are increasingly circumspect, while high potential areas like horticulture appear largely ignored, says the study report, compiled by Brian Cooksey and Tim Kelsall and titled 'The Political Economy of the Investment Climate in Tanzania.' In Tanzania presently, the ruling party Chama cha Mapinduzi (CCM) more or less monopolizes the main forms of economic rent. In the event, it is difficult to make serious money if one does not have good connections to the party! The result is that, recent increases in economic growth which have yet to have a discernible impact on poverty reduction are likely to be ephemeral. The Report also reveals that the current economic policies favour foreign investors although they have not created an impact upon the economy! It is worth asking whether Tanzania needs the kinds of foreign investors who employ few people, repatriate a vast majority of the countrys natural resource rents and have little sympathy for local people or local ways of doing things, the Study questions. The Report, published on behalf of the Africa Power & Politics Programme (APPP) by the Overseas Development Institute states in part that Tanzania, we conclude, is a case of non-developmental patrimonialism; and its regime is likely to face a mounting legitimacy crisis in coming years! The Report rejects the International Monetary Fund view that Tanzania will be one of the fastest growing countries in the world over the next decade. For reasons we shall discuss, political-economic realities in Tanzania create unfortunate constraints on investment, meaning that it is not a good model for other countries, it says. The Study of the political economy of the investment climate on Mainland Tanzania is part of a larger research project into business and politics in Africa, conducted by the Africa Power & Politics Programme. The analysis provided is focused on the relationship between the management of economic rents and provision of public goods conducive to a good investment and business climate. Tanzania was chosen for fieldwork in the Cooksey-Kelsall Study because, in recent years, it has had a good record of attracting foreign investment, especially in the mining and tourism sectors, says the Report a copy of which Business Times has. The Study also found that, under certain circumstances, neo-patrimonialism in Africa could be harnessed for strong economic performance and the general idea is that something of that sort might be happening in contemporary Tanzania. It analyses the political economy of the investment climate in horticulture-for-export, and gold mining. It also discusses the contribution of institutions political and cultural as well as external relations to Tanzanias non-developmental equilibrium, and possible avenues of change. It distinguishes between four different periods, or rent-management regimes. One: 1961-1967, when Tanzania pursued a relatively orthodox pro-market development strategy, with reasonably centralized, long-horizon, rent management. Two: 1967-1978, when the country embarked on a turn-to-the-left, with rent-management becoming more centralized, with the time-horizon remained long. Three: during 1978-1985 when, in spite of being committed to a long-term development vision, the 'Centre' lost control of rent-management... And, finally, 1985-1995, when some technocratic integrity was injected into the Administration but decentralizing pressures continued to undermine rent-management. A key criterion, it seems to us, is that the high political elite of the CcM should recognize that the current situation is unsustainable, says the Study. Organs like the Central Committee of the ruling party could then conceivably be used as part of monitoring mechanisms for mutual discipline of the elite, helping steer rent-seeking into more developmental areas. The Report stresses that the political system in Tanzania has settled into equilibrium of non-transformative growth without poverty reduction. Collective action problems within CCM, short-termism driven by periodic elections, complacency bred by foreign aid, and a political cultural hostility to private capital especially foreign helps to create this, and dissuade the political leadership from taking the steps that would significantly boost private investment. It may be that this equilibrium is sustainable for some time. But, it seems to us that growth without poverty reduction, when combined with a relatively open political environment, is likely to bring instability down the line. How might Tanzania move to a new, poverty-reducing pathway? The report asks... If there is no single leader with the will or reputation to impose a new discipline in CCM say by going over the heads of the party and engaging directly with the masses... then there is little chance in the short-term. On mining, the Study found that, although the fate of Big Mining in Tanzania is to some extent a cautionary tale about the pitfalls of relationship-based governance, authors of the Study do not believe that following best-practice guidelines would necessarily have been the solution. The legal situation with respect to mining sites in Tanzania was complex and confused; and, it seems probable that with a rule of law approach mining investments would never have got off (or under) the ground, the Study concludes. The situation is somewhat similar in horticulture... Although in the 1980s and 1990s the state condoned a process in which natural resource rents (i.e. land rights) were transferred to private investors, they have subsequently provided only intermittent support for the sector! We have explained Tanzanias failure to create the kind of climate favourable to long-term investment and growth in terms of an absence of centralized, long-horizon rent-seeking, the Study states. We believe this is an interesting finding that bears out our general conclusions about the conditions for successful economic performance in Africa. However, it does not in itself amount to a full explanation of why Tanzania is economically under-performing. In addition, CCM having much more organizational power than the political Opposition ought realistically to expect to be in power for a long time. However, CCM does not behave in the way predicted by Olsons Model!