What will it take for Tanzania to become a successful Middle-Income Country?

[Gerald .M Magembe]

March 2021

STORY HIGHLIGHTS

The Bank’s latest Tanzania Economic Update recognizes the important achievement the country has made by becoming a lower middle-income country (LMIC) and lays out the priorities for what will it take to achieve the next level of its development visionTo raise the bar and become a successful middle-income country, Tanzania needs to focus on sustaining its track record of economic growth, translating high growth into a more broadly shared set of opportunities and creating an economically secure middle class.Based on the country’s recent history and the experience of successful LMICs worldwide, the report emphasizes five priority areas for policy action that have the potential to contribute to meeting Tanzania’s Vision 2025: accelerating productive investment, prioritizing human capital development, enabling agricultural transformation, leveraging digital technologies, and building public sector institutions and capabilities.

DAR ES SALAAM, March 3, 2021 – In July 2020, Tanzania reached a remarkable milestone toward the objectives set in the country’s own Tanzania Development Vision (TDV) 2025 by achieving lower middle-income country status. This was the result of two decades of sustained growth and investment supported by stable macroeconomic conditions, rich natural endowments, and the country’s strategic geographical position.

The latest World Bank Economic Update, Raising the Bar: Achieving Tanzania’s Development Vision, argues that this achievement is an opportunity for the country to assess the quality of past growth in delivering broad welfare gains and to develop a roadmap to guide its further transition to a successful middle-income economy with a high level of human capital development, high-quality livelihood opportunities, and broad gains in living standards, as outlined in TDV 2025.

The report frames Tanzania’s ‘next leap’ of development around three strategic pillars: sustaining robust medium-term growth in a challenging external environment, improving the inclusiveness of growth and its impact on poverty reduction, and fostering upward economic mobility and strengthening economic security. These three pillars reflect both the lessons of international experience and Tanzania’s unique circumstances and form the basis for an actionable policy agenda to achieve the goals of the TDV 2025. This strategic framing is also timely as the country prepares its next Five-Year Development Plan.

The report highlights that what got Tanzania to LMIC status will not be enough to reach its ambitious middle-income goals. It will require a concerted effort to restore the economy’s growth momentum from the COVID-induced slowdown while expanding access to economic opportunities. Private investment should be the driver of sustainable future growth, as Tanzania’s experience of the previous two decades have shown. The report notes the slowing of private investment growth in recent years and urges the government to accelerate current efforts to improve the business climate. The report also underscores the double challenge Tanzania is facing – attracting private investment and boosting productivity – and suggests that policies to accelerate the uptake of digital technologies can play an important role on both fronts and promote inclusive growth.

High population growth, slow and uneven job creation, low levels of education and limited access to educational and employment opportunities, especially among women and girls, have hindered the inclusiveness of economic growth, blunting its effect on poverty reduction and the expansion of the middle class. The current economic expansion has been driven by sectors that employ relatively few workers, especially from poor households. Wealthier Tanzanians, particularly those in urban households with greater human capital and productive assets, were better positioned to seize opportunities generated by economic growth, and the imbalance in economic opportunity widened the income gap between households. Meanwhile, job creation is becoming increasingly urgent, as Tanzania’s population growth is intensifying pressure on the labor market.

“Human capital investments enable households at all income levels to access economic opportunities and benefit from growth, and this is critical for breaking the lack of intergenerational mobility to more employment opportunities and moving to more productive economic sectors,” write the report authors.

Based on Tanzania’s unique opportunities and challenges, and incorporating lessons from the experience of successful LMICs, this report highlights five priority areas for making progress across the strategic pillars described above. They are:

Accelerating productive investment: The highest priority reforms relate to investor protection and retention, including managing the legal risks associated with the transition away from investor-state dispute settlement and setting up a strong, transparent and accessible grievance redress mechanism that de-escalates investor concerns before they become disputes or exits. Other priority reforms include articulating a clear investment strategy that not only goes beyond the extractives sector and improving the overall regulatory environment to unlock export-oriented investments.Prioritizing human-capital development: A more ambitious human capital development strategy is needed that reflects the evolving needs of Tanzania’s growing population, focusing on the poor and underserved. Improved access to basic education and health services for women and adolescent girls could generate enormous social and economic benefits.Enabling agricultural transformation: Agricultural transformation can deliver results across all three pillars.

Private sector incentives to investment in the sector have remained modest, largely due to an unfavorable regulatory environment.Leveraging digital technology: Major factors constraining private investment in ICT sector in Tanzania include underinvestment in backbone network infrastructure; lack of an effective Open Access Policy; constrained independence and low capacity of Tanzania Communications Regulatory Authority; and low levels of income, digital literacy and domestic market size.

This is holding back progress in closing the country digital divide and leveraging digital technologies for inclusive growth.Building institutions and capabilities: The Tanzanian government has proved their commitment to macroeconomic stability, which needs to be maintained and strengthened, while making further efforts to boost domestic revenue mobilization, improve efficiency of public expenditures, and mobilize resources for development without jeopardizing fiscal sustainability.

Finally, the report provides an overarching message on the importance of accurate and transparent development data. The report says “investing in high quality granular data and facilitating their exchange within the government and between the government and other stakeholders, is critical. High quality development data is the foundation for meaningful policy-making, effective public service delivery, transparent accountability and increased economic activity through private sector growth, and thus, data have enormous potential in improving development outcomes in low- and middle-income countries.”

 

[Freddie Matuja]

Gelard, I highly appreciate the topic/subject you have brought on the floor. I view it is very substantial and for we (Tanzanians) as nationals, to establish need system thinking and system approach to ensure we all get what we want. I guess this is breeding more billionaires as His Excellency President Magufuli desires. As long as we have many billionaires at the top, the ripple effect will result in generating sustainable middle class. As long as we have many middle income earners who can afford to "consume" good and services available in the market, this process will ascertain more cashflow.

We have to accept as as a nation that, Tanzanian private sector needs funds as a means to acquire technology to ensure productivity and production of goods and services are maximised. The market locally and globally is always in need of good and services for consumption. Money will be the medium of exchange in the course of trade. Eventually the investors gets returns as profit and the government gets 18% as VAT for traders with businesses with turnover above 100mil TZS and 30% of net profit generated by companies (businesses).
For the process to complete, we need system thinking and system approach to ensure the desired outcome is realized. The desired outcome is cashflow from businesses which in the course can provision of products for the market in term of goods or services.
So what is system thinking?

Systems thinking is a holistic approach to analysis that focuses on the way that a system's constituent parts interrelate and how systems work over time and within the context of larger systems. Systems thinking can be used in any area of research and has been applied to the study of medical, environmental, political, economic, human resources, and educational systems, among many others.
According to systems thinking, system behaviour results from the effects of reinforcing and balancing processes.
Part of the system which should build as a nation is what other nations call it economic intelligence modes as a strategic tool to ensure we get what we want as far as economic competition is concern in the global market.
Allow me to share with you Japanese and Swedish strategic economic intelligence tools/models which they established and eventually they reap with abundance.

The Japanese, for their part, as previously mentioned, developed their economic intelligence strategy around the Ministry of International Trade and Industry (MITI). It is a “glocalization” concept that implies the need to protect its domestic market while fostering the expansion of international trade. The Japanese market has been traditionally very difficult for foreigners, and the large Japanese companies dominated the electronic or car international markets. It was a system of economic intelligence developed in seven strategic lines perfectly coordinated from “top to bottom”, which involved companies and government services:
Global and local approach to markets.
Commercial penetration tailored to the economic context and each country’s way of life.
Very selective information policy, also with the participation of companies, on a daily reporting system basis.
Long-term economic strategy.
Integrated approach and coordination between large industrial conglomerates.
Selective release of information according to levels.
Training programmes in companies for young professionals, on a country-by-county-specialization basis, even mastering foreign languages and understanding local cultural events.

Sweden is a small European country that, however, understood the need to develop an economic protection system to boost the creation of large multinational corporations, while developing an international educational system based upon knowledge of at least three languages per student; a means to compensate their geo-economic difficulties. In 2010, Sweden already had 30 companies in the Forbes 2000 ranking list: AstraZeneca in biotechnology, Telia Sonera in telecommunications, Ericsson in technology, Ikea in furniture and other household accessories, ABB in energy and capital goods, and so on. This would not have been achieved if it had lacked a policy and economic intelligence systems able to overcome many difficulties. A “bottom to top” plan opposed to the Japanese one, since the State is not the one to boost the system or the criteria to be applied, but companies and their information systems, which aim at improving their competitiveness.

As we have learnt from Sweden and Japan, the public-private is key for for parts to win. The public should be ready and innovative to initiate and or allow the private sector if it initiate to support so that in the course of cashflow increase, more outputs of good and services will be sold to the market. As long as sales are made to consumers, taxes and other government collections will be avail in the course.

In most cases I do write insisting, why don't sell final products from cashews, cocoa, coffee, tea, sisal and "fatten" the forex account in our corporate accounts. The answer is simples, inaccessible funds to procure technology and know-how which will lead us to get more money by selling consumable products in the global market, but also create jobs for young men and women who went to the universities. As long as these people gets employment they can service the loans from the board in the course they buy luxury. One of the key issue we miss as nationals, is failing to understand you men and women like to buy luxury! And as long as they enjoy good and services available as luxury, the more earning goes to the treasury through taxable good/services.

Does the public see the way I see and be part of the equation; Yesu alisema, ukipanda haba utavuna haba. Is the treasury/central bank ready to liberalize the financial instruments?

Weekend njema wakubwa.

 

[Gerald .M Magembe]

Gelard, I highly appreciate the topic/subject you have brought on the floor. I view it is very substantial and for we (Tanzanians) as nationals, to establish need system thinking and system approach to ensure we all get what we want. I guess this is breeding more billionaires as His Excellency President Magufuli desires. As long as we have many billionaires at the top, the ripple effect will result in generating sustainable middle class. As long as we have many middle income earners who can afford to "consume" good and services available in the market, this process will ascertain more cashflow.

We have to accept as as a nation that, Tanzanian private sector needs funds as a means to acquire technology to ensure productivity and production of goods and services are maximised. The market locally and globally is always in need of good and services for consumption. Money will be the medium of exchange in the course of trade. Eventually the investors gets returns as profit and the government gets 18% as VAT for traders with businesses with turnover above 100mil TZS and 30% of net profit generated by companies (businesses).
For the process to complete, we need system thinking and system approach to ensure the desired outcome is realized. The desired outcome is cashflow from businesses which in the course can provision of products for the market in term of goods or services.
So what is system thinking?

Systems thinking is a holistic approach to analysis that focuses on the way that a system's constituent parts interrelate and how systems work over time and within the context of larger systems. Systems thinking can be used in any area of research and has been applied to the study of medical, environmental, political, economic, human resources, and educational systems, among many others.
According to systems thinking, system behaviour results from the effects of reinforcing and balancing processes.
Part of the system which should build as a nation is what other nations call it economic intelligence modes as a strategic tool to ensure we get what we want as far as economic competition is concern in the global market.
Allow me to share with you Japanese and Swedish strategic economic intelligence tools/models which they established and eventually they reap with abundance.

The Japanese, for their part, as previously mentioned, developed their economic intelligence strategy around the Ministry of International Trade and Industry (MITI). It is a “glocalization” concept that implies the need to protect its domestic market while fostering the expansion of international trade. The Japanese market has been traditionally very difficult for foreigners, and the large Japanese companies dominated the electronic or car international markets. It was a system of economic intelligence developed in seven strategic lines perfectly coordinated from “top to bottom”, which involved companies and government services:
Global and local approach to markets.
Commercial penetration tailored to the economic context and each country’s way of life.
Very selective information policy, also with the participation of companies, on a daily reporting system basis.
Long-term economic strategy.
Integrated approach and coordination between large industrial conglomerates.
Selective release of information according to levels.
Training programmes in companies for young professionals, on a country-by-county-specialization basis, even mastering foreign languages and understanding local cultural events.

Sweden is a small European country that, however, understood the need to develop an economic protection system to boost the creation of large multinational corporations, while developing an international educational system based upon knowledge of at least three languages per student; a means to compensate their geo-economic difficulties. In 2010, Sweden already had 30 companies in the Forbes 2000 ranking list: AstraZeneca in biotechnology, Telia Sonera in telecommunications, Ericsson in technology, Ikea in furniture and other household accessories, ABB in energy and capital goods, and so on. This would not have been achieved if it had lacked a policy and economic intelligence systems able to overcome many difficulties. A “bottom to top” plan opposed to the Japanese one, since the State is not the one to boost the system or the criteria to be applied, but companies and their information systems, which aim at improving their competitiveness.

As we have learnt from Sweden and Japan, the public-private is key for for parts to win. The public should be ready and innovative to initiate and or allow the private sector if it initiate to support so that in the course of cashflow increase, more outputs of good and services will be sold to the market. As long as sales are made to consumers, taxes and other government collections will be avail in the course.

In most cases I do write insisting, why don't sell final products from cashews, cocoa, coffee, tea, sisal and "fatten" the forex account in our corporate accounts. The answer is simples, inaccessible funds to procure technology and know-how which will lead us to get more money by selling consumable products in the global market, but also create jobs for young men and women who went to the universities. As long as these people gets employment they can service the loans from the board in the course they buy luxury. One of the key issue we miss as nationals, is failing to understand you men and women like to buy luxury! And as long as they enjoy good and services available as luxury, the more earning goes to the treasury through taxable good/services.

Does the public see the way I see and be part of the equation; Yesu alisema, ukipanda haba utavuna haba. Is the treasury/central bank ready to liberalize the financial instruments?

Weekend njema wakubwa.

On point, excellent contribution. The bottom line is liberalise investment, business and capital, otherwise there would be bottle neck somewhere and the intended objectives of churning out billionaires won't be achieved.