Could you give us some insights on the development of the industry and trade sector here in Tanzania, in the last couple of years.
The development of the last couple of years would be too short, but I would say that the state of industry in this country is very much affected, or related to what has gone on in the field of trade. More especially the effect of trade liberalization, on the general economic situation. In order for you to fully understand the state of industry, I am afraid we have to go back many years to the time when this government, or the Government of Tanzania, shortly after Independence, decided to pursue a socialist economic ideology. In 1967, because of our history the government of that time decided to nationalize all the major means of production. The Arusha Declaration, as it was called was the Blueprint for that kind of policy which formed the basis for our economic structure and our economic management. We built up a large parastatal sector. After nationalizing all the Banks, large scale commercial farms, all forms of industries, services, mining, tourism - whatever major economic activity that was operating in this country, was transformed into an operation of the State. In this way, we developed a very large parastatal sector. We invested very heavily, not only in compensating those who had been nationalized, but also breaking into new fields, the so called green fields, and so we established a fairly large industrial base which was in a very large way dependent on the natural resources available in our country. This went on, for as long as the whole world was largely socialist, even the western countries. In the western countries of Europe, the governments were socialist. Britain if you remember at that time, was governed by the Labour Party. You had the Social Democrats in Germany, and of course Sweden, Norway, Denmark and so on, were all socialists of a certain kind, and very sympathetic to the kind of policy that we were pursuing here. You had similar sentiments in Canada. It was fashionable at that time, to be Socialist. We were Socialist. The only difference here, was that in our case we took our Socialism extremely seriously. We legislated impassively for it, we built up a large bureaucracy, trained this bureaucracy, precisely for the development of a socialist economy, and we had as I say, a very vibrant industrial sector. We were exporting industrial goods. We were producing goods to satisfy the demand internally. This went on until the collapse of the East African Community. That is another factor that you ought to take into account.
We were very closely related to Kenya and Uganda in the East African Community, which broke up in 1977. After 1977 we had to look inward in order for us to develop. Life started to become little difficult for us, because we lost that arrangement that we had with Kenya and Uganda. Slowly the world started to change. Politically the world started to change. It was no longer fashionable to continue to be Socialist. The Berlin Wall collapsed, which you all remember. Life became very hard. Our shelves in our shops dried up. We decided as a conscious policy to introduce into our system, a trade liberalization régime. The first mistake we made was to liberalize our trade without sufficient controls, without sufficient regulatory mechanism. That was the first mistake we made. This market was then flooded with cheap goods from elsewhere. We did not have the sufficiently elaborate mechanism for imposing taxes and duties on these goods which came in. So progressively we found that our industries could not compete with these cheap goods which came into our country. By the collapse of Socialism in the world, we were forced to change our course as well. So not only did we liberalize our trade, but we also changed our ideology. We introduced to our system free market ideologies. Now two things were against us. One, we did not have, and we still don't have, a sufficiently highly developed local entrepreneurship. Two, we did not have a Private Sector that was already developed and organized in some form of civil society. Everybody was doing their own thing. So when the government decided to pull out of ownership and management of the economy, they left a vacuum, because Tanzanians were not used to going into private business. Bureaucracy was not prepared to deal with the private sector. Political leadership had a different kind of mindset. So we could not quite cope with this new situation which we found ourselves in. The Chinese were much cleverer. They moved slowly. They introduced free market system but progressively. Slowly they introduced regulatory mechanisms to make sure that whenever there were changes, these changes were properly regulated. We did not have that kind of mechanism. It was really haphazard, and we suffered a lot from that. In the process, what happened? Industry after industry - either it collapsed, or it went on operating very much below optimal capacity. Some of them actually closed. That situation is not very different from what it is today. We are an economy in transition. We are still trying to cope with the problems of dealing with this change which is imposing a lot of difficulty. So at a time that the present administration, President Mkapa, when he came into power, 5 years ago, decided that the first thing to do was to deal with macro-economic issues. The big picture. He had to deal with macro-economic fundamentals. Inflation at that time was excessively high. Borrowing rates from banks were also very, very high. We were not able to collect our revenues properly. Maybe because of that we could not pay our debts. We had a bad name with our creditors. Our rate of exchange was very volatile. It kept on changing from one week to another. So we had to establish a more stable macro-economic framework. We did that, with assistance from the World Bank, IMF and so on, we were able to attain a reasonable measure of macro-economic stability, which we maintained up to now. Now we have an inflation rate of 6.46% and it has come down from 30%. We are fairly stable. But these factors did not stimulate production. For production you need other things. We were able in this process to pay our debts, and we were spending as much as 40% of our revenues, servicing debts! That in fact means you are pretty short on investments. The government had to invest in infrastructure, which would stimulate production. Even if the government were able to do that, the question is whether we have a buoyant local domestic, private enterprise to take advantage. Or to react to the stimuli. When you put a stimulus into the system, somebody has got to pick it up. But if your entrepreneurial skills are lacking. If your entrepreneurial spirit is lacking. If you don't have a large number of elaborate business people, people with business minds, people who then see opportunities, and very quickly jump at these opportunities - they will not take advantage of it. You cannot depend all the time on foreign investors alone. No country in the world, has been developed only by foreign investors. As a matter of fact, foreign investors would be scared, if they went to a country and they did not see local people investing. It is only the foreigners investing, and the locals were simply sitting, and spectating. It is potentially very dangerous. Socially, it would erupt into a commotion one of these days. So these problems of transition are very complicated for us and we have got to cope with these problems. We are not only concerned about micro-factors alone, which means stimulating private investment. We have to build up private investment. So what is the state of industry? It is still very low, very poor. We are dealing right now only, or largely with those industries which were operating under the management and ownership of the state, and which are now being privatized. So when these industries are privatized, we have to make sure that those who have bought them, those who have acquired these private industries, make the necessary investments and resume production. You know, even if you were to keep up production of the textile mill which belonged to the State. Now it is privatized and you have taken it over, we need a lot to bring it back to production. Our tax regime has got to be right, licensing procedures have got to be right, our labor laws have got to be right, banking systems have got to work, land policy has got to be right, our Judiciary has got to be right, and all these things have got to be reformed. We are still going through that process. Therefore even the process of retrieving industries which existed before is a difficult one, but we are coping with it. There are green fields, because we are a very wealthy country. Our country has tremendous mineral, agricultural, tourism, fisheries, resources. Those resources are there, and when you talk about green field opportunity investment - they are there. We have to embark upon collecting all this information and marketing it. We have to market Tanzania, that is why this exercise of yours is a particularly good one, because we have a good story to tell. We are bordering 8 countries. Transit trade alone for the kind of population that we have could sustain us, if it is handled properly. Agriculture alone, can sustain us. Tourism alone as an activity, can sustain us. Mining can sustain us. Fishery and Forestry resources can also sustain us. We are only 30 million people. That is all potential. There is a good story to be told, and to be told properly. We are in league with the countries of Eastern Africa - that is Kenya, Uganda, Rwanda, Burundi and Eastern Congo. These are our natural trading partners. We are in league with countries of SADC. Starting from Mozambique, Malawi, Zimbabwe and so on, south as far as Mauritius and Seychelles. Now these are all countries which, together with us form a regional block of 18 countries. We have a population of 300 million people. So our industrialization potential is very great. Let us not look at the state of industry, only in terms of what we are currently doing today, but rather what we can do given the opportunities that are open to us. We are members of WTO, and under WTO arrangements we have access to markets like Western Europe, the American Market In fact, with the coming into force with the African Growth and Opportunity Act, we will be able to sell unlimited quantities of whatever goods we want to sell, to America and a zero duty.
But the question is - Do we have a capacity internally to produce and sell?
| Could you tell us a bit more about the reasons for Tanzania to pull out of the COMESA?
The East African Communities, SADC and COMESA, are all regional organizations with exactly the same objectives. Looking at this issue from the interest of Tanzania, we argue that there are countries which are traditional trading partners with us. Whether we are at peace or we are at war, we will trade with Kenya, Uganda, Rwanda, Burundi, Congo, Mozambique, Malawi, and Zambia. We will trade with them - our people across the border don't really care what we do, at the level of government. They just go on trading and they have got their own payment mechanisms. They don't even need the Central Bank. So we have a very, very powerful informal sector going on. These are countries which are our traditional trading partners. These countries I have mentioned are either members of the East African Community, or they are members of SADC. When we go further south and talk about Zimbabwe, Lesotho, Swaziland, Namibia, South Africa, Mauritius, and Seychelles - countries of the south, these countries I have mentioned are members of SADC. By strengthening our position in the East African Community, and in SADC we have all the countries which we need to form a solid and powerful trading block - 18 countries with a population of 300 million people. If all the three organizations, SADAC, COMESA and the East African Community, have exactly the same objectives, why keep all of them? By pulling out of COMESA we are only losing Egypt, with which we don't have trade links. Losing Eritrea, Djbouti, Ethiopia and Somalia, again with which we do not have any trade links at all. The cost of keeping our membership of COMESA is enormous, it does not pay. It's mathematical you know, just financial sense. What do we actually get? If Egypt becomes an important factor to us, we can enter into Bilateral Agreements with Egypt. We have a joint commission, but we have not links with Ethiopia, Djibouti, Eritrea and Somalia. But these which are naturally our trading partners, we have them either in the Community or SADC, so we decided we will keep them. Another factor is that we are all members of WTO. Ten years or so down the road, we will have to follow WTO rules. This is to open your borders, absolutely, widely, to the whole world. What happened to these little common markets that we had here? The factor that you have the whole world to deal with, the regional markets won't be relevant. If any is going to be relevant at all, it will be the East African Community, because these are our immediate neighbors, and it will be SADC. For us the logic is pretty straightforward. But my friends in Kenya, Hon. Devot is always on my throat. But I'm saying I am here to serve Tanzania, not to serve other countries' interests.
In November you started the East African Union Treaty, and there is one protocol which calls for free trade by 2005. This has been on hold, because of fear of Kenya's very fast developing industrial sector. By when do you think you can develop your industrial base, so that you can become more competitive and can cope with Kenya?
We are committed to establishing a Customs Union, maybe 18 months or so from now. After that, we will have a Common Market, within four years. By the year 2005 definitely, we are going to have a Common Market, within East Africa. As for our own internal ability to produce and to sell to these markets, I don't think we have a choice. We will have to double, treble our efforts, and make sure that as soon as we can, maybe before the next budget or so, we reestablish a good firm ground for our industrialization But if you ask me, what are the critical factors that have got to be put in place? In order to be able to do that, my very quick answer is two-fold: One, we need to put in place a good Regulatory Mechanism. Right now our trade is not properly regulated. We have got to put in place our quick mechanism and grant to our Bureau of Standards, so we control the quality of goods which come in. We have got to make sure that we have a proper mechanism or Fair Trade Practices Tribunal, so we establish a level playing field for everybody. Factor no. two is Marketing. We have just got to let the world know about what we have, and what we can do. Because the world really doesn't know. I was in America two weeks ago, by invitation of the US Government. It was for us to attract American Investors here, so we had to do a lot of talking. We have to just keep on knocking at their doors, if we can do it every month, we shall do that. Then people will know that there is an opportunity here for investment. Really, for us to sell those markets, somebody has got to be here to produce.
While marketing this industrial base of your country, what are the major industrial product and industries that you want to focus on? Which are the industries with the most potential?
So little has been done in this country, with the kind of resources that we have, one does not necessarily have to talk about the priorities. I think your question should be to describe fully what kind of opportunities do exist in Tanzania, and let the investors themselves decide. We cannot say our priority is this, or that, as our priority may not be the priority of the investors.
We have to deal with the liberty factors. If someone wants to come here to invest don't subject them to too many loopholes. You go here, fill in a form, you go elsewhere and fill in another form, you meet a committee to answer questions. He will say look here, I have come with my money which I want to invest, don't subject me to interrogation as if I was a criminal.
What do you think of the Tanzanian Investment Center?
Having an Investment Center is definitely a good idea, the law is all right, the people are in tune, but we have not yet changed other regulations elsewhere. They will give you a piece of paper saying this is what you can do. But then the Ministry of Agriculture will tell you, no, you can't do it because of our rules, and laws here have not changed.
Our readers are businessmen and they are looking for opportunities, what advice can you give them?
We are a country in Africa which has a peaceful government. We are peaceful, highly democratic. We have been holding our elections regularly, every 5 years since Independence. It is a tradition that we cannot move away from. We have no problem with foreign investors at all. We do not believe in any form of discrimination. We have a lot of respect for human rights and a sense of justice. We respect our women and give them their due place in society. But we had taken our Socialism very seriously, and we are suffering right now with the problems of transition. So the mindset is a problem. We are trying now, desperately hard to change that. In good time we will succeed. We have a country with a lot of resources, and great investment opportunities and we have access to markets, e.g. the Market of America. We are ready to cooperate with any investor who is ready to come and invest with us in these areas of opportunity, between our will, our resources, our peace and tranquility that we enjoy, and their skills, their investible capital, we will be able to do business together. Come and make money with us, in peace and tranquility. |
