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FOREWORDFOREWORDFOREWORDFOREWORDFOREWORD

Tanzania enters the Twenty First Century with hopeinspired by the goals of Development Vision 2025 and ourdetermination to consolidate gains on the macro-economicfront and to face the economic challenges that lie ahead.This inspiration has led to the determination to forge astrong, diversified, resilient and competitive economy.Towards this end all sectors have specific roles andcontributions to make in raising the pace of developmentto a dynamic self-sustaining level. In this regard, the tradefunction is seen as a central and pivotal pillar in theattainment of the mission of the economic sectors towardshigher ef ficiency, productivity and internationalcompetitiveness.

While Development Vision 2025 inspires and raises hope,the argument for trade as the engine of growth anddevelopment in the face of globalisation needs no emphasis.Unfolding developments in the political, economic andsocial spheres are bringing about tremendous changes andchallenges in the business environment. These changesentail radical shifts in international economic relations,evident in the trade liberalisation and globalisationphenomenon.

Tanzania needs a trade policy that will ensure effectiveparticipation in the rules-based trading system that hasemerged at the international level and in seizing theopportunities inherent in the free flow of resources inherentin globalisation. The goal of Tanzania’s National TradePolicy is to facilitate smooth integration into the MultilateralTrading System (MTS) and roll back the gradual descenttowards marginalisation. It is intended to ensure thatliberalisation of fers meaningful, identifiable andmeasurable benefits.

The efficacy of trade policy depends on the establishmentof a specific macro-economic, social and politicalenvironment. When fundamental changes occur in theunderlying environment, the configuration of policystrategies also has to change. Consequently this policyreflects the dynamics of Tanzania as an economy in

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transition towards a market system.

One consequence of liberalisation is the de facto merger ofdomestic and international markets into a single marketand the necessity for domestic firms to becomeinternationally competitive even in internal markets. Theimpact of globalisation is the accessibility to domestic firms,of resources that can facilitate enhanced productivity andefficiency necessary for competitiveness. In this setting,export-led growth is both an opportunity and a challengefor Tanzania. Tanzanian firms and entrepreneurs, liketheir counterparts in other parts of the world, have to strivetowards production of higher quality goods and first classservices at lower prices. The overall strategy includesreform of institutional structures and change of culturalnorms and practices in economic activities so as to put inmotion the process of re-orienting the economy towardsan open market system targeting export-orientation.

The policy is presented in two documents - the main policydocument and one volume of annexes. The Annexespresent technical papers charting out the strategic pathfor trade development. These documents are the outputof an extensive consultative process of involvedstakeholders from different walks of life in the public andprivate sectors, civil society and the academia. Public andprivate sector institutions were represented in theTechnical Committee, established in March 2000, whichundertook the basic research and produced the first set ofworking documents. Moreover, this policy document isan outcome of deliberations at various levels of the publicdecision-making machinery.

This policy is, therefore, the outcome of joint effort by awide spectrum of stakeholders, reflecting public-privatesmart partnership. Its implementation equally depends onthe common effort of each one of us as we strive to curve aplace for Tanzania in the global economy and a niche for itsproducts in the international market place. As stated timeand again in the policy, the private sector is the leadimplementer, the economic agent responsible for the

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production of goods and services that will enable Tanzaniatake its rightful place in the global market. The publicsector’s primary role is that of facilitating this process.Further, because of the current weaknesses of the privatesector, the public sector is also expected to play the role ofstimulating private sector development.

This is the essence of the strategy that will enable Tanzaniato use her resources, especially her manpower base, toaddress economic challenges with the objective of attainingthe goals of the Development Vision 2025, of povertyeradication within two and a half-decades. The goal isachievable if all of us work together in a focused andstrategic way.

Hon. Dr. Juma A. Ngasongwa (MP)MINISTER OF INDUSTRMINISTER OF INDUSTRMINISTER OF INDUSTRMINISTER OF INDUSTRMINISTER OF INDUSTRY AND TRADEY AND TRADEY AND TRADEY AND TRADEY AND TRADE

Dar es Salaam, February, 2003.Dar es Salaam, February, 2003.Dar es Salaam, February, 2003.Dar es Salaam, February, 2003.Dar es Salaam, February, 2003.

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ABBREVIAABBREVIAABBREVIAABBREVIAABBREVIATIONS AND ACRONYMSTIONS AND ACRONYMSTIONS AND ACRONYMSTIONS AND ACRONYMSTIONS AND ACRONYMS

ACP: Africa Caribbean PacificASDP: Agriculture Sector Development ProgrammeASDS: Agriculture Sector Development StrategyAIDS: Acquired Immune Deficiency SyndromeATI: African Trade InsuranceAU: African UnionBDS: Business Development ServicesBET: Board of External TradeBEST: Programme for Business Environment

Strengthening for TanzaniaBOOT: Build Own Operate TransferBOT: Build, Operate and Transfer / Bank of

TanzaniaBRELA: Business Registration and Licensing AgencyCAMARTEC: Centre for Agricultural Mechanisation &

Rural TechnologyCTI: Confederation of Tanzanian IndustryDDB: Duty Draw Back schemeDFID: Department for International DevelopmentEAC: East African CommunityEDS: Export Development StrategyEPZ: Export Processing ZoneERP: Economic Reform Programme/Effective

Rate of ProtectionEWURA: Energy and Water Utilities Regulatory

AgencyFCC: Fair Competition CommissionFDI: Foreign Direct InvestmentGATT: General Agreement on Tariff and TradeGDP: Gross Domestic ProductHIV/AIDS: Human Immuno Virus/Acquired

Immunity Deficiency SyndromeICT: Information and Communication

TechnologyIF: Integrated FrameworkILO: International Labour Organisation

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ISO: International Standard Organisation /Industry Support Organisation

JITAP: Joint Integrated Technical AssistanceProgramme

LDCs: Least Developed CountriesMAFS: Ministry of Agriculture and Food SecurityMCM Ministry of Cooperatives and MarketingMCT: Ministry of Communication and TransportMEC: Ministry of Education and CultureMEM: Ministry of Energy and MineralsMoF: Ministry of FinanceMFN: Most Favoured NationMIT: Ministry of Industry and TradeMFAIC: Ministry of Foreign Affairs and International

Co-operationMNRT: Ministry of Natural Resources and TourismMTN: Multilateral Trade NegotiationsMTS: Multilateral Trading SystemMWLD: Ministry of Water and Livestock DevelopmentNISC: National Investments Steering CommitteeNPHC: National Policy Harmonisation CommitteeNICs: New Industrialising CountriesNDC: National Development CorporationNGO: Non Government OrganisationNTBs: Non Tariff BarriersPRSP: Poverty Reduction Strategy PaperPOPP: President’s Office, Planning and PrivatisationPSI: Pre Shipment InspectionPSDS: Private Sector Development StrategyR & D: Research and DevelopmentRTA: Regional Trading Agreements/AreasRoO: Rules of OriginSADC: Southern Africa Development CommunitySIDO: Small Industries Development OrganisationS&D: Special and Differential (Treatment)SSA: Sub-Sahara AfricaSME: Small and Medium Enterprises

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STE: State Trading EnterpriseSOE: State Owned EnterpriseSAP: Structural Adjustment ProgrammeSPS: Sanitary and Phytosanitary MeasuresSUMATRA: Surface and Marine Transport Regulatory

AgencyTBTs: Technical Barriers to TradeTAS: Tanzania Assistance StrategyTCCIA: Tanzania Chamber of Commerce,

Industry and AgricultureTEMDO: Tanzania Engineering & Manufacturing

Design OrganisationTBS: Tanzania Bureau of StandardsTIC: Tanzania Investment CentreTPSF: Tanzania Private Sector FoundationTIRDO: Tanzania Industrial Research and

Development OrganisationTRA: Tanzania Revenue AuthorityTRIMS: Trade Related Investment MeasuresTSN: Trade Support NetworkUSD (US$): United States DollarVAT: Value Added TaxWMA: Weights and Measures AgencyWTO: World Trade Organisation

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NANANANANATIONAL TRADE POLICYTIONAL TRADE POLICYTIONAL TRADE POLICYTIONAL TRADE POLICYTIONAL TRADE POLICY, 2003, 2003, 2003, 2003, 2003

TTTTTABLE OF CONTENTSABLE OF CONTENTSABLE OF CONTENTSABLE OF CONTENTSABLE OF CONTENTS

PageFOREWORD iABBREVIATIONS and ACCRONYMS iv

1. BACKGROUND .............................................. 11.1 INTRODUCTION ..................................... 11.2 LIBERALISATION AND GLOBALISATION 31.3 HISTORICAL PERSPECTIVE,

ECONOMIC INDICATORS AND POTENTIAL 41.3.1 Historical Background ................. 41.3.2 Trade Liberalisation and Reorientation of Internal Trade .... 6

1.4 RATIONALE FOR A NATIONAL TRADE POLICY 71.4.1 Domestic Market Considerations . 81.4.2 The International Environment .... 91.4.3 Re-orientation Towards Trade Development ............................... 10

2. ECONOMIC OVERVIEW ................................. 122.1 TRENDS IN WORLD TRADE AND THE PLACE

OF SUB-SAHARAN AFRICA .................... 122.2 TANZANIA: ECONOMIC PERFORMANCE

TRENDS................................................. 133. TRADE POLICY VISION, MISSION

AND OBJECTIVES ......................................... 153.1 VISION ................................................... 153.2 MISSION ................................................ 163.3 OBJECTIVES ......................................... 16

4. CONSTRAINTS AND CHALLENGES FORTRADE POLICY .............................................. 184.1 ENABLING POLICY ENVIRONMENT ....... 19

4.1.1 Good Governance ......................... 194.1.2 Macro-economic Policy Environment ................................ 204.1.3 Legal and Regulatory Framework .. 214.1.4 Economic Regulation and Competition Policy........................ 22

4.2 CAPACITY DEVELOPMENT .................... 23vii

4.2.1 Human Skills Development............ 234.2.2 Private Sector Development ........... 264.2.3 Institutional Capacity Building ...... 274.2.4 Transformation of Production ........ Capacity ........................................ 28

4.3 INFRASTRUCTURE DEVELOPMENT......... 294.4 CROSS-CUTTING ISSUES ........................ 30

4.4.1 Trade and the Environment ........... 304.4.2 Trade and Gender ......................... 31

4.5 DOMESTIC MARKET AND DEMAND ........CHALLENGES ..........................................32

4.6 REGIONAL AND INTERNATIONALTRADE DIMENSIONS ............................... 33

4.7 IMPLEMENTATION INSTRUMENTS ANDCOMPLEMENTARY SECTOR POLICIES .... 34

5. TRADE POLICY INSTRUMENTS AND PRIORITYSECTORS 365.1 TRADE POLICY TARGETS ........................ 365.2 POLICY INSTRUMENTS ............................ 37

5.2.1 Tariff-based (Ad Valorem) Instruments.. 385.2.1.1 Tariffs ................................ 385.2.1.2 Taxation ............................ 395.2.1.3 Duty Draw Back Scheme.... 405.2.1.4 Export Taxes ...................... 41

5.2.2 Non-Tariff Barriers/Measures ......... 415.2.2.1 Import Licensing ................ 425.2.2.2 Pre-shipment Inspection.. .. 435.2.2.3 Customs Valuation............. 435.2.2.4 TRIMs (Local Content

Requirement) ...................... 445.2.2.5 Standards .......................... 455.2.2.6 State Trading Operations ... 465.2.2.7 Government Procurement .. 475.2.2.8 Administrative Procedures . 48

5.2.3 Trade Defence Instruments............. 495.2.3.1 Safeguard Measures........... 495.2.3.2 Anti-dumping..................... 505.2.3.3 Subsidies and Countervailing

Duties ................................. 50

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5.2.3.4 Rules of Origin ................... 525.2.4 Trade Development Instruments ..... 52

5.2.4.1 Export Processing Zones .... 535.2.4.2 Investment Code and Rules 545.2.4.3 Export Promotion and Market

Linkages .............................. 555.2.4.4 Export Facilitation ............. 56

5.2.5 International Policy Instruments..... 575.2.5.1 Bilateral Co-operation ........ 575.2.5.2 Regional Trading Arrangements 575.2.5.3 The WTO Agreements ......... 58

5.3 PRIORITISATION OF POLICY INSTRUMENTS 605.4 SECTOR POLICIES ALIGNMENT .............. 61

6. IMPLEMENTATION FRAMEWORK AND ACTIONPLAN............................................................... 646.1 ROLES AND FUNCTIONS ......................... 64

6.1.1 Public Sector - The Facilitator ......... 646.1.2 Private Sector - The Implementer .... 666.1.3 Civil Society .................................... 676.1.4 Development Cooperation Partners .. 68

6.2 TRADE POLICY DEVELOPMENT GROUP ANDSUPPORT NETWORK ............................... 68

6.3 SEQUENCING AND CONTINUITY OFTRADE POLICY ........................................ 70

6.4 TRADE POLICY IMPLEMENTATIONACTION PLAN .......................................... 716.4.1 Major Implementation Issues .......... 716.4.2 Sectoral Strategies and Programmes 736.4.3 Implementation Matrix and Concepts 746.4.4 Implementation Programmes and Projects 756.4.5 Market Supporting Institutions

and Capacity Building .................... 776.4.6 Monitoring and Evaluation ............. 78

Annex..................................................................... 80Figure 1: STRUCTURE OF TRADE POLICY DEVELOPMENT

GROUP...................................................... 81Figure 2b: TRADE POLICY IMPLEMENTATION MATRIX 82

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CHAPTER ONE

BACKGROUNDBACKGROUNDBACKGROUNDBACKGROUNDBACKGROUND

1.11.11.11.11.1 INTRODUCTIONINTRODUCTIONINTRODUCTIONINTRODUCTIONINTRODUCTION

Tanzania has declared, through the Development Vision2025, the bold goal of poverty eradication within thelifespan of one generation. The challenge is formidable.On the one hand, developments in the international settingprovide unique opportunities for the attainment of thisgoal. These opportunities include: globalisation andliberalisation; the new forces for trade expansion and rapideconomic growth; technological innovation summed up inthe digital revolution that is transforming the means andcosts of human communication and interaction leading todramatic declines in the cost of production; and politicalthrust for good governance that is reviving the traditionalvalues of humanity and stimulating human-centreddevelopment. On the other hand, at the national level,social tranquillity, resource endowment and determinationin carrying through reforms are providing the platform forbuilding economic competitiveness.

The opportunities in the international environmentnotwithstanding, internal weaknesses, if not addressedadequately, can be debilitating constraints to tradeexpansion and growth. The process of economictransformation towards an open market system poses newchallenges on the need to build a strong private sectorand addressing the concerns of empowerment associatedwith this. Economic liberalisation also means fundamentalchanges in the perception of internal trade as a sectorthrough which the government controlled economic activityas underscored by the 1982 internal trade policy.

The objective of this National Trade Policy is to enable Tanzaniaidentify ways and means of navigating through a viable and steady

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path towards competitive export-led growth for therealisation of the goal of poverty eradication. By adoptingthis National Trade Policy, Tanzania commits itself to onedirection of change, namely that of trade liberalisationbased on selectivity and a gradual process. In this regard,the strategy provides some space for governmentintervention in the direction of trade subject to continuingconformity with obligations in the MTS and regionalundertakings.

In a dynamic world, trade policy must be even moredynamic. This calls for a timeframe of 5 years as theduration of the policy and the need for constant monitoring,evaluation and review of the implementation process. Thegoal of breaking out of the vicious cycle of poverty within25 years may be ambitious, but it is unavoidable andachievable.

In this presentation of Tanzania’s first comprehensivemarket-oriented trade policy, the first chapter revisits thebackground to the policy formulation process, recalls thegoal of National Development Vision 2025 and the needfor a responsive policy paper. The second chapter makesan overview of domestic and world economic trends whilechapter three presents the mission and objectives of thetrade function responding to these developments. Chapterfour reviews unfolding developments in the internalenvironment in order to identify persistent constraints,ensuing challenges and emerging opportunities,highlighting the need for consistent movement away fromcontrol and protectionism towards competitiveness throughinitiatives for trade development. It is in this setting thatchapter five reviews the current status of policyinstruments targeting the realisation of priority objectivesand determines the appropriate strategic path ofimplementation. Finally, chapter six concludes the processwith a treatise on the policy implementation frameworkstarting with the identification of deliverables andculminating in proposals for the transformation of theNational Trade Policy into programmes and viable projects.

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1.21.21.21.21.2 LIBERALISALIBERALISALIBERALISALIBERALISALIBERALISATION AND GLOBALISATION AND GLOBALISATION AND GLOBALISATION AND GLOBALISATION AND GLOBALISATIONTIONTIONTIONTION

Tanzania’s economic take-off, more than ever before,depends on how the country makes use of opportunitiespresented by trade liberalisation and globalisation. Tradeliberalisation has meant gradual lifting of restrictions ontrade through removal of Non-Tariff Barriers (NTBs) andthe reduction of tariffs. Trade liberalisation leads to fiercecompetition within and outside the economy.Opportunities that accrue out of trade liberalisation areenhanced domestic productivity, efficiency, improvedquality and low prices which ultimately lead to improvedconsumer welfare. The main challenge facing Tanzania ishow to enhance the competitiveness of domestic firms andentrepreneurs.

Globalisation refers both to increasing flow of goods, assetsand resources across national borders and to theemergence of a complementary set of organisationalstructures to manage the expanding network ofinternational economic activity and transactions. A globaleconomy is one where firms and financial institutionsoperate beyond the confines of national borders. In a globaleconomy goods, factors of production and financial assetsalmost flow freely. Globalisation entails the merging ofTanzania’s domestic markets into the global market.Tanzania’s major challenge is how to effectively andgainfully participate in the emerging global market.Globalisation requires dynamic policies and strategiesgeared at exploiting inherent opportunities. It is beneficialin terms of trade development through enhanced accessto the world market and the opportunity to convert currentcomparative advantages into new sources ofcompetitiveness based on the free flow of investmentresources, factors of production, assets and information.

Both globalisation and liberalisation impose constraintsthat inhibit available domestic capacity to compete withthe external sector. So far, Tanzania has not been able toderive substantive benefits from globalisation and tradeliberalisation due to inadequate supply and deliverycapacity characterised by low technology, inadequate

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physical and human capital and underdevelopedinfrastructure. The main challenge therefore is to addressthe constraints limiting Tanzania ’s meaningfulparticipation and integration into the global economy.

1.31.31.31.31.3 HISTORICAL PERSPECTIVE, ECONOMICHISTORICAL PERSPECTIVE, ECONOMICHISTORICAL PERSPECTIVE, ECONOMICHISTORICAL PERSPECTIVE, ECONOMICHISTORICAL PERSPECTIVE, ECONOMICINDICAINDICAINDICAINDICAINDICATORS AND POTENTIALTORS AND POTENTIALTORS AND POTENTIALTORS AND POTENTIALTORS AND POTENTIAL

The United Republic of Tanzania consists of the areaformerly known as Tanganyika and Zanzibar (includingthe islands of Unguja and Pemba). The former gainedindependence in December 1961 while the latter becameindependent in December 1963 and the two sovereignrepublics formed the union on 12th January 1964.

Located in Eastern Africa between longitude 290 and 410

East and latitude 10 and 120 South, the country has atotal land area of 945,000 sq km with more than fortymillion hectares of arable land and good tropical climate,adequate rainfall and ample water resources for irrigationpurposes. Current population is estimated at 34.5 millionpeople with per capita GDP of about USD 270. Eighty percent of the population depends on agriculture, the sectorthat also contributes about 50% to GDP and 70% ofearnings from merchandise exports. Major export productsare coffee, cotton, sisal, cashew nuts, cloves, diamondsand gold. High growth potential lies in mining, tourism,agriculture and industry. Specific high potential productsinclude gemstones and minerals, fish and fish products,horticultural products and spices, cotton and textiles,handicrafts and tourism services.

1.3.11.3.11.3.11.3.11.3.1 Historical Backgr Historical Backgr Historical Backgr Historical Backgr Historical Backgroundoundoundoundound

Over the four decades of independence, Tanzania haspursued diverse economic policies culminating in majorchanges in trade policy with profound consequenceson expansion of trade and economic development. Thefirst major policy initiative was consequent to theArusha Declaration in the 1970s, followed

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subsequently by the Structural Adjustment Programme(SAP) initiated in 1986.

The post-independence trade regime was a liberal onereflecting the relationships inherited from the colonial era,with the private sector playing the conventional role ofeconomic agent and engine of growth. Foreign trade flowsand relations rested on continued increased production ofagricultural commodities and raw materials for export,largely in unprocessed form. Domestic trade relationsreflected the predominance of a subsistence economy inwhich policies and laws encouraged commercial activitybased on export commodities and the discouragement ofcommercialisation of the production of food-crops. Thissituation prevailed up to 1972 when the “Policy ofConfinement” was adopted as one of the pillars for theimplementation of the Arusha Declaration.

The policy of confinement largely sought to place the traderegime, comprising of foreign and internal trade for goodsand services at levels from wholesale to retail, under publicsector control and management. Eventually directGovernment intervention in all operational aspects andthe common use of administrative resources allocation,price controls, import quotas, rationing and use of permitsto control the internal movement of goods and servicesbecame the primary policy instruments. Increasingrecourse to control-oriented trade policy instrumentsprevailed with the onset of the economic crises resultingfrom the internal limitations of a planned economy andexternal factors such as the series of oil-price shocks andthe collapse of the East African Community (EAC).

By the early 1980s the policy of trade confinement and itsimplications culminated in the following problems:• Inefficient resource allocation and inability to mobilise

adequate resources due to government intervention andcontrols in monetary policy including exchange and interestrate controls;

• The emergence of an inefficient payment system attributed tolack of competition in the financial system and the collapse of

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the credit system;• Decline of private sector activity and Foreign Direct

Investment (FDI) due to the nationalisation of foreignand domestic investments and assets; and

• Transformation of the co-operative movement into aninef ficient state-owned enterprises and cropauthorities serving as single agricultural marketingchannels dependent on public subsidies.

These developments culminated in the emergence andprevalence of parallel markets in the financial and goodsmarkets, with the larger proportion of transactions takingplace in unofficial channels leading to worsening balanceof payments and widening fiscal deficits. By mid-80s theprevalence of controls in a situation of increasing shortagesmade change in trade policy imperative.

1.3.21.3.21.3.21.3.21.3.2 TTTTTrade Liberalisation and the Reorientationrade Liberalisation and the Reorientationrade Liberalisation and the Reorientationrade Liberalisation and the Reorientationrade Liberalisation and the Reorientationof Interof Interof Interof Interof Internal Tnal Tnal Tnal Tnal Traderaderaderaderade

The initial trade policy reforms took the form of informaltrade liberalisation measures initiated in 1984 based onthe liberalisation of imports and of exchange controlsthrough partial retention of the proceeds of own exports.The formal introduction of the Economic ReformProgramme (ERP) in 1986 facilitated the extension of theliberalisation initiative to include wide spread pricedecontrol, and the removal of import restrictions throughthe introduction of the Open General Licence. The ERPintroduced a series of measures designed to establish amarket economy based on free trade through gradualintroduction of policies that complement and facilitateeffective functioning of trade policies. The set ofcomplimentary policies which have been put in place sincethen include:• Establishment and sustaining of a stable macro-

economic environment through a series of monetaryand fiscal policy measures and initiatives including theintroduction of a floating exchange rate, interest rateliberalisation and financial sector institutional reforms;

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• Liberalisation of agricultural marketing systemincluding the re-introduction of the co-operativemovement;

• Restructuring and divestiture of state-ownedenterprises in the productive, services and tradesectors;

• Social sector reforms covering the health andeducation sectors with a view to raising the qualityand outreach of these services with emphasis onbroad-based accessibility; and

• Public sector reforms to facilitate more efficient deliveryof private sector support services and theestablishment of an enabling business environmentthrough legal and regulatory reforms.

By 1996, initiatives in these areas had not achieved theobjective of reversing the general trend of stagnating tradeflows. At the same time the process of economic openingentailed a continuing systematic shift of the theme of tradepolicy away from the concept of internal trade based on aclosed economy towards a competitive system based on amarket economy. The formation of the World TradeOrganization (WTO) and the deepening process ofglobalisation have added new impetus to the need forbuilding a competitive market economy for the purpose ofwithstanding competitive pressures in the domestic marketand more effective participation in Regional TradingArrangements (RTAs) and in the MTS. The initiative toformulate and implement a comprehensive trade policypaper responds to the consequences of these developments,particularly the fact that the concept of internal trade isno longer valid as the domestic market has become anintegral part of the global market.

1.41.41.41.41.4 RARARARARATIONALE FOR A NATIONALE FOR A NATIONALE FOR A NATIONALE FOR A NATIONALE FOR A NATIONAL TRADE POLICYTIONAL TRADE POLICYTIONAL TRADE POLICYTIONAL TRADE POLICYTIONAL TRADE POLICY

Tanzania’s trade policy has evolved and been shaped bychanges in its socio-economic regime and politicalphilosophy over the past four decades. Immediately afterindependence, Tanzania pursued free trade policy. In orderto address the legacy of colonial inequality andunderdevelopment, the Government adopted the ArushaDeclaration whose policy focus was public ownership of the

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commanding heights of the economy, trade confinementand import substitution guided by protectionism. Theformal trade policy adopted in 1980 as part of this regimefocused solely on internal trade controls based on theconcept of building a self-sufficient economy. After oneand a half decades of implementing trade policies that wereformalised in 1980, the economy was plunged into a seriesof severe economic crises that necessitated a policy shifttowards trade liberalisation under a market-led economy.The unfolding process of globalisation has accelerated theprocess of liberalisation and economic opening up.

1.4.1 Domestic Market Considerations1.4.1 Domestic Market Considerations1.4.1 Domestic Market Considerations1.4.1 Domestic Market Considerations1.4.1 Domestic Market Considerations

As the domestic economy opened up to the rest of the world,liberalisation has been accompanied by substantial shortand medium term adjustment costs in the form of firmclosures, loss of jobs, incomes and more poverty. Thestructure and level of effective domestic demand remainseffectively weak and inadequate as a source of povertyreducing growth. This highlights the need for a trade policyto guide liberalisation so as to reduce its negative effectswhile promoting trade development as the means of raisingthe capacity of domestic demand through a strategy basedon increasing participation in the global market.

Strategic trade liberalisation entails a number of things;the most important being movement in one direction oftrade liberalisation but gradually and selectively allowingsome space for government intervention. This entailseffective management of the process of change to ensurepolicy continuity and credibility. It entails the removal ofintra-regional and district administrative barriers to trade.Finally it calls for deliberate measures for rapid tradedevelopment through widening and deepening of linkagesin the domestic market and more effective participation inthe global market.

The primary objective of this trade policy is to enhance Tanzania’seconomic growth, which addresses Tanzania’s key priority of

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poverty eradication. Openness to trade is positively relatedwith growth and growth is the prime requirement forpoverty eradication. However, the transmission mechanismbetween trade liberalisation and poverty eradication is notautomatic and suitable policy interventions are necessaryif desired objectives are to be attained.

1.4.2 The Inter1.4.2 The Inter1.4.2 The Inter1.4.2 The Inter1.4.2 The International Envirnational Envirnational Envirnational Envirnational Environmentonmentonmentonmentonment

The international business environment has beensubjected to radical shifts in relationships resulting fromtechnological changes and emphasis on good political andcorporate governance. Economies are opening up to tradeand small national markets are merging into larger entitiesthrough regional integration schemes. Competition isintensifying as firms become more innovative.Developments in Information and CommunicationTechnology (ICT) have given rise to new communicationmedia with wide and instantaneous outreach at relativelylow cost. The ultimate result is the transformation ofcustomer expectations that are forcing the business worldto strive for higher quality, lower prices and first-rateservices.

In this situation, export-led growth is a prerequisite forthe attainment of poverty eradicating rates of GDP growthin Tanzania. However, the proficiency underpinning thecompetitiveness required in export-led growth is built andnurtured through the learning processes and experiencesgained in the domestic economy. This calls for a dynamicprocess of trade development to stimulate thecompetitiveness of Tanzanian goods and services in thedomestic and regional markets as the stepping-stone tomore effective entry and participation in the global market.Trade policy must stimulate the adoption of tradedevelopment strategies that respond proactively to theemerging opportunities and challenges and addressdivergences between supply capacity and the demands ofa converging global market.

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1.4.3 Re-orientation T1.4.3 Re-orientation T1.4.3 Re-orientation T1.4.3 Re-orientation T1.4.3 Re-orientation Towarowarowarowarowards Tds Tds Tds Tds Trade Developmentrade Developmentrade Developmentrade Developmentrade Development

Tanzania’s new trade policy goes beyond the traditionalfocus on tariffs and quantitative restrictions and changesin relative prices. It captures the deeper transformationaland production issues. It emphasises the role of thegovernment as implementer of trade policy and that of theprivate sector as the engine of growth as well as partnersin the formulation and implementation process. It setsnew and modern rules on how to increase internationalcompetitiveness, establishes how these rules are made andimplemented, elevates the role of the private sector andcreates opportunities for its development and promotes anew philosophy of economic management based on seriouscommitment to openness.

This policy addresses the critical issues facing theTanzanian economy including:• Consolidating consensus on trade development

measures that will entrench the continuing policy shiftfrom a protected and controlled economy towards acompetitive market economy;

• Highlighting the central role and contribution of thetrade function to the attainment of the primary goalof poverty eradication under the National DevelopmentVision 2025;

• Identifying measures for the development of thedomestic market as a tool of inclusion and broad-basedparticipation in economic activity based on improvedmarket-infrastructure, technology diffusion and accessto market information;

• Alignment of national development agenda withregional and international trade obligations andmaximisation of the benefits of participation in regionaland international trade arrangements;

• Adopting an appropriate framework of measures forthe interim safeguarding of domestic industry andeconomic activity threatened by liberalisationincluding identification of sectors to be protected, therationale and costs of protection, and the maximumduration for protection; and,

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• How best to address the supply-side constraints that5inhibit expansion of trade within the domestic andglobal market as the route towards rapid economicdevelopment.

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CHAPTER TWO

ECONOMIC OVERECONOMIC OVERECONOMIC OVERECONOMIC OVERECONOMIC OVERVIEWVIEWVIEWVIEWVIEW

2.12.12.12.12.1 TRENDS IN WORLD TRADE AND THE PLACE OFTRENDS IN WORLD TRADE AND THE PLACE OFTRENDS IN WORLD TRADE AND THE PLACE OFTRENDS IN WORLD TRADE AND THE PLACE OFTRENDS IN WORLD TRADE AND THE PLACE OFSUB-SAHARAN AFRICASUB-SAHARAN AFRICASUB-SAHARAN AFRICASUB-SAHARAN AFRICASUB-SAHARAN AFRICA

During the 1990s, world trade expanded by over 55% innominal US dollar terms, from US$4,300 billion toUS$6,700 billion. Trade volume growth, averaging 6.7%per annum, has continued to out-pace significantly thegrowth of real GDP, rated at an average of 3% a year. Theratio of global trade to GDP rose from 19% in 1990 to 23%in 1998.

Transactions in trade in services rose from about 20% oftotal trade value in 1993 to about 33% by 1997, equivalentto 7.6% of world GDP with a value of US$2,200 billion.The most promising sub-sector, for developing countries,is the tourism industry and transit trade although servicesbased on movement of natural persons is gaining inimportance. The key to better performance in the servicesindustry lies in the adoption and popularisation of ICT inenhancing performance in services delivery. Tanzania hasthe potential to build on the rapid expansion in trade inservices.

Continuing expansion of manufactures has been the keysource of growth in international trade. Over that period,manufactured goods accounted for about 93% of theincrease in value and currently accounts for over 70% ofinternational trade. In contrast trade in raw materials, oresand metals demonstrated a declining trend from over 30%of world trade in the 1960’s to only 5.8% in 1998. Onlytrade in food products has demonstrated increase in growthfollowed closely by trade in fuels.

Analysis of world trade by major economic areas indicates that the

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industrialised countries dominate world trade. Developingcountries in total account for less than 30% of world tradewith the smallest 150 trading countries accounting for lessthan 15%.

The share of Sub-Saharan Africa (SSA) in world trade,excluding South Africa, has over the past twenty yearsdeclined from 5% to around 2%. SSA countries continueto trade in primary commodities, mainly agriculture andmining products. The fundamental cause for their poorperformance is the failure to share in the increase in tradein manufactured goods. The share of SSA countries inworld manufacturing output declined from 0.6% in the1970s to 0.3% by 1995. The growing importance of tradein services, particularly tourism, offers new opportunitiesto reverse the trend of declining SSA share in world trade.

2.22.22.22.22.2 TTTTTANZANIA: ECONOMIC PERFORMANCE TRENDSANZANIA: ECONOMIC PERFORMANCE TRENDSANZANIA: ECONOMIC PERFORMANCE TRENDSANZANIA: ECONOMIC PERFORMANCE TRENDSANZANIA: ECONOMIC PERFORMANCE TRENDS

The share of Tanzania’s exports in world trade has beenon the decline. The nation maintained a surplus balanceof trade up to 1969 but has experienced a widening tradedeficit since then. Import demand has increasingly beenfinanced through external borrowing and assistance.Between 1979 and 1995, export earnings were barelyadequate to meet a third of imports. A leap in exportearnings recorded in 1994 resulted from, among otherthings, the implementation of trade liberalisation measuresand changes in both volumes and prices for three majorcrops: coffee, cotton and tobacco. Export earnings fromthe three products peaked in 1996, but starting from 1997onwards, there has been resumption of the declining trendin terms of volume of output and earnings.

Merchandise exports declined from US$ 764 million in1996 to US$ 603 million by 1999 with a slight improvementto US$ 751 million in 2000. Agricultural commoditiesaccounted for more than 70% of merchandise exports whilemanufactured products contributed only about 15% ofexports. The contribution of tradable services to foreign

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earnings increased substantially consequent to the rapidgrowth of the tourism industry. Earnings from tourismgrew at an average of 29% increasing from US$ 65 millionin 1989 to US$ 730 million by 1999.Constraints to trade expansion and growth in Tanzaniainclude: low production capacity; technology-relatedproblems; inadequate physical and economicinfrastructure; and the consequences of marginalisationin the context of globalisation. Whereas liberalisation andglobalisation present daunting challenges to Tanzania, theyalso provide opportunities for increasing its share in worldtrade.

By way of addressing the constraints against tradeexpansion, Tanzania embarked on a number of reforms.The reforms include foreign exchange de-control andliberalisation of interest rates; removal of export taxes; andprivatisation of state owned firms. On the export front,the Export Development Strategy (EDS) initiative hasprovided the foundation for programmes initiated underthe framework of the MTS, such as the IntegratedFramework for Trade Development (IF) and the JointIntegrated Technical Assistance (JITAP) that arecontributing to the establishment of an appropriateenvironment and framework for increasing exports.

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CHAPTER THREE

VISION, MISSION AND OBJECTIVESVISION, MISSION AND OBJECTIVESVISION, MISSION AND OBJECTIVESVISION, MISSION AND OBJECTIVESVISION, MISSION AND OBJECTIVESOF TRADE POLICYOF TRADE POLICYOF TRADE POLICYOF TRADE POLICYOF TRADE POLICY

This trade policy responds to and builds upon the internaleconomic reforms that have been under implementationsince the mid 1980s, and to unfolding events in theinternational economic scene. These developments callfor a systematic and consistent approach in the applicationand use of trade policy instruments in the process ofbuilding a competitive economy and striving for higher ratesof growth. From the internal perspective, the policy drawsupon the primary goal of the National Development Vision2025, emphasising on poverty reduction and its ultimateeradication. In order to address the problem of poverty, itis necessary to attain and sustain a minimum GDP growthrate of 7% which in turn requires a minimum rate of 14%for trade growth. This highlights the importance of theinternational dimension in trade expansion strategies.Hence, from the international perspective, the policy drawsupon unfolding changes in the MTS and emergingopportunities which can contribute immensely to theprocess of attaining and sustaining the high rates ofeconomic growth that underpin strategies for povertyeradication.

3.13.13.13.13.1 TRADE POLICY VISIONTRADE POLICY VISIONTRADE POLICY VISIONTRADE POLICY VISIONTRADE POLICY VISION

The role of the trade sector towards the realisation of thenational goal of poverty eradication will be attained throughthe structural transformation of the economy andenhanced productivity that will in turn contribute to theprocess of international competitiveness and lead to rapideconomic growth. In this regard, Tanzania’s Trade PolicyVision is:“… to transform the economy from a supply constrained oneinto a competitive export-led entity responsive to enhanceddomestic integration and wider participation in the global

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economy through national trade liberalisation”.

3.23.23.23.23.2 MISSIONMISSIONMISSIONMISSIONMISSION

Trade is not an end in itself but a means for achievinghigher welfare to society, than would be possible withouttrade. The function of the trade sector, therefore, is tointegrate the Tanzanian economy into the global economythrough trade. This entails structural transformation ofthe national economy, and product/market diversification.

Indeed, to sustain an economic growth rate above the 7%necessary for the achievement of the goals of NationalDevelopment Vision 2025 depends on developing a modernexport-led economy. High volumes of exports are necessaryto achieve the goals of Vision 2025. Sustaining a highgrowth rate is a necessary but not sufficient condition forpoverty eradication. Growth has to be complemented bybroad-based equal opportunity of access to the primaryassets of production – land, education and finance – forsuch growth to be translated into poverty eradication. Themission of the trade sector is therefore to:“…stimulate the development and growth of trade throughenhancing competitiveness aiming at rapid socio-economicdevelopment.”

3.3.3.3.3.3.3.3.3.3. OBJECTIVESOBJECTIVESOBJECTIVESOBJECTIVESOBJECTIVES

In accordance with the National Development Vision 2025,the goal of trade policy is that of raising efficiency andwidening linkages in domestic production and building adiversified competitive export sector as the means ofstimulating higher rates of growth and development. Fivespecific objectives emanate from and reflect this goal.

The first specific objective is to stimulate a process of tradedevelopment as the means of triggering higher performance and

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capacity to withstand intensifying competition within thedomestic market. This includes the establishment ofimproved physical market-place infrastructure andstimulating dissemination of market information andincreasing access to the market. The second objectiveinvolves economic transformation towards an integrated,diversified and competitive entity capable of participatingeffectively in the MTS.

The third objective entails the stimulation andencouragement of value-adding activities on primaryexports as a means of increasing national earnings andincome flows even on the basis of existing output levels.Fourth is the stimulation of investment flows into export-oriented areas in which Tanzania has comparativeadvantages as a strategy for inducing the introduction oftechnology and innovation into production systems as thebasis for economic competitiveness.

The fifth objective is the attainment and maintenance oflong-term current account balance and balance ofpayments through effective utilisation of complementaritiesin regional and international trading arrangements as ameans of increasing exports combined with initiatives forhigher efficiency in the utilisation of imports. The ultimatetarget is to enhance income generation and the people’searning power at the grass-roots level as the key to povertyreduction in fulfilment of the fundamental human right ofequal opportunity for all citizens as enshrined in theconstitution of the United Republic of Tanzania.

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CHAPTER FOUR

CONSTRAINTS AND CHALLENGES FORCONSTRAINTS AND CHALLENGES FORCONSTRAINTS AND CHALLENGES FORCONSTRAINTS AND CHALLENGES FORCONSTRAINTS AND CHALLENGES FORTRADE POLICYTRADE POLICYTRADE POLICYTRADE POLICYTRADE POLICY

Tanzania’s trade performance within a shrinking domesticmarket, in an increasingly liberalising economy that isconverging with a deepening global market, is a source ofconcern. The essence of impediments against the growthand expansion of Tanzanian trade flows lies in “supply-side constraints.” The success of the envisaged tradedevelopment strategies depends on prioritising theimplementation of measures addressing the totality ofsupply-side constraints. These constraints extend acrossthe entire commodity/product value chains fromproduction through processing and delivery to theconsumer and encompass the full range of supportingservices involved.

From the perspective of globalisation the same constraintsassume the feature of two fundamental requirements: theneed for raising the private sector’s capacity to compete;and ensuring that benefits from the unfolding opportunitiesare accessible to broader segments of the society.Successful resolution of these demanding multi-dimensional constraints depends on prior determinationof fundamental premises underpinning the developmentof production capacities including increasing access to themeans of production and inherent challenges.

The major fundamental premises and challenges include:establishing and sustaining an enabling businessenvironment; development of hard and soft infrastructure;building capacity for market supporting institutions;creating the internal ability to participate in and influencechanges in the world trading system; and promotion ofprivate sector development in the context of supply-sidecapacity.

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4.14.14.14.14.1 ENABLING POLICY ENVIRONMENTENABLING POLICY ENVIRONMENTENABLING POLICY ENVIRONMENTENABLING POLICY ENVIRONMENTENABLING POLICY ENVIRONMENT

The fundamental role of government is in providing theenabling policy environment that will facilitate the privatesector in becoming the engine of economic activity andgrowth through efficiency and better performance. TheTanzanian Government is already implementing a policyentailing its withdrawal from direct involvement ineconomic activity to facilitate channelling of its resourcesin the conventional area of establishing and maintaininga conducive and enabling policy environment. Fourcategories of measures are involved in the process ofcreating an enabling environment: good governance;stability of the macro-economic framework; legal andregulatory framework reforms; and efficient economicregulation and competition policy.

4.1.14.1.14.1.14.1.14.1.1 Good Gover Good Gover Good Gover Good Gover Good Governancenancenancenancenance

Constraints and Challenges

Good governance is a pre-condition for developmententailing the existence of a combination of tangible andintangible attributes and functions of the governmentmachinery. The intangible attributes refer to the well-functioning of the state coupled with the institutionalcapacity to: maintain peace, law and order; create anatmosphere of tranquillity and confidence for investment;ensure individual liberty and equality before the law;ensure security of property and fair delivery of commercialjustice; and provide adequate checks and balances in theexercise of power including transparency and predictabilityin public decision-making.

For example, the ongoing socio-political and economicreforms including broadening popular participation of thepeople in economic and political processes, andentrenching security of people are intended to enhancegood governance. Likewise, major public and private sectorinvestments in social and physical infrastructure aim atstrengthening the capacity for efficient delivery of services

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necessary for competitive economic activities. However,its efficiency is hampered by a weak institutional frameworkfor enforcement and execution.

Strategy

The Government is continuing with the implementation ofmeasures aimed at strengthening its capacity to maintaingood governance as its cardinal mandate includingpromotion of self-regulation through introduction of codesof conduct. Other measures will include extensive publicawareness campaigns and moral persuasion targetingpublic and private sector active involvement andparticipation in good governance.

4.1.2 Macr4.1.2 Macr4.1.2 Macr4.1.2 Macr4.1.2 Macro-economic Policy Enviro-economic Policy Enviro-economic Policy Enviro-economic Policy Enviro-economic Policy Environmentonmentonmentonmentonment


One of the prerogatives for attaining and sustaining highrates of economic growth is the establishment of anattractive, stable and predictable macro-economicenvironment for increased flow of investment and trade.This rests on the implementation of appropriate monetaryand fiscal policies such as lowering and controlling inflationand the stabilisation of interest and exchange rates. Alsoit requires increased liberalisation of the operations of thefinancial, commodity and labour markets. In the socio-political sphere the observance of good governance,maintenance of peace, the rule of law and enhancedefficiency in the delivery of goods and services are ofparamount importance.

Strategy

The Government will continue with the implementationof measures aimed at sustaining a conducive macro-economic policy environment in its entirety as the basiccondition for stimulating economic growth throughincreased investment and trade expansion. The

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Government will continue to strengthen its institutionaland supervisory capacity for this purpose. This entailsbuilding a national consensus on the direction offundamental macro-economic policy variables combinedwith a deliberate change in the culture of governmentservice towards increasing responsiveness to the needs ofthe business community.

4.1.3 Legal and Regulatory Framework4.1.3 Legal and Regulatory Framework4.1.3 Legal and Regulatory Framework4.1.3 Legal and Regulatory Framework4.1.3 Legal and Regulatory Framework


The establishment of an enabling business environmententails a process of continuous adjustment of the legaland regulatory framework impacting on the performanceof the business sector. Despite economic reforms sustainedsince the mid-eighties, there are still residual impedimentsthat lead to high transaction costs. This discourages theinflow of foreign and domestic investment and hindersefficient trade sector performance. The envisaged legaland regulatory reforms seek to lower transaction costs,enhance business compliance and improve efficiency andcompetitiveness. The ultimate objective of legal andregulatory reforms is to protect the interests of consumersthrough enhancing the capacity of government institutionsto perform their regulatory functions efficiently and bymaintaining regulations only where they are necessary forthis objective.

Strategy

The Government is expediting measures to stimulateinternational competitiveness through:(a) Reduction of unnecessary bureaucratic procedures

that lead to high transaction costs for the businesssector;

(b) Facilitating and encouraging the development of privatesector capacity to participate more effectively in theprocess of better regulation through public-privatesector partnerships and improved advocacy; and

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(c) Expediting the establishment of market-supportinginstitutions in the area of better regulation to ensureco-ordinated legal and regulatory reforms andimprovement of commercial justice delivery.

4.1.4 Economic Regulation and Competition Policy4.1.4 Economic Regulation and Competition Policy4.1.4 Economic Regulation and Competition Policy4.1.4 Economic Regulation and Competition Policy4.1.4 Economic Regulation and Competition Policy


Generally, competition policy addresses the problem ofconcentration of economic power that can arise frommarket imperfections, monopolistic behaviour in economicactivities and consequent restrictive business practices.Restrictive business practices primarily affect the consumerthrough either higher prices and unacceptable qualitystandards or limitations on the availability of goods andservices. Competition policy aims at perpetuating freedomof trade, freedom of choice and access to markets.Competition law is a component of competition policyprohibiting firms from engaging in anti-competitivebehaviour and abuse of dominant market position. Theultimate objective of economic regulation and competitionpolicy is to protect the consumer through control ofmonopoly behaviour on the part of producers.

Tanzania has enacted three laws to govern competitionand regulation of economic activity: the Fair Trade PracticesAct of 1994; the Energy and Water Utilities Regulatory Act(EWURA) of 2001 and the Surface and Marine TransportRegulatory Act (SUMATRA) of 2001. The SUMATRA Actalso amends the Fair Trade Practices Act to establish theFair Competition Commission (FCC) in place of the FairTrade Practices Bureau. The mandate of these Acts islimited to the regulation of natural monopolies in theutilities and communications sectors and does not coveractivities in the social and economic sectors.

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Strategy

The Government is expediting the implementation ofCompetition law under the co-ordination of the FCC andrelated regulatory institutions and promote consumerprotection through broad-based public awareness onconsumer’s rights and obligations.

4.24.24.24.24.2 CAPCAPCAPCAPCAPACITY DEVELOPMENTACITY DEVELOPMENTACITY DEVELOPMENTACITY DEVELOPMENTACITY DEVELOPMENT

Capacity development in the context of Tanzania’s futuredevelopment agenda concerns strengthening, diversifyingand evolving a supply-side that is reliable and in tandemwith changing trends in the world market. This alsorequires enhancing productivity of the factors of productionand raising efficiency for exports to become competitiveboth in the domestic and export markets. Moreover, itrequires building capacities and skills to predict andinterpret changes and adopting appropriate responses.This capacity depends on human skills development andinstitutional capacity building, transformation ofproduction systems and overall private sector development.

4.2.1 Human Skills Development4.2.1 Human Skills Development4.2.1 Human Skills Development4.2.1 Human Skills Development4.2.1 Human Skills Development


The concept of human capital as a major factor ofproduction is increasingly assuming importance. Thedevelopment of human capital from the perspective ofdeveloping economies entails focusing on four factors: basicnutrition, education, health and protection againsteconomic vulnerability.

The level of access to formal education and technicalskills in leading sectors is the determinant factor inhuman skills development. A relatively high level ofeducation to a large segment of the population and goodtraining in the different aspects of the economicenvironment and the trade development function are the

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prerequisites for a successful trade regime. The experienceof the Newly Industrialising Countries (NICs) shows thatthe process of economic transformation was underlinedby quality universal primary education, enrolment ratioshigher than 25 per cent in secondary education and anaverage of 10 per cent enrolment ratio in tertiary anduniversity education.

Data for Tanzania indicates the magnitude of the taskinvolved in the education sector in terms of raising thescope and outreach of secondary and university educationto levels necessary for the realisation of the goals of Vision2025. For instance, at 6% the ratio of secondary schoolenrolment is the lowest in SSA. Performance in skillsdevelopment and extension services has also remainedbelow expectations and requirements with respect toproduction practices in key sectors particularly agriculture,tourism and small-scale mining.

The level of skills is relatively low compared to other regionaleconomies due to low enrolment ratios in formal educationat the secondary and tertiary levels and curtailed trainingin production and value-adding activities for workers inkey economic sectors. The pace of economictransformation in Tanzania depends on the rate at whichsociety can absorb and assimilate modern production skillsand technologies in areas where the nation has advantagesin resource endowments. The importance of educationand skills is crucial to the perception of technology asencompassing better production and delivery techniquesand practices rather than mechanisation. At the sametime the legal framework prevailing in the labour sectorcontributes to the pace of development of an adequate poolof skilled labour. Existing labour laws retain the tendenciesof a command economy characterised by lack of flexibilityin hiring practices and over-protection of employees, andlimited linkage between performance and remuneration.

The daunting task of expansion of the outreach of the educationsector in Tanzania is highly constrained by the implications of

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demographic features including the concept ofdemographic transition and the incidence of HIV/AIDs.Demographic transition refers to the rate of change of therates of birth and death. The essence of the concept isthat developing countries experience rapid populationgrowth and changes in its dependency ratio. While thedeath rate has been declining, the rate of birth has beenrising resulting in the increase in the dependency ratio.HIV/AIDS has become a major health problem as well asa serious impediment to socio-economic developmentthrough its impact in the reduction of the active labourforce, in particular the human capital that underpinseconomic transformation, higher productivity andcompetitiveness.

Strategies

Education:Education:Education:Education:Education: With respect to education, the Governmenthad planned to raise primary education enrolment ratioto 85% by the end of 2002 and increase the rate oftransition from primary to secondary education from 15%prevailing since 1998 to 20% by 2003. Emphasis had beenplaced on training in business education andentrepreneurship at various levels of the education system.This thrust and tempo will be maintained in the mediumand long term as a strategy to bridge the gap in the outreachof the national education system.

TTTTTraining:raining:raining:raining:raining: With regard to skills development andproduction techniques top priority will be accorded toextension services for agronomic and animal husbandrypractices in agriculture where the highest potential forgrowth based on wide linkages across sectors prevail. Thiswill include promotion of irrigation based on traditionaland modern practices and mechanised farming as far aspossible. The Government will also initiate measures tointroduce better packaging and delivery practices in directresponse to market expectations and demands. TheGovernment will take measures to contribute to marketlinkage programmes that aim at stimulating tradedevelopment through product and market diversification based

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on introduction of new product and new processes forvalue-adding activities.

Labour laws:Labour laws:Labour laws:Labour laws:Labour laws: The Government is reviewing prevailinglabour laws and regulations to induce the evolution oflabour practices that conform to market practices that linkmerit, efficiency and productivity to rewards and flexibilityin employment to reflect the principles of free entry andexit into industry. Labour law reforms will adhere toobligations from the International Labour Organisation.The Government will implement social sector policies aimedat the development of human capital through creation of alarge pool of trained and trainable labour force as the baseof structural transformation of the economy.

HIV/AIDS:HIV/AIDS:HIV/AIDS:HIV/AIDS:HIV/AIDS: The government will implement a broad-basedstrategy of raising awareness on the scourge of HIV/AIDSand the incidence of demographic transition and encouragechange in social behavioural patterns. Towards this end,emphasis will be placed on the instruments of moralpersuasion and social responsibility based onaccountability and self-determination rather than laxityand social permissiveness as the key to stimulating changein cultural patterns, attitudes and habits. Finallyincreasing accessibility to income generating activities forsocially vulnerable groups will be one of the pillars toaddress the problem.

4.2.2 Private Sector Development.4.2.2 Private Sector Development.4.2.2 Private Sector Development.4.2.2 Private Sector Development.4.2.2 Private Sector Development.

The private sector is now formally recognised and acceptedas the producer of goods and lead provider of services forthe domestic and export markets and consequently theleading employer and primary vehicle for povertyeradication. The thrust of socio-economic reformsundertaken since 1995, highlights the determination tobuild a vibrant private sector for this purpose.

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Strategy

The Government is developing a Private SectorDevelopment Strategy (PSDS) to ensure broad-based andinclusive participation in production and trade and willexpedite its adoption and implementation. The strategyentails the establishment of an enabling businessenvironment through better regulation; increased privatesector access to capital including “titled-land,” education,skills and entrepreneurship as well as provision of businesssupport services in management, production andmarketing.

4.2.3 Institutional Capacity Building4.2.3 Institutional Capacity Building4.2.3 Institutional Capacity Building4.2.3 Institutional Capacity Building4.2.3 Institutional Capacity Building

Institutional capacity building amongst the key public andprivate sector stakeholders in the trade policy process isthe key to successful implementation. Performance inpublic institutions, including the Ministry of Industry andTrade (MIT) and its supporting agencies, and in businesssector associations that serve the private sector, such asthe Tanzania Private Sector Foundation (TPSF),Confederation of Tanzania Industry (CTI) and TanzaniaChamber of Commerce, Industry and Agriculture (TCCIA),reflects major cultural and operational weaknesses, oftenassociated with the “mind-set.” These include lack ofproactive initiative in identifying and addressing problems,low analytical capacity, low commitment to work and poorco-ordination. Moreover, there is evidence of lack ofappropriate experience to amend or repeal obsolete lawsand make better and simpler regulations to facilitateenforcement on the part of the public sector, and lack ofanalytical capacity to advocate for requisite change on thepart of the private sector.

Strategy

The Government will undertake capacity building needsassessment to identify institutional complementaritiesand gaps. Priority will be accorded to private sectorcapacity for analysis and advocacy in influencing policyformulation and implementation. Twinning of

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indigenous institutions with overseas counterparts will beexplored and utilised to facilitate rapid movement alongthe learning curve.

4.2.4 T4.2.4 T4.2.4 T4.2.4 T4.2.4 Transforransforransforransforransformation of Prmation of Prmation of Prmation of Prmation of Production Capacityoduction Capacityoduction Capacityoduction Capacityoduction Capacity

Agriculture remains the backbone of the Tanzanianeconomy with over 80 per cent of the population dependenton this sector. It remains a source of employment to 75per cent of the population, contributing 50 per cent toGDP and about 70 per cent of export earnings. Leavingthe economy dependent on traditional agriculture, whichin turn is dependent on the whims of nature and fluctuatingterms of trade, makes the path of development unstableand unpredictable. Success of this trade strategy in thecontext of the goal of Vision 2025 depends on strategiesfor the transformation of agriculture.

The revival of the agricultural sector is constrained by lackof support to facilitate technology diffusion for modernagronomic practices to raise productivity and slow responseby foreign investment culminating in stagnation in thedevelopment of the private sector and agribusiness.Specific constraints include: limited access to extensionservices, inputs and credit facilities necessary to stimulateproduct diversification; weak market linkages due to poorinfrastructure; and lack of market knowledge andinformation necessary to facilitate market diversification.

Likewise there is need to modernise production practicesin the designated lead sectors of mining and tourism andother priority sectors such as industry and transit trade.Such modernisation depends on application of moderntechnology on the national resource base. Enhancingcompetitive value-adding capacity in these sectors is thekey to transformation of economic activity.

Strategy

The Government will prioritise measures for agricultural

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transformation through implementing the AgriculturalSector Development Strategy (ASDS) of 2001. One priorityaspect is to ensure a net-inflow of resources into the sectorto facilitate transformation of production technologiesthrough wider research and dissemination of researchresults and better extension services. The government willalso encourage investments in commercial farming andagro-processing industries as growth poles of the sectorthrough out-grower and contract farming schemes andother market linkage relationships.

Other measures include the promotion of industrialisationthrough investment in Export Processing Zones (EPZs) andIndustrial Parks. The Government will also encourage thechannelling of investment resources to non-traditionalsectors, in particular mining, tourism, livestock and transittrade services. Implementation of the agricultural sectordevelopment strategy will ensure the prioritisation of effortsto mobilise and channel investment resources into thesector.

4.34.34.34.34.3 INFRASTRUCTURE DEVELOPMENTINFRASTRUCTURE DEVELOPMENTINFRASTRUCTURE DEVELOPMENTINFRASTRUCTURE DEVELOPMENTINFRASTRUCTURE DEVELOPMENT

There are two categories of infrastructure, i.e. hard andsoft infrastructures. Both hard and soft infrastructureare vital for economic growth. Hard infrastructure includestelecommunications, transportation, power, water andsanitation. Soft infrastructure refers to financial andinformation services. Efficient delivery of both categoriesis critical to the development of a competitive economyand for broader participation in economic activity.

Tanzanian infrastructure is generally underdeveloped andsparse relative to needs, making service delivery unreliableand expensive. There are major challenges in the capitalmarket with pressing needs to widen and deepen financialmarkets. Lack of financial instruments in the formal sectorto serve the informal sector and the Small and MediumEnterprises (SME) niche remains a major constraint andimpediment to private sector development and

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economic empowerment.

Strategies

The Government will implement strategies for thedevelopment of hard and soft infrastructure based on thefollowing measures:• Expedite implementation of the ICT policy adopted

recently as the basis of building a knowledge-basedeconomy;

• Continue implementation of measures to consolidatethe financial sector and encourage private sectorinvestment in specialised banking institutionstargeting key sectors such as agriculture and industry;

• Encourage reforms underpinning the emergence of asuitable credit culture as the means of stimulatingefficient financial intermediation in support of theSMEs segment;

• Restructuring and divestiture of the utilities sector,especially power and water, as a means of raising thereliability of supply while lowering costs to regionallycompetitive levels; and

• Modernisation and expansion of the transportationinfrastructure based on increasing recourse to privatesector resources through Build, Own, Operate andTransfer (BOOT) and Build, Operate and Transfer(BOT) schemes. Emphasis will also be placed onefficient utilisation of existing infrastructure in thecourse of exploiting the accessible resource-base.

4.44.44.44.44.4 CROSS-CUTTING ISSUESCROSS-CUTTING ISSUESCROSS-CUTTING ISSUESCROSS-CUTTING ISSUESCROSS-CUTTING ISSUES

Trade development initiatives have implications for theenvironment and gender issues. Both issues should betaken into account and given priority in trade policyformulation.

4.4.1 T4.4.1 T4.4.1 T4.4.1 T4.4.1 Trade and the Envirrade and the Envirrade and the Envirrade and the Envirrade and the Environmentonmentonmentonmentonment

Growth and development depends on sustainable and optimal useof the world’s renewable and non-renewable resources. This entails

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judicious exploitation of existing resources and theprotection and preservation of the environment. Tanzaniaattaches great importance to the growing need to protectand conserve the environment and has consistently upheldenvironmental conservation measures. Nevertheless, thecapacity to administer and enforce implementation of theenvironmental regulation is weak and frequently violatedallowing continuation of degradation of the environmentand compromises the sustainability of its resource base.The push for economic transformation and attainment ofhigher rates of growth tends to lead to environmentallydegrading production practices. This highlights the needfor pro-active measures to mitigate against the emergenceof environmentally harmful production practices indeveloping economies.

Strategy

The government will strengthen institutions entrusted withthe execution and enforcement of environmental laws andregulation. Priority measures include the mainstreamingof environmental issues into the development agenda.Environmental policies and simplified guidelines will beput in place to ensure consideration of environmentalissues in formulating and implementing growth strategies.

4.4.2. T4.4.2. T4.4.2. T4.4.2. T4.4.2. Trade and Genderrade and Genderrade and Genderrade and Genderrade and Gender

Gender issues are normally perceived from the perspectivesof sex, age and physical disability. The pertinent issue isthe inclusion of disadvantaged population segments andgroups into the mainstream of economic activity throughfacilitating their effective participation in domestic andforeign trade.

Women, as a disadvantaged group in developingeconomies, are the normal focus of the gender factor inview of their unique role as a productive force severelyconstrained by limitations in their accessibility to keyproduction assets, including capital, education

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and skills. This is evidence of the need to highlight thegender issue from the perspective of inclusion of womenin trade development processes through more egalitarianaccess to productive assets particularly titled land,infrastructure, finance, education and skills.

Strategy

The Government realises that measures to increase genderequality, apart from their social and distributionalimplications, have considerable potential in inducinggrowth acceleration. Consequently, policy initiatives toensure access to better extension services in agriculturefor the rural population and in particular women will beexpedited.

4.54.54.54.54.5 DOMESTIC MARKET AND DEMAND CHALLENGESDOMESTIC MARKET AND DEMAND CHALLENGESDOMESTIC MARKET AND DEMAND CHALLENGESDOMESTIC MARKET AND DEMAND CHALLENGESDOMESTIC MARKET AND DEMAND CHALLENGES

Although Tanzania has a large population, estimated atabout 34.5 million people, the level of effective demandremains low with a per capita income of approximatelyUSD270 and half of the population living in poverty.Clearly, the domestic market does not constitute adequatedemand to stimulate the high rates of growth that are theprerequisite for poverty reduction. In this regard, export-led growth is a prerogative rather than a matter of choice.However, export-led growth depends on emergingcompetitiveness in the domestic market. Consequently,initiatives for more effective participation in the globalmarket have to start with deeper economic integrationwithin the domestic economy based on trade development.

Essentially the development of trade within the domesticmarket depends on three factors: enhanced economicefficiency based on wider participation; improved marketaccess based on development of physical marketinginfrastructure; and access to market information. Theseaspects highlight the need for the development of modernmarket-place facilities and dissemination of information ontrends in the market. Simultaneous with these actions is theneed to remove intra-district trade barriers and encourage cross-

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border official trade particularly in food-products, theemerging area of product competitiveness for many Africancountries. The strategic policy direction on the domesticmarket is to encourage higher production and output offood products so as to remove the underlying cause forintra-district trade barriers.

4.64.64.64.64.6 REGIONAL AND INTERNAREGIONAL AND INTERNAREGIONAL AND INTERNAREGIONAL AND INTERNAREGIONAL AND INTERNATIONAL TRADETIONAL TRADETIONAL TRADETIONAL TRADETIONAL TRADEDIMENSIONSDIMENSIONSDIMENSIONSDIMENSIONSDIMENSIONS

Economic cooperation has assumed increasing importanceas the building block for the creation of larger marketsand increasing trade flows. The essence of tradecooperation is fourfold: solidarity in forging bargainingpower; creation of larger more viable markets throughmerging weak and fragmented markets; preservation ofregional markets; and locking-in of trade liberalisation.Regional and international cooperation stimulatesproductivity and competitiveness through economies ofscale and lower transactions costs by facilitating tradebetween countries and regions. Tanzania has consistentlyplaced high priority in participation in regional andmultilateral trading arrangements and economicintegration. The goal of Tanzania’s continuing participationin these arrangements will be the maximisation ofadvantages of inherent opportunities.

Strategy

Tanzania will undertake measures to ensure that thenation will benefit from the opportunities of market accessand investments arising in the MTS and from membershipin RTAs. Towards this end, the nation will implementstrategies aimed at targeting the following:• Increasing agricultural exports in particular non-

traditional products;• Promote valued-adding activities on current exports

particularly in the areas of agriculture, mining andtourism on the basis of stimulating investment inindustry;

• Encouragement and channelling of foreign and domestic

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investments into commercial farming that will serveas links between domestic producers and theinternational market; and

• Expansion and modernisation of the services industrywith priority on tourism and transit trade sectors.

4.74.74.74.74.7 IMPLEMENTIMPLEMENTIMPLEMENTIMPLEMENTIMPLEMENTAAAAATION INSTRUMENTS ANDTION INSTRUMENTS ANDTION INSTRUMENTS ANDTION INSTRUMENTS ANDTION INSTRUMENTS ANDCOMPLEMENTCOMPLEMENTCOMPLEMENTCOMPLEMENTCOMPLEMENTARARARARARY SECTOR POLICIESY SECTOR POLICIESY SECTOR POLICIESY SECTOR POLICIESY SECTOR POLICIES

Trade policy, in comparison with sector economic policies,is a unique cross cutting collection of strategies addressingthe single goal of achieving a high rate of economic growth.As such it seeks to address a wide range of economy-wideconstraints apparent in the fundamental premises forsuccessful trade policy. This feature extends to theinstruments that are conventionally necessary for effectiveimplementation. There are two broad categories of tradepolicy instruments. These include instruments that havea direct relationship and impact on policy transmissionsuch as tariffs, NTBs and measures for the safeguard ofthreatened industry.

While tariffs, NTBs and safeguards generally contribute tothe enabling environment, there are other direct policyinstruments that target the productive and deliverycapacity and these include the group of trade developmentinstruments.

Consequently, there is a wide package of instrumentsavailable for implementation of strategies necessary toaddress the constraints that mitigate against the realisationof the major objective of achieving higher rates of economicgrowth. These instruments have to be applied consistentlyas a package. Direct trade policy instruments aresupplemented by key economic sector policies thatcompliment trade policy measures. In practical terms, theapplication of each group of trade policy instrument callsfor the identification of underlying constraints andchallenges, a specific objective for each and adoption of anappropriate and consistent strategy for its implementation.The treatment of trade policy instruments adopted in thispolicy reflects the fact that the nation has been implementing

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the recommended trade policy in the course of economicreforms initiated in mid-1980s. The objective of this policypaper is to facilitate ownership of these initiatives,consolidating and continuing their systematic andconsistent application.

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CHAPTER FIVE

TRADE POLICY INSTRUMENTS ANDTRADE POLICY INSTRUMENTS ANDTRADE POLICY INSTRUMENTS ANDTRADE POLICY INSTRUMENTS ANDTRADE POLICY INSTRUMENTS ANDPRIORITY SECTORSPRIORITY SECTORSPRIORITY SECTORSPRIORITY SECTORSPRIORITY SECTORS

5.15.15.15.15.1 TRADE POLICY TTRADE POLICY TTRADE POLICY TTRADE POLICY TTRADE POLICY TARGETSARGETSARGETSARGETSARGETS

Tanzania is endowed with a rich and varied naturalresource base and a strategic geographical location relativeto international and regional markets. The country hasenjoyed exceptional social and political stability over thepast four decades, and has forged a cohesive nationalidentity based on a common language and culturalorientation. However, the country has persistentlydisplayed high levels of incidence of poverty and its impacton low standard of living.

The current structural pattern of the economy reveals thatthe share of agriculture, in terms of output andemployment, as well as that of agricultural commoditiesin total exports show a downward trend. However, overallcontribution to total production and exports remainsdominant. On the other hand, the contribution of industryto GDP remains insignificant accounting for only 8%.Effective trade policy implementation will, therefore, haveto be measured against the level of achievement intransforming the current structure, level of production,global market repositioning and integration.

Specific targets for this policy are:(a) Contribute to raising per capita income to levels

targeted in National Development Vision 2025;(b) Trade development measures to stimulate and expand

domestic demand through product and marketdiversification;

(c) Limited interim safeguard of domestic economicactivity threatened by liberalisation while buildingeconomic competitiveness;

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(d) Achieving and sustaining a rate of growth in trade ofnot less than 14% i.e. an average of twice the targetedrate of growth of GDP;

(e) Achieving and sustaining the long-run share of exportsin GDP of about 25% and reversal of the decliningtrend in the import-coverage ratio;

(f) Attainment of a two-fold increase in manufacturedexports for every ten-year interval, and a two-foldincrease in trade in services at intervals of 6 years;and,

(g) Raising the value of merchandise export earnings inabsolute terms to US$1,700 million within five yearsas envisaged in the EDS.

To achieve trade volume growth of 14% the followingfundamental conditions should be fulfilled:• Creation of an enabling environment consistent with

the implementation of a dynamic trade policy;• Adoption and implementation of appropriate sector

policies in key economic and social sectors;• Increase in savings and investments;• Transformation of agriculture;• Development of market linkages; and,• Human capital development.

5.25.25.25.25.2 POLICY INSTRUMENTSPOLICY INSTRUMENTSPOLICY INSTRUMENTSPOLICY INSTRUMENTSPOLICY INSTRUMENTS

Trade policy instruments are measures taken bygovernments to influence the direction and pattern of tradedevelopment. The application of these instruments inTanzania will be guided by the need to stimulate domesticproduction, promote exports, safeguard domestic industryagainst dumping practices and protect consumers.Tanzania will exercise trade policy options in line with itsinternational obligations. These instruments include:tariff-based (ad valorem) instruments; NTBs; trade defencemechanisms; trade development instruments; andinternational trade policy instruments as listed hereunder.

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(((((a)a)a)a)a) TTTTTarifarifarifarifariff-based instruments:f-based instruments:f-based instruments:f-based instruments:f-based instruments: Tariffs; Taxation; and DutyDraw-Back (DDB) Schemes.

(b)(b)(b)(b)(b) Non-TNon-TNon-TNon-TNon-Tarifarifarifarifariff Measurf Measurf Measurf Measurf Measures: es: es: es: es: Quotas; Import Licensing andRegistration; Pre-shipment Inspection (PSI) andCustoms Valuation; Local Content Requirements;Standards; State Trading Operations; GovernmentProcurement; and Administrative Barriers.

(c)(c)(c)(c)(c) TTTTTrade Defence Mechanisms:rade Defence Mechanisms:rade Defence Mechanisms:rade Defence Mechanisms:rade Defence Mechanisms: Subsidies; Safeguards;Antidumping; and Rules of Origin (RoO).

(d)(d)(d)(d)(d) TTTTTrade Development Policy Instruments: rade Development Policy Instruments: rade Development Policy Instruments: rade Development Policy Instruments: rade Development Policy Instruments: InvestmentCode and Rules; EPZs; Export Promotion Measures;and Export Facilitation Measures.

(e)(e)(e)(e)(e) InterInterInterInterInternational Tnational Tnational Tnational Tnational Trade Policy Instruments:rade Policy Instruments:rade Policy Instruments:rade Policy Instruments:rade Policy Instruments: BilateralCooperation Initiatives; RTAs; and WTO Agreements.

5.2.1 T5.2.1 T5.2.1 T5.2.1 T5.2.1 Tarifarifarifarifariff-based (Ad Vf-based (Ad Vf-based (Ad Vf-based (Ad Vf-based (Ad Valoraloraloraloralorem) Instrumentsem) Instrumentsem) Instrumentsem) Instrumentsem) Instruments

5.2.1.1 Tariffs

Tariff measures will continue to be the major instrumentfor trade policy implementation. Tariffs have traditionallybeen used for the twin objectives of revenue generationand protection of domestic industry. Under the importsubstitution industrialisation regime the protectionelement led to the emergence of non-uniform and hightariffs that harm unprotected industry and ultimatelyreduce consumer welfare. Ongoing reforms have reducedthe problem significantly, leading to the current four-bandtariff structure (0, 10, 15 and 25) in comparison to over40 bands that existed previously. The average rate hasalso been reduced significantly to about 16%.

Policy statement

The Government will ensure transparent application andpredictability in use of tariffs and further liberalisation andrationalisation of the tariff structure. This includes rationalisationof the continued use of tariffs as an instrument of protection and

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revenue generation; further reduction of tariff rates; andnarrowing of tariff bands. The objective is to increasecompetitiveness and raise consumer welfare. In applyingthis instrument, evaluation benchmarks will include thedegree of tariff rationalisation and reduction to levelsconforming to regional and multilateral obligations.Instrument application strategies will include the buildingof analytical capacity for tariff policy analysis includingEconomic Impact Assessment or the calculation of EffectiveRates of Protection (ERP).

5.2.1.2 Taxation

The Tanzanian tax regime comprises different types ofcentral and local government taxes, with weak co-ordination between the two regimes. This leads to overallhigher rates and high administration and managementcosts.

The existence of many types of taxes has contributed tothe high incidence of tax evasion and duty exemptions.This adversely affects the Government budget. Forinstance, total exemptions (VAT and tariffs) amounted to49% and 42% of total assessment for fiscal years 1997/98and 1998/99 respectively. A desired situation would beone where discretionary exemptions are minimised due totheir inherent lack of efficiency and transparency.

Policy Statement

On taxation, the Government targets widening of the taxbase and raising the ratio of taxation revenue as a percentof GDP from the current level of 13% to the conventionallevel of 20% prevailing in other neighbouring states. Thestrategies towards this objective include the reduction oftaxpayers burden through rationalisation and institution ofa unified tax regime in place of the prevailing two-tier regime.The government will ensure that the tax regime is supportiveof increased exports with a view to responding to the problemof a domestic market that is too small for the realisation of

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the economies of scale in modern industry. The necessarymeasures will include reduction of the types and numberof taxes, increasing efficiency in tax-regime managementand expansion of the revenue base. Ongoing initiativesinvolving capacity building in the tax administrationauthorities and computerisation of the tax system will beexpedited.

The Government appreciates the importance of increasinglyshifting the function of tariffs from being a majorinstrument for revenue generation to becoming the primaryinstrument for trade expansion. Hence it will continueimplementing measures targeting the reduction of tax andduty rates in conjunction with the eventual minimisationof exemptions as a means of enhancing revenue generationthrough taxation. The aim is to facilitate the use of tariffsas a trade policy instrument including its systematic useas an instrument to protect domestic industry in conformitywith WTO rules.

5.2.1.3 Duty Draw-Back Scheme

The DDB scheme is a tool for export promotion throughrefund of import taxes on imported inputs that go towardsproduction for exports. Tanzania has a DDB scheme inplace but its major constraint is lack of capacity for timelytechnical verification on the value of inputs consumed byexports resulting in delays in effecting duty refunds. Theseconstraints continue to prevail inspite of a number of recentreviews.

Policy Statement

The significance of DDB in stimulating exports declineswith progressive reduction of tariff rates. Lower tariffs aregenerally a better instrument for the stimulation of exportsthan cumbersome tax refunds, even when the refundsystem is efficient, and this remains the long-term objectiveof trade policy. In the short and medium term, theGovernment will review and strengthen the institutionalframework for efficient refund of import taxes under

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the DDB scheme. Likewise the mechanism for VAT refunds,where applicable, will be expedited.

5.2.1.4 Export Taxes

Export taxes are instruments for the discouragement ofexports of raw materials in favour of value added productsalthough in many developing countries they are appliedostensibly for revenue generation purposes. In Tanzania,the use of export taxes has been phased out as part ofeconomic reform measures. However, export taxes are stillapplicable to the primary export commodities includingcashew nuts and cotton, ostensibly as a source of revenueto finance product development activities includingresearch, training and extension services.

Policy statement

The Government, recognising that export taxes may beused as an instrument to discourage export of unprocessedproducts such as logs, hides and skins, cashew-nuts,cotton, oilseeds and the like, will use this instrument toencourage export of value added goods. The Governmentwill allow, on selective basis, the levying of export taxes toachieve the objectives of raising funds for research, trainingand extension services in the agricultural sector, in themost appropriate manner.

5.2.25.2.25.2.25.2.25.2.2 Non-TNon-TNon-TNon-TNon-Tarifarifarifarifariff Barriers/Measurf Barriers/Measurf Barriers/Measurf Barriers/Measurf Barriers/Measureseseseses

Non Tariff Barriers (NTBs) are instruments for the protectionof industry that work on the basis of restriction of imports.NTBs work through a variety of administrative or regulatorymeasures such as quantitative restrictions, administrativearrangements and stringent standards and qualityrequirements. The following NTBs are applicable in Tanzania:import licensing and registration; customs valuation; TradeRelated Investment Measures (TRIMs) such as local contentrequirements; standards; state trading; government

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procurement procedures; and administrative procedures.

The Government acknowledges that the obligationemerging from participation in the WTO is the gradualelimination of NTBs and their replacement with tariffs asthe instrument of protection, where necessary. Theultimate objective is to phase out NTBs throughtariffication. Tanzania is already implementing a strategyfor the tariffication of NTBs in line with WTO obligations.

5.2.2.1 Import Licensing

Import licensing can serve as a trade barrier, with adverseeffects on the flow of trade. The WTO agreement on importlicensing seeks to ensure transparency and non-discrimination in the use of import licences. There aretwo types of import licenses: automatic licensing wherethe authorities issue licenses automatically withoutdiscretionary powers; and non-automatic licensing usedfor administration of quota restrictions and other measuresbased on discretionary powers. Tanzania has adoptedautomatic granting of import licenses, for trade facilitation,data collection and monitoring purposes. The objective ofthe instrument of registration of importers is to keep trackof imports for tariff and tax administration purposes.

Policy statement

The Government recognises the adverse consequencesassociated with discretionary licensing, use of importpermits and registration of importers as instruments ofregulation of trade. The Government will implementmeasures to strengthen the machinery for collection ofduties and taxes. However it will maintain judicious useof import licensing and registration, in accordance withthe WTO obligations for the purposes of consumerprotection in specific circumstances such as theimportation of pharmaceuticals and hazardous products.

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5.2.2.2 Pre-shipment Inspection

PSI is a set of activities aimed at the verification of quality,quantity, price, exchange rates, financial terms andcustoms classification of goods undertaken in the exportingcountry at the request of the importing country. WTOrecognises that developing countries need PSI with theobjective of preventing capital flight through over-invoicingand the loss of customs revenue through under invoicingby traders. The WTO PSI agreement aims to strike abalance between the concerns of exporters and the needto safeguard the essential interests of importers indeveloping countries.

Policy statement

The Government recognises the need to distinguishbetween mandatory and voluntary PSI and use of theformer in consumer protection. Increasing recourse willbe made to the use of alternative but more directinstruments in verifying valuation for taxation and dutycollection purposes and ensuring consumer protection witha view to reducing the incidence of mandatory PSI forcontrol purposes, while encouraging the option of voluntaryPSI on the part of the importer. The success of alternativemeasures for enhancing conformity to consumer protectionand taxation measures, combined with successfulimplementation of customs valuation as an independentinstrument will facilitate the gradual elimination of theexpensive exercise of mandatory PSI.

5.2.2.3 Customs Valuation

Although Tanzania has in the past treated customsvaluation as part of PSI, the WTO agreements treat thetwo as separate instruments. The main objective of theWTO in the area of customs valuation is to provideprocedures for greater uniformity and certainty in theundertaking of customs valuation on a fair, uniform andneutral system.

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Currently the responsibility for mandatory psi and customsvaluation in Tanzania is contracted to private firms. InJanuary 2001, Tanzania switched from using the BDVdefinition for customs valuation to WTO-compatiblecustoms value definition precluding the need for PSI. Theinterim objective of the reviews of customs valuation andPSI has been to shorten the turn-around time required forcustoms clearance to internationally competitive levels.

Policy Statement

The Government will expedite measures to restore thefunction of customs valuation under the Tanzania RevenueAuthority (TRA) taking into consideration ongoingmeasures to build the requisite capacity. The success ofthese measures will facilitate the de-linking of the customsvaluation function from PSI and facilitate improvementsin customs valuation as an independent instrument.

5.2.2.4 TRIMs (Local Content Requirements)

The instrument of local content requirements falls underthe WTO agreement on Trade Related Investment Measures(TRIMs). The agreement covers a number of restrictiveissues on foreign investments in view of their traderestricting impact. These include conditionalities on localcontent, local equity, foreign exchange balancing, importobligations and others that are specifically prohibited underthe TRIMs agreement. The TRIMS agreement prohibitscountries from using these measures as they areconsidered inconsistent with GATT rules on nationaltreatment and rules against the use of quantitativerestrictions. Tanzania, as a least developed country (LDC),was required to comply with the TRIMs agreement by 2002following the expiry of a 7-year grace period given to LDCs.

Policy statement

The Government will undertake initiatives to seek extension of theTRIMs compliance deadline so as to facilitate use of this instrument

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to enable local industry to gain the necessary edge indeveloping its competitiveness. In the course of futureTRIMS negotiations, the Government will adopt measuresto emphasise concern on the need for developed countriesto perceive the issues of firms equity requirements, localcontent requirement, technology transfer and exportperformance as necessary conditions for LDCs to expeditethe process of socio-economic development.

5.2.2.5 Standards

Technical Barriers to Trade (TBTs), such as Sanitary andPhytosanitary (SPS) measures and other standards, areused as instruments of trade policy to authenticate thequality and specification of imports and exports inconformity with international safety requirements andregulations that largely aim at consumer protection.Tanzania has developed a combination of mandatory andvoluntary standards, some of which have been adoptedfrom International Standards Organisations (ISO).

Tanzania faces two challenges with respect to standards.First is the need for further alignment of national withinternational standards, building of capacity forenforcement and development of the culture of observingthe standards of main international trading partners inmajor export products. The second challenge is that ofconforming to WTO agreements on SPS/TBTs based onbuilding capacity for scientific analysis and risk assessmentmatching with the requirements of international marketsfor national exports.

Policy statement

The Government will implement measures to ensure thatTBTs and SPS will not be used as unnecessary traderestrictive measures on imports. It will continue to observeand enforce international standards rigorously in order toprotect economic activities particularly in the agriculturaland livestock sectors from the dangers of exotic peststhrough SPS measures. Likewise measures will be

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undertaken to protect its consumers against sub-standardand harmful products through application of suitablemeasures under the SPS and TBT agreements. Otherinitiatives will focus on raising awareness on internationalstandards with respect to conventional exports and to newproducts adopted under economic diversification strategies.These measures will include building public and privatesector capacity for conformity to prevailing standards aspart of entry strategies in accessing new markets.

As regards export development, the government will seekmembership, accreditation and participation ininternational standard setting organisations. Thegovernment recognises that lack of adequate technical andfinancial capacities in local standard organisations is animpediment to market access. It will explore opportunitiesemerging in the MTS, regional groupings and bilateralarrangements regarding the provision of technicalassistance on standards and SPS and utilise them to buildthe requisite capacity. In addition, it will encourage andbuild a culture of strict adherence to standards, startingwith those that are relatively easy to implement such asspecification requirements based on weights and measures.Finally initiatives will be undertaken to build internationalaccreditation capacity on standards at the national leveland in collaboration with regional economic partners.

5.2.2.6 State Trading Operations

State trading is undertaken by enterprises that are broadlydefined as: “Government and non-governmentalenterprises, including marketing boards which have beengranted exclusive or special rights or privileges includingstatutory or constitutional powers in the exercise of whichthey influence through their purchases or sales the levelor direction of imports or exports”.

State Trading Enterprises (STEs) need to bedistinguished from government procurement. In somecountries state trading still continues to play animportant role in import and export of certain

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goods particularly food and food products and commoditiestraded in bulk.

The General Agreement on Trade (GATT) rules impose twomain obligations on member countries in regard to STE.One is the requirement to conduct business on the basisof commercial considerations i.e. prices, quality,availability, marketability, transportation and otherconditions of purchase or sale. The obligations also insiston allowing competition in such purchases or sales by otherpurchasers or sellers. The second is transparency throughnotification to the WTO regarding state enterprises engagedin foreign trade and the products they import or export.

Policy statement

The existing policy position, evident in the divestiture ofState Owned Enterprises (SOEs), emphasises Governmentwithdrawal from direct participation in economic activitiesincluding trading services, in favour of the private sectortakeover of this function while the Governmentconcentrates on the conventional facilitating role. Yet, theGovernment recognises the benefits of state tradingenterprises in that they can still play an important role inimport and export of selective products including food andfood products particularly at times of crises. Where sucha need arises the government may give exclusive rights toSTEs to provide the requisite services for a specifiedduration.

5.2.2.7 Government Procurement

The Government procurement system is based on atendering system whose objective is to facilitate least-cost procurement through centralisation ofinternational and national procurement procedures. Aspecific law to regulate the process of Governmentprocurement has already been enacted. Governmentprocurement remains an inevitable instrument and theissue on hand is how much to open the Tanzaniansystem at different hierarchical levels to international

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bidders in conformity with WTO regulations.

Policy statement

The Government appreciates the importance of maintainingan open procurement system as a means of increasingcompetitiveness amongst suppliers and lowering costs. Thepolicy of openness has to be balanced with otherconsiderations, such as measures for stimulating thedevelopment of an infant private sector. The Governmentwill undertake measures to motivate the development ofthe domestic private sector through the procurementsystem and will also cooperate with donors in workingtowards the opening up of the procurement system fordonor-funded projects.

5.2.2.8 Administrative Procedures

Administrative procedures prevail in developing economiesas a response to difficult situations at times of naturaldisasters such as the need to ensure food security whengrain shortages are envisaged due to shortfalls inproduction. They are applicable at the regional and districtlevels. Their main impact include the discouragement ofcross-border trade in grains and other food crops, timberand livestock in border regions/districts. Currently theapplication of administrative procedures is largely at thediscretion of regional and district authorities.

Policy Statement

The Government will take measures to rationalise localgovernment by-laws so as to conform to specific nationalguidelines as well as to stimulate the integration of ruralsub-sectors into the national and international economythrough the commercialisation of food products so as toprevent the emergence of administrative procedures asbarriers to trade.

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55555.2.3.2.3.2.3.2.3.2.3 TTTTTrade Defence Instrumentsrade Defence Instrumentsrade Defence Instrumentsrade Defence Instrumentsrade Defence Instruments

The WTO agreements provide for safeguarding specificeconomic activities within a limited time-frame throughapplication of a set of instruments that are identified as“trade defence instruments.” Instruments available forthis purpose are safeguard measures, subsidies andcountervailing duties, anti-dumping legislation and RoO.The aim of these instruments is to ensure fair competitionthrough availing infant industries time to grow and becomecompetitive without inhibiting trade, hence contributingto gradual acceleration of trade expansion. Theinstruments can be used to address a wide range ofsituations and provide for flexibility in application in linewith perceptions of prevailing problems.

5.2.3.1 Safeguard Measures

According to the WTO Agreement on Safeguards, if a sub-sector of the domestic industry of a country suffers injuryor considers that there is a threat of injury from a surge ofimports, measures for safeguarding that sector can betaken by the importing country. Safeguards normally takethe form of raised tariffs and are a temporary reliefmeasure.

Policy statement

To ensure free and fair competition, expansion of trade aswell as to protect its national interests against unfairinternational trade practices, Tanzania will, whenevernecessary, invoke trade defence mechanisms throughsafeguard measures in line with WTO Agreement onSafeguards. Safeguards will also be invoked in publicinterests and applied only to the extent necessary to preventor remedy serious injury and facilitate adjustment on anon-discriminatory basis.

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5.2.3.2 Anti-dumping

Dumping occurs when a country or a company exports aproduct at a price lower than the price it normally chargesfor the same product in its home market. This practicedistorts trade and undermines local industry. The WTOprescribes action against dumping when the practiceaffects competition. The application of these measurescalls for the enactment and application of anti-dumpinglegislation at the national level. The main problem in takinganti-dumping action is determination of dumping margins,the level of threat or material injury on domestic industry,and causal link between the dumping and the injury. Thiscalls for building national capacity in the public and privatesectors in undertaking the related investigations andanalysis. The issue of effective undertaking of anti-dumping measures can also be addressed from the regionalperspective, given that the incidence of dumping equallyaffects the East African region. Tanzania is moving towardsfurther liberalisation of its import regime and anti-dumpingmeasures can be used as an effective instrument for thesafeguarding of domestic industry.

Policy statement

The Government will take measures for the enactment ofanti-dumping legislation and utilise opportunities emergingfrom international programmes that aim at capacitybuilding for better participation in the MTS. In this regard,the objective will be to build the requisite public and privatesector capacity for investigation and analysis involved inthe course of establishing the existence of dumping andinitiation of anti-dumping action.

5.2.3.3 Subsidies and Countervailing Duties

Subsidies are measures that confer benefits to producers andexporters and exist where a public body or the Government providesfinancial contribution to producers in the form of grants, soft loans

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or equity. It is recognised that subsidies are intended toincrease and diversify production and exports, promotetechnological development and enhance competitivenessboth in the domestic and international markets. Thereare three types of subsidies:• Permissible and non-specific subsidies that are non-

actionable (green box). They are subsidy programmesgranted on the basis of objective criteria that areeconomic in nature and do not favour certainenterprises over others. Subsidies given bygovernments to SMEs identified on the basis of sizeor number of employees fall under this category. Otherallowable subsidies include those for research,technological development, adoption of existingproduction facilities to new environmentalrequirements and development of industries indisadvantaged regions.

• Permissible but actionable subsidies (amber box) aresubsidies that are specific and targeted to:� An enterprise or group of enterprises;� An industrial sector or group of industries; and� A designated geographical region within the

jurisdiction of the granting government.• Prohibited subsidies (red box) are subsidies that

impede competitiveness of prospective exports to othercountries. Instances of prohibited subsidies includemore favourable exchange rates to exporters,packaging and transportation assistance and the like.

In order to safeguard against unfair practices, clear rulesand procedures have been laid down in the WTO systemon the granting of subsidies and requisite action againstthem. Tanzania has no export subsidy schemes currentlyin place although there is provision under the WTO foruse of export subsidies by LDCs within the transition periodof 8 years expiring by January 2003 with possibility ofextension for two more years.

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Policy statement

The government recognises the role of subsidies in thestimulation of exports within the allowable limits givenunder WTO obligations. In this context the governmentwill take measures to utilise subsidies as an instrumentfor export trade stimulation. At the same time measureswill be undertaken to ensure the use of the concept of“prohibited” subsidies as a trade defence instrument.Likewise the Government will use countervailing duties toaddress unfair competition from subsidised imports as aninstrument of protection.

5.2.3.4 Rules of Origin

RoO are laws, regulations and administrative criteriaapplied by a country to determine the country of origin ofgoods, for tariff preference purposes, subject to specificconditions as defined in WTO Agreements and RTAs. Clearand predictable rules of origin and their applicationfacilitate the flow of international trade. Nevertheless, RoOcan create unnecessary obstacles to trade and nullify orimpair the rights of members in regional and multilateraltrading arrangements including the EAC, SADC and theWTO. Consequently, RoO have to be applied in atransparent, predictable, consistent and neutral mannerso as to avoid their negative effects.

Policy statement

The Government will undertake measures to observe RoOpreferences requirements prevailing in different tradingarrangements with a view to maximising benefits accruingin the cause of implementation. Priority will be accordedto the issue of building national capacity for effectiveutilisation of this instrument.

5.2.45.2.45.2.45.2.45.2.4 TTTTTrade Development Instrumentsrade Development Instrumentsrade Development Instrumentsrade Development Instrumentsrade Development Instruments

This group comprises of instruments that are used in stimulatingthe development of export trade by focusing on measures at all

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levelsof production, such as crop/animal husbandry practicesand product transformation processes through the variousaspects of marketing and actual delivery. They targetaddressing the supply side constraints that remain themajor impediment to trade expansion in developingcountries. Trade development instruments include EPZs,Investment Code and Rules, export development/promotion and export facilitation.

5.2.4.1 Export Processing Zones

The EPZ is a trade development instrument used tostimulate export-oriented economic activities throughbuilding an exporting culture, acquisition of appropriatetechnology and skills, and building capacity forcompetitiveness. The instrument works through reducingthe relatively higher transaction costs facing exportingfirms as compared to those operating in the domesticmarket. The EPZ eliminates the need for initial investmentsin infrastructure and limits capital investments tomachinery and equipment. It is an interim measure aimedat compensating investors for distortions in an economypending the emergence of an efficient market system.

Policy statement

The legal and regulatory framework for the establishmentof EPZs in Tanzania is now in place. The Government willundertake a concerted marketing drive for theestablishment of EPZs through the mobilisation of privatesector resources. Zones will be located in different regionsdepending on the existing potential for export-orientedproduction. Priority locations will be selected on the basisof criteria including: proximity to resources used as inputsin processing, proximity to neighbouring country markets;and access to existing physical infrastructure such as portsand airports. Promotion of manufacturing capacity withinthe zones will place emphasis on products that use localmaterials such as textiles, garments and leather goods,agro-processing, the lapidary industry and implementation

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of programmes that facilitate the dif fusion oftechnology to local entrepreneurs and firms.

5.2.4.2 Investment Code and Rules

The investment code as a trade policy instrument worksthrough compensation for distortions which impede theflow of foreign investments largely due to marketimperfections. In principle, the investment code isconsidered a necessary interim instrument for stimulatingboth foreign and domestic investments while initiatingmeasures for strengthening the enabling businessenvironment and working for the emergence of a vibrantmarket economy. In the long-run, the necessity of thisinstrument declines as imperfections in the market arereduced and an enabling environment emerges.

Tanzania has undertaken significant efforts to encourageinvestments through the Tanzanian Investment Act of 1997and the establishment of the Tanzania Investment Centre(TIC), the Mining Act of 1998 and the establishment ofDar es Salaam Stock exchange in 1996.

Policy statement

The Government recognises that current macro-economicpolicy achievements notwithstanding, the inflow of FDI intothe critical sectors of agriculture and industry remainsnegligible while the level of domestic investments is still low,and it is necessary to use the Investment Code and Rules tochange this situation. From the short-term perspective, theGovernment will address constraints of a regulatory andadministrative nature that impede investments through useof the National Investments Steering Committee (NISC)chaired by the Prime Minister. In the medium and long-term, the Government will expedite reforms of the legal andregulatory framework and encourage self-regulation by theprivate sector as part of measures to enhance the enablingbusiness environment so as to stimulate higher FDI flows

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and increase domestic investments.5.2.4.3 Export Promotion and Market Linkages

Export promotion entails the provision of support servicesto exporters with the objective of expanding trade forexisting product lines. Such services include theundertaking of market research, demand surveys,packaging and labelling, prices, quality and deliverysystems. Other functions include dissemination ofinformation on markets, organisation and facilitation ofbusiness contacts, trade fairs and missions. Exportpromotion primarily focuses on the demand side of theproduction function and works well for product-lines forwhich competitive supply capacity is already in place.

Market linkages is a concept that complements exportpromotion in that it places equal emphasis on both supplyand demand side. In this regard, market linkages as atool for trade expansion examines trends in the worldmarket relative to products for which a country has thepotential production capacity and identifies the full-rangeof requirements for successful production. In the case ofagricultural products this entails the organisation andtraining of farmers in production methods for the fullproduct-cycle, undertaking research on productiontechnology and requirements, support through provisionof inputs and extension services, and facilitatingcontractual linkage with commercial enterprises for thepurpose of processing and marketing. Market linkages isa necessary tool in implementing strategies for productdiversification through the re-orientation of supply capacityto reflect the needs and demands of the market. Exportpromotion is an efficient tool for trade expansion whenused in complementing market-linkages as part of an EDS.

Policy statement

The Government will use the joint tools of market linkagesand export promotion to implement a strategy of economicdiversification, through product and market diversification,as recommended in the EDS report of 1996. This includesthe introduction of new agricultural products, such as

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horticultural products, and adding value toconventional products as a means of facilitating entry intonew markets. Necessary institutional reforms in the exportsector will be undertaken as part of measures to ensurethe effective use of these instruments to facilitate effectivepublic and private sector co-operation and co-ordinationin the course of stimulating the rapid expansion of tradethrough higher exports.

5.2.4.4 Export Facilitation.

Export facilitation works through the simplification of tradeprocedures and reduction of the high costs involvedthrough measures such as provision of export creditfinancing, insurance and credit guarantee schemes, andaccess to better storage facilities. In-spite of major financialreforms undertaken during the 1990s, Tanzania has fewconventional export facilitation instruments: Likewisethere are no institutions undertaking the export facilitationfunction subsequent to the withdrawal of the Bank ofTanzania (BOT) and the Board of External Trade (BET)from this area of operations during the 1990s. RecentGovernment accession to the African Trade Insurance (ATI)encourages the development and provision of support forinsurance, co-insurance, re-insurance, guarantees andother financial instruments and services for tradefacilitation and investments stimulation.

Policy statement

The Government will implement measures to promotebetter regulation and enhance efficient commercial justicedelivery as a means of addressing the problems underlyingthe withdrawal of BOT and BET from the delivery of exportfacilitation services. The objective is to stimulate the entryof private sector service providers, especially banks andinsurance companies, in the provision of export facilitationservices. The government will work with other Africancountries to enable ATI facilitate access to commercial andpolitical risk insurance. Private sector institutions,particularly the commercial banks, working in

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collaboration with relevant public institutions suchas BOT, TRA and BET, will be encouraged to address issuesinvolved in the simplification of export procedures and there-introduction of export credit guarantee schemes.

5.2.5 International Policy Instruments

There are three international trade policy instruments:Bilateral Co-operation Initiatives; Regional TradingArrangements; and the WTO agreements.

5.2.5.1 Bilateral Cooperation Initiatives

These are international instruments whose efficacydepends on the willingness of contracting parties topromote bilateral investments and trade expansion.Bilateral co-operation was the preferred internal tradepolicy instrument in Tanzania during the 1980s and early1990s as it conformed to the demands of the time. Theinstrument took the form of trade cooperation agreementsadministered through joint commissions. However,developments in the late 1990s emphasise the shifting ofinternational economic relations away from bilateraltowards regional and multilateral trade arrangements.

Policy statement

In recognition of the benefits from RTAs and the MTS, theGovernment will implement measures emphasising moreeffective participation in these schemes. These measuresimply a gradual shift from bilateral arrangements towardstrade expansion within the framework of regional andmultilateral co-operation.

5.2.5.2 Regional Trading Arrangements

RTAs evolved from the concept of economic integrationand are considered as a building block towardseffective participation in the MTS. The main objective

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of this instrument is to create large marketsfor goods and services through trade liberalisation,introduction of preferential tariffs and reduction of otherbarriers to trade.

Tanzania is a pro-active member of two regional economicco-operation schemes, i.e. SADC and EAC. The nationhas not benefited significantly from these arrangementsmainly due to supply-side constraints that culminate inlack of competitiveness. Tanzania’s main objectives forparticipating in regional arrangements are to: reduce tradeimbalances with regional partners; achieve harmonisationof policies with regional partners; promote diversificationof exports; and become a competitive regional economy.These goals will be achieved through access to the largermarkets resulting from regional economic co-operation.

Policy statement

The Government will strive to take full advantage ofmembership in regional markets and the reversal of balanceof payments deficit through four measures:• Encouraging production of quality goods and services

including focus on diversification of both products andmarkets;

• Improvement of hard (physical) infrastructure and soft(information and financial services) infrastructure toensure reliable availability of services at competitiveprices;

• Implementing measures contributing to private sectordevelopment; and

• Capacity building for private and public sectors inorder to facilitate proactive participation in theprocesses of negotiation and implementation ofregional and international co-operation agreements.

5.2.5.3 The WTO Agreements and the MultilateralTrading System

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The WTO coordinates the rules-based MTS. The objectives oftheMTS are to stimulate sustainable world economic growththrough trade expansion, encouraging specialisation andopening up of national economies through elimination oftariffs and NTBs. The basic premises on which the MTSoperates include: fair competition and transparency intrade; national treatment entailing equal treatment ofnationals and foreigners in trade; and the most favourednation treatment (MFN) whereby the most favourable termsin trade are extended to all WTO members. The systemincludes a mechanism for dispute settlements amongstmembers and allowable trade defence mechanisms.

Tanzania’s ability to effectively participate in the WTOprocesses is largely constrained by the volume ofnegotiations in the MTS involving an average of 12,000meetings a year, and the relative complexity of the issuesinvolved. While benefits in terms of trade expansionthrough enhanced access to the world market are apparent,the nation has not been able to benefit from theseopportunities in view of limited participation and follow-up of proceedings in the plethora of committee meetingsin which implementation problems are reviewed anddecisions on alternative courses of action are made.

As an LDC, Tanzania is eligible for Special and Differential(S&D) Treatment which provides lesser obligations in theform of market access preferences, zero tariffs andderogation on compliance for specified periods. Tanzaniais also eligible for technical assistance from multilateraland bilateral development partners for building capacityfor compliance with and application of internationalstandards and SPS requirements. These measures aredesigned to facilitate smoother but more effectiveintegration into the global economy.

Policy statement

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The Government will develop and implement a strategy ofinteractions in the MTS that aims at prioritisation of the realisationof the following targets: capacity building for more effectiveparticipation in multilateral trade negotiations (MTNs);implementing resulting agreements; ensure the use of therules-based system in defending and enhancing nationaleconomic and commercial interests; and securing theopportunities and privileges provided for under the S&DTreatment.

Towards this end, the Government will undertakemeasures aimed at raising private sector awareness of theessence and opportunities inherent in the MTS includingensuring pro-active participation in negotiations andimplementation. The Government initiatives will includeadvocating group positions in MTS negotiations based onregional economic schemes such as EAC, SADC andAfrican Union (AU) and political groupings such as theLDCs group. To ensure the success of these measures,the Government will strengthen the negotiating capacityof institutions involved.

5.35.35.35.35.3 PRIORITISAPRIORITISAPRIORITISAPRIORITISAPRIORITISATION OF POLICY INSTRUMENTS.TION OF POLICY INSTRUMENTS.TION OF POLICY INSTRUMENTS.TION OF POLICY INSTRUMENTS.TION OF POLICY INSTRUMENTS.

Tanzania recognises the importance of prioritisation oftrade policy instruments as necessary to ensure maximumeffectiveness in stimulating growth, taking intoconsideration factors such as the structure of the domesticeconomy, the growing challenge of globalisation, thereduced role of government in direct commercial activitiesand the key role of the private sector as the producers ofgoods and services.

The major problems constraining trade expansion andgrowth in Tanzania include limited production capacity,low competitiveness and poor export development andpromotion. To address these problems it is necessarythat the choice of suitable instruments should reflectthe most direct relationship between issues involved inthe identified constraint and the instruments available.Trade policy implementation has to prioritise theapplication of instruments to address specific problems

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on the basis of envisaged direct impact. Effective tradepolicy also depends on adoption of a commondirection for dif ferent instruments so that theseinstruments complement rather than contradict each other.

Policy Statement

The Government will adopt and implement a prioritisationstrategy that ensures that first priority will be accorded toinstruments addressing the perceived binding constraintsrelated to supply and delivery capacity. In this regard, thepromotion of investments into sectors and sub-sectors withhigh combined domestic and export market potential basedlargely on internal resources is the leading instrument.Simultaneously tariff and tax policies will be implementedin such a manner as to promote trade through encouraginginvestment into areas in which Tanzania has comparativeadvantages. Third priority will be accorded to exportdevelopment, promotion and facilitation.

TBTs, SPS measures and other standards will be used tofacilitate enhanced market access and consumer protectionwhile the RoO will be used to maximise utilisation ofdomestic resources in production for export. Finally, useof trade defence mechanism will be taken into considerationas the means to secure Tanzania’s economic interests andto ensure free and fair competition in the course of aconsistent process of liberalisation. These priorityinstruments will be used to steer the economy from thecurrent comparative advantage basis towards competitiveadvantage orientation for enhancing high export led growth.

5.45.45.45.45.4 SECTOR POLICIES ALIGNMENTSECTOR POLICIES ALIGNMENTSECTOR POLICIES ALIGNMENTSECTOR POLICIES ALIGNMENTSECTOR POLICIES ALIGNMENT

The trade function cuts across all sectors of the economy,ranging from the productive sectors to the economic andsocial services sectors. The essence of export-led growthand its success hinges on appropriate prioritisation ofsectoral development strategies and the adoption of

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appropriate and linked sector policies over a given span oftime. As such it is imperative that all productive sector policiesare closely interlinked and co-ordinated and focus on thekey aspect of stimulating supply-side capacity. Sectorpolicies have to aim at removing impediments that hampercompetitive supply from the stage of production to actualdelivery. The key sectors in a trade strategy include thesocial sectors (i.e. education and health) and the productivesectors (i.e. agriculture, industry, mining, tourism andsectors responsible for the economic services). Theorientation of specific policies in these sectors entails thefollowing:• Sector policies relating to hard (physical) and soft

(information and financial services) infrastructureshould facilitate the process of linkage to markets anddelivery capacity;

• Social sector policies should ensure availability ofhealthy and trained or trainable pool of manpower tomeet the demands of the productive sectors;

• Other social sector policies especially those concerningthe judiciary, land and labour issues, have tocontribute to the establishment and sustenance of anenabling competitive business environment;

• Ultimately policies in the productive sectors have tofocus on building capacity for product competitivenessin unique sub-sectors where the nation has theopportunity to convert comparative advantages tocompetitive ones; and,

• Establishment of a National Policy HarmonisationCommittee (NPHC) to ensure focused implementationof sector policies consistent with the goals ofDevelopment Vision 2025.

Policy Statement

The Government will continue and expedite theimplementation of well co-ordinated and linked sectorpolicies that will ensure maximum contribution to rapideconomic growth for poverty eradication through tradeexpansion. In this regard, it will establish a NPHC to co-ordinate and harmonise the thrust of key economic sectorpolicies in line with the goal of Development Vision 2025.

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Specific sector policies that require harmonisation and co-ordination in terms of theme and direction include:• Modernisation of physical infrastructure including the

mobilisation of private sector resources on the basisof the BOT (Build, Operate and Transfer ) or the BOOT(Build, Own, Operate and Transfer) concepts;

• Transformation of the education sector policies toaccommodate a rapid increase in enrolment capacitiesat the secondary and tertiary education levels andimprovement of quality and standards at the primaryschool level to match with the demand for humancapital and the emergence of a knowledge-basedsociety;

• Transformation of the agricultural sector throughadoption of modern technology in terms of crophusbandry practices from planting through toharvesting, packaging/storage and delivery to themarket, including market linkages and access;

• The rapid development of an industrial sector orientedtowards adding value to agricultural produce andnatural resources;

• The consolidation of tourism and mining as leadsectors whose proceeds can be ploughed back toinvestment in critical sectors where returns havelonger gestation periods such as education,infrastructure and agriculture;

• Formulating and implementing a PSDS which links awide range of initiatives that target the emergence ofa vibrant private sector, responds to the concerns foreconomic empowerment and takes into considerationthe de facto designation of the sector as the engine oftrade expansion and economic growth; and

• Revitalisation of soft infrastructure sector policies tobecome responsive to the demands of the privatesector.

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CHAPTER SIX

IMPLEMENTIMPLEMENTIMPLEMENTIMPLEMENTIMPLEMENTAAAAATION FRAMEWORKTION FRAMEWORKTION FRAMEWORKTION FRAMEWORKTION FRAMEWORKAND ACTION PLANAND ACTION PLANAND ACTION PLANAND ACTION PLANAND ACTION PLAN

The efficacy of even the most articulate trade policy lies inthe design and implementation of specific programmes andprojects within a specific time frame. The time frame forthis policy is 5 years - from 2003 to 2007. Likewise,successful implementation requires stakeholder consensuson key implementation issues including methodology,mechanisms and functional roles for each party. Suchconsensus defines and facilitates broad stakeholderparticipation; appropriate institutional frameworkincluding organisational behavioural patterns; sequencingof projects and activities taking into account the dynamismof trade policy in a changing environment; and definitionof monitoring and evaluation criteria and systems.

6.16.16.16.16.1 ROLES AND FUNCTIONSROLES AND FUNCTIONSROLES AND FUNCTIONSROLES AND FUNCTIONSROLES AND FUNCTIONS

On the one hand, effective trade policy implementationrequires harnessing of resources from all stakeholders,that is the government as implementers, the private sectoras partners and NGOs/civil society as supporters andactive participants. On the other hand, it requiresrecognition of the fundamental roles of the private sectoras the generator of wealth and engine of growth and thatof the government as a facilitator of the economic activitiesthat generate wealth and lead to growth. In the secondperspective the private sector is the implementer ofeconomic activity and the public sector the facilitator.

6.1.1 Public Sector – The Facilitator6.1.1 Public Sector – The Facilitator6.1.1 Public Sector – The Facilitator6.1.1 Public Sector – The Facilitator6.1.1 Public Sector – The Facilitator

The public sectors’ role in the trade function hinges on the

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formulation and implementation of macro-economic andsector policies that define and provide the guidelines forcompetitive economic activity underpinning trade. Theessence of good governance relates to the efficiency withwhich the Government performs the facilitative roleincluding the establishment and maintenance of anenabling environment, social infrastructure and services,and provision of key economic services in areas whereprivate sector involvement is either weak or non-attractive.The concept underlying the public sector’s facilitative roleshould not be misconstrued with the fact that it remainsthe lead agent in terms of formulating and overseeing theimplementation of policies.

The public sector comprises of Government Ministries,departments and specialised institutions. SeveralGovernment Ministries are involved, to different extents,in trade policy formulation, monitoring and evaluation.These include MIT, the Ministry of Finance (MoF), thePresident’s Office, Planning and Privatisation (POPP), theMinistry of Foreign Affairs and International Co-operation(MFAIC), the Ministry of Agriculture and Food Security(MAFS), the Ministry of Cooperatives and Marketing (MCM),the Ministry of Water and Livestock Development, theMinistry of Energy and Minerals (MEM), the Ministry ofNatural Resources and Tourism (MNRT), and the Ministryof Communications and Transport (MCT). The lead roleon the side of the public sector rests with MIT, which hasthe functional mandate for the trade portfolio.

MIT, as the focal point on trade related issues, will notonly co-ordinate policy implementation but also play a keyrole in actual implementation in terms of pro-activepromotion, facilitation and coordination of tradedevelopment. MIT’s effectiveness requires urgentconsolidation of the currently fragmented mandateregarding the trade function, including import managementunder one ministry, review of the roles and functions ofRegional Trade Officers and re-introduction of trade andeconomic representatives in key Tanzania missions abroad.Likewise trade policy aims at building commonguidelines in setting sector policy directions and targets

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for the realisation of economic development goals.In performing its co-ordination and facilitating role, MITis assisted by several public institutions and agenciesunder its auspices i.e. the BET, the National DevelopmentCo-operation (NDC), the Small Industries DevelopmentOrganisation (SIDO), the Tanzania Bureau of Standards(TBS), the Business Registration and Licensing Agency(BRELA) and the Weights and Measures Agency (WMA).There are also several Research and Development (R & D)institutions supporting the industrial sector such as theTanzania Industrial Research Development Organisation(TIRDO), the Centre for Agricultural Mechanisation andRural Technology (CAMARTEC) and the TanzaniaEngineering and Mechanical Design Organisation(TEMDO). Other public institutions that play significantroles include: BOT, TRA and TIC and a wide range of sectorR & D institutions such as those serving the agriculturalsector.

6.1.2 Private Sector – The Implementer6.1.2 Private Sector – The Implementer6.1.2 Private Sector – The Implementer6.1.2 Private Sector – The Implementer6.1.2 Private Sector – The Implementer

In a market economy, the private sector is recognised asthe main engine of growth by virtue of its role in theproduction and distribution of goods and services. As suchit is also recognised as the public sector’s partner in theformulation and implementation of trade policy. Theemergence of a vibrant private sector is of paramountimportance for this reason. Towards this end, a PSDS isnecessary to stimulate and expedite the strengthening andgrowth of the domestic private sector in Tanzania. Theissues involved in such a strategy constitute part of thefundamental premises for trade development and highlightthe facilitative role of the Government and place of pro-active initiatives on the part of the private sector itself.Private sector development initiatives have to target highpriority sectors including agriculture, mining, industry,natural resources (fisheries), and the services.

Ultimately, the goal of poverty eradication implies the issue ofeconomic empowerment is an integral part of a PSDS. This strat-

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egy has to prioritise the fundamental concerns involved,such as broad-based participation and inclusion ofdisadvantaged population segments in economic growthopportunities through equitable access to productionassets.

6.1.3 Civil Society6.1.3 Civil Society6.1.3 Civil Society6.1.3 Civil Society6.1.3 Civil Society

Civil society includes NGOs, academia, the media and othermembers of society. This group has a role in tradedevelopment through supporting initiatives for higherproductivity, assisting in market development andfacilitating domestic as well as export market linkages.For instance the print and electronic media, national andeducational institution libraries can play a major role inthe dissemination of and creating awareness on trade policyimplementation. These roles are necessary for inclusionof poor rural communities in a commercialised domesticeconomy and eventually into the international market. Theinitiatives of this group also provide examples of bestpractices necessary to tackle the problem of poverty byfacilitating access for the poor to factors of productionincluding education, skills development and finance. Keycivil society institutions include:• The academia and research institutions whose role is

to provide technical back-up and training;• Micro finance institutions providing critical financial

support to small firms;• Business Development Services (BDS) providers

especially those involved in product and marketdevelopment and market linkages

• Sub-sector business associations working on advocacyand other membership services;

• Other non-governmental organisations working in thearea of poverty reduction in rural and urban areas;and,

• Print/electronic media and library networks in policydissemination and awareness creation.

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6.1.4 Development Cooperation Partners

Development cooperation partners play a critical roleby supporting national efforts in addressing constraintsto development. They provide resources towardsdevelopment of physical infrastructure, transportation,communications system and facilities, the utilities, themodernisation of the social sectors and improvementof governance institutions, which is crucial forcompetitiveness and export-led growth. These resourcesare providing the supportive role that is necessary topropel the economies of many developing countries ontothe path of sustainable higher rates of growth.

6.26.26.26.26.2 TRADE POLICY DEVELOPMENT GROUP ANDTRADE POLICY DEVELOPMENT GROUP ANDTRADE POLICY DEVELOPMENT GROUP ANDTRADE POLICY DEVELOPMENT GROUP ANDTRADE POLICY DEVELOPMENT GROUP ANDSUPPORSUPPORSUPPORSUPPORSUPPORT NETWORKT NETWORKT NETWORKT NETWORKT NETWORK

The trade policy-making process involves four distinctstages: situation analysis to identify constraints andopportunities; formulation of policy strategies andmeasures; actual implementation; and monitoring andevaluation based on regular review. Realisation of theobjectives of trade policy calls for close inter-linkagesbetween these stages. Often missing links have evolvedaround provision of effective leadership, institutionalcapacity and stakeholder inclusiveness.

Effective leadership calls for the Government to taketrade-related issues as paramount in its overalleconomic development strategy and ensuring that tradeis mainstreamed into national development plans bykey sector ministries and institutions. Inclusivenessrefers to the need for a co-ordination and consultativeprocess for the various stages of the trade policy–makingprocess so as to involve all stakeholders and partiesincluding government ministries and agencies, thebusiness community and private sector, civil society anddevelopment co-operation partners.

Figure 1 in the annexes illustrates an adaptationof the relationship and interactions inconventional trade-policy making process to the

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Tanzanian situation. At the top, the chart highlights thetheme and gist of National Development Vision 2025 andthe consequent mission for trade strategy necessary tocontribute to the realisation of this vision. The main goalof Vision 2025 is poverty eradication while the resultingmission for trade strategy is attainment and sustenanceof high rates of poverty reducing growth.

The middle section of the chart portrays the four categoriesof stakeholders or parties involved in the trade policyprocess and need for flexibility in their interactions in theprocess of formulation and implementation of measuresthat will facilitate the realisation of declared goal andmission. This interaction highlights consensus buildingon defining the objectives reflecting the primary goal andidentification of policy measures and instruments tofacilitate their achievement. Such policy measures andinstruments include those responding to developments atthe international level and the realities of the internalsituation. The bottom line highlights the need foridentifying specific trade objectives that reflect theattainment of broader economic development objectivesand of transforming these objectives into quantifiabletargets with which to evaluate the achievement of the goalsof the National Trade Policy.

However, effective policy implementation calls for furtheradaptation of the Trade Policy Development Group modelwith the objective of establishing an efficient Trade SupportNetwork (TSN). Emerging best practice indicates that theideal TSN links the major public and private sectorinstitutions involved in an export-oriented trade policyfrom two perspectives: that of formulation of a strategy forExport Development and that of coordinating initiativesfor the implementation of such a strategy. The practice isto establish an Export Development Council, under theauspices of the Ministry responsible for trade to performthe coordination role. The implementation of NationalTrade Policy, 2003, calls for revisiting the EDS adoptedfor implementation in 1999 and the initiation of measuresfor its effective implementation, based on the establishmentof a TSN.

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6.36.36.36.36.3 SEQUENCING AND CONTINUITY OF TRADESEQUENCING AND CONTINUITY OF TRADESEQUENCING AND CONTINUITY OF TRADESEQUENCING AND CONTINUITY OF TRADESEQUENCING AND CONTINUITY OF TRADEPOLICYPOLICYPOLICYPOLICYPOLICY

The attainment of trade policy objectives depends on thetiming, sequencing and continuity of policy interventionsthrough appropriate policy instruments in co-relation andconsistency with other macroeconomic policy objectivesand measures (e.g. monetary, fiscal, industrial, etc.), aswell as with sector policies (e.g. agriculture, industry andmining, etc.). It is also of fundamental importance to avoidreversal of policies in favour of short-run objectives anddue to possible conflict that may exist between tradereforms and the entrenched elite interests especially thoseof industry that benefit from protection and naturally worksfor indefinite postponement of trade liberalisation.

The strategic path and sequential order for tradeliberalisation in a competitive and export oriented economypasses through four phases. The first priority measure isto address NTBs through their conversion to tariffequivalents. The second priority sequence is to reducetariffs peaks and tariffs dispersion with a view to movingtowards lower and more uniform tariffs across the economywhile taking into consideration the need for measures tocompensate for revenue lost through the process oflowering tariffs. The third move entails the rationalisationof tariff bands in a further drive to unify the tariff structure.In the fourth instance, there is need to develop capacity tomake increasing use of safeguard measures such as anti-dumping, safeguards, countervailing duties and rules oforigin as instruments of protecting nascent industrialstructures and ensuring upholding consumer safety, rightsand welfare.

Equally important is the simultaneous emphasis on theuse of complimentary policies at macro and micro levelswith the objective of addressing supply constraints andcreating market links. Macro-economic stability,competitive exchange rates and political commitment arethe prime requirement for building the environment inwhich dynamic sector policies will lead to higher efficiency,

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productivity and competitiveness in the market place.

The major impact of trade liberalisation depends on thetotality of reforms under implementation and theconsistency with which the process is pursued. Thereare often tendencies to reverse the process due to thepressures of interest groups and misconception on thecauses of unfair competition between imports and domesticoutput, however this only serves to lengthen the timing ofthe inevitable reform process and extend the attendanteconomic adjustment costs. The key to avoiding reversalof trade liberalisation lies in building broad nationalconsensus for the adoption of a trade strategy that includessimultaneous action on the issues identified as constitutingthe fundamental premises for trade liberalisation to workso as to ensure that positive results will be forthcoming inthe medium term. Partisan political interests can lead totrade policy reversal. However, the implications of suchreversals in the context of obligations arising frommembership in the WTO, and the need to strengtheneffective participation in the MTS rather than withdrawingfrom the WTO in view of the process of globalisation, aresufficient arguments for the necessity to adopt a bi-partisannational approach to trade policy implementation.

6.46.46.46.46.4 TRADE POLICY IMPLEMENTTRADE POLICY IMPLEMENTTRADE POLICY IMPLEMENTTRADE POLICY IMPLEMENTTRADE POLICY IMPLEMENTAAAAATIONTIONTIONTIONTIONACTION PLANACTION PLANACTION PLANACTION PLANACTION PLAN

Experience shows that although the nation is adept informulating good policies, implementation has beenwanting and many policies end up largely unimplemented,or with limited realisation of underlying objectives. Thistrend is attributable largely to failure to includeimplementation initiatives in the policy formulation processand undertaking actual implementation subsequent toGovernment approval.

6.4.1 Major Implementation Issues6.4.1 Major Implementation Issues6.4.1 Major Implementation Issues6.4.1 Major Implementation Issues6.4.1 Major Implementation Issues

In addressing this shortfall, this trade strategy includes an

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implementation matrix comprising of 6 interrelated partscorresponding to the questions: What, Why, Where, How,When and By Whom?

What?

The first question is: “What?” This question highlightsthe issue of fundamental premises and challenges thatserve as prerequisites towards achieving the objectives andvision of trade policy. Fourteen issues or premises areidentified under this question namely:• Improvement of the macroeconomic environment;• Creation of an enabling business environment;• Competition policy and regime;• Human skills development;• Development of hard infrastructure (i.e. transport,

communication systems, water and energy supply);• Development of soft infrastructure (i.e. financial

services and information technology);• Trade-related environmental and labour issues;• Trade and electronic commerce;• Tourism services industry;• Intellectual property services;• Regional economic cooperation ;• MTS;• Liberalisation and globalisation; and• Trade development and promotion.

Why?

In posing and answering the second question – Why? – weseek the specific objectives for measures envisaged underthe fourteen premises identified above and their linkageto trade development.

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Where?

This is the third question and it aims at the definition oftargets underlying trade policy objectives. Generally, it isthese targets that will determine the nature and directionof specific deliverables that are envisaged as outputs ofthe process of implementation of the National Trade Policy.

How?

Once targets have been defined, it is necessary to determinethe activities through which the set targets can be achieved.This is addressed by the fourth question: “How?” Theessence here is not only the identification of requisiteactivities but also their prioritisation.

When?

The fifth question refers to the benchmarks and time framesfor the implementation of trade policy. This responds tothe question “When?”. The overall timeframe of the tradepolicy is 5 years from date of initiation of actualimplementation, i.e. 2003 - 2007.

By Whom?

The sixth and final questions refers to the line ofresponsibilities on the major issues involved i.e. who doeswhat? Effective implementation calls for clear division oflabour among various stakeholders at all stages, frompolicy formulation and implementation to monitoring andevaluation.

6.4.2 Sectoral Strategies and Programmes

Successful implementation of the National Trade Policy is dependenton the thrust of complimentary policies in the form of sector policies

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in key economic sectors. Tanzania has designated fivehigh growth economic sectors: agriculture, industry,mining, tourism and transit trade. Policy themes andtheir implementation programmes in all these sectors reflectthe goals of National Development Vision 2025 and theframework provided by the Tanzania Assistance Strategy(TAS). Trade is included in the TAS framework as a crosscutting issue.

In more specific terms all key sector policies focus onachieving the objectives of the Poverty Reduction StrategyPaper (PRSP). Trade Policy also orients its core themetowards this direction. Other specific policy papers anddevelopment programmes whose implementation is crucialfor the success of this Trade Policy include:• The Agricultural Sector Development Strategy (ASDS)

approved in October 2001 and its implementationdocument, the Agricultural Sector DevelopmentProgramme (ASDP);

• The Sustainable Industrial Development Strategy of1996 and its implementation mechanisms based onIndustrial Competitiveness Programmes;

• The SME Policy paper of 2003 and the Micro Financepolicy;

• The Tourism Policy;• The Mining Policy and Mining Act; and• Policies on physical infrastructure and the utilities (i.e.

energy and water).

6.4.3 Implementation Matrix and Concepts6.4.3 Implementation Matrix and Concepts6.4.3 Implementation Matrix and Concepts6.4.3 Implementation Matrix and Concepts6.4.3 Implementation Matrix and Concepts

The starting point for implementation is a matrixhighlighting concepts that form the basis for the design ofprogrammes and projects for the transformation of policystatements into concrete actions and activities. Figure 2apresents a template of this matrix whilst the actual matrixis presented in Figure 2b.

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Fig 2: Template for Tanzania’s Trade PolicyImplementation Matrix

Subject/Subject/Subject/Subject/Subject/ ObjectivesObjectivesObjectivesObjectivesObjectives TTTTTararararargetsgetsgetsgetsgets PriorityPriorityPriorityPriorityPriority Benchmarks/Benchmarks/Benchmarks/Benchmarks/Benchmarks/ Responsi-Responsi-Responsi-Responsi-Responsi-IssueIssueIssueIssueIssue ActivitiesActivitiesActivitiesActivitiesActivities TTTTTimeframesimeframesimeframesimeframesimeframes bilitybilitybilitybilitybility

QuestionsQuestionsQuestionsQuestionsQuestions What?What?What?What?What? Why?Why?Why?Why?Why? WherWherWherWherWhere?e?e?e?e? How?How?How?How?How? When?When?When?When?When? By Who?By Who?By Who?By Who?By Who?

6.4.4 Implementation Pr6.4.4 Implementation Pr6.4.4 Implementation Pr6.4.4 Implementation Pr6.4.4 Implementation Programmes and Programmes and Programmes and Programmes and Programmes and Projectsojectsojectsojectsojects

The current approach is to develop the implementationmatrix into a full “Implementation Programme Document”immediately after the policy paper is approved by theGovernment. However, as an interim implementationmeasure, three groups of programmes emerge from theimplementation matrix: programmes already underimplementation; programmes in the design stage; and otherpotential programmes.

(a) Programmes Under Implementation

The unilateral trade liberalisation measures initiated in1984 gained momentum following accession to the WTOand the emergence of the rule-based MTS. Tanzania isimplementing two programmes addressing the concern ofmarginalisation of LDCs in the MTS. These are JITAP andIF. JITAP responds to the need to build public/privatesector and civil society understanding of the main issuesinvolved in the WTO and aligning national legislation withWTO rules. The IF programme is a framework for the co-ordination of Trade-Related Technical Assistance targetingtrade development in LDCs as a strategy to mitigate againsttheir marginalisation in the MTS. A number of bilateraland multilateral support programmes for enhancing theenabling environment, including the programme forBusiness Environment Strengthening for Tanzania (BEST),and for trade development through private sectordevelopment are being initiated under the IF. BEST is asector wide programme focusing on better regulationsthrough legal and regulatory reforms and enhancedcommercial justice delivery. It includes components for thedevelopment of private sector advocacy targeting the grass-roots

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level, changing the culture of Government and capacityfor the TIC to implement its five-year corporate plan.

(b) Programmes Under Design

The formulation of this trade strategy incorporatespreparations for implementation supported by Sida. Asecond major programme supported by DFID, is theTanzania Trade and Poverty Programme (TTPP), whoseobjectives include the identification of the links betweentrade and poverty and the institutional capacities availablefor trade policy implementation. TTPP also aims at carryingforward the process of capacity building for participationin the international trade agenda through enhancing theawareness of stakeholders in government, the privatesector and civil society of the WTO agreements with respectto analysis, negotiations and implementation. Anotherobjective is the mainstreaming of trade development issuesinto the national planning processes.

TTPP includes an Institutional Review whose objectivesinclude consideration of the issue of establishing anef fective TSN as the basic framework for theimplementation of the National Trade Policy, 2003. A thirdprogramme, supported by DANIDA, targets capacitybuilding on market access issues, including that forparticipating in trade negotiations and conforming tostandards.

(c) Other Potential Programmes

Several programmes under implementation and othersunder design focus on creating awareness on WTOissues and institutional capacity building in the publicand private sectors. In addition, proposals on priorityareas of support in trade development have beensubmitted to major bilateral development partners andconsultations are underway regarding extension ofsupport to private sector development related to supply-side constraints. These proposals are drawn from therecommendations of the EDS adopted by theGovernment for implementation in 1999. The thrust is to

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identify selected priority sub-sectors and products andchannel Government and donor resources into these areas.

6.4.56.4.56.4.56.4.56.4.5 Market Supporting Institutions and CapacityMarket Supporting Institutions and CapacityMarket Supporting Institutions and CapacityMarket Supporting Institutions and CapacityMarket Supporting Institutions and CapacityBuildingBuildingBuildingBuildingBuilding

The efficiency of a market economy, particularly in thecase of LDCs and other developing countries, depends onthe establishment of well-functioning market supportinginstitutions. These institutions include the totality ofbehavioural norms, habits and customs as well asorganisational structures designed to addressshortcomings that arise from market imperfections andmalfunctioning. Market- supporting institutions includethe measures designed to promote and enhancecompetition under the umbrella of competition policy andthe regulatory role of a wide range of governmentinstitutions. The objective of these measures and respectiveinstitutions is to ensure and maintain fair competitionamongst investors and producers, protecting consumerwelfare, while also laying the groundwork for nationalcompetitiveness in the global context.

In many cases the reversal of trade liberalisation isattributable to failure to establish new market supportinginstitutions in view of wariness in creating new organs ata time when emphasis is on divestiture. Tanzania, as anation transiting towards a market economy needs to makedeliberate efforts for the establishment of market supportinstitutions whose absence is the cause of high adjustmentcosts in the process of liberalisation. Where these alreadyexists, the strategy is to expedite their reform andrestructuring.

From the behavioural perspective, cultural norms andpatterns comprise a set of institutional aspects for whichchange is a prerequisite for market efficiency. Players inthe public and private sectors need to change their ways ofthinking or mind-set to conform to the exigencies of public-private partnership and co-operation that underliescompetitiveness. The public sector needs to become more pro-active in its facilitating role while the private sector needs to

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become more aggressive in building upon nationalstrengths to achieve and sustain internationalcompetitiveness. Institutions such as the BOT, the TRAand TIC have undergone a process of change that hasraised their outlook to correspond with the basic needs ofbuilding a market economy. For instance, the TRA isimplementing the Tax Administration Programme gearedtowards raising the efficiency of the tax and tariff regimes.

The concept of “internal trade,” the centre-piece of a closedcommand economy, has been rendered redundant by theprocess of globalisation and the necessity of consistentlybuilding an open economy. Consequently, MIT, the leadgovernment agency on trade issues, together with its leadsupporting institutions, including BET and NDC, arerevisiting their structural and functional set up to reflectcapacity and orientation for leading the initiative of tradedevelopment. Likewise, BRELA and WMA have beenreconstituted from internal departments of MIT intoexecutive agencies to improve their performance. OtherIndustrial Support Organisations are also reorienting theirfunctions towards the central theme of trade developmentthrough support to the development of a strong and vibrantprivate sector as the engine of growth. The ultimate goalis to develop a TSN that will serve as the framework foreffective coordination of trade development initiatives.

6.4.6 Monitoring and Evaluation6.4.6 Monitoring and Evaluation6.4.6 Monitoring and Evaluation6.4.6 Monitoring and Evaluation6.4.6 Monitoring and Evaluation

Systematic monitoring and evaluation is essential forpolicy assessment. The overall responsibility for themonitoring and evaluation of trade policy implementationlies with the MIT working in close collaboration with theeconomic sector ministries. The central ministries,including the MoF and POPP all play key roles in theimplementation process as well as monitoring andperformance evaluation. Likewise, key sector ministriesinclude MAFS, MCM, MNRT, MWLD and MEM. TheMinistries responsible for social and physical infrastructurealso have a critical role to play. These are the MCT, theMinistry of Education and Culture (MEC), the Ministry

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of Science Technology and Higher Education (MSTHE)and the Ministry of Works (MW). Effective monitoringwill depend on co-ordinated efforts and close co-operationbetween these public institutions and the private sector ina relationship of enduring smart partnership. Cleardefinition of the specific roles of the different institutionsin the course of monitoring and evaluating this trade policyis a function of time and the process of learning that resultsfrom active implementation.

Dar es Salaaam, February 2003.Dar es Salaaam, February 2003.Dar es Salaaam, February 2003.Dar es Salaaam, February 2003.Dar es Salaaam, February 2003.

ANNEXANNEXANNEXANNEXANNEX

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ACHIEVEMENT SOCIO-ECONOMIC DEVELOPMENT OBJECTIVESACHIEVEMENT SOCIO-ECONOMIC DEVELOPMENT OBJECTIVESACHIEVEMENT SOCIO-ECONOMIC DEVELOPMENT OBJECTIVESACHIEVEMENT SOCIO-ECONOMIC DEVELOPMENT OBJECTIVESACHIEVEMENT SOCIO-ECONOMIC DEVELOPMENT OBJECTIVES

NATIONAL DEVELOPMENT VISION 2025TANZANIA’S ECONOMIC DEVELOPMENT STRATEGY

NATIONAL TRADE POLICY

Achievement ofTrade Objectives

Macroeconomic,Legal-RegulatoryFrameworks AndTrade Legislation

MTS, RTAs, Bilateralagreements

negotiations andImplementation

Trade DevelopmentPromotion and

Facilitation

InstitutionalCapacity building(Public, Private &

Civil Society)

Private SectorRepresentatives

(TPSF, CTI, TCCIA, TCAL etc)

Civil SocietyResearch / academia

NGOs, Gender groups

Donors

(Partner) (support)TRADE POLICYPROCESS

(Formulationimplementation

and review)

Government ministries and institutions

• Ministry of Industry and Trade

• Ministry of Finance

• President’s Office, Planning & Privatisation

• Line (Economic / Social Sector) Ministries

• BoT, TRA, TIC, BET, NDC, TBS, BRELA, WMA etc

FigurFigurFigurFigurFigure 1:e 1:e 1:e 1:e 1: STRUCTURE OF TRADE POLICYSTRUCTURE OF TRADE POLICYSTRUCTURE OF TRADE POLICYSTRUCTURE OF TRADE POLICYSTRUCTURE OF TRADE POLICYDEVELOPMENT GROUPDEVELOPMENT GROUPDEVELOPMENT GROUPDEVELOPMENT GROUPDEVELOPMENT GROUP

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