26 February 2013

Tanzania: EDF Boosts Trade, Agricultural Performance

THE EUROPEAN Development Fund (EDF) is one of the donor instruments that plays significant role in boosting the contributions of trade and agriculture to the Gross Domestic Product (GDP), with the goal of ending abject poverty in the society.

The National Bureau of Statistics (NBS) quarterly GDP report shows that trade and agriculture recorded a growth rate of seven per cent and 4.4 per cent, respectively, in the third quarter of 2012. Sources within the sectors however describe the growth rates as too minimal to impact positively on the national economy.

Finalising the 10th EDF from 2008 to 2013, European Union (EU) last year set aside 5.88million US dollars (over 9bn/-) to support horticultural industry with the views of increasing smallholder farmers' earnings through better access to markets. The fund aimed at providing support to key commodities which offer opportunities for pro-poor trade such as fisheries, cotton, coffee and tea by increasing production and income generation.

The Deputy Permanent Secretary in the Ministry of Industry and Trade Dr Shaban Mwinjaka said recently that with the growing prevalence of regional and global supply chains, effective and predictable trade facilitation is an essential ingredient in making supply chains work for developing countries.

The EDF focuses on addressing quality issues including capacitybuilding, fiscal losses and trade facilitation as well as infrastructure with the ultimate goal of producing products that can compete on both quality and price. "The specific objective of this focal sector was to be achieved through a concentration on those key commodities which offer an opportunity for pro-poor trade in the East African Community," stated the strategy paper and multiannual indicative programme 2008/2013.

This report is based on the analysis of the supply chain of key commodities and indicatively involve quality enhancement through agricultural research notably for coffee, tea, cotton, and potentially innovative crops such as bio-energy plants One option for support could indeed be the development of alternative energy sources and support to measures which can enhance trade, for example price risk management systems.

A second priority will be the facilitation of market access to smallholders, supporting producer organizations in their work to link small farmers especially women to local and regional markets. This area of support includes the organisational arrangement for improved market information and contract arrangements between commercial operators and small holder farmers, which has a great potential for poverty reduction.

For most governments and especially for the private sector the three terms quicker, easier and less costly are termed as the simplest ways of looking at competitiveness. It is hardly hard to find a business which does not have competitiveness at the core of its growth.

Although most of the cooperation in the field of trade and private-sector development comes under country and regional programmes, various instruments have been put in place in these areas as part of cooperation under the EDF. According to World Trade Organization (WTO) effective trade facilitation increases customs productivity, improves tax collection at the border and helps in attracting Foreign Direct Investment (FDI).

For example, the payment of fees and charges, risk management, electronic payment, expedited shipments, authorized traders, single windows, are the processes that allow the wheels of trade to move. According to the World Bank (WB) report, African Countries are reforming their investment code to attract investment, but the condition for doing business in Africa including Tanzania needs improvement.

The report mentioned difficulties which led to high cost of doing business in the continent like starting business, dealing with construction permit, employing workers, registering property, acquiring credit, protecting investors, paying taxes, trading across borders, enforcing contract and closing business.

Despite having limited resources to invest in trade related infrastructure, Tanzania has been struggling to create and improve business environment aimed at reducing costs to ensure premium returns and enhance contributions to economic growth.

According to the Ministry of Industry and Trade a lot has been done on the modernizations of business registration where it is currently done online, further improvements are in progress in the area of customs unions as well as financial sector for accessing low cost loans.

Over time the government has shown its commitment to sensitize the private sector to utilise the opportunities with the aim of accelerating the rate of economic growth and hence eliminate poverty among its people. Similarly, a multilateral agreement on Trade Facilitation would expedite the movement of goods across borders and would improve the transparency and predictability of trade and of doing business.

The income creating impact of that is further multiplied for goods and services in regional and global value chains which may have to cross different borders several times in their production and distribution cycle. A recent study by the World Economic Forum just released last week in the margins of the Davos -Switzerland meetings concluded that reducing barriers to trade in supply chains could increase world Gross Domestic Product (GDP) by 6 times more than just eliminating tariffs.

It estimates that by reducing these barriers many of them which are regulatory in nature global GDP would increase by 4.7 per cent versus just 0.7 per cent gain if the focus was just on removing tariffs. It further notes that there would be a 14 per cent gain in trade after reduction of barriers versus only a 10 per cent gain for tariff removal.

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