20 May 2016

Africa: Tanzania Needs to Invest More On Infrastructure and Human Capital to Improve Its Competitiveness and Create More Productive Jobs

press release

Dar es Salaam — The new Tanzanian government is implementing sweeping measures to strengthen fiscal management and curb corruption. These measures have started to yield results with monthly tax revenue collection slightly exceeding the target during first four months of the administration. The World Bank's newly released 8th Tanzania Economic Update notes that these measures are likely to be more effective and sustainable if complementary actions to improve the overall business environment for private sector development are undertaken.

While Tanzania's economic growth is relatively high, it has not yet led to acceleration of job creation. Poverty remains substantial in Tanzania with around 12 million Tanzanians still under the poverty line while the majority of non-poor are only just above the poverty line. At the same time, about 800,000 young Tanzanians enter the job market every year where productive opportunities remain scarce.

"Tanzania needs to increase investments in infrastructure and human capital to further unlock its growth potential while enabling the private sector to create more jobs", says Bella Bird, World Bank Country Director for Tanzania. "This will not only have a stronger impact on poverty reduction but it is also consistent with the new government's priorities and its commitment to the achievement of the country's Vision 2025 goals. The needs are many but the resources are limited and a focused approach in which key development priorities are fully financed will be needed to achieve the desired results".

According to the Update, titled; "The Road Less Traveled: Unleashing Public Private Partnerships in Tanzania with increasing fiscal challenges due to declining aid, low domestic revenue mobilization, high expenditure pressure for clearance of payment arrears and debt service, Tanzania will need to find alternative sources for financing its huge development needs.

The report highlights the need to explore PPPs as a yet under-utilized way of financing development, consistent with the 2030 Agenda for Sustainable Development Goals (SDGs). However, the report emphasize that the projects need to be carefully selected, prepared well and implemented well.

"Tanzania needs to improve overall business environment, including through improved access to finance and electricity, for private sector development," says Emmanuel Mungunasi, World Bank Senior Economist and co-author of the report. "Further development of the private sector will be key to accessing the needed resources including financing and creating more employment opportunities which are critical for poverty reduction."

"Tanzania has had a mixed experience with public private partnerships," says Jeffrey Delmon, World Bank Senior PPP Specialist and co-author of the report. "What is needed now is to embrace these important past lessons and combine them with best practices from the largest emerging economies such as Brazil, Chile, Mexico and India and develop a strong PPP program that addresses the country's infrastructure development challenges and generates jobs."

Noting that Tanzania's own policy documents identify PPP as a key instrument to attract new investment, the report calls instead for a bold new approach as opposed to "business as usual," and outlines the key factors to be considered by the government in developing a PPP framework that is fit for purpose. These include providing strategic direction and leadership to the PPP program; ensuring the use of competitive approaches to procure PPPs; providing adequate resources towards identifying and preparing PPPs and promoting transparent approaches in providing Government support to PPPs.

Noting the strong management of the economy which has helped to maintain the current healthy outlook of seven percent, the 8th Update calls on the authorities to continue to monitor the country's debt levels in a prudent manner in order to ensure ongoing fiscal and debt sustainability.

The Tanzania Economic Update is a biannual report published by the World Bank with the aim of fostering constructive policy dialogue between stakeholders and policymakers and stimulating debate on essential economic issues in the country.

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