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CONTENTS
A. Introduction
B. Background
C. Current
Situation
D. Structure of
Economic Decision-Making in the Government
1. Executive
Decision-Making
2. The Planning
Commission
3. Department of
Statistics
4. Points of Economic
Analysis in Government
a. Economic Research
Department of the Central Bank
b. Marketing
Development Board, Ministry of Agriculture
E. Sources of
Economic Analysis Outside of Government
1. Faculty of
Economics and Economic Research Bureau at USDM
2. Pattern of
Relationships Between Government and University
3. Role of Donors in
Providing Policy Advice
F. Training
Priorities
1. Macro-economics
2. Economic
Management Skills
3. Computer training
as a Strategy for Developing Analysis
4. Training in
Computer Systems Design and Management
5. Women in
Development
6. Business School
Training
G. Supply of
Economic Analysts
1. Staffing of
Government Offices
2. Staffing of ERB
and the Faculty of Economics
H. Policy
Implementation
I. Conclusion
A.
INTRODUCTION
Tanzania has an air
of optimism about it. The streets are badly pot-holed, buildings
run-down, and offices clearly overcrowded. In the Planning Commission,
the same dog-eared files seem to be in the same wooden racks in the old
German buildings along the port entrance that they were in 25 years ago.
Computers and other even less modern office equipment are not in
evidence (except in the University).
Yet conversations in
Government offices and the University are decidedly upbeat. There is a
sense of renewal that reminds one of the confident immediate
post-independence era. Demand for policy analysis is high in Government,
and economists at the University have a variety of research and
consulting opportunities open to them.
The reasons for the
optimism lie in the U-turn Tanzania is making in its philosophy of
government. Gradually, economic policy-making is coming under Government
control, with less ideological dictation from the Party and more
consideration of market forces. Some say the turn began with the budget
message of 1984, others look back three years to when University
economists became more involved in policy-oriented studies for the
Government, others think changes only began in earnest in the past six
months.
But most agree the
policy change will not be complete until August at least, when
leadership of the Party and the Government are again unified and can
speak with one voice. Until then, there is concern that the ideological
forces governing the country since the Arusha Declaration of 1967 will
continue to constrain actions aimed at liberalizing the economy.
B.
BACKGROUND
The policy process in
Tanzania, perhaps more than other African countries, needs to be viewed
through an historical lens. This background section is therefore a bit
more extensive than would be appropriate in other cases.
Tanganyika, which
joined with Zanzibar to become Tanzania in April 1964, was exploited for
slaves and ivory for centuries, but nothing that could be called
economic development occurred until after the Germans claimed the
territory in 1884. They introduced sisal, coffee, tea, cotton and rubber
grown on estates but did not encourage smallholder cultivation of cash
crops.
Following World War
I, the United Kingdom received a mandate to administer the country. Crop
production expanded gradually between the wars, but little new capital
was invested. The Second World War brought a spurt of production of cash
crops and foodstuffs, and primary production continued to expand at a
healthy rate after the War. From 1948 to 1963, only six countries
expanded crop output at better than a 5% rate per annum, and one of them
was Tanganyika.
At Independence, in
December, 1961, Tanganyika had a population of around 9.5 million and a
gross national product of around 103 million pounds sterling, of which
53% came from agriculture. Only 480 of its African citizens had
completed secondary school, and fewer than 100 were university
graduates.
Shortly before
Independence, the World Bank issued an analysis of the country’s
development potential, which had a major impact on President Nyerere and
his Government. While noting the admirable rate of increase in
agricultural production over the previous 15 years, the Bank report
found the increase to be largely due to expanded acreage and warned that
this expansion could not be sustained with traditional African farming
methods. These methods would lead increasingly to depletion of soil
fertility and to erosion. Instead of gradually improving these methods,
the Bank report recommended a “transformation” approach, with the
dual aims of making more productive use of land while protecting its
fertility, and of instituting the type of farming which would justify
the injection of capital.
Transformation
implied villagization, a gathering together of hitherto scattered rural
inhabitants, which would encourage more efficient farming practices as
well as permit more efficient delivery of social services. A year after
Independence, a large-scale village settlement program was launched, and
regional leaders began organizing settlements at a rapid rate, often
with little regard for soil fertility or cropping feasibility. For many
reasons, most of these ill-planned ventures quickly failed, and a
Village Settlement Commission was set up to do proper planning. Sixty
village settlements were to be set up with heavy capitalization
beginning in 1964, but within a year it was clear that this approach too
would fail.
Other disquieting
post-independence developments included a rapid escalation of urban
wages while the number employed fell by a sixth, a drop in foreign aid
because of diplomatic disputes with the Germans and the British, the
fall of sisal prices by 50%, and the rejection by a third of the
students of the University of a national service scheme. These events
contributed to Nyerere’s growing belief that class divisions were
arising in Tanzania and that foreign sources of financial support,
public or private, could not be relied upon.
The Arusha
Declaration, a policy pronouncement that would shape Tanzania’s
development, or lack of it, for 20 years, was announced in early 1967.
The Declaration, stressing that there was no room for class divisions in
Tanzania, set down severe limits on sources of income for party leaders,
Government ministers, and civil servants down through the middle ranks.
None of these could hold directorships in private companies, have more
than one salary, or own houses for rent to others. Any surplus funds
could only legitimately be invested in state banks for the going rate of
interest.
The Declaration also
included the nationalization of banks, life insurance companies, and
selected milling and import-export firms.
This produced the most comment at the time, but it was the limits
on incentives and rewards imposed on all official Tanzanians that
probably had the greater impact on the course of the country’s
development.
One of the more
remarkable things about the Arusha Declaration was that it was
articulated by the President and endorsed by the Party Executive
Committee without consulting the Government departments that would be
called upon to carry it out. The economic planning process had never
really achieved influence in Tanzania, as it had in Kenya, and the
absence of economic analysis in policy-making was never more clearly
demonstrated than in the proclamations at Arusha.
Tanzania was less
favored than Kenya from the start. It came to independence with a per
capita income only half that of Kenya, with but a fraction of the
trained manpower, and with a much less developed set of institutions.
The common market and common service arrangements in the colonial era
had generally favored Kenya in the location of industry and the siting
of head offices of the various services.
Despite differences,
the governments of Kenya and Tanzania went about dealing with their
economic problems in rather similar ways, initially. Each issued a
rudimentary economic plan shortly after independence, and then
constructed a more professional plan soon thereafter with the assistance
of economic advisors.
In Tanzania, the 1964
Five Year Plan (superseding the initial three-year plan) was a good
technical document, but in less than a year its projections had been
seriously distorted by the international economic forces mentioned
above. The advisors who worked on the plan departed shortly after its
completion, so no revision was forthcoming, and clear diagnoses of the
economic problems were delayed.
The planning process
was revived in the period 1967 to 1969 while the second five-year plan
was being prepared. Even though planners were not consulted in the
drafting of the Arusha Declaration, the Ministry of Development Planning
(DevPlan) had the major task of working through the macroeconomic
implications of the sharp policy shifts announced, and was instrumental
in helping other ministries reshape their plans to meet the new
conditions.
During this period,
DevPlan built up to a total of 16 competent economists, all supplied
through foreign assistance. It was Tanzanian policy to avoid becoming
overly dependent upon a single donor, and at one point advisors from 13
countries were working on the plan. A number of these advisors were
concerned about the absence of Tanzanian counterparts, but at the time
Government’s interest in training economists was curiously low.
Then in 1971, the
Party issued an important policy statement, called Mwongozo, which
sought to decentralize decision-making from the center to regions, and
to emphasize social and political objectives over economic ones. In part
this policy reflected the Party’s interest in lessening the influence
of the foreigners in DevPlan, as shown by speeches attacking the notion
that outsiders could successfully plan for the accomplishment of
Tanzanian aspirations, most of which they could not understand. In part,
as well, Mwongozo reflected Nyerere’s strong conviction that the
people must be more directly involved in shaping the decisions that
affect their lives.
In any case,
Mwongozo, and the decentralization plan drawn up by an American
management consulting firm, spelled the end of any real influence of
DevPlan, and in 1976 it was merged with the Ministry of Finance. The
villagization program, decentralization, and the tendency to favor
social and political objectives over economic ones reduced the
usefulness of the economists’ tools; and the almost exclusively
expatriate tinge to the planning process led to its early demise.
One other important
element must be added to this mosaic of the historical context for
improving economic policy capacity in Tanzania. This element is the
Tanzanian, or more precisely, the Mwalimu’s, or Teacher’s,
definition of African socialism. All three East African states
proclaimed themselves to be African socialists, but their definitions of
the term diverge widely. Nyerere’s definition can’t be captured in a
single quotation, but the following excerpt from a speech he made in
1968 contains an argument still of concern to policy-makers on the
continent:
“The choice is
between foreign private ownership on the one hand and collective
ownership on the other. A capitalist economy means a foreign-controlled
economy. The only way in which national control of the economy can be
achieved is through the economic institutions of socialism.”
Disillusionment with
the economic institutions of socialism is by now, in Tanzania, fairly
complete. But the concern over foreign economic control, or undue
control by an indigenous group, is likely to remain and affect the
policy context for some time to come.
Tanzania’s economic
difficulties in the 1970s and 1980s cannot, of course, be ascribed
entirely to domestic economic and social policy choices. The oil-price
shocks of the 1970s were heavy on Tanzania, as on other African
countries. A border war with Uganda led to sharp increases in defense
spending. A decade of bad weather forced massive importation of
foodstuffs in the mid-1970s.
The economy scraped
bottom through much of the 1980s. A rural population never far from
subsistence levels was perhaps less adversely affected than it would
have been had production and consumption levels been higher initially,
but any structure or technology utilizing capital has tended to
deteriorate. Tanzania, after proclaiming self-reliance as one of its
highest objectives, became one of the most dependent countries in the
world on foreign assistance.
Sporadic efforts at
economic recovery have been made throughout the 1980s, and some of these
are beginning to bear fruit. In the early part of the decade, a National
Economic Survival Program (1981) and a locally designed structural
adjustment program (1982) failed to arrest the decline, in part because
of a long-running dispute with the IMF over conditionality.
The Economic Recovery
Programs (ERP) of 1986 and 1989 show more promise of success. Working
closely with the Bank and the Fund now, the Government set out to
increase food and export crop production, to rehabilitate physical
infrastructure, to increase the rate of utilization of industrial
capacity, and to restore internal and external balance by following
prudent fiscal, monetary and trade policies. During the three years of
ERP I, agricultural production responded well, increasing by an average
of 3.9% per year, after averaging only 1% growth per year for the
previous five years. Foreign exchange availability increased with rising
exports and increased foreign support, but foreign exchange continues to
be a major constraint on growth. In short, the economy made a modest
turn-around under ERP I, enough to offer hope for continued progress in
the second phase of the Recovery Program.
C.
CURRENT SITUATION
The economic progress
of the past three years offers some encouragement to Government
policy-makers that they have reached the turning point and Tanzania is
on an upward trajectory. To the short-term visitor, returning after
years of absence, some positive factors appear which support an
optimistic outlook, including the following:
1.
Tanzania now has large numbers of trained people, compared with
the early days of independence. Skill shortages still abound in fields
like accounting, which we will discuss in more detail later, but one is
more impressed with the numbers trained than with the estimates of
continued need. Tanzanian training institutions have continued to
perform throughout the economic crisis, although they have been
desperately short of teaching materials and technology. Education and
human resource development generally has always had a high place in the
Mwalimu’s lexicon of values, and the number of people who have
received literacy and vocational training may be his most enduring
legacy.
2.
There is a sense of realism concerning the road ahead. In the
past, Tanzanians tended to adopt a tone of moral superiority, the poor
but proud syndrome, based perhaps on the high moral tone of the
Mwalimu’s pronouncements. Now, there is a more realistic appreciation
of human motivations, seemingly complete disillusionment with the
efficacy of state ownership, and an understanding of the difficulties of
the road ahead.
3.
Another of the Mwalimu’s positive heritages appears to be
personal honesty and the integrity of institutions. Dire circumstances
have led to petty graft and moonlighting, michuzi and miradi, as noted
in the Country Development Strategy Statement (CDSS) of the Mission, but
this seems to be relatively minor, readily eliminated once the country
can afford living wages. The overall impression the brief visitor gets
is of hard-working officials laboring against heavy odds in an
extraordinarily poor and ill-equipped setting. This impression might
disappear on closer inspection; after all, our interviews were with
high-level people, but the time warp sensation is there, reminiscent of
the age when life was simpler and problems more manageable.
Against this rosy
vista, a few lingering clouds remain. The CCM is still a powerful force,
and it isn’t clear that the ideological orientation of the Party will
automatically change with the change in leadership from Nyerere to
Mwinyi in August. The position of the Party relative to The Planning
Commission, and to the Cabinet and the Parliament, shown in Figure 1, is
taken from an official publication, “Profile of the Planning
Commission of the Union Government,” issued by the President’s
Office in July 1989. The diagram is more eloquent than words in
portraying the pre-eminent position of the Party, at least as it was a
year ago.
Figure 1.
Position of the Planning Commission Relative to Other Organs on
Matters of Planning and Economic Management
Apart from
ideological rigidity, the level of understanding of economics among
Party officials and some senior government officials is limited. The
Economic Research Bureau (ERB) and the Faculty of Economics at the
University of Dar es Salaam (UDSM) hold an annual workshop on economic
issues, attended by many senior officials. This very valuable event was
supported last year by USAID; more informative and educational
activities of this sort would be useful.
Ideological bias and
economic naivete add to the negative potential of a third factor, the
strong inclination of Tanzanians to want to shape their own solutions.
Tanzania has always proudly carved its own path, even when the path led
to increased economic dependency, and Self Reliance is right up there
with Socialism as a national priority. The
David and Goliath struggle Tanzania had with the Fund and the
Bank in the early 1980s is an example of their principled defiance of
external forces. Admirable as this trait is, its exercise in the past
has been costly and may be again if the technocrats in Government lose
sway.
Another cloud lurking
on the horizon concerns ethnicity and free enterprise. At independence,
the retail distribution system of the country was largely in the hands
of Asian shopkeepers. They were greatly resented, despite studies
showing them to be very low-cost distributors, and in time were squeezed
out. To some extent the Wachagga, an energetic tribal group from the
slopes of Kilimanjaro, have replaced them in the retail business. If the
country turns increasingly to free enterprise, as the senior people in
Finance and Planning seem determined to do, ethnic resentment may rise
again against the Asians, or the Chaggas, or whoever seems to do well
from the system.
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