Download THE TANZANIA LONG TERM PERSPECTIVE PLAN

THE TANZANIA LONG TERM PERSPECTIVE PLAN (LTPP)
2011/12-2025/26
Commentary by PMG
A Long term Plan with a Vision
The draft Long Term Perspective Plan (LTPP) envisages a development path to achieve the
development aspirations articulated in the Vision 2025. The development issues that Tanzania
facing currently are well articulated and shown courage to take up some politically sensitive
issues such the population growth but also to see significant progress in areas such as life
expectancy and maternal mortality. The guiding pillars set a pretty good model to work with
as they cover a wide range of areas for socio-economic development. Overall the LTPP gives a
policy direction for all Tanzanians and other stakeholder to work on. The implementation of
FYDPs will thus be key to achieving the desired objective of achieving the Middle Income
Country (MIC) status by 2025.
Notwithstanding its clear-cut objectives, analysis of issues and proposed strategic direction
(way forward) the following comments are based on a closer look at where Tanzania currently
is and how to get to the ultimate goal.
Building blocks of Tanzania Development Vision
The LTPP articulates that the socio-economic transformation will be addressed in depth
through three strategic FYDPs: the First FYDP (2010-2015): Unleashing the Growth Potential;
the Second FYDP (2015-2020): Nurturing an Industrial Economy; and the Third FYDP (20202025): Attaining Export Growth and Competitiveness. The FYDPs are building blocks within the
LTPP for achieving the long term goals. While the themes under each FYDP are logical a
question one would ask is if this means nurturing industrial economy or attaining export growth
and competitiveness will receive a lesser focus (or no focus at all) in the first five year period
(2010-2015)? If that’s the case further questions arise. How long will it take to feel the impact?
Wouldn’t it delay progress? How consistent are these assumptions and strategy with the
targets to achieve within the given time frame? While specific attention be given to a
particular issue/theme in a given FYDP, other areas should get the due policy attention.
Structural Transformation and achieving MIC status
The LTPP envisages a significant sectoral transformation within the 15 year period in
achieving the MIC status by 2025. As per the LTPP the 8 percent GDP growth target, implies a
drastic change in the growth path, especially in the agricultural and manufacturing sectors, in
turn requiring raising capital to implement the necessary investments. Several points need to
be made here. First, Tanzania has performed below expectation for 12 years since TDV was
introduced in 2000. It has lost at least 1 percentage point growth through out this period with
implied slow progress in other areas as well. If the assumptions of getting to MIC status with
an 8% growth was correct, the lost GDP in the past 12 years need to be recouped in the
remaining years (from 2012-2025) to achieve MIC status. And the growth target should have
reflected this lost growth rather than the taking the growth (8%) as given.
Second, the yardstick used to measure the MIC status is also questionable. Although the GNP
(PPP)/per capita is a more useful marker of wealth, especially when one compares with other
countries, that is not what is implied in the Vision 2025 as the yardstick. The idea of the Vision
2025 was not just achieving MIC status to showcase but to get out of the vicious cycle of being
poor and indebted. Achievement of broad human development, in particular eliminating abject
poverty is an example of this objective. What appears to have meant is a MIC status based on
GNP/per capita at nominal terms. This makes a big difference as Tanzania is already a lower
middle income country as per GNP (PPP)/per capita income. Does an average citizen feel like
being a citizen of a middle income country? Does it makes sense if in 2025 Tanzania achieves
MIC status as defined in the LTPP but many people are still below the poverty line? MIC under
GNP (PPP)/per capita terms will only reflect LMIC status under GNP (nominal terms)/per capita.
At 8 per cent growth (assuming that inflation is maintained at the average rate during the past
decade and a corresponding exchange rate depreciation, and population growth will reduce to
2.7 on average), the country will achieve MIC status only in 2035 ( as per GNP/per capita
(nominal terms and not PPP). Unless of course the exchange rate depreciation is kept to
minimum (this implies the inflation rate is as low as the developed countries) and GDP deflator
remain low while CPI remain high, it is highly unlikely that Tanzania will achieve the MIC status
according to this definition. The growth rate has to be more than 13% to achieve the MIC status
by 2025 under this definition.
Donor Dependency
The LTPP targets to bring the ratio of Official Development Assistance (ODA) to Gross National
Income (GNI) closer to current levels in lower middle-income countries (reducing it by more
than half to about 6 percent). This is a welcome approach as it is only then a country could
claim that it is on its own feet. A far long term objective could even be to become a donor, a
regional one to start with. While having these objectives in mind a country should also be
mindful of its alternative options and their implications on debt sustainability and macro
stability.
Tanzania needs to be realistic as it will not have the flexibility to do away with donor
dependency given its income status by 2025 (only around $1500 in nominal terms, not PPP). By
that time Tanzania may not enjoy IDA but still may have to rely on foreign assistance. What
matters is how Tanzania is going to harness donor assistance to its development objectives
also ensuring debt sustainability in the long run. Tanzania could of course go in this path
gradually by raising domestic revenue, increasing resource mobilization (with debt
sustainability and macro stability in mind) and also using available resources efficiently (cutting
down unnecessary expenses and reducing misuse of state resources and corruption)- an
element that is totally missing in the LTPP. In this regard, the view that the current growth
trend in the country’s total debt might take Tanzania to pre-HIPC debt levels by 2016 (World
Bank) should be taken seriously. Things can go really wrong it Tanzania gets there so soon.
The LTPP also seems to make contradictory arguments on donor dependency in the analysis
of financing LTPP. For example, under ‘Foreign grants and concessional loans’ in the Resources
Mobilization section, LTPP goes on to say that the Government will seek more access to foreign
grants and concessional loans, from foreign governments and other international institutions
such as AfDB. This is not consistent with an intended reduction in donor dependency.
Short to long term plans: back and forth dilemma?
The LTPP elaborates on the regular shift in planning processes -from short-term to long-term. A
particular point to note is that the regained importance of short-term plans in the 1980s and
1990s did not produce the expected outcome in growth and poverty reduction. Does this imply
a habit of moving back and forth from short to long term plans without a proper focus of
implementation of any of the two? What is different this time around? Political leadership,
commitment, planning, and Institutional changes? What about people who carry out
(implement) these? Have they changed? As per the LTPP there is a marked resistance to change
and calls for a paradigm shift in the people’s mind-set towards promoting a dedicated and
patriotic population. A big question is how to do this, which is not elaborated in the Plan.
The role of trade in the transition
The LTPP points out that the country’s lack of innovation can be seen in the diversity, value
addition and sophistication of its exports. This is an area that the LTPP has not exploited to its
potential. As the Plan articulates, the country has a relatively low level of export sophistication
but provide little emphasis on addressing this issue. The analysis does not critically look into
issues such as the dominance of primary product exports or the potential from the EAC, SADC
or COMESA and the challenges that have to be addressed if Tanzania is to benefit greatly from
them or lose out to neighboring countries such as Kenya. And it seems this potential is not
taken into account seriously in the projections where Tanzania’s trade is projected to grow
only at 10% in the long run.
Access to Finance by Farmers
One of the constraints to agricultural sector’s progress is the limited access to finance by
farmers. Lack of access to credit to source the 50% requirement to benefit from the subsidy is
also attributed for many farmers not benefiting from the fertilizer subsidy. As the Plan points
out the formal financial system does not cater to the demands in the sector due to high risk.
The rural sector access to credit is facilitated primarily through savings and credit cooperatives
(SACCOS), but the demand is low (according to Finsco survey) due to reasons that need to be
explored. It is not clear as to how the SACCOS are going to be revived or whether other financial
arrangements (such as through cooperatives) are to be introduced.
Governance issues
The analysis on governance is mostly positive and little discussion on issues relating to
corruption issues. The discussion is confined to what was done and not the issues constraining
the progress and in relation to LTPP.
Private sector role
Although the LTPP considers the private sector as a key partner in development, it is not
aggressive enough to reap the potential in the expected economic transition. The trend of
government dominance could not only jeopardize future growth rates by constraining private
sector growth but also stall progress in the economic transition. How does the LTPP address this
issue of State sector dominance in the transition is not clear.
The LTPP emphasizes on the role of the private sector Public Private Partnerships (PPPs) in the
economic transition. While PPP could bring in lot of benefits, a complementary way could be to
enter into venture capital type investments with private sector (initially PPP) but later once
developed the Government can sell its stake (generate revenue) and undertake similar ones
with the proceeds. This could also be done by establishing a ‘Venture Capital Fund’ where funds
could be utilized to undertake PPPs. The management should be mainly by the private sector to
ensure efficiency and avoid political interference. The funds generated through the sale of its
stake at a later stage could be channeled to the Fund to be invested in similar ventures. The
Fund could especially encourage domestic private investment.
Planning, implementation and M&E
The fundamental role of POPC is to monitor LTPP’s implementation. While the POPC takes the
lead in planning medium and long term development plans (FYDP, LTPP) and guide in preparing
Annual Work Plans by MDAs, the financing of the implementation of these plans and M&E
should be the responsibility of MOF. M&E could even be the responsibility of a third party. In
this regard the proposed National Planning Council is a good proposal for monitoring and
evaluation of the implementation of FYDP and LTPP. Plan Implementation Monitoring Unit
(PIMU) could be within the NPC instead of POPC. It would not be desirable to delegate all
three functions (planning, implementation and monitoring) for POPC not only for logical
reasons but for effective and transparent outcomes as well. Resource mobilization should be a
function of the MOF (ensuring proper financial planning and execution) and not POPC although
it could be a member of the Resource Mobilization Committee.
The model used in the estimation
On projections in the Annex: The growth of exports is projected at 10 per cent while the share
of Tanzania trade in world exports is projected to almost double by 2015 and triple by 2020
increase by five fold by 2025. The advance economy trade is growing at around 6 per cent while
that of emerging and developing countries is growing at around 10 per cent. Unless the rest of
the world experience a sharp contraction in trade during this period (which also means
Tanzania could as well) the assumptions seem completely off and unrealistic. How realistic are
estimates of other variables? This could imply that some thing is wrong in the model used
unless the numbers are put arbitrarily (if there is any).