In a recent report released by the World Bank, Tanzania is encouraged to transition to a more private sector-driven growth model in the coming years to unlock greater economic potential. Despite its robust economic growth over the past two decades, the report underscores the need for Tanzania to embrace a private sector-oriented strategy to sustain its development trajectory successfully.
The report highlights Tanzania's remarkable resilience during the challenges posed by the Covid-19 pandemic, positioning the country ahead of many developing nations. However, Nathan Belete, the World Bank Country Director, emphasized the necessity for Tanzania to pursue faster, better, and more inclusive growth through a combination of public investment and strong reforms.
According to the Country Economic Memorandum titled 'Privatising Growth,' Tanzania has relied heavily on public infrastructure investments for growth over the past two decades. However, this approach has led to slowing structural transformation and a reduced emphasis on exports.
The memorandum outlines key challenges, noting a slowdown in Tanzania's structural transformation and a failure to generate sufficient jobs in higher-productivity sectors. This scenario hampers poverty reduction efforts, making it imperative to foster a more inclusive development agenda.
Tanzanian exports, which experienced substantial growth until 2012, have faced challenges, contracting as a share of GDP. The composition of exports has shifted towards extractives, primarily gold, leaving the country vulnerable to global market fluctuations.
Harun Onder, World Bank Senior Economist and co-author of the Memorandum, commented, "Considering the slow structural transformation and persistent poverty, in the absence of a stronger domestic market, one that facilitates a more qualified participation of a greater number of Tanzanians, a shrinking export orientation will likely constrain Tanzania’s development trajectory."
To address these challenges and achieve a more balanced and inclusive growth pattern, the report recommends five priority policy actions: Accelerating Business Climate Reforms: Implementing reforms to promote a favorable business climate is crucial for sustainable and private sector-driven growth. Boosting Inclusion and Resilience: Aligning social policies with the domestic market orientation of the current growth model is essential. Scaling up social protection and ensuring access to healthcare are key components. Improving Agriculture Productivity: Addressing factors contributing to low productivity in agriculture, such as limited access to technology, finance, and skills, is vital. Rapid scaling of adaptation efforts is also recommended. Leveraging Tourism Potential: Addressing regulatory and infrastructure bottlenecks in the tourism sector can attract private investors and harness the full potential of Tanzania's tourism industry. Promoting Regional Integration: Overcoming challenges in export potential due to low productivity and high trade costs through addressing logistical and procedural challenges is crucial.