Economic Experts root for a strong private sector

21Nov 2017
The Guardian
Economic Experts root for a strong private sector
  • • According to the World Bank’s Chief Economist for the Africa Region, Dr Albert Zeufack, Tanzania also needs to invest more efficiently in infrastructure, reduce policy uncertainty and continue tackling corruption

The government and the private sector are indispensable partners who should closely work together if Tanzania is to achieve its ambitious growth and development goals, including becoming a middle income state by mid next decade, experts have said.

The World Bank’s Chief Economist for the Africa Region, Dr Albert Zeufack. File photo

According to them, the country needs to accelerate its current rate of growth that has averaged about seven per cent for over a decade now in order to realize objectives of Vision 2025 and attain goals envisaged in the Second Five-Year Development Plan (FYDP II).

 

Speaking recently at the University of Dar es Salaam, a World Bank expert, Dr Albert Zeufack, said partnership between the government and a strong private sector was inevitable in driving the country’s development agenda.

He said it was only by working closely together can Tanzania be able to maintain and attain high economic growth rates which are required to help the country tame poverty. According to him, several factors should be addressed by the government and the private sector to achieve the desired GDP growth pace.

These include adequate investment in infrastructure projects, according the private sector a pivotal role in development, ensuring policy certainty and curbing corruption. Equally important, the World Bank Chief Economist for the Africa Region added, was maintaining macroeconomic stability and strengthening of public institutions.

“The country needs to invest more efficiently in infrastructure, promote private sector development, reduce policy uncertainty and continue tackling corruption,” Dr Zeufack, who was the keynote speaker at a seminar on skills and infrastructure development hosted by the University of Dar es Salaam, noted.

“It also needs to maintain macroeconomic stability and strengthen institutional operations in public and private sectors,” the Cameroonian national, who joined the World Bank in 1997 as a Young Professional, added.

Dr Zeufack was in the country from November 5 – 8. Apart from holding high level talks with government officials, he also participated at the launch of the 10th edition of the Tanzania Economic Update (TEU) that contains the World Bank’s regular review of Tanzania’s economy and near term outlook, and a special focus chapter on the pressing issue of water resource management.

Dr Zeufack noted that the government should create conducive environment for the private sector to be able to participate in boosting and sustaining the current GDP growth through reliable physical infrastructure. He asserted that Tanzania’s performance in public investment is currently mostly dedicated to the extractive industry which does not play a significant role in propelling growth since it is not labour intensive compared to sectors such as farming and the construction industry.

“Infrastructure development and human capital accumulation are two essential factors for private sector growth. Roads, railway networks and electricity are crucial tools for boosting GDP growth as they greatly help to ease business activities,” Dr Zeufack said calling for more public investment in infrastructure projects.

Among other things, he noted that Tanzania’s current average electricity production per capita of 100kwh was quite low compared to higher levels in some African countries like Ghana’s 250.

On his part, development and management consultant Prof Samuel Wangwe said that low investment and the falling of productivity posed a big challenge to sustaining economic growth in the country. According to him, both the public and private sectors have a crucial role in helping the country dealing with infrastructure challenges.

Prof Wangwe also called on the government to prioritize skills development for its industrialization agenda to succeed.

Writing in the TEU, the World Bank’s Country Director for Tanzania, Malawi, Burundi and Somalia, Bella Bird, says the report has been published at a critical juncture in the country’s development history. The new administration has outlined an ambitious vision for the country, in which it envisages Tanzania becoming a semi-industrialized nation by 2025.

According to her, the government should continue to implement measures to ensure macroeconomic stability. In the foreword to the report, Bird also has it that prudent monetary and fiscal policies will form the foundation for any effort to boost growth and to create productive jobs.

“Reforms to control waste and corruption, such as the successful removal of thousands of ghost workers, are supporting prudent fiscal policies. Foreign investment will remain critical to ensuring Tanzania’s external balance. Prudent monetary policy continues to support the Tanzanian shilling and to maintain low and stable inflation rates,” she says.

Apart from calling the government to intensify efforts to implement its development-oriented budget, Bird also wants the authorities to urgently implement measures to enable and encourage the private sector to play a more significant role in Tanzania’s development. She argues that although the FYDP II rightly aims to facilitate an ambitious increase in investment in human and physical capital, the National Budget was still significantly under-executed, delaying important public investments and contributing to softened growth.

To her, no country can achieve large and sustained industrialization and poverty reduction without a flourishing private sector.

“Growing businesses can finance the Government’s ambitious investment plans, be a source of finance and innovation, and create jobs for new entrants into the job market. However, record low levels of private sector credit growth, a decline in foreign direct investment, and an increase in non-performing loans all indicate the need to improve the environment for doing business.”

In the TEU, the World Bank says that Tanzania’s economic growth has softened, with the GDP growth rate declining to 6.8 per cent in the first half of 2017, compared to the figure of 7.7 per cent recorded inthe same period in 2016. According to it, the economy is facing two important and related challenges, which are the under-execution of the national budget and the decline in private sector sentiment.

The report says the economy has continued to be constrained by a weak business environment, record low levels of private sector credit growth, and weak development budget implementation, especially in the case of capital projects.

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