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Best practice in investment promotion
2006-04-05 08:38:24
By Mireny John
Since the early 1980s, when Tanzania decided on a policy shift towards more liberal principles of managing the national economy, the first daunting challenge was how to attract substantial foreign direct investment (FDI).
And because the country was just emerging from a socialist background, we had no vibrant domestic private sector to talk about.
The second challenge was how to mould home-grown private investment.
The investment promotion process has gone through several levels, from policy formulation to legislation, and more than a few improvements have been made over the last fifteen years.
One obvious pitfall that had bedeviled the investment process in Tanzania is institutional weakness.
New market-oriented laws, rules and regulations for guiding the investment climate have been enacted, but with little institutional capacity to implement them in line with investors’ expectations.
There was much refinement in the institutional investment set up when the Tanzania Investment Centre (TIC) was created by an act of parliament in 1997, as a one stop investment promotion centre.
However, in terms of cumulative value, much of Tanzania’s FDI has gone in the direction of mining and related activities, thanks to a generous Mining Policy and Act.
Yet, potential investors still complain about the presence of myriads of impediments to FDI, the reason why the recently published Blue Book, already endorsed by President Kikwete, suggested setting up a new package of investment incentives to encourage up private sector growth.
In summary, the Blue Book, a result of a consultative process between UNCTAD and the Japan Bank for International Co-operation (JBIC) provides guidance to constructive dismantling of the remaining administrative bottlenecks in the way of promoting FDI.
Notably, it seems TIC is absolved as having done its homework excellently, and so overwhelmingly the new proposals target investment holdup areas, like reduction of back-log at the commercial courts and updating legal frameworks and supervision of legal institutions.
There are also suggestions for developing performance charters for agencies in-charge of business regulations and inspections, as well as the enhancement of transparency in tax administration.
The Blue Book is a thumb up to the overall development of the economy as it proposes strategies for uplifting agriculture and agro-processing in Tanzania.
More importantly, the issue of divergent interpretation of incentive packages will have to be streamlined.
TRA for instance, should liaison with TIC so that the two share the same frequency of elucidating, say, tax incentives.
Borrowing a leaf from other developed countries, when an investment climate is stable and predictable, the nationalistic concerns about capital flight and the need for retaining benefits at home cancel out each other because of the natural tendency by investors to plough back profits.
In the long run therefore, the overall outline of the economy will improve, including the living standards, when other things are equal.
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