Workshop on Industrial Development and Globalisation 17 May 2011 Tanzania’s experience in industrial development and comparative analysis with other countries Milasoa Chérel-Robson Africa Section, Division for Africa, Least Developed Countries and Special Programmes, UNCTAD Structure of the session Main objective: towards an industrial diagnosis of Tanzania I. Brief History of industrial development in Tanzania II. Data collection for comparative analysis III. The possibility of structural change 3-4 minutes per slide including class discussion and questions I. Brief history of industrial development in Tanzania • Perpectives from the literature • Perspectives from policy makers • Class discussion I. Brief history of industrial development in Tanzania Key points: Identifying differing industrial performance across Tanzania’s history. Identifying the role of the commodity economy in financing the industrial sector. Brief history of industrial development in Tanzania (1) • Industrial strategy at independence focused on: structural change and self reliance. • Manufacturing to satisfy domestic needs before targeting export markets. Selected sectors were: food processing, textiles, clothing, footwear, building materials and materials and facilities to meet the requirements of education, health services etc. Brief history of industrial development in Tanzania (2) • Historical data available despite challenges in computation of reliable data on MVA. • Industrial censuses in 1961, 1978 and 1989. more recently? • Tanzania is a latecomer to the process of industrialisation. The production of industrial goods for the local market almost from scratch in the 1950s. Brief history of industrial development in Tanzania (3) • 1964 – 1966: MVA doubled. With an average growth rate of more than 10 percent. • 1966: growth rate of 17.7%. Establishment of some factories: oil refinery, cement factory, sisal bag factories, blanket factory. • 1973: OIL CRISIS Brief history of industrial development in Tanzania (4) • 1973: Industrial growth was lower than economic growth. Deterioration of the balance of payments. • 1976: Industrial growth improved. • 1977: Coffee boom. Foreign exchange used to fund industrial activities. • 1977-1978: MVA increased by 24 percent • 1978: MVA deteriorated • 1979: balance of payments deteriorated and • Negative industrial growth rate between 1979 – 1984 • After? II. Data collection for comparative analysis Key points: Identifying relevant data for an industrial diagnosis of Tanzania. Situating Tanzania’s industrial performance in the regional context. II. Data collection for comparative analysis (1) Table 1: The regional situation: Contribution of Industry to GDP 1970-2008: Africa and East Africa performance % share of GDP 1970 1980 1990 2000 2005 African developing economies Industry Mining & utilities Industry 4.81 3.12 35.6 2 11.9 2 19.2 8 7.80 Manufacturing 1.67 4.93 Mining & utilities 0.83 1.48 Manufacturing Eastern Africa 13.1 1 6.25 35.2 2 15.3 1 15.1 6 20.5 6 13.3 7 3.33 35.5 4 12.8 1 18.4 3 18.5 8 10.3 7 3.11 38.7 8 11.5 9 22.9 8 20.6 0 10.3 1 3.63 2008 40.6 8 10.4 9 25.7 5 20.2 8 9.68 3.65 Data collection for comparative analysis (2) • Commenting on table 2 on Manufacturing performance of African countries and ranking of Tanzania (on separate excel sheet) Data collection for comparative analysis (3) • Identifying Tanzania’s key selected sectors : based on industries relative growth potential (i.e. sectoral growth elasticity), considering the country’s stage of development and endowments (country size, resource endowments and population density). This is the purpose of group exercise 1. Data collection for comparative analysis (4): making use of the UNCTAD/UNIDO framework Data collection for comparative analysis (5) • International benchmarking: – Identifying Tanzania’s performance in the identified most relevant industries (i.e. the level of efficiency in each industry) in relation to the identified comparators Data collection for comparative analysis (5) • Comparators should include dynamically growing countries with similar endowment structures and a per capita income that is about 100 per cent higher than their own Data collection for comparative analysis (6) • among the selected industries, single out which domestic private firms have already entered spontaneously and try to identify: (i) the obstacles that are preventing these firms from upgrading the quality of their products; or (ii) the barrier that limit entry to those industries by other private firms III. The possibility of structural change Key points: Introducing the use of the framework for industrial diagnosis and structural change analysis to inform Tanzania’s industrial policy. III. The possibility of structural change (1) • In international benchmarking: Select benchmarks that more closely resemble the country as well as offers a vision for possibilities of structural change: Undertake structural change analysis based on three exogenous variables (country size, resource endowments, population density). UNIDO is working on an extended version. The possibility ofd structural change (2) • Use the framework and include information on: – industries’ relative effect on a country’s employment creation (i.e. sectoral employment elasticity), environmental sustainability, gender mainstreaming, and so forth. The possibility of structural change (3) • A comparative assessment of a country’s relative performance in the identified most relevant industries (i.e. the level of efficiency in each industry) in relation to the identified comparators The possibility of structural change (4) • A comparative assessment of the structure of a country’s manufacturing portfolio in relation to its identified comparators • Conduct a feasibility study to prioritize actions based on current capabilities and endowments. The possibility of structural change (5) • Beware of risk of fallacy of composition: – Many countries with similar characteristics may choose to focus on the same sectors – Global demand structure may constantly change and will necessitate capacity to adapt Next step • Use information from the industrial diagnostic to inform strategic choices for National Industrial Policy. Note: this is the purpose of group exercise 2 for group 1. Thank you ! Source: recent joint research by UNCTAD and UNIDO Additional notes and references will be provided in final CD of the course.