Principles for effective implementation of FYDP II Dirk Willem te Velde (ODI) Presentation at ESRF Tanzania 27/10/2016

Introduction and overview Tanzania recognises importance of industrialisation and need for supportive policy Emphasis on infrastructure policies, but are we seeing the same practical push around industrial policy? Have we seen the FYDP II in action? What can be done next?

Tanzania: Real growth by sector (% per annum Pa, 2005-2015)

FYDP II, Tanzania’s Industrial policy and SET analysis Emphasises industrialisation (enabling environment, SEZ , logistics centre, IP, R&D, MSME, productive capacities) (and human development), .. Infrastructure as supporting factor: ports and rail, but still a large number of options eg ports. Flagships: air carriers, training, development corridors,etc Highlights many manufacturing sub-sectors, (chemical, pharmaceutical, construction, agro- processing (ctc, leather), coal, iron and steel, automotive ), but do we need to prioritise Mentions several SEZs Initial analysis of actions and finance flows, e.g. new financing options to mobilise / use finance effectively but large financing appendix mandating public and private financing is not the same as an action plan Includes implementation / evaluation, frank on lessons learned (50% of objectives met), but not much on new approaches of experimentation (which is key for future)

Coherent Industrial policies: key characteristics Improving fundamentals (macroeconomic management, investment climate, infrastructure and skills); Export push Clustering in special economic zones; Active FDI promotion and building linkages with local firms; Supporting productivity in SMEs through access to technology and long-term finance; Improving co-ordination of implementation within government; and Strengthening collaboration between government and the private sector. (Ansu et al, 2016a)

Implementing transformation policies: lessons Constructing a consensus among key actors that establishes economic transformation as a nation-building project, with shared commitments beyond single electoral term; Giving at least one public agency sufficient autonomy, budgetary control and political authorisation to override interdepartmental coordination problems and engage in a practical way with credible private sector organisations; Creating institutional arrangements that can coordinate a sufficient set of powerful public and private actors so as to ensure (1) an appropriate level of technically justified public support to promising sectors or firms; and (2) conditioned on mutually enforceable performance standards; and Enabling discovery of approaches that work for transformation in the particular country context by means of explicit experimentation, good feedback and timely correction. (Ansu et al, 2016b)

Where next for implementation in Tanzania Build consensus around the direction of the economic transformation strategy – prioritise and communicate FYDP II Give one public agency the power to override co-ordination challenges – Planning Commission, and/or enterprise Tanzania combining agencies such as TIC/EPZA? Build public sector capacity to engage with private sector networks – more capacity / willingness to solve private sector problems Build trust between government and the private sector – consult on key fiscal policy issues Incentivise the private sector to co-ordinate around strategic issues through the use of effective umbrella and specific sector business associations – business to step up strategy Use performance contracts within the public sector targeted on industrialisation Improve the business climate, but also use targeted projects, selective, time-bound support around bilateral deals which are transparent - e.g. use SEZs Make public support for the private sector conditional upon performance – e.g. in SEZs Monitor implementation and the impact of economic transformation plans – e.g. employment impact Evaluate and adjust economic transformation plans where necessary - experiment

Next steps Manufacturing a key future sector, lots of progress is being made Prioritise further on sectoral focus, agree action plan, start implementing it Improve and operationalise implementation and institutional structures around industrialisation

203 Blackfriars Road, London, SE1 8NJ T: +44 207 9220 300 The Supporting Economic Transformation (SET) is an ODI programme funded by UK DFID to support countries in their quest for economic transformation through data and policy analysis and covening. The views expressed are those of the researchers and do not necessarily represent the views of ODI or DFID. For further information: Sonia Hoque, SET programme manager 203 Blackfriars Road, London, SE1 8NJ T: +44 207 9220 300 www.odi.org s.hoque@odi.org.uk

References: Ansu, Y. , McMillan, M. , Page, J. and te Velde, D. W References: Ansu, Y., McMillan, M., Page, J. and te Velde, D.W. (2016a) Promoting Manufacturing in Africa. Supporting Economic Transformation Programme, London: ODI and ACET, Accra.  Ansu, Y., Booth, D., Kelsall, T. and te Velde, D.W. (2016b) Public and Private Sector Collaboration for Economic Transformation. Supporting Economic Transformation Programme, London: ODI and ACET, Accra. Balchin, N., Gelb, S., Kennan, J., Martin, H., te Velde, D.W. and Williams, C. (2016) Developing Export-Based Manufacturing in Sub-Saharan Africa Report, Supporting Economic Transformation Programme, London: ODI. Khanna, A., Papadavid, P., Tyson, J. and te Velde, D.W. (2015) The Role of Services in Economic Transformation – With an Application to Kenya. Supporting Economic Transformation Programme, London: ODI. Balchin, N., Hoekman, B., Martin, H., Mendez-Parra, M., Papadavid, P., te Velde, D.W. (2016) Trade in Services and Economic Transformation. Supporting Economic Transformation Programme, London: ODI. Leipziger, D. (2015) Economic Transformation Lessons from Large Developing Countries, Supporting Economic Transformation Programme, London: ODI. McMillan, M., Page, J. Booth, D., and te Velde, D.W. (2015) Supporting Economic Transformation. Supporting Economic Transformation Programme, London: ODI te Velde, D.W., Booth, D., Leipziger, D. and Uneze, E. (2015) Supporting Economic Transformation in Nigeria. Supporting Economic Transformation Programme, London: ODI. Supporting the Preparation of Tanzania’s Second Five Year Development Plan (FYDPII) 2016/17-2020/21 (2016) Supporting Economic Transformation Programme, London: ODI.