Industrial Policy Programme and Industrial Competitiveness Report Findings Presentation to DPG-PSD Tuesday, 11th December 2012 Andrea Antonelli – UNIDO Dar es Salaam Brian McCrohan – UNIDO Consultant Falecia Massacky – Industrial Intelligence Group

Presentation Outline Background UNIDO Industrial Policy Programme (IPP) The Tanzania Industrial Competitiveness Report (TICR) and main findings Selected theoretical questions and answers from TICR for discussion with the PSD Group Selected Policy Recommendations Conclusions/discussions

UNIDO IPP: Background The Tanzania Industrial Competitiveness Report (TICR) is an important output of the UNIDO Industrial Policy Programme (IPP), part of the UNIDO Country Programme aligned with UNDAP (2011-2015) IPP contributing to UNDAP Outcome 1 Cluster I: Key national institutions develop/enhance evidence-based pro-poor economic development policies and strategies Objective: The IPP aims at “Building institutional capacities for industrial policy design, implementation, monitoring and evaluation” Rationale: Weak institutional capacity, lack of information and poor sector dialogue lead to often flawed policy choices

UNIDO IPP/CP and GoT Plans UNITED NATIONS DEVELOPMENT ASSISTANCE PLAN (UNDAP) 2011-2015 2011-2015 UNIDO COUNTRY PROGRAMME 2011-2015 (Economic Growth and Environment WGs) MKUKUTA II MKUZA II (NGRSP) 2010/11-2014/15 VISION 2025 FYDP I 2011-2015 Unleashing Growth Potential FYDP II 2016-2020 Nurturing an industrial economy FYDP III 2021-2025 Realizing competitiveness led export growth IIDS LTPP

IPP: The Approach

IPP: Planned Tangible Deliverables National implementation/competitiveness intelligence unit set and trained at MIT Publication of key analytical inputs for industrial policy making, including the TICR, Sectoral Competitiveness and Value Chain Studies, Policy Briefs and Assessment of Business Environment for Industrial Activity (e.g. transactions costs) Industrial observatory (UNIDO’s Industrial Competitiveness Intelligence System), if funds allow Review of Industrial Strategy/Policy if needed Revised IIDS Action Plan/Implementation Roadmap

TICR 2012: background, objectives The report was a collaborative effort by UNIDO trainees under guidance. The contributions came from: MIT, POPC, UDSM, ZMTIM, REPOA, STIPRO and university graduates The report seeks to provide a quantitative background on the current competitiveness of Tanzanian industry TICR aims at facilitating the policy process from planning to implementation The report does not look at the hard solutions but seeks to affect the political environment and institutional framework Challenges to industrial development are explored Policy recommendations are outlined for industrialization

Key Findings on industrial Competitiveness Industry in Tanzania remains quite limited and concentrated in few sectors and regions. Tanzania’s MVA has grown significantly in the last decade (above 8 percent per year) but the industrial base of Tanzania remains one of the lowest in the world (MVA per capita of only US$ 44). Manufacturing Exports Performance has been very high but has been driven by resource based products (metals, minerals) and has not had the desired benefit for MVA and other linkages to the economy. There has been little structural change within the industry- The growing economy is not translated into equitable growth, job creation and poverty reduction. Structural change, diversification –verbally (though little diversification, main manufactured products are among the 20 world most dynamic!)

Selected Questions on market potential for Tanzania manufactured products Can Tanzania promote real economic growth from the value addition of the resource based products? What are the key products and market opportunities that Tanzania has? Is trade integration really a strategic direction for Tanzania?

Structure of manufactured exports by technology classification for Tanzania and comparators, 2010

Resource-based Industrialization

Substituting manufactured imports from where? 93% of the goods that Tanzania is currently importing are manufactures, suggesting a lack of a vivid presence of domestically manufactured products. the goods that Tanzania is currently vivid presence of domestically manufactured products.

Other Questions Raised Can Tanzania promote real economic growth from the value addition of the resource based products? What are the key products and market opportunities that we have? Is trade integration really a strategic direction for Tanzania?

Step-wise market exploitation

Markets for manufactured products in Tanzania’s landlocked neighbours, 2000-2010

Tanzania’s share in selected global emerging markets for manufactures, 2000-2010

Markets for Tanzania’s top-10 resource-based manufactured exports, 2010

Other Questions Raised Can Tanzania promote real economic growth from the value addition of the resource based products? What are the key products and market opportunities that we have? Is trade integration really a strategic direction for Tanzania?

Regional Integration RI can act as a trigger for industrial development through enhanced openness intra-regional trade RI can foster competition, give access to wider markets, help diversify investment and production What has Regional Integration done for Tanzanian industry?

Regional Integration

Strong regional competitors: KNY & SA

Market growth and Tanzania’s presence in EAC & SADC markets for manufactured products 2000-2010

Policy Recommendations

Policy Recommendations The emergence of a competitive manufacturing sector involves short-medium and long term strategies: Short-term: involves a gradual shift from the current niche status of manufacturing towards increased value addition in agro-processing, accompanied by a rapid expansion of a few existing low-technology, labor intensive activities. Medium-term: manufacturing could be clustered around mineral extraction projects which already exist or are currently in the startup phase, by strengthening forward and backward linkages to relevant manufacturing sectors. Long-term: could eventually witness the emergence of a more diversified and more sophisticated internationally competitive manufacturing sector. Intra-industry diversification in the short term, inter-industry one in the longer term

Practical Conceptualization Need for good evidence (e.g. industrial intelligence) Coherence, Leadership and Coordination at national level Consistency at regional/local level (e.g. land issue) Skills development through education, science technology and innovation as a long term strategy