Tanzania: Evaluation of Strategies

IMF and World Bank: The International Monetary Fund is an international organization. It provides short term financial assistance to help a country balance their payments if necessary, promotes monetary cooperation, contributes to exchange rate stability and orderly exchange arrangements, fosters economic growth and unemployment. The World Bank is an agency of the United Nations, with the goal of reducing poverty. It is concerned with financing reconstruction and development by supporting projects, constructing national infrastructure, and providing technical assistance to developing countries. They also provide low-interest loans, interest-free credit, and grants to developing countries. The contributions of these organizations to countries is often through structural adjustment programs.

TANZANIA: Tanzania is a member of the IMF and the World Bank, receiving a great quantity of support from both organizations since the 1960s.

Other international organizations: These organizations include the Food and Agriculture Organization of the UN, UNICEF, UNESCO, and WHO. The Food and Agriculture Organization of the UN aims to raise levels of nutrition and standards of living, to improve agricultural productivity, and to improve conditions for the rural populations. It works to encourage sustainable agriculture and rural development for both present and future generations in hopes of increasing food production and security as well as promoting environmentally-friendly economic development in developing countries. UNICEF is the United Nations Children’s fund aiming to help children overcome obstacles like disease, poverty and discrimination so they go through proper childhood development. UNESCO is the United Nations Educational, Scientific and Cultural Organization. It basically works to fulfill people’s basic rights. The organization aims to contribute peace and security to the world through collaboration associated with education, science, culture, and communications. By these means it promotes justice in terms of human rights and fundamental freedoms. There is also the World Health Organization, which is another UN agency. Its overall goal is to improve people’s health worldwide.

TANZANIA: Tanzania is a member of the Food and Agriculture Organization of the UN, UNICEF, UNESCO, and WHO. All of these organizations have made large contributions to Tanzania, for example, UNESCO has been a great contributer to education in the country.

Private sector banks: These banks make loans to developing countries. Most of the time the interest associated with these loans builds up debt for developing countries.

TANZANIA: Tanzania does not seem very involved with private sector banks.

Non-governmental organizations: These organizations often act as guests in developing countries, working on non-governmental projects inside the country aiming to help the people and the country’s development. Some examples of these organizations include Oxfam, Save the Children, Action Aid, Caritas, and Christian Aid.

TANZANIA: Tanzania does have non-governmental organizations. A major one can be found at “www.tango.or.tz”. The main programs they are working on in the country are Capacity Building and Lobbying and Advocacy.

Multinational corporations: As mentioned in “Strategies of Growth”, these corporations bring a company into a country, and operate in that developing country, producing for the company. However, all proceeds go to the company’s mother country, not to the developing country itself. Despite that setback, these corporations promote a growth of international trade, globalization, profit maximization, growth of economic agreements with other countries, advances in communication and technology, and a market economy.

TANZANIA: Tanzania does seem to be involved with multinational corporations, in areas such as the mining industry.

Commodity agreement: Commodity agreements are agreements attempting to stabilize the prices of a country’s products. There are two basic strategies used to carry this action, buffer stock schemes and cartel agreements. Buffer stock schemes operate under a central authority that buys up the stocks when there is too much supply and releases stocks when the supply is too low. Many of these schemes fail. Cartel agreements are basically quotas that either limit or must be reached by a producer. These schemes often fail as well.

TANZANIA: Tanzania does show some signs of using commodity agreements, however, they show little or no benefit to the country.

Tanzania: Strategies to Achieve Growth

Harrod-Domar growth model: emphasizes investment, savings, and technology. More savings->more investment->more technology->more output->higher incomes… cycle. does not consider difficulty in stimulating domestic savings, savings and investments are not neccessarily beneficial for economic growth, or foreign overseas debt.

TANZANIA: this model has not been applied to the Tanzanian economy.

Structural change/dual sector model: Structural change: three stages of production (primary, secondary, tertiary). Dual Sector Model: productivity is key, move more labor to the most productive levels. problems- assumption of stable wage levels, capital flight, shifts labor force.

TANZANIA: this model has not been applied to the Tanzanian economy.

Types of Aid: These include Humanitarian, Bilateral, and Multilateral. Humanitarian is for a specific occurance, it may be from an organization or the governement. It is not a loan, so does not collect interest. Bilateral is a loan from another country, however, special terms of repayment may be agreed upon. Multilateral is when countries all pay into a fund that gives the most needy country money when necessary. These help to overcome the low savings ratios, help reduce foreign exchange outflows, and reduce the dependency on private investment, as well as improve the living standards for poor people, move with the times, not simply provide cheap food, and allow choice to be excercised by the receiving country.

TANZANIA:

• humanitarian aid: Tanzania does receive humanitarian aid to help with many problems including lack of natural resources, refugees, and disease. Contributors include the United Nations and the European Community Humanitarian Aid Department.
• bilateral aid: Tanzania receives bilateral aid from many countries including Finland, Japan, and Ireland.
• multilateral aid: Tanzania also receives multilateral aid, like the IMF.

Export-led growth/outward-oriented strategies: increasing export of goods with comparative advantage->higher incomes->growth in domestic market along side growth in export market. requires-liberalized trade and capital flows, floating exchange rate, infrastructure investment, minimal government regulation and interventions.

TANZANIA: this strategy does seem to be attempted in areas such as the coffee industry.

Import substitution/inward-oriented strategies/protectionism: focuses on domestic production for a good; protectionism against that good being imported, developing the domestic production, and selling the good on world market. problem-likely protectionism put on their good imposed by countries importing the good.

TANZANIA: this strategy does not apply to Tanzania

Commercial loans: foreign direct investment: long-term investment by private Multinational Corporations. loans from banks and other financial organizations to companies and countries helping them achieve development.

TANZANIA: this does apply to Tanzania

Fair Trade Organizations: allow small manufacturers and farmers to get a “fair” price for their product, reasonable profit and revenue for third-world producers.

TANZANIA: Tanzania has fair trade organizations in the coffee industry. These include the  Kagera Coffee Union, Thobias Milloni Mushi (farmer), and Ambrose Martin Kimati (farmer).

Micro-credit Schemes: organized by non-governmental organizations, they loan small amounts of money to the poor in developing countries.

TANZANIA: These schemes are used in Tanzania

Foreign Direct investment: this investment often has the involvement of multi-national corporations who bring some of their company’s production to a developing country.

TANZANIA: This is present in Tanzania, particularly mainland Tanzania.

Sustainable Development: economic development and growth that considers ecological factors in how it is achieved.

TANZANIA: While there seems to be some concern for the ecological factors, the dominant interest associated with Tanzania’s economic development and growth is the native people’s well-being.

Tanzania: Barriers to Growth

Poverty Cycle: a cycle often created by a developing country that needs to invest to develop. So they invest, but they have low incomes, therefore, they have low investment levels leading to even lower incomes.

TANZANIA: HDI: 0.530, Literacy rate: 69.4, water supply access: less than 40% rural and 70% urban population, GDP (purchasing power parity): $29.62 billion , GDP per capita: $800, HIV/AIDS: about 1.5 million people, Population below poverty line 36% , Inflation rate 5.9%, external debt: $4.61 billion.

Although many facts and figures do not show Tanzania in extreme poverty, still most of the population lives in poverty, particularly in rural areas. There are efforts from the government to reduce policy levels but many have failed for numerous reasons.

Institutional and Political factors: the basic institutional framework and political structure for the country. If these basics are poor, they could cause an ineffective taxation structure, lack of property rights, political instability, corruption, unequal distribution of income, formal and informal markets, and lack of infrastructure.

TANZANIA: In the early 1990s the economy looked hopeful with rigorous economic reforms, however, because of corruption in the political structure the economy took a very negative turn.

Tanzania first gained its independence in the 1960s, so it is still developing as a country. The political stucture is still adjusting, and meanwhile it shows attempts of helping the economy grow. However, there are other problems the government must face including the poverty, the clean water supply, medical and public health access, and education. Additionally there has also been problems of corruption or failure in the political framework that has posed major setback for Tanzania.

International Trade Barriers: this factor is based on a country’s reliance on other countries and trade. International trade may lead to a developing country’s overdependence on primary products for exports, as it likely leads the developing country to export more products in return for less imported products. Also considering elasticity and terms of trade, developing countries often export with each other rather than developing countries. Additionally these barriers can cause a lower value for the country’s currency. From a narrow range of exports, consequences may include overproduction, failure to get all producers to join, storage of some commodities is difficult, and floor prices are too high and encourage overproduction. There are also issues of protectionism, which is often practices by developing countries to protect the domestic economy.

TANZANIA: no restrictions on exports and foreign exchange controls. major trading partners: Japan, India, European Union, Germany, Zambia, Netherlands, Kenya, China. Major trade product: Tanzanian coffee

International trade barriers do not seem to be a large barrier of growth for Tanzania. They have a popular product as well as trade partners willing to trade.

International Financial Barriers: these barriers often include net capital inflows reduced, net outflows of money, total debt increased, debt-export ratio increased, debt to GDP ratio increased, debt-service ratio increased. Also as loans are taken out to help this debt, they sometimes only create more. With more loans and time, then more interest added over time, the country only increases its debt in the long-run. This barrier may lead to changes in a country’s exchange rate and capital flight.

TANZANIA: external debt: $4.61 billion, inflation rate (consumer prices): 5.9%

International financial barriers do seem to exist for Tanzania, hurting its domestic economy. This may possibly be another setback along with the political structure, because it prevents Tanzania from reducing major problems within the country.

Social and Cultural factors: these factors are basically religion, culture/tradition, and gender issues.

TANZANIA: Official Language: Swahili (mostly all ethnic groups have own tribal language). Religions: Muslim, Christian, (also Animalistic, Jainism, Hinduism, Roman Catholic ). Although there is “freedom of religion” in Tanzania, there are often religious conflicts that may go to the extent of affecting schools and businesses.

Overall, Tanzania’s social and cultural factors do seem to pose some bit of a  barrier for the economy. They all speak a common language, which is very convienent for a growing economy. However, there are different ethnic groups with different religions and these sometimes cause conflicts that could greatly affect the economy.

Probably the major barriers for Tanzania are the Political and Institutional factors, poverty cycle, and perhaps the international financial barriers. The most significant, I feel, is the institutional and political factors because these seem fairly weak and if they were stronger the government would be more organized at running the country enforcing actions that will help the current problems at hand, such as the poverty cycle. The factor of international financial barriers should be of a lesser concern in my opinion. Although it is a nightmare that will not really go away, until Tanzania is strong enough as a country and an economy nothing in this area is likely to be resolved in the close future.

Tanzania’s Sources of Economic Growth

There are five categories that define sources of economic growth and development; natural factors, human factors, population, physical capital and technological factors, institutional factors.

Natural factors: quality and quantity of natural resources in the country. (land, minerals, fuels, climate, geographical location)

TANZANIA: total land area: 947,300 sq km. mostly surrounded by land with a border on the Indian Ocean. Tropical climate near coast and more of a Temperate climate inland. terrain is plains along the coast, central plateau, and also includes highlands. natural resources: hydropower, tin, phosphates, iron ore, coal, diamonds, gemstones, natural gas, gold, and nickel. problems: flooding during rainy season or possible drought. not much land irrigated or used for agriculture. some current issues include: soil degradation, deforestation, desertification, threatened marine habitat, droughts hurting agriculture, wildlife threatened due to humans. agricultural products: coffee, sisal, tea, cotton, pyrethrum, cashew nuts, tobacco, cloves, corn, wheat, cassava, bananas, fruits, vegetables, cattle, sheep goats.

Tanzania seems very reliant on their agriculture especially their coffee, therefore, these factors are important. The problems of the soil degradation as well as the weather and seasons seem to be major components for agriculture.

Human factors and population: labor supply’s quality and quantity. (Quality: education, status of food and environment, government influence in society) (Quantity: birth rate, average age, women’s role in society, people’s migrations within country)

TANZANIA: population is 41,048,532 people. 43% 0-14 years, 54.1% 15-64 years,2.9% is 65+ years. average age 18 years. life expectancy is about 55 years. 34.29 births/1000 population. urban population is 25% of total population. sex ratio for total population is 0.98 male/female. infant mortality rate is 69.28 deaths/1000 live births. life expectancy at birth is 52.01 years. people living with HIV/AIDS is 1.4 million very high risk of major infectious diseases: bacterial diarrhea, hepatitis A, typhoid fever, malaria, plague, schistosomiasis, rabies. 69.4% of the total population is literate. labor force is 21.06 million. work force 80% agriculture and 20% other

Tanzania’s population and work force seems rather large. However, there are issues of disease and education that are major weaknesses. There is also probably malnutrition, which has no factors listed above, but I am sure that is another likely disadvantage for Tanzania’s population.

Physical capital and technological factors: quantity and quality of capital resources in terms of directly productive capital (country’s factories and other manufacturing equipment) and indirectly productive capital (country’s infrastructure: roadways, railway, etc.).

TANZANIA: industries: agricultural processing. diamond, gold, and iron mining, salt, soda ash, cement, oil refining, shoes, apparel, wood products, fertilizer. electricity production is 3.786 billion kWh. electricity consumption is 3.182 billion kWh. electricity imports is 200 million kWh. oil consumption is 32,000 bbl/day (all imported). natural gas production and consumption is 560.7 million cu m. telephones: main lines in use 179,849 and mobile cellular 14.723 million. (telecommunication network is fairly inadequate). 125 airports (9 with paved railways). railways of 3,689 km. roadways of 78,891. waterways: lakes can be used, but rivers not navigable and Indian Ocean has risks of unreliability. one port, Dar es Salaam.

Institutional factors: financial, legal, and social institutional factors. (banking system, educational system, healthcare, communication methods, political stability)

TANZANIA: legal system based on English common law (3 branches). suffrage at 18 years. six political parties. education expenditure 2.2% of GDP. Under the previous president Benjamin Mkapa harsh economic reform has been applied to Tanzania, it made inflation drop, the economy grow, and most foreign debt paid; yet most people remained impoverished. there is not much television, but more radio broadcasting.

Tanzania’s institutional factors seem to give the country disadvantages, because it seems weak and that has a large effect on the economy, reflected by the country’s poverty and debt  despite efforts to improve conditions.

General Facts about economy: GDP is $54.38 billion. GDP per capita is $1,400. very reliant on agriculture. budget revenue $4.099 billion. budget expenditure $4.517 billion. current account balance is -$3.536 billion. transnational issues: hosting refugees and drug trafficking.

From my research I think the weakest source of economic growth in Tanzania is the human factors and population. Personally I think this is a very important factor for economic growth, a base foundation for everything else. And if the country was improved or enhanced through education it would help the country grow in other ways to achieve more economic growth. For example, a stronger education system could result in a stronger government and other important institutions as well as further prevention or care with diseases and also more advanced agriculture. These advances could help the country grow economically.

Sources included: cia’s world factbook, bbc, state.gov, and infoplease.com

3 big ideas of exchange rates

THREE BIG IDEAS:

1) One of the major ideas I learned about under this topic was the means of appreciation and depreciation for money on a currency market. On a market as the demand for a currency increases that currency’s value appreciates, and as a currency’s supply increases that currency’s value depreciates.

2) I also learned what affects the changes in a currency’s demand and supply. A currency’s demand on a market is affected by that country’s exports and investment flows into the country. An increase in demand will appreciate the currency, and a decrease in demand will depreciate the currency. An increase in demand could result from an increase in a countries’ exports (goods and services), an increase of foreigners’ investments within a country, an increase in a countries’ interest rates, a decrease in a countries’ inflation rates, speculative buying of a countries’ currency, or if the country is buying up their currency. Demand could decrease in response to a decrease in a country’s exports (goods and services), a decrease of foreigners’ investment within a country, a decrease in a country’s interest rates, or an increase in a country’s inflation rate.

3) Likewise, the currency supply also appreciates and depreciates a currency. A currency’s supply is primarily dependent on that country’s imports and its investment flows out of the country. These aspects can appreciate a currency if they decrease the supply or depreciate a currency if the increase the money supply. Supply could increase as a result of a country’s increase in imports (goods and services), an increase in a country’s foreign investment abroad, an increase in foreign interest rates, a decrease in foreign inflation rates, speculative selling of a country’s currency, or the country selling their currency. Supply could decrease from a decrease in a country’s imports (goods and services), a decrease in a country’s foreign investment abroad, a decrease in foreign interest rates, or an increase in foreign inflation rates.

Considering all of these ideas of exchange rates, I feel a deeper understanding can be found about how exchange rates work.

Reflection

It has now been three months into my second year of economics. Over the three months there has been many changes to the class. Some of these changes which I had to adjust to included the strong reliance on laptops for blogs and internet, the AAA text, the powerpoint lectures, and of course a new teacher as well as new course material. With these new changes I have had to do more independent learning in class, which I found difficult, yet I continue in my adjustment to it. There are also the powerpoint lectures, they do make it easier to take notes in class, however, at the same time it feels like there is less emphasis on the course material since it is not really discussed in depth, just briefed. Then with the AAA textbook, while it is shorter and more concise, it doesn’t engage as much as the McGee textbook, plus it is difficult to read a computer screen for so long.

In regard to the actual course material I am learning, I find that international economics is rather interesting and easy to grasp. For this information the laptops are helpful, because we have more access to articles and such on the internet, benefiting our learning. As a student I think that it is a difficult adjustment in becoming more reliant on my computer among everything else, but it is a transition that I am attempting.

Procrastination…

After reading the article on procrastination, I have thought about the subject regularly, and probably procrastinated in responding to it. On the question of when do I procrastinate, I think it would be quite often, but primarily on big, long-term assignments. I think there are two main reasons. One: I feel like there is enough time to do it so I push it aside and work on my short-term assignments until the week it is due. Two: When I work on a big assignment over a long period of time I loose interest in the topic and the quality of my work turns poor as I struggle for a mental focus that could last for a very long time period.

Another problem is that I have difficulty finding a good place to work. I find this particularly difficult with economics as it requires internet, which greatly limits my workspace and also seems to tease me when it fails and I loose everything I have been working on. I also find it quite difficult to find a place comfortable to sit for a long-period of time and also has limited distractions. Many things distract me, particularly the mosquitos currently biting my feet.

In addition, I also notice that as work stacks up I loose motivation, because even though I get some of it done, there is always more to follow, making me sad because I never get a break from homework. Especially with these two-year courses, its the most depressing thing I have ever had to endure… it never ends!!!

In response to which methods will most likely help me here are my comments:

1) I know procrastination hurts me. Nothing has changed as a result.

2) When I work on assignments ahead of time, I suffer from extreme perfectionista. I never just leave it once it is complete. I need to perfect it. Sometimes this has led to me redoing the entire assignment. I question if that does not hurt me more.

3) Creating a flow simply distracts me. I will begin by doing push-ups and cleaning the bathroom mirror, then I remember all those chores I still have to do and things I have been trying to remember to do. Basically I get so distracted that I don’t actually begin the project for two or four hours.

4) I don’t know how this could help me homeworkwise. I like making lists but then observing everything I have to do only makes me flustered.

5) I have found that when I do this I focus a lot on the first bit and then put less effort and time into the following bits.

6) This one confuses me.

7) It is almost impossible to do any adequate work in five minutes. I need more time and I can’t leave and come back to something after I start it. I have a focus and then I lose it. Once I lose it I don’t get it back.

In conclusion, I don’t find the methods in this article very helpful, but by writing this post I have learned about my own productivity as I write in this hotel lobby with spotty internet connection and hungry mosquitos. I know now that in order for me to complete an assignment I need to go somewhere I can be for a long time, gather all my materials, get my focus in the subject and work on it until it is complete. When I am focused on a particular subject I can retain knowledge more effectively and work more efficiently. I need to be at peace, rid myself of my stress and just work, focusing only on that work.

Current Events: U.S. consumer protection

The U.S. government prepares to pass and enforce a new consumer protection law as of February 2010. This law will limit the power of U.S. credit card companies and their flexible ability to raise interest rates in high percentages for their clients. In anticipation of the new law and current problem, the government sent letters out to some of the many major credit card companies requesting the freezing of the current interest rates for consumers. Of all these companies only Discover reports it will freeze the interest rates for current card-holders, very convenient prior to the holiday season. However, other companies are taking advantage of this period, hiking up interest rates in high percentages while they still have a rather easy ability to do so. The February consumer protection law will create more obstacles and inconvenience for companies trying to increase interest rates.

Therefore, this has very large affects on consumers. With these new actions taken by credit card companies–not including Discover–consumers are feeling restricted as well as betrayed. Many long-time consumers particularly feel betrayed from the increase in their interest rates. In ways of the economy, this will restrict consumers action on the market, especially at this time of the year, the beginning of a major shopping period. This could decrease consumer demand and may in return hurt the producers of products as well as services. Another possibility is that these credit-card holders may change their credit-card companies, again hurting another market (credit card companies).

This new law may help U.S. consumers come February, however, for the present this issue seems to be hurting consumers in a big way, and also hurting the economy as it approaches the holiday season.

http://edition.cnn.com/2009/POLITICS/10/09/credit.card.outrage/index.html

A Pro and a Con of Protectionism

One of the advantages of Protectionism is that through the restrictions of international trade the country is safeguarding domestic employment within the country as importation is reduced. Furthermore, putting this in terms of aggregate demand–and its make-up of consumer expenditure, government expenditure, investment, and the difference of imports and exports–the countries imports will decrease. In return this will increase the amount of exports, increasing the aggregate demand as well as the countries domestic output. Therefore, the employment within the domestic economy will be protected, because with a growing domestic output, aggregate supply will increase responding to aggregate demand, employing more workers as labor is a factor of production. This might be seen in the recent dispute between the U.S. and China on the subject of tires, since the U.S. already is trying to help its unemployed and ill businesses, therefore, enforcing tariffs to protect more jobs in their economy.

The action of protectionism also encounters disadvantages, such as creating a downward multiplier effect. Through the use of protectionism imports are decreased, as mentioned above. However, this action taken by one country may also then be adapted by another country. If this occurs both countries will endure falling exports, and if action is not taken to prevent this from continuing, it may multiply to the point where both countries are falling domestically as well as perhaps globally, as domestic output and global output decrease due to a falling aggregate demand.

Tariffs between US and China

Between the United States and China there was recent accusation on the topic of tires as  well as chicken meat and car parts. This accusation from the U.S. is that China is dumping  tires onto the U.S. market–in other words, selling tires in the U.S. below their production  cost in order to sell more in that country (U.S.). In return the Chinese government  claims U.S. businesses are dumping chicken meat and car parts into China, also selling these products below their production costs. Despite the returning accusations of the Chinese the U.S. government prepares to levy duties 35% in the next year and a 30% tariff the following year. In addition to a 25% one the following year.

Through this procedure the U.S. tries to protect their domestic economy, particularly on the tire market. Even more so the U.S. restrains itself from a minimal but sufficient amount of international trade. Overall, this action might help the U.S. businesses keep their head above water, but many theories suggest this action stunts the overall progression of the world economy, as international trade enhances. Also resulting from this reaction the Chinese government may likely act towards these tariffs similarly by enforcing their own protection against the U.S. again stunting the overall progression of the world economy.

http://www.bized.co.uk/cgi-bin/chron/chron.pl?id=3446