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.