Decrease costs of importing capital goods, urge experts

Dar es Salaam. Economists are concerned about high costs of importing capital goods.

They suggest that a way be found to reduce such costs as industrialisation is gaining tempo.

The revival of public supplies parastatals similar to the defunct Agricultural and Industrial Supplies Company (Aisco) is urgently needed to spearhead industrialisation and reduce costs of importing machinery, opined the director of the Centre of Economic and Community Economic Development at Open University of Tanzania, Dr Christopher Awinia.

He was speaking at the Leadership Thought Forum by MCL recently.

Economics professor Haji Semboja last week raised a similar view, insisting that an institution of the kind of Aisco was important in assisting potential investors to minimise business risks and other uncertainties associated with the importation of capital goods.

“Such institution must be autonomous, with a high level of professionalism. Investors can rush to seek its services if it’s highly efficient, professional and credible,” said Prof Semboja.

According to him, countries such as China, Germany, India, France, South Korea, Norway and Sweden have such institutions, which operate at high levels of professionalism and efficiency.

“Tanzania needs to form such institutions to operate competitively so that fears, risks and other uncertainties associated with business expansion are minimised.

According to him, to ensure the efficient running of such institutions, Tanzania can emulate Ethiopian Airlines.

Dar es Salaam business consultant Joseph Matala spoke of a big vacuum in public procurement for industrialisation.

“The availability of that kind of public institution is important to enable young industrialists to venture in manufacturing and agro-processing on the basis of cost effectiveness.”

According to him, it is a pity that the cost of procuring beer in all regions is the same, but prices of building materials and manufacturing equipment differ.

“Availability of such institutions will cut costs of purchasing manufacturing equipment and agro-processing machinery from industrialised countries. They will also reduce costs of distributing inputs within the country.”

As a result of this vacuum, he says the efforts to promote local content in the process of industrialisation is hampered, because there is a dominance of foreign dealers, speculators and a few middlemen engaged in supplying machinery for transforming agriculture and improving agro-processing plants.

Experience has also shown that the costs of importing machinery and allied inputs constitute a huge import content in the balance of payments.

Figures show that after importation of oil, importation of machinery and capital goods normally comes second in consuming the highly needed foreign currencies.

According to the Bank of Tanzania economic review for July 2018, importation of capital goods rose by 54 per cent in one year.

It showed that in June 2017, capital goods valued at $7.6 million were imported.

The value jumped to $11.5 million in March this year, and reached $17.8 million in June.

Had a procurement institution been in place, the costs would have been reduced, according to economists.