Why education, agriculture and growth in business matter

Monday January 27 2020

 

Can you please tell us a little about your  experience from your stay in Tanzania?
Well, Tanzania is a great country and I am privileged to have led the World Bank programme here. Our core focus is to accelerate poverty reduction and shared prosperity. In the last four-and-a-half-years I have been the Country Director of the World Bank (from July 2015 to January 2020) - working to pursue that mission here - Tanzania is a member of the World Bank, and has access to IDA concessional loans. This presents an opportunity to access resources way below market rates to invest in the development of the fundamentals of the economy and society.

to flourish, it needs support of the public sector; and for the public sector to raise the resources to run the country and create employment, it needs the private sector. So, it’s a symbiotic relationship which depends much on understanding.
Having dialogues at the national level, the sectoral level, and the local level to unlock the problems businesses are facing is important for success.
A fair and transparent taxation system is also key for a productive relationships. Businesses need to know clearly what they are expected to pay and streamlining the system to make it easy for them to pay.
The authorities also need to grow their taxation base through business growth rather than through overtaxing.
The issue of getting tax policy and administration right is very important. When it comes to issues like payment arrears and tax refunds, quick payment is critical to facilitate business growth. It is vital for cash flow.
Another issue is with regulation streamlining. The Blueprint for streamlining business regulation was introduced and we have seen its elements in the Budget.
However, I think that could go much further - and faster.
It is also important to ensure that as regulations are streamlined, new ones are not introduced.
The last point is about providing a predictable environment for businesses to invest so that they can borrow money - and lenders have confidence.

What would you say of the government’s pursuance of a public sector-led growth strategy?
I think any government needs to be careful when they start moving to areas of the economy that are better suited to private sector.
You can use a lot of resources that could otherwise be used, for example, in building human capacity.
It can also disincentivise business in areas where there is a dominant presence of the government.
So, in pursuing economic growth, it’s good to keep the state as more of regulator rather than a service provider in order to encourage competition.
One of the major concerns in East African economies is the high level of national debts.
With the ever-rising accumulation of expensive debts, is there reason for the people to be worried on the sustainability of these debts?
The World Bank is closely following debts across Africa. In some countries it has reached higher levels.
But Tanzania has managed to maintain prudent borrowing and a low-risk of debt distress in its borrowing history.
However, looking forward, it’s critical to ensure the quality of borrowing is scrutinized and to invest the money borrowed in areas with high economic return. We always urge governments to consider concessional loans first and keep borrowing at sustainable levels.

What is the level of funding?
For the period I have been in Tanzania, we have lent Tanzania around $3.5 billion. I could see when I came as country director that the poverty challenge was still very large although the record of economic growth has been good. There had been progress with development of roads and energy sectors, but there were also large infrastructural gaps.
The biggest thing that struck me was the human development indicators. The question in mind was that, given Tanzania’s strong peace and stability since independence: why are these indicators below the African average? I could see that from the global experience we have at the World Bank, in order to accelerate poverty reduction, make it more sustainable and expand opportunities in Tanzania, investment in human capital is critical.
I’m pleased to say that of the 15 projects that have been approved since I became the country director here in human capital development, including education and social protection. The others were transport projects - such as the port of Dar es Salaam upgrade, the Ubungo Flyover, Bus Rapid Transit (BRT) project in phases three and four, water and sanitation programme, rural electrification, conservation (REGROW) and judiciary modernisation including the mobile court system.
So, we have been doing a lot across both infrastructure and human capital.  Always keeping in mind how the people of Tanzania can really benefit from the programmes to enable them to live sustainably out of poverty.

To what extent do you think you managed to achieve your objectives?
I think we have definitely shifted the balance towards human capital development through systematic investment in education, scaling up the Tanzania social protection programme, rural electrification and water and sanitation programmes, which are reaching the poor in remote areas. We see good progress there, but it can take time for the programmes’ impacts to be seen. I think all are in the right direction - although there are some areas where I would want to see more focus in the partnership between the World Bank and the government of Tanzania.

What are those areas?
One of the areas is agriculture. When you look at the poverty assessment data, you can see that poverty has been going down, but the rate of poverty reduction has slowed. For example, between 2007 and 2012, poverty decreased from 34 percent to 28 percent, which is around one percent per year. But between 2012 and 2018, there was only around two percent reduction in poverty! It’s a slower rate of reduction and because of population growth, the absolute number of poor people increased from 12 million in 2012 to 14 million in 2018.
There is no single answer for that trend, but certainly one of the reasons is what is happening in the agriculture sector. As you know, the majority of people in Tanzania are working in agriculture and if that sector is not growing strongly then they will see limited benefits from growth. So, what to do in agriculture is a question on which I would like to find agreement with the government and put more resources and energy from the World Bank.
All in all, the future looks promising. Agriculture is no longer a subsistence sector, it is business – whether small, medium or large. The more it is facilitated as a business sector, the more success it is likely to have. So, I would like to do more in agriculture.
On human capital, we have done well in investing in education, but more can be done with regard to early child development. There is a high stunting rate in Tanzania - at around 30 percent among children under five. We know from the data that if children do not get the right kind of care, nutrition, stimulation and a secure environment, this undermines their long-term potential. Investment in that period is important and I would personally like to do more.
I would also like to see more progress made in the business environment because business growth is critical to Tanzania realising its potential in creating jobs and opportunities for the people.

If you were to rate your performance, how would you rate your achievements?
It’s not for me to rate my own performance; I leave that to others. However, I am pleased that we made some important achievements during my time in Tanzania. It is not just on lending but also on the knowledge that we brought. We are a knowledge bank, not just financing bank. We have done that through regular economic updates. Analytical work has been done on water resource management, financial inclusion, agriculture, human capital development, child marriage, etc. We worked with different stakeholders on doing these analyses. So, I’m leaving Tanzania particularly pleased to have made this contribution.

How do you assess the relationship between the World Bank and the government of Tanzania during the time you worked here? And what does the future look like?
I don’t think it’s a secret that we had areas of differences as well as great synergy. Tanzania and the World Bank have a long history of engagement. I am pleased to say that even in the last four-and-a-half years, where we had agreement we pushed ahead rapidly. Where we did not have agreement, we sorted out our differences, largely. Dialogue remains open and we have good discussions. We have to remember and come back to our mission to promote poverty reduction and shared prosperity.

Can you remember some of the areas in which you had differences?
One of the issues was the Statistics Act introduced in 2018, which really created difficulties for us to operate. However, through our open and constructive dialogue with the government, we managed to find a resolution on that and once the law was amended again, we were pleased with the new Act because it aligned with international standards and best practices. It would have been difficult for us to work in Tanzania under the original, unamended Act.
Are you happy with the Statistics Act as it is now?
Looking at the law, we believe it’s in line with international standards, but we are still waiting for the regulations to be made under it. We would then have details on how the government plans to implement the law.

Are there pending issues you are yet to resolve for now?
There is the issue of supporting pregnant girls to complete their education. Encouraging girls to stay in school longer by providing safe and good quality secondary education opportunities is one of the most effective ways of reducing early marriages and pregnancies, which are a problem in Tanzania.
We are continuing our dialogue with the government to strengthen measures to protect girls from pregnancy - and find ways of supporting them to finish their education in case they become pregnant.
There has also been difference of opinion about the role of the private sector, but there is a pathway forward. Around 97 per cent of jobs are in the private sector in Tanzania and that will continue to be the case. Over 85 per cent of industrial output comes from the private sector and if Tanzania wants to industrialise, obviously the private sector needs to grow. I know the government has had its reasons for discomfort with some elements of the private sector, but I think there are ways to move forward. Dialogue between the private and public sectors is critical for building common understanding and ensuring companies have a predictable environment in which to operate. Business growth is really critical to create jobs for the 800,000 or so young women and men in Tanzania who enter the jobs market every year.

What is your assessment of the business environment in Tanzania - considering that there has been a not-so-rosy relationship between the government and the private sector?
There are four areas we noted through data and observation which need to be improved. One is about dialogue: it needs to be consistent and open. Essentially, for the private sector