Improving the business environment: A win-win proposition

Since the Edelman company began tracking trust with its Trust Barometer, never has the world seen such an “implosion of trust”. In 2017, two-third of countries fell into “distruster” territory with trust levels below 50 per cent. Government is now distrusted in 75 per cent of countries, while it is the case for business in 46 per cent.

To paraphrase the American essayist Ralph Waldo Emerson, “distrust is very expensive”. If you apply his thought to policymaking in the field of economics or the business environment, one quickly realises that the lack of trust between the government and the private sector can indeed be very costly.

Governments, unwilling to engage with the private sector, will use their state authority to impose policies and regulations that may impact negatively on the business environment, subsequently increasing the level of distrust in the government.

A direct result from this conundrum will be the withdrawal or cancellation of planned investments in a country, and a further deterioration of the economic outlook.

Investors abhor political risks associated with government actions and unpredictability. This vicious circle of distrust will affect the overall economic environment of a country.

In Tanzania, the relationship between the government and the private sector has seen better days. As the latest World Bank edition of the Tanzania Economic Update indicates, “concerns regarding the business environment persist”.

Recent government actions have had a mixed impact on the business climate and on investor confidence (tax collection, delays in VAT refunds, proliferation of regulatory authorities, licenses, etc.).

To its credit, the government of Tanzania has taken positive actions towards re-engaging with the private sector with President John Magufuli and the Ministry of Industry, Trade and Investment, together with the Ministry of Finance and Planning having held joint discussions with business in the last few months.

Public-private dialogue (PPD) is a powerful tool to ensure the constructive participation of the private sector in policy dialogue. PPD is a structured participatory mechanism that helps restore social and political trust by delivering sound economic policies through an inclusive, transparent and accountable process. It is used globally with multi-pronged applications: from investment climate policy reforms (Myanmar, Cameroon, Mongolia, Ivory Coast) to sector-specific interventions (Burundi, Grenada, Mauritania, Kyrgyzstan, Ethiopia), and industrial policy dialogue (Peru), climate competitive industries (Bangladesh), or spatial solutions (Mauritania, Mozambique).

PPD is not new in Tanzania. The Tanzania National Business Council (TNBC) was created in 2001, with the private sector co-chairing the Executive Committee with the Chief Secretary of the Government. While the legal foundation and the structure of PPD has been laid out years ago, its operationalisation remains weak.

To overcome the ad-hoc nature of the meetings between the government and the private sector, a review of its mechanics and the capacity of the main public and private actors deserves renewed and urgent attention.

The emphasis of the PPD process should be on the work at the technical level that will help identify, prioritise, and implement key pro-growth reforms. The National Council, chaired by the President on a bi-annual basis, should be the high-level event where decisions emanating from the downstream PPD work are announced and where strategic orientations for the future of the country are presented.

While Tanzania’s economic growth has softened and trust has been wounded, policymakers and business leaders alike should leverage the existing public-private dialogue framework that Tanzania had the discernment to create years ago, to improve the business environment.

There is a momentum to strengthen and streamline the PPD process to restore trust between parties and deliver better pro-growth economic reforms for the benefit of all Tanzanians. Who does not like a win-win proposition?