What is the priority for investments in Tanzania ?

The priority is rural sector investments where I think the greatest growth can occur in the shortest period of time – and where the greatest needs are. So, to give a couple of examples, African food yields are the lowest in the world because the inputs to agriculture are the lowest in the world as well. There is no irrigation to speak of, 96 per cent of African food crops are grown in rain-fed conditions, and increasingly drought prone conditions. There is no fertiliser to speak of on food crops. The land is degraded because basic land management practices are not in place – terracing, water catchments, break dams.
The result is a dismal level of impoverishment – miserable yields, chronic hunger, non-monetised rural economies and a lack of even basic infrastructure, like roads and certainly motorised transport. Villages are basically connected to their local markets by women carrying stuff to and from the market.
So my argument is that this most extreme poverty is absolutely solvable because when you look at the pieces you see what is wrong. And the kinds of investments that we can make on a small scale could be made on a large scale to address these problems systematically.
Let us try to call for significant scaling up of those kinds of investments, and arguing that one can actually make plans for success. And that identified trajectories actually get the job done so that people have an economy that begins to function and grow under its own impetus – because there is enough income to save something and to start a process of self-generating economic growth.
Waiting for the private sector to make these investments is to wait forever. There is no chance in the world that, for the poorest people, the market is going to save them. Because well functioning markets are designed to bypass such people. Because they have nothing to demand, they have no income to demand, no surplus above subsistence. So they need help to get up to the level of which they can achieve development, so let us try to show that practical investments backed by practical commitments of funding, supported by sensible strategies of governance and scaling up can make the breakthrough through to success.

How can Tanzania make the most of globalization?

The case for free trade is one of the rare propositions in economics for which there is empirical proof. By encouraging nations with differing economic, social and geographical characteristics to specialize in the production of what they do best, trade maximizes total prosperity. For poor people and poor nations like Tanzania, the right to trade our goods freely is an essential way of improving life chances. Periods when world trade has been free are associated with economic growth. And growth is not an abstract phenomenon. For a shopkeeper in Musoma, it means an electric fan to ease the blistering heat; for a peasant in Kyela, a mobile phone to check the latest ‘viazi mviringo’ prices.

Put solely in those terms, it’s hard to see why anyone could be against free trade. But critical observers have a broader target in sight; not trade as such, but the word of the decade – globalization.
Globalization is currently en vogue, but it means different things to different people. For some, the term describes the world in which technologies have rapidly shrunk the cost of distance, so that goods and services can be produced and distributed on a global scale. For others globalization is a plot by multinational companies, which can source their production wherever the costs are lowest. For some people it is absolutely positive. Through it, the whole world shares what is worth sharing intellectually, culturally, politically, and even economically. For others it is absolutely negative since it benefits only a minority at the expense of the majority.

While industrialized countries are largely awash with prosperity, the benefits of globalization seem to elude growing numbers of people in more and more developing countries.
The global imbalance of misery is far more dramatic than anything people ever imagined - billions of the world’s inhabitants live under the poverty line, subsisting on less than the equivalent of $ 1 a day. This has caused more and more people to think of globalization as an agenda set by and for the benefits of powerful nations.

What has globalization to offer?
Globalization is conceived to be the trend of increasing integration of economies in terms of not only goods and services, but of ideas, information and technology. It also means trade liberalisation, free capital mobility, privatization, commercialization and empowerment of multinational corporations.

The basis of globalization is improvements in telecommunications, computer power, electronic communications and information networks, together with all those techniques that help to overcome physical barriers. These aspects of globalization include free market forces. Any state regulation on the markets is prohibited. Another aspect is that large corporations have the right and freedom to operate anywhere and dominate the market.

The major assumption of globalization is that the benefits from the free market operations will in turn be used to develop and protect the environment for further sustainability. The question we may ask ourselves is: does this happen in Tanzania today?

But let us not forget that globalization brings with it new challenges. First, globalization is so one sided that its working in favour of Africa will depend on the goodwill of those masterminding it. Second, African intellectuals and leaders are challenged to put mechanisms in place of how Africa can take advantage of globalization. Third, how will the export of resources help African economies? Africa does not fix prices for its commodities. Access of Africa’s agricultural produce to western markets is limited. Agricultural sectors in developed countries are subsidised and so outcompete African ones which are not.

Are there any developing countries that have benefited from globalization?

If African countries can learn from elsewhere, globalization can also be beneficial even for poor countries. If one will look for examples of developing countries which have benefited from globalization and made great strides in alleviating poverty the list will, no doubt, include China and those countries in East Asia (e.g. Korea, Taiwan).

There is little doubt that exports and foreign investment have played an important role in China's development. By selling its products on world markets, China has been able to purchase the capital equipment and inputs needed for its modernization. And the surge in foreign investment has brought much-needed managerial and technical expertise.
But if you look closer at the Chinese experience, and you will discover that it is hardly a poster child for globalization. China's economic policies have violated virtually every rule by which the promoters of globalization would like the game to be played. China did not liberalize its trade regime to any significant extent, and it joined the World Trade Organization (WTO) only recently; to this day, its economy remains among the most protected in the world. China resolutely refused to open its financial markets to foreigners, again until very recently. Most striking of all, China achieved its transformation without adopting private-property rights, let alone privatizing its state enterprises.
China's policymakers were practical enough to understand the role that private incentives and markets could play in producing results. But they were also smart enough to realize that the solution to their problems lay in institutional innovations suited to the local conditions— township and village enterprises, special economic zones, partial liberalization in agriculture and industry—rather than in off-the-shelf blueprints and Western rules of good behaviour.

The remarkable thing about China is that it has achieved integration with the world economy despite having ignored these rules—and indeed because it did so. If China were a basket case today, rather than the stunning success that it is, officials of the WTO and the World Bank would have fewer difficulties fitting it within their worldview than they do now.

Another positive example is provided by East Asia. Countries in East Asia have grown the fastest and done most to reduce poverty - and they have done so, clearly, via "globalization". Their growth has been based on exports - by taking advantage of the global market for exports and by closing the technology gap. It is not just gaps in capital and other resources that separate the developed from the developing countries, but differences in knowledge. East Asian countries took advantage of the "globalization of knowledge" to reduce these disparities. But while some of the countries in the region grew by opening themselves up to multinational companies, others, such as Korea and Taiwan, grew by creating their own enterprises. Here is the key distinction: Each of the most successful globalizing countries determined its own pace of change; each made sure as it grew that the benefits were shared equitably; each rejected the basic tenets of the "Washington Consensus," which argued for a minimalist role for government and rapid privatization and liberalization.
In East Asia, governments took an active role in managing the economy. The steel industry that the Korean government created was among the most efficient in the world--performing far better than its private-sector rivals in the United States (which, though private, are constantly turning to the government for protection and for subsidies).

Therefore, as one can see those countries that have managed globalization on their own, such as those in East Asia, have, by and large, ensured that they reaped huge benefits and that those benefits were equitably shared; they were able substantially to control the terms on which they engaged with the global economy. By contrast, the countries that have, by and large, had globalization managed for them by the International Monetary Fund and other international economic institutions have not done so well. The problem is thus not with globalization but with how it has been managed.

The question of the day is: how can Tanzania and other African countries benefit from globalization?

There have been suggestions that, if Africa is to reap more benefits of globalization, it should devise mechanisms that will force these multinationals to enter joint ventures with either local governments or private local companies. Others see that it is high time our parliaments should consider passing bills that will fix minimum pay for local employees working with these companies. There are also those who think that Africa has no alternative to globalization – the only thing our governments can do is empower the natives and equip them with the necessary competences, entrepreneurial skills and capital to enable them participate in global activities. They are also those who say that the problem, in developing countries, is not globalization but how it has been managed by local governments and thus there is the need for balance between market forces and governmental interventions - that developing countries be given a real and honest chance to sit in the driver's seat when developing locally adapted international economic models.

How can Tanzania make the most of globalization? Do African economies have any alternatives to globalization?
What do you think?

Investments Needed To End Poverty

The key problem for African countries is that poverty itself can be a trap. When poverty is very extreme, the poor do not have the ability – by themselves- to get out of the mess. They are too poor to save for the future and thereby accumulate the capital per person that could pull them out of their current misery.

Popular beliefs-stereotypes- that Africans are underdeveloped because: they are lazy, they lack modern values, or because their governments are corrupt, are not always true.
These perceptions are usually made on the basis of prejudice rather than measured evidence.
Governance ratings (based on the World Bank and Transparency International) show that, at any given level of governance, African countries on average grow (economically) less rapidly than developing countries at the same quality of governance and same level of income, but in different parts of the world. The slower growth is caused, in my opinion, mainly by Africa’s adverse physical geography and deficient infrastructure.

Stereotypes that Africans work little and therefore are poor are put to rest by spending a day in an African village, where backbreaking labour by men and women is the norm. Promoters of these interpretations rarely understand that low productivity results not from laziness and lack of effort but from lack of capital inputs to production. African peasants lack soil nutrients, tractors, feeder roads, irrigated plots, storage facilities, and the like.
Contrary to popular perception that trillions of dollars have been spent on Africa, the amount of aid money per person per year made available to Africans is really very small (some studies put it at 30 US dollars per sub-Saharan African in 2002 from the entire world!). Of that modest amount, if you deduct the money for paying consultants from the donor countries, the money for food and other emergency aid, and the money that went to servicing Africa’s debts, ONLY $12 per person went to Africa in that year. Is it really a surprise that we do not see many traces of that aid on the ground?
If we want to see the impact of aid, we had better offer enough to produce results.
And if the world is really serious with poverty eradication and economic growth in Africa, they should stop spreading the “privatization gospel” on health services and education to people who do not have even enough to feed themselves while most of the high-income-country shareholders of the world bank have health systems that guarantee universal access, and all have education systems that ensure access to public education.
We will only develop if our governments make investments that are needed to end poverty (health care, education, physical infrastructure, technological capacity etc).

Do you think otherwise?