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The Case of The Case of Business Business Environment Environment Strengthening Strengthening Programme for Programme for Tanzania (BEST)Tanzania (BEST)

PRACTISE OF REFORMING THE PRACTISE OF REFORMING THE BUSINESS ENVIRONMENT: BUSINESS ENVIRONMENT:

By By Dr. Stergomena TaxDr. Stergomena Tax--BamwendaBamwenda

The Better Regulation Unit, (BRU), POPPThe Better Regulation Unit, (BRU), POPP

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OUTLINEOUTLINE• Introduction

– Purpose – Historical Background

• Dimensions to the Tanzanian Private Sector

• The Best Programme– Rationale– Structure– Beneficiaries– Achievements– Challenges

• Issues for Discussion

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TANZANIATANZANIA

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TANZANIATANZANIA

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PURPOSEPURPOSE• Sharing practical experience of

implementing reforms for improving the Business environment in Tanzania– Using BEST as an illustration

• The BEST Programme is one of the key pillars of economic reforms in Tanzania – Directly under the President Office

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BACKGROUNDBACKGROUND

• The social economic path of Tanzania

– Policy of Socialism and Self Reliance– Structural Adjustment Programmes– Economic Recovery Programmes– Economic Policies and a series of Reform

Programmes/Initiatives

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Policy of Socialism and Self ReliancePolicy of Socialism and Self Reliance• Extensive involvement of the State in Production and

commercial activities• State led, almost all means of production and exchange

under the direct control of the State• Nationalization of major business• Crowding out of Private Sector and Emergence of an

underground economy• Economic Crisis led to economic melt-down and

macroeconomic imbalances:• fiscal crisis, drawdown of foreign reserves, budgetary deficit,

BoP deficit, huge debt budged, rising inflation, weak productive and service sectors, etc.

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Market OrientationMarket Orientation• Economic crisis signaled a need for a market

reorientation– Structural Adjustment Programmes with the support

of IMF and WB• Aimed at macro economic stability through market

liberalization• Attached with unrealistic and stringent conditionalities with

meager resources– Economic Recovery Programmes

• Emphasis placed on market liberalization, fiscal performance and administrative capacity improvements, promotion of higher productivity

• Resulted into a partial liberalized economy and certain macro-economic stability

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Momentum to Develop the Private SectorMomentum to Develop the Private Sector• NSGPR recognizes the Private Sector as an engine for

growth– expected to play a significant role in job creation, wealth

generation, and thus, poverty reduction

• A series of Economic Reform Programme and, economic policies, strategies initiatives (Sectoral Policies and Strategies LSRP, LGRP, PSRP, FSRP, TNBC)– Resulted into fiscal and macro economic stability (a solid

background for growth of business)– Role of Private Sector widened and strengthened– Improvements in physical infrastructure– Tanzania ranks favourably among African Counties in attracting

investors – Cost of doing businesses is declining, BUT still high, THEFORE

more needs to be done to fully address regulatory constraints AND unleash Tanzanian Economic potential

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WHY BUSINESS REGULATORY WHY BUSINESS REGULATORY REFROMS?REFROMS?

• A conducive regulatory environment is among the key economic growth drivers needed to spur growth of businesses both small and large in rural and urban areas towards the full development of the private sector SO AS TO FACILITATE

– Easy entry to business– More Legalized business– Access finance– Timely/speed commercial disputes resolution– Control risks– Easy acquisition means of production commercially (e.g. hire

and fire)– Timely resolution of commercial disputes

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BUSINESS REGULATORY IN TANZANIABUSINESS REGULATORY IN TANZANIA• The business environment is still constrained by

legislation and regulations on trade, commerce, employment and resource utilization that date from colonial and post-independence socialist era– Still costly, complicated and cumbersome to establish and run a

business– High cost due too many prerequisite licenses for businesses – Difficult and cumbersome process in the land acquisition processes– Access to finance still limited by inhibitive financial procedures and

problems related to land ownership– Inadequate and outdated labour laws – Business unfriendly labour laws– Unfriendly dispute resolution mechanism

• Bureaucracy is still burdensome– Services rendered to private sector are still hamstrung by red tape and

lengthy bureaucratic procedures

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COST OF DOING BUSINESSCOST OF DOING BUSINESS• According to the Doing Business Report for 2005

– It takes 35 days to start a business– With 13 procedure– Cost of starting a business is 161.3% of GNI per capita

• According to the diagnostic Report of the Formalization of Property Rights, September, 2005– There 67 bottlenecks in the legal system that account in the ability to

create wealth– there are 10 stages, 103 steps, its 379 days and cost US$ 5506 to

register a business– there are 13 stages, 68 steps, its 8 years, and costs US$2252 to get a

building permit– there are 5 stages, 74 steps, its 1286 days and cost US$1022 to collect

a debt– there are 9 stages, 92 steps, its 390 days and cost US$11964 to

register a business (legally incorporate a Private Coy)

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WHAT IS THE BEST PROGRAMME?WHAT IS THE BEST PROGRAMME?

• A very important initiative to realize NSGPR(MKUKUTA) objectives

• BEST is a GoT’s cross cutting programme aimed at improving the business environment by reducing the legal and regulatory burdensand improving service delivery to the Private Sector, and thus

• Contribute to Private Sector enhancement (big, medium, small, individual), wealth and job creation, economic growth and poverty reduction

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WHAT ARE THE SPECIFIC WHAT ARE THE SPECIFIC OBJECTIVES?OBJECTIVES?

• Ensuring a conducive regulatory business environment;

• Reduction or elimination of red tape and bureaucratic procedures enshrined in legislation and regulations in order to reduce costs (in terms of finances and time) incurred in doing business in Tanzania;

• Ensure fair, timely and speedy resolution of commercial disputes;

• Improve efficiency of service delivery to the private sector by the public sector; and

• To strengthen Advocacy Capacity of the Private Sector and thus partnership between the private and the public sectors

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BEST DEVELOPMENT PARTNERSBEST DEVELOPMENT PARTNERS

Four Development Partners are supporting the BEST programme

The Government of Sweden - SIDAThe Government of Denmark - DANIDAThe Government of the United Kingdom -DfIDThe Government of the Netherlands

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HOW IS IT STRUCTURED?HOW IS IT STRUCTURED?Programme divided into 5 components:

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HOW IS IT STRUCTURED?HOW IS IT STRUCTURED?Programme divided into 5 components:

• Achieving Better Regulation: Improving legal and regulatory environment – support legal and regulatory reforms

• Improving Commercial Dispute Resolution: Improve speed and quality of processing of commercial disputes

• Strengthening the Tanzanian Investment Centre: Support to TIC in line with its Corporate Plan - with special focus on promotion of SMEs

• Changing the Culture of Government: Build on existing initiatives e.g. PRSP and LGRP to deliver private sector orientation within the public sector and ensure improved service delivery

• Empowering Private Sector Advocacy: Improve the capacity of the private sector to identify & advocate for improved environment

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BEST PROGRAMMESTRENGTHENED BUSINESS

ENVIRONMENTEMPOWERED PRIVATE

SECTORECONOMIC GROWTHREDUCED POVERTY

COMPONENT I:ACHIEVING BETTER REGULATION A

Business Licensing ReformsBusiness Registration and Licensing Agency (BRELA) ReformsLand Law ReformsLabour Law ReformsTaxation ReformsAgriculture ReformsImport/Export Reforms

COMPONENT IV:TANZANIA INVESTMENT CENTRE (TIC)

COMPONENT V:PRIVATE SECTOR ADVOCACY

COMPONENT II:COMMERCIAL DISPUTE RESOLUTION Building Capacity for CDRReforming Courts and Legal ProceduresClearing Case BacklogAlternative Dispute Resolution mechanisms

COMPONENT III:CHANGE OF GOVERNMENT

CULTURE

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BEST PROGRAMME

STRENGTHENED BUSINESS ENVIRONMENT

EMPOWERED PRIVATE SECTOR

ECONOMIC GROWTH

REDUCED POVERTY

COMMERCIAL DISPUTE RESOLUTION (CDR) IMPROVEDA fundamentally reformed commercial dispute resolution system and an alternative dispute resolution system with greater effectiveness made available.Enhanced access to the Commercial Court.Simplified Civil Procedure Code.The Injunction / Adjournment culture combated.Backlog of commercial cases cleared.Greater integrity in the court system achieved.Improved enforcement of judgements.Greater willingness by financial institutions to provide loans to SMEs.

CULTURE OF GOVERNMENT CHANGEDChanged mindset and orientation of the public sector to enhance private sector growth.Better quality services delivered by Government to the private sectorGreater private sector compliance with business regulations

TANZANIA INVESTMENT CENTRE (TIC) STRENGTHENED

Greater access to information on investment opportunities and trends provided.Increased investments by local businesses especially SMEs as well as foreign investors.

BETTER REGULATION ACHIEVEDA simple and efficient business registration and deregistration system,

with well-kept business statistics.Simplified and transparent land acquisition procedures and regulations

with greater access to land mortgage and finance.A modern labour regulation framework that is consistent with

international standards and one that suits private sector employment.A harmonised local and central government tax system.Reduced cost of doing business and greater compliance to regulations

by businesses and especially SMEs i.e. formalising the informal sector.Increased investment in the agriculture sector and greater access to

support services such as research and expertise, finance, and marketing.Simplified and efficient import and export procedures.

PRIVATE SECTOR EMPOWEREDGreater private sector influence in creating

government policies and regulations.Enhanced private sector contribution to the

economy

Expected ResultsExpected Results

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BENEFICIARIES OF BESTBENEFICIARIES OF BEST• Ultimately all Tanzanians will benefit

– form the economic growth flourishing form an enabled business environment

• Immediately beneficiaries are businesses of all sizes– Exploit commercial opportunities more effectively and profitably– Enabled to be a more effective player in the national economy

• Small business who are disproportionately inhibited by excessive and conflicting regulations that inhibits the transition from the informal to formal sector – Creation of the missing middle

• The Government– A more constructive and effective interaction with the Private– Increased revenue

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THE IMPLEMENTATION STRUCTURETHE IMPLEMENTATION STRUCTURE• The decision making tier, the TRC - approves

work-plans and budget, and monitors implementation through TRC meetings and quarterly reviews

• The technical consultative and advisory tier, the BSC - Supports the TRC through consultations to oversee the implementation

• The management tier comprises of the BRU, and BEST AC Unit

• Participatory implementation and technical tier, TWGs and MDAs that supports both the BSC and BRU, while building capacity on part of the sector ministries and addressing sustainability needs

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ACHIEVEMENT SO FARACHIEVEMENT SO FAR• Despite the short period of implementation, a number of positive

lessons are emerging

– Embedded Participatory Approach and PPP Principles• A clear demonstration of the Government Commitment to improve the

business environment by Created practical space for the private sector to contribute in policy and legislative process

• BEST has catalyzed and fostered a true Public-Private Partnership and thus, ownership and commitment

• Has facilitated practical translation of decisions made at higher levels into concrete actions at implementation level

• Provides for an effective feed-back mechanism, and the enhancement of accountability, transparency and good governance.

– A testimony of a functional model of harmonized procedures

• Resources from a umber of Development Partners with diverse policies and procedures are pooled together and utilized through unified procedures

• Opportunity for increased coherence of reforms• Smooth and timely implementation of activities, paving the way for timely

realization of programme targets and milestone

– galvanized support for reforms at grass-root level

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ACHIEVMENTS DRIVERSACHIEVMENTS DRIVERS• Government Commitment

• BEST is came at a time when a number of key important policies were in place– embedded in the NSGPR, and NSGPR therefore spells the roles

of BEST– NSGPR emphasizes the need for the public to interface with the

private sector through increased dialogue and partnerships – Sectoral Policies, provides for a fertile ground upon which the

BEST could implement its regulatory reforms– Other ongoing initiatives are complementary to the objectives of

BEST

• Stakeholders comittment

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CHALLANGESCHALLANGES• Challenges faced emanate from:

– Its cross-cutting nature • By design the BRU is supposed to be a lean coordinating Unit, in

practice the BRU intervenes/help out so as to ensure the reformsare implemented at the envisaged pace and thrust

– BRU is overstretched– Potential danger of undermining ownership and eroding the existing

commitment• lack of cross-cutting statutory mandate that is necessary for the

Implementation and Coordination Unit to oversee and ensure quality of the intended results

– Culture (lack of customer service orientation)– The status and infancy of the private sector in Tanzania

• the lack of capacity of Small and Medium Enterprises to fully take advantage of the reforms under the BEST Programme

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CONCLUDING REMARKSCONCLUDING REMARKS• The BEST Programme is one of the key pillars of economic reforms

in Tanzania Business Regulatory Reforms under BEST are very essential

• BEST is consistent, add values, and takes forward the stable macro-economic and policies, and compliments other reforms, by improving the regulatory business environment that is essential for businesses and private sector development

– The gains expected from the BEST Programme are all encompassing will benefit all business, in particular SMEs.

– The approach used in its implementation ensures that all stakeholders are brought on board

– Continued joint efforts by the Govt, Development Partners and the Private Sector are therefore critical to unleash the power of Private sector to contribute in wealth generation, job creation, and thus economic growth and poverty reduction.

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ISSUES FOR DISCUSSIONISSUES FOR DISCUSSION• What strategies could be used in the short and long term

to enable the private sector in particular SMEs in Tanzania participates and benefit fully from the BEST programme?

• What measures could be used by the BRU to ensure that it can assure quality control of the reforms (final outputs) in the presence of statutory powers that are vested in the implementing MDAs?

• What additional tools could be used with RIA to ensure that regulations are developed in accordance with international best practice?

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Thank you for your attentionThank you for your attention