Trade Performance Review 2007: Chapter 2: Tanzania

Year of publication: 
Longinus Rutasitara, University of Dar es Salaam
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Over the past five years, Tanzania's trade performance has been affected by developments occurring on various fronts. Export diversification shifted Tanzania's exports towards non-traditional exports, yet its NTEs were dominated by minerals, while other non-traditional agricultural exports, particularly horticultural products and fish exports, also increased. Trade policy reforms created an attractive investment climate for domestic and foreign private investors. Through the formation of the Confederation of Tanzania Industries and the Tanzania Private Sector Foundation, the government accommodated private sector investors' views, for example, which helped to improve Tanzania's investment climate. However, more efforts and resources, including aid, are needed to develop the capacity of the country's private sector to grow, understand and seize opportunities in the international market place.

Imports also rose, largely to cater for the capital and intermediate inputs demanded by Tanzania's expanding mining and tourism sectors, as well as governmental spending on physical infrastructure projects. Whilst the country's import bill supports growth and investment capacity, its ability to finance the widening trade deficit will be dependent on future streams of income that would arise from greater employment creation and having an efficient revenue strategy.

Challenges include Tanzania's infrastructure, particularly power, water supply, transport and telecommunications, which are of a low quality yet of a high cost. In addition, counterfeit goods have been dumped in the country and there is evidence of unfair competition. Weak managerial and marketing skills afflict many Tanzanian firms and few firms have units or departments responsible for product and market research. This is compounded by general weak research capacity in the country. There is also a lack of access to land while the poor have low skills, and little is spent on the development and education of the labour force. The cost of financing is a concern, too. Tanzania has low interest on savings but high borrowing rates, especially for micro-loans that are charged even higher rates. Bureaucracy, corruption and inadequate security of property and life are also evident and erode the potency of Tanzania's political stability and its ability to atract investment and tourists to the country. 
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