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The economic, social impact of unrestricted investment is critical

The economic, social impact of unrestricted investment is critical

AN important constituent of investment policy framework enhancement at any point in time is in my opinion concerns more private sector development than public sector, although both are candidates.

Objective is to boost home grown private enterprise and the development of SMEs largely and also to boost absorptive capacity to facilitate linkages with and spill overs from foreign direct investment (FDI).

At the half day validation workshop held recently in Dar es Salaam, Tanzania to evaluate implementation of the 1996 investment policy, the representative from the PMO acknowledged a number of successes since the policy was introduced, but openly it was acknowledged that there are still some challenges in facilitating both domestic and foreign investment in Tanzania.

Much as views from private sector were aired to indicate where things aren’t going as it should be and due to the fact that among other aim of the workshop was to get feedback private sector actors, the way decision are made and time it take to solve mix-ups was considered as a major limitation hence limiting potential investors contributor to be attained timely.

Much as the audience were told of benefits which Tanzania has gained from 1996 investment policy that consist of jobs both in the foreign firms themselves and crucially also in local supplier firms; capital investment; and higher exports, dynamic benefits accrued, for instance, from the stimuli to entrepreneurship and innovation as local small-and medium sized enterprise learn from the foreign investors to mention a few, caution was raised that if policy doesn’t walk the talk al
luring to investors could risks what would be future investment potential that the country
badly need.

To date, notwithstanding the success attained and initiatives that the government has been pursuing towards promotion of investment growth in Tanzania, the policy and legal framework for investment climate remain inadequate.

Investment coordinator in the PMO dyed-in-the-wool to explain that a number of studies including test reviews, Government and private sector reports reveal that there are still issues which adversely affect investment environment and hence impact investment promotion in Tanzania that need to be addressed should Tanzania aim at growing its economy to upper end of middle income status.

To mention a few, the investment coordinator underlined most important issues that led to resolution to evaluate the investment policy as investment coordination challenges, investment regulation overlapping, scope and administration of investment incentives, land administration and getting hold of access to finance.

Why these were key issues? Ups and downs in the worldwide and regional investment structures in one way or another has amplified the domestic challenges.

All these, the participants were told have compelled the evaluation of Tanzania investment promotion policy 1996 in order to address emerging encounters and capitalize on the opportunities that could benefit Tanzanians and investors.

Thus objectives of the evaluation are to provide analytically-based, practical and effective policy advice that would help Tanzania on enticing and benefiting from FDI.

What is critical in my opinion the process to involve a multi-phase process integrating a systematic assessment of the policy and regulatory environment on one hand, and the identification of strategic investment priorities and, thereafter, implementation and follow-up including capacity building.

In my view, the principle underpinning the evaluation is to create the prerequisites for growth and poverty alleviation in Tanzania by stimulating FDI and stimulating its interactions with the local private sector.

The challenges for economic development and poverty alleviation that also is felt in Tanzania are well known, with each nation differently facing particularly severe constraints.

Adverse geographical, economic and political circumstances joined with poor infrastructure i.e. inadequate roads layout, airports and airport logistics, energy and utility supplies and costs, low levels of education and skills, and a fault-finding business climate for private sector improvement
and weak institutions, may act together to propagate a vicious cycle of under-development
and poverty.

Given the huge challenges and demands on resources, the only breakthrough mechanisms is to have in place practical investment policy that can potentially play a key role in breaking  and reversing this spiral into one of positive reinforcement and the creation of virtuous cycles of growth and poverty alleviation.

It is this ambitious objective which the investment policy has to aim to achieve but it can be done.

A weak private sector that isn’t supported by a robust investment policy can be a barrier to FDI attraction hence restricting the positive linkage and spill over effects.

What many of us don’t realise especially as investment is concerned is that an inadequate backbone of private enterprises edges the down stream benefits of FDI since the weak supply capabilities to meet the requirements of demanding transnational corporation customers within
the region and beyond tend to be limited.

Creating a beneficial symbiotic relationship between foreign and domestic enterprises in the development process that can unlock potential within private sector not only requires  a strong private sector but requires a sound and practical investment policy.

Much as Government is reviewing its National Investment Policy, 1996, in my judgment a central element that would make the exercise beneficial is the analysis of the legal and regulatory framework for investment, with sanctions for reform to meet external factors that compile our approach towards the way we attract investors to change.

The valuations and suggestions regarding the investment framework since 1996 meaning 24 years has gone by a substantial impact not only on the economic and business climate for investment, but also on overall private sector development in Tanzania.

Swayed also by multifaceted and international trade and investment agreements, so as to compete in markets within the East Africa community (EAC), the Southern Africa Development community (SADC) and the envisaged Africa continental Free Trade Area (AfCFTA), Tanzania in my opinion will need correct and better investment policies to attract more investment to our country.

And with better accommodative policy, Tanzania as whole championed and led by president such as Dr Magufuli if re-elected the policy will play a crucial role in stimulating overall private sector development and promoting symbiotic relationships between foreign investors and domestic enter prises.

Having skimmed through and look at the 79 pages document evaluation report on the execution of the National Investment Promotion Policy, 1996, and based on over decades years of looking at how countries can strategically boost their economic activities through empowering private
sector, failure to improve existing policies shall in my opinion discourage investors from es
tablishing strategic projects in Tanzania.

Economic conditions change with development, and investment policy-and perhaps regulations need to be adjusted accordingly.

As a consequence there are links between phases of economic development, the challenges facing countries and the required investment policy responses.

There is a need to appreciate that world has changed considerably since 1996 and is likely to change again in perhaps unprecedented and unexpected ways in the forthcoming decade following among other drivers Covid-19 effects that has hold the world economic system in ransom.

In order to inform national policymaking and assist Tanzania to face emerging and on-going challenges, an investment policy structure for sustainable development is mandatory.

Against this context, plans for refining investment policy 1996, while keeping the basic layout of the country specific fiscal incentives need to keep on being flexible to the forthcoming changing business world as far as promoting responsible investment is concerned.

Without stand up for private sector role, economic accomplishments can be doomed and their multiplier effects can be devastating to the private sector and to the country at large


Even with new resolutions, I will not fear

As others start talking in low tones ...

Author: Hilderbrand Shayo

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