a tripartite report - Unctad

TANZANIA
Thirdly, the domestic competition distortions have
further been made manifest by the capital imbalance.
A reliance on foreign capital is also an indica-
sources
to invest in high capital intensive industries
such as mineral exploration, extraction, processing
and banking. Locally owned mining ventures
are not able to compete with the more resourceful
foreign investors who, in addition, have access
to better information, more negotiating power
for advantageous investment conditions such as
long-term tax holidays.
1.2 Economic Context
The United Republic of Tanzania inherited at independence
a market economic system, which
ish
colonial era, where the private sector played
the conventional role of economic agent and
tions
rested on continued increased production
of agricultural commodities and raw materials for
export, largely in unprocessed form. Domestic
subsistence economy in which policies and laws
encouraged commercial activity based on export
commodities and the discouragement of commercialization
of the production of food crops.
This situation prevailed up to 1967 when the ruling
TANU Party enunciated the Arusha Declaration.
TANU’s Constitution created a socialist State
based on collective consciousness, which in the
Arusha Declaration found a Swahili equivalent
of “Ujamaa”. The Declaration emphasized on
the self-reliance of the Tanzanian people, with a
greater emphasis on the preservation and sustenance
of the peasant farmers in the rural areas,
as a source of wealth. The aims and objects of the
Arusha Declaration included:
To see the Government mobilize the resources of
this country towards the elimination of poverty,
ignorance and disease;
To see that the Government actively assist in
the formation and maintenance of cooperative
organizations;
To see that wherever possible the Government
itself directly participated in the economic
development of this country; and
35
To see that the Government exercises effective
control over the principle means of production
and pursue policies which facilitated the way
to collective ownership of the resources of this
country.
A week after the Declaration was made, President
Nyerere made the following comment 16 :
“. . . The Arusha Declaration and the actions
relating to public ownership which we took last
week were all concerned with ensuring that we
can build Socialism in our country. The nationalization
and the taking of a controlling inter-
determination to organize our society in such
and that there is no exploitation of one man
by another”.
The Arusha Declaration questioned the use of industries
that were foreign or privately owned as agents
people, especially the rural peasants. Among other
measures, the Government nationalized major industries
through SOEs and Crop Marketing Boards
in the agriculture sector, the Regulation of Prices
Act,1973, which set up the National Price Commission
(NPC).
However, by the late 1980s, both Government and
the complexity and dynamic character of policies
and incentive structures which were necessary to effectively
drive the development process. As noted
earlier, the Declaration was overly based on State
control of the major means of production, exchange
and distribution with the State creating a viable public
sector as the principal engine for wealth creation,
distribution and retention 17 .
Direct Government intervention and participation
in key industrial sectors, price controls, import
quotas, rationing and use of permits to control the
internal movement of goods and services were
no longer sustainable. The internal limitations of
a planned economy and external factors such as
the series of oil-price shocks and the collapse of
the East African Community (EAC) had a toll on
the United Republic of Tanzania’s economy. By the
its implications culminated in the following problems
18 :
TANZANIA