Research Theme 1 - Inclusive Growth, Employment and Industrialization

Sub-Theme 1: Macro-Economic Fundamentals

Macro-Economic Fundamentals involve economic management instruments that impact the economy. They include changes of major macroeconomic variables (both monetary and fiscal) which have far-reaching impact on the performance of the economy.

In the medium and long term ESRF should first of all enhance its own capacity in Macroeconomic Modelling Techniques for effective execution of modelling related tasks in the future. This will be pursued by training or recruitment of professionals in economic modelling. ESRF will use various macroeconomic approaches such as Macroeconomic Modelling to facilitate the government of Tanzania to evolve a suitable Macro Modelling tool for the national economy. This would provide inputs into macroeconomic policy frameworks such as the MTEF budget process, and the annual national plans, in line with Tanzania’s LTSP, and medium term development plans.

Such a model is also critical in the assessment of different policy options and constraints that planners and budget decision makers face but have narrow room to decide on for example in gauging specific spending priorities. Economic models will be needed for operational purposes in the central economic management agencies like The Treasury (MoFP), the Bank of Tanzania (BOT) and the National Bureau of Statistics (NBS) that directly handle key macroeconomic policy issues such as inflation, interest rates, and exchange rate movements, foreign reserves provisioning, monetary policy, public expenditure frame, tax proposals, and domestic and external public debt. ESRF can house the basic modelling frame, if properly facilitated. Specific niches could be derived from this kind of initiative in the direction of forecasting possible GDP growth scenarios, inflation and the unemployment trends for Tanzania.

    (a) Effective Macroeconomic policy frameworks that are interrelated and are complemented by relevant sectoral and cross-sector policies and strategies;
    (b) Challenges that prevent key sectors from unleashing their potentials to achieve high productivity, making them unable to contribute robustly to overall economic growth, especially in agriculture, industry, mining and tourism;
    (c) How to further enhance the role of the private sector to particularly play a more vigorous role in resource mobilization for development, and for becoming a veritable engine of growth;
    (d) How to develop effective capacity for designing national and sub-national development plans and their systematic implementation plans and the respective monitoring mechanisms; and
    (e) The credible macro-economic models that should be selected in order for ESRF to get involved in the forecasting initiative.

b>Sub-Theme 2: Employment Generation and Unemployment Issues

Employment in a developing country is a powerful means for poverty reduction. Generation of employment opportunities particularly for the youth is of critical importance for sustained growth of Tanzania’s economy and social stability. The link between economic growth and human development is not automatic. It depends on other intermediate variables such as the quality of economic growth in terms of job or employment creation (quality of work, the conditions of work, the society’s value of work), role of the government and other economic agents in the process of wealth creation and distribution. Growth in employment is therefore one of the requisite intermediary variables which are placed in between growth and human development to facilitate transmission of the impacts.

Since employment generation is a necessary vehicle towards achieving shared growth and concurrently poverty reduction, an employment generation strategy in the country is particularly required because of intolerable levels of rising unemployment.

Thus research should delve into the dynamics of employment as linked with outputs as well as with income generation and the quest for societal equity. Research activities under this sub theme will include:

    (a) The essence of jobless growth that has in the recent past persisted in certain sectors and how to mitigate such trends in the future;

    (b) Linking employment generation (and employability) with the safety net initiatives;

    (c) Exploring the training aspect to enhance employability, without forgetting to deal with the mindset of peoples’ inclination vis-a-vis working hard and promoting integrity at work;

    (d) Investigation on barriers to labour market and determinants of unemployment in Tanzania;

    (e) Absorption of excess labour among the youth: Promoting the sectors and activities that act as labour sponge and last resort for job seekers (such as in urban and rural informal sectors, self-employment, agro-processing activities, retail trading and even machingas, SMEs, etc. as they have flexible labour absorptive capacity);

    (f) Revisiting the issue of labour intensive technology industries and services in the current massive trend of automation and deepening of ITC use in general. What is the role of government policy and function in giving direction in trying to balance the above trend with the underlying quest for sufficient generation of more employment;

    (g) Implication of the ‘Natural Gas’ economy on employment in Tanzania; and

    (h) Possibility of GOT initiating systematic affirmative employment actions like job attachments for graduates, tax credits for job creation (vis-à-vis imposition of the employment levy) and encouraging force labour schemes in local communities. This research should also review the experience of income redistributive social safety nets and mechanisms that promote income earning through employment such as TASAF’s conditional cash transfer scheme (which should be linked to Research Area One under Sub-Theme Two above).

Sub-Theme 3: Enhancing Industrialization in Tanzania as a Pivotal Pillar of Economic Growth

Having tackled growth constraints during the FYDP I period, the focus of FYDP II (and the Fifth Phase Government) is to prioritize rapid industrialisation so that the latter can be a driving force of Tanzania’s economic transformation. Hence industrialization will be highly productive and increasingly driven by use of science, technology and innovations. In this regard, the following supportive measures for promoting industrial transformation, which will also form the major ESRF research questions, are inevitable:

    (a) Industrial deepening with better forward and backward linkages;

    (b) Maximum use of natural resources which promote greater inter-sectoral linkages within the economy, and ensure that industrialization embodies continuous innovations and thus is sustainable over the long term;

    (c) Enhancing the Agro-based processing industries which utilize raw materials from agriculture, livestock, forestry and fisheries, thus adding value to raw materials and in so doing creating employment and raising rural incomes;

    (d) Expanding into other types of industries such as processing mineral products (e.g. large scale natural gas based/fueled industries, chemical industries, iron and steel processing, mineral processing and beneficiation) and medium-technology manufacturing; mineral beneficiation and value addition products;

    (e) Determining the role and place of MSMEs and labour intensive technologies;

    (f) Inter-industry diversification and clustering of the manufacturing activities as well as industrial networking;

    (g) Evaluation of progress of Export Processing Zones;

    (h) Policies and measures for building efficient protection mechanisms for Tanzania industries against unfair and excessive onslaught of imports (often cheap ones) without infringing on protocols of WTO and other international trading frameworks that Tanzania has officially committed to adhere to; and

    (i) Improve participation and involvement of Tanzanians and empower them during the process of industrialization.

Sub-Theme 4: Enhancing Business Environment, Investment Climate and Financial Inclusion

In response to the ongoing concerns over the business environment, the government aims to further improve the business and investment climate by reducing the cost of doing business, establishing a fairer and efficient regulatory regime, and easing controls and administrative constraints on investment and business operations, as well as improving public service delivery to the business community and investors. Along the same lines, the government has also resolved to promote and support Public Private Partnership framework. These measures are necessary in order to create an enabling environment and enhance the competitiveness of Tanzania’s products and services in the domestic and international markets. To facilitate success of these initiatives, ESRF will focus on the following research areas:

    (a) Outstanding major constraints to investors and the business community in Tanzania, including availability and the quality of basic infrastructural services such as energy, water, the road network; railways and harbours, marine and airports. To avoid duplication, ESRF will build on what other institutions are doing such as under the Business Leaders Perception on Doing Business in Tanzania;

    (b) How can the fiscal policy, financing and banking activities become more supportive to business and investments;

    (c) Ensure appropriate investment incentives, enforcing transparent business regulations, the quality of human resources, access to land and business licensing;

    (d) Assess the roles, responsibilities and capacities of public institutions that can facilitate strategic investment and trade; Transforming the quality of the informal sector and promoting enterprise development;

    (f) Because of the geographical location of Tanzania, the research into the question of investment and business climate has also to consider cross-border investments and joint ventures among neighbouring states, ascertain which large infrastructure projects are more economically viable on a regional scale;

    (g) Promoting and supporting PPP frameworks;

    (h) Robustly enhance local content and local ownership in industrialization and development of other dynamic sectors of the economy;

    (i) Studies on financial inclusion, including financial education and the use of ICT in financial services delivery;

    (j) Studies on the legal framework, regulations and supervisory system which govern microfinance in Tanzania; and (k) Understanding the challenges facing microfinance in Tanzania.

Sub-Theme 5: Agriculture, Food and Nutrition Security

Agriculture is a key sector in the growth of the economy and in poverty reduction as well as improving the rural livelihoods in Tanzania. It should also be noted that Tanzania enjoys a comparative advantage in the production of a number of agricultural products. This is underpinned by several factors such as rich agricultural land; big potentials for irrigation; large agricultural labour force (reserve); and the rich river basins. This comparative advantage could be further exploited by addressing some weaknesses and/or impediments hindering the sector’s maximum growth. These bottlenecks include markets, technology, dominance of subsistent farming, poorly developed infrastructure, skills, limited capacity for irrigation, capital deficiency, weak agro-business, limited capacity for processing, transportation and storage facilities.

Efforts directed at achieving economic growth and reduction of Tanzania’s widespread poverty have to accord priority to the transformation of agriculture if the national priority goals and targets are to be achieved. ESRF research agenda will therefore be exploring better ways to unleash growth potentials in agriculture. Among the research activities under this sub theme will be:

    (a) Bolstering agro-processing and rural industrialization;

    (b) Enhancing agricultural technological absorption;

    (c) Approaches to be adopted to transform traditional low productivity smallholder farmers into high productivity commercial farmers;

    (d) Enhancing agricultural standards and quality of agricultural commodities;

    (e) Promoting gainful international trade in agricultural commodities; and

    (f) Pursuing policies that can contribute to resilience of agricultural systems in Tanzania in face of deterioration of the environment and onset of other negative external forces.

Sub-Theme 6: Private Sector Development

(a) Assessment of the current status of the private sector in Tanzania;

(b) Understanding the challenges faced by the private sector in Tanzania;

(c) Participation and involvement of the private sector in implementing the national development plans; and

(d) Private sector development and employment generation in Tanzania

ESRFs activities are supported by the Government of the United Republic of Tanzania, United Nations Development Programme (UNDP), African Capacity Building Foundation (ACBF),Think Tank Initiative of IDRC and The Foundation for Civil Society.