Achieving shared prosperity, one of the World Bank’s twin-goals, isn’t just a middle-income country’s preoccupation. It has a special resonance in Tanzania, a US$1,000 per capita economy in East Africa.
Tanzania has seen remarkable economic growth and strong resilience to external shocks over the last decade. GDP grew at an annualized rate of approximately 7 percent. Yet, this achievement was overshadowed by the slow response of poverty to the growing economy. The poverty rate has remained stagnant at around 34 percent until 2007 and started a slow decline of about one percentage point per year, attaining 28.2 percent in 2012. To date, around 12 million Tanzanians continue to live in poverty, unable to meet their basic consumption needs, and more than 70 percent of the population still lives on less than US$2 per day. Promoting the participation of the poor in the growth process and improving their living standards remains a daunting challenge.
During the 1990s and 2000s, nearly two dozen African countries proposed de jure land reforms extending access to formal, freehold land tenure to millions of poor households, but many of these reforms stalled. Titled land remains largely the preserve of wealthy households and, within households, mainly the preserve of men.
The potential for expanding the industrial sectors of African countries is substantial – this was a message I delivered on a recent trip to Italy, Tanzania, Mozambique and Malawi. This can happen through an improved understanding of the mechanics of economic transformation as well as by focusing on how such countries can follow their comparative advantage in natural resources and labor supply.
During my site visits and meetings with the private sector for the African segments of my trip, I became more convinced than ever of the strong untapped potential for private sector-led industrialization. Yet that can only happen when the government plays a facilitating role, such as by overcoming information asymmetries, coordination failures and externalities associated with first-mover actions. In Tanzania, initial experiments with industrial parks look promising, as do agricultural development projects and rural transport initiatives currently under way. In the case of industrial parks, it’s important to have a one-stop shop for registration and other administrative obligations, adequate electricity and water supply, and good transport/logistics links.