The Business Environment

Key Issue DiscussionGBS Annual Review23 November 2009

Introduction

Macroeconomic stability and strong economic growth.

But sluggish progress of reforms to improve the business environment.

Presentation organised around 4 key messages, drawing on results of recent comparative surveys.

Objective of the session is to agree on concrete actions

Message #1

Tanzania is slipping down the Ease of Doing Business rankings and losing ground against its neighbours.

M1a: Tanzania’s record against the continent’s top performers

2006 2007 2008 2009 2010

Mauritius 32 32 29 24 17South Africa 28 29 35 32 34Botswana 44 48 52 39 45Namibia 39 42 48 54 66Rwanda 158 158 148 143 67Zambia 92 102 101 99 90Tanzania 150 142 124 126 131

M1b: Tanzania’s record against its neighbours in the EAC

M1c: Drilling into the data

Tanzania:2010 2009 Change

Ease of Doing Business 131 126 -5

Starting a Business 120 111 -9

Dealing with Construction permits 178 175 -3

Employing Workers 131 133 +2

Registering property 145 145 0

Getting credit 87 84 -3

Protecting investors 93 88 -5

Paying Taxes 119 113 -6

Trading Across Borders 108 105 -3

Enforcing Contracts 31 31 0

Closing a business 113 113 0

Message #2

The high costs of doing business not only deters new investment but also reduces the competitiveness of Tanzanian firms and Tanzanian exports.

M2a: The % of manufacturing firms that export from Tanzania is low.

M2b: High Cost of ExportsRank Documents

for export (number)

Time for export (days)

Cost to export (US$

per container)

Documents for import (number)

Time for import (days)

Cost to import (US$

per container)

Tanzania 103 5 24 $1,262 7 31 $1,475

Uganda 145 6 39 $3,090 7 37 $3,290

Kenya 148 9 29 $2,055 8 26 $2,190

Rwanda 168 9 42 $3,275 10 42 $5,070

Burundi 170 9 47 $2,147 10 71 $3,705

Thailand 10 4 14 $ 625 3 13 $ 795

Mauritius 20 5 17 $ 725 6 16 $ 677

Malaysia 29 7 18 $ 450 7 14 $ 450

China 48 7 21 $ 460 6 24 $ 545

South Africa 147 8 30 $1,445 9 35 $1,721

M2c: Other Business Environment constraints (power, finance)

M2d: Power outages in Tz relative to neighbouring economies (2006)

0

2

4

6

8

10

12

14

TZ RW KY UG BU MA SA NA BO ZM

Number of PowerOutages in a TypicalMonth

Value Lost Due to PowerOutages (% of Sales)

Message #3

The Government of Tanzania needs to reassure domestic and international investors of its commitment to investment climate reforms, particularly during this Global Economic Downturn

M3: Falling investor confidence

Tanzania Investment Centre reports fall in number of registered investment projects.

“Toxic actions” by Government ministries in the headlines

Uncertainty created has increased the level of perceived risk of investing in Tz

Good reputations hard won are easily lost.

Message #4

Slow progress in implementation of Investment climate reforms - coupled with vocal complaints from the business community over their treatment at the hands of officials - threaten to undermine the case for GBS

Conclusions

Need to secure agreement on concrete steps that the GoT will take over S/M/L-term to improve the Business Environment

Strong leadership is critical Seriousness of response taken to

2010 DB survey is encouraging. Look forward to hearing the outcome

of the task force deliberations from PS MITM.

Asante Sana