20th November 2009 National Policy Dialogue 1 Role of State in a Developing Market Economy S.B. Likwelile

20th November 2009 National Policy Dialogue 2 Outline Rationale Re-orientation of GOT Context and main argument Functions of State Developmental state Conclusion

20th November 2009 National Policy Dialogue 3 Rationale Inspired by: –Tanzania’s experience, experience from other developing countries, and recent thinking on the role of the developmental state –Recognition that all states have a role to play in managing their economies; BUT nature of involvement is context-specific. –There is need therefore for shared understanding of TZ long term direction given the central role expected of the state –Clear recognition of the division of responsibilities among actors Examines the evolving role and principle function of the state in economic management –In responding to emerging challenges from local and global developments –Desire to put growth at centre stage

20th November 2009 National Policy Dialogue 4 Re-orientation of GOT Over the years GOT has re-oriented its developmental responsibilities in: Providing policy and strategic direction Creating an enabling environment for private sector participation Establishing and strengthening the institutional framework for growth and accompanying regulatory and enforcement systems.

20th November 2009 National Policy Dialogue 5 Context and main argument Main argument and premise: the state in Tanzania has a developmental role that mixes non-market instruments and selective proactive engagement to facilitate markets and private sector for efficient and effective resource use towards realizing the vision BUT this does not imply direct implementation of all development activities or state ownership of the means of production The expectation is that the state leads, provides signals and guides other actors in the desired direction; in line with agreed broad development agenda of the country.

20th November 2009 National Policy Dialogue 6 Functions of a State Define the national vision/strategic direction as first role of the state Medium term strategies and actions: setting out the means to achieve the Vision Properly align institutional framework and incentive system for effective implementation: of government, private sector, market – in line with the strategic direction: efficiency and results orientation key Maintain macro stability: predictability, in line with development agenda Ensure good governance: setting priorities, opening up opportunities for investment and transformation Address key constraints to economic growth: Infrastructure, Human capital, etc

20th November 2009 National Policy Dialogue 7 Developmental state Recognize strengths and capabilities of development actors and effectively use them based on relative comparative advantages Prioritize areas critical to development - more resources and better governance system –Infrastructure investment –Human capital development –Social protection –Research and Development for Innovation –Environmental management Institutional framework and incentive systems –Address reform of institutions of government –Nurturing strong national players in the private sector –Efficient markets: oversight, information, consumer protection, progressive interactions with non-market institutions

20th November 2009 National Policy Dialogue 8 Developmental state (ctd) Requires strong state capacity, competent bureaucracy, willingness, dynamic and champions principles of good governance: –To ensure enabling environment to actors –To provide proactive support to the private sector and market institutions where necessary and justifiable (without succumbing to patronage and capture) –Address capacity building of individuals, organisations and institutions

20th November 2009 National Policy Dialogue 9 Conclusion Vision2025 goals should be realised, clarity on how we navigate towards them is thus required Maintain the view of Tanzania’s LT horizon as a vibrant, developed market economy, capable of sustaining growth and shared benefits. A developmental role is appropriate for the Tanzanian government in this context Comparative advantage and strategic engagement to guide State involvement: recognition of role of private sector, NSAs, etc. Ensure that markets continue to develop and nurtured Need for strong political leadership, highly skilled bureaucracy, effective systems.