CENTRAL CORRIDOR FORUM: Tanzania’s Commitment to Reduce Cost of Doing Business ‘Disputable’

President Jakaya Kikwete Speaking at podium to the Left

President Jakaya Kikwete Speaking at podium to the Left

By TZ Business News Staff.

 

Tanzania has been rated worse, although marginally,  on the World Bank Ease of Doing  Business rating for the year 2015 in comparison to 2014. The rating contradicts remarks made by President Jakaya Mrisho Kikwete this month of March, 2015, suggesting that Tanzania was committed to reducing the cost of doing business.

In a speech in Dar es Salaam on Wednesday,  March 25, 2015  when opening the  East African Central Corridor Presidential Round Table and High Level Industry and Investor Forum, President Kikwete said  Tanzania was committed to developing economic infrastructures, as well as cutting down the cost of doing business.

But the commitment to cut down the cost of doing business is not visible in the facts and figures available.  The World Bank ranking of Tanzania on the Ease of Doing Business list shows the country has regressed. The country was listed at number 130 in 2014. The ranking has been moved to 131 in 2015, a notch worse than the year before.

Factors used by the World Bank to rank a country include the ease of trading across borders, the ease when dealing with construction permits, paying taxes and starting a business.

World Bank Doing Business Index Final

Speaking at the same Forum on Wednesday, Uganda President Yoweri Kaguta Museveni  added bureaucratic red tape, corruption and laziness to the list of costs of doing business in a country which do work against ease of doing business.

“Laziness brings its own costs,” Museven said. “You may have the infrastructure there but which is not being used.”  The Uganda President then added: “Corruption brings its own costs.  If you don’t reduce the costs of doing business, then prosperity for those stakeholders will not be realized.”

Uganda President Yoweri Museveni

Uganda President Yoweri Museveni

A Memorandum of Understanding signed between East African Community (EAC) member states and  the Central Corridor Transit Transport Facilitation Agency (CCTTFA) seeks to promote the development of transport infrastructure, transit transport, customs and trade facilitation with a view of enhancing development in the Eastern and Central Africa region.

The Dar es Salaam Forum was organized by the CCTTFA in partnership with the World Economic Forum (WEF) and CCTTFA member states  which comprise of Burundi, the Democratic Republic of Congo (DRC), Rwanda, Tanzania and Uganda. The Kenyan president Uhuru Kenyatta was invited  to attend the Forum as an observer. He sent the Kenya foreign affairs minister to represent him.

An agreement in the region stipulated that the investments be put to improve  roads, railways and port infrastructures to open up more economic opportunities and boost trade amongst the nations.  The Dar es Salaam forum focused on obtaining investments for this so-called central corridor.

President Jakaya Kikwete said Tanzania was committed  to developing infrastructures as well as cutting down the cost of doing business, which would open room for more investments that would change people’s lives thus eliminate poverty in the region.

He also said every country has done its part in changing and advancing the corridor which has resulted  in the the design of 121 projects. He however added that governments  alone won’t bring success, and that it was thus  important  to involve the private sector.  “Participation of the private sector is very important;  that’s why we have invited them on board,” he noted.

President Kikwete who doubles as Chairperson of the corridor,  which is formed by the Democratic Republic of Congo (DRC), Rwanda, Burundi, Uganda and Tanzania, invited Kenya to participate in order to link the Central corridor and the Northern  Corridor. The forum’s theme was ‘Central Corridor: Connecting Africa’.

The president said  the upgrading of ports and other infrastructures will go hand in hand with the improvement of service delivery.

But TI and other stakeholders have argued corruption is among hindrances to good service delivery in Tanzania. Tanzania is among the 14 most corrupt countries in the world, according to Transparency International.  A public document published by the Norwegian Aid agency, Norad says Tanzania has a Corruption Perception Index score of 3.5 out of 10, which is 5.4% worse than the average.

In Tanzania, 31.9% of citizens surveyed believe that the government is effective in the fight against corruption. Of surveyed citizens, 49% report having paid a bribe in the past 12 months.

Speaking at the Forum on behalf of  President Uhuru Kenyatta of Kenya,  the country’s Foreign Affairs Minister,  Amb. Amina Mohammed called on African countries to place emphasis on the development of infrastructure in order to realise Africa’s vision of an integrated continent.

Kenya Foreign Affairs Minister, Amb. Amina Mohamed

Kenya Foreign Affairs Minister, Amb. Amina Mohamed

The foreign affairs minister said infrastructure deficits in the East African region and Africa in general have resulted in high costs of transport which continues to hinder development.  “As a result of high expenditures in transport, trade costs in Africa constitute a high percentage of export and import costs; estimated to range between 30 and 40 per cent higher than in other developing countries,” the minister said.

The minister  said  lack of finance was one of key challenges limiting infrastructure development in the East African region and the continent.

Amb. Amina Mohamed stressed the need for regional economies to focus on the development of vibrant capital markets in which to raise long term funds for infrastructure development.

“Long term local financing which is available only in local capital markets is best suited for infrastructure projects,” said Amb. Amina Mohamed, adding:  “Developing vibrant capital markets represents one of the most viable ways of raising long term debt financing for infrastructure development.

“African countries can tap on pension funds which offer an ideal avenue of increasing the pool of investible resources that can be transformed into investment funds for infrastructure development,” the Minister said.

“It is imperative to accelerate pension reforms in order to pave way for the emergence of a vibrant contractual savings industry,” said Amb. Amina Mohamed., adding that need existed for African countries to focus increasingly on improving credit profile in order to access foreign commercial lending.

Amb. Amina Mohamed said the success of the Eurobond floated by Kenya to raise funds for infrastructure in 2014 was partly due to the positive rating by credit rating agencies. “The B+ rating of Kenya  by Standard & Poors credit rating agency greatly helped to re-assure investors of positive returns from the Eurobond floated in June last year” said Amb. Amina Mohamed.