: More should be done to improve investment climate in Tanzania

By THEO MUSHI

FOR the past decade, Tanzania has tried to improve its investment climate by giving fiscal incentives to investors like having a one-stop centre at TIC to issue all the necessary documentation to investors.

It has also embarked on intensive and extensive investment promotion. As a result, there has been an increase of FDI inflows from an average of US$10 million in 1990s to $500 in 2005.

The Government has also invested in infrastructure including roads, airports, harbours, communications and energy in order to reduce the cost of doing business in the country. There is a need to have a business friendly bureaucracy which delays decision making and breeds corruption which also increases the cost of doing business.

The programme for Business Environment Strengthening for Tanzania (BEST) was introduced to have better regulations, procedures and stable and predictable policies BEST is part of on going reforms by the Government of Tanzania. Recent research studies by the World Bank ('Doing Business 2007, 2008 and 2009) have shown that there are currently many laws, by laws regulations and administrative procedures that create an unfoavourable business environment in Tanzania through high transaction costs.

It is explained that one of the reasons for high transaction costs is that many Tanzania’s laws do not meet the expectation of firms and entrepreneurs mainly due to deficiencies in consultation and policy analysis prior to introduction of new legislation.

It is also noted that poor quality regulations may turn good laws into impediments for private sector growth and affect adversely the reputation and service delivery capacity of Governments and Parliaments.

It is proposed that these problems will be solved by a adopting into the laws and policy making process Regulatory Best Practice (RBP). This requires any ministry that proposes new laws or regulations that have cost implications for businesses or significant economic or social implications for businesses to carry out meaningful consultation with stake holders.

The consultations should include full analysis of potential costs and benefits of the proposals. Underpinning new legislation and justification of the proposals. The ministries will also be required to consider alternatives to regulations such as education or better enforcement of existing laws.

This is meant to identify specific outcomes to be achieved as a result of the new law and to spell out methods human resources and budgets required for ensuring effective compliance as well as monitoring such compliance. A new concept of Regulatory Impact Assessment (RIA) will also be introduced.

It is a tool for policy making that helps the government to apply the principles of Regulatory Best Practice. It analyses whether or not the new regulation would have the desired impact. It helps to identify any possible side effects or hidden costs of compliance on individual citizen or business.

RIA document assists ministers in decision making process within the cabinet supporting parliamentarians in scrutinizing of draft legislation and communicating the justification for government decisions to the public, private sector and civil society.

RIA is an important tool for contributing evidence – based policy making as it helps to improve the quality of policy and regulatory decision making by uncovering evidence of what effects of potential decisions on proposals will be.

RIA can enhance the quality of law making in social and economic areas, enhance systems of governance and improve the capacity and performance of public service.

By encouraging public consultation and demonstrating potential impacts across society of a proposed law, RIA improves transparency and accountability in government decision-making.

RIA is a central component of BEST programme.

It is being introduced into government policy and law making process as a means to design more effective policies, laws and regulations that reduce the compliance costs to business associated with the regulatory environment in Tanzania.

RIA is not expected to replace the existing system but instead to add value to existing policy and law making process. A good regulation should be necessary, fair, effective in securing envisaged benefits and enforceable.

It should also be balanced, weighing risk and costs and practical benefits. Poorly enforced laws create disrespect for the rule of law, undermines legitimacy of the enforcing authority and it also creates uncertainties and encourages corruption.