Role of State in a Developing Market Economy

1. Role of State in a Developing Market Economy S.B. Likwelile

2. Outline • Rationale • Re-orientation of GOT • Context and main argument • Functions of State • Developmental state • Conclusion

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

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.

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.

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

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

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

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.