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THEME“Nurturing Industrialization for Economic Transforma-tion: The Role of Procurement and Supply Professionals”

DECEMBER, 2017

A R U S H A I N T E R N A T I O N A L C O N F E R E N C E C E N T R E ( A I C C )

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PSPTB ANNUAL CONFERENCE

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B O A R D M E M B E R S

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S P O N S O R S

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S P O N S O R S

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M E S S A G E F R O M T H E A C T I N G E X E C U T I V E D I R E C T O R

1.0 Introduction

This report covers Board’s performance for a period of twelve months since the 7th Annual Conference held at Arusha from 13th to 14th December 2017. The conference theme was titled Governance in Procurement and Supply Profession, and was attended by 620 delegates. The Board’s 8th annual conference theme titled “Nurturing Industrialization for Economic Transformation: The Role of Procurement and Supply Professionals” was selected to echo the 5th Government initiatives towards economic transformation. This report includes implementation of the 7th Annual Conference resolutions, Board’s performance and future prospects of the Board.

2.0 Implementation of 7th Annual Conference Resolutions

There were 20 resolutions drawn from papers that were presented during the 7th Annual Conference from 13th to 14th December 2016. Six out of 20 resolutions were directed to the Board while the rest were directed to other institutions. This part discusses in detail the implementation status of the six resolutions that were directed to the Board.

P R E S E N T E D B Y : A C T I N G E X E C U T I V E D I R E C T O RM R . G O D F R E D M B A N Y I

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Table 1: 7th Annual Conference implementation statusS/N. Observation Resolution Implementation Status

1 It was observed professionals lack capacity in conducting procurement activities

Efforts to be taken to ensure capacity to professionals

üThe Board has developed competence based CPD program training philosophy.

üThe Board has developed demand driven CPD program for 2018/19 that has incorporated both soft and technical skills. Either specific leadership programs has been incorporated.

üThe Board has conducted tailor made training to 14 Procuring Entities

üThe Board conducted 12 CPD workshops which were attended by 486 professionals.

2 Construction of PSPTB O f f i c e Building at Luguruni.

The Board to be exempted from the ban imposed to public institutions whose core function is not construction not to construct offices on their own.

üThe focus has been changed to comply with Government directives to relocate to Dodoma.

üThe Board has rented the office building which requires rehabilitation before being used in DODOMA.

üThe Board has applied from the Dodoma Municipal Council for office plot acquisition in DODOMA.

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3 Employment of unregistered procurement and supplies staff hence b r e a c h i n g PSPTB Act No. 23 of 2007

To contact Accounting Officers to avail the names of unregistered procurement and supply staff and act upon the law

üCompliance Inspection were conducted in Tabora, Lindi and Mtwara where unregistered practitioners have been served with letters of intention to take legal action. They will be summoned to appear before disciplinary committee before the end of January 2018.

üFollowing implementation of MoU between PSPTB and PPRA, Professional registration status was included as one of PPRA’s audit requirement for financial year 2016/17.

üThe Board registered 2,216 professionals from December 2016 to October 2017.

ü

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4 Noted among professionals e m b r a c i n g moral hazard behaviors

Create awareness through seminars/workshops

üThe Board conducted visits to eight higher learning Institutions namely Mzumbe University, St. Augustine University of Tanzania, Jordan University College, College of Business Education-Dodoma & DSM, Institute of Accountancy Arusha, Moshi Cooperative University, National Institute of Transport, and Tanzania Institute of Accountancy. The objective of these visits was to sensitize professional ethics and conduct to upcoming professionals.

üProfessional etiquettes was one of the topics in CPD workshops for the year 2017/18.

üSpecial leadership programs were conducted to leaders of students’ associations that are supported by the Board

5 Lack of professionals under Fellow category

To design favorable criteria to attract more candidates to apply

üThe category was set for the purpose of recognizing people whose contribution to the profession is exemplary.

üThe criteria has been set but the primary aim of the category remains the same.

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6 The need of knowledge of other laws. e.g. law of contract, property law

Awareness to stakeholders. For example, inviting other disciplines such as CRB to present their papers.

üIn both CPD and Tailor made training, facilitators with different disciplines were employed depending on the nature of the program

üThe 8th annual conference paper presenters have different professional background too.

The detailed implementation matrix of 20 conference resolutions is appended to this report.

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3.0 Board’s performance from January to December 2017

The Board from January to December 2017, has excelled some achievement in implementing their functions as indicated in the PSPTB Act as follows:a) The Board has registered a total of 2,216 professional members for a period

of 12 months. The total number of members registered by the Board since its inauguration in 2007, is 8,346 in the categories of Authorized (692) Approved (1,292), Graduate (4,841), Full Technicians (1,369), Technicians (59), Affiliates (46), Foreigners (20) and 27 Consulting and Tuition providing centers.

b) The Board administered examinations to 1,578 candidates in May 2017, while---candidates sat for November 2017 examinations and their results are being processed. Furthermore, 303 candidates graduated and were awarded their CPSP certificates on October 2017. These graduates were also awarded an international certificate issued by IFPSM for the first time.

c) The Board has developed competence based CPD programme training philosophy. This training approach will enable the Board to address the challenges of professionals in implementing procurement activities.

d) The Board conducted Tailor Made training on implementation of Public Procurement and Supplies management to the following PE’s:MUHIMBILI NATIONAL HOSPITAL, SUMATRA, TANZANIA INSURANCE REGULATORY AUTHORITY, TANZANIA FOREST SERVICES (TFS) AGENCY – NORTHERN ZONE, TANZANIA PETROLEUM DEVELOPMENT CORPORATION, ZANZIBAR ANTI-CORRUPTION AND ECONOMIC CRIMES AUTHORITY (ZAECA), JAKAYA KIKWETE CARDIAC INSITITUTE (JKCI), TANZANIA FOREST FUND (TaFF), TANZANIA METEOROLOGICAL AGENCY (TMA), TANZANIA COMMUNICATION REGULATORY AUTHORITY (TCRA), NATIONAL INSURANCE CORPORATION OF TANZANIA LTD, PRESIDENT OFFICE, TANZANIA RAILWAYS LIMITED AND MEDICAL STORES DEPARTMENT (MSD).

e) The Board was one among trainers invited by Uongozi Institute on the ongoing countrywide training conducted to District Commissioners’ and District

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Executive Directors f) The Board has conducted special training to some employees from the Council

of Kilimanjaro region as part of Corporate Social Responsibility. The aim was to build capacity to their employees from some of the councils whose CAG audit report had some weaknesses in the area of public Procurement.

g) The Board visited higher learning institutions namely Jordan University, Mzumbe University, CBE Dodoma, St. Johns, IAA, MoCu, TIA and SAUT where issues related to professional code of conduct and ethics were addressed.

h) The Board has managed to form Students Association Clubs that are working closer with the Board in order to nurture and mentor upcoming professionals. Furthermore leadership gurus were invited to train, mentor and inspire the association leaders through leadership training program.

i) The Board conducted training to its staff by the assistance of the President’s Office-Public Service Management on Business Process Improvement. The purpose of this training was to improve how to handle our esteemed customers. Furthermore, the Board conducted training on the role of the Board as a regulator, aiming to improve the service delivery capacity to its members.

j) The Board also conducted a stakeholders meeting to provide inputs for the proposed finance act amendment. These professional inputs were submitted to MoFP for further considerations.

k) The Board is one of the organizing members of the International public procurement forum to be conducted in 2018 in Arusha.

l) The Board has engaged e-GA’ to develop electronic registration and payment system, that will enable applicants for professional or examinations registration to apply and monitor their registration status online. The system also is expected to allow professionals to effect payment of various services using e-payment gateway by using mobile phone and other facilities.

m) The Board has attended international forums in Uganda and Kenya that were organized by PPOA and KISM respectively. The Board also presented a paper on “Cross-border Logistics-Tanzania case”

n) The Board is working closer with International Institutions such as IFPSM, KISM, for development procurement and supplies professional.

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o) In improving working environment, the Board has acquired recruitment permit for eight new staff, and currently three have reported, and the remaining five are at different recruitment stages.

p) The Board has also developed its five years strategic plan, Disaster recovery plan, ICT policies, examination quality assurance plan, Training program for 2018/19 to enhance its operations

q) The Board has enhanced financial management and the audited financial statements for 2015/16, the Board had unqualified audit opinion. 1

4.0 Board’s Challenges

During implementation of PSPTB functions some constraints observed during the period include the following:a) Non-voluntary reporting compliance of unregistered practitioners by registered

members. Registered members have a professional moral duty to ensure that they don’t work with non-registered practitioners. The same code of ethics requires professionals to report to the Board cases of unregistered practitioners employed in their organizations.

b) Unsatisfactory payment of annual subscription feesRegistered members have a professional duty to pay for their annual subscriptions fees. To date a total of Tzs 479,140,188.46 is still outstanding as unpaid fees by members. This hampers the ability of the Board to serve its members

c) Inadequate or lack of professional researchesTo keep in pace with the current professional dynamism, the professional board and its members need to be at the forehand to conduct researches so that to bring in new developments and innovations that will be employed in developing our nation. So far, no funding request has been received from members to conduct research .

d) Increase of unethical cases There is an increasing trend of reported unethical cases related to conduct of either registered or unregistered practitioners that are reported by media or in court of law. These incidents tarnish the image of the profession, as we are all

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judged by unprofessional conduct of few among use) Inadequate financial resources

The Board recurrent budget depends on workshop fees, examinations fees and consultancies conducted, thus affecting the ability to deliver its services to its members.

f) Inadequate knowledge and skills on procurement and supplies issuesg) Lack of funds to carry out capital intensive development programmes

5.0 Future prospects

The Board developed Strategic Plan for the year 2016/2017 to 2020/2021 with very specific objectives for implementing the Board functions as shown below:a) HIV/AIDS and non-communicable disease at work place addressed and

supportive services improvedb) Implementation of the National Anti-corruption strategy enhancedc) Provision of advisory services to the Government on the procurement and

supplies profession policy improvedd) Legal and regulatory framework and standards of professional practices

strengthened.e) Provision of procurement and supplies management consultancy and research

services enhancedf) Provision of professional examinations in procurement and supply management

enhancedg) Operational and outreach capacity to deliver quality services enhancedh) Financial sustainability enhanced

6.0 Other Future prospects

a) The Board developed CPD training program for the period of January 2018 to June 2019. The program is practical oriented and soft skills on leadership management and emotional intelligence will be discussed during the period.

b) The Board developed Consultancy and Research policy that will guide implementation of consultancy and research activities acquired by the Board.

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7.0 Conclusion

The Board promises to continue serving its members to the best possible level and urge professionals to pay their annual fees as directed by the Law. Professionals are also urged to curb any acts that tarnish the image of the profession and professionals as well.

I submit,

Ag. Executive Director

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I M P L E M E N TAT I O N O F T H E 7 T H R E S O L U T I O N

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2 0 1 7 A N N U A L C O N F E R E N C E T I M E TA B L E

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D AY 1 PA P E R P R E S E N T E R SProf. Honest Prosper Ngowi

Industrialization Strategies in Emerging Economies:The Case of Malaysia and Implications for Tanzania’s New

Industrialization Move

AbstractThe paper dwells on industrialization in emerging markets in general with selected economic issues and perspectives in new industrialization move in Tanzania in particular. The focus is on the industrialization strategies in emerging economies with the case of Malaysia in particular.

Various industrialization strategies adopted by Malaysia are outlined. Then implications of these strategies for Tanzania’s new industrialization move by the fifth phase government are discussed. The paper also outlines implications of the industrialization move in Tanzania to the procurement and supplies professionals.

Key words: Industrialization, Emerging economies, Malaysia, Tanzania, Procurement

1. Introduction and ContextAmong the key indicators of economic development of a country is its level of industrialization. It stands to improve living standards. Developing countries consciously adopted industrialization strategies for economic development purposes and as a solution to their vulnerable dependence on export of few primary products and import of high valued manufactured goods (Brisbane, 1980). Industrialization is beneficial for developing countries for many reasons. They include reducing their vulnerable dependence; speeding up their economic growth process; modernizing the economy through spill over or externalities effects; creating direct and indirect employment and generating foreign currency through export and saving the same through import substitution with the results of reducing balance of payment (BoP) problems (Brisbane, 1980).

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Pass et al (2000) describe the term industrialization to imply the extensive development of organized economic activity for the purpose of manufacture. It is characterized by inter alia transformation of a primarily agrarian economy into a more specialized, capital – as opposed to labour – intensive economy. It took the form of Industrial Revolution in Western Europe and North America in the 18th and 19th centuries.

Elsewhere in the economic and business literature (see Bishop, 2009), industrialization is described as the process in which a country transforms itself from a basically agricultural society into one based on manufacturing of goods and services. Whereas manual labor is more often than not replaced by mechanized and automated high tech-mass production, craftsmen are replaced by assembly lines. Industrialization is associated with the growth and development of large urban centers and suburbs. Tanzania may need to adopt its own definition of industrialization but it should not miss out the key components of a true industrialized economy.

1.1. PotentialbenefitsofindustrializationThere are many potential advantages embedded within industrial economy. These include but are not limited to potentials for direct and indirect jobs and therefore incomes creation and improved standards of living. Industrialization also poses potentials for foreign exchange earnings through exports and foreign exchange saving through imports substitution. It can also generate government revenues from related taxes and none tax charges. It stands to develop other sectors of the economy through inter-sectoral linkages via both backward and forward linkages that can trigger development of many other sectors through providing them with markets as well as supplying these sectors with factor inputs both intermediate and finished. As a country we should not dwell on the potentials only but should make concrete moves to actualize the potentials.

2. Industrialization Strategies in Emerging MarketAmong the key defining characteristics of industrialization strategies in the emerging markets include import substitution and export oriented industrialization. These strategies are briefly described before zeroing-in the strategies that have been used in Malaysia which is the case study country in this paper. 2.1. Import Substitution IndustrializationImport substitution industrialization (ISI) is a trade and economic policy which advocates replacing imports with domestic production. ISI is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialized products. It is a theory of economics typically utilized by developing countries or emerging market nations seeking to decrease dependence on developed countries and to increase self-sufficiency. The process makes local economies self-

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sufficient. It is a trade or economic policy theory that advocates replacing imports with domestic production. It is the product of inward oriented economic development strategy.

ISI is a development strategy focusing on promoting domestic production of previously imported goods to foster industrialization. The strategy was pursued mainly from the 1930s through the 1960s in Latin America—particularly in Brazil, Argentina and Mexico—and in some parts of Asia and Africa. In theory, ISI was expected to incorporate three main stages. These are domestic production of previously imported simple nondurable consumer goods; the extension of domestic production to a wider range of consumer durables and more-complex manufactured products and export of manufactured goods and continued industrial diversification.

Origins of ISIThe theoretical foundation for deliberate, government-promoted ISI emerged from critiques of the international division of labour, in which less-developed countries largely exported primary products and imported finished manufactured goods from Europe and the United States. In the 1950s, critics such as Argentine economist Raúl Prebisch claimed that this division of labour would ensure continued poverty for primary-product producers. Prebisch and others argued that developing countries must promote industrialization through practices that encourage domestic manufacturing. Promotion policies involved both protection of “infant industries” for imports and incentives to encourage capital and technology imports. Tariffs were often used in addition to exchange controls, exchange-rate manipulation, and import licenses for particular products necessary for manufacturing.

Key to the implementation of the policies was an alignment that emerged between three actors in these societies: the government, including state-owned firms; domestic private enterprises; and transnational corporations (TNCs). This “triple alliance” involved government investment in intermediate and capital-goods sectors to support industrial expansion, domestic production of import substitutes, and TNC production of high-tech goods needed for manufacturing that could not yet be produced domestically. Although promoters of ISI anticipated that this alignment would last only until access to capital improved and production spilled into additional industries, the interactions between these actors were often mutually reinforcing.

Shortcomings and critiques of ISIBy the 1960s, ISI strategies were seen to have significant drawbacks. Although results varied from country to country, general trends included production that often did not extend into industries other than consumer goods, slow employment growth,

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agricultural-sector decline, and minimal productivity growth. Social strife also emerged and was seen in part as resulting from increased internal migration and greater inequality. Although large countries such as Brazil and Mexico produced at least short-term growth with ISI policies, smaller countries, including Ecuador and Honduras, were less successful.

Critics within Latin America, particularly at the Comisión Económica para América Latina (Economic Commission for Latin America) and the University of Chile in Santiago, condemned ISI’s dependence on TNCs and its failure to promote egalitarian development. These scholars, and others in Mexico, often pushed for socialist models free of TNC participation.

Promoters of free trade instead decried ISI’s protective measures, arguing that they created distortions in capital appropriation and prevented developing countries from pursuing their comparative advantage in international trade. New, protected industries and government planning were deemed inefficient in comparison with those encouraged through market-led development strategies. These critiques, supported in part by early observations of export-led growth in East Asia, produced a strong emphasis by economic and development agencies on export promotion beginning in the 1960s.

A third perspective highlights the relevance of national social and political histories to the success, or lack thereof, of ISI strategies. The ability of the government to learn and adapt production strategies to local conditions depended highly on the character of local institutions and social organization.

Also, even though the producers of consumer goods may have been initially successful, they had little incentive to support industrial expansion, because this would require protection of those industries on which they relied for their production tools, thus potentially limiting their supply of high-quality inputs. In addition, the opportunities available to expand domestic production into new industries were limited by the lack of support by TNCs for domestic technological development, compounded by low levels of technical training in the domestic population.

In each country, the opportunity to expand industrial production often depended on variations in these social and political constraints.

These critiques raise important questions about development strategies and the role of the state in the 21st century. Although ISI policies are seen not to have accomplished their developmental goals, market-led and export-driven growth have also been criticized. In the context of international trade and with some recognition of a role for

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the state in development, the way for national governments to pursue development remains a critical if unanswered question.

To industrialize, developing countries adopted import substitution strategies from about 1945 to the 1970’s. Import substitution strategy is designed to produce few luxury consumer goods for domestic consumption behind a very high tariff wall. However, most countries which followed the import substitution strategy failed to meet the goal of industrialization, while spectacular growth and development was reported from developing countries that pursued an export oriented strategy, in the 1970’s. (Brisbane, 1980).

2.2. Export Oriented Industrialization (EOI)Export-oriented industrialization (EOI) also called export substitution industrialization (ESI), export led industrialization (ELI) or export-led growth is a trade and economic policy aiming to speed up the industrialization process of a country by exporting goods for which the nation has a comparative advantage. Export-led growth has been a dominant paradigm for industrial development .

EOI requires countries to open up their domestic market to foreign competition in return to getting access to international markets. In order to promote EOI and ultimately economic development, complementary policies in relation to tariffs, trade, exchange rate, and others need to be adopted and employed. Export oriented industrialization is essential for economic growth in developing countries, if it can be backed up by appropriate policies on trade, industrial policy and exchange rate policy, geared for that purpose.

EOI can be one of the key strategies to register economic growth. In order for it to function effectively it has to be supported by appropriate components of the policy like infant industry protection strategy, competition policy, export promotion strategy and others. It requires well functioning and well integrated macroeconomic policies like trade policy, industrial policy, exchange rate policy, investment policy, tariff policy and others. Government intervention can also play a key role in making EOI effective for economic development. EOI was particularly the characteristic of the economic development of the Asian Tigers like Hong Kong, South Korea, Taiwan and Singapore in the post World War II period. It also contributed to the economic development of the United States of America (USA), Germany and others.

3. Industrialization Strategies in Malaysia This part of the paper dwells on industrialization strategies in Malaysia as in-depth case study of industrialization strategies in emerging markets. About 40 years after

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independence, Malaysia adopted two economic policies and two industrialization strategies that were influential in the country’s journey towards industrialization. The two industrialization strategies were the Import Substitution Industrialization (ISI) strategy and the Export-Oriented Industrialization (EOI) strategy. The key to the achievement of the ISI and EOI strategies was the ‘Malaysia Incorporated’ policy, introduced in 1983, which cemented on public-private sector relationships. Okposin et al, 2005).

The resulting partnership between the public and private sectors re-imagined the business environment in the 1980s and 1990s. The Malaysian government prioritize export-oriented firms that are more knowledge-intensive than production-intensive, so as to transform the country’s manufacturing in the direction of high-tech and knowledge-based industries.

Malaysian economy recorded rapid growth from 1970 to 1997, with the exception of the brief recession of the mid-1980s. The economy grew by 8.3% between 1970 and 1980, shrank to 5.9% between 1980 and 1990, but recorded unprecedented sustained high growth of about 9% from 1990 until it fell to the Asian financial crisis of 1997. The remarkable economic expansion was progressively led by manufacturing. (Negara, 2000)

3.1. Strategies for Industrialization in Malaysia The industrial strategy adopted since independence can be classified into six phases. (Noor, 1999, Ariffin, 2000 and (MITI, 1996. These phases are outlined in what follows.

3.1.1. First Phase: The Pre-independence Period (prior to 1957) The economy of colonial Malaya was based almost entirely on the primary sector, which comprised of agriculture and mining. Primary industries generated 45.7% of gross domestic product (GDP), as well as 61.3% of employment (Lim, 1994, Okposin et al, 2005). The MNC subsidiaries of the time belonged to the British Empire and were engaged in the production of rubber and tin. The manufacturing sector contributed only marginally to the Malayan economy (Okposin et al, 2005). Only 10 percent of the workforce and 11 percent of the economy were involved in the manufacturing sector at that time (Von der Mehden and Troner, 2007).

3.1.2. Second Phase: The Import Substitution Industrial (ISI) Strategy After independence in 1957, ISI strategy was incorporated under three five-year economic development plans: the first Malaya plan (1956-60), the second Malaya plan (1961-65) and the third Malaysia plan (1966-70). The ISI industries were mainly instituted to cater for the domestic market. A predominant feature of the policy was

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its directed weight towards promotion of industrial development via the private sector, but also Foreign Direct Investment (FDI) was given a pivotal role in the process while importing technologies from industrialized countries. Firms possessed technological capabilities together with skilled labor as well as research and development facilities.

3.1.3. Third Phase: The Export-Oriented Industrial (EOI) Strategy The third phase of the industrial strategy took place from 1968 to 1980 and saw the enlargement of the industrial base and the encouragement of exports. The import of capital equipment and machinery was continued on a more selective basis, but the EOI strategy was still heavily dependent on foreign inputs. Moreover FDI was encouraged through the investment incentive Act 1968, as well as the establishment of an Export Processing Zone (EPZ) and the restriction of labour unionization to attract MNCs looking for low-cost production sites. Incentives were given to foreign companies through the Act to draw FDI’s into export-oriented activities (Kanapathy, 1997).

3.1.4. Fourth Phase: The Import Substitution Industrial (ISI) Strategy II Malaysian government in the early 1980s embarked on a heavy industries program. As the second phase of the ISI strategy, it forecasted better linkages with the local economy, mainly from the utilization of natural resources. This phase began in 1981 with the inauguration of the fourth Malaysia plan (1981-1985). The paramount strategy was heavy industries. To attain its heavy-industry objectives, the Malaysian government created tariff protection in the form of import duties on priority items, as well as protection through price control, import restrictions, duty exemptions and other investment incentives under ‘pioneer’ status.

3.1.5. Fifth Phase: The Export-Oriented Industrialization (EOI) Strategy II The Industrial Master Plan (IMP)1 (1986-1995) was launched in 1986 (MITI, 1986). It provided the framework for the development of the manufacturing sector and the long-term plan for the development of specific sector and policy measures for the period 1986-1995. IMP1 focused on technology and stressed the importance of science, technology and human resource development in supporting the industrialization process. IMP2 as a continuation strategy of IMP1, concentrated on creating an integrated industrial development with manufacturing at the forefront. It aimed at a transition from labor-intensive to knowledge-intensive industries, as can be recognized in the requirement that the manufacturing sector should develop a global marketing capability.

3.1.6. Sixth Phase: Knowledge Economy Industrialization For a service-led economy, Malaysia elevated information technology and multimedia industries as the new sources of economic growth (Okposin et al, 2005). In 1996 the National Information Technology Agenda was launched to offer the framework

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for the coordinated and integrated development of skills and infrastructure, as well as information technology-based applications. Multimedia Super Corridor (MSC) was formulated as a catalyst to enlarge the information technology and multimedia industries. As the result, the government was keen on attracting export-oriented industries firms that were knowledge-intensive than production-intensive, in order to form a knowledge-based economy.

3.2. New strategies and approaches to industrial competitivenessApart from the above strategies, Malaysia has adopted several approaches to industrial competitiveness. These are outlined in what follows.

3.2.1. Manufacturing ++ strategy and approaches to industrial dynamismIt is an intergrated and co-ordinated approach to industrial development. It strengthens on complete integration of manufacturing operations via value chain to effect industrial linkages and boost productivity and competitiveness. It constitutes changing the industrial structure from the predominance of basic assembly and production operations into more upstream activities such as research and design and production development as well as downstream activities such as distribution and marketing. The strategy rather than moving along the value chain it shifts the value chain upwards through productivity growth.

3.2.2. Promotion of new growth sectorsMalaysia is almost post-industrializing and currently planning towards service-led economy. Additionally manufacturing is projected to maintain a considerable role after the structural transformation, as it did within the economies of Newly Industrializing Economies (NIEs). As seen from the experience of many developed economies, the presently share of 30% is generally the sign of optimum growth level. Hence new policy initiatives to diversify into high value added services industries have been introduced.

Conclusion on industrial strategies of emerging economiesAsian Newly Industrialized Economies (NIEs) used a mixture of strategies, with incentives, to endorse local industry such as lower costs of entry into diverse manufacturing activities. They commenced their industrialization practices in situations relative to modern African countries. Malaysia for instance, primarily exports chief products prior to rapid industrial development through a series of policies (Athukorala, 1996). Areas of development concern were put forward and used a number of policies and strategies to attain the set objectives.

On the other hand, implementing sustainable structural transformation in Africa is complicated as there is no “one size fits all” approach. Each African country must

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create strategies and policies characteristic of their sectoral and resource priorities, environmental challenges, initial conditions and domestic capabilities. Attention should directed towards efficient, sustainable resource use in energy, industry and agriculture (UNCTAD, 2012).

The planning and industrial acceleration process in Africa must consider industrialization strategies, identify priority sectors to focus on the short term, as well as strategies for the medium and long terms, and pinpoint the key enablers to initiate and maintain industrial development.

4. Implications of Emerging Markets Industrialization Strategies to Industrialization in Tanzania and to the Procurement and Supplies ProfessionalsThis part of the paper dwells on the implications of emerging markets industrialization strategies to industrialization in Tanzania. It also highlights implications of the same for the procurement and supplies professionals in Tanzania and beyond.

4.1. Industrialization in TanzaniaAmong the main economic projects of Tanzania’s fifth phase government is industrialization. This is not a new move as such. There have been several industrialization efforts since independence. Detailed descriptions of industrialization efforts in Tanzania have been documented widely. These include but are not limited to the works of Kim (1966) and Kim, K. S (1966). According to Kim (ibid), at independence in 1961, Tanzania had a very low level of industrialization. It was the least industrialized of the three East African Common Market partners. Its development strategy placed emphasis on agricultural development. Industrial production was primarily oriented towards agro-processing and light manufacturing without internal linkages to domestic raw materials.

Kim (ibid) further informs that Tanzania’s first, comprehensive industrialization effort began with the First Five Year Plan in 1964. While continuing with an emphasis on the agricultural sector, the Plan called for an ambitious industrialization program that was to rely on private foreign and domestic investment for expansion of local import substitution industries (ISI). Incentive schemes to induce investments included tax holidays, accelerated depreciations, tax rebates, guarantees for repatriation of capital, and tariff protection. With the adoption of the Arusha Declaration in 1967, the Government set a new course in industrialization strategy consistent with Tanzanian socialism and self-reliance (Ujamaa). The Declaration stipulated two principles that must be adopted in the future industrial plan.

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Firstly, the future strategy should not be significantly dependent on foreign investment; and secondly private ownership of industry must gradually be substituted by state ownership in the form of parastatal corporations. The Arusha Declaration did not stipulate any action plans.

It was in the Second Five Year Plan which began in 1969 that the strategy was spelled out in detail. While calling for continuous process of transferring the means of production to the state, the plan prescribed a restructuring of industry, placing priorities on the production of simple import-substitution manufactures, intermediate and capital goods, and agro-industry based products for export. Also emphasis was placed on the promotion of labor-intensive, small-scale firms and the decentralization of industry, where this was considered economically appropriate.

The progress in industrial restructuring in subsequent years was very slow. In 1974, the government laid down for the Third Five Year Plan more drastic measures for structural changes in the direction of self-reliance. Efforts for industrialization would be aimed at the processing of agricultural products and import substitution of basic industries. These are those that would promote Tanzania’s capacity to be self-reliant in industrial production as well as those that would fulfill the basic needs of human life for the majority of Tanzanians. For the latter category, the industries would include those producing such necessities as food, shelter and clothing. Self-reliance in the context of industrial restructuring was to be interpreted as an economic independence.

Tanzanian industry depends heavily on intermediate and capital goods imports. The industries producing these goods were considered not only as the cornerstone of the country’s industrial structure upon which other branches of industry could be developed, but also as exerting important linkage effects in generating economy-wide employment. The strategy thus sought development of this branch of industry through import substitution.

From the late 1970s, Tanzania began to be affected by a series of economic malaises of external origins: First, the war with Uganda; the second global oil crisis, the world price of coffee, which is Tanzania’s main export product, declined. Tanzania had to put on hold further implementation of its industrialization strategy, as the government sought adjustment by cutting imports and per capita expenditure by 50 percent. There were virtually no expansionary capital budget increases.

The recurrent budgets had to be drastically reduced. With the rapid increase in external debt and arrears, and largely in response to increased pressures from the International Monetary Fund (IMF), the government decided to reverse the earlier strategy of

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overprotecting industry, and instituted new measures to support agriculture by increasing agricultural producer prices by 30-35 percent in 1983/84, at the same time giving the economy a more export-oriented structure. Export incentives included devaluations of the shilling, the scheme for export retention and, most importantly, that for own funds imports. In the mid 1980, there were major and far-reaching reforms in the management of the economy. These included major liberalizations and privatization of the economy. Almost all sectors of the economy including the industrial sector were liberalized. Among other things the former state owned enterprises (SOEs) were privatized. Over time there have been various efforts to industrialize including statements in the Development Vision 2025 and Sustainable Industries Development Strategy (SIDP) 1996 – 2020. It is seen therefore that the current (2016) industrialization move in Tanzania is not a new one.

4.1. Fifth Phase Government Industrialization MoveDebates and plans on Tanzania’s fifth phase government economic future revolve around the axis of industrialization. This is the main economic project for the fifth phase government. This new industrialization move is packed in various documents. They range from the ruling party’s 2015 election manifesto to President Magufuli’s maiden speech in the Parliament on 20th November 2016 and the Second Five Years Development Plan that saw the light of the day in July 2016 after coming to end of its predecessor on the same date. In order to put all the debates on this grand move in the right perspectives, there is a need to unpack the whole industrialization move including but not limited to what it is all about, why it is important and which are the guiding documents that one needs to make reference to.

4.2. Prospects of the Fifth Phase Government Industrialization Move The fifth phase government move on industrialization has been captured in various documents. These include but are not limited to the ruling party’s 2015 election manifesto; President Magufuli’s maiden speech in the Parliament on 20th November 2015; in the second Five Years Development Plan (FYDP II) 2016/17 – 2021/22), annual plan 2016/17 and the 2016/17 national budget and budget for the Ministry of Industry, Trade and Investments (MITI) inter alia. The government has several prospects in its new industrialization move as partly captured in its various documents outlined in what follows.

4.2.1. Industrialization in CCM Manifesto What the fifth phase government is attempting to implement in the bid to industrialize the country is derived from the ruling party’s 2015 election manifesto. The word industrialization is mentioned over 70 times in the CCM manifesto. Among other things,

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the manifesto aims to accomplish and implement Sustainable Industrial Development Programme (SIDP) Phase Three covering the time period 2010–2020. It also aims to attain industrial sector contribution in Vision 2025. The manifesto aims at increasing industrial sector Gross Domestic Product (GDP) contribution from 9.9% in 2013 to 15% in 2020 and to have 40% of employment in the country coming from industrial sector by 2020.

These targets are tall orders. The manifesto also talks about mobilizing the private sector to invest in middle and large industries as well as protecting them against foreign industries. Whereas protectionisms may be a good argument for infant domestic industries that cannot withstand competition, it can be a raw deal to consumers by way of reducing their consumption menu. Furthermore, protecting inefficient industries that are not likely to grow is bad economics. As if the above were not enough, protectionism in the globalized world of the World Trade Organization and possibilities of retaliations need to be re-thought.

4.2.2. Industrialization in President’s speechIn President Magufuli’s speech in the Parliament on 20th November 2015 the word industrialization appears about 35 times covering five out of 48 pages or 10.4% of the volume of his speech. On page 20 of the speech, the President acknowledges that he deliberately dwelt on the matter in length as he states that “… nimeamua kulisema hili kwa kirefu sana”. The speech (page 19) insisted on the type of industries that the fifth phase government is aiming at. These are mass employment-creating industries; industries for domestic mass consumption goods and industries for export goods. Each of these will be interogated separately in coming articles given the weight of each in gold.

4.2.3. Industrialization in the FYDPThe Second Five Years Development Plan (FYDP) that was unveiled in the Parliament in the last week of April 2016 is focusing on industrialization. Its theme is ‘Nurturing Industrialization for Economic Transformation and Human Development’. The FYDP will be implemented annually through annual plans that will be funded by annual budgets. These annual budgets on the other hand will be guided by annual budget guidelines. One therefore need to understand the FYDP, the annual plans for the coming five years, annual budget guidelines and their corresponding annual budgets to unpack and analyze the extent to which the planned industrialization move will be unfolding and seeing the light of the day in the five years of the fifth phase government.

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4.3. Desired industrializationDrawing from President Magufuli’s speech in the Parliament on 20th November 2015, there are three main typologies of industries that the fifth phase government desires to attain. These are mass employment-creating industries; industries for domestic mass consumption goods and industries for export goods. On its part, the ruling party’s 2015 election manifesto aims to accomplish and implement the third phase of Sustainable Industrial Development Plan (SIDP) 2010–2020. It also aims at attaining industrial sector contribution in Vision 2015. It desires for construction of agro-processing, middle, large and basic industries and industries that use domestic raw materials.It also desires to strengthen existing industries and increase industrial sector GDP contribution from 9.9% in 2013 to 15% in 2020 and have 40% of Tanzania’s employment coming from the industrial sector by 2020. It also desires to mobilize the private sector to invest in middle and large industries and protect them against competition from foreign industries. It also desires to increase sub-regional, regional and global preferential markets access. Good as these desires are, there are needs for for critical and construcive interogations on what it takes to attain the desired industrialization above. Selected thoughts are shared in what follows.

4.3.1. Employment creating industriesThe desire is to have 40% of employment in Tanzania coming from the industrial sector by the year 2020 although the current percent is not given in the said manifesto or President’s speech. For Tanzania to attain the mass employment-creating industrialization, then it has to opt for labour intensive industrialization if it means jobs coming direct from industries. labour intensive production techniques employ more labour than capital and therefore create more jobs. However, there are several downsides of labour intensive production and by extension labour intensive industrialization. These include limited ability to enjoy economies of scale through large scale production, less speed in production, less efficiency and at times less quality and standardization of products. For this type of industrialization, employment can only be mainly created along industrial value chains nodes through backward and forward integration. It calls for strong inter-sectoral linkages and holistic approach to industrialization. All sectors related to the industrial sector need to be adequately developed.

Unpacking jobs-creating industriesThat industries will create jobs, is not a contested territory. The issue is on the number of jobs to be created directly and indirectly. Implications of the wished ‘mass-employment’ creating industries is that there industries have to be labour intensive. There are the ones that make use of more labour and human muscles than capital. These are industries that are not automated, computerized and highly high-tech. This will be the case if by ‘mass employment’ creating industries one means direct jobs from industries.

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Reality on the groundIn modern day industrialization, one is likely to see and embrace more capital intensive than labour intensive industrialization process. Involved here are highly mechanized, computerized and high tech driven industries. These present a more transformative industrialization than their labour intensive counter parts. They augur well with modern day industrialization in which state of the art, high tech, capital intensive, mechanization and automation are key words. These are industries for with bigger competitive edge than labour intensive ones. They are better suited for mass production and therefore enjoyment of economies of scale by captains and titans of the industry whose bottom line is profit. These types of industries are more likely to produce higher quality and standardized goods and services and at a bigger speed than labour intensive ones.

Capital displaces labourOn employment creation however, capital intensive industries will not create as many direct industrial jobs as will their labour intensive counter parts. This is because in capital intensive production technique, capital in the shapes of machines displaces labour. What could be done by a dozen of labour is done by just one person who presses machines buttons on and off as required. Therefore capital intensive industries will not create direct mass industrial employment. There is therefore a need for all stakeholders in the new industrialization move to understand this reality on the ground correctly in order to manage expectations and avoid unnecessary surprises when the true employment colours are seen.

Potentials for indirect jobsThe uncomfortable truth that capital intensive industries will not create mass direct industrial jobs should not be the end of mass employment creation through industries goal. Ceteris paribus (all other things being equal), employment through industrialization can be created along the long and many industrial value chains nodes. Through the backward forward integration in the context of inter-sectoral linkages and the associated multiplier effects, many indirect jobs can be created. These will be jobs created by the sectors that supply factor inputs of all kinds to the industrial sector through backward integration as well as those that save as markets for the same through forward integrations.

This calls for strong inter-sectoral linkages and holistic approach in the new industrialization move. All sectors touched by and touching the new industrialization move should be optimally developed to absorb and support what comes from the move. When sectors such as agriculture, fishery, livestock, infrastructure, financial services, education and much more are optimally developed to support the industrial sector then

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mass employment can see the light of the day. Short of that the mass jobs creation goal through industrialization will remain a wishful thinking.

4.3.2. Industries for mass consumptionThe fifth phase government targets industries that will produce goods for mass domestic consumption. They include but not limited to textile, footwear, cooking/edible oil etc. There are many economic advantages embedded in consumption of domestically produced goods and services. They include saving of foreign currency that would have imported the goods, more domestic jobs creation and related individual incomes as well as government revenues through tax and none-tax charges. However, there is a need to interrogate the theory and practices of consumers behavior. Tanzania consumers as are consumers elsewhere, have their tastes and preferences for goods and services. The tastes and preferences may not be necessarily in favour of domestically produced goods. In Tanzanian context, there is emerging and complex high and middle class with by and large tastes and preferences skewed towards imported consumables. This can be attributed to higher quality and better brands of imports. For Tanzanian industries to produce goods and services for mass domestic consumption, there is a need to ensure that they meet the needs of consumers as captured in their tastes and preferences.

4.3.3. Export oriented industrializationThe fifth phase government desires to have industries that will export industrial goods. This is a good thing because inter alia, exports earn a country the much needed foreign currencies with the many and far-reaching advantages of this. In order to be able export industrial goods, domestic value addition and a move away from the current predominantly export of unprocessed raw materials is important. Among the key implication here is availability of and access to export markets for the ‘made in Tanzania’ industrial goods. Currently the main industrial goods from Tanzania include agro-processed products. In order to access the export market in a meaningful way, there is a need to meet and adhere to the demanded quality and standards. For food and beverage products for example issues of sanitary and phytosanitary conditions as well as traceability are very important. Important too, in exporting is the ability to meet and adhere to the needed quantity and supply frequencies. Performance of African countries – Tanzania included - in the AGOA market access opportunity should be able to give us lessons.

4.3.4. Industries Using Domestic Raw MaterialsThe aim is to use domestically available and produced raw materials as factor inputs in the production process. In Tanzanian context this is likely to imply mainly agro-processing industries. They include those that will be process agricultural crops,

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livestock and fish.

5. Implications of Emerging Markets Industrialization StrategiesThis part of the paper makes a discussion on the implications of emerging markets industrialization strategies to Tanzania in general and then to the procurement and supplies professional in particular.

5.1. Implications to Industrialization in TanzaniaThe paper has mainly covered two strategies that emerging economies, with the case study of Malaysia, have adopted in their industrialization process. These are import substitution and export oriented industrialization. Each of these strategies has implications to Tanzania’s industrialization move if it chooses to adopt any of these.

5.1.1. Implications of import substitution industrializationImport substitutions industrialization in Tanzanian context has many and far-reaching implications. This is especially so in the era of globalization and open, competitive global trade. Among other things in a country that is a net importer as Tanzania is, it will imply that a lot of efforts have to be made to substitute the currently imported goods with domestically produced ones. This calls for inter alia very good, conducive, attractive and friendly investment climate to attract and retain investors to produce domestically. Investment climate variables include but are not limited to policy, legal and regulatory frameworks. They also include issues related to infrastructure both hard and soft; skills and talents in the labour force; availability of and access to finance and utilities such as electric and water; fiscal environment; corruption; bureaucracy etc.

Import substitution industrialization in Tanzania has also implications in terms of consumer behavior in general and taste and preference in particular. With highly informed, exposed and choosy consumers including a rising middle class, the question of quality is very important. If local consumers have great preference to imported than locally made industrial goods, then ISI will be difficult. It implies that local producers have to produce very competitive goods in all aspects (quality, price, timely and consistent delivery) to meet tastes and preferences of domestic consumers. In the world of free trade and trade agreements in the context of World Trade Organization (WTO) inter alia, ISI strategies should avoid using protectionism to keep imports at bay.

5.1.2. Implications of export oriented industrializationIndustrializing through EOI as is the case with ISI has a number of implications as well. These include having proper policy, legal and regulatory frameworks as well as other business environment variables in place. Among other things issues of Export Processing Zones (EPZs) have to be addressed properly. These include having proper

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fiscal and none fiscal incentives in place and avoiding making these EPZs enclaves that are not linked with the rest of the economy. EOI also implies that the country has to be competitive enough to access the export markets. It should be able to jump both tariff and non tariff barriers hindering exports. To make it relatively easier, exporters should start focusing on closer regional markets then other more easily accessed and penetrated markets such as those in Asia before the hard-access and penetrate ones like those of Europe and North America. Furthermore, it also implies that the country’s representatives abroad such as embassies should be very aggressive in having economic diplomacy in action.

5.2. Implications to the Procurement and Supplies ProfessionalsThe industrialization move in Tanzania in general and in the context of the fifth phase government and implications of industrialization in emerging markets in particular have implications to various professionals. These include the procurement and supplies professionals. These implications to the professionals are based on key role roles of these professional in general and in industrialization in particular.Roles of procurement professionals

According to Section 38 of Public Procurement Act, the Procurement Management Unit shall (Roles of procurement professionals):i) Manage all procurement and disposal by tender activities of the Procurement Entuty (PE) except adjudication and the award of contract; ii) Support the functioning of the Tender Board; iii) Implement the decisions of the Tender Board; iv) Act as a secretariat to the Tender Board; v) Plan the procurement and disposal by tender activities of the PE;vi) Recommend procurement and disposal by tender procedures; vii) Check and prepare statements of requirements; viii) Prepare tendering documents; ix) Prepare advertisements of tender opportunities; x) Prepare contract documents; xi) Issue approved contract documents; xii) Maintain and archive records of the procurement and disposal process; xiii) Maintain a list or register of all contracts awarded; xiv) Prepare monthly reports for the Tender Board; xv) Prepare and submit to the management meeting quarterly reports on the implementation of the annual procurement plan; xvi) Coordinate the procurement and disposal activities of all the departments of the PE; andxvii) Prepare other reports as may be required from time to time.

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Therefore, all processes of construction and/or reviving industries, acquisition of industrial tools and machines, raw materials and maintenance, repair and operating spares as well as other goods and services are coordinated by procurement professionals. This is done in collaboration with other functional departments such as engineering department, quality assurance department, marketing department and production department among others.As elaboration for ISI and EOI, procurement professionals have to be engaged with a lot of logistical issues. For ISI for example, they have huge roles in all logistics related to imports for example at ports, airports and border posts. This is also the case for EOI in which exports require a lot of logistical arrangements before and after reaching the export points.

RecommendationsIt is very important therefore for these professionals and the Board to ensure that there is adequate and correct understanding of industrialization in particular and in Tanzania and in the context of ISI and EOI in particular as discussed in this paper. It is equally important for the involved parties both public and private to ensure that all logistical infrastructure are in place in adequate quantity and quality to support the needed up to date competitive IS and EO industrialization.

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References

Barbiero, T. P and Brown, A. A (1991). The Role of Agriculture in Industrial Development

Symbiotic vs. Parasitic Relationship. The American Economist, Vol. 35, No. 1 (Spring,

1991), pp. 21-29. Published by Sage Publications, Inc

Bishop, M (2009). Economics: An A – Z Guide, Profile Books Limited, London

Kim, K. S (1966). Issues and perspectives in Tanzanian industrial development –with

special reference to the role of SADCC. . Working Paper #87 - December 1966, The

Helen Kellogg Institute for International Studies

Ngowi, H. P (2016). What Does It Take to Attain The Desired Industrialization by

Tanzania’s 5th Phase Government? Selected Economic Thoughts. Paper Presented at

REPOA’s Annual Research Workshop held at the Ledger Plaza Bahari Beach Hotel,

Dar es Salaam, Tanzania; April 6-7, 2016

Pass, C., Lowes, B., Davies, L (2000). Dictionary Economics. Harper Collins Publishers

URT – United Republic of Tanzania - Vision 2025

URT – United Republic of Tanzania (2016) Five Years Development Plan (FYDPII)

URT – United Republic of Tanzania (2016). The 2016/17 Annual Plan,

URT – United Republic of Tanzania (2016). The 2016/17 National Budget

URT – United Republic of Tanzania (2016). The 2016/17 Budget Speech by the

Minister, Ministry of Industry, Trade and Investment

Shigehisa, K (1996): The Role of Agriculture in the Early Phase of Industrialization: Policy

implications of Japan’s experience. Published in: EAST ASIAN DEVELOPMENT:

Lessons for a new global environment , Vol. No.5, No. Project sponsored by the

Government of Japan (February 1996): pp. 1-21

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Eng. Dr Ramadhan S. Mlinga

Industrial Development in Tanzania: Role of Procurement and Supply Profession

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ABBREVIATIONS

EU European Union

FYDP Five Years Development Plan 2016/17-2020/21

GDP Gross Domestic Product

ISIC International Standard Industrial Classification

PAP Policy Action Plan

PPA Public Procurement Act

PPFA Preferential Procurement Policy Framework

PPR Public Procurement Regulations

R&D Research and Development

SME Small and Medium Enterprise

TDV Tanzania Development Vision

USD United States Dollars

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1.0 Introduction

I was called upon by the organisers to write a paper on “Industrial Development in Tanzania: Role of Procurement and Supply Professionals”. Upon further reflection I decided to focus on the Profession instead of the professionals, which to me I think it is one and the same thing.

Put simply, the role of Procurement and supplies profession is buying the goods and services that enable an organisations to operate.

A more elaborate definition of procurement “Procurement is the business management function that ensures identification, sourcing, access and management of the external resources that an organisation needs or may need to fulfil its strategic objectives.Procurement exists to explore supply market opportunities and to implement resourcing strategies that deliver the best possible supply outcome to the organisation, its stakeholders and customers”

So the profession is important in the public and private sector. In the private sector, particularly in the manufacturing sector which is the focus of this paper, it provides the manufacturer’s with the necessary raw materials for production. In the public sector it provides public organization with goods and services needed for them to serve the society.

This paper focusses on public procurement and how it can be used to foster industrial development in Tanzania. The paper is divided into four Sections. First it looks at Tanzania Industrial Journey as envisaged in the National Five Year Development Plan– 2016/17 – 2020/21. Then it looks at linkages between public procurement and industrial strategy and gives examples of other countries that have successfully used public procurement in the promotion of industrial development. Finally it looks at the situation in Tanzania on how its procurement legislation can be used to foster industrial growth.

2.0 Tanzania’s Industrialization JourneyTanzania Industrialization Journey is well captured in the National Five Year Development Plan 2016/17-2020/21 – Nurturing Industrialization for Economic Transformation and Human Development”. The FYDP II implements Tanzania’s Development Vision (TDV) 2025 which envisage to have Tanzania transformed into a middle income, semi-industrialized nation by 2025 characterized by: (i) high quality and sustainable livelihoods; (ii) peace, stability and unity; (iii) good governance and the rule of law; (iv) an educated and learning society; and (v) a strong and competitive

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economy. It outlines new interventions to enable Tanzania to industrialize in a way that will transform its economy and its society.

FYDP II is built on three pillars of transformation, namely industrialization, human development, and implementation effectiveness. Specifically, among others, the Plan aspires to build a base for transforming Tanzania into a semi-industrialized nation by 2025 .

Globally, industry is broadly defined to cover Mining and quarrying (International Standard Industrial Classification (ISIC)) revision 4 (Section B); Manufacturing, (Section C); Electricity, gas, steam and air conditioning supply, (Section D); Water supply, sewerage, waste management and remediation activities, (Section E) and Construction, (Section F). Industry, so broadly defined is targeted in Tanzania, to account for about 23.7 percent and 25.0 percent of GDP by years 2020 and 2025 respectively. These targets are shown in

Table 1.

Within industry, Manufacturing is identified as leader of industrialization process as historically it has been an important driving force to economic development. The sub-sector is also the most knowledge-intensive sector of the economy and recipient of technological progress; and exhibits higher productivity and scope for innovation’ Lastly competitiveness of manufacturing is one of the basic determinants of long-run sustainable growth.The targets set for manufacturing sub-sector are shown in Table 2.

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To achieve the set targets, creating an enabling environment and strong systems to support the variety of manufacturing planned activities is among the key interventions. This, amongst others, includes strengthening of R&D Institutions and Promoting SMEs and local content which are areas where public procurement can have a great input.

Despite the expected contribution of the Industrial Sector to the economy, there have been challenges facing existing industries in the manufacturing sub-sector including unfair competition from imported products. Also it is noted for example, that “the local share of medicines market is declining due to rising barriers to market entry for local firms; a prohibitive tax structure (on one hand discouraging local production and on the other, encouraging imports); increasing price-based competition from imports, most having been subsidized in their countries of origin; power and infrastructure constraints; skills constraint; delays in registration; and unfavourable procurement procedures”.

It is the purpose of this paper, later in Section 6, to show the potential of public procurement, through the provisions of the Public Procurement Act and Its Regulations to promote the local manufacturing sector.

3.0 Linkages Between Public Procurement and Industrial Strategy 3.1 A case for Linking Public Procurement to IndustrializationPublic procurement is a business process within a political system. It is a big part of the economy of developing countries, accounting for an estimated 9-13% of their gross domestic product. Nevertheless, it is an area in need of attention since resources are not being properly managed in many countries Governing administrations in developing countries can reap benefits from improved management of their public procurement systems. With a more focused approach on the control of resources within this large internal market, greater value can be achieved in national budgets while developing

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local industry.

Despite the potential for developing local industry through public procurement, many local and international firms do not participate in public procurement because of a perception (and at times the reality) that governments are slow payers, difficult to work with or have their own favoured suppliers for contract awards. In addition to these general complaints, there is also a feeling among suppliers - based on anecdotal reports - that corruption plays a part in contract decisions. Some “corrupt” activities could be caused by a lack of understanding of the best practices in public procurement.

Given the large sums spent on public purchasing, the government of every state is itself an actor in the market, and often a relatively large one at that. Government activities in the marketplace, the purchase of goods and services or sometimes the marketing thereof impact and in some cases shape the market itself. Governments have therefore explored the possibility of using government purchases to not only promote redistribution among different segments of the population, but also to develop an industrial strategy, to introduce innovation technologies or foster environmental protection through products or services that have a reduced environmental impact. Procurement policy is typically viewed as a legitimate tool to stimulate domestic production and consumption. By concluding contracts that target particular sectors or groups in society, the government can push forward policies to redistribute wealth, promote industrial strategies or ensure sustainable development.

Due to the significant amount of financial resources involved, public procurement can be used as a useful pull mechanism to stimulate private investment and to influence market dynamics, entrepreneurship, and Research and Development activities, in order to promote the growth of local industries. 3.2 Linking Kenyan’s Public Procurement to IndustrializationKenya’s public procurement is guided by the Public Procurement and Disposal of assets Act 2015 . This legislation provides for the establishment of procedures for public procurement and for the disposal of unserviceable, obsolete or surplus stores, assets or equipment, in order to: 1) Maximize economy and efficiency 2) Promote competition and ensure that competitors are treated fairly 3) Promote the integrity and fairness of those procedures 4) Increase transparency and accountability in those procedures 5) Increase public confidence in those procedures; and 6) Facilitate the promotion of local industry and economic development

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The spirit of this legislation is to promote industrial growth as envisaged in Vision 2030, which includes the development of a robust, diversified and competitive manufacturing sector. The Public Procurement and Disposal regulation states that “the procuring entity may grant a margin of preference of up to 15 per cent in the evaluation of bids to candidates offering goods manufactured, mined, grown, and extracted in Kenya”.

The Act also provides for pre-qualification of suppliers: “To identify qualified persons, a procuring entity may use a pre-qualification procedure, or may use the results of a pre-qualification procedure used by another public entity, and the specific requirements based on national or international standards”.

The promotion of local industry is further elaborated in Section 155 of the Act:155. Requirement for preferences and reservations (1) Pursuant to Article 227(2) of the Constitution and despite any other provision of this Act or any other legislation, all procuring entities shall comply with the provisions of this Part.

(2) Subject to availability and realisation of the applicable international or local standards, only such manufactured articles, materials or supplies wholly mined and produced in Kenya shall be subject to preferential procurement.

(3) Despite the provisions of subsection (1), preference shall be given to— (a) manufactured articles, materials and supplies partially mined or produced in Kenya or where applicable have been assembled in Kenya; or (b) firms where Kenyans are shareholders.

(4) The threshold for the provision under subsection (3) (b) shall be above fiftyone percent of Kenyan shareholders.

(5) Where a procuring entity seeks to procure items not wholly or partially manufactured in Kenya—

a) the accounting officer shall cause a report to be prepared detailing evidence of inability to procure manufactured articles, materials and supplies wholly mined or produced in Kenya; and

b) the procuring entity shall require successful bidders to cause technological transfer or create employment opportunities as shall be prescribed in the Regulations.

3.3 Linking Malaysia Public Procurement to IndustrializationMalaysian Procurement Policy is summarized in Figure 1 in which it is seen that it aims at (i) promoting the growth of local industries through the maximum use of local materials and resources, (ii) encouraging and supporting the participation of (indigenous) entrepreneurs, (iii) increasing and enhancing the capacity of institutions and local industries through the transfer of technology and expertise, (iv) stimulating

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Where the procuring entity does not proceed with the local person or firm set-aside under subsection (1), and procures on unrestricted basis, the procuring entity shall include in the procurement file the reason or reasons for the unrestricted procurement.

Also regional preference based on the locality of the firms has been recognized in which case PEs, particularly those in the local governments, are allowed through PPR 2013-Regulation 40to reserve contracts up to a certain value to firms located in their locality as shown in Table 5. This move will encourage establishment of businesses outside major cities and towns of the country.

6.4 Promotion of Special GroupsNew Regulation 30A has been introduced in the Amended Procurement Regulations 2016 which seeks to give preferences to special groups. And accordingly PEs are required to set aside 30% of its budget for granting procurement opportunities to these special groups.

Typical examples of groups that could benefit from this provision are those falling under National Economic Empowerment Council Carpentry Promotion Campaign.

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I quote from NEEC Website about the Promotion of Carpentry Industry Initiative “This is the initiative by which the NEEC works in collaboration with relevant stakeholders to promote domestic carpentry industry. From around the year 2000 our country was flooded with nicely decorated but mostly very low quality imported furniture which dominated in our market and therefore posing a very stiff competition to the local made furniture. On the other hand the entities that procured these imported furniture were subjected to the crises of how to keep scraps resulting from destruction of these un-repairable furniture while at the same time required to procure new furniture each year.Promotion of the industry is done through training, facilitation of linkages with large investors, associations’ formation and management, researches, advocacy for markets and raw materials accessibility”

6.5 Adequacy of the ProvisionsIt is the opinion of the Author that Tanzania Public Procurement Law has adequate provisions, which following examples from other countries discussed in Section…, that could be used to promote industrialization in the Country. It should be noted the provisions discussed herein are mandatory, and PPRA is required in accordance with Regulation 45 to monitor the implementation of the preference scheme.

A summary of provisions of the PPA 2011 and its amendment, and how they can be used to stimulate industrialization are given hereunder:

1) The provision for 15% margin of preference for goods locally produced, manufactured or mined in Tanzania if properly utilized. There are a number of industries that produce goods which are consumed by public bodies ranging from construction materials, pharmaceutical products, clothing, food materials etc. – all these could benefit from this provision.

2) The provision of incentives of firms using locally manufactured, produced or mined materials as required under Regulation 55B is basically intended to promote the buy Tanzania products culture. This if well implemented will boost local manufacturing capacity.

3) Similarly, the set asides as provided by PPA Section 55, and amplified in Regulations 39 and 40 if properly used could benefit manufacturers at national and regional levels. Its use could further be supported by the use of Section 65A of the Amended PPA 2011 which allows Procurement directly from manufacturer, dealers or service providers.

4) The provisions for promotion of special groups could be used to promote Small Scale Industries which constitute an important and crucial segment of

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the industrial sector. They play an important role in employment creation, resource utilisation and income generation and helping to promote changes in a gradual and phased manner. Small scale enterprises are generally more labour intensive than larger organisations. As a matter of fact, small scale sector is now emerging as a dynamic and vibrant sector for many economies in recent years. An example of Furniture Industry given above is worth pursuing in other sectors as well. With an assured market in the public sector, there is a big potential of growth of these small scale industries.

7.0 Conclusions and Recommendations.This paper has looked at the contribution which the procurement and supply profession can make towards promoting Industrialization. Successful use of public procurement to promote industrialization have been given for Malaysia, India, Jamaica, South Africa, Brazil and South Korea. Fortunately, the provisions which were used by those countries are also contained in the Tanzania procurement legislation, however Tanzania is lagging behind in the implementation.

Given the Industrialization Agenda which is well defined in the FYDP II, it is recommended that:

1) PEs should be required to implement all the provisions of the Procurement Act and Regulations with respect to preference scheme. PPRA should ensure that PEs comply with the preference scheme as stipulated in the Public Procurement Act, and for that purpose they should introduce a Compliance and Performance Indicator to be scored during procurement auditing to show the extent to which a Procuring Entity is complying with the provisions of the preference scheme.

2) The Government, through the Ministry of Finance and Planning working together with the Ministry of Trade and Industry to agree on a list of goods that shall be sourced locally from industries located in the country – in the same way it restricted importation of furniture.

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and promoting local industries and services such as freight and insurance; and (v) accelerating the country’s economic growth .

Malaysian Government is using Public procurement for Innovation, in which according to its 10th Plan

(2011-2015) it aims a) to become a high-income, knowledge intensive and innovation-led

economyb) to deliberately act to create incentives and opportunities for Malaysian

companies to invest in innovation, through the public procurement c) to use procurement to create demand for innovation and push SMEs to

develop products in areas that are of benefit to the nation and have larger commercial potential

3.4 Linking South Africa Public Procurement to IndustrializationThe South African Industrial Policy Action Plan (PAP) 2012-2015 explicitly highlights the role of public procurement as a strategic policy tool to leverage demand to support production development in different sectors, including transport equipment, pharmaceuticals and electronics. It leverages public expenditure for industrial development amid a host of competing economic challenges facing South Africa. The key aims are to minimise import leakages (which represent an outflow from the fiscus) whilst at the same time attempting to increase both aggregate demand and supply in the South African economy.

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Procurement of locally manufactured products is one of the key levers identified by the government to support industrial development in South Africa. The amended regulations to the Preferential Procurement Policy Framework (PPPFA) Act 5 of 2000, promulgated in June 2011, came into operation on 7 December 2011, empowering the Department of Trade Industry (the dti) to designate products, sectors and sub-sectors for local production with stipulated minimum thresholds for local production. So far about 21 sectors/sub-sectors/products are designated for local procurement. The designation of these sectors/products for local production and content was done in accordance with Section 9. (1) of the amended PPPFA Regulations.

The PPPFA Regulations require that organs of state must specify local content requirements in the advertisement of tenders designated for local production and also consider local content in the adjudication of bids.

For each designated product, except pharmaceutical products, instruction notes are issued by National Treasury, which regulate the environment within which government departments and public entities may procure designated products. Nineteen sectors have so far been designated for local production with minimum local content thresholds. In terms of the local content rules - in particular, the adjudication and awarding of tenders designated for local production - the first qualifying threshold that must be achieved by bidders is local manufacturing of the products/commodities to be supplied; no points are awarded for this. If bidders meet the threshold for local production, then their bids will be considered further and evaluated on the price and preferential points. Other procurement levers do not have this requirement and all tenders not designated for local production are evaluated based on functionality, price and preferential points as required by the PPPFA.

3.5 Other Cases of Linkage of Procurement with IndustrializationTable 3 shows a comparison of public procurement policies targeting domestic industry development for India, Jamaica, South Africa, Brazil and South Korea. It summarizes the interventions into four areas: domestic preference, SMEs promotion, industrial innovation and environmental protection and sustainable development.

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The typical public procurement strategies and policies adopted across the countries (including the case study countries below) to support industrial development, which can serve to provide with a more structured understanding of possible role public procurement policy can play in driving industrial development in their countries discussed herein include promotion of SMEs, and Industrial Innovations:

4.0 The Use of Public Procurement in SME promotion SMEs constitute the overwhelming majority of all enterprises in both developed and developing countries and are therefore considered the engine of an economy . Governments are typically keen to support SMEs as a vital component of promoting economic growth, job creation and economic and social cohesion. The public sector in many instances is an important market for small businesses, so improving public procurement practices by removing obstacles and boosting the involvement of SMEs is a key priority. Developing a more SME-friendly approach to public procurement means SMEs can maximize their potential for job creation, growth and innovation. Increasing involvement of SMEs in public procurement schemes can, if properly designed, result in higher competition for public contracts, leading to better value for money and efficiencies for contracting authorities.

Nicholas and Fruhmann note that the existing data suggest that SMEs’ share in the public procurement market is below their proportion of total enterprises. In the EU, for example, SMEs secured between 31 per cent to 35 per cent of contracts by value in 2006 and 2007, and 42 per cent in 2008, and between 53 per cent and 78 per cent of contracts by volume. This contradicts reports which indicate that in EU, 99.8 percent of enterprises in the non-financial sector are SMEs and 92 percent of total business sector is estimated to be micro-enterprises with fewer than 10 employees .

Reasons reported for the relatively low levels of SME participation in bidding for public procurement contracts include:

a) Lack of information / transparency. SMEs have fewer resources to spend to

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seek out new tenders to bid for than large and incumbent firms b) Bidding firms incur threshold administrative or ‘fixed’ costs that

disproportionately affect SMEs c) Onerous supplier and contractor registration requirements d) Detailed bid information and documentary requirements e) Costs of supplying a performance bond or guarantee f) Costs of inspection requirements during bidding g) Protracted bid qualification, evaluation and award procedures h) Lengthy payment intervals after contract award require interim cash flows i) Complex contract dispute resolution procedures j) Government procurers risk averse when dealing with SMEs k) Procurement instruments to promote SMEs

Government interventions to support SMEs include : 1) Set-asides: Under this system a quota as a percentage of designated

government procurement contracts or total spending is reserved or ‘set aside’ for a targeted category of bidders that meet the preferential qualification criteria such as SME status. This can be applied on a mandatory or voluntary basis, depending on a country’s specific context. It can also be for designated categories of products or services or procurement contracts below specified thresholds, exclusive purchase systems from SMEs only can be introduced.

2) Preferential treatment for SMEs in tendering: SomeGovernments have devised different ways of favouring SMEs including

a) Requiring Contract winners to subcontract to SMEs for designated categories of products or services;

b) Easing market entry requirements such as delivery performance requirements for designated groups of SMEs or start-up

c) Simplifying contract award process for recurring high volume purchases to ensure active participation of SMEs in public procurement by mitigating bidding-entailed costs and administrative burdens.

3) Bid price preferences: Under this approach Bids from eligible SMEs are a given margin of preference and if the lowest evaluated bidder is a SME, it is awarded the contract. The Bid preference schemes frame evaluation criteria that provide additional points or weightings as part of a ‘bid score card’, depending on the extent to which the preference targeted group is integrated into the bid submission.

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4) Financial support to SMEs: This includes a) advance payments to qualifying SMEs. In some instances, government

procurement policy has been to approve the release of a larger percentage of procurement funds upon awarding of contracts to contractors who would otherwise not be able to fund the execution of the contract or would not have access to finance facilities which would enable them to execute the contracts.

b) Financial loan schemes: Government procurement intervention in this case is similar to advance payments, but this form of support entails providing financial loan schemes that support SMEs in order for them to be able to bid for and execute procurement contracts.

5) Capacity building and awareness-raising: Capacity building includes training and skill development for the execution of procurement contracts, and increasing awareness entails disseminating information about the availability of contract opportunities.

5.0 The Use of Public Procurement in Promotion of Innovation Among Domestic Industries Public procurement is often viewed as a key driver for innovation, particularly in the manufacturing and construction industries and generally in relation to the achievement of sustainable development .

Innovation is generally considered an essential component of economic growth and development. By decreasing the necessary inputs or costs of a given quantity of production, allowing the development of new and superior products, and creating markets which did not exist previously, innovation is the foundation of long-term economic growth. It is common, therefore, for governments to develop policies they believe will promote innovation.

Innovation can be defined as ‘the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations’. Public procurement of innovation is commonly referred to as the procurement of pre-commercial goods and services, i.e. those that have not yet significantly appeared on the market. It may be either general or specific: there may be a general policy of the government to give preference to tenders or suppliers that are able to demonstrate innovation in their product or, alternatively, a specific effort to bring about the development of a product or market (e.g. smart technologies that reduce power consumption during peak hours).Government interventions to promote industrial innovation include:

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1) Tender preferences : There are various ways in which Governments can promote innovation through tender preferences. These include:

a) Including requirements in the tender specifications for innovative solutions to the contract requirements, for example, i) requirements for development with local and/or new technology in designated sectors or products/services which can also be combined with the application of “set-aside” rules, ii) requirements for local value addition in designated industries or products/services, iii) explicit preferences for the use of alternative energy solutions, etc.

b) Designating goods and services that satisfy certain pre-set quality criteria and provide preferences for them in public procurement.

c) Putting requirements for local production with minimum local content thresholds in the contract for procurement contracts lower than specified thresholds, so as to restricted tenders to national bidders or suppliers locally registered.

2) Public procurement of innovation through public private dialogue: Governments can work with private companies in a dialogue to address specific contractual needs that do not exist in the commercial market. This negotiated tender process would target firms that are capable of undertaking innovative production designs and techniques. However, this may undermine transparency and competition in procurement processes and be susceptible to corruption and conflicts of interest.

3) Release of resources for innovative contractors: Government procurement policy can approve of the release of a larger percentage of procurement funds upon awarding of contracts to innovative contractors who, due to the costs associated with innovation, would otherwise not be able to access the necessary financing to execute the contracts.

4) Capacity building and awareness-raising: Government interventions can be capacity building to develop skills necessary for designing innovative commercial solutions for government procurement needs, and raising procurers’ and firms’ awareness of innovation needs in contract design and firms’ responses through information dissemination.

6.0 Potential of Tanzania’s Procurement Legislation to Promote Industrialization6.1 General Provisions of Procurement LegislationThere are a number of interventions contained in the FYDP II aimed at fostering Industrialization, through the provision of the necessary infrastructure to the actual construction of the industries themselves. The successful realization of the envisaged flagship projects will depend on successful and efficient handling of procurement. In addition, for sustainability purposes, the involvement of key players is very important

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to help them benefit economically from the industrialization process but also in building their capacity and capability for the maintenance and for future provision of the goods and services.

One of the areas where efforts have been made to ensure participation of local firms in contracts is through the provisions in the procurement legislation. The measures contained in the Public Procurement Act (PPA) 2011, PPA 2016, Public Procurement Regulations (PPR) 2013 and PPR 2016 to increase participation of local firms in the tender process are in three categories as follows :

• packaging (splitting) of contracts in sizes which allows the participation of small firms;

• setting aside contracts of up to a certain value to local firms only; and • granting a margin of preference in favour of local firms in the tenders where

they compete with foreign firms.

6.2 National PreferencesPPA 2011-Section54 makes it mandatory to a PE when procuring goods, works or services by means of international or national tendering to grant a margin of preference for the benefit of local players.

Margin of preference of up to 10 percent in favour of local firms for works, consultancy and non-consultancy services is provided in PPR 2013-Regulation 34 and amplified in the 9th and 13th Schedule. The applicable preference depends also to the input of foreign firms in the association with local firms either through joint venture and subcontracting arrangements. It is important to note that, Section 55C of amended PPA 2011 gives aMargin of Preference for goods mined ormanufactured inTanzania of 15%.

Similarly the use of local experts in works and non-consultancy services isSection 55B of amended PPA 2011, and Public Procurement Regulatory Authority (PPRA) is required to issue guidelines which will address how inclusion of key local staff in the assignments and the use of locally manufactured, produced or mined materials will be taken into account.

6.3 Exclusive Preference:PPA 2011-Section 55 provides for exclusive preference, i.e. setting aside contracts exclusively for local persons, where financial resources are exclusively providedby aTanzanianpublicbody. It is mandatory for PEs under those circumstances to set aside contracts for local firms. The PPR 20163-Regulation 39provides the limits of exclusive preference shown in Table4.

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Industrial Development in Tanzania; Strategies and a Journey Ahead

D AY 2 PA P E R P R E S E N T E R SDr. Adelhelm Meru

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E-procurement in Tanzania and the Journey toward Industrialization.

Dr. Christopher Nditi

NURTURING INDUSTRIALIZATION FOR ECONOMIC TRANSFORMATION

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1.0 IntroductionTanzania spends a significant amount of money in acquisition of goods, executing works projects, consultancy services as well as non-consultancy services. The acquisitions of these requirements cost a lot of money that need be managed properly so as to avoid any possibility of misuse and loss. The key concepts of this paper involve e-Procurement in Tanzania and The journey toward industrialization. The paper has covered the Background information, Impact of E- procurement towards Industrial development, the journey towards e-procurement in Tanzania, E-procurement benefits, Practical challenges of e procurement system and Way-forward.

2.0 Background InformationThe term e-procurement results from the electronic support of procurement activities between a purchaser and a supplier through information and communication technologies (chaffey, 2014).The main role of government of Tanzania toward Public E- Procurement is to ensure efficient and effective public procurement functions. Efficient and effective Public Procurement functions are those functions that are defined as offering a high level of transparency, accountability and value for money in the application of a procurement budget.

Effective E-Procurement and Contract Management is a key to achieving the required deliverables of a contract (UWI, 2015). Professionals responsible for E-Procurement in the Public Sector, need to know the elements, objectives and role of e- resource, the importance of proper e-administration, and must also have an appreciation of the cost and risk of various e-procurement provisions. The government applies Rules (PPA2011) and Regulations (PPR, 2013) in implementing e-procurement management in Tanzania.

For the past decade the Government of Tanzania had “old school” methods of performing day-to-day tasks and activities.The traditional public procurement is facing many deficiencies, especially in developing countries that are characterized by bureaucratic procedures, corruption (Yap et al., 1994, p. 191).Complicated procedures and extended relationships, Excessive state intervention, Bureaucratic dysfunctionalities, Absence of clear national IT policy, Large volume of paper, Lack of flexible centralized control, Lack of information quality, and Resistance to change.

The Government has enhanced several reforms in order to redesign procurement Process. Currently, employees perform every procurement task by either passing paper (too much paperwork). As with “standard” traditional procurement processes, there are usually traditional organizational structures that backup those processes. However with the introduction of E- procurement the government anticipated to enjoy various benefits such as reduce errors caused by manual processing of orders, Expedite order

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fulfillment through quicker order processing, Maintain or reduce staffing levels in mail order and phone order processing, Open new communication channels through Internet, Increase competition, transparency and accountability, Increase customer loyalty through extensive customer support and information, and so on.

3.0 Impact of E- procurement towards Industrial development E-procurement Systems and Applications E-procurement is more than just a system for making purchases online. A properly implemented system can connect industries and their business processes directly with suppliers while managing all interactions between them. Industrial development has had an important role in the economic growth of country. Along with accelerated growth, poverty rates have declined in many countries. The pattern of industrialization, however, impacts remarkably on how the poor benefit from growth (Kniivilä, 2005).According to NBS (2016), Tanzania’s GDP grew at a rate of 7.9% in Q2 2016 reaching TZS11.7tn at constant prices, compared to TZS10.9tn in Q2 2015 with a growth rate of 5.8%.

Figure 1: Tanzania GDP growth

Several organizations, even today, underestimate the role of procurement as important player in industrialization growth. Recent studies show a gap among the departments that directly or indirectly have an effect on the final cost of the product, especially in small / medium companies where there is no dedicated industrialization department.

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The industrialization department normally involves the keyareas as shown in the following figure:

Figure 2: Industrializationkey departments

Source:.jwsrl(2016)

Therefore with the introduction of E- procurement will enable to stabilize the strength of our industries since Procuring sector will be in position to involve industries in fair competition within and outside the country. Also E- procurement will enable industries and procuring entity to have strong communication channels which will enable even transactions to conduct easily electronically and at the reasonable cost.

The introduction of E-procurement supports industries in planning the future requirements of independents and dependent demand items. Supply chain management will function efficiently by Reducing costs, improve quality, Reduce lead time and inventory, Reduce time to market, Increase sales, and Improve demand data/forecasting. E-procurement therefore, helps organizations remain engaged in their supplier relationships and related advantages. The emerging information technologies provide the opportunity for the governments to transform itself and the way it provides services to citizens. Doingso would not only cut the cost and improve the quality of government, it would improve the trust citizens have in their government.

The advent of these new technologies coincides with increasing demands for public access to government information. The tools of the Internet provide a vehicle for improved information-sharing among branches of government, as well as with the public. Among the potential benefits of digital government are savings in money and time for the government, consumers, and businesses.

Recent improvements in Internet technology (e-business) connectivity provide an opportunity to make procurement for goods and services more transparent and efficient

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(see figure 1 below). The impact of E-procurement affects not only the public’s expectations with the way government performs its tasks, but also provides a better way for the government to improve its ability to meet these heightened expectations.

Figure 2: E- System

E-Procurement System therefore can cover a number of elements including:• The ability to download bidding documents from a website

Submission of bids through an electronic tender box.• The development of Management Information Systems to assist with

procurement reporting as well as oversight and monitoring.• The publication of contract awards on the website of a procurement regulatory

or oversight body (Bruno et.al, 2005). Institutions that use e-procurement technologies save 42% in purchasing

transaction costs due to the simplification in the purchase process and the reduction in purchasing cycle time, which in turn, increases flexibility and provides more up-to-date information at the time of placing a purchase order. Thus, e-procurement tends to leverage the bargaining power of companies willing to establish contracts with their preferred suppliers and as a result, the overall maverick buying is lower (Hawking et al, 2004).

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4.0 The journey towards e-procurement in TanzaniaTraditionally, procurement has involved a number of communication mediums to facilitate procurement process between the various parties. These have included the use of mail, phone, and fax, EDI and more recently, email and the Internet.

The process as it was undertaken before the emergence of e-procurement was manual, involving a lot of paper work and prone to corrupt tendencies, besides being time consuming. These inefficiencies led to adoption of e-procurement, where electronic communications are used to support all forms of transactions that facilitate the procurement process.

In Tanzania we have introduced TANePs.Development of e-procurement system, termed TANePS, continued in accordance with the requirements of PPA whereas during the reporting period, the initial version of the system was tested and areas for improvement identified. In addition, PEs were sensitized through various forums, including the 5th APGW, on the advent of e-procurement whose operationalisation is expected to commence in FY 2017/18(PPRA-APER, 2017).

E-procurement is a new phenomenon, but what it wants to achieve is not new. As long as companies have been around, they have sought to improve efficiency and effectiveness. E-procurement is an umbrella concept that backs up the same tree, improving efficiency and effectiveness.

The concept behind introduction of e-procurement systems reduction of transaction costs by automating processes, replacing human labor with information technology. There are some fundamental things the purchasing company wants to achieve when it comes to purchasing. These include reducing the time employees spend looking for a product, service or suitable supplier, reducing the time and cost of administering purchases, reducing cycle times, increasing volume with a few preferred suppliers to get better pricing and other conditions, as well as limiting choices to only a number of pre-qualified suppliers to ensure quality.

5.0 E-procurementbenefitsEfficiency and Effectiveness- E-Procurement’s efficiency benefits include lower procurement costs, faster cycle times (improved procurement process), enhancing transparency, Widen market reach, improved compliances and reduce inventory level.E-Procurement’s effectiveness benefits include in the increased control over the supply chain, proactive management of the key data, and higher-quality purchasing decision within

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6.0 Practical challenges of e procurement systemThere are many practical challenges that can affect the implementation of e-procurement system; some of them are as follows:

i. Lack of involvement of users in development of the system. The fact the full capabilities of the system are often not realized by users, specific reporting functionality is not always offered. There can also be high supplier interface costs and data validity issues. The research also found the greatest challenges to adopting and implementing e-procurement include staff preferences for legacy systems, issues in change management, the demand for a user-friendly environment, a lack of time permitted to learn the new system, perceived loss of control, and technology being seen as an expense rather than an investment.

Taking example of Online public procurement forum The forum was established in 2009 to enable stakeholders share information and experience on public procurement. During the period under review, a total of 897 users were registered compared to 844 in the preceding year (PPRA-APER (2017).

Figure 3: Online Public Procurement Forum

ii. Internet problemPeople and businesses that do not have access to the Internet cannot take part in the supplier selection and contracting process at county level due to poor infrastructure of

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the internet in their respective institutions.

Figure4: Proposed E-procurement system

The security over the internet cannot be guaranteed due to the major hacking techniques and theories, even the interaction between the two strangers can lead to friendship and then serious cases of murders and serial killers plots which have become increasingly popular because of the internet launch.

The most widely used part of the Internet is the World Wide Web (often abbreviated “WWW” or called “the Web”).Using the Web; you have access to millions of pages of information. Lack of trust and security problems. Due to cyber-crime via the internet many stakeholders in procurement transaction including the government. Piracy and presence of fake suppliers make some stakeholders not to have much trust with the use of internet as they calculate many risks from cyber-crime.

Procurement stakeholders continued to make use of the website (www.ppra.go.tz) and tender portal (http://tender.ppra.go.tz ) by accessing useful procurement related information including but not limited to, tender opportunities as shown in the figure below. However as the number of user’s increases, the security of the system becomes

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a major concern. Inadequate IT security may result in compromised confidentiality, integrity, and availability of the data due to unauthorized access.

Figure 5: Adoption of PPRA’s Website

iii. Technology development problemTechnology is a dynamic process. Changes in technology are associated with high set-up costs. Financial constraints are a major drawback, especially in some developing economies, when it comes to capital projects. Modern procurement is now taking place online; yet many companies in developing economies (including Tanzania) are still lagging behind. Poor infrastructure, weak strategic alliances and reluctance to change have resulted in poor or even non-adoption of such technologies.

iv. Lack of e-procurement skillsLack of perceived benefits of e-procurement by many stakeholders who participate in the transactions. This is due to lack of enough skills in ICT (Information and Communication Technology) hence lack of e-procurement skills, which in turn make reluctance in going for this modern way of procurement despite the fact that some of the activities like advertisement of tendering is currently done through internet.Also not all suppliers will have the positive response in terms of complying effectively into the new IT system of e-procurement.

v. DifficultyinintegratingprocurementSystem.This comes in due to the fact that the integration will need many resources when

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training people involved in the process, set up costs, running costs etc.According to PPRA-APER (2017), there is Delays in integrating selected government systems with the proposed TANePS due to issues related to in-house expertise and funding;

vi. Top executives’ buy-in problem

Unwillingness to incur training and other costs due to Negative attitudes to procurement among top executives, who were more likely to regard it as an overhead than as a strategic function.

Figure 6: PMIS operationalization progress

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According to PPRA-APER (2017), Use of systems developed by PPRA, Analysis of the audit results indicated an overall compliance of 48% which was poor performance. PEs performed as shown by Figure 7Figure 7: USES of Existing systems prepared by PPRA

7. Way-forwardThe following is the recommended way forward in order to ensure successfully implementation of e-procurement system:

i. Users of the system should always be incorporated in the development of the system.

The people who are primarily involved in information system development are system analysts. The follow a step-by-step process to develop the system. In addition, programmers are involved because they write and modify the programs that are part of the system. Users are also involved in system development because the system must be designed to meet the needs of its users. Systems analysts, programmers, and users often work together in a project team that is responsible for developing the information system. User involvement in System development is very potential due to the following facts:

a) The user is often the one who recognizes the need for a new information system by identifying a problem with the existing system. The user should report the problem to the person responsible for system development thus

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beginning the system planning phase. b) During system analysis, the user is interviewed about how the current system

functions. In addition the user provides detailed information about his or her requirements for the new system.

c) The user’s involvement in system design is mainly in reviewing screen, report, and form layouts and helping to describe procedures.

d) The user may be involved with system testing during system implementation. When the system is finished, the user is trained in the use of the system and is asked to compare the system with his or her requirements.

e) Finally, the user is involved in system maintenance to ensure that the modified system meets the user’s requirements.

Table 1.0 System Development Steps

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ii. We need to create the system that People and businesses can have easy access to the Internet and hence be able to take part in the supplier selection and contracting process at country level. Since Today, the Internet is a public, cooperative, and self-sustaining facility accessible to hundreds of millions of people worldwide. Since Security is a major concern when working on the internet. E- Procurement system must be secure from damage due to unauthorized access or use, in order to protect data and other transactions.

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To ensure that individual privacy remains carefully protected, institutions should implement state-of-the-art Data and Information security practices. Having a sound security plan in place to collect only what you need, keep it safe, and dispose of it securely, can help PEs meet their legal obligations to protect that sensitive data.

iii. There are need to strengthen infrastructure in technology as well as strategic alliances among stakeholders in implementation of e-procurement. This way will reduce reluctance to change and enhance e-procurement. The Introduction of new technology has great impact on changes in work lives of employees. So Participation, involvement and open, early, full communication are the important factors.

• Workshops are very useful processes to develop collective understanding, approaches, policies, methods, systems, ideas, etc.

• Staff survey sare a helpful way to repair damage and mistrust among staff - provided you allow people to complete them anonymously, and provided you publish and act on the findings.

If the organization’s internal culture is not technological welcoming, which means that there is no top management or employees’ support, then it can be the biggest hurdle as this is the foot step in adoption of e-procurement.

iv. Training should be enhanced on the perceived benefits of e-procurement and all stakeholders should be empowered with enough skills in e-procurement. Also the Authority and other Public institutions responsible for the training should be empowered with all necessary resources when training people involved in the process, since we must have capability and capacity amongst the staff that are going to operate the e-procurement system and process. Suppliers should also be involved in all necessary training on importance of e-procurement on their supply side, in terms of complying effectively into the new IT system of e-procurement Integration with business partners or suppliers enhances the adoption of e-procurement system.

v. Collaborate with all e-procurement stakeholders towards integrating various government systems with the proposed TANePS. Sometimes Lack of integration with business partners or suppliers can also resist adoption of e-procurement system.

vi. Top executives should be emphasized to participate in training in order to mitigate negative attitudes toward e-procurement as an overhead than as a strategic function and hence be able to buy-in the idea and collaborate to implement the system successfully. Empathy and facilitative capability are priority areas. Top executives are crucial to the change process; they must enable and facilitate, not merely convey and implement rule, which does not work.

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Arora, A., (2014), ‘Sustainability strategies in supply chain management’, PhD dissertation, Department of Marketing and Logistics, Georgia Southern University, viewed 12 September 2017, from http://digitalcommons.georgiasouthern.edu/etd/1063/Balchin, L. (2015), Strategic enlightenment. Logistics Europe, Issue: September, L ULEA: University of Technology Division of Industrial Marketing & e-Commerce. Journal of Information Engineering and Applications.5 (4), 16-19. Bruno, (2005).E-procurement. Retrieved 3 October 2017 http://www.grin.com/en/e-book/276666/challenges-of-e-procurement-adoption-in-a-private-bank-in-tanzania.Chaffey, D. (2014) ed., E-business and E-commerce Management, 2nd ed., London: Prentice Hall.Kniivilä, M. (2005).Industrial development and economic growth: Implications for poverty reduction and income inequality. The European Journal of Information Systems 3(3), 191.PPRA (2016) .e-procurement-challenges-and-opportunities. Retrievedon 22ND SEPTEMBER 2017 http://ppra.forumotions.net/t186-e-procurement-challenges-and-opportunities.PPRA (2017) ANNUAL PERFORMANCE EVALUATION REPORT FOR FINANCIAL YEAR 2016/17.Retrieved 3/10/2017 from https://www.ppra.go.tz/phocadownload/attachments/annualReports/APER_%20201617.pdfPublic Forum (2015). E-procurement in Kenya. Retrieved on 6th October, 2017 from http://www.publicspendforum.net/blogs/peter-smith/2015/09/25/procurement-e-procurement-kenya-africa-problems-corruption.Romm, C.T., Sudweeks, F. (1998).Doing business electronically: a global perspective of electronic commerce, Springer Verlag Press.Savage, C.J., Fransman, L. & Jenkins, A.K., 2013, ‘Logistics in Namibia: Issues and challenges’, Journal of Transport and Supply Chain Management 7(1), 1–8. http://dx.doi.org/10.4102/jtscm.v7i1.86Yap, C., Soh, C., Raman, K., 1994. Effect of government incentives on computerization in small business. The European Journal of Information Systems 3(3), 191.

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E-procurement in Tanzania and the Journey toward Industrialization.

Dr. Ramadhan S. Mlinga

Dr. Ramadhan Mlinga is a specialist in construction industry, procurement, contract and project Management with over 28 years of post graduate work experience. He has a PhD (university OF Cape Town- 2001) with a focus on Tanzania’s construction industry;MSc in Construction Management (University of Birmingham - 1990) and BSc in Civil Engineering (University of Dar -1986).

He worked for National Construction Council for seven years (1986- 1993) in which he was involved in Building Local Contractors Capacity through the Sixth Highway Rehabilitation Project and Integrated Roads Project.

Dr. Mlinga has vast knowledge and experience in procurement reforms in Tanzania having participated as a Team Leader in the Amendment of Tanzania Public Procurement Act (PPA) No. 21 of 2001 to PPA 2004 and as a member of a team responsible for amendments of PPA 2004 to PPA 2011. He was also a Team Leader for Preparation of procurement Regulations for PPA 2004 and he was a team member in the preparation of procurement Regulations for PPA 2011.He championed the use of bid securing declaration instead of bid security whose introduction has helped to remove one important hurdle that was limiting participation of local contractors in public tenders.

As a Executive Secretary of Central Tender Board and the Chief Executive Officer of PPRA (2005 to 2013) he has overseen the development of various guidelines, procedures and systems for implementing a modern procurement system. These include Procurement Capacity Building Strategy for public procurement in Tanzania; System of Checking and Monitoring Procurement Activities of the Procuring Entities; Procurement Information Systems; Including Procurement Management Information System for collection and sharing procurement information, PPRA’s website www.ppra.go.tz for dissemination of procurement information, Tanzania Public Procurement forum http://forums.ppra.go.tz for sharing procurement knowledge, tenders portal http://tender.ppra.go.tz for disclosure of tender opportunities and awards; and Tender

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Alert System for notification of procurement opportunities through Mobile phones; Anti-Corruption Strategy for Public Procurement in Tanzania; Tanzania Procurement Journal which is published once a week (since Feb 2008); Feasibility Study for the Introduction of e-Procurement in the Country; System of Procurement of Common Use Items and Services and Various Tender Documents and Guidelines for better carrying of procurement Activities in the Country.

Dr. Mlinga has also participated in international procurement forums on Construction Industry and those involved in setting systems and procedures governing public procurement. Notable among those are CRB’s Annual Consultative Workshops 2004, 2005, 2006, 2007 and 2009; 2nd International Conference of CIB Task Group 29 (TG29) on Construction in Developing Countries, Gaborone Botswana in 2000; First Meeting of Task Group 29 (TG 29): Construction in Developing Countries, AICC- Arusha Tanzania, 21-23rd Sept. 1998; UNCITRAL Expert Group Meeting, to discuss proposed Amendments to the 1994 UNCITRAL Model Law on Procurement which was held from 29 September - 1 October 2009 in Nairobi, Kenya; African Development Bank Round Table on Public Procurement held in Dakar, Senegal from 11th -14th May 2009; OECD/DAC - World Bank Procurement Roundtable Meetings on Strengthening Procurement Capacities in Developing Countries. He has also visited and shared experience with other countries undertaking procurement reforms including Kenya, Uganda, Ethiopia, Ghana, Botswana, Phillipines and Indonesia.

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109

110

111

112