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Business regulations: What Tanzania can learn from Singapore

2019-03-31 07:49:16

By Paul Kibuuka @tzpaulkibuuka

While Singapore turns 54 on August 9, 2019, Tanzania turns 58 on December 9, 2019. The independence gap between the two countries is 4 years and 4 months.

According to historical accounts, approximately 54 years ago today, Singapore was an archetypal ‘Third World country’ with a measly $500 per capita income.

As of 2017, World Bank figures show that Singapore’s per capita income is $52,600. This astonishing economic success of the small-island nation of Singapore is plainly incredible.

What has been the recipe for such economic success? Why has Singapore flourished where many other countries failed drably? And how did Singapore develop its blueprint that has transformed the whole country?

Modern Singapore is rooted in the good vision of the country’s founding father and former Prime Minister, Lee Kuan Yew. In his quest for Singapore to thrive, he unwaveringly attracted both indigenous and foreign businesses to set up in the country.

He nurtured dynamic local enterprises which would be able to support the Singaporean economy.

Although Lee Kuan Yew’s government was criticized for its heavy-handed approach, he believed that such an approach was indispensable if businesses were to build shared prosperity in Singapore.

He also put in place state-of-the-art infrastructure and facilities, an effective public bureaucracy, a transparent and sound legal and regulatory framework, and prudent fiscal policy.

The case for business regulation is often linked to Adam Smith’s epic classic, The Wealth of Nations, in which he argued against unregulated businesses in a free market.

A typical business perspective on government oversight of businesses is that regulations encourage competition, level the playing field, and promote vibrant and dynamic markets.

In the ‘Key Note’ of Tanzania’s “Blueprint for Regulatory Reforms to Improve the Business Environment” (the Blueprint), the permanent secretary in the ministry Industries, Trade and Investment, Prof. Elisante Ole Gabriel, acknowledged the private sector’s concern that the conduct of business should be determined by market forces and stated that the concern has been addressed in some aspects by the Blueprint, but that it does not purport to remove government oversight.  

But there has been increased concern in the Tanzanian business community that the burden of regulation is overly burdensome as regulations are fragmented, overlapping or duplicative.

This increases compliance costs and sometimes inhibits the growth of businesses and inflow of new investments.

Singapore is ranked 2 and Tanzania is ranked 144, among 190 economies in compliance and ease of doing business, according to the 2019 World Bank annual ratings.

If compliance costs surpass the forecasted profits, businesses are forced to wind-up and move into a better regulatory climate; those that persevere find ways to reflect such costs in the price of products and services.

It’s the consumers that ultimately bear the burden of overregulation, which may also lead to job cuts and reduction in employee benefits as businesses compensate for compliance costs.

The impact of private sector businesses can be substantial. Promoting businesses should be part and parcel of Tanzania’s economic development agenda, and that calls for putting in place simple, clear, predictable, and efficient regulations and investment processes.

This is very important as the country to looks attract investment and create an industrial economy by 2025.

The introduction of the Blueprint for pro-business regulatory reform in Tanzania heralds improvements in the country’s ease of doing business.

However, the grandiloquence must be supported by evidence of the government’s implementation of the Blueprint.

Around half of the world’s fastest growing economies are in Africa and Tanzania is in that group. Endowed with a diverse natural resource base, the country has sustained relatively high economic growth over the last 10 years, averaging 6-7 per cent, according to World Bank data.

But as with any other developing country, regulatory bottlenecks and other challenges including youth unemployment still exist in Tanzania.

The good news is that the Tanzanian government led by Dr John Magufuli has restored industrialisation at the heart of government policy, and is seeking investors in manufacturing and other economic sectors.

Tanzania is a magnate for investors; however, the government can take lessons from inspirational Singapore and improve the quality of Tanzania’s regulatory regime for business and industry.

Paul Kibuuka is the managing partner of Isidora & Company Advocates, a corporate, commercial and financial law firm. This article was published in The Citizen on Saturday, 30 March 2019

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