Emerging issues and the challenges ahead

The preceding discussion presents two main challenges facing Tanzanian manufacturing firms seeking international competitiveness in exports. The first challenge is to acquire the capabilities to search actively for relevant and flexible technologies, secure the best sources and negotiate the best possible terms of acquisition. The second challenge is how to accelerate the process of technological mastery. There are two main actors in this game of technological capability acquisition, the firms and the government.

The role of government will certainly be crucial in creating conditions conducive to exploiting new technological opportunities. One of the key policy areas in which government should intervene is the development of the human resource base needed for industrial development. Training is an important source of capability acquisition. Government should provide both the literacy base in the general population and the formal training needed for industrial training. In-firm training, either on the job or in a more formal framework, would then supplement, but cannot substitute for, such training. Infirm training is bound to be limited. The government will therefore have to subsidize firms or provide training facilities directly, or assist in securing foreign technical assistance.

Table 8.5 Performance indicators for sample non-textile firms for selected years (TSh x 1 000)

Source: Survey data. Bureau of Statistics

The other area for government intervention is the provision of an environment in which flexible adjustment of production structures in the face of changing demand conditions is made possible. The provision of efficient infrastructure in the form of functioning water and electricity supplies and efficient telecommunications and transportation facilities would reduce firms' operating costs significantly. Government should also facilitate access to information about, and the acquisition of, technologies by domestic firms. It should promote contacts between domestic firms and foreign technology suppliers. Support in these efforts might significantly reduce search costs.

Most of the firms in Tanzania are still too small and ill-equipped to make any meaningful expenditure on R&D. The state, while stimulating R&D activities among industries, will initially have to mobilize and pool resources and then to decentralize such resources to individual firms. The examples of NEM and Themi have shown that government can play an important role in stimulating technological activity, by intervening more directly and taking the initiative. The state can also assist in the early phases of investment by carrying out feasibility studies, identifying products and production processes, estimating market potential and securing equipment suppliers. It is important, however, that government should involve potential entrepreneurs when making such decisions.

There are also some technological functions that cannot be performed adequately in-house. As already pointed out, the Tanzanian government has set up relevant institutions for research and extension, quality control, design, training, technology information and industrial standards. These institutions' however' need to have adequate manpower and financial resources if they are to perform their functions properly.

Finally, provision of incentives in the form of protection for strategic industries, which, for example, generate higher externalities, use flexible or difficult technologies, or have high linkages, will be necessary. Such protection, however, should be industry-specific and properly phased.