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Outline of the presentation. Overview Strategies of IIDS 2025 2-1 Gateway Strategy 2-2 Cluster based Industrialization 2-3 Agriculture led Industrialization 2-4 Resource based Industrialization 2-5 Institutional Intervention 3. Plan of Action.

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  1. Outline of the presentation • Overview • Strategies of IIDS 2025 • 2-1 Gateway Strategy • 2-2 Cluster based Industrialization • 2-3 Agriculture led Industrialization • 2-4 Resource based Industrialization • 2-5 Institutional Intervention • 3. Plan of Action

  2. Integrated Industrial Development Strategy 2025 From Policy to Implementation December 2011

  3. Over View Targets • Manufacturing sector *growth Average annual growth at 15 % p.a. • Manufacturing sector contribution to GDP** From 9.0 % in 2010 to 23% by 2025 • Manufacturing Value Addition From US$ 1.8 bil in 2010 to $16.8 bill by 2025 • Manufacturing Goods Export From US$ 707mil***in 2010 to $ 6.6 bill by 2025 *The term “manufacturing sector” means Category “D” of International Standard Industrial . Classification (ISIC) Rev.3 and cover all the activities identified by ISIC code 15111 to 39999. ** GDP of 2025 was computed on the assumption of 8.0 % growth to achieve Vision 2025 targets. *** The figure followed SITC classification available at UNCTAD statistics.

  4. Manufacturing Sector 1970-2010 Over View Stagnated 10 years Source: United Nations Statistic Division

  5. Over View Growth of Manufactured Exports in 2000’s Source: UNCTAD Statistics 2011

  6. Over View Diversification of economic structure • In early 1990’s, Traditional Agricultural Export was only forex earner. • In 1996, Sight-seeing revenue caught up it, and in 2000 gold exportfollowed. • Growing Transport service reflects growth of neighboring economies. Traditional Agriculture Exports Almost constant for last 30 years

  7. IIDS Strategies Integrated Industrial Development Strategy 2025

  8. Gateway Advantage of geographic superiority UGD RWD DRC BRD TNZ MLW ZMB Source: IMF World Economic Outlook, Apr.2009

  9. Gateway Cargo volume increases 8 times by 15 years. TEU Capacity after Expansion No. 13, 14 Terminal Relocation of Oil Jetty Large ICT 7 million ton of cargo was delivered to back land countries through DAR port in 2009 Current Capacity Source: WB Infrastructure Round Table 2009 Arranged by IIDS team using data from TPA

  10. Gateway 234m as the Max. Vessel Length at DAR Sailing Route DAR Port has limitation Existing Container Terminal Proposed Extension ５ｋｍ Future Extension

  11. Gateway Maritime seeks larger vessels Because of LOA Dar Port can accommodate up to 2000 TEU class 234m（Maximum LOA at Dar Port Ocean freight and vessel size Larger size container carriers coming to operation along side with hike of energy cost In case of 10 sailing days and 1 staying day NYK Maritime Report 2006

  12. Gateway Generation Change of Container Vessels Carriers retire from service after 30 years of operation Dar es Salaam Mombasa

  13. Gateway Develop Bagamoyo as Twin Port by 2020 Tanga Corridor Railway 60km Central Corridor Trunk Road Mbegani located 60 km north-west of DSM and 10km south of the historic town Bagamoyo Tanzam Corridor

  14. Cluster based Cluster based Industrialization For concentrated infrastructure support. For improvement of productivity efficiency To enjoy scale merit of economy <Special Economic Zones> • Waterfront SEZ(Bagamoyo, Mtwara and Tanga) • Agribusiness SEZ (Arusha, Mbeya, Iringa etc.) • Cross-border SEZ (Kigoma, Mwanza, Musoma etc.) <Industrial Clusters> • Specialized industrial clusters (Edible Oil, Metal etc.) • Multi-sector industrial clusters • SME Parks One in every region • Industrial Villages One in every district

  15. Cluster based ( Billion U.S. Dollars ) Asian lessons prove effectiveness of Economic Zone approach 2.7 4.3 6.5 10.6 13.3 15.8 20.0 19.5 22.7 27.2 30.7 31.6 35.1 36.9 45 42.8 PHILIPPINE MANUFACTURED EXPORTS 41.1 40 36.9 35.5 34.3 35 31.7 32.0 31.5 30 28.6 26.1 25 21.6 Production in Economic Zone 20 18.5 50% 50% 15.8 58% 42% 15 51% 49% 35% 65% 12.2 27% 73% 49% 51% 22% 78% 68% 32% 72% 28% 10 86% 14% 85% 15% Production in Non-Economic Zone 86% 14% 86% 14% 85% 15% 5 0 9.5 11.5 12.0 11.0 12.8 15.9 14.3 9.1 8.8 4.8 4.8 5.3 6.0 5.9 Other Philippine Manufactured Exports 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

  16. Cluster based Industrial Village to up-grade MMEs(Micro-scale Manufacturing Enterprise Park) • Local Government provides plots and shades • MITM provides guidance and supervision • SIDO provides technical and management service • MMEs form association for management • By issuance of membership ID, turn to formal sector • Culture of business linkage starts from here • Two step financing to MMEs through the association Expansion Iron smith Tin smith Association Give chance to grow to MMEs who haswish to grow, efforts to grow, ability to grow and a little bit of fortune. Timber process Common Facility Furniture make Portly Estimated cost Tsh. 400mil for 1 hectare cluster

  17. Cluster based Fostering business group formation Building Business Group ! • Fostering business experts who can stand well in a global market. • Concentrated support to the identified candidates. • Technology transfer through subcontract • Promotion of forming business groups to share/obtain - Business Codes - Quality Control - Packaging/Labeling - Larger scale supply capacity - Market information - Negotiating Power

  18. Cluster based Cluster Based Industrialization Providing cluster at every level of Micro to Small, Medium and to Large or Specialized. Waterfront SEZ Agricultural SEZ at strategic locations SIDO SME Parks at identified cities MME industrial Parks at district cities

  19. Cluster based Bagamoyo Waterfront SEZ and Corridor

  20. Agri. SEZ : Incentives to every kind of Agro-processing, Agro-support Industries inclusive service lenders Centers : Centers for Tractor hiring, Depo for Agri-input, Collection & Storage and SME park for agro-processing Kilosa Center Morogoro Agri. SEZ Sumbawanga Center Iringa Agri. SEZ Makanbako Center DRC Mbeya Agri. SEZ Njombe Center Tunduma Center Kyela Center Songea Center Zambia Malawi Mozambique Cluster based Agriculture based Institutional Spport Southern Agricultural Growth Corridor of Tanzania Bagamoyo SEZ DSM Market Ifakara Center

  21. Agriculture based Agricultural Development Led Industrialization = Sunflower Oil Case = Improvement of yields through promotion of quality seeds and fertilizer Short Supply Entry of entrepreneurs in oil processing Biz. Increase of Supply Shut Down Over Supply 3bags 12-15 bags/acre Stop Prod’n Price Crash Needs of Collaborations Demand Formation of cluster & Association Supply of Agri- input and tractor tilling through contract farming Construction of oil refinery

  22. Institutional Support Agriculture based Up-grading and appropriate technology Following the increase of sunflower production in the area, 8 processors funded an association in 2006 to jointly promote contract farming, joint brand, joint marketing and joint procurement of quality seeds. Small capacity plant to support local industrialization Localization of machineries Currently planning to establish a small capacity refinery to expand their market

  23. Institutional support Agriculture based Interest subsidized loan for Agro-processing Investment Tanzania Investment Bank Targeted Business Fresh investment in Agro- processing industries Aggregated investment Tsh. 20 billion in total Size of Loan Tsh. 50 – 1,000 million Duration: Max. 5 years Interest Compensation byMIT 10% p.a Base lending rate to Borrower 5 %p.a. (+risk factor max. 3%). Collateral By Bank Policy Assessment Bank final Fund (Tzs 5 Bil) Int. 10% Priority identified Principal TZS 20 bil Int. 5% Agro-processing Industries Investment TZS 30 bil Local Industrialists (Borrowers) Targeted Business: Milk, Milk Products, Edible Oil, Leather, Fruits, Vegetable, Meat Processing, Serial Milling and above related collection, storage, transportation and packaging facilities.

  24. Institutional Support Agriculture based SIDO Credit Guarantee for SME NMB agreed to finance MSME at Prime Rate w/o requesting Land Title up to TZS 20 billion as credit ceiling under SIDO guarantee. National Microfinancne Bank 3. Recommendation 4. Bank Approval 5. Guarantee 6. Loan & Repayment 7. Tech Assist 1. Application 2. Business Plan Making Qualification: 1. SIDO’s member enterprise 2. SIDO undertakes assit. In Business Plan making 3. Track record. Conditions: 1. Size: Tsh 5 – 50 million 2. Lending Rate: 15 % 3. Duration: Max 3 years 4. Collateral: Required but no land title conditioned. Fee: 1. Technical Assistance Fee: 2% of Loan Amount 2. Guarantee Fee: 2%p.a. of guaranteed balance Assessment: 1. Initial assessment by SIDO 2. Final Approval by Bank SIDO Guarantee Fund MSMEs (Borrowers) Targeted Business: Agro-processing and Agri-business undertaken by enterprise known to SIDO and the business viability has been confirmed by SIDO.

  25. Agriculture based Cluster based Insttutional Spport Sunflower Oil Cluster = Urban Model = • The plot is owned by SIDO and leased to occupants on long term. • Common infrastructure is prepared by SIDP and recovered through the rent. • Buildings and facilities are to be constructed by each occupants. • Refinery is owned and operated by a private company by own account. • Sales of crude oil by processors to the refinery is not compulsory. • The refinery markets the refined oil by own brand. • SIDO/RLDC provide technical assistance to the refinery as an infancy enterprise. • CRDB provides working capital to processers through the collateral management. • The occupants are encouraged to form an association to handle common issues. Oil Extractors Canteen Warehouse Oil Extractors Mini-refinery Storage Tanks Packaging Common Facilities Service Lenders Association Collateral Manager

  26. Institutional Support Intervention to the Manufacturing Sector

  27. Institutional Support • Zonal Industrial Officer (ZIO) shall be appointed by MIT and seconded to Viwanda Office (VO) in PMO-LARG • Viwanda Desk (VD) shall be opened at DED’s office to undertake License issue under BARA Act • 3. District Industrial Officer (DIO) shall be • appointed by PMO-LARG to run VD • 4. ZIO shall supervise DIO through PMO- • LARG • DIO at VD undertakes • - One stop office for license & registration • - to reflect MIT policy and strategy to District • Development Plan (DDP) • - to provide industrial info to local enterprises • - to convey voices of local enterprises to MIT PMO-RALG MIT Viwanda Office MIT Penetration to Districts Zonal Industrial Officer(ZIO) DED Viwanda DesK District Industrial Officer (DIO) District Development Programs Local Enterprises

  28. Institutional Support Full implementation of BEST Program BEST Programme Strengthening Biz. Environment Empowered Private Sector Economic Growth • Better Regulation • Simple Biz. Regulation • Removal of unnecessary regulations • Reduce cost of doing Biz • Simplified procedures Change of Government Culture Strengthened TIC Improved Commercial Dispute Resolution

  29. Resource based Sub-sector Institutional Support Iron and Steel Production Industry • NDC signed a JVA with a Chinese developer to establish the first Iron and Steel making plant in East Africa by 2015. • <1st phase> • Construction of Coalmine 1.5 mil tons p.a. • Construction of Coal Power 2 x 150 MW • Construction of Iron Ore 1.5 mil tons p.a. • Construction of Iron Plant 500,000 tons p.a. • Massive infrastructure support such as roads, power transmission line, water supply, railway and man power supply would be required.

  30. Resource based Agriculture based Sub-sector Fertilizer Industry Ammonia/Urea Production is a kind of Petrochemical Industry • The raw materials required for Nitrogen Fertilizer (Ammonia/Urea) production are Natural Gas and Air only. • However, it is a highly sophisticated petrochemical complex which requires more than $ 1 billion initial investment and over 2000 per day (660,000 ton/year) production capacity at minimum. • The Government has decided priority use of Mnazi-bay Gas for the fertilizer production, and MIT is on the way to facilitate it. • Challenge is the gas cost and infrastructure support to make the plant run economically feasible for coming 25 years in tough competition with cheap gas producing countries in Middle East. • Mtwara gas concession holding consortium proposes to develop fertilizer plan as a downstream project.

  31. Sub-sector Targeted Sub-sectors • Fertilizer and Chemical sub-sector Establish the first Urea plant in East Africa.by 2018 2. Textile sub-sector Local processing from 30% to 70% by 2025 3. Agro-processing sub-sector Edible Oil / Fruits Processing / Cashew nuts / Milk and Dairy Products • Leather & Leather products sub-sector Export leather and leather products US$170mil by 2025 5. Light machinery sub-sector Establish agro machinery industry by 2015 • Iron and Steel Production sub-sector The first iron making plant in East Africa.by 2015 7. Hospitality industries linked with Tourism.

  32. Plan to Action DraftMaster Plan is ready under IIDS 2025 - fifty action plans proposed. Validation Workshop to be held soon. Your participation as one of the important stakeholders shall be highly appreciated.

  33. Asante sana

  34. MIT/SIDO Finance Programs to build-up post-harvesting capacity in regions Fund Required TZS 5 bill Leverage Effect of Six times Fund Required TZS 5 bill NMB agreed to finance SMEs at Prime Rate without requesting Land Title up to Credit ceiling of TZS 20 billion

  35. Agro-processing Industry Promotion Loan (AIPL) A part of interest of applicable loan shall be subsidized by the Ministry Tanzania Investment Bank Targeted Business Fresh investment in Agro- processing industries Aggregated investment Tsh. 20 billion in total Size of Loan Tsh. 50 – 1,000 million Duration: Max. 5 years Interest Compensation byMIT 10% p.a Base lending rate to Borrower 5 %p.a. (+risk factor max. 3%). Collateral By Bank Policy Assessment Bank final Agro Fund (Tzs 5 Bil) Int. 10% Priority identified Principal TZS 20 bil Int. 5% Agro-processing Industries Investment TZS 30 bil Local Industrialists (Borrowers) Targeted Business: Milk, Milk Products, Edible Oil, Leather, Fruits, Vegetable, Meat Processing, Serial Milling and above related collection, storage, transportation and packaging facilities.

  36. Identified investment collected from fields under Agro-processing Industry Promotion Loan(AIPL) <Milk Processing Subsector> (1) A milk collection terminal with 2000 litter tank TZS 150 mil (2) An insulated tanker truck with 10,000 litter capa TZS 180 mil (3) Tessa UHT processing unit for 5,000 litter/day TZS 600 mil <Fruits and Vegetable Processing Subsector> (1) Packing plant of French fly potatoes TZS 150 mil (2) Coconuts Milk processing and packing TZS 250 mil (3) Tomato pule production TZS 400 mil <Edible Oil Subsector> (1) Butch type small capacity refining unit TZS 200 mil (2) Soap processing plant in Kigoma & Kyela TZS 0.5-5.0 bil <Leather and Leather Products Subsector> (1) Shoe sole manufacturing facility TZS 300-500 mil (2) Sawing, skywriting, pressing and cutting machines TZS 100-500 mil (3) High quality leather processing machineries TZS 350 mil From MIT field survey conducted in Sep and Oct 2010

  37. Example Milk Processing Industry Milking Collection Transport Processing Market 1.6 mil ton Missing Link 0.06 mil ton • About 1.6 mil ton of milk is produced in TZ, while only 4% of which is processed and marketed. • Milk has to be stored in cooled tank (2-4C)within 2 hrs after milking. Collection tank should be available within 5km from farm (on foot) . • Improved road network has made it possible to transport collected milk from distance sources to processing facility. • Milk processors in Tanzania utilizes less than 30% of their capacity. • TZ imported 8300 ton of milk and milk products and paid Tsh 9 billion in 2009.

  38. At a Milk Collection Point A collection point in Amani Village, Tanga The collection center opens at 7 in the morning. 450 families bring a bucket of raw milk (7-9 litters in average) everyday. Milk is recorded on notebook after measured and paid TZS 428 per litter at end of the month. The tank is maintained at 4°Cand backed up by D/G. Processor in Tanga send an insulated tanker to the village every 1.5 days. Cash revenue of TZS 3,424 (=TZS 428 x 8 ltrs) is more than a day wage of farm labor which is around TZS 3,000 in Tanga City Stable cash revenue has changed life style of villagers drastically. Some send children to school in town, some bought bicycles and some bought calves.

  39. Why MSMEs cannot access to finance ? NMB agreed that NMB shall - share the unpaid risk - loan SMEs up to TZS 20 bill - not request Land Title - apply Prime Interest rate • Incapable to prepare Biz Plan • ２．Incapable to provide Land Title • ３. Very high interest over 25% １．SIDO can fully assess the Biz. 2．Land Title is no more required ３．Prime Rate can be applied Intervention of SIDO Poor assessment capability of Banks １．Make SIDO to draft Biz. Plan ２．Make SIDO to assess the Biz. ３．Make SIDO to guarantee. Let’s make the best informed party to assess the MSME buiness

  40. SIDO SME Credit Guarantee （SIDO/SME CG) NMB agreed to finance MSME at Prime Rate w/o requesting Land Title up to TZS 20 billion as credit ceiling under SIDO guarantee. National Microfinancne Bank 3. Recommendation 4. Bank Approval 5. Guarantee 6. Loan & Repayment 7. Tech Assist 1. Application 2. Business Plan Making Qualification: 1. SIDO’s member enterprise 2. SIDO undertakes assit. In Business Plan making 3. Track record. Conditions: 1. Size: Tsh 5 – 50 million 2. Lending Rate: 15 % 3. Duration: Max 3 years 4. Collateral: Required but no land title conditioned. Fee: 1. Technical Assistance Fee: 2% of Loan Amount 2. Guarantee Fee: 2%p.a. of guaranteed balance Assessment: 1. Initial assessment by SIDO 2. Final Approval by Bank SIDO Guarantee Fund MSMEs (Borrowers) Targeted Business: Agro-processing and Agri-business undertaken by enterprise known to SIDO and the business viability has been confirmed by SIDO.

  41. Effects of Scheme • NMB agreed to finance SMEs at Prime Interest Rate without requesting Land Title without up to TZS 20 bill as credit ceiling. • This covers 1000 of average size loan every year, and the program can be sustainable if carefully operated. Sensitivity Analysis

  42. Up-grading of Sunflower Oil Producer

  43. Proposed Sunflower Oil Industry Custer • Local Government provides plots and shades • Association is to be formed by participants to the park • Buildings are to be constructed by members • Association runs the management of the park • Refinery is to be owned and operated by a joint company • SIDO/CAMARTEC/RLDC extend technically assist the operation • Service Lenders participate the association providing specialized services Oil Extractors Oil Extractors Oil Extractors Warehouse Oil Extractors Storage Tanks Mini-refinery Packaging Co Service Lenders Common Facilities Association

  44. Institutional Support Promotion through Market Mechanism Priority Industry Promotion Missing Link Promotion Packaging Industries Promotion SME Promotion Entrepreneur Biz Formalization Market Mechanism Interest subsidized loan Incentive Measures Credit Guarantee Industrial Development Fund

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