revised cd contents tanzania...

The World Bank

Study on Growth and Environment Links for Preparation of Country Economic Memorandum (CEM)

Natural Resource Based Growth

Summary Paper

May 2005

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The World Bank

Study on Growth and Environment Links for Preparation of Country Economic Memorandum (CEM)

Natural Resource Based Growth

Summary Paper

May 2005

Report no. 1

Issue no. 1

Date of issue 18 May 2005

Prepared KEP

Checked TNH

Approved

iii

Table of Contents

1 The Contribution of Natural Resources to Growth 1 1.1 Accounted and Unaccounted Contributions 2 1.2 Public Investment in Natural Resource Based Growth 4

2 Untapped Growth Potentials 6

3 Sustainability of Growth 9

4 Externalities 12

5 Recommendations 14 5.1 General Recommendations 14 5.2 Sector Specific Recommendations 15

Study on Growth and Environment Links for Country Economic Memorandum – Summary Paper 1

1 The Contribution of Natural Resources to Growth

Natural resources in Tanzania constitute a wealth asset. During the past dec-ade Mining, Fisheries and Tourism have been the most dynamic sectors in the economy. Although Tourism development is a success story of growth in macro-economic terms, local development spin-off effects could be explored more fully. Most currently known mineral deposits are being already tapped while at the same time new mineral stocks are being discovered.1 Fisheries is still a growing sector but there are signs of decline in Catch per Unit in Lake Victoria and catch of fish and prawn in the coastal zones, which points towards a deceleration of growth in these sectors in the medium and long term.

Forestry, Wildlife and Marine Fisheries resources, though declining, are still relatively abundant, rendering largely un-tapped growth potentials. Although these natural resources like labour and capital contribute to the economy and subsistence base of the rural population, their value and potential is underes-timated.

This underestimation is partly based on missing markets in the case of pub-lic goods, imperfect competition in the case of distorting government inter-ventions as well as pricing of natural resources below market value. Results of all these market failures lead to sub-optimal economic decision making and loss of income to the country.

The National Strategy for Growth and Poverty Reduction (NSGPR 2005) subscribes to the principles of sustainable and equitable development. Op-erational starting points of these principles include that:

• Renewable resources should be exploited on a profit-maximising sus-tained yield basis and not driven to extinction, regardless of the dictates of present value maximisation. Hence, harvesting rates should not ex-ceed regeneration rates and waste emissions should not exceed absorp-tive capacities.

1 Daily News of 18. May 2005.


• Non-renewable resources should be exploited at a rate equal to the crea-tion of renewable substitutes. Revenue from the exploitation of nonre-newable resources should contain an ’income component’ and a ’capital component’, the latter being used to invest in building up a new renew-able asset to replace the nonrenewable one at the point of exhaustion.

• Revenue generated from natural resources should be shared equitably, in particular with rural communities on whose land these resources occur.

These macro-economics of sustainability would require an integration of GDP growth and qualitative development more fully, giving equal weight to need for pro-poor growth and maintenance of a sustainable natural resource base.

This summary paper as well as the three detailed background papers defend the hypothesis that, due to policy failure, Tanzania’s natural resource en-dowments are not harnessed in an optimal way to both economic growth and poverty reduction.

On the contrary, due to weak governance regimes in revenue generating sec-tors, resources are offered below market price to the benefit of a few power-ful winners, and at the loss of the majority of the rural population. Yet, these natural resources provide substantive potential for income to communities in rural areas.

The weaknesses in governance regimes in all three sectors, Forestry, Wild-life and Fisheries, include primarily lack of transparency and accountability in issuing rights of resource extraction and revenues accrued thereof, lack of equitable sharing of benefits with communities, as well as weak monitoring and surveillance of stocks.

In all four principal sectors providing natural capital to the Tanzanian growth equation, i.e. Forestry, Wildlife, Fisheries and Mining, royalties are set arbitrarily and do not reflect scarcity. Royalties are hence not used as a policy instrument of intertemporal resource pricing and sustained yield man-agement.

As long as these weaknesses are not addressed, a substantial base of eco-nomic growth will be slowly eroded and poverty reduction objectives are unlikely to be achieved.

1.1 Accounted and Unaccounted Contributions Commonly for Forestry, Wildlife and Fisheries, a great share of their eco-nomic contributions does not enter GDP and export statistics and is hence not taken into account in the analysis of growth. Availability and quality of data is a general problem.


As part of this study, various sources have been analysed as an attempt to provide an inventory of the overall contribution of natural resources sectors to the economy. The picture is patchy and mainly based on estimates.

An overview of annual revenue earned by the Ministry of Natural Resources and Tourism from its key departments in the last two financial years is pre-sented in Table 1 in the Annex.

Although revenue is an important measure for growth, it does not capture all contributions to economic and rural development by the respective sectors.

Forestry provided over Tsh. 5 billion in Government revenue over the last two financial periods. It contributes officially 2-3 percent to GDP and a 10-15 percent share of export earnings. Estimates taking unaccounted services and non-industrial forestry into account are accounting for a value of 10-15 percent of GDP. Forests provide around 75% of building materials and 100% of indigenous medicinal plants and supplementary food products.

In addition, Forests provide an important component of value added to na-tional income through their eco-system service functions providing for in-dustrial and domestic water and energy supply. 95% of Tanzania’s energy consumption is woodfuel based, which includes major inputs factors into rural industries such as for example tobacco curing and fish smoking. For-ests provide watershed functions for major rivers feeding into the national hydropower dams. Lack of reliable power and water supply can hamper growth in the longterm and are already being cited as a serious constraint to attracting private investment.

Further to their ’source’ functions, forests also have ’sink’ functions, absorb-ing and neutralizing negative externalities of economic growth, most impor-tantly pollution. The value of carbon sequestion services provided by Tan-zanian forests is estimated to be between 700 and US$ 1,500 per ha. Addi-tional environmental service functions include inputs from land and forests into agricultural production.

The revenue generated from Wildlife resources, accrued to the MNRT mainly from hunting licenses was over Tsh. 9 million during the last two financial periods. An independent study of the sector, quotes annual earn-ings of about US$ 30 million from tourist hunting and an additional US$ 9 million generated by the private companies leasing hunting concessions from the government (2001). In the year 2002 live animals exports earnings amounted to roughly 170.000 US$.

The largest income earner is the non-consumptive use of wildlife resources through game viewing by international tourists. In 2001 Tanzanian national parks drew over 100,000 international visitors. This generated receipts of almost 5% of GDP, equivalent to about US$ 400 million US$.

In addition wildlife provides unaccounted subsistence values. Well over two-thirds of people eat wild meat, with up to 95 per cent of the rural popu-lation claiming it is their most important meat protein source.


Tanzania’s Fisheries sector has grown at a rate of 6 to 7 percent annually since 2000. In 2004 revenue collection from Fisheries amounted to Tsh. 9.7 billion. This represents roughly a 50 percent increase from revenue collected in 2001/02. While about 80 percent of revenue is coming from freshwater fisheries (2003), only 20 percent of revenue originates from marine fisher-ies. However, the number of foreign vessels licensed to operate in the EEZ (Mainland and Zanzibar) has increased from less than ten in 1998 to more than 170 in 2004 corresponding to a revenue of US$ 3.3 million. In terms of export earnings, Fisheries contributed 10% of total exports in 2003, which equalled US$ 130 million, the export value of Nile Perch being US$ 100 mill. Fisheries registered a revenue over-collection of roughly Tsh. 3 billion in 2003/04.

A great share of the marine catch does not enter GDP and export statistics and plays an important role in livelihoods support. The official number of artisanal fishermen has doubled since 1995 and reached close to 120,000 in 2003. Although contribution to GDP is still not more than 1.9 percent, Mining is the single most important earner of foreign exchange to the country. About 50% of export earnings accrue from Minerals, predominantly from gold mining by large-scale foreign owned operators. In addition, Mineral re-sources are of importance to the artisanal mining sector.

1.2 Public Investment in Natural Resource Based Growth It is obvious from the data above that these revenue generating sectors are making an important contribution to both the formal and subsistence economies. However, out of the three natural resource sectors, only Fisher-ies is a net contributor to Treasury, while Forestry and Wildlife are subsi-dized through government allocations to cover their recurrent expenditures and through foreign grant allocations to finance their operational budgets.

Table 2 in the Annex shows the government recurrent budget allocations to the respective sectors. Forestry and Wildlife each received 29% of the Budget in the last financial year, followed by Fisheries (18 percent) and Tourism (11 percent).

There is a mismatch between foreign resource allocation for sectoral devel-opment activities and national funding allocation for recurrent expenditures. The large degree of under-spending of the development budgets in both sec-tors is a possible indication of capacity constraints to absorb foreign funding and institutional inefficiencies, aggravated by uncoordinated policies of the development partners. In the Forest sector, a planned SWAP is supposed to address the latter problem.

There is a tendency to draw government allocation away from those sectors, as they should finance themselves and move towards privatization. However there are trade-offs to this trend. There is a need for government to control and regulate, setting and enforcing fiscal and market instruments to ensure


sustained growth and incorporation of externalities. While the recurrent government budget allocations to these sectors are reducing, combined with a trend towards privatizing some of the government functions, there is an increasing need for sector wide environmental management functions, such as environmental impact assessment, market based instruments for environ-mental protection (e.g. taxes, subsidies, standards, permits etc.), monitoring of stocks and legal enforcement, which are becoming increasingly more im-portant with increased economic growth. Due to institutional failures, these over-arching environmental management functions have basically been lack-ing in Tanzania for the last decade.

Although the new Environmental Management Act provides the necessary environmental framework law, it is still a long way to see the effects of its implementation. Increased public investments are needed to support these broad based environmental management activities.


2 Untapped Growth Potentials With regard to non-consumptive wildlife utilization for game viewing tour-ism, there is untapped potential in the Southern Parks of Tanzania. While the northern circuit has supposedly reached maximum carrying capacity in terms of numbers of visitors, places like Ruaha and Katavi National Parks are still fairly unknown. Shifting marketing and infrastructure development to those areas would provide new growth potential for the Tourism sector. In addition, there is scope to increase concession fees of international tour op-erators and lodges, which currently account only for 2% of TANAPA’s revenue.

Marine Fisheries has recorded a sharp revenue increase due to increased li-cense revenue from foreign vessels in the EEZ (see Chart 1 in Annex). There are estimates that the presently earned revenue is not reflecting the total amount that the government could earn and that real catch is much higher than what has been assumed as a basis to set the license fees (be-tween 200 and over 400 tons a day per boat). Notably, there is no catch based license or fee, and the vessels are allowed unlimited catch once they are in possession of a valid license. Although the above revenue figure is a considerable amount, it is low compared to the estimated value of the catch by foreign vessels in Tanzanian waters sold on foreign markets. This gives rise to the assumption that there is scope of revenue increases.

With regard to Freshwater Fisheries, past growth rates are mainly based on Nile Perch Exports from Lake Victoria. Other lakes, such as Lakes Tangany-ika and Nyasa, as well as harvesting of other species are so far commercially under-developed.

Diversification could also be sought in terms of exploring additional export markets. Risks and vulnerability increase in a situation where export earn-ings in a sector are entirely dependent on a single market. This is the case of Fisheries export from Lake Victoria, which is mainly destined for the EU. Previously following unfavourable assessment of sanitary standards in Tan-zanian fish processing plants halted the entire production for several months due to an important ban.

Despite high growth in the fisheries sector and existing local production of fishnets, the proportion of imported fishnets is 95%. Hence, an important backward linkage to the industry and employment opportunity remains un-exploited.


Commercial Fisheries presents an important, emerging revenue source for the country and the sector. If the sector is well managed, commercial Fisher-ies can have a positive impact on economic growth and poverty reduction at the same time. Principles of management would need to include retention and re-investment of revenue into the sector and putting up safeguards to the artisanal Fisheries to protect their rights and access to the resource.

Potential for local spin-off effects Local spin-off effects are presently missing in the context of marine fisheries in the Exclusive Economic Zone. While new Fisheries Agreements are being negotiated with foreign countries, no fish is expected to be landed ashore and few supplies will be sourced from within Tanzania. If none such spin-off effects are created, the net impact of commercial fisheries on poverty reduction may be negative, provided increased completion with artisanal Fisheries over the same resource.

Similarly, the fact that Tanzania is a net importer of forest products is a sign of lost opportunities for income generation for the local economy.

Similarly, the Mining sector seems to have had limited influence on poverty reduction in the local economy. Employment in the large-scale Mining sec-tor is limited although especially younger employees may receive significant salaries. The majority of those employed in the Mining sector operate, mostly as self-employed, in the small-scale sector, typically as artisanal miners. This category receives very low returns, especially when one con-siders the hardship associated with this kind of employment. It seems fur-thermore that an increasing income disparity is emerging between those em-ployed in the small-scale and large-scale Mining sector. To the extent that those recruited by the large-scale Mining-sector are recruited outside the local community, the local community is thus restricted to opt for poorly paid employment opportunities in the small-scale sector.

Large-scale Mining may have positive effects for local communities through the improvement of basic infrastructure. There is however no indication that the expansion in the Mining sector triggers significant growth in the local economy, since Mining operations generally are detached from local supply chains and therefore primarily create employment in the services sector.

Potential for poverty reduction In addition to their potential for government revenue generation Wildlife, Fisheries and Forestry resources provide the non-agricultural subsistence base for rural communities in remote locations. Increased emphasis on natu-ral resources related enterprises has potential to create additional income opportunities for the rural population.

For example in Loliondo Division in Ngorongoro District, seven villages earn a total of over US$ 110,000 per annum from joint ventures with wild-life tour operators. In Ololosokwan village, tourism revenue totals about US$ 55,000 per annum. The income from payments by one of four tour op-


erators in Olosokwan Village is shown in Chart 2 in the Annex. If effects of elite capture are avoided and income equitably distributed within the com-munities, this income has large poverty reduction potential in a dryland area, which does not offer many other opportunities of diversification.

While the case of Olosokwan is an exceptional example, the potential for local development from wildlife related tourism has not been fully tapped in other areas. In the Mara-Serengeti ecosystem, the number of households earning any income from tourism varies from 86% in Talek (Kenya) to 12% and 3% at the Ngorongoro Conservation Area and Loliondo Game Reserve on the Tanzanian side.

In the southern circuit, tourism is growing offering potential scope for posi-tive impacts on local economic development. Participatory Wildlife Man-agement in communities close to Ruaha National Park, Iringa District, cre-ated a total of Tsh. 15 million in 1999 in local income accrued through earn-ings from resident hunting quota. In addition, an additional Tsh. 4,1 million was earned from the 25% share of license fees from tourist hunting (see Chart 3 in Annex).

The income from hunting quotas was sufficient to treble village level com-munal income, enabling villages to pay district-level taxes, which would otherwise be levied by households, as well as to carry out social infrastruc-ture investments. One of the success factors identified was that the project has placed emphasis on institutional capacity building at village and inter-village levels.

Similarly, community based forest management has provided revenue to villages across Tanzania. The 2002 Forest Act authorises villages to sell timber from their own forest reserves, which has potential to provide a new and additional source of forest revenue, directly accruing to the communi-ties.

Despite the conducive policy framework in both the Wildlife and Forestry Sectors, weak governance systems at both central and local levels have so far limited the realization of the poverty reduction potential through com-munity based natural resources management.

The main focus within community wildlife management has been on institu-tions and distribution of benefits rather than enterprise opportunities at household level. Fear over inequity has led to the relative neglect of entre-preneurship in Tanzania, reflecting persistent and much broader philosophi-cal bias against private enterprise.


3 Sustainability of Growth In the context of sustainability of natural resources based growth, the fol-lowing constraints are emerging in the Tanzanian context, which lead to revenue loss and possible deceleration of growth in the longterm:

Under-pricing of resources not allowing capturing of resource rents;

Weak environmental governance systems;

Limited knowledge of stocks, their values and changes over time.

Under-pricing of resources Sustainable growth based on renewable resources requires that the cost of extracting a resource and the notional cost of replacing a unit of the re-source, commonly known as ’resource rent’, is evaluated so that the wealth base is not eroded. While royalties are the most important source of gov-ernment revenue in the Forestry (83%), Wildlife (96% hunting licenses) and Fisheries (84% royalties, 15% export licenses) sectors, they are set arbitrar-ily and capture neither market values nor resource rents.

Similarly, in the Mining sector, licenses to foreign investors do not take the ’capital component’ into account. Tax incentives have been generous to-wards foreign investors to attract capital investment and to open up the mar-ket at the expense of sustainability principles.

In such a scenario, acceleration of growth comes at the expense of pricing resources below market value, which leads to loss of income, erosion of critical stocks and an associated deceleration of growth in the longterm.

Estimates of resource rents from Marine Fisheries computed from license fees as percentage of value of revenue through licenses for foreign vessels fishing in the Tanzanian Exclusive Economic Zone (EEZ), show that gross resource rent is approximately 2.2 percent, which is less than half of what might be expected in a western industrial fishery. While the current license fee arrangements of private fisheries agreements (PFAs) in the EEZ generate not insignificant amounts of revenue, the level is too low to result in a rea-sonable return of revenue (>5 to 7 percent of gross revenue) to capture a re-source rent.


Similarly in Forestry, royalties have in the past been fixed arbitrarily. The 2002 Forest Act demands the determination of royalties based on market value, profitability and principles of sustainable harvesting. Improvement of the Forest Produce Pricing System would include market-base pricing of forest produce and public auctions or tendering for timber lots. Royalties could also be used as an instrument to divert harvest from pressured species towards lesser-known species.

In the Wildlife sector, the concession component of TANAPA’s earnings is only 2%, which most likely under-represents the value of these concessions compared to the income they generate to the foreign investor. Loss of reve-nue and unsustainable use is also fostered through hunting quotas that does not reflect true market values and is not based on ecological monitoring to maintain critical stocks. Presently, concessions are leased at rates far below true market value irrespective of size, quality or income potential. This represents a massive loss of income to the Wildlife Division (estimated at over US$ 7 million). The system promotes subleasing to foreigners with a result that much of the income generated by the industry never enters the country and substantial tax revenue is lost.

Weak environmental governance In Forestry, an undercollection of 5 to 10 percent of revenue is reported due to inefficiencies in revenue collection and corruption in the sector. As the 2004 logging scandal in Rufiji revealed, the value of the illegally harvested logs was valued at Tsh.382.65m.

Illegal trade of ivory from Tanzania to the Middle East, is estimated to cause a 200 million US$ revenue loss through a single consignment of ivory, evaluating the value of those elephants with their trophy price. In this case, corruption is based on organised criminal networks involving the police and government officials.

In Marine Fisheries, there is alleged information that Zanzibar licenses for foreign vessels are registered in Muscat, Oman with the fees escaping the Zanzibar authorities. In EEZ fisheries lack of transparency is attributed to a large degree through lack of catch reporting by foreign vessels. The govern-ance regime in EEZ fisheries is unique in the sense that it imposes responsi-bilities for transparency and accountability on the Distant Water Fishing Na-tions.

In the Wildlife Sector, a non-transparent system of quota setting for the hunting industry by the Government leads to imperfect competition in the market. There is no competitive bidding for hunting concessions but distri-bution through autonomous government decision making. Effective market forces are hence not applied to optimize revenues. This policy intervention leads to a ’monopoly of knowledge’ by the Wildlife Division and an ’oli-gopsony’ in terms of access to the resource, a situation in which a small number of large buyers controls the market. Consequently, quotas are sold below market value leading to a loss in revenue. While imperfect competi-tion usually benefits a few powerful players, it is at the disadvantage to the


majority of the population. It leads to loss of income and livelihoods for rural communities.

Limited knowledge of resources stock values and stock changes The optimal scale of natural resource based economic growth must be at a sustainable level. Hence, a general macro-level constraint of growth is then that the optimal scale is the one at which the long-run marginal cost of ex-pansion are equal to the long-term marginal benefits of expansion. This macro-level constraint of optimal growth cannot be operationalized if the true costs of resource extraction are unknown.

Commonly in Fisheries, Forestry, Wildlife and Mining, there are neither in-ventories of the full availability of stocks nor full information about their value. In addition, stock changes are not monitored in a comprehensive manner. In the absence of stock and flow data, limits of extraction and quota associated with licenses can hence only be set arbitrarily and hence not based on sound ecological calculations and realistic projections. For exam-ple in Marine Fisheries, there are no catch limits at all attached to licenses, allowing vessels to take as much fish as is available while scant information on actual catch is returned by the foreign fishing vessel to the coastal state (Tanzania). Similarly, in Forestry, land coverage, deforestation and values represented in the country’s forest estate are a matter of speculation.

There is already government effort in the Fisheries and Forestry sectors to address some of these problems. For example the Fisheries Department has lately increased its monitoring, control and surveillance with support of the SADC regional project. The Forestry Department is in the process of devel-oping a National Forest Monitoring Facility and Database.


4 Externalities Consideration and efficient control of ’externalities’ is important to reflect the true cost of resource utilization preventing their over-exploitation.

In addition, externalities can cause trade-offs between economic growth and poverty reduction as they can negatively affect local peoples’ access to natu-ral resources.

Lastly, control of externalities can realize cost savings otherwise spent on pollution control. Examples are abundant, a few are described below.

Economic growth is associated with increased need for energy and water supply for domestic and industrial purposes. Currently, 95% of energy supply comes from biomass energy. Due to incorrect pricing, charcoal does not represent the full value of the wood being harvested. In terms of providing value-added to growth through energy and water supply, Tanzania’s Forests provide ’critical capital’. Catchment Forests are one such example and their conservation is clearly a binding constraint to be addressed.

Increased agricultural production and intensification can create external-ities. Large commercial rice farming in the Usangu Plains has reduced the dry season flow of the Great Ruaha River through intensified year round irrigation, which is negatively affecting water use by small scale farmers downstream.

Commercial fish production for export markets at Lake Victoria erodes a base of livelihood and food supply for local fishing communities. Simi-larly, the penetration of foreign vessels into territorial seas impacts on the catch of artisanal fisheries.

Mining poses a number of threats and possibilities to the local communi-ties as well as to the miners themselves. The nature and extent of these threats and opportunities cannot be assessed in detail due to lack of reli-able data. There are concerns that large commercial mining crowds out the artisanal sector. Also, there are indications of a number of negative social effects, notably child labour, HIV/AIDS, and gender imbalances.

The evidence provided about the environmental effects of large-scale Mining suggest that Mining communities may suffer a number of severe


effects, spanning from direct and observable noise and erosion, to longer term pollution of air, water and soil, which in turn may have seri-ous health consequences. Still, the evidence does not allow for extrapo-lation and more rigid, comprehensive analysis is required to have a bet-ter idea of the environmental implications of large-scale Mining in Tan-zania.

The current policy framework in Tanzania does not provide for sound man-agement of natural resources and the mitigation of externalities. Presently applied instruments for revenue generation do not address externalities, nor are they used as instruments to capture rents from natural resources. Rather than employing fiscal instruments to steer the exploitation of resources, there is, allegedly, tax evasion within the revenue generating public sectors themselves.

Hence, in the present regime of environmental governance, increased growth will come at the cost of running down the resource stocks, impeding on longterm growth opportunities.

In order to ensure a positive net effect of accelerated growth on positive poverty reduction, a careful balance needs to be drawn between increasing export earnings and maintaining the resource base for the artisanal sector. In particular in Fisheries, certain safeguards need to be put in place for the ar-tisanal fisheries to protect their rights, access to the resource and livelihoods.

Key policy recommendations are formulated in the next Chapter.


5 Recommendations The operationalisation of sustainable development presents an international political challenge. In particular in the context of globally shared resources, such as Fisheries, responsibilities apply to both ‘harvesting’ and ‘host’ coun-try (Tanzania). While true factor pricing and resource rent capture are policy instruments that even some western countries are grappling with, there are some basic principles of governance that are missing in Tanzania, which if rectified, could re-gain some of the lost opportunities described in this paper.

The single most important recommendation to capture and maintain natural resource based growth in Tanzania is to reform environmental governance so as to achieve ’good’ governance, rule of law and equity.

This would include ensuring greater coherence between different national policies and instruments, particularly community based wildlife manage-ment, tourism development, rural growth strategies, investment regulations and incentives and poverty reduction strategies.

In addition, Tanzania would need to make investments into the improvement of its human capacity and capital stock so that value-added processing of natural resources can increasingly take place within the country. This would be required to comply with the principle states in the NSGRP that policies should be designed so that benefits from high-growth sectors are transmitted to the poor in form of better livelihoods opportunities, e.g. supporting supply linkages with local producers.

The recommendations below are divided into general recommendations that equally apply to all natural resources sectors and sector specific recommen-dations.

5.1 General Recommendations Strengthen capacity for data collection, record keeping, monitoring, con-

trol and surveillance and enforce punitive measures to control illegal practices.

Control of externalities through fiscal instruments, royalties and resource pricing and to increase revenue from rent capture rather than un-controlled exploitation.


Increase efficiency in revenue collection and administration, as well as full transparency and accountability over revenue generation and distri-bution.

Promote market based principles, where appropriate, ensuring local spin-offs and allowing competition and entrepreneurial development.

5.2 Sector Specific Recommendations

Fisheries Put in place a regulatory framework and sound governance regime for

marine Fisheries, comprising the EEZ and near-shore Fisheries.

Safeguard rights and livelihoods for coastal communities, through for example demarcation of a Community Territorial Sea.

Conduct a Fisheries Sector review to assess the economic and social, ecological and fiscal perspectives and policy options. This could inform policy makers and influence the strengthening of the regulatory frame-work.

Establish some form of EEZ inspectorate in patrol terms to build up a more accurate picture of available resources.

Investigate the potential for exports of (various) marine products and value adding of these products in order to promote growth in the coastal zone.

Forestry Introduce taxes for wood lot and plantation owners, in particular an in-

come tax based on timber sales, as well as a property tax based on aver-age productive capacity of different land categories.

Enforce the collection of royalties and fees and include exempted indus-tries such a tobacco and fishing.

Improve Forest Produce Pricing System through market-based pricing of forest produce; public auctions or tendering for timber lots; cheaper royalties to lesser-known species.

Increase domestic and foreign private sector investment through reduc-tion of bureaucracy in licensing system, clear investment guidelines, clearly defined ownership of all forestland, tax incentives; credit facili-ties, and technology transfer.

Increase capacity utilization of the sector to reverse the trade balance to net forest product export.


• Introduce new revenue sources, i.e. watershed management fees from hydropower stations, sale of genetic resources and carbon credits.

Wildlife Encourage attitudinal change towards wildlife at policy level, as an asset

for rural development and poverty reduction rather than as something looked after by conservationists. This will include a shift in emphasis of community wildlife approaches to focus on creating enterprise opportu-nities.

Ensure that local communities are the principal decision makers for allo-cation of concessions and quota setting for hunting on their land, and they receive and manage the funds generated on their land.

Reform the tourist hunting industry to realize the true revenue potential of the industry. This will include the introduction of market-based com-petition in the commercial hunting industry through competitive bidding for concessions. This may have the positive side effort of naturally con-trolling sub-leasing and related revenue losses.

Introduce performance based independent monitoring of the hunting in-dustry, possibly through certification, to ensure certain standards are ad-hered to. Criteria should be set to consider maximum income from the least number of animals hunted and contribution towards protection and community involvement.

Revise the quota setting system based on more objective criteria, com-puterization of hunting data; monitoring of trophy quality and age.

Conduct a review by the Ministry of Finance into financial management and taxation procedures of the Wildlife Division to assess the strengths and weaknesses. This would include an inventory of the true value of hunting licenses.

Tourism Integrate opportunities for pro-poor tourism into tourism strategies, set

objectives in terms of local development impacts not just numbers of tourists or foreign exchange earnings.

Ensure a pro-poor tourism growth programme to place attention on company practices, destination management, infrastructure develop-ment, procurement patterns, national training and regulation.

Mining Ensure improved data collection on externalities in the Mining Sector,

for example through more rigorous and systematic enforcement of EIAs.

Revise pricing system to capture ‘capital component’ of non-renewable mining resources.


Annex

Table 1 MNRT Annual Revenue 2003 and 2004 Revenue in billion Tshs 2003 2004 Forestry 5.29 5.82 Wildlife 9.17 9.55 Fisheries 6.99 9.70 Tourism 0.83 0.96

(Source: MNRT 2004. Note: This includes revenue collected and retained at source)

Table 2 Budget of MNRT, distribution by sub-sector, 2002/03 – 2003/04

Note: The Total includes other sub-sectors not listed here. The amounts are only recurrent expen-ditures. Based on MNRT 2004.

Chart 1 Annual License Revenue and foreign vessels in Tanzanian EEZ

(Source: Fisheries Department)

Sub-sector '000 Tsh. % 000 Tsh. %Forestry and Beekeeping 4,897,656 24 7,633,912 29Wildlife 6,593,025 33 7,586,736 29Fisheries 3,688,280 18 4,648,202 18Tourism 2,208,073 11 2,880,761 11other Total MNRT 20,243,165 26,257,352

2002/03 2003/04

0500,000

1,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,000

1998 1999 2000 2001 2002 2003 2004

US$

020406080100120140160180

No.

of v

esse

ls

US$ No of vessels


Chart 2 Income to Olosokwan Village, Ngorongoro District Council, 1999 - 200303

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

1999/2000 2000/01 2001/02 2002/03

Village (Tsh.)District (Tsh.)

(Source: Reconstructed from Kallonga et al. 2003, figures not exact)

Chart 3 Village Total Incomes comprised of resident hunting quota and 25% share of license fees from tourist hunting

(Source: Walsh 2000)

0

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4,000,000

6,000,000

8,000,00010,000,000

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village income fromtourist hunting

village income fromresident hunting

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