tanzania cluster competitiveness program inception report · 1. purpose of the inception report...

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Cluster Competitiveness Program

Tanzania Cluster Competitiveness Program

Inception Report

Prepared by: CCP Project Team Emerging Markets Group, Ltd. Resubmitted December 21, 2009

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Table of Contents 1. Purpose of the Inception Report ...........................................................................................5 2. Objectives and Expected Outcomes of the Project ...............................................................5 3. Project Approach to Building Competitiveness .....................................................................8 4. Project Phases and Methodology .......................................................................................17

4.1. Conduct competitiveness assessment .......................................................................18 4.2. Identify target clusters ................................................................................................24 4.3. Craft cluster strategies ...............................................................................................27

5. Organization of the Project Team .......................................................................................38 5.1. Staffing and Organization ..........................................................................................38 5.2. Consortium Partners ..................................................................................................39

1. Actions to Date ..................................................................................................................40 2. Monitoring Systems ...........................................................................................................41 3. Implementation Schedule ...................................................................................................45 Abbreviations: CCP – Cluster Competitiveness Program EU – European Union ISCP-TZ – Innovation Systems and Innovative Clusters, Tanzania Program SIDO – Small Industries Development Organization SME – Small and Medium Enterprises UNIDO – United Nations Industrial Development Organization VETA – Vocational Education and Training Authority Firm – this is a term used to broadly include private sector companies that are registered in the formal sector. The vast majority of firms in Tanzania are SMEs.

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Preface Data for this inception report have primarily been compiled during the first four months of the CCP program, and as such, do not precisely reflect the state of the program’s accumulated knowledge base as of the report’s resubmission in December 2009. For a cluster focused analysis, and proposed CCP interventions, see the Cluster Value Chain Analysis submitted October of this year. It should be noted that CCP is not able to address every conceivable industry sector and cluster; however, twenty of the most significant sectors were considered for CCP involvement. The fact that several sectors/clusters have not been addressed is to be expected. The methodology used in the Inception Report has been employed in other developing economies and is designed to capture a new program’s objectives and scope against a snapshot of the host country’s business environment. Meetings with Ministry program personnel, business associations, donors and private sector firms all contributed to the content of this report via a combination of primary and secondary data gathering. Dozens of studies and reports were obtained during this process, though certainly not all which may be available. It is important to note that few programs operate precisely as originally designed and CCP is no exception in this regard. The CCP team will, now and later, propose approaches which vary somewhat from the initial design framework. This is not to fault the designers of the CCP Terms of Reference; instead, it reflects the inevitable reality that conditions on the ground are constantly changing and a successful program must be flexible to achieve success. The CCP team envisions several notable changes to the original program design, which will enhance our performance and increase impact to the clusters we are here to serve. First, as CCP’s initial four plus year design was shortened to just three years, attaining measurable impact across six industry clusters is less than optimal as an objective. Impact may of course be achieved in six clusters; however, it is unlikely to be sufficient and of a nature that leads to systemic and sustainable change. At the end of the program, the results would likely be borne of many small initiatives spread across disparate beneficiaries, little of which contributed to sustainable cluster development or a stronger economy for Tanzania. We therefore propose to touch six clusters but focus on three. Horticulture, Tourism and Food Processing form an extended cluster and have interrelated value chains. These three will comprise the focal point and mainstay of CCP’s efforts over the three-year project term. One advantage of Food Processing is the wide array of possible subsectors and inherent flexibility when working in this sector. Our suggested approach involves exploiting this facet of the Food Processing cluster and including two other key subsectors within it, both of which scored highly in the CCP Cluster Value Chain Analysis: Livestock and Fishing. By including these two subsectors within Food Processing, CCP will be able to achieve impact across five clusters without spreading its resources too thinly. The proposed sixth cluster is not really a functioning cluster at all but an important country asset nonetheless – Precious and Semi-Precious Gems. The Gems industry is overly reliant on foreign ownership and industry players who exploit Tanzania’s wealth with little or no benefit returning to the country. The CCP intervention in this case will be to determine the regulatory

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and investment climate changes necessary to transform the Gems industry into one that promotes wealth creation by building local capacity and spurring domestic investment. If, upon completion of this study, the government finds the recommendations viable for reform, an expansion of CCP activities in the sector may be warranted. In order to more efficiently secure near term successes we will utilize a pilot cluster methodology. This will involve an early concentration on a subset of geographic clusters in a given sector, e.g., horticulture, to achieve results regionally and take advantage of the demonstration effect. Other geographic regions will then be added to broaden the scope and the resulting impact. In our experience, three years is roughly the minimum duration required to develop clusters – those which have at least some structure already in place – longer for those which do not. In this regard, focusing on three clusters from the program’s outset provides a better chance of ensuring adequate time to achieve sustainable capacity building. Another proposed deviation from the contract scope of work, as it now stands, is to expand the manner in which the Special Fund is deployed. Two and one half million dollars strictly for equipment (and some study tours) – without feasibility studies beforehand and training/capacity building afterward – is an approach that will not optimize the use of these funds. Instead, we propose to earmark a portion of the Special Fund, from $250,000 to $500,000 (depending on target cluster needs) for subcontracted resources to properly prepare for and add capacity to the recipients of the newly installed equipment and/or systems. The ability to use a portion of the Special Fund to assess equipment/systems needs, and for follow up activities to ensure capacity exists to best benefit from the new systems, is important to ensure sustainability. In the broad sense, we envision priority being given to requests for equipment or systems which advance the adoption of international standards for exports, increase productivity and/or engage technology transfer. Such grants will not be widely solicited but rather counted on to reveal themselves naturally from the cluster strategies now under development with the three target clusters. Finally, some of the employees put forth in the original technical proposal were not available at time of contract award. Others were available but may not have been selected once interviews were completed. The contract binds EMG only to three proposed key staff – substitutions for which must be documented and provided. These include the Team Leader, the Deputy Team Leader and the Senior Competitiveness Advisor. Any employees, other than these three, were included in the proposal as indicative candidates, the best available at time of submission. Selecting the most qualified staff and ensuring a close fit between skills and experience is essential to the success of CCP. To this end, after an extensive interviewing process, the CCP team has carefully made its employee selections, some of which differed from those originally proposed.

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1. Purpose of the Inception Report This inception report outlines the definitions, principles, proposed approach, and initial project workplan for enhancing the competitiveness of six industry clusters in Tanzania over the course of the next three years. The report serves two functions. First, it is to be used internally among the CCP consortium to set the approach for working with the industry leadership, both at a cluster level as well as at the national level. Second, it is to be used to communicate the principles, approach and workplan to ensure that there is no misunderstanding or confusion among CCP partners with the scope and parameters of CCP. Specifically, this report will:

Reconfirm the objectives and expected outcomes for the CCP consortium Set out project methodology for building competitiveness in Tanzania across value

chains and clusters Clarify definitional and methodological questions Set out an implementation framework for the phases of the project Introduce monitoring and evaluation approach for the project Give a status update on the actions taken to date Outline a workplan for the first year for the project office team and consortium

2. Objectives and Expected Outcomes of the Project

The objective of the Cluster Competitiveness Program is to support the development of at least 6 industry clusters in Tanzania over the next three years. Three primary outcomes are expected:

1. Enhance the competitiveness of industry clusters and value chains – this comprises the private sector focused nature of the CCP program and relies on the cluster and value chain methodologies to improve competitiveness.

2. Improve competitiveness capacity – indicates the importance of ensuring CCP’s efforts are sustainable and local capacity is built during the project term.

3. Accelerate the pace of regulatory reform – to provide an operating environment which is supportive of private sector development rather than stymie it.

Specifically, the program will work with business leaders in each of the 6 industry clusters to develop action plans for: • Increasing industry productivity • Expanding access to domestic, regional and international markets • Improving the quality of the skilled workforce • Improving the business environment • Co-investing in infrastructure • Improving the focus and coordination between industry stakeholders CCP was designed as a private sector development initiative that implements the industry cluster competitiveness approach to economic development in Tanzania. Cluster competitiveness initiatives are an increasingly popular approach to improving private sector performance in a specific geography or region. The major over-arching goal of CCP is to

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stimulate a significant, sustainable increase in value added in specific industry clusters and for Tanzania’s economy as a whole. Below are additional subsidiary goals: Outcome 1 • Generate a significant number of productive, sustainable jobs. • Boost export revenues and foreign exchange. • Increase productivity—the key to improving living standards. • Contribute to regional economic development. • Support the development of clusters beginning with pilots to achieve quick impact and

utilize the demonstration effect.

Outcome 2 • Change the mindset of a nation by fostering consensus among business, government,

university, labor, religious and civic leaders regarding the economic challenges facing the country and their solutions.

• Help entrepreneurs and business leaders in specific sectors to identify sound strategies for repositioning their enterprises and their industries leading to specific initiatives and bankable projects.

• Transfer skills and knowledge to local professionals who can continue to implement cluster competitiveness initiatives over time in a variety of industries and regions.

Outcome 3 • Contribute to popular understanding and support for government and private initiatives to

improve competitiveness. • Provide a practical roadmap of priorities to government leaders who seek to achieve

high rates of growth in GDP. • Contribute to an effective private-public dialogue that goes beyond talk and achieves

tangible results. The systemic approach outlined in more detail below will help Tanzania to reach a “tipping point” where business and government leaders alike are enthusiastically pursuing objectives that are increasingly and sustainably focused on achieving greater competitiveness, capacities are in place to support this momentum, and domestic and international investment resources are attracted to Tanzania because of its competitive focus. In other words, in terms of momentum towards achieving global competitiveness, Tanzania will have reached the same sort of “tipping point” that the world has witnessed in countries such as Ireland, China, and a handful of other high performing economies. Note: The term “tipping point” in this context is when businesses and government alike begin to habitually coordinate to improve the country’s competitive stance. This increases the performance of the early adopters and sets an example for others to follow. Thus, at the end of the project, the achievement of this “tipping point” momentum will be evident by the following…

1. Tanzania will be focused on and emphasizing increased cluster based competitiveness

as the main vehicle to economic growth.

2. All stakeholders in Tanzania’s competitiveness growth will have a good understanding of cluster based competitiveness, and use cluster development concepts to guide their decision making.

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3. Tanzanian companies will continually strive to use competitiveness principles in their strategy and operations.

4. Business and the private sector constantly engage in productive, effective dialogue that

emphasizes increased competitiveness. The public sector listens to sound business advocacy, and is eager to remove constraints in, and continuously strive to create a business environment conducive to a competitive Private Sector.

5. National Competitiveness Dialogue provides well-informed and wise guidance to public

sector decisions and policies, and to national economic growth initiatives. 6. The Tanzanian Government has access to sound data and information about the

performance of the economy, and its industry clusters.

7. Three to six industry clusters in Tanzania will achieve measurable results in terms of improved productivity, increased value added, increased sales and exports. Their firms are investing more, and increased FDI is attracted to the clusters who are positioned to better exploit opportunities in regional and global markets.

8. Other industry clusters will begin to coalesce and implement strategies for repositioning

themselves in world markets.

9. Universities will include new, world class curricula in their programs, which incorporate competitiveness, value chain and cluster development themes and faculty will be trained to effectively deliver the courses. There will be demand on the part of students to participate in such courses, as preparation for careers in competitive business or as planners and facilitators.

10. Tanzania will be on track in developing a global reputation for its focus on

competitiveness, its cluster and national economic achievements, the quality of its public-private decision-making, and its competitiveness practitioners.

Core CCP ActivitiesCore CCP Activities

• Assess the competitiveness of Tanzania’s economy and specific industry clusters highlighting opportunities for and constraints to growth

• Develop strategies with six industry clusters to enhance productivity, increase access to markets and improve the regulatory environment

• Provide targeted assistance to industry clusters in areas such as training, market research, policy, legal and regulatory analysis

• Assist industry clusters to implement strategic agendas via domestic and export market development, productivity enhancements, policy reform and other targeted measures

• Build capacity of relevant private institutions and public policy makers through seminars, training and involvement in practical cluster work

• Assess the competitiveness of Tanzania’s economy and specific industry clusters highlighting opportunities for and constraints to growth

• Develop strategies with six industry clusters to enhance productivity, increase access to markets and improve the regulatory environment

• Provide targeted assistance to industry clusters in areas such as training, market research, policy, legal and regulatory analysis

• Assist industry clusters to implement strategic agendas via domestic and export market development, productivity enhancements, policy reform and other targeted measures

• Build capacity of relevant private institutions and public policy makers through seminars, training and involvement in practical cluster work

Expected OutcomesExpected Outcomes

1. Enhanced Value Chains & Clusters Sustainable competitiveness improvements in six industry clusters and hundreds of firms

2. Enhanced Competitiveness Capacity Enhanced capacity of relevant private and public institutions to sustain improvements in Tanzania’s competitiveness

3. Enhanced Business Regulatory Environment Improved business environment policies and regulations through systematic public/private dialogue

1. Enhanced Value Chains & Clusters Sustainable competitiveness improvements in six industry clusters and hundreds of firms

2. Enhanced Competitiveness Capacity Enhanced capacity of relevant private and public institutions to sustain improvements in Tanzania’s competitiveness

3. Enhanced Business Regulatory Environment Improved business environment policies and regulations through systematic public/private dialogue

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Note: outcome number 3 overlaps to some degree with the BEST and BEST-AC programs. CCP will coordinate closely with these programs while focusing our policy reform activities on those that most impact the selected clusters. A guiding principle we will use to pursue project objectives and achieve project outcomes will be to always maintain a balance between strategic analysis and action. Strategic analysis is critical to prioritizing the highest value initiatives for each cluster. However, in the end, the project will be measured on the actions taken by business and government that increase Tanzania’s competitiveness. By engaging in thoughtful analysis and moving swiftly to action at the right time, we believe transformational change will be possible.

3. Project Approach to Building Competitiveness Principles and Definitions of Competitiveness What is competitiveness? The myths. Myth #1: Abundant natural resources make an economy more competitive Many people believe that a wealth of natural resources makes a country competitive. Access to oil, minerals, and other valuable natural resources should automatically place the economies ahead economically. In fact, as the graph below demonstrates, countries that are highly dependent on natural resources tend to be poor and less competitive. A wealth of natural resources presents an opportunity to an economy to use the wealth to increase the country’s productive capacity, but too often economies fail to turn the natural wealth into future investment.

Analysis & Strategy Action

Strategic analysis is critical to prioritizing the highest value initiatives for each cluster. However, in the end the project will be measured on the actions taken by business and government that increase Tanzania’s competitiveness.

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Competitiveness is not abundant natural resourcesCountries highly dependent on natural resources tend to be poor and less competitive, but the revenues from these resources can be used wisely to build competitiveness elsewhere in the economy

Percentage of Exports in Natural Resources and GDP per Capita

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

0 20 40 60 80 100

GDP per capita (PPP adjusted,

US $, 2003)

% of Exports in Natural Resources

Source: World Development Indicators, developed in partnership with Monitor Co Myth #2: High commodity prices increases competitiveness Recent history shows that commodity prices fluctuate widely. As a result, incomes in commodity sectors can fluctuate as well. While a spike in commodity prices presents a significant opportunity and can lead to a windfall of income for a country, the volatility is an equally great, if not greater risk. In commodity sectors, competitiveness is defined by how well an industry increases its productivity and incomes despite the cycles of global commodity prices.

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Coffee Rice

Gold Copper

Annual Prices ($/kg)

Constant 1990 (Arabica)

Constant 1990 (Robusta)

forecastforecast

forecastforecast

Annual Prices ($/metric ton)

Constant 1990

Current (LME)

Annual Prices ($/ton)

Constant 1990

Current (Thai 5% broken)

forecastforecast

Annual Prices ($/troy ounce)

Constant 1990

Current (London)

forecastforecast

Competitiveness is not high commodity prices

Competitiveness cannot rely on highly volatile commodity prices…

Myth #3: Low wages make a country competitive A country competing on the basis of low wages is actually competing with countries that are even poorer. Low wages can be a starting point for attracting initial private investment; however, in order to increase competitiveness and raise income levels, an economy needs to invest in its workforce to increase skill levels and raise productivity which will lead to justifiably higher levels of wages.

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Competitiveness is not low wagesCompetitiveness is not low wages. Low wages position a country to compete against countries that are even poorer. But if managed wisely, it can be a starting point

3 13 1 2 27 41 34 98 76 73GCR Rank (out of 104) 4 22

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Sweden

German

yFinl

and

U.S.

France

Taiwan

South

Africa

Chile

Thaila

ndBoli

viaPhil

ippine

sSri L

anka

Cambo

dia

Monthly Earnings (US$)

Source: World Development Indicators, ILO, Global Competitiveness Report 2004. Note: Study is indicative and identifies relationships. So, what is competitiveness? Competitiveness is the productivity with which an economy uses its physical and human resources to produce goods and services of value to local, regional and international markets. Productivity can be directly measured by the prices an economy’s good and services command in international markets and the efficiency with which they are produced. In short, competitiveness is:

Better products and services (unique and higher quality) that command higher prices on the market

Investment in skilled labor force leading to higher wages Higher productivity inputs at a lower cost Better market information Expanded access to markets Continuously improving business performance

The competitiveness framework used in this project for analyzing Tanzania’s economy is grounded in Michael Porter’s determinants of competitiveness. His model provides a useful framework for organizing the many determinants of a country’s competitiveness and economic growth potential (figure below). The model illustrates how a country’s potential for competitiveness, and long-run economic growth, is created by a sound macroeconomic, political, legal and social context, and a continuous drive to improve the microeconomic environment, foster the sophistication of local companies, and increase local competition. The model also illustrates how Tanzania’s future economic growth track will be determined by its ability to support sector-specific growth, driven by:

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1. Local companies that are successful in raising the sophistication of their operations and strategies and increasing their competitiveness. 2. Industry clusters that are able to coalesce and collectively resolve common constraints to the industry’s growth (coordination and market information failures). 3. Improvements in the business environment and release of cross-cutting, binding constraints to economic growth.

Competitiveness is only achieved through sustainable increases in private sector productivity resulting in improved incomes for the average citizen. It is represented in the ability of products and services from Tanzania to meet the test of the market place without protection or subsidies.

The CCP project team understands that productivity has various components, each of which can be addressed in the context of this project. These demonstrate the appropriateness of the combined cluster and value-chain approach.1

The first way to increase productivity is through the choice of appropriate market and product, and the adding of new product features and service components which enables companies to increase the value of their product and hence the price. This strategic or market price related productivity can be as important as “operational” productivity. By repositioning its products in new markets or by adding additional value (real and perceived), companies increase their sales and profits per unit of capital and labor.

A second way to improve productivity is through operational productivity, improved technology and manufacturing and service processes. This upgrading has featured prominently among the “Asian tigers”, all of which had productivity councils focusing on the upgrading and adoption of technology. For this reason, “technology transfer” features in the World Economic Forum’s competitiveness index.

A third way is by focusing on supply chain management in terms of costs of raw materials, transportation logistics, communications and information technology—things that have generated great efficiencies in manufacturing, retailing and other industries.

A fourth way to improve productivity is by investing in human resources including motivation, management and training at the firm level, by specialized institutes and in the overall educational system.

In an effort to achieve higher levels of productivity, businesses can also improve themselves in the marketplace by forming new partnerships with international firms in their value chains that provide access to markets, technology, finance and know-how.

1 Value chain productivity framework developed by JE Austin Associates for use in developing and implementing industry strategic agendas with public and private sector leaders

Determinants of Productivity and Productivity Growth

Macroeconomic, Political, Legal, and Social Context

Microeconomic Competitiveness

The Quality of the Microeconomic

BusinessEnvironment

The Sophisticationof Company

Operations andStrategy

The Quality of the Microeconomic

BusinessEnvironment

The Sophisticationof Company

Operations andStrategy

State of Cluster State of Cluster DevelopmentDevelopment

Endowments (Natural Resources, Location)

Source: Michael Porter, 2007.

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In the end, productivity increases are delivered at the firm and industry level by improving the quality of business strategy and operations. CCP interventions designed to enhance productivity will differ by value chain and cluster and require a different balance across the four components above. However, the business environment contributes importantly to the ability of firms to do this. These business environment factors, or the micro-economic foundations of growth are perhaps even more important in the case of Tanzania.2

These business environment factors include reduction of bureaucracy and red tape, ensuring the rule of law and functional commercial courts, providing good infrastructure, modernizing and supervising the financial sector, expanding trade access, attracting foreign investment and ensuring proper functioning of land markets through reliable registries and labor markets through policies that encourage job creation, labor flexibility and overall productivity.

These in turn can be improved in several ways: by responding in a demand driven way to champions of change within the Government of Tanzania; by helping private sector leaders provide input to the Government and monitor progress, by facilitating linkages between industries and their education/training providers and by providing key interventions for firms and industries that can have a potentially leveraged and catalytic effect.

The chain of activities can be a useful framework for understanding productivity and value addition

OperationalProductivity

StrategicProductivity

Supply-Chain Management

Business Environment Improvement

Human Capital Investment

Source: JE Austin, 2006

R & D Raw Materials Production Distribution Sales &

Marketing

• Advocacy platform development• Advocacy capacity building

• Internal staff development• Human resources systems

• Business – academia linkages• Joint training facilities (model farms)

• Logistics improvements• Management training• Training / consulting for entire chain

• Adoption of international standards• Use of best practices/new technology• Management training

• Access new markets• New product develop• Partnerships and

linkages outside TZ

Value Chains and Clusters Our experience in designing and implementing cluster competitiveness programs informs us that clarity around the use of terms – clusters, sectors, sub-sectors, value chains – is required, as often these terms are used interchangeably, and need to be adjusted for the context of the 2 Even Dr. Michael Porter, the thought leader of business competitiveness, weights his “Business Competitiveness Index” with 80% towards the national business environment and 20% towards “the quality of business strategy and operations” in the influential World Economic Forum Global Competitiveness Report.

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country in which they are being used. In reality, we will be working in the context of all of these concepts. We will develop clusters and cluster relationships, and in doing so, we will work intimately to upgrade and improve value chains. What are value chains? A value chain is the full range of activities required to bring a product or service to market, including all the different stages of production from raw materials sourcing to sales and marketing. Value chains are typically more specific and linear than clusters, can span geography, and most interventions tend to be transaction oriented, seeking to increase operational productivity and transactional efficiency, build business-business linkages, and fill gaps in the chain. Bottlenecks or constraints are specific in value chains, and can include regulatory issues, production, transportation, distribution, and access to affordable and quality services, reaching scale and obtaining financing.

Bacterial count < 1 mio./ ml

Farmer(Rs.12)

Gawala(Rs.15)

Processors (Rs.15)Cold Chain

MinimumPasteurization

Value Added Products*

UnpackedMilk (Rs. 20-28)

FUTURE

Middle Man (Rs. 13)

* Processed milk, Ice Cream, Cheeses, Yogurt/Yogurt drinks etc.


Farmer(Rs.12)

Gawala(Rs.15)





FUTURE

Middle Man (Rs. 13)


Farmer(Rs.12)

Gawala(Rs.15)





FUTURE

Middle Man (Rs. 13)

* Processed milk, Ice Cream, Cheeses, Yogurt/Yogurt drinks etc.

Farmer(Rs.10)

Gawala (Rs.15)

Processors(Rs.15)

Middleman(Rs.11)

Contractor (Rs.13)

Processed, Unpackaged Milk

Milk (Rs.23)

Loose Milk (Rs.20-28)

Bacterial count > 5 mio./ mlEXISTING

Processed Milk (Rs.29)Farmer

(Rs.10)

Gawala (Rs.15)

Processors(Rs.15)

Middleman(Rs.11)

Contractor (Rs.13)

Processed, Unpackaged Milk

Milk (Rs.23)

Loose Milk (Rs.20-28)

Bacterial count > 5 mio./ mlEXISTING

Processed Milk (Rs.29)

Pakistan Milk: Restructuring the chain to include a cold chain was key to reducing bacteria, increasing quality

Source: JE Austin Associates, 2006 What are clusters? A cluster is a group of companies and associated institutions working in a common industry, usually benefiting from being located close to each other in the same geographic region. Clusters can include:

An industry or collection of related industries or value chains Supplier industries, especially specialized suppliers Providers of specialized services Related industries (those with important shared activities, technologies, distribution

channels, customer relationships) Financial institutions

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Infrastructure providers Educational, training, and research institutions

Clusters are characterized as multi-dimensional networks due to the many strong linkages among competing firms, and often with a geographic focus. Because of their proximity—by geography and activities—clusters can take advantage of economic benefits of being located in the same place. Such benefits include access to specialized human resources and suppliers, access to and sharing of information and expertise, increased productivity in head-to-head competition, etc.

What is in a cluster?What is in a cluster?

• An industry or collection of related industries

• Supplier industries, especially specialized suppliers

• Providers of specialized services• Related industries (those with important

shared activities, technologies, distribution channels, customer relationships)

• Financial institutions• Infrastructure providers• Educational, training, and research

institutions

• An industry or collection of related industries

• Supplier industries, especially specialized suppliers

• Providers of specialized services• Related industries (those with important

shared activities, technologies, distribution channels, customer relationships)

• Financial institutions• Infrastructure providers• Educational, training, and research

institutions

How are clusters different from value chains?

How are clusters different from value chains?

Clusters:• Are typically geographically centered,• Which can lead them to be more Strategic

and Collaborative• Include of related/supporting industries

and institutions• Are able to address coordination,

information and market failures:• Policy reforms, Infrastructure• Quality of the skilled workforce• Establishment of industry standards• Engagement with related and

supporting industries

Clusters:• Are typically geographically centered,• Which can lead them to be more Strategic

and Collaborative• Include of related/supporting industries

and institutions• Are able to address coordination,

information and market failures:• Policy reforms, Infrastructure• Quality of the skilled workforce• Establishment of industry standards• Engagement with related and

supporting industries

A cluster is a group of companies and associated institutions working in a common industry, usually benefiting from being located close to each other in the same geography

What is a cluster?

While clusters can take time to build, productive cluster-like relationships can be fostered very quickly

Source: JE Austin Associates, 2006 Clusters will incorporate many – or parts of many – value chains. So, a developing or emerging cluster implies a growing core of lead and related firms, organizations, skills providers, and more – all aiming to share information, strategies and innovation. Collaboration brings competitors together around the same table to pursue common interests – typically interests that cannot be easily achieved by individual firms – and discussions and interventions are strategic in nature, often seeking to solve coordination and information failures: policy reforms, infrastructure, industry organisation, strategy, establishment and monitoring of industry standards, engagement with related and supporting industries, universities and institutions. Because of the multi-dimensional aspects of clusters, the initiatives to support them can often be confused with other types of initiatives that support economic development on a regional or national level. In countries as large as Tanzania, there can be multiple clusters in the same industry across the country. Because the clusters are located in different parts of the country, they will face unique conditions in doing business that will require specific interventions. However, a cluster will also have common issues that it shares with the other clusters in its industry in different parts of the country. For instance, the horticulture cluster in Arusha will have different priority issues than the emerging horticulture cluster in the Southern Highlands:

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on-farm conditions, available supporting services, transportation and route-to-market barriers, etc. Yet both clusters will also share a set of issues that are common across the industry: laws and regulations, workforce, terms of trade, etc.

Example of a Cluster: Luang Prabang Tourism

Source: Lao PDR Export Competitiveness Report, World Bank, 2005. JAA Analysis.

HotelsHotelsGuest HousesHomestaysVillages

WatsMuseumsCavesWaterfallActivities

Airlines, Domestic

AirlinesAirportBusesRiver Cruises

Tour Guides / Interpreters

Tour OperatorsLuang PrabangVientianeAbroad

Restaurants

PropertyServices

Souvenirs, Duty Free

ShoppingRetail StoresNight marketsHandicraft ShopsDuty Free

Banks,Foreign

Exchange

Financial ServicesBanksForeign ExchangeATMs

Local Transportation

Local TransportationTaxies / Tuk-tuksLocal busesCharter ServicesRiver Boats

MaintenanceServices

InfrastructureMaintenanceUtilities

Government agenciesNTATourism PoliceLocal Tourism OfficeImmigration ServicesCustoms

e.g. Universities,EducationNational University (Vientn)Lng Prbg Tourism School

Industry Groupse.g. Tourism

Industry GroupsLATAHotel and Restaurant AssocHeritage Committee

FoodSuppliers

Specialty Food

Suppliers

Public Relations & Market Research

Services

Media / Information Travel PressTelevision, RadioInternet

Local retail, health care, andother services

Local Healthcare

Lao Traditional MassageSpa ServicesHospitals

CommunicationsProvidersInternetPhone

International AgenciesAsian Development BankSNVUNESCOWorld Bank

Tourists

HotelsHotelsGuest HousesHomestaysVillages

WatsMuseumsCavesWaterfallActivities

Airlines, Domestic

AirlinesAirportBusesRiver Cruises

Tour Guides / Interpreters

Tour OperatorsLuang PrabangVientianeAbroad

Restaurants

PropertyServices

Souvenirs, Duty Free

ShoppingRetail StoresNight marketsHandicraft ShopsDuty Free

Banks,Foreign

Exchange

Financial ServicesBanksForeign ExchangeATMs

Local Transportation

Local TransportationTaxies / Tuk-tuksLocal busesCharter ServicesRiver Boats

MaintenanceServices

InfrastructureMaintenanceUtilities

Government agenciesNTATourism PoliceLocal Tourism OfficeImmigration ServicesCustoms

e.g. Universities,EducationNational University (Vientn)Lng Prbg Tourism School

Industry Groupse.g. Tourism

Industry GroupsLATAHotel and Restaurant AssocHeritage Committee

FoodSuppliers

Specialty Food

Suppliers

Public Relations & Market Research

Services

Media / Information Travel PressTelevision, RadioInternet

Local retail, health care, andother services

Local Healthcare

Lao Traditional MassageSpa ServicesHospitals

CommunicationsProvidersInternetPhone

International AgenciesAsian Development BankSNVUNESCOWorld Bank

Tourists

Although CCP seeks to promote the development of clusters in Tanzania – simply calling something a cluster will not make it a cluster. Too often consultants leave the term undefined or use it as shorthand for describing a sector or sub-sector or even try to argue that clusters and value chains are the same thing. As we have said above, cluster development starts with the right mix of interventions to create enthusiasm for collaboration, and these usually start with little steps. Often strengthening value chains is what creates the nucleus for a cluster. As firms along the value chain gain strength and confidence, they branch out and create similar linkages along their respective supply chains.

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4. Project Phases and Methodology

Project Phases

1

2

34

5

Conduct Competitiveness Assessment

Identify Target Clusters

Craft Cluster Strategies

ImplementCluster Strategies

Build Local Capacity

Note: The five phases listed above are indicative of the approach CCP will follow and one which has been employed in numerous countries since the late1990s. Capacity building, as noted above, should not be viewed simply as the “last phase” in the process. In fact, capacity building begins with crafting the cluster strategies as cluster stakeholders are brought together to assist in the conceptualization of the vision and create a finite two to three year action plan. However, the local capacity building really begins to gain momentum during the implementation phase. CCPs team will live by a credo which constantly engages with partner organizations – deploying technical assistance through them whenever possible – throughout the life of the project. CCP implementation will follow a virtuous circle of five phases that will be replicated a number of times over the course of the three years and then can be sustained after the project by TPSF and Consortium Members. The first phase, the National Competitiveness Assessment, is the tool to understand Tanzania’s relative competitiveness position. The assessment is a baseline report that will examine Tanzania’s recent economic performance, map the economy, and benchmark Tanzania’s position against other countries in the categories of income level, exports and investment, business environment, human resources and workforce capacity, infrastructure, and banking and finance. The assessment also serves to create a common vision for the future of competitiveness in Tanzania. Using the National Competitiveness Assessment as a foundational tool, next we will identify target clusters and value chains. The criteria for identification will be scale of impact, growth potential, and industry leadership and feasibility. The process for identification begins with economic mapping, pre-selecting eight potential clusters or value chains based on initial interviews, and compiling and reviewing recent relevant industry studies. We will then conduct an in depth analysis and primary research to fill in any data gaps and from there we will facilitate industry round tables within each cluster to determine feasibility, interest, and commitment.

18


Working with cluster stakeholders, public and private, to craft and implement cluster strategies is a critical step for which we have a proven process described below. First we engage leadership by mapping all key stakeholders, delivering compelling presentations about the approach, forming cluster working groups and establishing MOUs, all while engendering a spirit of cooperation and ownership. The second step is diagnostics and strategy development. In that stage we focus on gathering baseline data for cluster evaluation, using diagnostic tools to evaluate the competitive health of the sector, and develop cluster strategies. It is during the third step that we begin the implementation of strategic initiatives. By immediately implementing quick wins we harness the enthusiasm of stakeholders, in part through the demonstration effect, and may then engage cluster participants to lead longer term action initiatives. At this stage we also work with cluster and government stakeholders to address policy constraints. In step four we facilitate identification of financing for initiatives requiring additional capital. If necessary, we develop feasibility studies and business plans for major undertakings and present financial plans to potential sources of finance. Finally, in step five we will ensure that the cluster stakeholders have the tools they need to sustain activities beyond the life of the project. CCP will endeavor to learn as much as feasible about existing cluster programs and organizations who are supporting economic development in the broader sense. To date, program staff have already reached out to many key stakeholders both public and private, and the donors serving them, to map the environment for program support. In fact, several donors (DANIDA, USAID, etc.) have been invited to join strategic working groups in the selected clusters. These and home grown institutions, including some of the consortium partners involved in the cluster process, e.g., Match Maker and UD-CoET, we become important strategic partners. The stages of assessing Tanzania’s competitiveness and engaging the clusters are described in detail below.

4.1. Conduct competitiveness assessment The first step in the CCP will be to conduct a National Competitiveness Assessment. The assessment is already underway and is being completed through a combination of desktop work, on-the-ground interviews and roundtables and presentations/workshops – based on reliable data and rigorous analysis. These presentations will also include discussion of competitiveness principles, tools and approaches that will also serve the purpose of raising awareness of competitiveness and its importance for the economy. They will provide information and perspective for informed dialogue between public and private sector – TNBC, TIR, TIC, GoT – BET, TRA and the government will be able to develop a clear sense of the current and potential competitiveness of Tanzania and its major industry clusters and the implications of these for policy, export development, investment promotion, infrastructure and human resources. The national competitiveness assessment will build a foundation of information and momentum among leadership for the start of the larger initiative. This activity is largely to provide a clearer understanding of the enabling environment, whereas CCP’s detailed approach will be derived more from the bottom (cluster needs) up. In parallel to the National Competitiveness Assessment, CCP is conducting an in-depth value chain assessment of the eight short-listed industry clusters outlined below. The selection of the initial three industry clusters that will be engaged in the first year of the project will be informed by the value chain and cluster analysis of eight value chains. The analysis will be completed

19


through a combination of primary research through on-the-ground interviews/roundtables and presentations/workshops with desktop work gathering and reviewing already available analysis. In addition to informing the selection process, the value chain analyses will build a foundation of information and momentum among specific cluster leadership once the initial three clusters are selected. An International Value Chain Expert will work with two local consultants and the CCP team to conduct initial competitiveness diagnostics for each of the 8 pre-selected value chains, including a value chain analysis, cluster mapping, trade and export analysis, and a business environment analysis. The latter will be coordinated with other policy related programs such as BEST. The value chain analysis will be completed with the following tasks:

Compile, review and synthesize recent reports on the 8 pre-selected value chains

Design questionnaire for business, public sector and civil society stakeholders in each of the 8 value chains

Work with local competitiveness consultants to administer questionnaire to value chain stakeholders, building local experience and capacity and transfer knowledge

Through one-on-one interviews with business, public sector and civil society leaders:

Conduct a map of each cluster, gathering contacts and details for all the businesses operating across the value chain

Identify the individual sector strengths, weaknesses, opportunities and threats faced in each value chain

Identify the binding constraints to the growth of the sector/clusters, specifically in industry productivity, access to export markets (regional and international), quality control and upgrading, workforce development, access to supporting services and the general business environment

Identify the highest value opportunities across the value chain level to enhance competitiveness

Identify relevant benchmarks for each value chain

The value chain analysis will conclude with industry roundtable discussions that present the value chain analysis to industry leaders and discuss the industry’s interest in working with CCP and commitment to transforming their industry.

20


Competitiveness AssessmentNational Competitiveness

AssessmentNational Competitiveness

Assessment• The baseline information / understanding

on Tanzania’s competitiveness, includes:• Definition/principles of competitiveness• Tanzania’s recent economic performance• Mapping of the Economy• Benchmarking Tanzania’s

competitiveness against other countries• Levels of income• Exports and Investment• Business Environment• Human Resources and Workforce• Infrastructure• Banking and Finance

• Can create a common Vision for the Future

• The baseline information / understanding on Tanzania’s competitiveness, includes:

• Definition/principles of competitiveness• Tanzania’s recent economic performance• Mapping of the Economy• Benchmarking Tanzania’s

competitiveness against other countries• Levels of income• Exports and Investment• Business Environment• Human Resources and Workforce• Infrastructure• Banking and Finance

• Can create a common Vision for the Future

Value Chain / Cluster Assessments

Value Chain / Cluster Assessments

• Analysis of 8 value chains including:• Economic estimate of the flow of

value throughout the value chain• Structure and composition of the

value chain (sizes of businesses, types of activities, current markets)

• Strengths, weaknesses, opportunities and threats

• Industry specific regulations, standards/certifications, workforce, infrastructure, access to financing

• Cluster mapping of businesses, supporting institutions, govt entities interacting with the value chain / cluster

• Analysis of 8 value chains including:• Economic estimate of the flow of

value throughout the value chain• Structure and composition of the

value chain (sizes of businesses, types of activities, current markets)

• Strengths, weaknesses, opportunities and threats

• Industry specific regulations, standards/certifications, workforce, infrastructure, access to financing

• Cluster mapping of businesses, supporting institutions, govt entities interacting with the value chain / cluster

Below are some initial findings of the National Competitiveness Assessment. From the industry cluster mapping below, we can see that the Tanzanian economy is still heavily concentrated in natural resource and agricultural-based sectors. The development of value-added activities and higher-skilled, higher-value services is still in the early stages.

21


Mapping the Tanzanian Economy

Fishing /Fish Products

Transport/Logistics

Tourism

DairyMeat

Hides & Skins

Livestock

Footwear

Textiles / Apparel

Sisal

Maize

Oilseeds

Tea Coffee

Furniture

Spices

Health

Music / Entertainment

Tobacco

FinanceConstruction

Materials

Construction

Cassava

Gems & Jewelry

Cashew Nuts

Pyrethrum

Sugar

Potatoes

Pulses

PaddyBananaMillets

Sorghum

Wheat

Cotton

ForestryHandicraft

Metalworks

FoodProcessing

SeaweedHorticulture Pharma

Precious Stones/Metals

Iron & Steel

Wood Products

Mining

Telecom

Pulp and Paper

Packaging

Chem, Plastic, Rubber

Source: TCCP Illustrative Analysis Tanzanian exports appear to be performing well, with many industries growing their share of total world exports. The two graphs below show the export performance of Tanzania’s main export industries. In the graphs, the size of the bubbles represents the total value of exports in 2007 (latest possible figures). The Y-axis represents the percentage of the total exports worldwide that are Tanzania exports in the industry. The X-axis indicates whether that industry is growing in its share of world exports. In all industries, Tanzania still commands a very small share of global exports – less than one percent. Despite strong growth in share among some industries, only a handful of industries exceeded $100 million in exports, indicating that many of the industries are still in early development stage and/or serving only very specific parts of the industry.

22


Coffee

Tea

-0.10%

0.00%

0.10%

0.20%

0.30%

0.40%

0.50%

0.60%

0.70%

0.80%

0.90%

1.00%

-20% -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Fertilizers

PlasticsMining equipment

Electrical equipment

Salt / cementTextiles

Travel and Tourism

Precious Stones / Metals

Transport

Milling products

Business Services

Tobacco

Tanzania’s Exports% Share in World Exports(2007)

% Growth in Share of World Exports(5 Yr CAGR 2003-2007)

= $ 200,000,000 USD

Size of Bubble: Value of 2007 Exports

Source: UN COMTRADE Database, TCCP Analysis

-0.10%

0.00%

0.10%

0.20%

0.30%

0.40%

-20% -10% 0% 10% 20% 30% 40%

Oil seeds

Communications

Live plants, cut flowers

Insurance

Palm oil / beeswax

Hides and skins

Travel and Tourism

Precious Stones / Metals

Transport

Fresh fish

Tobacco

Cotton

Fresh Veg

Cereals

Government Services

Fresh fruits

Vehicles not rail Wood products

Sugar

Ore, Slag, Ash

PetroleumJelly

Spices

Business Services

Milling products

Tanzania’s Exports% Share in World Exports(2007)

% Growth in Share of World Exports(5 Yr CAGR 2003-2007)

Source: UN COMTRADE Database, TCCP Analysis Note: The second figure is an expansion of the shaded are of the first figure. Based on a recent survey of registered businesses in Tanzania, we are able to understand the breakdown of number of operating businesses and formal employment by sector. The formal private sector is still largely concentrated in trade activities. Manufacturing and services are still

23


well behind in overall business activity as well as generating employment. Despite the construction boom in Dar es Salaam, and investment in infrastructure across the country, the construction sector is registering just 10,000 jobs across the country.

Number of Registered Businesses by Sector

59.3

9.4 9.61.5 1.4

8.60.7 1.3 0.5 0.4 0.1 0.0 0.6

63.3

15.622.9

3.9 3.610.8

1.5 1.2 0.6 0.5 0.2 0.1 0.2-

10.020.030.040.050.060.070.0

Trade:

Whls

le& R

etail

Manufa

cturin

g

Hotels

& Res

tauran

ts

Public

Admin/

Defenc

e

Educa

tion

Other C

omnty

/Soc

ial &

Prsn

...

Health

& S

ocial

Serv

ice

Transp

ort / S

torag

e & C

omm

Financ

ial In

termed

iation

Constr

uctio

n

Electric

ity, G

as, W

ater

Mining

& Q

uarry

Real E

state

/ Ren

ting &

Bu..

.

Dar es Salaam

Outside Dar

(000’s)

Source: Ministry of Industry, Trade and Marketing 2009

Employment by Sector (Registered Businesses)

129.3

51.437.2 31.0 23.5 28.1

8.618.3

9.4 5.83.2 0.4

2.4

131.4

57.2 63.9 64.551.2

35.422.2

6.7 5.0 4.33.4 6.1

0.6-

20.0

40.060.080.0

100.0

120.0140.0

Trade:

Whls

le& R

etail

Manufa

cturin

g

Hotels

& Res

tauran

ts

Public

Adm

in/Defe

nce

Educa

tion

Other C

omnty

/Soc

ial &

Pr...

Health

& Soc

ial S

ervice

Trans

port /

Stor

age &

Com

m

Financ

ial In

termed

iation

Constr

uctio

n

Electric

ity, G

as, W

ater

Mining

& Qua

rry

Real E

state

/ Ren

ting &

B...

Dar

Non-Dar

(000’s)

Source: Ministry of Industry, Trade and Marketing 2009 Mapping the geographic concentration of manufacturing allows us to see if any clustering is occurring in specific regions of the country. From the diagram below we see that the highest concentration of firms are in food and beverage, reflecting the agricultural orientation of the economy. Dar es Salaam is the only city with multiple industries of more than 10 firms in each industry. Arusha and Tanga both have smaller clusters of firms operating in the same industry.

24


The rest of the regions have only a handful of non-food and beverage manufacturing firms in operation.

Geographic Concentration of Manufacturing Industries

22

Dar es Salaam

Furniture, others

Building Materials

Chem, Plstc, Rubber

Paper & Publishing

Timber & Wood

Leather & Footware

Textile & Garments

Food, Bev, & Tob

Metal & Allied

Machinery & Electric

= 1 firm

= 10 firms

Scale

= 20 firms

Source: Ministry of Industry, Trade and Marketing 2009

4.2. Identify target clusters Tanzania has few, if any, true clusters. The task of CCP is not to create clusters in the academic sense, but to help stakeholders build cluster relationships in order to achieve competitiveness opportunities, release specific growth constraints and reposition Tanzanian sectors in regional and international markets. These cluster relationships will deepen and be sustainable since they help cluster stakeholders respond profitably to market opportunity. And, how will we know when we have a cluster? When the stakeholders – business and government – are working together to achieve agreed objectives that benefit multiple businesses in possibly multiple value chains, and that are beyond the capability of individual businesses to achieve. While helping stakeholders to build true cluster relationships, we will also substantially work through value chains as this will allow stakeholders to adopt concepts rapidly, leading to quick wins, and using the three-to-five year time frame to ensure sound cluster relationships and sustainable cluster formation. Tanzania is too big to generally consider an entire sub-sector as a cluster, or even as a value chain – except in cases when the lead firms are located close to each other, or where production has a geographic focus. A sub-sector would typically include many related value chains – and possibly even clusters – which could benefit from similar business models, services and service providers. As value chains deepen and strengthen in both the vertical and horizontal dimensions, and begin to address issues like availability of a qualified workforce, the cost of energy, appropriateness of infrastructure, environmental degradation, then a cluster is

25


beginning to emerge. Tanzania’s size offers wonderful opportunity for replicating sound business models and value chain and cluster models. Thus, an emphasis of CCP’s approach to capacity building is to provide Tanzanian practitioners and organizations with the skills and experience that will allow them to work with other constituencies in Tanzania to successfully facilitate the formation of many more competitive value chains and clusters. The CCP recognizes the necessity to work with specific geographic clusters while also elevating the common industry issues to the national level. As a result, CCP has designed an approach that allows the project to work at both the cluster and national level. In the first year of the program, CCP will work with 3 industry clusters. For each of the industries, CCP will select 1 pilot cluster to support over the first year. In working with each pilot cluster, the program will identify issues that require national level coordination and attention. After 6-9 months, as the pilot clusters begin to stand on their own, the program will explore opportunities to replicate the work of the initial pilot clusters across the other clusters in the industry. The diagram below illustrates the approach with the horticulture industry. CCP partner organizations (the consortium members) will all be involved in the planning and implementation phase with the selected clusters.

By selecting pilot clusters within each industry, TCCP will work at both the National and the Cluster Level. In years 2 and 3 the programme will then look for opportunities to replicate the activities of the first cluster

Start with a pilot cluster and replicate across clusters

• Laws and Policies• National Taxation• Terms of Trade

• Coordinated Marketing• Export Infrastructure• National Workforce Institutions

National Industry Cluster Issues

Cluster Specific Issues

Arusha• Access to

inputs• On-farm

productivity• Standards and

certifications• Local

workforce• Supporting

services

Sthrn Highlands• TBD

Lushoto• TBD

Cluster 4• TBD

Illustrative

National Horticulture Industry

The selection of industry clusters is a practical necessity based on the limitations in terms of resources and leadership capacity of CCP and its project partners. Experience implementing cluster competitiveness projects in other countries demonstrates that a major factor of success is the willingness and commitment of the business leaders in the cluster to creating change and working together to transform their industry. So in addition to specific economic indicators that

26


can be used to select clusters for engagement, there are a number of principles which the selection process should follow to increase the chances of success:

The selection process should be open and competitive o No or limited predetermination of industrial sectors or activities o Funding for top performers, not for meeting set standards o Cluster participants should self-select, creating a strong psychological contract

The selection process should be a recurring activity, not a one-off decision o Successful cluster initiatives get a “life of their own” o Government can start new waves of cluster initiatives Note: Cluster initiatives are those activities which directly lead to the improved coordination and development of regionally based industry clusters.

Industry Clusters should be selected based on criteria that reflect their roles in economic development

o Identify cross-cutting challenges: Size, heterogeneity o Enable collaboration for change: Willingness to act o Unlock economic potential: Critical mass, business environment conditions o Export-oriented: Allowing the industry players to collaborate on “growing the

market” o Domestic market potential including opportunities for import substitution.

The selection criteria proposed and approved for identifying the initial 3 clusters for engagement is outlined below. The criteria respond to the overall objectives of the CCP, and have been informed by our work elsewhere. These criteria are grouped to permit a comparative analysis of the three key groups of differentiators – Growth Potential, Scale of Impact and Industry Leadership – as described below and illustrated in the diagram:

1. Growth Potential measures the relative capacity of a cluster to grow competitively and hence, to contribute to overall economic growth.

2. Scale of Impact measures the relative capacity of an industry cluster to benefit all strata of society and geography.

3. Industry Leadership considers the capacity of likely cluster participants to engage in a highly motivated manner, in the cluster development. It also examines the quality and capacity of leadership in the cluster. Will there be a critical mass of individuals who collectively will be able to provide the necessary vision to grow the cluster?

One important criterion will be the stage of development of the cluster itself. Although we expect to find some emerging clusters, we expect to find mostly value chains, which through strengthening and upgrading will form the nucleus around which a cluster will eventually develop. Furthermore, value chains may hold more promise for quick wins during the initial years of the CCP.

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Scale of Impact• Job creation • Geographic scope• Number of firms • Social impact

Growth Potential• GDP contribution• Exports• Investment• Linkages to regional /

global value chains

Industry Leadershipand Feasibility

• Participant commitment• # of lead firms• Strategic vision

1. Economic mapping2. Pre-select 8 clusters/value

chains based on available information and initial interviews

3. Compile and review recent studies on specific industries

4. Conduct in-depth analysis and primary research to fill in data gaps

5. Facilitate industry roundtables with 8 clusters to determine commitment and feasibility

Process for IdentificationCriteria for Identification

Based on the criteria described above and an initial mapping and analysis of the economy CCP has recommended the eight industries listed at the right of the diagram below for further in-depth consideration. The analysis is summarized in the appendix of this document.

• Tourism• Horticulture• Food Processing• Tea• Livestock – Beef, Dairy• Textiles and Apparel• Transport/Logistics• Fishing/Mariculture

• Staple Crops• Horticulture • Coffee• Cotton• Tea• Oilseeds• Livestock: Meat, Dairy• Spices• Cashew Nuts• Food Processing• Metalworks• Tourism• Transport/Logistics• Footwear• Textiles and Apparel• Furniture• Construction Materials• Chemicals/Pharmaceuticals• Fishing / Fish Products• Wood Products• Gems & Jewelry

SCALE OF IMPACT

ENGAGEABILITYCOMPETITIVE GROWTH

POTENTIAL

Identification of Industries for Analysis

4.3. Craft cluster strategies The major over-arching goal of a sector competitiveness initiative is to catalyze significant, sustainable increase in value added in specific industry sectors and for the national economy as a whole. Success will be measured by the enhanced competitive position for the sector in

28


regional and international markets leading to increased investment, export revenues, and the generation of productive, sustainable jobs. A supporting objective is the creation of an effective private-public dialogue that achieves tangible results leading to the identification, prioritization and investment in sound sector strategies. The transfer of skills and knowledge to local professionals who can continue to implement sector competitiveness initiatives over time in a variety of industries and regions will be critical to the further extension of the cluster methodology to other sectors. In today’s global economy, firms do not compete against firms—supply chains compete against supply chains. Strategic positioning of an industry means considering all potential markets and which products or services will be the most competitive and profitable for each market. This requires an in depth understanding of the market, efficient supply chain management, and input from all key participants across the value chain—not only the processors or exporters. A competitive industry understands its customers, is forward integrated, has internal industry cooperation as well as government collaboration to solve problems, and seeks improved quality through better inputs, production, and management. By offering technical assistance and facilitation at a working group level—which includes sector firms, government, academia, and stakeholders—a competitive strategy can by designed and implemented to enhance policy and regulations, increase industry productivity, and maximize market access.

Strategic Positioning of an Industry Cluster

Strategically positioning of an industry means considering all potential markets and which products/services will be the most competitive and profitable for each market. This requires:

– In-depth understanding of the market– Efficient supply-chain management– Input from all key participants across the value chain, not just

the processors or exporters

Value Chain and Industry Cluster Development

In today’s global economy, firms do not compete against firms; supply chains compete against supply chains.

The goal of CCP is to develop a platform from which the clusters can speak with one voice and form a strategy for positioning themselves on a more competitive basis within the world market. The catalytic process of cluster formation involves continuously increasing participation of greater portions of the value chain. The process involves facilitation by international industry

29


experts who assist members in interacting more effectively among them and with the public sector. Lessons learned from cluster competitiveness projects in other countries show how the process will evolve, understanding that there are variations in each industry cluster. Previous experience demonstrates that there are many investments required in developing a cluster to the point of implementing an industry-owned and led strategy involving effective public-private dialogue. The CCP approach includes global industry experts, international and national study tours, and the costs incurred by bringing industry members together to dialogue and develop their strategy in concert with the public sector, as required. Based on a proven, facilitative and catalytic methodology and a comprehensive strategic framework (see figure below), the project team will work with the cluster leaders to identify the highest-value opportunities to enhance value chain productivity and reposition the cluster in key markets. In parallel, the cluster will identify and articulate highest-priority constraints in the cluster. The process will be facilitated by the Senior Competitiveness Advisor and the Local Cluster Development Specialist (one per cluster), and will include the active participation of the cluster leadership and stakeholders. The process will build upon the analytical work that was carried out during Phases 1 and 2, by developing potential solutions to the constraints identified and strategies for repositioning the cluster to capture valuable market opportunities. In order to gain some quick wins, constraints will be ranked in order of potential impact upon the cluster, with those constraints that can be addressed relatively easily and more rapidly being the first to be implemented. This will result in early successes to help to consolidate support for the cluster upgrading strategies. Solutions to the constraints will involve a number of outside resources, including the other components of PSCP, reaching out to lead firms, working with local service providers to devise solutions, working with the sector association to lobby for administrative change, and the creation of working groups. These groups will have the mandate to lead the charge of addressing the constraint and will have the responsibility of establishing a timeline with expected outcomes and define the baseline against which success will be measured. They will report back regularly on progress to the cluster stakeholders, including posting the information on the CCP website. Over time, the goal of the Cluster Strategic Working Group is to develop a platform from which the cluster can speak with one voice and form a strategy for positioning itself on a more competitive basis within the regional and world markets. The catalytic process of cluster formation involves continuously increasing participation of greater portions of the value chain. The process involves facilitation by international industry experts who assist members in interacting more effectively among them and with the public sector. This dialogue results in a common strategy for growth that is private sector owned and supported by government. In order to prioritize the strategic initiatives on the agenda and be able to communicate both importance and the urgency of each initiative, the cluster strategies will quantify for each initiative both the economic and social value-at-stake.

30


Source: JE Austin Associates Successful cluster engagement must be driven by the “speed and need” of the industry so the details of this plan will be adjusted or customized as CCP works with the industry cluster. Specific responsibilities for each activity are denoted with “” and outlines of deliverables are presented. Stage 1: Research and Engagement Leading to MOU

Activity: Leadership Mapping: Identify and engage key individuals, organizations, entrepreneurs, government officials and agencies that play a formal or informal current or potential leadership role in the SWOG

Resources: Project Leader, Senior Competitiveness Experts, Cluster Development Specialist, Consortium Members (consortium members)

Activity: Develop and present the compelling economic, social and political rationale for

the sector and the benefits of improving its competitiveness based on existing data Resources: Project Leader, Senior Competitiveness Expert, Consortium

Members

Activity: Elicit strong interest in cooperation by raising awareness, demonstrating potential, giving relevant examples and laying out the potential

Resources: Project Leader, Senior Competitiveness Experts, Cluster Development Specialist, and Consortium Members

Key point: this usually requires more than one meeting, allowing time for critical mass of support to grow among various segments of the industry. This may entail subsequent

Engage Leadership

Stage 1

Stage 2

Stage 3

Stage 4

Stage 5 Diagnostics and

Strategy Development

Implementation of Strategic Initiatives

Facilitate Sources of Financing Build Sustainability

l Conduct leadership mapping of all key stakeholders

l Deliver compelling presentations to engage sector leadership

l Form cluster working groups and establish MOUs

l Engender ownership and foster cooperation

l Immediate implementation of quick wins

l Mobilize and faciliate cluster participants to lead action initiatives

l Work with cluster and government to release policy constraints

l Identify initiatives that require external financing

l Develop feasibility studies and business plans

l Present financial plans to potential sources of financing

l Apply key diagnostic tools for competitive position of sector

l Coordinate with other initiatives in sector

l Gather baseline data for cluster evaluation

l Develop cluster strategies

l TCCP to assist/encourage cluster to ensure continuity post-project

l Resources and sector leadership to be taken on directly by the clusters themselves

l TPSF and other business support institutions to continue with some cluster support activities

l International Industry Expertsl Cluster Study Tours to World-class

Centers of Excellence

Working with the Cluster Stakeholders

31


small group meetings, one-on-one meetings with key leaders and several larger group meetings

- Leadership mapping is essential to get “key leaders” on board - MOU has to present mutual commitments - MOU can be with sector or with one or more specific organization(s)

Stage 2: Industry Diagnostics Strategy Through workshops, conferences, and interviews, the CCP consortium will facilitate and assist the industry in repositioning itself in the global market. It will help improve both strategies and operations, enhancing their growth and profitability. The project team will seek to help the clusters to identify “quick wins” to help generate momentum with the sectors. In addition, the team will further use the diagnostic tools as part of the facilitation of and dialogue with the sector and its constituent cluster(s) to highlight and prioritize the high-value strategic and operational opportunities for the development of the sector. The emphasis is one of facilitating decision-making by the sector. Through workshops, conferences, and interviews, the CCP consortium will facilitate and assist the industry cluster in repositioning itself in the global market. It will help improve both strategies and operations, enhancing their growth and profitability. The project team will seek to help the clusters to identify “quick wins” to help generate momentum with the sectors. In addition, the team will further use the diagnostic tools as part of the facilitation of and dialogue with the sector and its constituent cluster(s) to highlight and prioritize the high-value strategic and operational opportunities for the development of the cluster. The emphasis is one of facilitating decision-making by the sector. The process and stakeholders is illustrated in the chart below:

Sector firmsSector firms AcademiaAcademiaGovernmentGovernment StakeholdersStakeholders

Cluster StrategyWorking Groups Cluster StrategyWorking Groups

Cluster StrategyCluster Strategy

ImplementationImplementation

Policy & RegulationsPolicy & Regulations Industry ProductivityIndustry Productivity Market AccessMarket Access

Facilitation & TechnicalExpertise

Cluster Strategic Working Groups

Source: JE Austin Associates

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Benchmarking against global best practices enables each of the existing clusters to grasp the significant trends, functions, and direction of the industry, especially in the areas of research and development and implementation of innovative approaches to production. Through benchmarking, local producers can understand how investments of those in the global value chain have enabled the best to achieve higher levels of productivity and value. Benchmarking, gap analysis, and other competitiveness analysis, strengthens the ability of each cluster to identify second-generation policy reforms and pilot initiatives that will drive cluster competitiveness. Each cluster uses the results of these analyses to develop its strategy with private sector involvement from across the domestic and global value chain, fostering a strong sense of private sector ownership in partnership with the public sector.

Developing an Industry Cluster and Value Chain Strategy

• Customer segmentation• Understanding brand position• Market trends• E-commerce capabilities• Customer surveys• Pricing• Targeted advertising

• Better raw material at lower cost• Workforce skills development• Capital Costs• Energy Costs• Route-to-market• Research Institutions• Supply-chain management

Understanding and Shaping Demand

Upgrading and Streamlining Supply

• Forward Integration• Value Addition• New Products and Markets• Increased Quality Standards• Supply Chain Improvements• Market –buyer linkages• E-marketing

Strategic Positioning for Emerging Opportunities

Industry cluster/VC strategies address issues, pursue opportunities that are above the capabilities of just one firm and eventually raise the productivity and performance of the entire industry

Source: JE Austin Associates The development of a well-benchmarked strategy owned by the private sector and supported by government, identifies investments needed in: skills development, research and new product development, cluster infrastructure and innovation, and better management of each cluster. Active industry cluster management is important to avoid previously unforeseen threats and an inability to retain or expand market share through increased value. Active industry management will help each cluster move away from a state of complacency toward making needed investments in human resources, infrastructure, sector management, innovation, and research and development.

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Strategic Agenda

Productivity Enhancements

Market and ProductDevelopment

Industry Standards

Workforce Development

Industry Organization and Supporting Institutions

Regulatory Reforms

Financing

Infrastructure and Logistics

A strategic agenda will allow the clusters to take a systemic approach to development, balancing both short-term and long-term objectives

Linkages across clusters can be coordinated to multiply the effects from each cluster strategy. The CCP consortium will capture and enhance the linkages among the clusters and with the rest of the economy. Parallel strategic planning for the cluster strategic working groups will provide a unique opportunity for cross-fertilization of ideas and collaborative initiatives. Successful sector engagement must be driven by the speed and need of the industry cluster so the details of this plan will be adjusted or customized as we work with the strategy working group. The solutions to the constraints will vary considerably from one cluster to another, and CCP consortium staff will be available to ensure that there will be no resource constraints to solving the constraints. CCP will assist the working groups to delineate the options that are available to them, which will include accessing CCP international short-term experts and local expertise. Some examples of strategic initiatives include:

Development of E-commerce capability by hoteliers and tour operators (Kazakstn) Branding “Ceylon Sapphires” (Sri Lanka) Investing in laboratory testing equipment to certify sapphires (Sri Lanka) Sri Lankan Cinnamon with its own trade code # Design competition for furniture export industry (Croatia) Negotiation of 10% energy price discount through joint procurement (Sri Lanka) Linking producers to markets through study tours/trade show participation (Pakistan) Improvement in travel logistics for tourists (air travel, taxis, visas, signage) (Mongolia) Adding product and service features to ornamental flower exports (Colombia) Foreign investment attraction efforts to “fill out” the cluster (Costa Rica) Increased efficiency of transport and logistics systems at border crossings and major

exchange points (Kazakhstan)

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To the extent possible, solutions to the constraints will be provided through local service providers and lead firms, supported by CCP expertise. This will constitute a major portion of the capacity building activity of CCP (Outcome 2). CCP expertise will be there to ensure that the local service providers are able to provide the services/solutions that they propose. CCP will work with the working groups to walk them through the definition of the problem, drafting of the terms of reference, and selection of the most appropriate service provider. Through this hand-holding approach, the working groups will gain the experience to continue to serve their clusters in the future.

JE Austin Associates 2

Cluster Strategic Agenda Template

Productivity, e.g.• Investment in modern technology • Demonstration of new business models• Adoption of best practice processes

Market and Product Development, e.g.• Improved market access/linkages• Industry branding• Product development

Policy and Standards Reform, e.g.• Reduced import tariffs• Adopted health / environmental standards• Access to resources: regulations and concessions

Workforce Development, e.g.• Industry training centers• Certifications / Qualifications• Improved curriculum

Industry Organization and Supporting Institutions• Industry Organization• Research institutes

Economic

E.g.:• Productivity• Sales/Income• Exports• Investment• Increased

expertise

Value Potential

Social

E.g.• Health• Education• Increased

employment• Quality of

employment

Activity: The Project Leader, Senior Competitiveness Expert, and Cluster Development Specialist will convene meetings with leadership during which time the business strategists and industry specialists will apply the appropriate diagnostic tools.

Resources: Project Leader, Senior Competitiveness Expert, Sector Advisor and Consortium Members

Activity: The Competitiveness Expert, Cluster Development Specialist and Consortium

Members will identify and coordinate with any pre-existing or new initiatives at work in the industry

Resources: Competitiveness Expert, Cluster Development Specialist, and Consortium Members

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Activity: The Competitiveness Expert, Cluster Development Specialist, and Consortium Members will gather, assemble and provide relevant information on the industry allowing for an ongoing evaluation of the performance.

Resources: International Industry Advisor, Cluster Specialist with Guidance from Senior Competitiveness Expert and Consortium Members

Activity: A diagnostic assessment of the industry and the identification of key strategies

for the repositioning of the industry to achieve industry objectives related to growth and profitability and government objectives related to growth, employment, regional development and economic diversification

Resources: International Industry Advisor, Cluster Specialist with Guidance from Senior Competitiveness Expert and Consortium Members

Activity: Development, preparation and dissemination of the industry strategy. Strategy

document to be developed initially in draft form Resources: Project Leader, Senior Competitiveness Expert, Cluster Development Specialist, International Industry Advisor and Consortium Members

Stage 3: Initial Implementation of Strategic Initiatives

Activity: Immediately upon finalizing the strategy, the cluster, with guidance from CCP will proceed to implement specific strategic initiatives. Strategies will depend on the unique circumstances of each industry. However, typical strategies include improving knowledge of consumers and markets, upgrading and innovating in products and services, improving supply chain management, collaborating with universities and R&D centers, and designing workforce development initiatives.

The team, (Project Leader, Senior Competitiveness Expert, Cluster Development Specialist, and Consortium Members) will seek to help the cluster participants to target and achieve some quick wins to provide momentum to this process and to encourage the cluster to continue after project termination.

The team will leave behind a process so that the cluster may continue to function after the end of the project along with final recommendations.

Resources: Project Leader, Senior Competitiveness Expert, Cluster Development Specialist, and Consortium Members

Stage 4: Help Facilitate Practical Sources of Financing

Activity: Identify initiatives that require external financing

Some strategic initiatives identified in stage 3 will not require much financing. For example, local universities can help train people who can improve e-marketing and who will later be hired by the companies themselves. Policy initiatives may not require funding.

Other initiatives will require varying levels of investment. These investment quality projects are often identified in the later half of the first year of engagement and at times even later.

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Resources: Senior Competitiveness Experts, Cluster Development Specialist, and Consortium Members

Activity: Develop feasibility studies and business plans

CCP will work with the clusters to develop business plans for cluster initiatives that require financing. Each strategic initiative identified by the cluster will have a detailed business plan and feasibility study developed that will clearly demonstrate financial viability and will outline revenue models, organizational structures, and management plans to ensure the business plans are attractive to a variety of financial sources. In addition, the business plans will highlight the economic and social value-at-stake. Resources: Senior Competitiveness Expert, Cluster Specialist, and Consortium

Members

Activity: Present financial plans to potential sources of financing With credible business plans in hand, the team will help link the clusters to those financiers who can take the cluster initiatives to the next step of technical, market, economic and financial feasibility.

The team will also be attentive to the interests of development banks and other groups promoting and financing economic diversification efforts and bring their attention to such opportunities.

It would be premature to speculate on the specific investment modalities that could fund the strategic initiatives mentioned above. Based on prior experience, there is no lack of financial resources if excellent investment opportunities are identified. There are multiple sources of financing appropriate to specific initiatives, for example:

o Equity financing o Commercial bank financing o Development bank financing o Venture capital/equity investment groups o International Finance Corporation co-investment o Voluntary contributions o Partial return of VAT or industry related levies/ tax collections to the industry o Attraction of new investment to “fill out” the sector offerings o Private Donors

Resources: Project Leader, Senior Competitiveness Expert, Cluster Development Specialist, and Consortium Members

Activity: Determine suitability for special fund (SF) assistance CCP will develop criteria for beneficiary access to special fund resources and determine suitability on a case by case basis. The SF will be used for cluster or value chain level assistance programs in support of productivity, sustainability and competitiveness improvement initiatives. The criteria will be developed and reviewed with TPSF.

Stage 5: Building Sustainability (End of Project) During the last months of the project, the CCP team will assist and encourage the Clusters to take steps to ensure the continuity of the effort after project termination. Resources, sector value chain, and constituent sector leadership should largely be taken on by the sectors themselves.

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Capacity-building Plan Developing the capacities and skills of TPSF and the cluster leadership is an integral component of the project, and all project activities are organized to maximize this result. More specifically, we will achieve the following objectives as the result of the project activities:

Develop capacities and transfer skills to enable cluster leaderships and various business beneficiaries to develop and implement strategies and improve their competitiveness

Improve the abilities of public and private sector to engage in constructive, effective dialogue and resolve key constraints to private sector development

Continue to develop TPSF’s capacities to continue to implement programs to build competitiveness and facilitate public-private dialogue on constraints to competitiveness

As TPSF builds its reputation for being the Center of Excellence in supporting cluster competitiveness through the cluster approach, the project team will work with TPSF staff to provide effective and world class competitiveness-related services, and be perceived as the Sector Competitiveness “practitioners” in Tanzania. The TPSF staff will develop capabilities in sector analysis and cluster facilitation skills. The capacity building will primarily be delivered by on-the-job working hand-in-hand with the CCP project team. Thus, CCP with assistance from our Consortium Members will deliver capacity building and training to TPSF staff in several ways:

Practical training on-the-job as part of the “ core team” Ongoing mentoring and support Information sharing and capacity building through presentations, lectures and

discussions to TPSF staff Direct exposure to the Competitiveness Process for developing and building the

Clusters And assistance to help build a core of facilitators within TPSF – specifically the

person in charge of the competitiveness function (soon to be established), the advocacy person and the outreach person, among others.

Cluster Competitiveness Initiatives: Things to do and common errors to avoid The methodology above lays out how to go about cluster engagement in a successful way. It is equally important to know what not to do so as to avoid costly mistakes that can retard the development of the industry. The cluster building process is a long-term process and is normally not completed within the scope of this current project. The clusters must be made aware of this at the outset of this process so that expectations are not unduly raised. The right “psychological contract” must be established at the outset. The team is not providing “help” but engages in a contract—a memo of understanding—that lays out the roles and responsibilities of both sides. There should normally be some “hurdles” in place that the industry cluster must pass to demonstrate that it will engage effectively. The principal of industry financing or co-financing must be established early. The project should not normally pay for venues or refreshments for meetings. It is also important not to “drown” the initiative by throwing government money or subsidies. This subverts the process and distorts the

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motives of those subsequently participating in the process. If they expect government funding or other free help, this can retard the development of independent initiative. Some industry leaders may not wish to participate feeling they are too busy. They may be doubtful that going to meetings will be of practical help. That is natural. Efforts should still be made to stay in communication with them and send them periodic updates if they are important. It is helpful to keep the press informed of the activities. This also encourages industry participation and the sense of identity. The cluster building process, where it has proven to be effective is not a “consultant-driven” or “expert-led” process. It is not an engineering project with boxes to be checked upon completion. By its nature it requires that local entrepreneurs assume leadership, develop a shared compelling vision and identify their practical interests with cluster initiatives. These “secrets of success” do not emerge automatically. They are not easy to induce if they do not exist. Many misunderstandings can derail the process. Therefore, much attention must be given to managing the process. A key question for CCP will be how to balance cluster replication within the first three industries with expansion of clusters in other industries? As the first three pilot clusters near the end of the first phase and begin to implement action plans, the CCP team will begin to evaluate the expansion of support to additional industry clusters based on the learnings from the first three pilot clusters. In some cases, it may make sense to support additional industries and pilot clusters, while in other industries, if there is clear potential to support additional pilots, CCP will consider replicating the pilot cluster to other regions.

5. Organization of the Project Team

5.1. Staffing and Organization Engaging exceptional Tanzanian talent and leveraging proven international experience are two guiding principles of our management approach. Hayley Alexander will serve as team leader, working closely with Justin Stokes, Senior Competitiveness Advisor. A rigorous recruit is underway to identify top Tanzanian candidates for cluster specialist positions, as well as finance manager, M&E specialist, public relations specialist, office manager, and driver. The team in Tanzania will be supported by EMG’s home office management team and short term international consultants when appropriate. All job descriptions have been approved by the client and posted in local media.

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CCP Organization Chart

TEAM LEADER

DEPUTY TEAM LEADER

SR. COMPTVNSS ADVISOR

CLUSTER SPECIALIST

CLUSTER SPECIALIST

CLUSTER SPECIALIST

FUNDS MANAGER

M & E SPECIALIST

OFFICE MGR & ACCOUNTANT

RECEPTIONISTSHORT TERM

EXPERTSDRIVER

Additional support for the Core Team will be provided by: Experienced Short Term Consultants from Consortium Members Specialized International Consultants EMG’s Home Office Management Team

5.2. Consortium Partners The consortium consists of the following entities: EMG – prime contractor JE Austin & associates – subcontractor Match Maker Associates – subcontractor Daima Associates – subcontractor University Dar es Salaam Entrepreneurship Center – subcontractor University Dar es Salaam College of Engineering and Technology – subcontractor TechnoServe – TBD The above consortium imbues CCP with a wealth of resources and talent to meet our competitiveness and capacity building objectives. These are further elaborated below. EMG – A firm with 25 years of experience in emerging markets in dozens of countries around the world. Expertise in private sector development, public sector and utilities, agribusiness, the financial sector, policy reform and the health sector.

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JE Austin – One of the preeminent firms in the areas of competitiveness, cluster building and value chain strengthening. JE Austin has ongoing projects in dozens of countries and is a well recognized leader for capacity building in the aforementioned. Match Maker – A specialist firm in developing the capacity of clusters in Africa. Match Maker will assist with cluster diagnostics, value chain analysis, market research and intensive training at the cluster level among CCP target industries. Daima Associates – A firm very experienced in business policy and regulatory reform working closely with government counterparts. Daima will assist with public sector capacity building, policy research and working with partners to effect regulatory reform. UD Entrepreneurship Center – The UDEC has the best developed center in support of entrepreneurs in the country. UDEC will assist with public outreach for the program, market research, M&E baseline surveys and training of business development services providers. UD College of Engineering and Technology – The UDCoET is the leader in advancing the understanding and implementation of clusters in Tanzania. USCoET will assist with training facilitators and industry leaders, cluster capacity building and public outreach.

1. Actions to Date Within five days of contract signature the EMG project office start-up team deployed to the field and set CCP in motion. During the start up phase the CCP workplan was finalized and local staff recruitment was initiated. Key personnel were in place within 30 days of contract signature, and client and counterpart meetings are ongoing. We are currently drafting project communication and operation guidelines and anticipate that local staff recruitment will be complete shortly. The project workplan and staffing plan deliverables have been submitted on schedule. Simultaneous with start up we were also able to launch the assessment phase of the project. The assessment workplan is complete, as is the collection of international benchmarking and Tanzanian economic performance data. We are in the midst of key stakeholder meetings and conducting the value chain analysis and national competitiveness assessment. See Quarterly report for more detail.

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Activities to Date

Project Start-up ActivitiesProject Start-up Activities

• Project start-up team deployed to field within 5 days of contract signature

• Key personnel in place within 30 days of contract signature

• Local staff recruitment on going with all job descriptions approved and posted in local media

• Start-up meetings with client and key counterparts are ongoing

• TCCP Work Plan finalized and shared with the client

• Project Communication and Operation Guidelines are being developed (in collaboration with the client) to ensure efficient and effective communication and operational procedures

• Project start-up team deployed to field within 5 days of contract signature

• Key personnel in place within 30 days of contract signature

• Local staff recruitment on going with all job descriptions approved and posted in local media

• Start-up meetings with client and key counterparts are ongoing

• TCCP Work Plan finalized and shared with the client

• Project Communication and Operation Guidelines are being developed (in collaboration with the client) to ensure efficient and effective communication and operational procedures

Assessment ActivitiesAssessment Activities

• Assessment workplan – Complete • Collection of international benchmarking

data - Complete• Collection of Tanzania economic

performance data – Complete• Meetings with key stakeholders and

economic policymakers – Underway• Draft of the National Competitiveness

Assessment – Underway• Development of value chain analysis

methodology – Underway • Initial meetings have occurred in a few

sectors

• Assessment workplan – Complete • Collection of international benchmarking

data - Complete• Collection of Tanzania economic

performance data – Complete• Meetings with key stakeholders and

economic policymakers – Underway• Draft of the National Competitiveness

Assessment – Underway• Development of value chain analysis

methodology – Underway • Initial meetings have occurred in a few

sectors

2. Monitoring Systems A successful project will lead to important results for the sports goods sector and the Pakistan economy, most of which will be realized beyond the life of the project. To track progress and results, the team has prepared a plan to monitor and evaluate process indicators and results. The kinds of indicators used during the life of a competitiveness initiative vary as the work progresses. An overview of these indicators is presented visually in the figure below. The monitoring system will be established to evaluate the progress of CCP and impact to selected clusters/value chains, including its actions, investments, financing, ownership and hence, sustainability Process Indicators will track CCP actions and interventions with stakeholders Impact Indicators will track stakeholder actions and environment improvements, and may include regulatory reforms undertaken, exports achieved, investments made, jobs created, etc. The illustration presents the project life cycle with time on the horizontal axis. The vertical access presents an approximation of the project expenditure with the project typically ramping up in the first three months and ramping down towards the end of the project. During this cycle, there are four kinds of indicators: process indicators in the early stage of the initiative, action indicators in the subsequent stages, counterpart investment indicators as the project continues and then results indicators as the project moves to maturity. However, these results must be directly connected to the project activity and so they are called “delivered results.”

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Tracking the correct indicators during the project lifecycle will enable the organization to track: • Implementation progress • Cluster follow-through on commitments in its action plan • Intermediate outcomes, in terms of investment • Delivered results, in terms of the expected results for the sector and the economy. Process Indicators: Engagement and Formation of Cluster Strategy Development Process Indicators will be used in the early stage of the project to ensure that the project is convening the right set of leadership, influencing mindsets, fostering cluster cooperation and establishing the appropriate relationship and commitments between the contractor and the cluster leaders. The process indicators will be used as a tracking tool for each important project element. These process indicators will track the ability of the CCP team to engage the leadership of the cluster, elicit a strong response, develop an ongoing working relationship where the responsibilities are clear and the commitment is sustained through the process of cluster diagnostics and strategy development. The specific process indicators that will be used to monitor the cluster engagement include:

Completed analytic activities Competitiveness presentations/discussions made to cluster leadership Degree of interest as measured by discussions with cluster players and openness of

opinions and information Quantity and quality of participation (number of firms engaged, numbers of CEOs) Minutes of follow up meetings with industry leaders

The specific process indicators that will be used to monitor the initial cluster engagement include:

Memoranda of Understanding are signed Clusters agree to meet at least monthly, participate in diagnostics and strategy exercises

and agree not to focus on protectionism, subsidies or special incentives but rather to focus on building sustainable long-term competitiveness

Diagnostics are applied and openly discussed in subsequent sessions with heavy Cluster participation

Action Implementation Indicators: Action Implementation Once the clusters are organized and meetings have started, strategic plans, timetables and action plans will be developed for implementation. During this phase of the project, specific strategic action initiatives, workforce development initiatives or policy action initiatives will be identified by the cluster as the means of implementing their strategy for repositioning their sector and increasing value added for their firms, their industries and the country. A cluster will typically have anywhere between three and twelve action initiatives going on at any one time with five to seven often being the norm. Estimates of the investment costs of implementing these action initiatives can be developed as can estimates of the potential impact on value added, export values and employment once the action initiatives have been implemented.

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Once they have been identified, timetables for implementation need to be fleshed out and these then become part of the performance-monitoring plan. The Cluster Development Specialist is the person in charge of seeing that these milestones are met and that there are records kept allowing for monitoring and evaluation. However, the M&E specialist is responsible for the overall monitoring and evaluation of the project goals. The indicators at this stage focus on whether or not progress is being made in developing the strategic plan and implementing the action initiatives according to a reasonable timetable. These action initiatives are indicators, developed on the basis of past experience and the project planning, that indicated that the project is en route to achieving its objectives. The focus is not yet on results and impacts but on actions. The action indicators at this stage would include the following:

Technical assistance is mobilized for specific clusters (business strategists, and industry experts as needed)

Strategies are developed and adopted by clusters (evidenced by prior heavy participation in the formulation, and often validated by outside industry experts)

Action initiatives are identified and plans of action fleshed out with responsibilities take on by the cluster representatives

In many cases actions are also carried out at the firm level. As a result, some action indicators may be at the firm level. One of the benefits of the cluster focus is that individual firms will take ideas and lessons and also implement them on an individual basis. This is a benefit that should be tracked, if possible. For example on a previous project, after industry experts verified that that a number of firms in the ceramics cluster had extremely high quality product, two firms launched their own brands on international markets rather than serving as back office production facilities for others. Given the difficulty in obtaining specific firm-level information, information collected in this respect may have to be by interview or survey. Action indicators will continue for the rest of the project life. Investment Mobilization Indicators: Increasing SWOG Investment A competitiveness initiative should generate investments from the cluster over time that are substantially greater than the value initial government investments in cluster development. Co-investment typically begins modestly through the contribution of cluster executive time, provision of workshop venues and working lunch refreshments, contributions to travel costs. However, once action indicators have been identified, investments should normally begin. The most significant investments occur at the stage of implementing action initiatives and should become quite significant in years two to three. However, some counterpart investment in time and materials should begin almost immediately to maintain the principle that the cluster owns this process. Investment indicators include but are not limited to:

Private equity investment in new projects Investment of retained earnings by companies in initiatives that have come out of SWOG

activity Government investment in needed infrastructure Investment of other donors in particular projects such as those related to vocational

education, research, workforce development, policy reform or institutional strengthening

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Private venture capital mobilized or other forms of finance developed such as fee-for-service or private sector financing of university research and training activities

Delivered Results: Measuring Sustained Impact on Competitiveness The final indicator that the project will be tracking is of delivered results—results directly attributable to project intervention. Since the major objective of the project is to achieve improvements in strategic and operational productivity, indicators focus around increases in value-added as well as including export revenues, employment growth, new enterprise growth, average wages, incremental tax revenues and average profitability in the industry. Delivered results will be tracked and measured on a periodic basis going forward. Experience shows that quantifiable results start to be available towards the end of Year 1 of the process, and afterwards. There will be a tracking mechanism to capture project results and impacts as they occur. It must also be demonstrated that the project contributed directly in delivering these results. It is not enough for the cluster to show overall results of the industry. It must demonstrate the results that were partially or wholly delivered by the project.

Indicators Change Over Time During the Life Cycle of the Project

• P1: process indicators; P2: action indicators; P3: investment indicators; P4: results indicators

• X axis represent the life of the project measured in time

• Y axis represents the level of investment necessary during the life of the project

• Solid curve line shows incremental increase in project or government investment at the start of the cluster project with declining levels of public investment as the project winds down

• As the project progresses, ideally other projects and investments will take place and with increasing co-investments by the private sector (as indicated by the dotted line)

Monitoring Systems


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Project Components

P1: Start-up, Industry Research, Formation of Cluster Working Group

P2: Cluster Diagnostic and Strategy Development

P3: Implementation or Strategic Initiatives

P4: Results-based Performance Tracking: (4.1) Submission of inception report with performance tracking plan; (4.2) Review of cluster initiatives; (4.3) Submission of quarterly reports to TPSF

Monitoring Systems Plan for Year One


3. Implementation Schedule A graphic depiction of the year one project workplan is presented below. In it we identify critical project activities and target dates for completing these activities. Most activities are on schedule; however, the cluster/value chain assessment and the national competitiveness assessment are now both expected to be completed at the end of September.

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Project Phases & ComponentsA. PROJECT START-UP & REPORTING ACTIVITIES

Start-upA.1 Mobilize key long-term staffA.2 Meet and coordinate with key stakeholdersA.3 Procure project equipmentA.4 Recruit local project staffA.5 Project launch event

Reporting and Performance Based TrackingA.5 Submit initial Project Work PlanA.6 Submit Inception Report with performance tracking planA.7 Develop Monitoirng and Evaluation Report tempate and methodologyA.8 Submit Quarterly Report

1. National Competitiveness Assessment

1.1 Mobilize industry expert1.2 Compile Background Economic Research1.3 Conduct Economic Analysis and Competitiveness Benchmarking1.4 Conduct Interviews with Key Economic Leadership1.5 Draft National Competitiveness Assessment (NCA)1.6 Submit NCA Report and present draft results

Cluster / Value Chain Assessments1.7 Mobilize two international industry experts1.8 Contract with local firm to assist with research/data collection1.9 Develop and test survey questionnaire

1.10 Perform macro assesmsment of key Tanzanian sectors 1.11 Hold stakeholder meetings to discuss key Tanzanian sectors1.12 Establish preliminary list of 8 clusters/VCs to further assess1.13 Review preliminary list of 8 clusters/VCs with TPSF and selected stakeholders 1.14 Agree on 8 clusters/VCs for detailed assessment1.15 Conduct SWOT, benchmarking and diagnostics on 8 clusters/VCs1.16 Conduct round table and present preliminary findings to all 8 C/VCs1.17 Assess commitment levels and vision among cluster leaders1.18 Submit draft Asssessment on 8 clusters/VCs

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CONDUCT INITIAL COMPETITIVENESS DIAGNOSTICS & ASSESSMENTS

2. IDENTIFY TARGET CLUSTERS2.1 Propose 3 clusters/VCs for more detailed research -- based on draft C/VC Assessment 2.2 Conduct detailed benchmarking and diagnostics amongst 3 C/VCs2.3 Detail specific market and policy failures with resulting opporutnities for assistance2.4 Hold round table with stakeholders to present findings and solicit feedback2.5 Submit and present C/VC Report and conclusions

3. CRAFT CLUSTER STRATEGIES3.1 Mobilize international industry experts3.2 Analyze detailed findings for 3 C/VC Reports to detemrine strategic priorities3.3 Develop draft Cluster Strategies3.4 Identify rapid actions (1 to 6 month time frame)3.5 Solicit feedback and achieve consensus with stakeholders on draft strategies3.6 Finalize cluster strategies 3.7 Share strategies with partners and form action groups to implement 3.8 Hold press event with partners to publicize strategic plans

4. IMPLEMENT CLUSTER STRATEGIES4.1 Implement immediate actions / quick wins4.2 Develop action plans with timelines responsible parties and expected results4.3 Provide technical assistance to achieve priority regulatory reforms4.4 Provide technical assistance to establish value chain linkages between firms4.5 Provide technical assistance to establish export market development4.6 Provide management training in disciplines to improve competitiveness/productivity4.7 Engage pilot interventions at mini-cluster level in market linkages??

5. 5.1 Develop capacity in TSPF through training and/or consulting

5.2 Develop capacity in Task Force through training and/or consulting 5.3 Identify and provide capacity building support to business associations5.4 Identify and provide capacity building support to other private institutions and NGOs

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tanzania cluster competitiveness program inception report · 1. purpose of the inception report...

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