Introduction

187. Tanzania has come a long way in its efforts towards socio-economic development and in transforming its economy from a state-led to a market oriented economy. A few years after independence in 1961, Tanzania chose the path of African socialism and self-reliance for national development. Under that path, all major means of production and businesses were directly controlled by the State.

188. Despite the achievements of the socialism and self-reliance policy in social development in the 1970s and early 1980’s particularly in primary education, health services delivery and water supply; the policy did not bring about the expected results due to macroeconomic imbalances resulting from world economic instability, increase in petroleum prices, the War against Idd Amin of Uganda and the breakdown of the East African community (EAC).

189. As a response to that economic crisis, the Government has been undertaking various economic reforms since 1980s. The reforms included the implementation of the National Economic Survival Program (NESP) of 1981 and the Structural Adjustment Program (SAP) of 1983. However, those programmes were not supported by development partners.

190. In 1986, the Government started the implementation of Economic Recovery Programmes I & II, which were supported by the development partners (World Bank and International Monetary Fund). Those programmes were followed by several other programs. The implementations of these reforms were accompanied by the Government abdicating itself from direct ownership and control of the major means of production. As a consequence, the public sector reduce its roles to core functions of policy formulation; economic management; provision of socio-economic infrastructure; provision of legal and regulatory framework; managing the rule of law and order; and selected areas of public-private sectors partnership. Basically, this development makes the private sector an engine of economic growth rate needed to achieve the objective of reducing poverty.

191. Since the 1990s, the participation of the private sector in the development process has been strengthened. Furthermore, a number of initiatives have been undertaken to strengthen and widen the contribution of private sector in socio-economic development. The Tanzania Development Vision 2025, and its implementation tools, the National Strategy for Growth and Reduction Poverty (NSGRP), popularly known in Kiswahili as “MKUKUTA”, Medium Term Plan (MTP) and various sectoral strategies spell out the importance of private sector as the engine for economic growth. MKUKUTA places high priority on accelerating broad based growth by developing interventions to sectors where the majority of the poor with the highest growth potential are found. In all those initiatives, the private sector development has been accorded special attention, as it is expected to contribute to realizing the national goals of accelerating growth, increase in income and reducing poverty.

192. With a view to facilitating the private sector to contribute effectively towards socio-economic development, an enabling business environment has been identified as among the key drivers. Policies and reforms undertaken have so far, enabled Tanzania to put in place a stable macro-economic framework for private sector growth. Nonetheless, there are still areas that need further improvements so as to unleash economic potentials, including further improvements in the business regulatory environment.

Status of the Private Sector
193. Despite the sustained efforts to revive the economy and empower the private sector; the latter is still at its infancy stage of development with over 80 percent of private enterprises falling in the Small and Medium Enterprises (SMEs) category. The 2005 diagnostic report of the Property and Business Formalization Programme in Tanzania (PBFT), popularly known as MKURABITA revealed that about 98 percent of businesses are informal; that is, they operate outside the legal system. Moreover, about 89 percent of all properties in Tanzania are owned outside the legal system. This indicates that, the private sector has concentrates itself in small businesses in the informal sector.

194. The SMEs are constrained by lack of adequate finance, technical and managerial skills. Furthermore, they also lack proper facilitative infrastructure and market information to properly link to domestic and external markets. In addition, the businesses are inhibited by excessive and conflicting regulations which make their transition from informal to the formal sector difficult.

195. The government has undertaken various reforms that touch and nurture the private sector, but the latter’s response has been low partly due to its infancy. Furthermore, there still exist several regulatory and administrative procedures that hinder development of the businesses and consequently impair their growth.

196. Following existence of such bottlenecks in the development of private sector, the Government has recently taken several initiatives to strengthen the private sector. The Government, the private sector and development partners have recognized problems faced by SMEs and acknowledged the extensive work which remains to be done to bring about a fully functioning private sector.

Developments in the Private Sector in Tanzania
197. Following the implementation of economic reforms, the Government has strengthened the cooperation with the private sector as a major stakeholder in bringing about economic development and reducing poverty. A number of umbrella private sector organizations and associations have been established in order to articulate their needs to the wider public and strengthen their capacity to dialogue with the Government. Such organizations include the Tanzania National Business Council (TNBC), Tanzania Private Sector Foundation (TPSF), Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA), Confederation of Trade and Industry (CTI), Tanzania Gender Networking Programme (TGNP) and “Vikundi Vya Biashara Ndongondogo” (VIBINDO) among many others. These organizations together with the support of development partners have facilitated modalities to institutionalize the then ad-hoc consultative dialogues between the public and private sector. This is being done through the public expenditure reviews, annual budget consultative meetings and meetings of the special tax task force. The TNBC in particular has been of significant contribution in providing a forum for public and private consultations.

Tanzania National Business Council (TNBC)
198. TNBC was established by a Presidential Circular in September 2001 to provide for a forum for public/private sector consultations. It is composed of balanced memberships from the Public and Private Sectors. It became fully operational in March 2002. The Council is chaired by the President of the United Republic of Tanzania, and its Vice-Chairman is the President of the Private Sector Foundation.

199. The TNBC functions through consultative meetings held twice a year. The meetings brings together key players in Public and Private Sector who are members of the council to discuss and agree on key issues pertaining to private sector development and economic growth. So far, the council has successfully conducted three Meetings. The first was in March 2002, which was also used to launch the council. The Second meeting was held in November 2004 and the third in March 2005.

200. The council has also facilitated one Local Investors Round Table that was held in June 2002 and five International Investors Round Table meetings. The first of the International Investors Round Table was held in July 2002, the second in May 2003, the third in November 2003, the fourth in November 2004 and the fifth in May 2005.

The Business Environment and Private Sector Development in Tanzania
201. In its efforts to strengthen the business environment in Tanzania, the government with the support of development partners, has developed a Business Environment Strengthening for Tanzania (BEST) Programme, which aims at reducing the cost of doing business, removing the regulatory and administrative barriers to formal business, and thereby laying the ground for formalization of businesses.

The Rationale and Objective of the BEST Programme
202. The BEST Programme is central in improving business environment and achieving the objectives of poverty reduction. The Programme is fully consistent with, and takes forward national development priorities and policy initiatives, as identified in the NSGRP, the Integrated Framework (IF) for Trade Development which prioritizes legal and regulatory environment reforms among areas.

The specific objectives of the BEST Programme are as follows:
(i) To reduce the burden on businesses by eradicating as many procedural and administrative barriers as possible;
(ii) To improve the quality of services provided by Government to the private sector, including commercial dispute resolutions;
(iii) To enhance the capacity of Private sector to advocate for and demand a better business environment.

Components of the BEST Programme
203. The components of BEST programme are as shown in table 1 below.

Table 10.1: Components of the BEST Programme and Areas of Focus

Component		Areas of Focus
1	Achieving Better Regulations	Removal of unnecessary regulations Revision and simplification of outdated legislation and regulations Preparation of required legislations and regulations Putting in place a sustainable process for ensuring business-friendly laws, regulations and administrative procedures Strengthening capacities for regulatory reforms
2	Improving Commercial Dispute Resolutions	Improved access to commercial justice by SMES and big business alike Improved speed and quality of services provided by court system to businesses, in particular commercial dispute resolutions. Diversification of channels for commercial justice delivery, including alternative dispute resolutions
3	Strengthening the Tanzania Investment Centre	Increasing the number and value of local and foreign investment in Tanzania Enhancing the promotion of Tanzania as an investment destination
4	Change of Government Culture	Improved “customer service” ethos for services provided to the private sector by the Public and the Judiciary
5	Empowering Private Sector Advocacy	Improved capacity of private sector stakeholders to identify regulatory problems and solutions and advocate for an improved business environment

Expected Results of the BEST Programme
204. The figure below presents a description of expected output, which starts with the improve business environment which will trigger enhanced economic growth and ultimately contribute to poverty reduction. Below is an illustration of what achieving each output will entail.

The Beneficiaries of the Strengthened Business Environment
205. Ultimately, all Tanzanians will benefit from the fast economic growth flowing from a more enabling environment for businesses. The immediate beneficiaries of the BEST Programme will be businesses in the private sector, which will be able to exploit commercial opportunities more effectively and profitably.

206. The perspective of the BEST Programme as discussed earlier, is to have a private sector which includes businesses of all sizes and stages of development ranging from small traders in the informal sector, to large established manufacturing companies and potential new large foreign and indigenous investors. All these businesses contribute to the growth of the national economy and all will benefit from a more enabling environment. Even more importantly, the programme emphasizes the creation of an environment conducive to the inclusion of women and youth in mainstream economic activity.

207. It is particularly important to note that small businesses will benefit more given that small businesses are currently the majority accounting for 80 percent of all businesses and 98 percent of those are in the informal sector. Furthermore, small businesses are disproportionately inhibited by excessive and conflicting regulations, which make the transition from the informal to the formal sector very difficult. This creates the phenomenon of the “missing middle” in which the economy includes a large number of very small businesses and a few large well-established businesses, lacking the dearth of the fast growing entrepreneurial businesses, which are the life-blood of growth in many successful economies.

Properties and Businesses Formalization Programme
208. The Government has given special priority to the formalization of property and businesses of the poor through MKURABITA theme here is to formalize the informal sector into formal one. The Program is a continuation of Government efforts and seriousness in developing private sector as an engine for economic growth. The main objective is to formalize property and businesses, and thus pave the way for private sector development. This will help the poor to formalize their properties and businesses and enable them access loans from commercial banks.

Conclusion
209. It is observed that the business environment is of enormous importance to private sector given its mandate as the engine of economic growth. The strengthened business environment not only facilitates smooth business undertakings and growth of the individual businesses in the economy but it also contributes to economic growth at the same time. The strengthened business environment also precipitates spill over effects to government revenue and employment among other benefits.