press release
Dar Es Salaam — Tourism is already a major contributor to Tanzania's
economy. However, as the latest Tanzania Economic Update published by
the World Bank argues, this strategic industry can grow and create more
high-paying jobs, and closer linkages with businesses and local
communities. To realize this opportunity, the government should simplify
its system of taxes and fees and make its revenue allocations more
transparent.
"There is no doubt Tanzania is in a good place with tourism and yet
could do considerably better," says Philippe Dongier, Country Director
for Tanzania, Burundi and Uganda. "Tanzania has abundant natural tourism
attractions and is well recognized internationally including. The
country received one million visitors in 2013 bringing in US$ 1.5bn in
foreign exchange earnings, which is remarkable by any account. But there
is potential for further growth as also emphasized by the Government;
and some of the needed reforms are quite urgent as the status quo could
be costly for the country."
Tourism directly employs close to half a million Tanzanians and
contributes to almost 20 percent of total exports. It represents
approximately 3.4 percent of Tanzania's total GDP but the level could
reach an estimated 10 percent when considering its indirect impacts on
other areas such as agriculture and transportation. In view of this,
tourism is considered to be a high priority under President Jakaya
Kikwete's development agenda, as well as that of the National Business
Council. The industry has the goal is to multiply by eight the revenues
from tourism by 2025 or to double the sector's annual growth rate
observed in recent years.
"This target is indeed achievable but only if there is a change in
policies and mindsets among all stakeholders," says Jacques Morisset,
World Bank Lead Economist who authors the report.
To increase tourism's benefits to the economy and the public, the
latest Update proposes three strategic directions. The first is to
diversify tourism activities from the current emphasis on high end
tourism in the north around Arusha and Zanzibar where up to 90 percent
of tourism activities are currently concentrated. The report recommends
realizing other opportunities, especially in the South, and developing
attractions and activities that cater to tourists on more modest travel
budgets, including more local and regional visitors.
The second direction is to further integrate local communities and
small operators into tourism activities, through benefit-sharing
processes. While such efforts already exist in Tanzania, they are still
at a small scale and have had limited impact on the ground. The report
highlights best practices where training and linkages programs developed
jointly by the private and public sectors have brought about higher
quality standards while also increasing the participation of the local
business community and workers in tourism activities.
The third direction requires revisiting the current complex system of
taxes and fees, and the non-transparent use of revenues collected from
tourism. The Economic Update recommends that the system of taxes and
fees should be made simpler and enforced more equitably with the goal of
reducing transaction costs for businesses and closing loopholes that
create space for illegal payments. Furthermore, the distribution of the
revenues needs to be streamlined so that these can easily be tracked to
increase benefits for the majority of citizens. The government also has
to boost its management of natural resources through the smart
application of incentives and sanctions to protect endangered species as
well as land and water use.
Apart from the discussion of Tanzania's tourism as the special focus
of this edition of the Tanzania Economic Update,, the publication
analyses the state of the economy. The recent rebasing of the GDP and
the latest household budget survey have challenged the traditional view
of the Tanzanian economy. The country's income per capita, at USD 950,
is now closer than before to reaching middle income status and the
poverty rate declined from 33 percent 2007 to 28 percent in 2012.
Meanwhile, the economy continued to expand by around seven percent in
2014 with controlled inflation averaging five percent.
"The main vulnerability of Tanzania's macroeconomic management
remains its fiscal policy, and it is imperative for the Government to
rectify this situation," says Morisset.
Urgent action is required to address fiscal risks currently faced by
the Government's budget as a result of missed revenue targets, the
arrears with the pension funds and contractors, and the partial
withholding of budget support by development partners which has led to
the Government's increased borrowing on the local financial market.
While the Government appears ready to take the necessary actions to
address these risks, the report warns there is no room for complacency
when the country is gearing up for a national referendum in April 2015
on the proposed new constitution and general elections in October 2015.
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