In its first videoconference for Tanzania, held November 10, the Vi gathered 31 students, staff and experts from Vi core member, the University of Dar es Salaam Business School, affiliate member, the Open University of Tanzania, and country offices of TradeMark East Africa in Tanzania and Kenya, to discuss the findings of the 2014 edition of the Trade and Development Report (TDR), November 10. The event was hosted by TradeMark East Africa, a non-profit organization supporting trade in the region.
The report was presented by co-author, Pilar Fajarnés, of UNCTAD's Division on Globalization and Development Strategies.
"Our work on this year's TDR was marked by two events - discussions on the post-2015 development agenda and the 50th and 70th anniversaries of UNCTAD and the Bretton Wood institutions, respectively", Fajarnés said while introducing the context of the report, whose 2014 edition focuses on global governance and policy space for development.
Six years after the global crisis, the world economy is still not back on track, with an estimated rate of growth of 2.5 to 3 percent in 2014, the weakest recovery in the post-war period, she said.
The roots of the crisis have not really been addressed, she added. The combination of monetary expansion, which is not directed at financing of the real economy but instead creates asset bubbles, as well as fiscal austerity and wage restraint which hamper aggregate demand, "is like driving a car by pushing at the same time the brake and the accelerator."
"The external economic environment for developing countries has become more complicated," she continued. “Two major sources of developing countries' growth - import demand from developed countries, and growing commodity prices, will not be able to play the same role as in the past.”
The sluggish aggregate demand in developed countries slowed down the growth rates of developed country imports from developing countries, and the commodity prices are unlikely to return to the pre-crisis levels, she explained.
In this situation, developing countries need to find new drivers of growth. A way forward would be "to rebalance the growth strategies by putting less emphasis on exports to developed countries, and focus more on domestic and regional markets," suggested Fajarnés. This would require structural transformation of their economies, using industrial policies and public investment in infrastructure and human capital.
Such strategy would need to be supported by adequate policy space to implement industrial policy measures - which is larger under multilateral than bilateral trade and investment agreements - as well as by sufficient financial resources - which require the mobilization of domestic fiscal revenues.
"We have looked at public revenues in developing countries," pointed out Fajarnés. It appears that as a result of transfer pricing, developing countries may be losing over USD 160 billion annually.
Additionally, "tax competition has reduced the natural resources rents from extractive industries. Between 2004 and 2012, only 17 to 34 percent of these rents actually accrued to governments in those developing countries where private corporations play a dominant role in the extractive industries," she added.
In Tanzania in particular, the share of rents is relatively low, around 18 percent over the period of 2004-2012. This is an important issue, because given the limited linkages and job creation in mining, the fiscal contribution of the sector is the key benefit for the economy. Tanzania has therefore recently embarked on a revision of its mining law, in view of possibly increasing the royalties paid by the mining companies.
"This issue is particularly important for the region with the new discoveries of natural gas," said Fajarnés. She also stressed the importance of regional initiatives in this regard, such as the Africa Mining Vision formulated by African countries.
In order to address the taxation challenge at the international level, the report puts forward a proposal for a UN-led initiative aiming to increase transparency, make firms pay taxes in the countries in which they make profits, and conclude an international convention against tax evasion.
The discussion which followed touched upon a number of related issues, such as the balance between trade liberalization and policy space, and between export policies and industrial policies; the role of tax incentives in attracting investment and transferring technology; the approach to the negotiations of international investment agreements; and the feasibility of using manufacturing as a step towards industrial development.
The videoconference received very positive feedback from the audience.
"I and my friends here are very happy, as we have actually gained some insights from the presentation that are useful for policymaking in the country,” said Mesia Ilomo, coordinator at Vi core member, the University of Dar es Salaam Business School. “I hope that we will maintain the collaboration for the benefit of our countries." concluded