I am such a reader,. I love reading especially reading on matters that i hardly know or dont know of totally.. As World Bank is one among my dream international organization and I being a young economist i tend to read more and more articles from the WB blogs..
SO, i came across this article of Jacques Morisset (just google him --what an intellectual!!) who is *** The
author is the World Bank’s lead economist for Tanzania, Uganda and Burundi, and
the author of the third Tanzania Economic Update titled ‘Opening the Gates: How
the Port of Dar es Salaam can transform Tanzania.’ He is a PHd holder from the University of Geneiva but resides in Tanzania.
Please read it and share it, its very eye opening and interesting..
Imagine that you are in an elevator. It stops to
pick up the next passenger going up. It turns out to be H.E. Jayaka
Mrisho Kikwete, yes, the President of Tanzania himself, accompanied by a group
of high anking officials. The President turns and asks you what you think
is the most important thing that he could do for his country. You have less
than three minutes to convince him. What would you tell him?
I know
what I would say, loud and clear: “Your Excellency, that would have to be
improving the performance of the port of Dar es Salaam.”
No doubt
there are plenty of issues that matter for Tanzania’s prosperity: rural
development, education, energy, water, food security, roads, you name it. They
are all competing for urgent attention and effort; yet it is also true that
each of them involves complex solutions that would take time to produce impact
on the ground, and it is hard to know where to begin and to focus priority
attention.
This is
not the case for the Dar es Salaam port, as most experts know what to do.
So why
the port of Dar es Salaam?
The port
represents a wonderful opportunity for his country. The port handles about 90%
of Tanzania’s international trade and is the potential gateway of six
landlocked countries. I would tell him that almost all citizen and firms
operating in Tanzania are currently affected, directly and indirectly, by the
performance of this port.
When
children are desperately ill in hospitals, the medicines that they urgently
need to cure them are likely to be stuck inside the port. When farmers are
keeling over due to excessive prices for fertilizers, this is partly as a
result of the long delays at the port. Not only are the vehicles that transport
us and our goods delivered to us as sea freight, they are also fuelled
gasoline/petrol brought in by tankers from abroad. Come to think of it, a large
portion of what Tanzanians eat, drink, or use in a typical day came into the
country through the port of Dar es Salaam at some stage, either during its
production or in its final state.
I would
emphasize the symptoms of the current poor performance of the port.
Delays in processes are generally long, very long. In mid-2012 for instance, a
typical container spent an average of 20 days in the port, including the
anchorage time and the time spent before the merchandise exited the premises.
In Mombasa port, the same container would spend an average of four to six days,
or two to three days in the world's most efficient ports.
Although
this average delay masks huge variations across customers and products, it
translates into significant monetary costs for shipping companies and importers
that are generally passed on to local consumers. To illustrate the magnitude of
these losses for his country and the region, the World Bank's Third Tanzania
Economic Update has calculated that Tanzania and six neighboring countries
could earn up to US$2.7 billion per year (or approximately seven percent of
Tanzania's GDP) if only the performance of the Dar es Salaam port was at par
with Mombasa’s.
At this
stage, the President might ask what exactly he should do to improve the port's
performance. The good news is that many experts involved already have an idea
what to do. They have proposed to improve both the soft and hard infrastructure
in and around the port. On the soft side, this means rationalizing current
processes and procedures that are overly complex and end up penalizing users.
For example, modifying the sequencing call of vessels and storage tariffs, as
well as simplifying custom payments.
For hard
infrastructure, equipment, such as cranes, needs to be modernized and new
berths built to increase capacity. These well-known actions have been
identified for a while now but have not yet been implemented or only at a
half-hearted pace.
Leadership
for Reforms
“Well,” Ndugu Kikwete might say, “if my country is losing so much money and
experts know what to do, what can I do to speed up the implementation process?”
My answer would be three-fold. Firstly, some of the actions require money but I
would quickly explain to him that this is not the main reason for the
resistance to reforms. Indeed, many actions are inexpensive and others can be
funded by private operators. Ports are good businesses, including in Tanzania,
and potential private investors have been queuing to invest in the port of Dar
es Salaam.
Secondly,
I would explain to him that the lack of progress in the implementation of
efficiency enhancing reforms in the port is partly the consequence of the
absence of information about the cost of inaction. Not many people are aware
that a more efficient port could boost the Tanzanian and regional economies, at
least not in the magnitude of the figures mentioned above.
Thirdly,
and more importantly, I would point out that he would have to fight the vested
interests that are gaining from the inefficient state of the port.
The port
is handling about US$15 billion of merchandise and this amount is expected to
grow as the result of the expansion of regional economies. What is the
corruption rate on these transactions? Of course, it is difficult to capture in
exact terms, but if the corruption rate is, say, 20% of the value of the traded
merchandise, this will be equivalent to US$3 billion per year!
Long
delays also provide an opportunity for connected users to speed up processes
through illegal payments. Such opportunistic behavior would not exist with an
efficient port since there would be less room for negotiation. Why would users
pay extra-money if the average delay in the port was only four days?
Another
group winning from the port inefficiency is constituted by domestic companies
that are facing less competition from imports. Longer delays of the imports
contribute to higher costs and translate into some sort of ‘protection’ for the
associated local industries. This protection could be as high as 22% of the merchandise's
value if it is imported by container. This is four times higher than the
average official import tariff charged by customs. Thanks to this protection,
domestic firms can increase their profits or have less incentive to produce the
most efficient way possible. As a result, the final consumer or investor loses,
either by paying too much or accepting low quality. The trade-off is of course
that faced with tougher competition someday some local firms could lose jobs or
disappear.
My
three-minutes are gone...
At the
end of my three minutes, to convince the President further, I would conclude by
telling him that he should not forget the "three Cs". The reform
process in the port of Dar es Salaam requires:
- More
Competition - by bringing new private investors in the port to finance new
investments and offer better quality services;
- Less Corruption - by reducing the opportunities for rent-seeking behaviors by
specific groups, and;
- More Communication by launching a strong advocacy campaign, which will help
stimulate the appetite for reforms and increase the accountability of policy
makers.
Thank
you, Mr. President.
