Distribution Restricted ADM/EVA/R.5 16 June 2003 UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION ORIGINAL: ENGLISH ______________________________________________________________ INTEGRATED INDUSTRIAL DEVELOPMENT PROGRAMME FOR CAPACITY-BUILDING TO ENHANCE INDUSTRIAL COMPETITIVENESS AND SUSTAINABILITY IN TANZANIA (WITH EMPHASIS ON SMEs AND AGRO INDUSTRIES) Report of the Independent Joint In-depth Evaluation Mission* Elizabeth Msengi Government Representative United Republic of Tanzania Colin Raynor Performance Adviser UNIDO Hans H. Heep Officer-In-Charge Evaluation Services Branch UNIDO * The designations employed and the presentation of the material in this document do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations Industrial Development Organization concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers and boundaries. Mention of company names and commercial products does not imply the endorsement of UNIDO. The views and opinions of the evaluation team do not necessarily reflect the views of the Government of the United Republic of Tanzania and of UNIDO. This document has not been formally edited. Acknowledgment The evaluation team would like to thank all persons met and especially all persons involved in planning and realizing the mission. We hope that some of the proposed recommendations will contribute to the continuous improvement of the Programme and to the achievement of the expected results. Table of Contents Acronyms 2 Executive Summary 3 Follow-up on Recommendations Error! Bookmark not defined. Component 1: Implementation of the Sustainable Industrial Development Policy (SIDP) 1996- 2020 18 Component 2: Small and Medium Enterprise (SME) Development 23 Component 3: Investment and Finance 35 Component 4: Productivity, Technology and Competitiveness 41 Component 5: Environment 50 Component 6: Private Sector Development Programme 54 Appendix I: Summary Terms of Reference for the Independent In-depth Evaluation Republic of Tanzania 62 Appendix II: List of Organizations and Persons Met 65 1 Acronyms ASDS Agricultural Sector Development Strategy BEST Business Environment Strengthening Programme for Tanzania BDS Business Development Services BRELA Business Registrations and Licensing Agency CAMARTECH Centre for Agricultural Mechanization and Rural Technology DAC Development Assistance Committee EAC East African Community EU European Union FDI Foreign Domestic Investment GDP Gross Domestic Product GEF Global Environment Fund IP Integrated Programme KIDC/KIDT Kilimanjaro Industrial Development Centre/Trust LAT Leather Association of Tanzania MAFS Ministry of Agriculture and Food Security MIT Ministry of Industry and Trade NESP National Poverty Eradication Programme POPS Persistent Organic Pollutants PRSP Poverty Reduction Strategy Programme SADC Southern Africa Development Community SIDO Small Industrial Development Organization SIDP Sustainable Industrial Development Policy SMEs Small and Medium-sized Enterprises TBS Tanzania Bureau of Standards TCCIA Tanzania Chambers of Commerce, Industries and Agriculture TIC Tanzania Investment Centre TILT Tanzania Institute of Leather Technology TIRDO Tanzania Industrial Research and Development Organization TNBC Tanzania National Business Council UNCTAD United Nations Conference on Trade and Development UNDAF United National Development Assistance Framework UNIDO United Nations Industrial Development Organization URT United Republic of Tanzania 2 Executive Summary IP1 was largely successful 1. The terms of reference for this evaluation are at appendix 1. The overriding objective is to learn lessons from the first Integrated Programme (IP1) to improve future UNIDO performance in Tanzania and elsewhere. The UNIDO IP1 team was breaking new ground for UNIDO in Tanzania and was under pressure to design and deliver a programme with a minimum of guidance and support and to a strict time schedule. They did so with commendable enthusiasm, commitment and professionalism and with the full support of UNIDO’s main counterpart / partner – the Tanzania Ministry of Industry and Trade (MIT). Their joint efforts were instrumental in making the programme largely successful. Programme integration is the way forward for UNIDO 2. The integrated approach to programme development and implementation has been a major and positive step forward for UNIDO that has brought a number of benefits. It has fostered a team based approach and promoted synergy both within and between UNIDO and its main counterpart / partner – MIT. There is a strong sense of ownership of IP1 at senior levels within MIT and there can be little doubt that the presentation and promotion of UNIDO’s services in a single programme document has contributed towards raising both the profile of UNIDO and the interest levels of stakeholders. One senior member of MIT commented that IP1 has “helped put UNIDO on the map in Tanzania.” The IP document also helped to improve the transparency of UNIDO operations and provided MIT with an additional vehicle for systematic dialogue with other Government Ministries, which in turn has helped it to demonstrate partial implementation of Tanzania’s SIDP. The integrated approach in Tanzania should therefore continue in IP2 but be based on an improved diagnosis of the latest industrial situation to establish better baselines and targets at national and output levels. IP1 has been well managed and great care has been taken to ensure synergy during implementation 3. IP1 was well managed both within UNIDO and MIT. Both teams have met regularly to discuss progress and to ensure synergy during implementation wherever possible. Indeed, the UNIDO Team Leader has maintained a ‘synergy table’ to assist him monitor progress and ensure coordination. The inclusive management style has contributed greatly towards a strong sense of ownership at senior levels within MIT. The strong partnership that has been developed during IP1 provides a solid foundation on which to build an even better IP2. 3 Each of IP1 outputs were relevant Figure 1: Outputs delivered or planned 4. As shown in Figure 1, IP1 is expected to produce 35 different outputs. Each output was 40 confirmed as relevant to 35 Tanzania’s SIDP although 30 Cumulative improvements to future programme 25 20 design are necessary to improve Total per 15 quarter focus, complementarities and 10 5 potential impact. It is also 0 interesting to note from Figure 1 that activity for the majority of outputs has been reported as completed during the final month of the financial year. This practice leads to bunching of UNIDO HQ administrative activity at the year- end and could lead to sub optimal use of UNIDO administrative resources. 5. Figure 2 shows IP1 outputs by 6 generic outputs that provide a direct link to the SIDP: i. A suitable environment for the promotion of private sector investments including fair practices and competition, social infrastructure and support institutions. Figure 2:Generic service outputs of IP1 ii. Increased sustainable productivity and environmental improvements through the 5 9 i. promotion of new or upgraded ii. technologies and management 4 iii. processes. iv. iii. Improved competitiveness and 4 v access vi. 9 of industrial products in both the 4 domestic and export markets achieved through the promotion of standards iv. New employment opportunities through the development of medium, small and micro industries and the encouragement of entrepreneurship including relevant support institutions. v. Government machinery able to 4 develop, implement and monitor new or improved strategies. vi. New or enhanced public / private sector platforms and partnerships necessary to implement Government policies and strategies including support institutions. Note that v and vi are included in the SIDP under ‘policy implementation modality.’ 6. As can be seen from Figure 2, the highest concentration of generic outputs (v and vi.) were aimed at assisting MIT to implement the SIDP, thereby meeting the priority objective of IP1. Other generic outputs also clearly address the priority objectives contained in the body of the SIDP. However, this analysis has served to highlight the lack of clarity of development objectives and the absence of industry-specific baselines and targets at the national policy level. A comprehensive assessment of industrial performance is needed to establish clear targets at national level, linked to the PRSP and MDGs as a prerequisite to any development effort. Amongst other things, this is needed to facilitate improved tracking of implementation performance and the policy impact evaluation necessary to inform future decision-making. It will also enable, future UNIDO and other donor programmes to be clearly targeted at national priorities and MDGs to the benefit of all. A link between outputs, Government policies and the Millennium Development Goals was retrospectively established but attribution could be strengthened. 7. A rudimimentary contributory Figure 3: Outputs by Millenium linkage from each of the 35 Development Goal programme outputs to the achievement of the Millennium 40 35 Development Goals (MDGs) 35 31 using the SIDP as a mid point in 30 25 the chain has been established. 20 Outputs As shown in Figure 3, all 35 15 UNIDO outputs contribute 10 4 towards MDG1 (eradication of 5 2 poverty through the ultimate 0 goal of sustainable industrial MDG1 MDG8 MDG7 MDG3 development including the creation of new jobs and income); 31 of the outputs contribute to Goal 8 (developing a global partnership for development); 4 contribute to Goal 7 (environmental sustainability) and 2 to Goal 3 (the promotion of gender equality). The latter contribute in 5 equal measure to MDG8 –hence the sum of the parts equal more than 35. The link could be improved if the both the SIDP objectives and UNIDO programme outputs / objectives were more clearly defined and consistently expressed against the MDGs. Further analysis of focus and target intervention levels supports conclusions of programme relevance 8. Figure 4 shows that outputs were Figure 4: Outputs by service module varied in terms of UNIDO service modules. As can be seen, the 9 8 majority of outputs are in the 7 6 UNIDO service modules of small 5 Service 4 Module business development and agro- 3 2 industry closely followed by 1 0 governance and policy. This is consistent with UNIDO’s Medium Term Programming Framework as endorsed by Member States. As mentioned earlier, it was also confirmed that each output met MIT priorities. 9. UNIDO helps in the fight against poverty by promoting actions that will improve national industrial performance and the capabilities of industrial enterprises. Within UNIDO Integrated Figure 5: Outputs by strategic perspective Programmes, this invariably involves interventions from the strategic perspectives of ‘policy and governance’ and ‘industrial Policy and institutions and support systems’. 37% governance Figure 5 shows that of the 35 expected outputs of IP1, 22 (63%) Institutions 63% and support interventions were at the strategic systems perspective of policy and governance and 13 (37%) at the strategic perspective of industrial institutions and support systems including 8 (23%) supporting the micro sector. This compares with an approximate 50:50 share of total funds between the two perspectives. 2/3rds of the 30 completed outputs have resulted in improvements but impact cannot be assessed on available data. 10. It is possible to confirm that 20 (2/3rds) of the 30 outputs completed to date have resulted in improvements to an assumed opening position and it is 6 reasonable to assume that further improvements will follow if the Government implements the recommendations of other outputs. However because of the lack of context and clarity the quantification of outcomes and impact has not been possible. Partly due to the speed in which IP1 was formulated, insufficient attention was given towards establishing firm baselines and setting measurable time bound targets for improving the industrial situation in Tanzania. In a number of cases objectives could have been more clearly defined. Additionally, the distinction between activities and outputs has not always been consistently applied particularly where the programme has accommodated ongoing activity. For example there is overlap between TNBC programmed outputs in components 1 and 6. UNIDO interventions are widely regarded as practical and of direct benefit to counterparts 11. A high percentage of counterparts interviewed as part of the evaluation exercise made the point that UNIDO interventions were widely regarded as delivering practical and tangible benefits and as such they were widely regarded. This was particularly the case in the field of investment promotion where hands-on coaching, practical assistance and support with promotion exercises and a delegate programme that made use of UNIDO’s worldwide network was considered to have contributed greatly to improvements in the capacity and performance of staff working in the Tanzanian Investment Centre. Success at the micro sector level is rewarding but the horizons of such interventions need expanding in order to achieve more impact and make the best use of MIT and UNIDO resources 12. There have been successes at the micro sector level of intervention in IP1 i.e. the 8 UNIDO outputs that focused on small sized micro sector support services. Notable successes include the ‘Women Entrepreneurs in Development – food processing project’; bridging support to the Artisans Development Agency of Tanzania – textiles project; and revitalization of the Kilimanjaro Industrial Development Center. But notwithstanding the undoubted progress on each, the potential impact on the sustainable national industrial development of Tanzania could end up being small unless the future horizons of each are significantly broadened and issues relating to sustainability are resolved. Accordingly, the Business Plans for each organization are being revised by their respective management teams to address these issues. 13. It is becoming increasingly difficult for UNIDO to differentiate itself and demonstrate unique value at the micro level in Tanzania. That said, there is a continued role for UNIDO to play at the micro level, perhaps in assisting MIT in programme coordination. Not only is it important that UNIDO professionals maintain an appropriate level of experience at this level to ensure credibility of advice, it is often necessary to operate at this level to develop models for wider application. The WED project is an example of this. However, UNIDO interventions at this level should always be limited to instances where it has a 7 comparative advantage or niche expertise and where long-term donor funding is assured in advance of activity necessary for the delivery of the required output. Only in exceptional circumstances, should programmable resources be used at the micro level on the assumption that donor funding will materialize at a later date to complete an activity or output. IP1 interventions at the policy and governance perspective including capacity building are likely to have greater potential for national impact 14. There are five outputs of IP1 that will have major short and long-term impact: i. The contribution made towards the establishment of the Tanzania National Business Council, chaired by the President of Tanzania. Notwithstanding issues of sustainability, this is widely acknowledged as a major step forward in facilitating improved dialogue between the public and private sectors that was achieved with UNIDO’s support. ii. Improvements to the national position on investment promotion through the development of staff capacity in the Tanzania Investment Center; the establishment of the National Investment Steering Committee, chaired by the Prime Minister of Tanzania, as a forum for resolving investment issues, and the facilitation of legislative change to make Tanzania more attractive to potential investors. iii. The formulation of a strategy to revitalize the leather industry, which was recently approved by the Cabinet. iv. The formulation of an SME policy, which was also recently approved by the Cabinet although success in this area is tempered by the need to strengthen donor support. v. Assisting the Ministry of Natural Resources and Tourism (Fisheries Division) to overcome a ban by the European Union on fish imports from Tanzania. 15. With the exception of v. each of these outputs are at the perspective of policy and governance. In the case of v., UNIDO’s standing as ‘honest broker’ in the international community played a large part in the success of the intervention. Findings therefore support the belief of the evaluation team that programmable resources and future funds mobilization activity in Tanzania should increasingly focus on interventions at the perspective of policy and governance including related capacity building. Donor interest was disappointing and on occasions available funds were spread too thinly 16. On the face of it, the funding Figure 5: Output funding position by position of IP1 looks reasonably service module encouraging. Compared with the original planning figure of $7.2 million, Project Allotment Documents to the value of $4.4 million (61%) were issued. Figure 5 shows that only 8 outputs or 19% 8