 Josaphatkweka Tdpsession1 authorSTREAMJosaphatKweka TDPSession1TDP in Tanzanias Textile sector: Missing Impactsor Links?:OUTLINE:OUTLINE INTRODUCTION AND TDP FRAMEWORK TRADE LIBERALISATIN AND PEFORMANCE IN THE TEXTILES SECTOR ANALYSIS OF WINNERS AND LOSERS LABOUR MARKET EFFECTS COMPLEMENTARY POLICIES CONCLUDING SUMMARYINTRODUCTION Recent debate on Trade and Development hinges on efficacy of trade in poverty reduction Trade has assumed a significant position in PRSP processes in the last 5 years The argument is that trade is as source of growth, which is the basis of poverty reduction winters et al 2000The recent Integrated Framework DTIS 2005 summarizes the evidence on Tanzania:The recent Integrated Framework DTIS 2005 summarizes the evidence on TanzaniaCont... DTIS confirms that trade contributed about 60 of the 3.8 average annual GDP growth1990-2004 However, it has had no significant effect on poverty reduction! Why? Is it missing impacts or linkages? The objective of the TDP project is to identify TDP linkages and short term impacts of tradeCont... Why focus on Tanzanias textile sector? With investment capital of over US 500,000 in the 1980s, the sector was: Pro-poor, 1largest employer about 40,000 3rd largest source of government revenue largest exporter of manufactures Cotton is the 2nd largest export crop after coffee Significantly long supply chain Trade intensive cottontextile, garments with access to numerous trade concessions Typical failure case of trade liberalisation...Conceptualisation of TDP framework and its application:Conceptualisation of TDP framework and its application The linkage between Trade and poverty is not straightforward Conceptual framework is necessary to simplify the causal links so as to enhance analysis of impacts Our emphasis is on income poverty, mainly through the labour market effectsCont... Two main mechanisms for Trade to link with income poverty reduction: Trade can impact poverty directly Trade can impact on poverty indirectly through growth In either case some strong assumptions exist: Trade is pro-poor The poor are able to participate in trade Market institutions exists and are pro-poor The conditions for trade performance are favourable.The following figure summarizes the hypothesized causal links between Trade and Poverty:Application on the Textile sector:Application on the Textile sector We explore these links by examining to what degree the labour market effects in the textile sector have been the result of structural factors, trade policy and performance of the sector sector-based approach Gathered information from in-depth review of secondary info and diagnostic interviews with selected informants We have examined complimentary policies that promote TDP linkages in the sector2. TRADE LIBERALISATION AND PERFORMANCE OF THE TEXTILE SECTOR:2. TRADE LIBERALISATION AND PERFORMANCE OF THE TEXTILE SECTOR Substantive part of macroeconomic reforms in Tanzania: Massive trade liberalization Move away from centrally planned to market oriented economic policy Privatization of SOEs Recognition of private sector as the engine of growth2.2 performance of the textiles sector since liberalisation:2.2 performance of the textiles sector since liberalisation Four key conclusions: Textile and cotton amongst worst hit by trade liberalization; net effects generally negative Lack of complementary policies in addition to structural constraints Different actors are affected differently more than others depending on their position in supply chain Despite several trade initiatives, textile exports have continued to fall to record lows while imports have surgedNumber of mills declined conspicuously following liberalization:Number of mills declined conspicuously following liberalization Increased from 4 in the 1960s to 35 in the 1980s, and then fell to about 7 in the 2000sTrends in Production:Trends in Production Growth, stability, decline but fluctuations post liberalisation Causes? Notable institutional and policy changes in addition to the structural constraints affecting production, marketing and pricing of cottonCotton Marketing Channels:Cotton Marketing Channels Liberalisation replaced a public monopoly with a private monopoly e.g. ginneries Lack of effective regulation has led to low quality, lower price to farmers and hence low production Cotton marketing channels in TanzaniaCotton Producer prices:Cotton Producer prices Positively reflects production trends but with less fluctuations Constant prices imply that profitability has been declining due to a notable rise in input pricesProducer prices a fraction of world prices :Producer prices a fraction of world prices The gap has widened in four fold since 1990s: why? Likely to narrow in 2000s High transaction costs, but also financing of Boards Lack of an effective price transmission mechanism3. WHO ARE THE WINNERSLOSERS, WHY?:3. WHO ARE THE WINNERSLOSERS, WHY? Cotton farmers Key players and bearers of sector policies, taxes, transaction costs and production constraints. Linked in the chain by the GinneriesCoops and policies. NET LOSERSTransporters Pass prices to Ginneriess, middle men, and factories Linked in the chain by Ginneries, Middlemen and factories Benefited from LiberalisationGinneries:Ginneries Most affected by quality and production Connect farmers to transporters, exporters, factories Informants and market agents Have mostly BENEFITEDTextile millsfactories:Textile millsfactories Bearers of structural and production constraints Victimsbeneficiaries of trade and investment policyregime Production costs are passed to consumers and workers Linked to Ginneries and consumers internal and external markets LOSERS from liberalisation and orphans of policyWorkers Basic agent for adding value. Affected by industrial policy, factory practices and wagewelfare policy Usually fight a loosing battle unrests, unions Linked in the chain by factories and labour laws NET LOSERSThe Government Poor policies, no production, no taxes, no welfare Search for optimum policy: Protection industry vs. liberalisation trade Liberalisation is good, but done badlycarelessly Globalisation forces abound, gov LOST the industry, taxwelfare4. IMPACTS ON LABOUR MARKET:4. IMPACTS ON LABOUR MARKET TDP linkage through labour markets Important forces are: structural effects, demand and supply sides of labour For LDCs, comparative advantage is in unskilled labour, but competitive advantage requires skilled labour Labour intensive industry in a country with low wages and high unemploymentStructural effects Policy shift from traditional agriculture to non-traditional e.g. mining exports Shift from formal to informal employment retrenchment, SMEs Increased rural-urban migration facilitated by conflicting policy objectives EP, ASDP Institutional shift from public to private institutions diminishing role of coops Shift in employment policy from permanent to short tenureLabour Market effects Result from production costs and competitive pressure Marked decrease in: labour demand low formal empl. wages employment elasticity less lab-intensive job security more short tenure. One of the frontier AGOA-EPZ mills NIDA closed down due to labour unrestLiberalisation has had severe impacts on textile workers:Liberalisation has had severe impacts on textile workers Note:Elasticity of employment is measured as increase in jobs from a unit increase in output5. COMPLEMENTARY POLICIES:5. COMPLEMENTARY POLICIES Benefits of liberalisation wont occur automatically, need complementary policies Need to be accompanied by compensatory policies Neither were designed by recipient country now curing PRSP rather than preventing The list is huge, but priorities include infrastructure accessibility, regulatory framework, extension services, access to finance, access to utilities and favorable fiscal and industrial policies. Finally, effective social safety nets are required, especially to vulnerable actors6. CONCLUDING SUMMARY:6. CONCLUDING SUMMARY Effect of liberalisation: the good thing about bad thing or bad thing about good thing? It cant be worse than the collapse of the textile sector, effects radiate across and become net loss to those without options AGOA, EBA, GSP and RTAs all are welcome initiatives whose performance have not matched that of 1970s TanzaniaMt. Ol Doinyo Lengai Climbing ToursBy: highpeaksMissingSectorTextileTanzaniasTDP 