Outline of the presentation 1. Overview 2. Strategies of IIDS 2025 2-1 Gateway Strategy 2-2 Cluster based Industrialization 2-3 Agriculture led Industrialization

Outline of the presentation

1. Overview2. Strategies of IIDS 2025 2-1 Gateway Strategy 2-2 Cluster based Industrialization 2-3 Agriculture led Industrialization 2-4 Resource based Industrialization 2-5 Institutional Intervention3. Plan of Action

Integrated Industrial Development Strategy 2025

December 2011December 2011

From Policy to

From Policy to Implementation

Implementation

Targets

• Manufacturing sector *growthAverage annual growth at 15 % p.a.

• Manufacturing sector contribution to GDP**From 9.0 % in 2010 to 23% by 2025

• Manufacturing Value AdditionFrom US$ 1.8 bil in 2010 to $16.8 bill by 2025

• Manufacturing Goods Export From US$ 707mil*** in 2010 to $ 6.6 bill by 2025

*The term “manufacturing sector” means Category “D” of International Standard Industrial . Classification (ISIC) Rev.3 and cover all the activities identified by ISIC code 15111 to 39999.

** GDP of 2025 was computed on the assumption of 8.0 % growth to achieve Vision 2025 targets.　　 *** The figure followed SITC classification available at UNCTAD statistics.

Over ViewOver View

Manufacturing Sector 1970-2010

Source: United Nations Statistic Division

0

500

1,000

1,500

2,000

US$ Million at Current Price

Stagnated 10 years

Over ViewOver View

Growth of Manufactured Exports in 2000’s

Source: UNCTAD Statistics 2011

Over ViewOver View

Diversification of economic structure

In early 1990’s, Traditional Agricultural Export was only forex earner.In 1996, Sight-seeing revenue caught up it, and in 2000 gold export followed.Growing Transport service reflects growth of neighboring economies.

Traditional Agriculture ExportsTraditional Agriculture ExportsAlmost constant for last 30 yearsAlmost constant for last 30 years

Over ViewOver View

Integrated Industrial Development Strategy 2025

IIDS StrategiesIIDS Strategies

Advantage of geographic superiority

2008

Pop.

mil

GDP

$ bill

Growth

Rate

TNZ 39.7 20.7 7.4%

UGD 32.0 14.5 9.5%

RWD 9.6 4.5 11.2%

BRD 8.0 1.1 4.5%

MLW 13.7 4.3 9.7%

DRC 62.9 11.9 6.2%

ZMB 12.4 14.3 6.0%

TTL 178.3 71.3 7.6%

Source: IMF World Economic Outlook, Apr.2009

TNZ

DRC

UGD

RWDBRD

MLWZMB

GatewayGateway

0

1000000

2000000

3000000

Capacity after Expansion

TEU

Arranged by IIDS team using data from TPAArranged by IIDS team using data from TPA

Source: WB Infrastructure Round Table 2009

Current Capacity

No. 13, 14 Terminal

Relocation of Oil Jetty

Large ICT

Cargo volume increases 8 times by 15 years.

7 million ton of cargo was delivered to back land countries through DAR port in 2009

GatewayGateway

DAR Port has limitation

Existing Container Terminal

Proposed

Extension

Sailing Route

５ｋｍ

234m as the Max. Vessel Length at DAR

Future Extension

GatewayGateway

Maritime seeks larger vessels

0

50

100

150

200

250

300

350

400

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000TEU

船長

234m （ Maximum LOA at Dar Port

0

25

50

75

100

2000 4000 7000 11000

NYK Maritime Report 2006

Because of LOA Dar Because of LOA Dar Port can Port can accommodate up to accommodate up to 2000 TEU class2000 TEU class

Ocean freight and vessel size

Larger size container carriers Larger size container carriers coming to operation along side coming to operation along side with hike of energy cost with hike of energy cost

In case of 10 sailing days and 1 staying day

GatewayGateway

Generation Change of Container Vessels

Capacity（TEU）

Length Beam DraftNumber of Rows

(On Deck)

Ⅰ 1960～700～1500 110～210 17～31 ～11 9

Ⅱ 1970～1800～2300 210～270 32 11～12.5 12

Ⅲ 1970～80

2000～2500 210～270 32 11～12.5 13

ⅣLate of 1980s

(Panamax)2500～4400 270～290 32 11～12.5 13

ⅤEarly 1990s

(Over Panamax)4400～5400 260～ 32～40 12～ 16

ⅥLate of 1990s(Ultra SuperPanamax)

6000～ 300～ 40～ 14～ 17～

Generation

Mombasa 　　　

Dar es Salaam 　　　

Carriers retire from service after 30 years of operationCarriers retire from service after 30 years of operation

GatewayGateway

Develop Bagamoyo as Twin Port by 2020

Mbegani located 60 km north-west of DSM and

10km south of the historic town Bagamoyo

60km

Tanga Corridor

Tanzam Corridor

Central Corridor

Railway

Trunk Road

GatewayGateway

Cluster based Industrialization

<Special Economic Zones> Waterfront SEZ 　　 (Bagamoyo, Mtwara and Tanga) Agribusiness SEZ (Arusha, Mbeya, Iringa etc.) Cross-border SEZ (Kigoma, Mwanza, Musoma etc.)

<Industrial Clusters> • Specialized industrial clusters (Edible Oil, Metal etc.) • Multi-sector industrial clusters• SME Parks One in every region• Industrial Villages One in every district

For concentrated infrastructure support.For concentrated infrastructure support.For improvement of productivity efficiencyFor improvement of productivity efficiencyTo enjoy scale merit of economyTo enjoy scale merit of economy

For concentrated infrastructure support.For concentrated infrastructure support.For improvement of productivity efficiencyFor improvement of productivity efficiencyTo enjoy scale merit of economyTo enjoy scale merit of economy

Cluster basedCluster based

PHILIPPINE MANUFACTURED EXPORTS

( Billion U.S. Dollars )

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

2.7

9.5

4.3

11.5

6.5

12.0

10.6

11.0

13.3

12.8

15.8

15.9

20.0

14.3

19.5

9.1

22.7

8.8

27.2

4.8

30.7

4.8

Asian lessons prove effectiveness of Economic Zone approach

Other Philippine Manufactured Exports

40

35

30

25

20

15

10

5

0

22%

78%

27%

73%

35%

65%49%

51%

51%

49%

50%

50%58%

42%

68%

32%

72%

28%85%

15%

86%

14%

12.2

15.8

18.5

21.6

26.1

31.734.3

28.6

31.5 32.0

35.5

2005

31.6

5.3

86%

14%

36.9

2006

35.1

6.0

85%

15%

41.1

2007

36.9

5.9

86%

14%

42.845

Production in Economic Zone

Production in Non-Economic Zone


Industrial Village to up-grade MMEs(Micro-scale Manufacturing Enterprise Park)

ExpansionExpansion

Iron smithIron smith

Tin smithTin smith

Timber processTimber process

Furniture makeFurniture make

PortlyPortly

Common FacilityCommon Facility

Local Government provides plots and shadesLocal Government provides plots and shades MITM provides guidance and supervisionMITM provides guidance and supervision SIDO provides technical and management serviceSIDO provides technical and management service MMEs form association for managementMMEs form association for management By issuance of membership ID, turn to formal sectorBy issuance of membership ID, turn to formal sector Culture of business linkage starts from hereCulture of business linkage starts from here Two step financing to MMEs through the associationTwo step financing to MMEs through the association

Give chance to grow to Give chance to grow to MMEs who hasMMEs who has wish to wish to grow, efforts to grow, grow, efforts to grow, ability to grow and a ability to grow and a little bit of fortune. little bit of fortune.

AssociationAssociation

Estimated cost Tsh. 400mil for 1 hectare cluster


Fostering business group formation

• Fostering business experts who can stand well in a global market.

• Concentrated support to the identified candidates.

• Technology transfer through subcontract

• Promotion of forming business groups to share/obtain

- Business Codes - Quality Control - Packaging/Labeling - Larger scale supply capacity - Market information - Negotiating Power

Building Business Group !Building Business Group !


Cluster Based Industrialization

Providing cluster at every level of Micro to Small, Medium and to Large or Specialized.

MME industrial Parks at district cities

SIDO SME Parks at identified cities

Agricultural SEZ at strategic locations

Waterfront SEZ


Bagamoyo Waterfront SEZ and CorridorCluster basedCluster based

Southern Agricultural Growth Corridor of Tanzania

Ifakara Center

Mbeya Agri. SEZ

Iringa Agri. SEZ

Morogoro

Agri. SEZ

Makanbako Center

Kilosa Center

Njombe Center

Songea CenterKyela Center

Sumbawanga Center

Tunduma Center

Zambia Malawi Mozambique

DRC

Agri. SEZ : Incentives to every kind of Agro-processing, Agro-support Industries inclusive service lenders

Centers : Centers for Tractor hiring, Depo for Agri-input, Collection & Storage and SME

park for agro-processing DSM

Market

Bagamoyo

SEZ

Cluster basedCluster based Agriculture basedAgriculture based Institutional SpportInstitutional Spport

3 bags 12-15 bags/acre

Supply of Agri- input and tractor tilling through contract farming

Increase of Supply

Construction of oil refinery

Needs of Collaborations

Agricultural Development Led Industrialization= Sunflower Oil Case =

Improvement of yields through promotion of

quality seeds and fertilizer

Entry of entrepreneurs in

oil processing Biz.

Formation of cluster & Association

Demand

Over Supply

Price CrashStop Prod’n

Short Supply

Shut Down

Agriculture basedAgriculture based

Following the increase of sunflower production in the area, 8 processors funded an association in 2006 to jointly promote contract farming, joint brand, joint marketing and joint procurement of quality seeds.

Currently planning to establish a small capacity refinery to expand their market

Up-grading and appropriate technology

Localization of

machineries

Small capacity plant to support

local industrialization

Agriculture basedAgriculture based Institutional SupportInstitutional Support

Int.10%

Interest subsidized loan for Agro-processing Investment

Tanzania Investment

Bank

Fund(Tzs 5 Bil)

Fund(Tzs 5 Bil)

Local Industrialists (Borrowers)

Targeted Business: Milk, Milk Products, Edible Oil, Leather, Fruits, Vegetable, Meat Processing, Serial Milling and above related collection, storage, transportation and packaging facilities.

Targeted Business Fresh investment in Agro- processing industriesAggregated investment Tsh. 20 billion in totalSize of Loan Tsh. 50 – 1,000 million Duration: Max. 5 yearsInterest Compensation by MIT 10% p.aBase lending rate to Borrower 5 %p.a. (+risk factor max. 3%). Collateral By Bank PolicyAssessment Bank final

Int.5%

PrincipalTZS 20 bil

Agro-processingIndustries

InvestmentTZS 30 bil

Priorityidentified

Institutional supportInstitutional support Agriculture basedAgriculture based

SIDO Credit Guarantee for SME

Targeted Business: Agro-processing and Agri-business undertaken by enterprise known to SIDO and the business viability has been confirmed by SIDO.

National Microfinancne

Bank

MSMEs (Borrowers)

SIDOGuarantee

Fund

SIDOGuarantee

Fund

NMB agreed to finance MSME at Prime Rate w/o requesting Land Title up to TZS 20 billion as credit ceiling under SIDO guarantee.

Qualification: 1. SIDO’s member enterprise 2. SIDO undertakes assit. In Business Plan making 3. Track record.Conditions: 1. Size: Tsh 5 – 50 million 2. Lending Rate: 15 % 3. Duration: Max 3 years 4. Collateral: Required but no land title conditioned.Fee: 1. Technical Assistance Fee: 2% of Loan Amount 2. Guarantee Fee: 2%p.a. of guaranteed balanceAssessment: 1. Initial assessment by SIDO 2. Final Approval by Bank

3. Recommendation 4. Bank Approval 5. Guarantee 6. Loan & Repayment 7. Tech Assist

1. Application

2. Business Plan Making

Institutional SupportInstitutional Support Agriculture basedAgriculture based

Sunflower Oil Cluster 　　 = Urban Model =

Oil ExtractorsOil Extractors

WarehouseWarehouse


PackagingPackaging

Service LendersService Lenders

The plot is owned by SIDO and leased to occupants on long term.The plot is owned by SIDO and leased to occupants on long term. Common infrastructure is prepared by SIDP and recovered through the rent.Common infrastructure is prepared by SIDP and recovered through the rent. Buildings and facilities are to be constructed by each occupants.Buildings and facilities are to be constructed by each occupants. Refinery is owned and operated by a private company by own account.Refinery is owned and operated by a private company by own account. Sales of crude oil by processors to the refinery is not compulsory.Sales of crude oil by processors to the refinery is not compulsory. The refinery markets the refined oil by own brand.The refinery markets the refined oil by own brand. SIDO/RLDC provide technical assistance to the refinery as an infancy enterprise. SIDO/RLDC provide technical assistance to the refinery as an infancy enterprise. CRDB provides working capital to processers through the collateral management. CRDB provides working capital to processers through the collateral management. The occupants are encouraged to form an association to handle common issues.The occupants are encouraged to form an association to handle common issues.


Mini-refineryMini-refinery Storage TanksCommon Facilities

Canteen

Collateral Manager

Agriculture basedAgriculture based Cluster basedCluster based Insttutional SpportInsttutional Spport

Intervention to the Manufacturing Sector

Institutional SupportInstitutional Support

MIT Penetration to Districts

MIT

Viwanda DesK

1. Zonal Industrial Officer (ZIO) shall be appointed by MIT and seconded to Viwanda Office (VO) in PMO-LARG

2. Viwanda Desk (VD) shall be opened at DED’s office to undertake License issue under BARA Act

3. District Industrial Officer (DIO) shall be appointed by PMO-LARG to run VD

4. ZIO shall supervise DIO through PMO- LARG

5. DIO at VD undertakes - One stop office for license & registration - to reflect MIT policy and strategy to District Development Plan (DDP) - to provide industrial info to local enterprises - to convey voices of local enterprises to MIT

Local Enterprises

District Development

Programs

Viwanda Office

DED

PMO-RALG

Zonal Industrial Officer(ZIO)

District Industrial Officer (DIO)


Full implementation of BEST Program

Strengthening Biz. Environment

Empowered Private Sector

Economic Growth

BEST ProgrammeBetter Regulation-Simple Biz. Regulation-Removal of unnecessary regulations-Reduce cost of doing Biz-Simplified procedures

Change of Government Culture

Strengthened TIC

Improved Commercial Dispute Resolution


Iron and Steel Production Industry

- NDC signed a JVA with a Chinese developer to establish the first Iron and Steel making plant in East Africa by 2015.

<1st phase> Construction of Coalmine 1.5 mil tons p.a. Construction of Coal Power 2 x 150 MW Construction of Iron Ore 1.5 mil tons p.a. Construction of Iron Plant 500,000 tons p.a. - Massive infrastructure support such as roads, power

transmission line, water supply, railway and man power supply would be required.

Resource basedResource based Sub-sectorSub-sector Institutional SupportInstitutional Support

• The raw materials required for Nitrogen Fertilizer (Ammonia/Urea) production are Natural Gas and Air only.

• However, it is a highly sophisticated petrochemical complex which requires more than $ 1 billion initial investment and over 2000 per day (660,000 ton/year) production capacity at minimum.

• The Government has decided priority use of Mnazi-bay Gas for the fertilizer production, and MIT is on the way to facilitate it.

• Challenge is the gas cost and infrastructure support to make the plant run economically feasible for coming 25 years in tough competition with cheap gas producing countries in Middle East.

• Mtwara gas concession holding consortium proposes to develop fertilizer plan as a downstream project.

Fertilizer IndustryAmmonia/Urea Production is a kind of

Petrochemical Industry

Resource basedResource based Agriculture basedAgriculture based Sub-sectorSub-sector

Targeted Sub-sectors1. Fertilizer and Chemical sub-sector

Establish the first Urea plant in East Africa.by 2018

2. Textile sub-sector Local processing from 30% to 70% by 20253. Agro-processing sub-sector

Edible Oil / Fruits Processing / Cashew nuts / Milk and Dairy Products 4. Leather & Leather products sub-sector Export leather and leather products US$170mil

by 20255. Light machinery sub-sector

Establish agro machinery industry by 20156. Iron and Steel Production sub-sector The first iron making plant in East Africa.by

20157. Hospitality industries linked with Tourism.

Sub-sectorSub-sector

Plan to Action

Draft Master Plan is ready under IIDS 2025 - fifty action plans proposed.

Validation Workshop to be held soon.

Your participation as one of the important stakeholders shall be highly appreciated.

Asante sana

MIT/SIDO Finance Programs to build-up post-harvesting capacity in regions

Fund RequiredTZS 5 bill




NMB agreed to finance SMEs at Prime Rate without requesting Land Title up to Credit ceiling of TZS 20 billion

Leverage Effect of Six times

Int.10%

Agro-processing Industry Promotion Loan (AIPL)

Tanzania Investment

Bank

Agro Fund(Tzs 5 Bil)Agro Fund(Tzs 5 Bil)

Local Industrialists (Borrowers)

Targeted Business: Milk, Milk Products, Edible Oil, Leather, Fruits, Vegetable, Meat Processing, Serial Milling and above related collection, storage, transportation and packaging facilities.

A part of interest of applicable loan shall be subsidized by the Ministry

Targeted Business Fresh investment in Agro- processing industriesAggregated investment Tsh. 20 billion in totalSize of Loan Tsh. 50 – 1,000 million Duration: Max. 5 yearsInterest Compensation by MIT 10% p.aBase lending rate to Borrower 5 %p.a. (+risk factor max. 3%). Collateral By Bank PolicyAssessment Bank final

Int.5%

PrincipalTZS 20 bil

Agro-processingIndustries

InvestmentTZS 30 bil

Priorityidentified

Identified investment collected from fields under Agro-processing Industry Promotion Loan(AIPL)

<Milk Processing Subsector><Milk Processing Subsector> (1) A milk collection terminal with 2000 litter tank(1) A milk collection terminal with 2000 litter tank TZS 150 milTZS 150 mil (2) An insulated tanker truck with 10,000 litter capa(2) An insulated tanker truck with 10,000 litter capa TZS 180 milTZS 180 mil (3) Tessa UHT processing unit for 5,000 litter/day (3) Tessa UHT processing unit for 5,000 litter/day TZS 600 milTZS 600 mil

<Fruits and Vegetable Processing Subsector><Fruits and Vegetable Processing Subsector> (1) Packing plant of French fly potatoes(1) Packing plant of French fly potatoes TZS 150 milTZS 150 mil (2) Coconuts Milk processing and packing(2) Coconuts Milk processing and packing TZS 250 milTZS 250 mil (3) Tomato pule production (3) Tomato pule production TZS 400 milTZS 400 mil

<Edible Oil Subsector><Edible Oil Subsector> (1) Butch type small capacity refining unit(1) Butch type small capacity refining unit TZS 200 milTZS 200 mil (2) Soap processing plant in Kigoma & Kyela(2) Soap processing plant in Kigoma & Kyela TZS 0.5-5.0 bilTZS 0.5-5.0 bil <Leather and Leather Products Subsector><Leather and Leather Products Subsector> (1) Shoe sole manufacturing facility(1) Shoe sole manufacturing facility TZS 300-500 milTZS 300-500 mil (2) Sawing, skywriting, pressing and cutting machines TZS 100-500 mil(2) Sawing, skywriting, pressing and cutting machines TZS 100-500 mil (3) High quality leather processing machineries(3) High quality leather processing machineries TZS 350 milTZS 350 mil

From MIT field survey conducted in Sep and Oct 2010

Milk Processing Industry

Milking ProcessingTransportCollection Market

About 1.6 mil ton of milk is produced in TZ, while only 4% of which is processed and marketed.

Milk has to be stored in cooled tank (2-4C)within 2 hrs after milking. Collection tank should be available within 5km from farm (on foot) .

Improved road network has made it possible to transport collected milk from distance sources to processing facility.

Milk processors in Tanzania utilizes less than 30% of their capacity. TZ imported 8300 ton of milk and milk products and paid Tsh 9

billion in 2009.

Missing Link

Example

1.6 mil ton 0.06 mil ton

At a Milk Collection Point

The collection center opens at 7 in the morning. 450 families bring a bucket of raw milk (7-9 litters in average) everyday.Milk is recorded on notebook after measured and paid TZS 428 per litter at end of the month.

Cash revenue of TZS 3,424 (=TZS 428 x 8 ltrs) is more than a day wage of farm labor which is around TZS 3,000 in Tanga City

The tank is maintained at 4°C and backed up by D/G.Processor in Tanga send an insulated tanker to the village every 1.5 days.

Stable cash revenue has changed life style of villagers drastically.Some send children to school in town, some bought bicycles and some bought calves.

A collection point in Amani Village, Tanga

Why MSMEs cannot access to finance ?

1. Incapable to prepare Biz Plan

２． Incapable to provide Land Title 　　　　　

３ . Very high interest over 25%

Poor assessment capability of Banks

Let’s make the best informed party to assess the MSME buiness

Interv

en

tion

of S

IDO

１． Make SIDO to draft Biz. Plan　　　２． Make SIDO to assess the Biz.　　　３． Make SIDO to guarantee. 　　　

１． SIDO can fully assess the Biz.

2 ． Land Title is no more required

３． Prime Rate can be applied

NMB agreed that NMB shall - share the unpaid risk - loan SMEs up to TZS 20 bill - not request Land Title - apply Prime Interest rate

SIDO SME Credit Guarantee （ SIDO/SME CG)

Targeted Business: Agro-processing and Agri-business undertaken by enterprise known to SIDO and the business viability has been confirmed by SIDO.

National Microfinancne

Bank

MSMEs (Borrowers)

SIDOGuarantee

Fund

SIDOGuarantee

Fund

NMB agreed to finance MSME at Prime Rate w/o requesting Land Title up to TZS 20 billion as credit ceiling under SIDO guarantee.

Qualification: 1. SIDO’s member enterprise 2. SIDO undertakes assit. In Business Plan making 3. Track record.Conditions: 1. Size: Tsh 5 – 50 million 2. Lending Rate: 15 % 3. Duration: Max 3 years 4. Collateral: Required but no land title conditioned.Fee: 1. Technical Assistance Fee: 2% of Loan Amount 2. Guarantee Fee: 2%p.a. of guaranteed balanceAssessment: 1. Initial assessment by SIDO 2. Final Approval by Bank

3. Recommendation 4. Bank Approval 5. Guarantee 6. Loan & Repayment 7. Tech Assist

1. Application

2. Business Plan Making

Effects of Scheme NMB agreed to finance SMEs at Prime Interest Rate without

requesting Land Title without up to TZS 20 bill as credit ceiling. This covers 1000 of average size loan every year, and the

program can be sustainable if carefully operated.

Sensitivity AnalysisAssumption Annual

ExpenditureAnnualRevenue

Lifetime

Default Rate 5%Other costs as designed

TZS 958mil

TZS 968 milTech fee 260 Srvc fee 390Depo int 318

Sustainable

Default Rate 7%Other costs 10% up

TZS 1,200mil

14 Years

Default Rate 10%Other costs 20% up

TZS 1,539 mil 8 Years

Up-grading of Sunflower Oil Producer

Proposed Sunflower Oil Industry Custer


WarehouseWarehouse


Packaging CoPackaging Co

Service LendersService Lenders

Local Government provides plots and shadesLocal Government provides plots and shades Association is to be formed by participants to the parkAssociation is to be formed by participants to the park Buildings are to be constructed by members Buildings are to be constructed by members Association runs the management of the parkAssociation runs the management of the park Refinery is to be owned and operated by a joint companyRefinery is to be owned and operated by a joint company SIDO/CAMARTEC/RLDC extend technically assist the operationSIDO/CAMARTEC/RLDC extend technically assist the operation Service Lenders participate the association providing specialized services Service Lenders participate the association providing specialized services


Mini-refineryMini-refinery Storage Tanks

Common Facilities

Oil ExtractorsOil Extractors Oil ExtractorsOil Extractors

Promotion through Market Mechanism

Priority Industry Promotion Missing Link PromotionPackaging Industries Promotion

SME PromotionEntrepreneur Biz Formalization

Industrial Development Fund

Interest subsidized

loan

Incentive Measures

Credit Guarantee

Market Mechanism


Documents

Outline of the presentation 1. Overview 2. Strategies of IIDS 2025 2-1 Gateway Strategy 2-2 Cluster based Industrialization 2-3 Agriculture led Industrialization