Policy, institutional structure and performance of the cotton-textile industry in Tanzania

Date

2001-11

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Abstract

The cotton-textile industry is an important activity m Tanzania's economy as source of employment, contribution to exports, contribution to GDP and clothing the population. The sector has been significantly influenced by policy changes, from a regime of controls, regulations and confinement dominant prior to 1986 to a free market regime thereafter. Despite the importance of this sector, it faces many problems at all three levels: cotton production, ginning and manufacture of textiles. Performance at the three levels has been poor in recent years despite pursuance of policies designed to improve performance. The main factors explaining this poor performance are related to macroeconomic policies - pricing, availability of financial services, price of utilities, increased competition from imports, e.t.c. Prior to liberalization, the cotton-textile chain was closely coordinated and supervised. After liberalization, the coordination network collapsed, leaving the three activities "every one to oneself". This has brought high costs in terms of resource allocation e.g. mismatch between (low) actual production of cotton and excessively high capacity in ginning. The policy implication is that reliance on macroeconomic policies alone is unhealthy. Instead translation and linking such policies to realities at the sectoral and micro levels are more important.

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TANZANIA, COTTON INDUSTRY, TEXTILE INDUSTRY, TRADE LIBERALIZATION, ECONOMIC POLICY, INDUSTRIAL POLICY, PRODUCTIVITY, PRODUCT DEVELOPMENT

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