What to Watch: Potential Challenges in Tanzania

The MCC's application of lessons learned will serve as a good foundation as it navigates the Tanzania proposal process, but there are signs of some complex challenges ahead. These challenges are flagged in this section, and some of their broader implications are discussed in the Emerging Issues section of this report.

Challenge 1: Balancing efficiency and thorough consultation
The MCC and GoT see an opportunity to move fast on Tanzania's Compact proposal because, they argue, Tanzania is in a class by itself.[1] Other donors join the MCC in saying that the GoT has been aggressive about public sector reforms, has more management and planning capacity than many neighboring countries and has engaged in participatory and transparent priority-setting through the PRS.

In addition, there is a strong convergence of policy priorities between the MCC and the new Tanzanian President; both emphasize growth, results and transparency. These factors have led USG and GoT officials to believe that the proposal process in Tanzania can be accelerated. Given that it took the MCC so long to ramp up in first round countries, efficiency in Tanzania will be refreshing. But what are the risks of accelerating this process? The clearest one is not leaving time for meaningful consultation with civil society. MCC and GoT officials argue that the proposal process can be more efficient partly because it is building on previous consultative planning processes, so let’s take a look at what’s already in place in Tanzania.

Civil society consultation prior to MCC: To their credit, senior MCC officials came on strong about consultation in their initial engagement with the GoT. But they soon heard that the recent process to set out national development priorities in the PRS (spanning two years, ending in 2005) involved broad and effective civil society participation. Since the target sectors for the MCA proposal come from the PRS, the consensus among government, donors and civil society is that the MCC was right to build on this process, rather than insist on another round of MCA-specific consultation to identify constraints to growth and priorities for investments. Civil society input is apparently being built into the PRS implementation framework as well. According to the MCC, “All donors have committed to working within this framework and we are hopeful that the MCA proposal will harmonize with these efforts.” Essentially, the MCC puts the good consultation ball squarely in the GoT court.

The MCA-TZ approach: harmonizing but not enhancing: In Tanzania, the MCA Steering Committee includes two NGO representatives, one local and one international, as well as representatives from three private sector networks. The technical team includes delegates from each of these groups. Thus, NGOs are nominally represented in the formal process. As is common, the MCC and MCA country team are relying on an NGO umbrella group (the largest but certainly not the only one in Tanzania) to represent national NGOs and community groups. While the MCC was right to build on the existing process, there are two aspects of this arrangement that make NGO and community input weaker than it could be at this stage.

First, NGOs were not convened to select their representation to the MCA process; their representation was chosen by the Ministry of Finance and MCA-TZ. This is particularly important because the GoT has a mixed record on dealings with NGOs. Several NGO representatives, both local and international, commented that, on paper, collaboration has increased, but that in practice there are still problems. They described several instances in which the GoT clamped down on NGOs opposed to government policies or its approach to civil society engagement. This is a red flag signaling that working only with government-identified groups may not be enough.

Second, the aggressive schedule set by the MCA-TZ and MCC teams, combined with a lack of resources dedicated to consultation, may weaken the quality of community input. The goal to have a formal proposal to the MCC in July leaves little room for the NGO representatives to manage broader consultation before the proposal is submitted. This means that, at this stage, the umbrella group cannot serve the IISC as it was surely selected to do--to hear from and inform the organization's constituency about the MCA process and the content of the proposal.

Next steps: Apparently an MCA-TZ outreach coordinator is planning consultation activities that will take place once the first proposal is developed. According to the MCC, at this point “additional consultations—including with potential beneficiaries and those impacted by the program--will be held to shape program and project design.” [2]

Does this sequence--proposal first, broad consultation second--make sense? In theory it may. It is certainly appropriate to rely on a good PRS to identify target sectors. And it is also okay to sign on to some of the PRS’ specific programs if they too reflect consultation and an assessment of poverty impact. But the MCC must also take seriously potential weaknesses in this approach in Tanzania. The MCC’s challenge here is to strike the right balance between three important factors in its streamlined approach to consultation: (i) supporting existing national strategies and fostering efficiency by relying heavily on the PRS; (ii) maintaining high standards for consultation and pushing Tanzania to raise the bar on civic participation by confronting previous weaknesses; and (iii) making time and space for meaningful consultation on the MCA-specific programs before the proposal is set in stone.

Challenge 2: Making tough choices on what to fund
The GoT first proposed four sectors to the MCC: water, transportation, energy and education. The current proposal process is considering only the first three. Let’s first take a look at how the MCA-TZ landed on these three sectors, then at challenges in choosing between different investments in these areas.

The absence of education: It is a test of the MCC's "country ownership" principle when a sector proposed by the government is left out of a Compact. Some MCA observers suspect that the MCC is encouraging countries to stay away from health and education in their proposals. Was this the case in Tanzania? Probably not. There are several reasons why education has fallen out of the equation in Tanzania. After initial discussions, MCC staff encouraged the Tanzanians to “streamline and focus the proposal to address fewer sectors in a more comprehensive manner." According to one GoT official, this guidance helped them realize that "We can't rely on the Americans for everything!" and choose a more streamlined focus on infrastructure. Finally, and perhaps most significantly, donors argued that the education sector is saturated, and encouraged the MCC to keep out of this area. Several NGO representatives agreed with this recommendation, and one argued, “there is already a lot of money on the feel-good side [health and education] and the government does not have the capacity to manage it all.” While most respondents agreed that there are fewer gaps in funding for education than in the proposed MCA target areas, there was not complete consensus on this. Two leading donor representatives (one bilateral and one multilateral) argued that primary education is well funded, but there are still large gaps in secondary and higher education, especially when it comes to infrastructure. Thus, there is not a crystal-clear picture of why education fell out of the proposal, but this MCA observer’s impression is that it was the result of an iterative, coordinated process.

All eyes on energy: Of the three focus sectors, energy may prove to be the most challenging and the most interesting to watch. That energy is a priority is not controversial. There was strong consensus among everyone interviewed for this report, including local NGOs, that the power sector is a huge priority in Tanzania. Reflecting this priority, the sector is featured in the PRS in both the economic development and social welfare sections. But those seeking to strengthen the sector face several significant challenges. Energy production and distribution remain in government hands and suffer severe inefficiencies. Tanzania’s grid network only reaches a small fraction of the country, and over-reliance on hydropower leads to severe outages in the dry season even where power lines are present. The sector lacks a solid national strategy or financing plan and has been embroiled in harsh debates about fees and tariffs. These factors conspire to make for unreliable service and poor coverage, as well as making the sector financially too precarious to invest in upgrades or expansion, or to attract private investment. Thus, the MCC and MCA-TZ have their work cut out for them as they design investments in the energy sector. There will be plenty of political heat, especially in debates about tariffs. And there will be plenty of tough choices, especially in deciding whether the link between economic growth and poverty reduction will be best made through improving existing services, expanding access or strengthening policies.

Challenge 3: Creating incentives for policy reform
The MCC has a great opportunity to create incentives for policy reform in Tanzania, especially in the energy sector. According to several donors, the overarching priority in the energy sector is getting the policies right, as the existing national energy strategy and financing plan are weak. The MCC has been clear with the GoT that it will not invest in this sector unless plans are strengthened. Apparently the MCC's firmness on this matter has inspired a serious response, with the GoT conducting the due diligence requirements of the MCC. The challenge for the MCC will be sticking to its guns on demanding better strategic and financial plans for the sector, even if this implies delays or cutting sensitive investments from the proposal. If it does, this may be a case of the MCC's incentive effect at work. In the words of one Dar es Salaam-based USG representative, the MCC may be able to “raise the bar” in the energy sector and "catalyze reforms in the sector before spending any money."

Next Section: Emerging Issues: The MCC Moving Forward

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[1] In general, the MCC asks countries to submit a proposal six months after the first MCC visit.
[2] According to the MCC, GoT has organized several important and comprehensive public outreach meetings since the time of this field visit.

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