EXAMINATION OFECONOMIC DIPLOMACY IN PROMOTING

INVESTMENTS: THE CASE OF TANZANIA, OMAN AND UNITED ARAB

EMIRATES

ALI AHMED SALEH

A THESIS SUBMITTED IN FULFILLMENT OF THE

REQUIREMENTSFOR THE DEGREE OF DOCTOR OF PHILOSOPHY OF

THE OPEN UNIVERSITY OF TANZANIA

2015
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CERTIFICATION

The undersigned certifies that he has read and hereby recommends for acceptance by

the Open University of Tanzania thesis titled “An Examination of Economic

Diplomacy in Promoting Investments: The Case of Tanzania, Oman and United Arab

Emirates” in fulfillment of the Requirements for the Degree of Doctor of Philosophy

of the Open University of Tanzania.

…………………………………..

Prof. Hossea Rwegoshora

(Supervisor)

……………………………..

Date
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COPYRIGHT

No part of thesis may be reproduced, stored in any retrieval system or transmitted in

any form by any means, electronic, mechanical, photocopying, recording or

otherwise without prior written permission of the author or the Open University of

Tanzania in that behalf.

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DECLARATION

I, Ali Ahmed Saleh, do hereby declare to the Senate of The Open University of

Tanzania that, this thesis for the Degree of Doctor of Philosophy is my original

work and it has not been submitted and will not be submitted to any other

University for a similar award.

…………………………………………

Signature

…………………………………………

Date
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DEDICATION

The realization of this work after years of hard work was not easy given my personal

official responsibilities. First at the Consul General of The United Republic of

Tanzania to Dubai and Northern Emirates from 2005-2011 and later as Tanzanian

Ambassador to the Sultanate of Oman from 2012 to date.Alot of Dedication and

sacrifice have had to be made up to this day.

My lifetime professional achievement spanning 30 years in Tanzania Foreign Service

and indeed this work is dedicated at first level to "ALLAH

SUBHANAWUATAALLAH". For all of this has been realized by HIS will.

Secondly to my two dear parents, my late father Shk Ahmed Bin Saleh AlIsmailly

and my late mother Jokha Bint Ali Al Jabry for bringing me up. Last but not least to

the man and women of my native Pemba Island, Zanzibar and indeed to the entire

United Republic of Tanzania for it is only through their sweat and support in

different ways as a fellow citizen that I achieved what I have and be what I am.
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ACKNOWLEDGEMENTS

The present study is a summation of efforts and experiences of the researcher and

other dedicated individuals. My thanks to everyone who supported me during this

process. However, a few deserve a mention. First I wish to extend my sincere

gratitude to my supervisor Prof. Hossea Rwegoshora for his guidance, perseverance

and genuine criticisms to bring this work to its present form. Their efforts, expertise

and commitment to academic work have been most helpful. I am grateful to all staff

of the open university of Tanzania for their cooperation and support. Last but not

least,my deep gratitude also goes to my family members namely, my spouse Sabrina

and my children Saleh, Jokha& Rashid for their tireless support, patience and

encouragement during the course of my study.

Special Thanks to Hon John Samuel Malecela, former Prime Minister and former

Chancellor of the Open University of Tanzania (OUT) for his first encouragement to

pursue this work. This happened during one of our meetings in Dubai during his

many stop-overs when I was Consul General. Secondly I wish to express my deep

thanks and gratitude to the immediate past vice chancellor of OUT, Prof Mbwete,

who I must say re-ignited my resolve to continue with this work when I had already

given up.

Finally I am responsible for any shortcoming in this work. any errors that may

appear are my sole responsibility.

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ABSTRACT

The purpose of this study was to examine why there has been low level of economic

cooperation between in Trade and Investment between Tanzania and GCC member

states. Specifically the study wanted to study wanted to find out the readiness of the

private sector and how favorable were the structural trade mechanism and legal

framework in promoting the trade and investment between Tanzanian and Oman and

United Arab Emirate. A total of 69 respondents were engaged by the study (i.e.

40.4% female and 59.6% males). These included officials from the government

ministries, chambers of commerce, investment promotion agencies, parliamentary

committee, business community members among others. The main finding reveals

that, there was low level of preparedness of the private sector to promote investment

in Tanzania as compared with the strong and buoyant private sector in Oman and

United Arab Emirates. It was further revealed that the existing trade structural

mechanisms in Tanzania were different with the structural trade mechanism in GCC

countries. The GCC countries had relatively better terms and conditions when

comparing with that of Tanzania likewise the legal frame work existing in Tanzania

and GCC played a different role to promote trade and investment. This was

facilitated by different level of development as well as different of interests among

different countries. The study recommends that, there is a need to promote an

expanding role of the private sector in its broader context and revisit legal and

structural trade mechanism in an effort to promote close economic links between

Tanzania and the Gulf Cooperation Council countries.

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TABLE OF CONTENTS

CERTIFICATION ................................................................................................. ii

COPYRIGHT........................................................................................................ iii

DECLARATION .................................................................................................. iv

DEDICATION ....................................................................................................... v

ACKNOWLEDGEMENTS .................................................................................. vi

ABSTRACT ......................................................................................................... vii

LIST OF TABLES ............................................................................................... xii

LIST OF FIGURES ............................................................................................ xiii

APPENDIX ......................................................................................................... xiv

LIST OF ABBREVIATIONS .............................................................................. xv

CHAPTER ONE .................................................................................................... 1

THE PROBLEM AND ITS CONTEXT ............................................................... 1

1.1 Introduction ................................................................................................. 1

1.2 Background to the Problem .......................................................................... 1

1.3 Statement of the Problem............................................................................ 10

1.3.1 The General Objectives .............................................................................. 11

1.3.1.1 Specific Objectives ..................................................................................... 12

1.3.1.2 Research Questions .................................................................................... 12

1.4 Significance of the Study ............................................................................ 12

1.6 The Organization of the Study .................................................................... 14

CHAPTER TWO ................................................................................................. 16

LITERATURE REVIEW .................................................................................... 16

2.1 Introduction ................................................................................................ 16

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2.5 Diplomacy and Globalization ..................................................................... 31

2.5.1 Commercial Diplomacy .............................................................................. 33

2.5.2 Trade Diplomacy ........................................................................................ 35

2.5.3 Finance Diplomacy..................................................................................... 40

2.6 Theoretical Discussions .............................................................................. 41

2.6.1 Theory of Economic Nationalism ............................................................... 42

2.6.2 Theory of Economic Internationalism ......................................................... 42

2.6.3 Theory of Economic Structuralism ............................................................. 43

2.6.4 Dependency by Theory ............................................................................... 43

2.6.5 World System Theory................................................................................. 44

2.6.6 Regional Integration Schemes .................................................................... 44

2.6.7 The South-South Cooperation ..................................................................... 45

2.7 New Actors and New Issues in Inter-State Relations ................................... 47

2.8 Empirical Review ....................................................................................... 50

2.8.1 Experiences from other Countries ............................................................... 52

2.9 Synthesis and Knowledge Gaps .................................................................. 56

CHAPTER THREE ............................................................................................. 57

RESEARCH METHODS AND PROCEDURES ............................................... 57

3.1 Introduction ................................................................................................ 57

3.2 Study Area ................................................................................................. 57

3.3.1 Qualitative Approach .................................................................................. 60

3.3.2 Quantitative Approach ................................................................................ 61

3.4 Research Design ......................................................................................... 61

3.5 Target Population ....................................................................................... 62

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3.5.1 Sampling Procedures .................................................................................. 63

3.6 Methods of Data Collection ........................................................................ 67

3.6.1 Documentary Review ................................................................................. 67

3.6.2 Interviews ................................................................................................... 68

3.6.3 Questionnaire ................................................................................................ 69

3.7 Data Analysis ............................................................................................. 69

3.8 Validity and Reliability of Data .................................................................. 70

3.9 Ethical issues .............................................................................................. 71

3.9.1 Access and Acceptance............................................................................... 71

3.9.2 Informed Consent ....................................................................................... 72

3.10 Limitation of the Study ............................................................................... 72

CHAPTER FOUR................................................................................................ 74

FINDINGS AND DISCUSSIONS........................................................................ 74

4.1 Introduction ................................................................................................ 74

4.2 Readiness of the Private sector in Promoting International Trade and

Investment .................................................................................................. 74

4.2.1 The Private Sector in Tanzania ................................................................... 75

4.2.1.1 Readiness of the Private Sector in Tanzania................................................ 76

4.2.1.2 Factors affecting Readiness of the Private Sector to in Tanzania ................. 83

4.2.2 Readiness of private sector in Oman and United Arab Emirate ................... 88

4.3 An Over View of Structural Trade Mechanism Tanzania ............................ 93

4.3.1 International Trade Mechanism in Tanzania ............................................... 95

4.4 Legal Framework in Promoting the Cooperation between Tanzania and GCC

Countries ...................................................................................................102
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4.4.1 Legal and Administrative Obstacles ...........................................................103

4.5 Chapter Summary ......................................................................................111

CHAPTER FIVE ................................................................................................112

SUMMARY, CONCLUSION AND RECOMMENDATIONS .........................112

5.1 Introduction ...............................................................................................112

5.2 Summary ...................................................................................................113

5.3 Conclusions ...............................................................................................115

5.4 Recommendation .......................................................................................118

5.4.1 Preparedness of the Private Sector .............................................................118

5.4.2 Legal Framework ......................................................................................120

5.5 Area for Further Studies ............................................................................121

REFERENCES ...................................................................................................122

APPENDICES .....................................................................................................129
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LIST OF TABLES

Table 1.1: Imports from GCC to Tanzania 2005 – 2008 in US$ Million Dollars ..... 7

Table 1.2: Exports from GCC to Tanzania 2005 – 2008 in Millions of USD)......... 8

Table 1.3: The Pattern of Investment by Company, Country of Origin and

Sector as of 2008 ................................................................................... 9

Table 3.1: Distribution of Respondents by Country, Category and Gender............ 66

Table 4.1: Responses on the Readiness of the Private Sector in Tanzania ............. 77

Table 4.2: Responses on Factors inhibiting the Growth of private Sector

in Tanzania .......................................................................................... 79

Table 4.3: Ranking by Different Categories on the Factors Disenabling

the Growth of Private Sector ................................................................ 83

Table 4.4: Awareness of the Business Support Systems among the Respondents .. 86

Table 4.5: Factors Facilitating Readiness of the Private Sector in Oman

and UAE to Promote Foreign Trade and Investments ........................... 90

Table 4.6: Factors Inhibiting the Promotion of Private Sector in Oman

and United Arab Emirates .................................................................... 92

Table 4.7: Existing Trade Mechanism in Tanzania by Frequency and Percentage . 95

Table 4.8: Knowledge about the Existence of Trade Mechanism in Tanzania ....... 97

Table 4.9: Response on Structural Trade Mechanism by Different Categories

of Respondents .................................................................................... 99

Table 4.10: Legal and Administrative Obstacles by Respondents in Oman

and UAE .............................................................................................104

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LIST OF FIGURES

Figure 1.1: Conceptual Framework ........................................................................ 14

Figure 3.1: Map showing Gulf Cooperation Council Member States Indicating

United Arab Emirates and Oman ......................................................... 57

Figure 3.2: The Map of Tanzania Mainland and the Isles ....................................... 58
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APPENDIX

Appendix 1: Sample Size Determination Using Krejcie and Morgan Table ..........130
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LIST OF ABBREVIATIONS

ASEAN Association of South-East Asian Nations

BIT Bilateral Investment Treaty

BOO Build-own-operate

BOT Build-operate-transfer

CIS Commonwealth of Independent States

COMESA Common Market for Eastern and Southern Africa

CSR Corporate social responsibility

EAC East African Community

EMS Electronics Manufacturing Services

FDI Foreign Direct Investment

GCC Gulf Cooperation Council

GFCF Gross Fixed Capital Formation

GHG Green House Gas

IIA International Investment Agreement

IPA Investment Promotion Agency

IPO Initial Public Offering

IPRS Intellectual Property Rights

ISDS Investor–State Dispute Settlement

IT-BPO Information technology and business process outsourcing

LDC Least Developed Country

LLDC Landlocked Developing Country

LNG Liquefied Natural Gas

M&As Mergers and Acquisitions

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MFN Most favored nation

MSI Multi-stakeholder initiative

NAM Non Aligned Movement

NAFTA Northern America Trade Free Area

NEM Non-equity mode

NIE Newly industrializing economies

ODA Official development assistance

OECD Organization for Economic Co-operation and Development

PPP Public-Private Partnership

QIA Qatar Investment Authority

R&D Research and Development

ROCE Return on Capital Employed

RTAs Regional Trade Agreements

SADC Southern African Development Community

SAARC South Asian Association for Regional Cooperation

SEZ Special Economic Zone

SIDS Small Island Developing States

SME Small and Medium-Sized Enterprise

SOE State-owned Enterprise

SWF Sovereign Wealth Fund

TBT Technical Barriers to Trade

TNC Transnational Corporation

TRIMs Trade- Related Investment Measures

TRIPs Trade-Related Aspects of Intellectual Property Rights

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CHAPTER ONE

THE PROBLEM AND ITS CONTEXT

1.1 Introduction

This study intended to examine challenges facing Tanzania in accessing available

opportunities in Gulf Cooperation Council states through the economic diplomacy in

international relations. This chapter provides background information and statement

of the research problem and the subsequent sections covers the objectives of the

research, research questions. The second part of the chapter is the significance of the

study and the conceptual framework of this study.

1.2 Background to the Problem

The phenomenon of economic diplomacy is not new. It can be traced back to the

commercial diplomacy of the European states in the 19th century. However, the

increasing of the role of economic diplomacy in the international economical

attitudes is promoted by quite a number of factors. Some of these factors include

Internationalization processes and reinforcement of interdependence of the world

economic system (i.e. global and regional integration). The other factor includes the

expansion of market economy area, liberalization of national economies and their

interaction via trade and international investments. Last but least there has been an

increasing number of global economy entities, i.e. transnational corporations, banks,

investment groups, which have a serious influence on world politics, international

relations, and existence of large‐scale and expanding dependence of economies of

new independent countries on world markets, investments, technologies forces them

to correct its positions on political and military problems of international life.

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Attraction of foreign investments is an essential issue of economic diplomacy.

Basically, the main facility for its realization is a favorable environment creation for

the meetings of exporters and their potential partners, undoubtedly, to define and

formulate priorities, as well as to show all profitable sides of exported goods and

technologies.

Nevertheless, it is necessary to emphasis on the importance of the minutely

developed export strategy of country determining the basic directions of export of

goods. On balance, it should be the primary goal of trade and economic missions.

Strengthening of the institutional and organizational base, growth of status of

economical diplomacy in the system of authority is observed practically everywhere.

The functions are expanding, the quality of work is improving and the number is

increasing of the trade and economic missions of the country in the field of support

of overseas trade activities, lobbying of interests of domestic companies abroad,

trade and political assistance, mobilization of effective external resources on

development purpose. In the final analysis, what economic diplomacy needs is to

maintain the auspicious conditions of international economic cooperation that is able

to promote and raise the level and quality of living of its population. To put it simply,

the trade and economic mission is a small islet in strange country accumulating

extensive knowledge on the host country and forming political direct contacts due to

its long‐term presence in other countries. Actually, their work should be directed on

the collecting of the accessible and solid data about the level and gravity of priorities,

objective interest in investments and mutual benefits of the host country. Even if it

requires to compromise, benefit should be greater than the concession.

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Experiences from many countries soon after their independence their diplomats

concentrated mostly on political work, leaving whatever little economic work was

there to specially appoint “commercial representatives”, many of whom were drawn

from the Commerce Ministry and some from Finance Ministry. As the importance of

economic diplomacy grew it was thought necessary to appoint Ambassadors to

oversee economic work. In recent years, however, more and more Heads of Mission

have been getting directly involved in economic work and are devoting the major

part of their time to such work. It is necessary not only to encourage this trend but

also to make our best talent available for it.

The most important task to be a Head of Mission today lies in identifying the ‘big

interest’ for country concerned and generating specific and concrete proposals of a

‘big item’ nature. For instance, it should be possible to identify a scheme involving a

country, which has iron ore and requires a steel plant, to be put in touch with both a

Government entity and a private Indian entity, working in unison, to extract a major

deal in the energy sector either there or through a third country/party. Similarly, it

should be possible to identify a private sector Indian entity to make a major overseas

investment in the IT sector in return for preciously required minerals and metals.

Some of this is already being done, but on a small scale. The need for such inter-

linked action and the realization which is a prime requirement needs to be promoted

through a change in the Foreign Service mindset.

In Tanzania like the rest of Africa was connected to the rest of world through

different forms of trade and contacts, mostly notable long distance and slave trade

(Barston 1997). The colonization process came to cement the then existing political
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and economic relations between Africa and Europe by directly connecting African

economies to the global markets. While the colonialists were basically interested

with the abundant new raw materials available in Africa, they brought back the

manufactured goods and hence turned Africa as a market for European manufactured

goods.

Whereas the economic diplomacy had been in existence under the context of

development and civilization of nations through traditional diplomacy, its importance

and recognition became vivid with the end of the cold war. Today, the need for

placing greater emphasis on economic diplomacy is universally recognized. As a

result, politics no longer drives economics as it used to be, instead it is economics

which drives politics. Economic considerations remain in the forefront to achieve

foreign policy goals. Countries which have been slower in recognizing this than

others have been disadvantaged.

It is against such background that as of now there has been a lot of definitions and

interpretations on the term Economic Diplomacy. As such there is no such a

definition which is considered self-sustaining and exhaustive. However, a brief

review of the contents of the major diplomacy text books show that economic

diplomacy is generally defined as the use of traditional diplomatic tools such as

intelligence gatherings, lobbying, representation, negotiation and advocacy to further

the foreign economic policies of the State (Hamilton and Langharne 1995, Johnson

and Hall 2005, Marshall 1997; Watson 1982). Berridge (2002) however argues that

“economic diplomacy” is an art of serving economic security and strategic interests

of the country by the use of economic instrument in conduct of state to state

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relations. Economic diplomacy is designed to influence policy and regulatory

decisions of foreign governments as well as those of international organizations. It

goes beyond trade and investment to the resolution of multiple causes of

international conflicts. Some of the basic objectives of economic diplomacy include;

the promotion of trade and investment, facilitate multilateral trade negotiations and

realization of political objectives through economic action.

In view of the above, state entities, official agents, foreign and economic ministries,

the diplomatic and commercial services, plus their promotion agencies now engage

in dynamic partnerships with state and non-state actors. Indeed such collaboration is

a sine qua non for effective external outreach abroad, in mirror fashion; the actions

similarly address a wide field of foreign Stakeholders.

Trade Diplomacy is mostly devoted to issues of trade policies particularly with the

developments in International trade relations with the growth of sub and regional

trading blocs such as the East African Community (EAC), Southern African

Development Cooperation (SADC) and so many other worldwide. It is further

supported by International body such as World Trade Organizations (WTO) where

issues of International trade practices and rules are the major agenda for negotiations

is where the concept of Trade Diplomacy attains its definitions. This aspect.

Similarly the emergence of an increasingly number of numerous bilateral trade

agreements such as the North American Free Trade Agreement (NAFTA); European

Union (EU); Southern Africa Development Community (SADC), South Asian

Association for Regional Cooperation (SAARC) all extend the need for trade

diplomacy.
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The above discussions demonstrate the importance of the Economic Power in

International relations of our times as a powerful weapon any country to have in

exerting its positions, status and interests. This is where the concept of Economic

Diplomacy comes in as a tool to achieve fresh goals while practicing any country’s

foreign policy agenda.

According to Brian Hocking (2005) the influence of the country`s perception on the

decisions accepted by foreign businessmen in the beginning stage of the business

activity. Hocking asserts that there are 72% of the perceptions of the country as a

base for decision making on investment projects or other forms of economic

co‐operation with the particular country. According to the publication of the World

Bank “Country Marketing: advertising, as the tool for foreign investment

attraction“, where it is pointed out the key position of the positive image of the

country for attraction of foreign investments. Above all, active economic exchange

can take place even between countries that do not have diplomatic mutual relations

or are burdened by serious political problems.

Eventually bilateral mutual relations based on positive perception of national identity

form the basis for more dynamical and easy development of trade and economic

mutual relations. Initiative, innovation and ingenuity are the qualities of successful

organization of activities for diplomatic missions. It should be added here that all the

methods of diplomatic activity management are substantially important, including

consular and cultural enlightening work, relations with mass media, diaspora and

other parts of diplomatic representatives` work which is directed on creation of

positive attractive image of its country in the host country.

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In 2001 Tanzania Government launched what was referred to as the “New Foreign

Policy” with Economic diplomacy as its core agenda. one of the main objectives

included) to project, promote and protect URT’s political, economic, social and

cultural interests through active and sustainable economic diplomacy; (i) To ensure

that URT’s relation with other nations and international entities are also driven in

line with economic interests, (ii) To build a self-sustaining economy, preservation of

national peace and security as well as supporting regional and international endeavor

for the creation of better and peaceful world. (iii) and to accelerate the political and

social economic integration for the region and the Policy manifest itself in active

international engagement, which is basically leveraged upon the pursuit of economic

objectives, while at the same time preserving the gains of the past and consolidating

the fundamental principles of Tanzania’s traditional foreign policy.

Table 1.1: Imports from GCC to Tanzania 2005 – 2008 in US$ Million Dollars
Country 2005 2006 2007 2008

472,450,856.9
Bahrain 5 418,137,934.47 176,627,926.26 43,072,620.05

Kuwait 9,373,448.94 3,482,090.03 44,207,697.69 66,243,575.21

Oman 8,184,640.78 7,093,346.46 22,078,455.17 7,918,255.42

Qatar 11,977,370.34 10,462,251.28 16,182,475.80 8,358,613.44

Saudi Arabia 40,821,410.46 258,654,644.89 226,911,569.56 253,932,587.97

192,265,863.1
UAE 6 516,254,198.28 803,072,802.63 878,065,720.61

735,073,590.6 1,289,080,927.1 1,257,591,372.7

Total 2 1,214,084,465.42 1 0
Source: Ministry of Industry, Trade & Marketing of Tanzania
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As highlighted on the Table 1.1 the imports from GCC countries have not been fairly

stable. The Table 1.1 indicates that the imports from Oman had been escalating. For

example whereas in 2007 Tanzania imported products worthy 22,078,455.17 USD in

2007, the rate of importation went down up to 7,918,255.42. USD in 2008.

On the other hand the imports from United Arab Emirates increased from

803,072,802.63 in 2007 to878,065,720.61 US $. However the general picture which

emerges from the above table is that the important has been fairly constant ranging

from 1,214,084,465.42 in 2006 to 1,257,591,372.70 USD in 2008.

At another level when one examines the rate exports from GCC countries to

Tanzania from 2005 to 2008 one can observe an escalating rate of volume of trade

between different years. For example whereas in 2005 the general exports was

62,961,770.11 USD, in 2006 there were a slight decline of the export to

52,197,160.82 USD.

Table 1.2:Exports from GCC to Tanzania 2005 – 2008 in Millions of USD)

Country 2005 2006 2007 2008

Bahrain 232,530.70 292,974.82 1,249,276.09

Kuwait 140,041.20 55,170.71 1,929,278.29 12,401.08

Oman 1,207,770.78 250,504.49 246,289.45 10,291,193.62

Qatar - 57,325.08 422,839.56 271,971.91

Saudi Arabia 28,380,001.36 2,815,543.32 10,111,698.94 15,155,020.69

UAE 33,233,956.78 48,786,086.53 91,703,727.83 64,437,800.98

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TOTAL 62,961,770.11 52,197,160.82 104,706,808.89 91,417,664.37

Source: Ministry of Industry, Trade & Marketing of Tanzania
In 2007 there were a big increase of exports from GCC countries from 52,197,160.82

up to 104,706,808.89 this was almost 100 per cent increase while in the following

year the volume of trade again went down to 91,417,664.37 USD. Also important to

was an increase exports from Oman and UAE. For example whereas in 2007 the

volume of export was 246,289.45 USD in 2008 the volume has gone up to

10,291,193.62.

Table 1.3: The Pattern of Investment by Company, Country of Origin and

Sector as of 2008
Company Sector Home country
Barclays Bank (T) Ltd Finance United Kingdom
Brooke Bond Tanzania Ltd Food, beverages and tobacco United Kingdom
City Water Services Ltd Electricity, gas and water United Kingdom
Gailley& Roberts (T) Ltd Wholesale trade United Kingdom
Glaxo Welcome Tanzania Ltd Wholesale trade United Kingdom
Rentokil Initial Tanzania Ltd Other business activities United Kingdom
Standard Chartered Bank Tanzania Ltd Finance United Kingdom
Unilever Tea Tanzania Ltd Food, beverages and tobacco United Kingdom
Aon Tanzania Limited Insurance United States
Chemicals and chemical
Body Care Ltd United States
products
Citibank Tanzania Ltd Finance United States
Price water house coopers Other services United States
Matsushita Electric Company (E A) Electrical and electronic
Japan
Ltd equipment
D T Dobie & Company (Tanzania) Ltd Wholesale trade France
Mic Tanzania Ltd Wholesale trade Luxembourg
Tri Telecommunications Ltd Telecommunication Malaysia
Karibu Textile Mills Limited Textiles and clothing Mauritius
T P C Ltd Agriculture and hunting Mauritius
Chemicals and chemical
Sadolin Paints Tanzania Limited Oman
products
Alliance Ginneries Ltd Agriculture and hunting Kenya
Desbro Tanzania Ltd Wholesale trade Kenya
Kibo Breweries Ltd Food, beverages and tobacco Kenya
Regional Air Services Air transport Kenya
Service And Computer Industries Ltd Wholesale trade Kenya
Tread setters Tyres (T) Ltd Rubber and plastic products Kenya
Tri Clover Industries (T) Limited Chemicals and chemical Kenya
 10

products
Geita Gold Mine (T) Ltd Mining and quarrying Ghana
National Bank Of Commerce Limited Finance South Africa
Source: World Investment Directory (2008)
On the other hand the volume of the exports from United Arab Emirate decreased

from of 91,703,727.83 in 2007 to 64,437,800.98 USD in 2008. In view of the above

findings it is fair to argue that the volume of trade has not been on the steady

increase. In as far as the investment pattern is concerned the World Investment

Directory (2008), among several GCC countries it was only Oman which had

invested in Tanzania. Table 1.3 elaborated this point more.

The general impression from the above data is that up to 2008 the United Kingdom

was leading country in terms of having many investments i.e. 28.2 percent followed

by Kenya 25 percent and USA 14 percent. African countries which had invested in

Tanzania by then were only Ghana, South Africa, while Oman was the only state

from GCC member states with only 3.2 percent participation in the investment

pattern.

1.3 Statement of the Problem

Tanzania is one of the developing countries in the world. As a country it has various

natural resources which have not been exploited fully to make it realize the desired

development of its people. Whereas Tanzania has long outstanding relationship with

GCC member countries (e.g. political, blood relationships and long local trade links)

there is generally very low trade and investment among these countries despite their

long historical link. This is particularly glaring when one looks at the trade and

investment figures.
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According to TIC (2009) the top ten investors in Tanzania does not include an Gulf

Cooperation Council member states. In terms of the value the top ten investors in

dollars include United Kingdom (5 billion dollars), United States of America (4

billions), china (3.3 billion), India (2 billion), Kenya (1.6 billion), Netherlands 1

billion, south Africa (767 million) Canada (546 millions); Germany (515 millions)

and Italy 131 (millions).The major problem is that, whereas GCC countries have

capital emanating from oil products, the GCC is net importer of food. As if this is not

enough, GCC states depend on imported food products from other countries in Asia

while Tanzania has land, water, resources, and labour which GCC states could also

exploit for the mutual benefit of these countries. The GCC states could and should by

now have established the long talked initiative of establishing Strategic Partnership

in Food, Security with Tanzania in a bid to secure their guaranteed food imports.

Hence whereas in its new foreign policy of 2001 Tanzania emphasis economic

diplomacy why is it difficult to enter into such strategic partnership with GCC

member countries and exploit the existing opportunities. This study wanted to

examine the reasons why there is low level of interest to forge a strong partnership in

trade and investment between these entities.

1.3.1 The General Objectives

The general objective of this study was to examine economic diplomacy in

promoting trade and investment in Tanzania, Oman and United Arab Emirates.
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1.3.1.1 Specific Objectives

The study was guided by the following specific objectives

(a) To find out the level of readiness of the private sector in Tanzania and Oman

and United Arab Emirates in the promotion of trade and investments.

(b) To examine if structural trade mechanism are favorable or unfavorable in terms

of Tanzania collaborating with GCC member states.

(c) To examine the nature of legal framework operating in Tanzania, Oman and

united Arab emirate (GCC countries) in relation with the promotion of trade

and investment among these countries.

1.3.1.2 Research Questions

The study will be guided by the following key questions:

(a) To what extent is the private sector in Tanzania and selected GCC countries

promotes the economic cooperation in these countries?

(b) How favorable/unfavorable are the structural trade mechanism in Tanzania,

Oman and United Arab Emirates

(c) How friendly are the legal frameworks in Tanzania, Oman and United Arab

Emiratesin promoting the cooperation among these countries?

1.4 Significance of the Study

The study is significant in the sense that it find out what have been the major

obstacles hindering the cooperation between Tanzania and GCC member countries

and thereby revisiting their new approach to enhance the long term relationships.
 13

Secondly, the study is important in the sense that, it will not only reveal weakness

and strength of the private sector in Tanzania, Oman and United Arab Emirates, but

also the study will make these countries revisit their strategies of cooperation by

looking at their legal and trade structural arrangement which will help to promote

their relationships.

It is also envisaged that the study findings will help the policy makers to identify

areas which need to be examined in order to promote the relationships between two

countries.Such areas may include the discovering new opportunities where these

countries can engage for the benefits of their sister countries. Last but not least the

study is significance because the findings generated by the study will help the

concerned countries not only to understand the existing weaknesses in their

economic cooperation but rather the findings will further help these countries to

strategize how best to enhance their cooperation.

Independent Dependent
variable variable

Domestic social Improved domestic

International
and economic social and economic
organizations-
conditions development
conventions,
- low level - decreased
charter
technology level of
- high level poverty
poverty Government - increased
- policies level of
- low level of
investment - laws employment
- Programs - increased
- high level
unemployment grams investment
Diplomatic
Relations –
Embassies
 14

Figure 1.1: Conceptual Framework

The major thesis of this study was to find out why there has been low level of

cooperation among selected GCC countries and Tanzania. This assumption was

based on the ground that Tanzania has had a long history between for example

Tanzania, Oman and other GCC countries. it was therefore assumed that Tanzania

as a country has low level of economic development, high level of poverty

characterized by high level of employment while it has various opportunities which

can be exploited by Tanzanian themselves and the investors from Oman, UAE and

other GCC countries. In order to develop economically there are policies formulated

by the government, laws enacted to facilitate the implementation of these policies.

Further there are diplomatic relations which motivates investors to come and invest

in Tanzania. It is therefore envisaged that with existence of strong policies and legal

procedures and good use of existing diplomatic relations the changes are that the

poverty will be reduced as the investors from different GCC countries would invest

in Tanzania in various areas and there helping to reduce the level of unemployment,

poverty and the promote economic prosperity. On the other hand it is envisaged that

the GCC countries would also benefit from the opportunities available in Tanzania

which have not been exploited fully.

1.6 The Organization of the Study

This thesis is structured around five chapters. Chapter one provides the context of the

research problem. In so doing the chapter provides the background information of

 15

the study, the statement of the problem, the general and specific objectives of the

study. The chapter further highlights on the significance of the study by indicating

the contribution of the study to the policy makers, business people and academicians.

The second chapter provides a review of literature. The major purpose of the review

of literature is to reveal what is already known about the research problem and what

is not known by identifying the knowledge gap which the study was attempting to

fill. Chapter three is basically a chapter dealing with the methods and processes

which were used by the study. The chapter highlights on the research design, study

areas, target population and data collection methods. Chapter four presents and

discusses the research findings while chapter is conclusion and recommendations

from the study.

1.7 Chapter Summary

The chapter has dealt with definition of the research problem. The chapter has further

explained the characteristics of the research problem by showing the specific

objectives, research question and significance of the study. The following chapter

deals with review of literature.

 16

CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This chapter presents various views presented by different scholars on economic

diplomacy. It reviews various theories and empirical studies which have been made

concerning economic diplomacy. The chapter is divided into four main sections. The

first section discusses the concept of Economic diplomacy; It does so by highlighting

on the genesis of diplomacy in historical context while the second part examines the

link between globalization and Economic diplomacy. The third part highlights the

theories related International economic relations. The fourth part reveals some

experiences and successes of countries which have practiced and benefited from

Economic diplomacy. The last part shows the knowledge gap identified in the review

of literature.

2.1 Definitions of Economic Diplomacy

Economic Diplomacy had been in existence and practice in history, development and

civilization of nations under the general term of traditional diplomacy. But its

importance and recognition became vivid and demanding as stated earlier on with the
 17

demise of the Cold War era and the emergence of globalization. It is during this

period that the term Economic Diplomacy has gained some special importance

among both the academics and practitioners (governments and precisely the

diplomats). It is against such background that as of now there has been a lot of

definitions and interpretations on the term Economic Diplomacy. As such there is

no such a definition which is considered self sustaining and exhaustive. However, a

brief review of the contents of the major diplomatic text as diplomacy show that

economic diplomacy is generally defined as the use of traditional diplomatic tools

such as intelligence gatherings, lobbying, representation, negotiation and advocacy to

further the foreign economic policies of the State Barston 1997; Berridge (2002;

Hamilton and Langharne 1995, Johnson and Hall 2005, Marshall 1997; Watson

1982).

At the power play end of economic diplomacy is what Baldevin (1985) calls

economic Statecraft which is the strategic use of positive and negative economic

sanctions such as trade embargos as well as aid programmes by State and other

actors such as the United Nations to convince other states to cooperate (see also

Davis 1999; Hogan 1987; Kunz 1997; Zimmerman 1993). Thus economic diplomacy

conceived is this realist way is concerned with economic agenda in diplomacy which

can be distinguished from the political agenda although the truth is and remains that

the politics and the traditional diplomacy are inherently the two faces of the same

coin. In other words State actors role in diplomacy and International relations

remain basic as it has been.

 18

Furthermore and as stated earlier very early diplomatic exchanges in early

civilization were basically aimed at facilitating trade (see Lee & Hadson 2004).

Thailand provides an example in the argument given its own account by its historical

development (Keith 1999) emphasizing how trade interests in China drove Thai

diplomacy in the 13th Century and Thai diplomatic relations with Europe in the 17th

Century. Prof. Marjan Svetlicic defines Economic diplomacy “as bilateral, regional

or multilateral realization of economic interests predominately by diplomats, but also

other civil servants and/or state actors in order to maximize national interests or

maximize welfare of the population of the home Country.

It is therefore not advisable to distinguish between different kinds of economic

diplomacies (economic; commercial; business or even intro business (see more in

Udovic 2009) Amra Nusinovic and Erkan Ilgun defining Economic diplomacy and

Business Negotiation from managerial approach argue that “ Economic diplomacy is

a specific combination of Classical diplomacy, economic Science and managerial

sciences, methods and techniques for negotiation with foreign partners, public

relations and collecting economic information of interest for the economy of one’s

country or company with the aim of penetration into the world market”.

Kishan S. Rama a former veteran Indian diplomat (from 1960-1995) and who has

written extensively on the subject on his many years of diplomatic services broad

and a as a practitioner in diplomacy views Economic diplomacy,” as the process

through which countries tackle the outside world, to maximize their national gain in

all the fields of activity, including trade, investment and other forms of economically
 19

beneficial exchanges where they enjoy comparative advantages; it has bilateral,

regional and multilateral dimensions, each of which is important.

No longer the monopoly of State entities, official agents the foreign and economic

ministries, the diplomatic and commercial services, plus their promotion agencies

now engage in dynamic partnerships with array of non state actors. Indeed such

domestic collaboration is a sine qua non for effective external outreach abroad, in

mirror fashion; the actions similarly address a wide field of foreign Stakeholders.

2.1.1 The History of Diplomacy

Diplomacy has been defined by many authors and experts alike in different manners.

Ronald Peter Barstan has defined Diplomacy “as an art and practice of conducting

negotiations between representatives of States. It usually refers to International

Diplomacy, the conduct of International relationsthrough the intersession of

professional diplomats with regard to issues of peace making trade, war, economics,

culture, environment and human rights”Oden Ishmael defines Diplomacy “as the

channel for excellence in executing foreign policy in the context of their proper

implementation and usually has an influence on the choice of the appropriate strategy

to enable the proper course to make the best decisions for the interest of the

nation”But the definition given by Sir Earnest Satow has been the most widely

accepted definition of Diplomacy for sometimes now “as the application of

intelligence and tact to the conduct of official relations between governments of

independent states extending sometimes also to their relations with vassal states.
 20

Diplomacy and diplomatic practice have been in existence since the early times of

human evolution and civilization. The foregoing details shall attempt to detail in a

very brief manner the early history of diplomacy, an exercise which some scholars

have argued that is hard to trace.

According to some most notable authorities on the subject, the major issue of

concern in the field of diplomacy has been its practice (Derian, 1981) Some of the

world renowned and widely acknowledged Guides who have written on the practice

rather than the origin of diplomacy are Abraham de Wickqu efarts’s

“L’Ambassadeur et Ses Souverains” (1681), Earnest Satow’s “Guide to Diplomatic

Practice” (1971), Harold Nicolsm’s “Diplomacy” (1939) Henry Kissinger’s

“Diplomacy” (1994). In all these publications, and numerous others on the subject

of Diplomacy, the historical aspect on the origin of diplomacy tend to be sketchy but

richer on the practice.

In view of the above, suffice it to say that the attempt that follows to trace the

“origins” of diplomacy will be seen to reflect the practice of Diplomacy in some of

the ancient parts of the world where such activities have been documented. It is

against such a background that despite the hard fact that some form of Diplomacy

was also practiced in ancient Africa but very little have been written at least

compared with other regions of the world. The very fabric of African traditions as it

is known is acknowledged to carry with it a lot of what the contemporary Diplomatic

Practice manifests. The chiefdoms that existed in Africa had all the ingredients of

civilization of what is a widely publicized value of today like Democracy, judicial

system ceremonial practices and the like. All and most of these were scuttled by the
 21

arrival of colonial powers by way of disrupting the natural evolution of Africa norms

and values of African societies and instead impose those of their own.

The African diplomatic history has as well not been researched and written by

Scholars of Africa history themselves. The notable challenge in this regard can at

least observed and to be seriously done by Dr. Fermi Adegbulum who at least had

made an attempt to detail not on the Africa Diplomatic history but rather on its

nature, and impact but again limited to Pre colonial West Africa only. Records on

Foreign relations of Imperial China show that one of the earliest realist in

International relations then was the 6 th century BC military strategist SUN TZU (d

206 BC) author of The Art of War. Tzu lived during the Zhon Dynast (c.1050-256

BC) when there was a great deal of diplomacy between warrying States and the

itemized role of the “persuader/diplomat” develop during numerous bargains

including treaty signing and the like

On the other side during the Tan Dynasty (618-907) AD the Koreans and Japanese

looked to the Chinese Capital of Chang’an as the hub of civilization and envied the

then existing central bureaucracy as the model of governance. The Japanese sent

frequent envoys to China during this period till the collapse of Tang. In the

consequent years there were also a record of intense diplomatic activities in the area

and during the Mongul Empire (1206 – 1294). The Monguls are reported to have

created something similar to today’s category of passports ranging from “diplomatic

ones and two others of what could be today’s service and ordinary passports granting

each respective holder certain respects and privilege. These were called Paiza and

which were in gold, silver and copper.

 22

2.2 The Genesis of Economic Diplomacy

Some of the aforementioned types of diplomacy had existed for a very limited period

of time during the circumstances that demanded their and have since remained only

in history of diplomacy and diplomatic practice. But of course some have been

growing and continue to be in use. These include Multilateral and Public

diplomacy. But of course and particularly following the demise of the Cold War

followed by the era of Globalization priorities and demands of nation states have

changed a lot. Notably in this regard is the realization of the ECONOMIC power as

an effective tool in international relations and politics. This is by no means in

substituting the Military power completely which remains to maintain its role

between and amongst nations. Military power remains a vital ingredient of power

politics and a deterrence between nations and there is no doubt about it as has always

been said that use of force implying War is another form or is an extension of

Diplomacy when negotiations seems to fail. But practice and experience on several

major Wars and limited ones have demonstrated that at the end of the day use of

force does not guarantee a solution to several conflicts. The warring parties would

eventually sit down and negotiate through diplomatic means. And what has been

more obvious through experience is the fact that it would be more prudent to deploy

all available means to secure the required results rather than resort to immediate use

of force.

This includes the use of Economic Power or in other words use of “soft Power”

(concept developed in 1980s by Joseph Nye) which has in most cases involved

Economic Sanctions and boycotts. There have been several cases in demonstrating
 23

this as in the then Unilateral Declaration of Independence ((UDI) of the then

Rhodesia now Zimbabwe by white minority rule and indeed during the South Africa

apartheid era. The current Western economic sanctions against Iran on its disputed

nuclear programme is also a case in point.

In view of the importance of Economic power as very briefly stated above in

International relations, nations, big and small, weak and powerful nations have

therefore each in its own way and given the available means have therefore resolved

to seek economic strength to supplement/support their military capabilities in their

International relations. In much as it is undoubtedly important to have several

Nuclear War heads for deterrence purposes yet Gross Domestic Product (GDP) and

the Strength in ones economy through International Trade has of late been seen a

strong indicator of power and well being. China’s current surge, ascendance and

recognition of its role in International relations and politics is not only because of its

nuclear arsenal and population but indeed because of its strong emerging economic

strength. According to the Economist International 2013-today China is leading as

the world’s largest economy on the Purchasing Power Parity (PPP terms).

On the same note, the current on-going saga between the West and Russia on

allegations of the latter’s “annexation” of Crimea from Ukraine proves the same

point. While the situation remains tense and potentially dangerous between East and

West on the issue, negotiations have been given priority with sanctions being used

against Russia as opposed to use of military force. Optimism still exist that this

dangerous dispute and stand-off shall be resolved amicably with all parties refraining

from the use of force.

 24

The above argument albeit very condensed and very brief indeed for the sake of this

work, definitely demonstrate the importance of the Economic Power in International

relations of our times as a powerful weapon any country to have in exerting its

positions, status and interests. And this is where the concept of Economic

Diplomacy comes in as a tool to achieve its goals while practicing any country’s

foreign policy agenda. This concept is not as new as it is perceived to be by many as

it had been in practice for sometimes now though without much publicity. The case

of the famous Dutch company Philips that was established way back in 1891 proves

the point. A Dutch newspaper Volkskrant in its edition of 7th May 2014 writing

about Philips under the heading “Philips Sees Opportunities in more prosperous

Africa” says “Philips has been active in Africa for at least a hundred years. At its

African headquarters in Johannesburg, the letter Anton Philips the founder of Philips

Company sent to the (Dutch) Consul in 1895 still hangs on the wall asking for the

Consul’s help to introduce (then) the light bulb in South Africa”. It is therefore very

clear that the concept of Economic diplomacy as we know it today is not new as it

appears and as seen by many. In 2001 Tanzania Government launched what was

referred to as the “New Foreign Policy” with Economic diplomacy as its core

agenda. The idea here should be seen to be the New priority and agenda in our

foreign policy rather the policy itself.

So this phenomenon/concept was not born yesterday but only got its prominence,

acceleration and capitalisation by the process of Globalisation. So this means that

policy emerging from commercial activity has always been an important area of

diplomatic service. It may be therefore that this policy/concept could be termed as

 25

Modern rather than New Economic diplomacy which took its importance around

early 1990’s. When we also trace the origin of diplomacy it would be discovered

that it was trade that actually stimulated the crossing of national borders and created

development of interaction between nations.

Historical examples confirms that extensive trade, regulated by trading contracts was

inherent in civilization of ancient Egypt and Western Asia and South America.

These development therefore marked and provided among the first foundation of the

establishment of mutual official and agreements between different entities and

regimes.Suffice to say therefore and for the sake of this work that the process and

acceleration of globalization with all its dictates, and competitiveness with global

scale repercussions, the economic aspects in all its forms have come much more to

the fore in the International relations and politics to which all nations have embarked

on in their foreign policies agenda with Economic diplomacy taking the centre stage.

On the same there are different opinions regarding Economic diplomacy, trade

diplomacy and commercial diplomacy. The broader definition by different parties of

Economic diplomacy is as consider it as the main concept and mostly covering

mainly economic policy issues under which fall the commercial and trade diplomacy

as its branches under its umbrella. The last two mainly represents the more visible

parts of the concept of Economic diplomacy on the ground which in turn are

considered to bear the manifestation and significance of globalization in diplomacy.

These aspects are considered by some parties as key models of economic diplomacy

which they see as critical to managing contemporary globalization. These modes of

 26

economic diplomacy have shaped the way we think about who diplomats are, what

diplomats do, and how they do it? One of the key developments of Globalization is

the Commercial Diplomacy which has seen fast growth in Economic diplomacy

within the “National Diplomatic System” (NDS) (Coolsaet 2004; Lee 2004; Potter

2004; Rana 2004 as well as Internationally (Kostecki & Navay 2007) in a nutshell

Commercial diplomacy can be said to be primarily involved in export and investment

support and advocacy for domestic business. It is as well focuses on building

networks of diplomats and business groups based in overseas missions to promote

trade and investment as well as business advocacy. For a developing country like

Tanzania this basically involves search for markets for its agricultural good and

promotion of tourism. Diplomatic networks provide commercial intelligence,

tourism marketing, business links and partner searches as well as business assistance.

Conceptually, studies of Commerical diplomacy point to complex organizational

networks involving Ministries of Commerce (often with trade promotion

agencies/depts.) trade and finance in addition to the foreign Ministry (which in most

case acts as a coordinating ministry) Business groups such as National and local

Chambers of Commerce are also key (Stakeholders) in these networks and many in

cases are formally placed into overseas missions and consulates through secondment

programmes.

Trade Diplomacy is mostly devoted to issues of trade policies particularly with the

developments in International trade relations with the growth of sub and regional

trading blocs such as the East African Community (EAC), Southern African

Development Cooperation (SADC) and so many others worldwide. And supported

 27

by International body such as World Trade Organisations (WTO) where issues of

International trade practices and rules are the major agenda for negotiations is where

the concept of Trade Diplomacy attains its bestdefinition. Similarly, the emergence

of an increasingly number of numerous bilateral trade agreements such as the North

American Free Trade Agreement (NAFTA); European Union (EU); Southern Africa

Development Community (SADC), South Asian Association for Regional

Cooperation (SAARC) all extend the need for trade diplomacy.

2.3 Theoretical Approaches to Economic Diplomacy

The question is how Economic Diplomacy is viewed from different theoretical

directions can be argued in a very compact manner as follows: As said in the

proceeding explanation there is no single theory of Economic Diplomacy and

theories that are concerned with the subject, must necessarily make certain

simplifying assumptions. This is the case as the practice of Economic Diplomacy

has by far superseded its theoretical development and research. This is the case

because since the wave of Globalization and the consequent emergence of Economic

Diplomacy decision making processes have been important and immediate rather

than research and theorization of the subject.

According to a realistic theory of International Relations this greatest emphasis is

placed on the relative economic power of individual states (as key stakeholders).

Hegemonic Stability theory argues that the cooperation in the relationship between

the government and Parliament. The theory of individuals deals with the importance

of an individual on the final form of politics. These theories also have both domestic

and international dimension.

 28

The above major theories of International relations can then deliver a number of

specific models that could better explain the phenomenon of Economic Diplomacy

as for example Constructivist models of the two – level game by Professor Putram or

the model of Professor Odell focused on bargaining and markets economic sphere

will occur when there is a dominant state, which ensures that this happens. Regime

theory pays particular attention to looking at how state cooperates, whether in formal

or informal processes or not. Alongside with the system of theories in which rather

dominates the International element as stated above there are also theories that deal

with more aspects of domestic Economic Diplomacy in an attempt to explain how

domestic decision making processes affect the international behavior of States. For

example the societal theory is seen as an outcome of interaction between different

interest groups, where government and representatives play role as negotiators.

These interest groups can then obtain the international as well as the cross border

dimension. State centered theory emphasizes the role of institutional structures and

relations particularly between different branches of government.

Equally important, on interpreting the applications of different theoretical approaches

it is not difficult to note that the potential friction and contradictions on the ground.

The first tension could be where one can draw a line between economies and

political issues at domestic level as well between internal politics and International

Economics. Despite the fact that a State is surely a political entity rather than

economic yet and as per the functioning of Economic Diplomacy there has to be a

co-existence and consensus in decision making by involving all stake holders. The

above argument could provide an answer to the popular argument as to which entity
 29

(politics or economics) that leads the other and if should politics dictate the

economic strategy or the other way around at domestic stage.

Another controversial point is the relationship between domestic and international

pressures, especially with regards to the formation of economic policy. This

relationship is complicated by domestic decision making process by different

institutions such say between private sector, the government and parliament.

Numerous Countries have and continue to suffer from the aspect sometimes resulting

to expensive deadlocks and the like. In the Economic Diplomacy there is often, at

the national level a problem and views of different and even rivalry Ministries and

there is no clear indication which one has got the leading role. While traditionally in

many countries it is the Ministry of Foreign Affairs which is officially entrusted and

dominate the day-to-day management of all foreign policy related issues yet with

more economic issues gaining the international dimension there is a need to involve

other government ministries department, agencies and indeed private sectors and

NGOs in this sector. And this has now been the rule rather than exception all over

the world, Tanzania included fallowing its adoption of the New Foreign Policy of

Economic Diplomacy in 2001. This set up is the first imperative step in discussing

and negotiating a joint domestic action and strategy of Economic Diplomacy before

selling the same at bilateral or multilateral level. The Cyclicality of Economic

Diplomacy can be a very interesting aspect as well.

In the case Economic Diplomacy and its tools in fact come to the fore especially

when acceleration in the globalization process is not general accepted roles of

behavior. In other words, the government proceeds to the use of economic

 30

instruments to meet the foreign policy goals when the legitimacy and prior of

existing structures in International cooperation has decreased. In other words this

statement underlines the ever increasing use of soft power prior rather than the direct

traditional use of force in achieving national goals and interests.

2.4 Operationalization of Economic Diplomacy

In practicing the Economic Diplomacy successfully and effectively and as detailed in

the proceeding explanation it is imperative to have new approach to this subject. In

the first place, economic diplomacy has to be recognized as a key strand in

diplomatic strategy and therefore it becomes necessary for states as the main actors

and coordinators to develop an integrated and coordinated diplomacy. This

coordinated diplomacy should and necessarily involves a multiplicity of actors and

individuals (Stake holders) build around policy networks drown from several

relevant key government ministries, such as the Foreign Ministry (as the main

coordinator) as well as the private and civil sector placed in national, regional and

international level. (Hocking 2004). This set up essentially and precisely involves

the Government, Chamber of Commerce, think tanks, private business entities as

well as civil organizations, and NGOs and academia in order to deliver the desired

diplomatic goals and results. The more useful concept in this regard is as referred

earlier as well as the National Diplomatic System (NDS). This concept better

captured the desire and complex nature of coordinated diplomacy.

In order to take care of the set up some countries have as stated earlier on have seen

it necessary to merge their trade and foreign ministries or have created joint bodies

for easy working relationship and formalizing this coordination role. In a global,
 31

interdependent economy, economic diplomacy assumes wider responsibilities and

diverse issues thus expanding the potential number of national and systemic players

with economic interests and responsibilities in the diplomatic process (Bayoe &

Woolock 2007).

Within this understanding of diplomacy it is necessary for scholars to identify the

linkages between this diverse set of public and private actors and interests that is the

nature of its diplomatic networks and the relationships between public and private

within diplomatic system. Consequently, charges to diplomatic practice can be

understood in terms of changes to diplomatic networks and to the National

Diplomatic System (NDS) within States that vary through time and across issues.

2.5 Diplomacy and Globalization

For much of the 20th Century onwards the global economy has become more

integrated either through regionalization or a process many describe as

‘Globalization’. Indeed globalization is currently one of the most widely used – and

contested - concepts in International Relations.

Some scholars of diplomacy have been fairly slow to fully address the impact of the

process and effects of Globalization upon diplomatic practice and organization. This

neglect both derives from, as well as exposes, the limitations of conventional realist

approaches to diplomacy already discussed. And yet, as we have also already

indicated, diplomats can be seen as the agents of globalization given their direct

involvement in the creation, development, and regulation of markets and capital

through trade and finance negotiations, as well as commercial activity.

 32

In the context of this changing environment caused by globalization, economic

diplomacy commonly drives the development of qualitatively different diplomatic

practices in new and existing economic forums. It involves networks of state and

non-state actors at domestic and systemic levels in pursuit of private as well as public

interests. These networks operate in, influence and are influenced by, an increasingly

integrated and interdependent world economy; that is a globalizing economy.

For the purposes of this necessarily brief piece, let us set aside the many critiques of

the concept of globalization and assume that it is primarily an economic process

driven by new technologies which heightens interdependence and integration. Put

simply, globalization means that there is much more economic activity occurring in

national, regional and international markets due to ever increasing flows of capital,

trade, services, people, ideas and information between states, firms and individuals.

Such changes, quite naturally, have increased the need for and significance of

integrated diplomacy to help facilitate as well as manage and govern economic

development and market integration.

Furthermore, if we understand globalization to include higher levels of integration of

progressively more competitive markets as a result of increasing liberalization of

international trade and finance, then diplomacy becomes an important tool for

managing increased economic risks and opportunities. Finally, since globalization is

one of many processes (such as regionalization and dependency) which breaks down

the barriers between the domestic and the international, the agendas of economic

diplomacy are found more at the fading boundaries between international and

domestic relations. Climate change, for example, is an issue that transcends national
 33

boundaries yet has enormous economic implications in relation to low carbon

economic growth strategies.

Equally interesting is the need for studies of diplomacy to encapsulate the increasing

domestication of diplomacy which results from the breakdown of domestic-systemic

barriers in the world economy. This is encapsulated in the growing concern in NDSs

with Public diplomacy. Increasingly, this is seen as more than the management of

image such as the UK’s ‘Cool Britannia’ branding exercise designed to attract

foreign direct investment into the British economy. Public diplomacy also has a

broader concern with promoting the strategic objectives of the state in the economy,

such as Canada’s public diplomacy on climate change.

The impact and significance of globalization for diplomacy has been highlighted in a

number of ways. Here we focus on four key modes of economic diplomacy which

are seen as critical to managing contemporary globalization; commercial diplomacy,

trade diplomacy, finance diplomacy, and consular visa services in relation to

increased migration flows. How has the development of these modes of economic

diplomacy shaped the way we think about who the diplomats are, what diplomats do,

and how they do it?

2.5.1 Commercial Diplomacy

One of the key developments has been the growth of commercial diplomacy within

the NDS (Coolsaet 2004; Lee 2004; Potter 2004; Rana 2004) as well as

internationally (Kostecki&Naray 2007). Globalization in this sense is seen to

increase economic vulnerability and/or opening up new opportunities for trade and
 34

investment growth in the world market. Globalization has also facilitated the growth

of international business and generally increased competitive pressures on business.

The impact on diplomacy is twofold.

First has been the institutional impact. Throughout the last two decades in particular

governments have increased commercial diplomatic activities by increasing funding

for export and investment support in foreign ministry s and other agencies as well as

creating new or bolstering existing institutional frameworks. Second has been the

drawing in of private actors from business. Responding to competitive pressures and

the need to find and exploit new markets for domestic goods and services,

commercial diplomacy primarily involves export and investment support and

advocacy for domestic business. Commercial diplomacy focuses on building

networks of diplomats and business groups based in overseas missions to promote

trade and investment as well as business advocacy. For many developing countries,

commercial diplomacy also includes tourism promotion as a primary activity.

Diplomatic networks provide commercial intelligence, tourism marketing, business

links and partner searches, as well as business assistance. Conceptually, studies of

commercial diplomacy point to complex organizational networks involving

ministries of commerce (often with trade promotion agencies/departments), trade and

finance, in addition to the foreign ministry. Business groups are also, not

surprisingly, key players in these networks and in many cases are formally placed

into overseas missions and consulates through secondment programs. Business

involvement is also channeled through other government departments as well as

though links with national and local chambers of commerce. In this

 35

conceptualization of commercial diplomacy, business actors are merged with the

state rather than autonomous and as such both public and private interests are

included in diplomatic representation.

2.5.2 Trade Diplomacy

The scholarship on trade diplomacy has also begun to shape the way we re-think

diplomacy by highlighting the role of non-state actors, networks, ideas and

institutions in diplomatic processes and outcomes. New ways of conceptualizing

diplomacy have emerged from studies of trade. Developments in international trade

relations such as the growth of regional trade organizations, the creation of the World

Trade Organization (WTO), the extension of the trade talks agenda to include new

issues such as internet gambling, highlight the need to recognize and understand the

new actors, new topics and new forums of economic diplomacy point to the necessity

of moving beyond the predominant realist conception of diplomacy. Earlier

conventional classic studies of trade diplomacy such as Curzon (1965) and Hudec

(1975) provide state-centric accounts of power-based diplomacy in the General

Agreement on Tariffs and Trade (GATT).

This is not surprising given the intergovernmental nature of the GATT/WTO

regimes. Recent work continues to emphasize the roles of states in trade diplomacy

but also points to the role of non-state actors in multilateral, regional and bilateral

trade relations (Hocking and McGuire 2004; Heron 2007; Pigman 2004). Indeed, in

an early attempt to reconceptualize diplomacy in order to reflect the growing

interaction of the foreign ministry with other non-state actors Hocking (1999b)
 36

developed the concept of catalytic diplomacy to highlight the growing linkages

between official and non- official diplomatic actors in diplomatic machinery.

The world economy is now governed by a set of economic institutions with rules and

procedures. With the creation of the WTO in 1995, trade between states is

increasingly governed by international rules which have to be negotiated and

implemented. The first decade of the 21stCentury has also witnessed an increase in

the number of bilateral free trade agreements between states which, added to the

network of regional trade agreements such as North American Free Trade

Agreement(NAFTA), the European Union(EU), Southern African Development

Community(SADC), and South Asian Association for Regional

Cooperation(SAARC) all extend the agenda and need for trade diplomacy. Much of

the literature on trade diplomacy focuses on multilateral trade negotiations and

particular providing detailed accounts of GATT/WTO Rounds (Croome 1999; Lee

2000; Lee & Wilkinson 2007; Winham2010). Trade diplomacy is often regarded as a

zero sum game of hard intergovernmental bargaining between rational-actor states in

pursuit of maximum concessions from others whilst conceding little as possible

(Odell 2000; Steinberg 2003). Much of our understanding of the diplomacy of

economic negotiations has been imported from prominent IPE scholars such as John

Odell. Odell (2000) makes use of game theoretical models to tease out the diplomatic

processes involved in negotiations in the world economy in order to explain

cooperative behavior bargaining and outcomes among self-interested states in forums

such as the WTO.

 37

Adopting a similar neo-liberal game theoretic approach, Putnum (1988) has been

influential in highlighting the importance of domestic as well as international factors

in international economic negotiations. In this seminal work he developed the highly

influential concept of ‘two-level games and, with others, also introduced the concept

of ‘double-edged diplomacy’ (Evans et al. 1993) to highlight how diplomatic

processes involve bargaining at both domestic and systemic levels, as well as the

opening up of economic diplomacy to include legislators and, consequently,

domestic based interest groups.

This work usefully details the complicated diplomatic process in international

economic negotiations in which diplomats must not only negotiate with other states

at the systemic level but also negotiate with powerful political actors back home in

the national sphere. In so doing he highlights the endogenous and exogenous sources

of diplomatic processes and practice.

Putnam’s insights into the domestic context of trade negotiations at least begin to

recognize the conflicted nature of states’ interests in trade diplomacy. Stopford and

Strange (2008) also highlight these conflicts within states by underscoring the

complex and dynamic character of trade relations in a continuously changing

international political economy structure {cross reference to IPE and negotiation

theory}. In drawing in the changing structural context to economic diplomacy they

successfully challenge the assumption built into rational actor models of trade

diplomacy that state interests can be fixed and, indeed, known. Stopford and Strange

(2008) conceptualize economic diplomacy as ‘triangular’ dominated by state-state,

state-firm and firm-firm relations.

 38

In this triangular diplomacy business diplomats are key players and a strategically

successful state will seek allies with powerful firms to increase its structural power.

Langhorne (2005) has referred to the ambassador-like role of the CEO of Microsoft

Bill Gates, for example, in his study of the growing influence of transnational firms

in contemporary diplomacy. One of the key issue areas where transnational business

has been active in trade diplomacy is in intellectual property rights (IPRs).

Susan Sell’s seminal work on IPR negotiations demonstrates not only the large

number of players (business, states, lawyers, inter-state organizations, IP users)

involved in the negotiations but also that the network of players functions quite

differently from one period to another as the nature of, and conflicts within, the issue

changes (Sell 2003). Business groups were, for example, a key promoter of the 1995

WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs)

during the Uruguay Round talks in order to protect their knowledge capital, whereas

when the issue shifted to one of global public health in the Doha Round business

groups retreated and public health NGOs became the prominent actors {cross

reference to IPE section}. As the issue of IPRs clearly shows, it is important not to

limit our conceptualization of agency in trade diplomacy to states and firms.

Other influential studies of trade diplomacy suggest an even more complex process

of trade negotiations. Hocking (2004) introduces the concept of ‘multi-stakeholders’

to the study of economic diplomacy to highlight the growing involvement of private

actors. In trade diplomacy, business is seen to operate within and merge with the

state such that the distinction between public (state) and private (business) interests is

difficult to draw.
 39

International trade governance has become increasingly contested since the infamous

‘Battle of Seattle’ at the 1999 WTO Seattle Ministerial Meeting. Other actors such as

NGOs and civil protest groups have been drawn into trade diplomacy as part of this

contestation. Some are directly involved in the negotiations (Oxfam and International

Centre for Trade and Sustainable Development are often members of smaller and

developing country delegations because they can provide much needed expertise and

resources). Others form highly visible protest groups challenging the WTO process

(which is seen as undemocratic and unaccountable) as well as the dominant neo-

liberal ideas which, they argue, create poverty in developing countries and increase

inequality between the powerful industrialized countries and the powerless less

developed countries (Scholte et al. 1999; Wilkinson 2006).

The study of trade diplomacy has certainly improved our understanding of the WTO

process and the workings and effects of institutional environments on trade talks

whether it be the very detailed discussion of WTO negotiations (see Jawara & Kwa

2004) or the more historical institutional approach of Wilkinson (2006). Studies of

the recent emergence of developing countries in WTO negotiations (Clapp 2006;

Narlikar 2003) are also significant not least because they bring a welcome move

away from a focus on the major industrialized countries, thereby making the study of

diplomacy more inclusive.

In this context there has also been recent analysis of the diplomatic strategies –

mainly focusing on strategic alliance building – of the new coalition groups within

the WTO such as the G20 and the Africa Group (Lee 2006; Narlikar &Tussie 2004;

Taylor 2006) which usefully discusses and draws attention to the diplomatic
 40

practices of otherwise neglected countries in the study of economic diplomacy such

Brazil, India and many African states, the BRICSAM states (Antiewicz &Whalley

2005) as well as regional organizations such as the Caribbean Community, the East

African Community and so on.

2.5.3 Finance Diplomacy

Another key issue area in the global economy is international finance and in the

context of globalization, finance diplomacy is mainly concerned with attempts by

governments to create stability in a regime which lacks the rules and laws of the

international trade regime. Much like studies of trade diplomacy, the literature goes a

long way to shaping a broader conceptualization of economic diplomacy since it

points to the role of nontraditional diplomatic actors such as finance ministries,

central banks such as the Bank of England, business groups and the banking sector,

as well as non-traditional diplomatic forums such as the World Economic Forum

(WEF).Influential work on the Group of Seven (G7) Russia Group of Eight (G8) as

well as the IMF and WB not surprisingly (since G7/G8 summitry is wholly

intergovernmental and the IMF and WB are instruments of governments) tends to

reinforce a state-centric approach to financial diplomacy (Bayne 1998; Budd 2003;

Kirton 1999; Wicks 2007). Most studies of financial diplomacy are concerned with

the failure of financial diplomacy to avert the various financial crises of recent years

such as the Asian Financial Crisis of the 1990s and studies of the IMF and WB

generally focus on the economic effects of the policies of these organizations rather

than the diplomatic process of the negotiations.

 41

In one notable exception, Kahler (1993) adopts the two-level approach to financial

diplomacy developed by Putnam to account for the failure of the IMF to reach

agreement with developing countries. Kahler finds Level II factors within the IMF as

well as the recipient countries best explain the failure to reach agreement despite the

apparent structural power of the IMF. Recent developments such as the G20

meetings of Finance Ministers as well as the now regular meetings of the fast

developing countries and interested parties through the newly created BRICSAM

organization which is a network of states, NGOs and business (Cooper et al. 2008)

have expanded analysis of finance diplomacy to include networks of state and non-

state actors as well as new regimes.

2.6 Theoretical Discussions

There are numerous schools of thought that can explain the phenomenon of the

economic diplomacy which Tanzania is strongly pursuing in its foreign policy.

However the present study is guided by the conceptual theoretical framework that

look the economic diplomacy from the perspective of international political economy

in contemporary International Relations and foreign policy making. Hence, the

theoretical approaches for the present study are the present studies are essentially

based on the theories of international political economy. There are five theories that

can explain the phenomenon of economic diplomacy in international political

economy.

These are economic nationalist, economic internationalist, economic structuralism,

dependency and world system theories, according to Rourke(2005).Rourke

(2005:373-378) argues that these theories are both descriptive in that they purport to
 42

describe how and why conditions occur and they are also perspective in which case

they argue about how policy should be conducted. Let us examine these theories as

describe by Rourke.

2.6.1 Theory of Economic Nationalism

The economic nationalism theory is centred on the state use of its economic strength

to further national interest. This theory advocate the use of state power to build its

economic strength (Rourke, 374). Economic nationalist therefore believe the conflict

characterizes international economic relations and that the international economy is a

zero-sum game in which one side can gain only if another loses. They rely on a

number of political-economic strategies including imperialism.According to

economic nationalist, countries that offer economic carrots, such as foreign aid and

favorable trade policies, or that use economic sticks, such as sanctions, to promote

states national interest are practicing economic nationalism (Rourke: 375-376).They

would look at protectionism and domestic economic support as tools that should be

used to promote national power; and from this perspective, economic nationalists are

suspicious of economic interdependence on the grounds that it undermined state

sovereignty and weakens the national economic strength. They would therefore refer

that their respective countries use trade barriers, economic subsidies and other

policies to protect national industries.

2.6.2 Theory of Economic Internationalism

The second theoretical and policy approach to IPE is economic internationalism.

This approach is associated with such terms as economic liberalism and free trade. In

this approach, economic internationalists believe that international economic

 43

relations should and can be conducted cooperatively because in their view, the

international economy is a non-zero-sum game in which the prosperity is available to

all.They contend that the best way to create prosperity is by freeing economic

interchange from political restrictions; and therefore, they oppose tariff barriers,

domestic subsidies, sanctions and other economic tool that distort the free flow of

trade and investment capital.

2.6.3 Theory of Economic Structuralism

The third major theoretical approach to IPE is economic structuralism in the

economic structure determines politics; and that the conduct of world politics is

based on the way that the world is organized economically. Those who follow this

approach believe that the world is divided between the have and the have-not

countries and that the haves, Economically Developed Countries (EDCs).Work to

keep the have-nots, the least Developed Countries (LDCs), weak and poor in order to

exploit them. The economic structuralism theory divides its followers into two

camps: Marxist theories who see the state and capitalism as inherent sources of

economic evil and Dependency and world system analysts who advocate

fundamental reforms to end economic oppression. Both camps believe that

significant changes have to be made in the way international politics works in order

to promote Least Developed Countries (LDCs) development (Rourke:377).

2.6.4 Dependency by Theory

It is argued in this approach that the economically underdeveloped conditions of the

LDCs is caused by their exploitation by the EDCs; and this is accomplished by the

EDCS through the indirect control of the LDCs and is driven by the EDCs need for
 44

cheap primary resources, external market, profitable investment opportunities and

low wage labor. Hence, the South produces low-cost, low-profit primary products

such as agricultural products and raw materials to supply the EDCS production of

high-prices, high profit manufactured good some of which are sold to the LDCs at

overstated prices.

2.6.5 World System Theory

This theory traces the current global economic inequality to the rise of the western

political and economic domination, especially the acceleration of that control after

onset of the western-centred industrial revolution in the mid-1700s.Theorists who

take this perspective contend that the evolution of the western- dominated capitalist

system has distorted development, leaving vast economic, social and political

disparities between the core (the EDCS) and the periphery (the LDCS of the

international system (Rourke: 378).Having highlighted some relevant theories on

global political economy, the following section looks at the concept of regional

economic integration which is an important component in the study of the Gulf

Cooperation Council (GCC) States and Tanzania reactions.

2.6.6 Regional Integration Schemes

Schiff (2003) observes that regional trade blocs have been one of the major

developments in international relations in recent years. According to him virtually all

countries are members of a bloc and many belongs to more than one. He then puts

regional trade blocs into the category to what he calls Regional International

Agreements (RIAS).
 45

Schiff (2003) points out several objectives for the RIAS which including

Governments wish to blind themselves to better policies and to signal such binding

to domestic and foreign investors; desire to maintain sovereignty by pooling it with

others in areas of economic management where most nation-states are too small to

act alone and the pressure for globalization, foreign firms and countries to seek

efficiency through larger markets, increased completion and access to foreign

technologies and investment.

Other objectives include the desire to jog the multilateral system into faster and

deeper action in selected areas by showing that the General Agreement on Tariffs

and Trade (GATT) was not the only game in town and by creating more powerful

blocs that would operate within the GATT system a the fear of being left out while

rest of the world swept into regionalism, either because this world be actually

harmful to excluded countries. The South-South Cooperation fits in exactly in the

RIAS objectives and the concept of economic diplomacy which is central in the

present Tanzania foreign policy comes in. This is discussed in the following section.

2.6.7 The South-South Cooperation

Sylvester (1981) discusses the Arab-African cooperation and observes that it is a

relationship between two communities of the Third World which has more to gain

than to lose by working together in the political as well as in the economic fields

(1982:221).He traces this cooperation from the political struggle against racism in

which the Arabs fought for the rights of Palestine while the African fought for the

liberation of the Southern Africa (1981).However, he observes that there has far less

achievement on the economic front where the underprivileged nations are fighting
 46

for a New International Economic order which would be more economically

productive and beneficial to all concerned (2008:17).

Wai (2000) discusses the triangular cooperation among Africa, Arab and member

counties of the Organization for Economic Cooperation and Development (OECD)

to promote complementary linkages between resource based and development

processes to idea to triangular cooperation he observes that some African countries

have investment potential to increase trade and income for the benefit of

participating partners. In his observation, on one hand a number of African countries

have enormous investment potential for improving their agricultural production

while others have mineral resources that could be developed but they lack capital,

technology and trained manpower necessary for the development of their natural

resources (1982:1).

On the other hand some Arab oil-production and oil-exporting countries have surplus

petro-funds buying power but lack other resources such as agricultural potential to

diversify their economies and to absorb the funds domestically (1982:1). Further, the

OECD member’s posses technology, trained manpower, banking facilities for

recycling the Arab petro funds, purchasing power and marketing expertise. He

argues that from these assumptions, flows the hypothesis that a tripartite partnership

in development among African, Arab and OECD countries would promote the

complementary linkages between resource bases and development processes, thereby

increasing trade and income to the benefit of the regions (1982:1).

 47

The south Commission (1990) traces the south-south economic links from the

founding of the Non-Aligned Movement (NAM) in 1961 and the Group of 77 in

1964 which marked the collective action between the south to advance its common

interests (1990:144).“In recent years much more cooperation has been taking place

between business concerns in the south. At the regional level, initiatives to encourage

cooperation in the business sector are visible in SEAN and in the Arab World”, the

commission observes, citing the formation of GCC and SADCC and other regional

groupings as active measures to enlarge the cooperation. (1990:183). The

commission calls for broad policy agreements among the development countries to

establish more favorable environment for joint ventures, investment flows,

technology transfer and to invite and encourage direct business initiatives

(1990:183).

2.7 NewActors and New Issues in Inter-State Relations

Globalization has not only brought in new actors it has also introduced new issues in

interstate relations. This has implications for the conduct of modern diplomacy. In

the first instance, it increases the complexity of relations and the possibility of

conflict. By forcing actors into increasingly smaller spaces, globalization heightens

tension and makes diplomacy a lot more complex. It also widens the scope of

diplomacy as it is increasingly difficult to clearly identify the blurred line that

connects domestic to international affairs. The impact of globalization has also

greatly enhanced the cross border relevance of many issue areas in international

politics. Chief among these is climate change.

 48

It has also heightened the relevance of issue linkages. Climate Change politics

therefore has Human rights implications, regional security policy has implications

for democracy, good governance has implications for peace and stability. The new

issues brought up by globalization include increased linkages in the International

Political Economy, refugee crisis, international pandemics like Ebola and HIV and

terrorism and resistance, instantaneous international communication and travel,

regionalism and the like. The pressures brought to bear on the conduct of diplomacy

by a growing population of knowledgeable and actively interested public is also a

critical new issue that modern diplomats have to contend with.

There are also unique new challenges faced by various regions of the world that are

reflective of the context and patterns of relations in those regions. These challenges

are often historically and geographically specific so much so that it is difficult to

universalize the practice of diplomacy without qualification. In Africa, for instance,

the spectra of intra-state conflict has had serious implications for diplomatic practice.

It challenges the traditional dominance of concepts like non-interference and the

inevitable direction of state security strategies towards external threats. This situation

presents complex analytical challenges for both scholars of international strategy and

practitioners of diplomacy.

This much was inferred by Kidane Mengisteab when he noted that ‘diplomatic

efforts have been rather ineffective in ending African intrastate conflicts’. This

statement reflects the need for diplomacy to rapidly evolve to develop the capacity of

states to confront new and emerging issues that bear deep salience for development.
 49

It is instructive to note that these new issues are a reflection of both the rapid

advancements in technology and the sheer complexity of global intercourse. Beyond

the emergence of new issues and perhaps deriving from it is the fact that new actors

have also emerged to confront these new issues. New actors include transnational

nongovernmental organizations, multinational corporations, international

organizations and regional organizations. These actors are largely new to the extent

that their relevance has been enhanced by the very character of globalization. There

multiplicity has also been intensified by the growing complex nature international

exchange and intercourse.

Globalization is also undermining the relevance of traditional actors like the state to

the extent that it erodes spatial sovereignty and tends to promote pressures from both

above and below that threatens the dominance of the state in the conduct of

diplomacy. From above, international institutions, international law, transnational

nongovernmental organizations and of course multinational corporations put intense

pressures on even the most powerful of states and therefore easily shape its

diplomacy. From below, grass root organizations, local civil society, labor

movements, public opinion, the press, students’ unions and indeed the endemic

tensions between and among these social formations tend to undermine the

dominance of the state in the arena of diplomacy.

It is important to note that the rising profile of new actors in the conduct of

diplomacy is a phenomenon that easily reflects the dominance of industrial neo-

liberal values of capitalism in the post-cold war era. Multinational/Transitional

 50

agencies, NGO 'sand multinational corporations have now also become key centers

of power so much so that they increasingly set the agenda for global interaction.

The treatment of these non-state actors and of course unelected representatives of

sectional opinion as, as Zivtev put it, if it were ‘unencumbered and untainted by the

politics of government or the greed of the market’ is misleading. In fact, these

transnational networks often reproduce existing power structures and are

increasingly controlled by local elites seeking to re-position themselves and

consolidate their power in the post-adjustment era.

This point brings up the question of the implications of these new actors to the

character of relations in the international system. For one, the nature of relations is

critical to setting the context for diplomatic practice. It highlights the diplomatic

options available for all stake holders in a given situation and easily determines the

overall effectiveness or otherwise of those options.

Where the patterns of relation are dependent, states are likely to lose in their attempts

to protect their interests, at times even their core interests. States like Iraq and

Afghanistan are cases in point. To the extent that the nature of relations determines

the relative power positions of states in the international system, it must be said that

it has serious implications for the conduct of diplomacy.

2.8 Empirical Review

Many studies have been conducted on the benefits and disadvantages of economic

partnership which is the essence of economic diplomacy. This part of the study
 51

presents the various empirical finding on this aspect of Economic partnerships.

Nunnenkamp (et. al, 2007) argues that it is hard to have conclusive evidence

supporting the view that developing countries should draw on Foreign Direct

Investment (FDI) to spur the economic development (2007:53).His conclusion is that

the positive effects of FDI are not guaranteed automatically but host economy and

industry characteristics as well as the interaction between such characteristics affect

largely the growth impact of FDI in the developing economies (2007:53).

Majocchi (2007) discusses the question whether market, trade and financial

liberalization has any impact upon FDI location using the sample if Italian firms

which made investments in seven Central and Eastern European countries. The study

confirmed that market size and growth the availability of labor and the quality of

infrastructure are important determinants of FDI location (2007:1).

The study also found that the choice of FDI location was positively influenced by the

extent of trade, financial and market liberalization and negatively related to openness

to foreign banks (2007:1)Guda (2012) studies the impact of Chinese FDI in Tanzania

and comparing with the Chinese FDIS he found that the local small and Medium

Enterprises (SMES) faced many constraints including: stiff completion, difficult in

raising capital, poor technology, poor skills, tax exemptions, pricing and poor access

to efficient distribution network. Kisiku (2012) compare the investment climate of

with other Africa countries in attracting FDIS and found that the inflows if FDIS

were spread unevenly over the countries of sub regions of Central Africa, West

Africa, East Arica, Southern Africa in which East Africa was at the bottom of the

regions. Abdallah (2013) studies the costs and benefit of the Economic Partnership
 52

Agreements (EPAs) among the East Africa Community (EAC) member states and

observed that EPAs showed both positive and negative impacts to the EAC

countries.However, she noted that EPAs would bring massive loss of fiscal revenues

to the EAC governments and affect the regional employment. She argues that EPA

was not a reliable agreement to the EAC, suggestion to the concentration on the

regional integration. Lugakingira (2013) studies the market access challenges for the

CP-EU Partnership Agreement and found a number of factors that hindered Tanzania

to access the market. These included lack of: business experience, management

skills, entrepreneurship skills, marketing information, capita and poor quality of

products, export strategy and lack of support from the government. Mbwana (2012)

assessed the impact of the East Africa Common Market of Tanzania and found that

the market would provide a single and bigger market for goods and services but

observed that the low level of awareness, fear, knowledge and government support to

were major challenges which hindered the economic development. Having

highlighted some theoretical and empirical studies on the subject, the following part

discusses the concept of economic development.

2.8.1 Experiences from other Countries

(a) Brazil

Brazilhas made a concerted effort to engage in economic diplomacy with the

developing world. She has made it a priority to be a leader in sharing technological

knowledge in areas such as education and the all-important agriculturalsector. One

of the notable examples of Brazil's economic diplomacy strategy is the Brazilian

Cooperation Agency, which is affiliated with the Brazilian Ministry of External

 53

Relations. The Agency has the mandate to negotiate, coordinate, implement and

monitor technical cooperation projects and programs with countries, primarily in the

developing world, that Brazil has agreements with. As Brazil States:

"Brazil has been investing in agreements with both developed and

developing countries to acquire and disseminate knowledge applied

to social and economic development. We have practiced the concept

of not simply receiving knowledge from developed countries, but

also sharing our own experiences with others in effective

partnerships towards development”.

South-South cooperation contributes to consolidating Brazil’s relations with partner

countries as it enhances general interchange; generates, disseminates and applies

technical knowledge; builds human resource capacity; and, mainly, strengthens

institutions in all nations involved. Taking these goals into account, Brazilian

Cooperation Agencyhas defined focal partners that include African Portuguese-

speaking countries (PALOPs), East Timor, Latin America and the Caribbean. In this

context, we have started cooperating trilaterally with developed countries as well.

The ultimate goal of technical cooperation – exchanging experiences and knowledge

– materializes reciprocal solidarity among peoples and does not only benefit

recipient countries, but Brazil as well." The ABC is a primary example of how Brazil

is using economic diplomacy to fit into its larger national strategy of providing

leadership in the developing world.

 54

(b) China

Economic diplomacy is a central aspect of Chinese foreign policy. During China's

remarkable economic rise, it has used economic diplomacy primarily through trade,

and the use of carrot as a means to accumulate or attract soft power. This was a part

of the broader strategy formulated by think tanks in the PRC during the 1990s titled

the new security concept. It is referred to in the West as the period of "China's

Peaceful Rise". Of late, China has changed its strategic doctrine and begun to use

economic diplomacy as a coercive tool. After 10 years or so of a policy based

primarily on economic carrots, China has begun to show a willingness to use

economic diplomacy for coercive means. This is evidenced of this is found in the

September 2010 incident blocked shipments of rare earth minerals to Japan. Another

incident took place in 2012 in the Philippines, where China sent a gunboat in to

enforce trade restrictions. China's willingness to use bring in warships during trade

disputes is reminiscent to an earlier era of American Gunboat diplomacy.

(c) African and Arab society’s experiences

Historically there has always been a movement of people, ideas and goods between

Africa and the Arab word. These movements could be traced in the pre-Christian

and pre-Islamic era. It is cited in history that in the first millennium Before Christ

Semitic speaking peoples emigrated from Southern Arabia into Ethiopian highlands

of Eritrea and Tigre where they settled and introduced iron technology and urban

settlements, which were conspicuous by the 5th millennium (Patrick O’meara). The

Assyrian Empire invaded and conquered Egypt on whilst in 30 B.C the Roman
 55

conquest was accomplished. The continent of Africa became the battle ground of

different empires accompanied by major religions.

Christianity and later Islam saw large scale emigration of Arabs into Africa,

especially Egypt, Northern Africa and the Horn of Africa. West Africa and East

Africa were later main areas of Arab settlement and propagation of Islam among the

indigenous people. P. M. Martin and Patrick O’mearated write that “All over the

world historical, cultural and religious affiliations play an important role in bringing

people closer. The existence of Arab states and Islamic communities in Africa is an

added advantage in interaction between Arab and African states.

However, political and economic relations play an important role in shaping the

nature and scope of relations between states. Africa states have examples originating

from their relationship with former colonial masters i.e. England and France, where

African countries are grouped as Anglophone group or francophone group or even

Lusophone (Portuguese) group. Though it sounds linguistic but it is an expression of

a system of wider dimensions.

However, African historicans and other writers have tried to show that Africa was

not at the receiving end from Arabs. Historians like Ki-Zerbo and Cheik Ant Diop

have tried to show the contribution of Africans to Egyptian Civilization and to the

indigenization of Islam. However, it was not until the time when Arab and African

people gained their independence and became sovereign state when normal formal

political and diplomatic relations were established.

 56

2.9 Synthesis and Knowledge Gaps

The review of literature has provided a precise discussion on the role of

Globalization, the conceptualization of economic diplomacy, theories on

international economic relations, and experience of other countries in connection

with the implementation of Economic diplomacy. However there are several gaps in

the literature remaining to be examined. First, the most of the studies have not

explored the factors which affect the effective implementation of economic

diplomacy policy in Tanzania. Secondly, there is no any other study which addresses

factors influencing low level cooperation between countries with long historical trade

relationship. Thus this study offers a unique opportunity to investigate the challenges

and opportunities in promoting the Economic diplomacy between Tanzania and GCC

states. The findings of this study as well as recommendations will bridge this notable

knowledge gap.

2.10 Chapter Summary

The chapter has reviewed various literatures. These include both theoretical and

empirical literature. The chapter has further highlighted the experiences of different

countries which were used to inform the study. The following chapter discusses the

research methods used to conduct the study.

 57

CHAPTER THREE

RESEARCH METHODS AND PROCEDURES

3.1 Introduction

This chapter presents the research methods and procedures used in the study. It

describes the study area, design of the study, target population, sample and sample

procedures. The chapter is divided into four main parts. The first part describes the

research paradigm and design while the second part highlights on sampling

procedures. The third part highlights the methods of data collection and data

analysis. The last part describes the ethical issues and limitations of the study.

3.2 StudyArea

The study areas were Tanzania and the GCC member states. The two countries were

the focus of the study because of long term historical relationships between the two

countries. The Gulf Cooperation Council (GCC) member states – Bahrain, Kuwait,

Oman, Qatar, Saudi Arabia and UAE have a very old historical links with Tanzania.

Figure 3.1: Map showing Gulf Cooperation Council Member States Indicating
United Arab Emirates and Oman
 58

Even if one perceives the relationship at the African continental level one might find

out this relationship is much deeper and much more intimate with Tanzania. One of

the main reasons that marked this relationship was the trade which has been a vital

catalyst in this relationship between the Gulf and the East African Coast with the

present Tanzania serving as the main centre. The monsoon winds powered hundreds

of the wooden sailing dhows to and from the East African Coast between November

and December. They transported with merchandise obtainable form the Gulf such as

dry fish, salt and handicrafts among others to the East African coast. The change of

direction of the monsoons between March and April was normally used to power the

dhows back to the Gulf mainly loaded with mangrove poles used for construction

and foodstuff.

Figure 3.2: The Map of Tanzania Mainland and the Isles

 59

The traded commodities changed. No longer was the mangrove poles needed in the

Gulf as they were replaced very far by modern building hardware etc. A new era

brought a new whole perception of relation between the GCC states and East Africa,

and in particular Tanzania. The flame was extinguished but the torch remained.The

emergency of new nation states in the Gulf followed by the discovery of oil made

these states take a different direction altogether so as to take care of their new

challenges of governance, security and indeed their quest for modernization fuelled

by the oil petrodollars.

These changes meant a new and faster means of transportation with ocean liners this

time around travelling not only to East Africa but around the world to numerous new

ports through the year with less time. A new era of development and modernization

brought with it a new whole perception of relation between the GCC states and East

Africa, and in particular Tanzania. The flame was extinguished but the torch

remained. It is therefore against such background that the idea of delving into this

research came in with the objective of revisiting this whole trail of relationship

between the GCC and Tanzania in particular which, for all practical purposes can

claim to be the Centre of this relationship.

3.3 The Study Paradigm

Paradigm refers to the modes of thinking about the conduct of research on any social

reality (Omari, 2011). According to Mc Burney and White (2007), paradigm consists

of a “set of laws, theories, methods and applications that form a scientific research

tradition” p.24. This study embraced the qualitative research approach to a large

extent whereby views, feelings and opinions of different targeted population in

 60

relation to how the respondents viewed the role of economic diplomacy particularly

in the light of existing structural trade mechanisms, the role of the private sector and

the legal framework in all three countries under study.

The study also used quantitative approach aimed at producing quantifiable data

whereby frequencies, percentages and averages were used to establish pattern of

behavior being studied. Cohen et al (2007) asserts that the use of two or more

methods of data collection “attempts to map out or explain fully, the richness and

complexity of human behavior by studying it from more than one stand point”. In the

present study the use of quantitative approach was used to increase the depth of the

researchers understanding and accuracy of the findings.

3.3.1 Qualitative Approach

As already highlighted above, qualitative approach was employed in order to gain

insight into respondent’s perception, feelings, sentiments, attitudes, in relation to

operationalisation of the economic diplomacy in these countries. This approach as

Kahn (2011) and Kothali(2009) argued was flexible and employed at different

settings. By using this technique respondents were free to express their feelings and

experience on assessing the level of cooperation and factors inhibiting high level

cooperation.

Through employing this technique, the researcher managed to gain insight in to

feelings and opinions among the selected population and that assisted the study to

understand the nature of the problem and discover weakness of the existing

structures with a view of suggesting the improvements.

 61

3.3.2 Quantitative Approach

Unlike qualitative approach, quantitative technique was used in this study to indicate

frequencies and number of respondents with certain characteristics who were

involved in this study. The study used this technique purposely with the intention of

getting easiest way of asking identical questions to different categories of

respondents and making comparison of responses and analysis on the information

related with opinions and suggestions to improve.

Since this study was aimed at soliciting opinions, perceptions and different views

about the factors affecting economic diplomacy. Because of that, explorative design

was the best design to acquire the needed information and hence qualitative approach

was largely applied; and to a smaller extent quantitative technique was employed just

to complement qualitative technique.

3.4 Research Design

A research design is a detailed outline of how an investigation will take place. A

research design typically includes how datawas collected, what instrumentswere

employed, how the instruments were used and the intended meansfor analyzing data

collected(Rwegoshora 2014, Bryman& Bell, 2007, p. 15).The research design greatly

influences the type and quality of the research problem under scrutiny. Since this

study was intended to investigate the challenges and opportunities of economic

diplomacy in international relations where the researcher wanted to get the different

viewpoints from various respondents, the study employed exploratory design.

Exploratory design not only helps to increase the understanding ofa researcher’s
 62

knowledge of a topic understudy, but it is also use secondary sources for example

published literature. Other resources utilized in exploratory studies include informal

discussions, formal structured interviews, pilot studies or case studies. The study also

employed quantitative approach. According to Burney and white (2007) quantitative

research approach is characterized by both its focus on producing quantifiable data

and by the emphasis on a research process which results in numbers which explains

the pattern of frequencies from different respondents.

The explorative design therefore, was the most ideal in the sense that, it helped the

study to interrogate different categories of respondents and acquired much

information that assisted the study to investigate and discover factors which support

or inhibit the optimal realization of the trade links and investment among Tanzania,

Oman and United Arab Emirates. In addition, the explorative design as Creswell

(2008) pointed out, guided the researcher to find better ways of data analysis and

presentation.

3.5 Target Population

In order to realize the study objectives the study involved different categories of

respondents from Tanzania and GCC member states .In Tanzania respondents

included government officials from the Ministry of Foreign Affairs, Industries and

Trade, officials from Tanzania Chambers of Commerce, Tanzania Investment

Centre, Tanzania Tourist Corporations(TTC), retired Ambassadors and members of

Parliamentary Committee of Foreign Affairs. In GCC states the respondents were

officials from the Chambers of Commerce, members from researchmarketing

 63

academia, media officials and promotional departments. Other respondents included

officials fromInternational corporation department, officials from Investment

Promotion Agencies and from Ministries of Trade. These categories of population

were useful because they had useful information which assisted the researcher realize

his research objectives.

3.5.1 Sampling Procedures

Sampling is the process which refers to the selection of individuals, units or setting

to be studied. However, the difference in sampling strategies between quantitative

and qualitative studies is different mainly because of different goals of each research

approach. Within this context, since the study was largely explorative and to a large

extent qualitative in nature, sampling techniques which were used were largely

purposeful or criterion based sampling that is, a sample that has the characteristics

relevant to the research question. This is contrary with quantitative studies strive for

random samplingwhereby inference is made to the whole population by examining

part of it (Rwegoshora 2014).

Thisis applied where the population understudy is relatively large or for some

reasons the population is physically not accessible. Bryman (2008) mentions

advantages of sampling to include first, data collection being cheaper, requiring few

people to collect and analyse data and last but not least it serves time and it permits

high level of accuracy. It was within this context four different sampling techniques

were used to select the respondents. These included purposeful and convenient

sampling techniques which are clearly elaborated below.

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(a) Purposeful Sampling

Researchers such as Punch (2004); David & Sutton (2004); Rwegoshora (2014) Best

& Kahn (2006) consider purpose sampling as an appropriate technique in research

design because it enables the researcher to collect relevant information and data.

Through the purposeful sampling a researcher identifies key informants purposefully

who is believed to be more knowledge able of the subject matter under study. The

criteria for identifying respondents using this technique are normally based on

various qualities such as the position one holds in a society, education level, age and

gender.

The respondents who were purposeful selected included officials from the ministries

of trade and industry because of their wider knowledge on the trade regulations,

officials from the ministry of foreign affairs were also purposefully selected because

of their conditional role between the Tanzania and GCC states. Other respondents

included members of parliamentary committees, officials coming from institutions

dealing with tourism, trade and investment promotion. These officials were selected

because of their experience in investment, trade and economic diplomacy issues in

international arena.

(b) Convenience Sampling

Convenience sampling is a technique used to select respondents based on easy

accessibility. This kind of sampling is generally applied in a situation where

respondents conveniently happen to be available when the study on a particular

theme is being conducted. As Davies (2007) points out, this technique was used

when the study visited the higher learning institutions where academic members of
 65

staff were conveniently approached to respond to the research interview and

questionnaires. Through this method the study managed to obtain various views,

perception and experience regarding the ongoing victimization, strengths and

weakness and factors which support of limit proper implementation of existing

strategies in addressing the problems of violating rights of children with albinism in

Tanzania.

3.5.2 Sampling Size

The ever increasing need for a representative statistical sample in empirical research

has created the demand for an effective method of determining sample size. To

address the existing gap, studies Krejcie& Morgan (1970) came up with a table for

determining sample size for a given population for easy reference. While the above

table applies more comfortably in quantitative studies in qualitative studies sample

sizes are largely determined by a reasonable size of respondents to enable the

researcher to obtain adequate information from the key informants. To this effect in

ethnography studies, Morse (1994) suggests approximately 30 - 50 participants as a

reasonable sample size, while Creswell (1998) suggests only 20 – 30

participants. Generally speaking, there are no specific rules used in determining an

appropriate sample size in qualitative research. In this study where both qualitative

and quantitative aspects were used the sample size was determined the time allotted,

resources available and study objectives at one level, while at another level Krejcie&

Morgan table was used to get an indication of the total sample size.

In this context, the study envisaged reaches a total population of 150 respondents.

However, due to scarcity of resources and time constraints, the researcher used
 66

Krejcle and Morgan table to determine the sample size that is 69 respondents as

shown on the sampling frame below on table 3.1. Out of these a total of 29

respondents were from Oman and United Arab Emirates while 40 respondents were

from Tanzania mainland and Zanzibar.

Table 3.1: Distribution of Respondents by Country, Category and Gender

Name of a Category of respondents Gender Total
country
M F
Oman and Officials from Government Ministries 4 3 7
United Arab (Ministry of Trade and foreign affairs)
Emirates
Officials from chambers of commerce 2 - 2
Officials from research, marketing and 3 2 5
promotion departments and media and
academia
Officials from International Cooperation 2 2 4
Officials from Investment promotion 2 3 5
agencies
Business community members 5 3 8
Tanzania Governmental officials e.g. Director Middle 5 1 6
East, Director of Trade
Chamber of Commerce Dar salaam 3 - 3
Chamber of Commerce Zanzibar 2 2 4
Parliamentary Committee of Foreign Affairs 6 5 11
Retired ambassadors 3 - 3
Tanzania Investment Centre TIC/Zanzibar 2 - 2
Investment Promotion Agency(ZIPA)
Tanzania Tourist Corporation 2 - 2
Tan trade (Export and Trade Promotion) 1 1 2
Business community members 5 2 7
Grand Total 45 24 69

Source: Compiled by a researcher 2015

 67

3.6 Methods of Data Collection

Methods of data collection are the process which engage different targeted group

directly or indirect to gather evidence related to the research questions. However

since each method has its strength and weaknesses, the researcher used different

methods of data collection to overcome inherent weakness in each method. The types

of method data collection were used including desk review, structured and in-depth

unstructured interview. The data collection process began in January 2011 and ended

at the end of December 2015.

The research and research assistants were used to gather information from various

research sites under the guidance of the main researcher. As already highlighted

above the study employed both primary and secondary data as the main source of

information. The primary data were collected from the field where its collection

involved structured, unstructured interviews. The secondary source of information

was obtained from published and unpublished reports, policies, research reports and

legislations.

3.6.1 Documentary Review

Documentary review refers to the data which has already been collected in the form

of printed and un printed materials. This was review was guided by the objectives of

this study. In this process the researcher reviewed different literature including text

books, journals, Conventions, Legislations, Reports, and unpublished research papers

related to economics, diplomacy, international relations and political science. Within

this framework the researcher collected and reviewed information from various

ministries of foreign affairs and trade and industry concerning the economic
 68

diplomacy, foreign policies and trade and investment protocols.Online materials,

papers and unpublished materials were also used.

Further the researcher also consulted seminar papers in order to gather different

investment opportunities in Tanzania and GCC member states. Frankly speaking the

documentary review was conducted throughout the whole period when the study was

being undertaken. The information gathered from the secondary source of

information helped the researcher to deepen and sharpen the understanding of a

researcher in as far as the research objectives were concerned. This was an ongoing

activity throughout the study period and in so doing it helped at the initial stage to

sharpen the conceptualization of the research problem, deepens the understanding of

the study area and identification of the research gap.

3.6.2 Interviews

This is a method of collecting a primary datafrom a person’s oral response to oral

inquiries. In other words, it is aplannedand systematic method where conversation

takes place between two or more people with a specific purpose. So, an interview is

formal meetings between two people (the interviewer and the interviewee) where

questions are asked by the interviewer to obtain information, qualities, attitudes,

wishes etc. an interview can either be structured or unstructured interview.

Structured interviews tend to follow formal procedures; the interviewer follows a

predetermined agenda or questions, while unstructured interview does not follow the

formal rules or procedures. The discussion normally flows freely and may shift form

on thematic area to another depending on the purposes of the interviewer.

 69

a) Unstructured interview

The officials from chambers of commerce in both countries, retired ambassadors,

ministers of trade and industry and foreign affairs were interviewed. This was

particularly because these had a tight schedule so when an opportunity was secured

they were interviewed. This method helped to gather information at policy level and

technical problem such as structural trade methods used in their countries and how

the existing opportunities between the two countries could be exploited.

3.6.3 Questionnaire

A questionnaire is a means of eliciting the feelings, beliefs, experiences, perceptions,

or attitudes of some sample of individuals. As a data collecting instrument, it may be

structured or unstructured. The questionnaire is most frequently a very concise,

preplanned set of questions designed to yield specific information to meet a

particular need for research information about a pertinent topic. This method was

used to solicit information from ministry officials and representatives of business

community in selected countries and investment promotion agencies. This instrument

proves quite useful as the selected respondents had the opportunity to respond to the

raised queries and questions at their own time online. One observation was the

respondents seemed very independent and sincere in giving their opinion, more

freely and uninfluenced

3.7 Data Analysis

The data which were collected were analyzed by using the content analysis

technique. Content analysis technique according to Rwegoshora (2014) involves

coding and classifying data. This technique also referred to as categorizing and
 70

indexing and aim of content analysis technique, is to make sense of the data collected

and to highlight the important message, features or findings.

In this study, the content analysis technique was used to analyze written

communication (essays, articles, reports and pamphlets), attitudes, and recorded oral

communication. The study formulated a simple format that allowed the study to

distinguish groups of respondents who were included in the study. The code was

created to each group in order to record and making comparison of respondents as

per specific objectives.

This technique helped the study to summarize the gathered information, counting the

frequencies of statements, and detecting the intensity of statements and described the

attitudes and perceptions hold by different respondents in all three countries. The

data collected in the field, were presented in different ways including tables in order

to show different responses regarding the research questions and study specific

objectives. Quantitative data were analyzed by using the arithmetic means,

frequencies and percentages.

3.8 Validity and Reliability of Data

3.8.1 Reliability

According to Flick (2011) reliability is the extent to which the test or procedures

produces similar results under constant conditions in all occasions. This is to say that

if the questionnaire and interviews obtains similar responses in all occasions then it

is reliable. In relation to this research, the questionnaire was easy to read. No

technical terms were used in order to gather information or confuse the respondents.
 71

3.8.2 Validity

There is a close connection between reliability and validity. If a thing is reliable then

it has also validity. Flick (2011) believes that validity tells whether an item measures

or describes what it is supposed to measure or describe. For an item to be reliable

and possess validity it must produce similar response in all occasions, which if there

are two researchers doing the same research, both of them would receive similar

responses and this is what we refer to as validity. In this study most of the questions

produced similar responses.

3.9 Ethical issues

Ethical concerns are crucial when planning, conducting and evaluating a research

study. According to Neuman (2012), social science research should have a clear

moral and professional obligation to behave in an ethical manner in all times and that

researcher “must balance two values: the pursuit of knowledge and the rights of

research participants or of others in society”.

3.9.1 Access and Acceptance

Research clearance was secured from the Open University of Tanzania and the

institutional consent was sought from the Ministry of Foreign Affairs in Tanzania

and GCC mainly in UAE and Oman where the researcher had been stationed as his

place of work in the last ten years i.e. 2005-2015. The research clearance enables the

researcher to gain access to various places to undertake the study. According to

Cohen et al (2007) permission to access the organization where the research is to

take place offers an opportunity for a researcher to “present their credentials as

 72

serious investigators and establish their own ethical position with respect to their

proposed research” P. 55

3.9.2 Informed Consent

Informed consent entails ”procedures in which individuals choose whether to

participate in an investigation after being informed of the facts that would be likely

to influence their decision” (Diener and Crandall 1978). Because of that, obtaining

informed consent for research study requires open and honest communication

between the researcher and the study participants prior to any study (David, 2008).In

this study, before engaging in any process of collecting data, permission was sought

from the respondents. Before data collection, the researcher informed participants

about the nature of the research as well as the social value and possible benefits from

the study. This enabled the participants to make rational and informed decision to

participate or not to participate in the study. A fair explanation of procedures to be

followed and their purposes were outlined to participants. After informed consent

was secured, the researcher told participants of their rights to confidentiality and that

participants would remain anonymous throughout the research process.

3.10 Limitation of the Study

In this study, some respondents due to the nature of existing traditional and cultural

beliefs were reluctant to reveal the right information to the researcher. As a result the

researcher faced difficulties to gather information needed by the study. In order to

overcome this problem, indirect questions were asked in order to allow respondents

to feel free to express their feelings and opinions towards the violation of rights of

children with albinism and the impact of existing strategies.

 73

Among the major limitation encountered by a researcher was that of working in three

different countries with different social, cultural and political orientation. For

example one of the major limitations encountered during data collection was the

working practice and culture in Oman and United Arab Emirates and GCC member

states in general. In these countries the government officials with decision making

mandate particularly at high levels are generally not free to talk or give interviews to

outsiders. It is on such note that such respondents were not easily accessed. It is

therefore against such background that such “walled” or “protected” leaders that the

researcher experienced difficulties to access reliable information and hence he had to

rely on the secondary source of information in cases where he could not get

necessary information. In other words the research operated in an environment where

there was a strict and regulated code of conduct in meeting with foreign officials and

indeed on the dissemination and strict management in disclosing information to

outsiders and the general public. In view of this, the researcher had to navigate and

talk to respondents informally to get their opinions.

3.11 Chapter Summary

This chapter has dealt with the research methods and procedures that were used to

collect and analyze data from the field. Specifically, the chapter focused on study

design, area of study, population and sampling procedures. The subsequent section of

this chapter covered instruments of data collection, procedures for data collection in

the field and ethical issues. The next chapter deals with data analysis and

presentations.
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CHAPTER FOUR

FINDINGS AND DISCUSSIONS

4.1 Introduction

This chapter discusses the findings of the study based on the data collected during

the research which was conducted in Tanzania and selected GCC member countries.

The chapter concentrates in three countries namely Tanzania, Oman and United Arab

Emirate (UAE) from GCC member countries. The chapter is divided into four main

parts as follows. The first part presents the findings related to the readiness of the

private sector in Tanzania, Oman and UAE. The second part of the chapter presents

and discusses different trade mechanism status and how the same affect the

promotion of trade and investments in three countries. The third part of the chapter

presents and discusses the legal framework practices and their implications on the

promotion of the cooperation among these countries. The last part of the chapter is a

concluding remark

4.2 Readiness of the Private sector in Promoting International Trade and

Investment

The private sector is the part of an economic system that is run by individuals or

group of individuals, companies in a given country. Within this context, the

government has limited role to play in running the private companies. Under normal

circumstances the private sector organizations are always run with the intention of

making profit. Because of that, the sector is characterized private ownership and

control, the business being run by the sole proprietorship and partnership, and direct

management of the firm by owners.

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4.2.1 The Private Sector in Tanzania

The concept of a private sector in Tanzania is relatively new when compared with

other East African countries like Kenya and Uganda. It is for this reason the notion

of privatization was not well received, when it was introduced in the mid 1980s,

given the country socialist orientation hangover. Although the private sector has been

introduced in Tanzania for more than three decades, the sector has not fully been

developed. The sector in Tanzania is composed of agricultural sector, manufacturing,

trade, tourist, and industrial activities. In this study the private sector has been treated

from a generalist point of view. Because of that the study did not concentrate on

selected private activities.

Needless to say Tanzania is the second largest economy in the East African

Community. Tanzania is largely dependent on agriculture for employment,

accounting for about half of the employed workforce. Agriculture is still a dominant

sector of the economy, employing over half of the Tanzanian population. The

country still is still characterized low development level, coupled with subsistence

farming which in many cases is performed by using just a hand hoe. The potential of

commercial agriculture is seriously under-exploited. Coffee has been the main export

commodity.

However, in 1999, earnings from cashew nuts exceeded those from coffee for the

first time. Other significant market crops include tea, cotton, cloves and tobacco.

Tanzania is also a major livestock raising country although the drought has a severe

impact on production of both crops and livestock. In view of the above it is estimated

that an estimated 34 percent of Tanzanians currently live in poverty.It should be

 76

noted that, theTanzanianeconomy has been on transition from a state command

economy to free market economy since 1985. Over the years, Tanzania has

successfully undertaken various macroeconomic policy reforms aimed at restoring

the economy and manufacturing is one of the sectors that has benefited significantly

from these reforms, which have led to increased industrial growth rate from 8.9

percent in 2005 to 9.9 percent in 2008.

The growth of the sector is also evidenced by growing interest in the industrial sector

and by increased number of new private sector industries in different sub-sectors of

the economy. In order to achieve sustainable growth in the industrial sector, more

and reliable information needs to be collected and analyzed for use in planning. Such

information and statistics show the performance and prospects of the sector, and can

only be obtained through regular industrial surveys. Accurate data are important to

monitor the growth of both public and private sectors, as they guide proper planning,

making informed decision on trade and investments.

4.2.1.1 Readiness of the Private Sector in Tanzania

Readiness is the state of being prepared of a system or anorganization to comply

with set conditions or carry out a planned activity. Most organizations or system fail

to achieve their intended objectives because there is no necessary social and

economic environment (in terms of for example infrastructure) needed to support the

realization of the set objectives. It was within this context that, the study wanted to

establish the readiness of the Tanzanian private sector to promote international

investment in industries and trade. The readiness or preparedness in this context was
 77

measured by examining the necessary economic, social and political conditions

required to promote not only the private sector in Tanzania but also to promote the

international trade and investment. Such conditions allow the smooth and steady

growth of the sector and thereby attracting foreign and local investors in the country.

In order to understand the preparedness the private sector in Tanzania, it was

necessary to examine factors which indicate the prepared or readiness of the sector in

Tanzania to promote the international trade and investment. To this effect different

respondents were asked to give their comments on how they rated the readiness of

Tanzanian private sector to promote the trade and investment. Various responses

were interrogated.

Table 4.1: Responses on the Readiness of the Private Sector in Tanzania

Categories Responses Frequencies Percentage
Policy makers Presence of economic diplomacy policy 5 6.9
Exploration of gas and uranium in the 6 8.3
southern part of Tanzania
Existence of chambers of commerce and 4 5.5
other related institutions
Members of the Supply of stable power to support 13 18.1
business manufacturing industries and other
community economic activities
Improvement of infrastructure such as 16 22.2
roads
Existence various financial institutions 9 12.5
to support the growth of the sector
Academicians Existence of political will 11 15.3
The discovery of gas and other minerals 8 11.1
in southern parts of Tanzania
Total 72 100

Source: Field data 2014

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These included policy makers, members of business community and academicians.

The findings which are summarized on Table 4.1 indicate that three categories of

respondents had different opinion about the preparedness of the private sector to

promote international trade links and associated investments in Tanzania.

The response from the policy makers indicated that, Tanzanian private sector was

prepared to promote the trade and investment in Tanzanian. Major reasons which

were given by the policy makers who included members of the parliamentary

committee and officials from the ministry of industries and trade (i.e. 6.9%) argued

that the presence of policies from the ministry of trade and economic diplomacy

policy were a good indication of the preparedness of the private sector to promote

trade and investment. This it was argued would promote the trade links with other

countries including Oman and United Arab Emirate. Other reasons which were

mentioned included the exploration of gas and uranium in the southern part of

Tanzania (8.3%) and existence of chambers of commerce and other related

institutions (5.5%).

On the other hand, the respondents from business communities complained of

inconsistent supply of stable power to support manufacturing industries and other

economic activities (18.1%), they mentioned factors such as improvement of

infrastructure such as roads (22.2%), and existence various financial institutions to

support the growth of the sector (12.5%) as factors which indicated preparedness of

the private sector in Tanzania. The other part of the sampled respondents i.e. the

academicians indicated that the preparedness was seen through existence of political

will (i.e. 15.3%) and the discovery of gas and other minerals in southern parts of
 79

Tanzania (11.1%).The recent exploration of gas in Mtwara region and subsequent

extraction of the gas has created a great hope for the private sector to flourish in

Tanzania.

Despite the positive attitude among the policy makers, other respondents such

business people low and medium class and a certain quarter of the academicians

when they were interrogated to give their views in relation to what they regarded as a

bottleneck facing the private sector in Tanzania. A number of factors were

mentioned. The findings which are shown below indicate that Tanzania is still

engulfed with high prevalence of poverty among several groups of people in

Tanzania a fact which in one way or another limits the growth capacity of the sector.

The prevalence of the poverty it was for example mentioned as a stumbling block

because of low level of purchasing power.

Table 4.2: Responses on Factors inhibiting the Growth of private Sector in

Tanzania
Categories Responses Frequencies Percentage
Policy makers Lack of trade mechanism in place to 5 6.9
encourage the growth of private sector
Low level encouragement of local people 8 11.1
to participate medium and big business
entrepreneurial
Members of the Low level quality products produced 14 19.4
business locally
community Low level of technology 11 15.3
Lack of entrepreneurial mind set 16 22.2
Academicians High prevalence of poverty among the 13 18.1
people in Tanzania
Lack of incentives of the locals to 5 6.9
participate in private sector
Lack of export diversification 72 100
Source: Field data from Dare s salaam and Zanzibar 2013
 80

The findings from the above table indicate that despite the private sector having

signals of promoting trade and investment, there were other factors which were

militating against the capacity of the private sector in Tanzania. According to the

policy makers the major obstacles include Lack of trade mechanism in place to

encourage the growth of private sector (6.9%) and low level encouragement of local

people to participate medium and big business entrepreneurial (11.1%).

The other category of local business community revealed that major problems

revolved around low level quality products produced locally which has no acceptable

standards (19.4%),Lack of entrepreneurial mind set (22.2%) and low level

technology (15.3%). As for academicians the responses indicated that there were

high prevalence of poverty among the people in Tanzania (18.1%) and Lack of

incentives of the locals to participate in private sector (6.9%).

When the respondents were interrogated to explain what they thought was the role of

science and technology in promoting trade and investment the findings from the

interviews revealed that science had a major role to play because it facilitated the

aspects of innovations. Hence dearth of science and technology was very crucial in

development of private sector. Furthermore, respondents from academic category

indicated that, the private sector was not ready because of existence of political and

social conditions in the country. As indicated in the table 4.2 below, the majority of

the respondents (i.e. 38%) indicated that there washigh prevalence of poverty among

the Tanzanian a factor which was not conducive of growth of the private sector. The

finding further indicates that there were the quality of products which were produced

by local industries and manufactures were of low quality and hence failing to
 81

compete with foreign products. The question of quality was therefore very critical

when it come to promotion of trade links.

It was interesting to note that all three categories which were interrogated they

indicated that the private sector was still at the low level because there was no

sufficient enabling environment to support the sector. one of the respondents who

was asked to give his views on the existing enabling environment has this to say:

“Industrial activities face serious constraints from poor

infrastructure such as bad roads in rural areas, unreliable

power supply. This was one of the reasons which affected the

manufacturing sector in Tanzania. The manufacturing activities

in Tanzania are relatively small”

When the respondent was further asked to explain the indicators of constraints facing

the industrial sector, it was mentioned that there were virtually low GDP contribution

when compared with the contribution of industries and trade in other countries. It

was further revealed through the interviews that the manufacturing sector in

Tanzania revolved around simple consumer goods such as food, beverages, tobacco,

textiles and furniture. The findings from an in-depth interview further revealed that

the industrial sector in Tanzania were established the light of import substitution

industries, whereby the production was geared towards substituting previously

imported goods in view of saving the country’s meager foreign exchange. The

findings revealed that this situation has not changed significantly to date.Out of 69

total respondents who were interrogated to mention other reasons which inhibited the

private sector to promote trade and investment in Tanzania 9% indicated that, the
 82

private sector in Tanzania was still young and that it needed more time to flourish.

Other 13% mentioned that Tanzania entered into the privatization business without

first creating the necessary conditions for private sector to grow and flourish among

the Tanzanians.

As a result, the majority of the Tanzania did not have a positive attitude to engage

themselves in the sector. Some of these for example remarked that:

“Today we witness a number of private banks in urban centers

but the majority of the people have not been able to use them

effectively. Only few people knowswhat it entails to take loans

from the bank and make a meaningful investment and indeed

question of Collateral is beyond the reach of many.”

What does this mean? It means that, the banks are there to service the well to do

members of the society. People who are business oriented and people who are ready

to take risk. Over 87% of the Tanzanians had not been able to use and benefit from

the bank. The mentality of taking risk is new to many Tanzanians associated with

collaterals looked something new and many respondents mentioned as a stumbling

block.

The study noted that the government introduced the program of MKURABITA

which was aimed at ensuring the small and medium could use their property as

collateral to access loans from the banks in Tanzania. However, this has not shown

any remarkable achievement. It was therefore evident from the casual observation

that, more education and sensitization for that matter was important if Tanzania

wants to engage their local people in investments.

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4.2.1.2 Factors affecting Readiness of the Private Sector to in Tanzania

We have already not that there are factors which have been promoting the private

sector in Tanzania. We have also noted that the sector has not been fully developed

hence the need to make more effort to promote the sector. In this case the study

wanted to find out what were thought to be obstacles to the growth of the sector. To

this effect the respondents asked to rank the factors which were though inhibiting the

growth of the sector.

Table 4.3: Ranking by Different Categories on the Factors Disenabling the

Growth of Private Sector
Category Inhibiting factors First Second Third Total
Business Power supply 12 4 2 18
community Lack of storage facilities 3 15 18
Lack of markets 8 8 4 18
Infrastructure 6 9 3 18
Moderate technological contents in 11 5 2 18
Tanzanian exports
Dominance of primary product in 9 7 2 18
Tanzanian export
Policy Power supply 0 4 2 6
makers Lack of storage facilities 1 3 2 6
Lack of markets 3 2 1 6
Infrastructure 1 3 2 6
Moderate technological contents in 4 1 1 6
Tanzanian exports
Dominance of primary product in 4 1 1 6
Tanzanian export
Academicians Power supply 4 5 10
Lack of storage facilities 3 3 4 10
Lack of markets 4 4 2 10
Infrastructure 5 2 3 10
Moderate technological contents in 7 3 0 10
Tanzanian exports
Dominance of primary product in 6 4 0 10
Tanzanian export
Source: Field responses 2014
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The factors which were provided included status of infrastructure, power, storage

facilities, markets, business attitudes and enabling policies. The findings which are

indicated on Table 4.3 indicate that the problem of low level use of the technology,

and great dominance of primary products were leading factors. The factors which

ranked second and third were lack of storage facilities, lack of permanent and

reliable power supply and lack of markets.

Regarding the question of dominance of the primary products, the general impression

from the responses from the interviews indicated that there was no export

diversification.One of the respondents from the chambers of commerce in Tanzania

commented that:

“Tanzania exports are still dominated by the primary products

which lead to low pace of economic growth. Because of that,

Tanzania is marginally benefiting from international trade because

of limited vertical diversification, that is, less emphasis on value

addition. This can be explained by the low productive and

innovative capacity of the private sector.”

The findings from the interview, who were asked to give reasons of the existing

inhibiting factor, indicated that 54% respondents argued that the weakness of the

private sector is deeply reflected in the existence of low level of technology. Other

factors included inadequate capital, weak and inadequate infrastructures (including

laboratories to test for quality), and lack of relevant knowledge and skills. It was

therefore suggested by the respondents that there was a need to start not only

investing in the infrastructure which will support the development of the sector, but
 85

also the question of technology was to revisited if Tanzania is to compete

meaningfully with other countries.It was mentioned that this was an opportune for

Tanzania to use the opportunities available through EBA and AGOA initiatives to

diversify its exports. Within this vein or argument mineral, horticultural and fish and

fishery products and manufactured goods are perceived to be products of highest

potential for export diversifications.

At another level, other disenabling factors the growth of the sector which were

mentioned included lack of markets, low level technology as we had to continue to

depend on imported technology and dominance of primary products. The similar

concerns were equally echoed by business members who were interrogated. When

these members were further asked to explain more about other factors which looked

as a stumbling block they argued that, Tanzanian exporters were still being affected

to a large extent by bureaucracy and poor business environment due to things like

poor infrastructure, weak institutions, and poor access to credit. The existence of

such factors inhibited Tanzania’s participation in international trade is interesting

because such issues have been identified in the various trade supporting policies, and

strategies were identified to deal with them implies that most institutions responsible

with promoting international trade directly or indirectly have not been effective in

undertaking

It was further noted that, since more than 50% of middle class had no business

mentality most of the loans taken from the bank end up building houses and other

luxurious items. Quite few people were borrowing to invest in big business and trade

activities, When the respondents were interrogated to explain what kind of industry
 86

they thought the Tanzanian could engage in, they mentioned that the post-harvest

crops get lost because there is no good preparation to reserve the crops. For example,

the fruits which are commonly grown by peasants in many parts of the country are

not well preserved or processed to produce other products which can be consumed

locally and internationally for that matter.

When these respondents were interrogated to explain if they knew any business

support system in the Tanzania on average 52.8 % indicated that they were aware of

business support system while on average 47.2% respondents indicated that they

were not aware of existence of support systems as indicated below.

Table 4.4: Awareness of the Business Support Systems among the Respondents
Support systems Rating by percentage

Aware Not aware

Existence of Local banks 51 49

Existence Foreign banks 38 61

SACCOS 91 9

Legal support 18 82

Policies 59 41

Average percentage 52.8 47.2

Source: Fieldwork from Dar es Salaam and Zanzibar 2014

Apart from the general picture which emerges from the above table, it could still be

noted that whereas the general members of the public were of the local bank existing

in Tanzania (i.e. 51%) there were few respondents who showed their awareness of

support provided by the foreign banks (i.e. 38%). The foreign bank unfortunately
 87

were not well scattered in many parts of the country particularly in the rural areas.

When the respondents were asked to explain their accessibility, the general comment

which was mentioned was that, and such banks was there to service the foreigners

and those big business people. Such a misconception was still held among many

people in the regions and rural areas.

Other supportive system which merit our attention include the high level of

unawareness of legal services (i.e. 82%) provided and high level awareness of

Savings and Credit Services (i.e. 98%). Savings and credit association were widely

scattered in rural area and most of the community members are were aware unlike

the legal services which were note provided into rural areas.However generally

speaking, trade and investment supporting policies are effective when considered in

isolation but are less effective when integrated to enhance trade.

This is due to lack of coordination and links between sector policies amongst

institutions with role on trade. Institutions which implement trade supporting policies

in Tanzania tend to undertake their work with little coordination amongst themselves

as they execute their mandate as if they exist in isolation rather than being part of a

larger objective that is composed of several supporting components whose activities

are geared towards achieving the general objective which is Tanzania’s enhanced

participation in international trade. It was however acknowledged by some of the

respondents that trade supporting policies in Tanzania has been doing well when it

comes to identify constraints and challenges to Tanzania’s participation in

international trade and identifying measures to address them.

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4.2.2 Readiness of private sector in Oman and United Arab Emirate

The Cooperation Council for the Arab States of the Gulf), originally known as the

Gulf Cooperation Council (GCC), is a regionalintergovernmentalpolitical and

economic union consisting of all Arab states of the Persian Gulf, except for Iraq. Its

member states are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and theUnited Arab

Emirates.The Gulf Cooperation Council economies reflect strong economic and

social outcomes.

These countries depend very much on oil as the main source of export and fiscal

revenues. Through the literature review it has been observed that for quite sometimes

GCC governments have increased not only the rate of employment in public sector,

but also there has been increased spending on infrastructure, health, and education

(Wallenstein, 2014). Needless to say, this has helped raise standards of living and

implicitly supporting the private sector activities.

It was further noted in the literature that there has increasing economic

diversification. It is envisaged that the more the diversification the more the

reduction of exposure to volatility and uncertainty in the global oil market. This is

likely to create private sector jobs, increase productivity and sustainable growth, and

establish the non-oil economy that will be needed in the future when oil revenues

declines in the future.

A number of policies have been adopted to diversify the GCC economies and reduce

their reliance on oil.A stable, low-inflation economic environment has been

achieved, the business climate has been strengthened, education has been expanded,
 89

trade and foreign direct investment (Packenharm, 1998). Nonetheless international

experience shows that diversifying away from oil may be a bit difficult. Success or

failure appears to depend on the implementation appropriate policies ahead of the

decline in oil revenues.

In addition to creating a favorable economic and business environment, these

countries focused on export diversification and quality upgrading by encouraging

firms to develop export markets and by supporting workers in acquiring the relevant

skills and education to boost productivity. United Arab Emirate and Oman are both

strategically positioned as the major trade and investment hub for a large geographic

region, which includes not only the middles east but also North African, Asia and

Africa south of the Sahara (Wai, 1998).

Multinational companies refer UAE and Oman political and economic stability, rapid

population and GDP growth, as efficient and fast growing capital markets. Findings

from the literature review revealed that absence of corporate and personal taxes and

lack of evidence of systematic corruption was and continues to be a positive factor

maintaining the UAEand Oman attractiveness to foreign investors.

4.2.2.1 Factors Facilitating Readiness of Private Sector in Oman and UAE

In an attempt to establish if Oman and UAE private sector was ready to promote the

trade and investment link respondents were asked to give their view points. The

responses which are summarized on the table below indicate that there were

favorable conditions which facilitated the growth of the private sector compared to

the conditions in Tanzania.

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Table 4.5: Factors Facilitating Readiness of the Private Sector in Oman and
UAE to Promote Foreign Trade and Investments

Responses Frequency Percentage

Availability of policies favorable to promote the trade 12 41
and investment
Existence of financial institutions to support the growth 2.6 9
of private sector
Existence of friendly infrastructure to support improved 5.2 18
infrastructure
Existence reliable source of energy to support the sector 9.3 32
Total 29 100

Source: Field visits Oman and UAE 2014

The picture which emerges from the above table is that the availability of policies

which were more favorable to promote trade and investment was one of the leading

factor. This was mentioned by 41 % respondents followed existence of reliable

source of energy to support the sector (i.e. 32%). Other factors included existence of

friendly infrastructure to the growth of the private sector that is 18 % and existence

of financial support which constituted 9% of the total respondents.When the

respondents were asked to explain which policies were more favorable the

respondents mentioned that rapid growth and high levels of foreign investment was

facilitated by the recognition that the private sector was an engine for development.

The reasons which were advanced as to why the private sector was crucial to the

development process included the following: a) creation of jobs and innovations, b)

providing products which can transform the lives of the people and c) provision of

the opportunities for direct foreign investment which was seen as the drivers for

economic growth.
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On the other hand, when the respondents were asked to explain the enabling

environment such as the friendly infrastructure to promote the sector, the response

indicated that thegovernment has invested heavily in the development of Oman’s

infrastructure. The government was said to have focused on the development of the

ports in Salalah, Sohar, and Duqm. These projects were envisaged to create a lot of

opportunities for the private sector. One of the respondents argued that the existence

of new ports has facilitated building more confidence to the private sector because

the government owned companies were ready for partnerships. It was said that this

have increased more confidence for foreign or national investor.

At another level respondents were asked to explain which actions or incentives were

used by Oman Chamber of Commerce to attract private sector participation in the

economy. The responses which were provided indicate that, there was an effort to

organize conferences where there were increased private sector participation by

transferring knowledge from meetings from international delegates.They respondents

further noted that many major cities and villages were managed by the private sector

as a result it was becoming more efficient.

4.2.3 FactorsInhibiting the Private Sector to Promote Trade and Investment in

Oman and UAE

Like the situation in Tanzania, the study wanted to find out what factors which were

responsible to inhibit the promotion of trade and investment through the private

sector in Oman and United Arab Emirates. The findings which are summarized on

Table 4.6 indicate that the reasons which affected the private sector in Tanzania are
 92

not the same as those found in GCC countries. When the respondents were

interrogated to explain the reasons which hindered the growth of the sector, 47.8%

indicated that the restriction of owning the land was one of the factors.

Table 4.6: Factors Inhibiting the Promotion of Private Sector in Oman and
United Arab Emirates
Factors Frequency Percentage
Weak labour resolution mechanism supply 24 35

Lack of regulatory transparency 31 45

Labour rights and condition of work 12 17.4

Restriction of land ownership 33 47.8

Total 69 100

Source: Field data from UAE and Oman

Other factors included weak labour resolution mechanism which was mentioned by

35% of the respondents, while lack of regulatory transparency i.e. 45% was also one

of the major reasons. These were seen as factors which to some extent affect the

growth of the sector.

The general impression which emerges from the above finding regarding the

preparedness of the private sector in these three countries (Tanzania, Oman and

United Arab Emirates), is that there a big discrepancies in terms of the growth of the

sector in these countries. Whereas for example, in Tanzania the private sector is still

in its infancy stage in Oman and United Arab Emirate the sector is well developed

and more efforts are made to improve the sector, in Tanzania there are still major
 93

problem to address if the sector is flourish and promote the expected drive of the

economy.

4.3 An Over View of Structural Trade Mechanism Tanzania

An observation of Tanzania’s export composition over the past decade reveals that

non-traditional exports of non-agricultural nature such as minerals and tourism while

and non-traditional agricultural exports such as vegetable products, cut flowers, live

animals, and fish exports have been on the increase in terms of have a larger share of

the country’s export share.

The increase in export share of non-traditional products has gone hand in hand with

the decline in export share of traditional products such as coffee, tea, sisal, and

tobacco. Tanzania has succeeded in exporting several dynamic products such as

minerals, horticultural products, textiles and primary products such as cashew nuts,

and spices (Mbwana 2012). There is such the need for the country to increase

emphasis on improving the supply and competitiveness of such products.

Tanzania has increased its volume of trade in the world in the EAC, SADC, EU, and

other African countries with Tanzania having a trade surplus with only one of these

regions which is the EAC (Lugakingira, 2013, Sarris 1993). There country has a

large trade deficit with SADC due to high import volumes from South Africa while

there is a slight trade surplus with the other SADC countries excluding South Africa.

Tanzania has a small trade deficit with the other African countries although volumes

of trade are low while the trade deficit with the EU has been worsening over the last

couple of years from a position of a significant trade surplus (Mbwana, op.cit).

 94

Countries in Asia and Middle East have emerged as significant markets for

Tanzanian exports about with a large share of cashew nuts, cloves, tea and raw

cotton going to these destinations with Japan, Hong Kong, Taiwan, Singapore and

Thailand being leading importers. Unfortunately Oman and United Arab Emirates

does not feature prominently as significant markets (Tairo 2011, Schiff and Winters

2003). India, Pakistan and Hon Kong are leading Asian destinations for non-

traditional exports such as minerals, vegetables and hides and skins. India, followed

by Japan as major destinations of Tanzania’s exports dominates the share of Asia.

Emerging markets create a significant opportunity for Tanzania since they have

fewer conditions compared to developing countries and thereby warrant more

concentration.

In the current economic environment, global trade plays an increasingly important

role in shaping economic and social performance and prospects of countries around

the globe. Because of that trade has to be well structure by defining the quality and

standards which will benefit all related parties (The South Commission 1990).

Standard entails setting the quality requirements for a specific item, material,

component, system or service, or describes in detail a particular method or

procedure. Standards are established by consensus and approved by recognized

standardization bodies.

Structured trade is a kind of trade which is organized in the form of a networking or

a mechanism between different interdependent stakeholders within a sector (Wai

1982, Wallerstein 1979, 2004). Since this is a structured or organized form of a trade
 95

for members to benefit, each stakeholder has to be fully informed and meet and

comply with the set standards and regulations. Otherwise if there is no any form of

compliance of some king the stakeholder will have to face certain sanctions.

4.3.1 International Trade Mechanism in Tanzania

Through the desk review it was observed that Tanzania had an institutional

framework which was responsible for international trade policy coordination,

management, implementation, monitoring and evaluation. It was noted that the

existence of Government Notice No. 2 of 2006 has mandated the Ministry of

Industry, Trade and Marketing to formulate and monitor Industrial Policy, National

Trade policy and Marketing policy, strategies and implementations of the

international trade policies and practices. When the respondents (i.e. medium and big

business people) were asked to identify the existing trade mechanism in relation with

the international trade in Tanzania the response which are summarized below

indicate that

Table 4.7:Existing Trade Mechanism in Tanzania by Frequency and Percentage

Existing Trade mechanism N %
Existing of trade blocks to defend member state against competition 1.6 4
Established tariffs on goods produced by other 12 30
Government subsidies, 1.6 4
Import quotas, 1.6 4
Export quotas 4.8 12
Customs union for the purposes of enhancing intra trade 5.6 14
Establishment of quality standards 12.8 32
Total 40 100

Source: Field data 2013

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The picture which emerges from the above table is that there were several structural

trade mechanism in Tanzania. The most common structural arrangement which was

mentioned by many respondents was the establishment of quality. This was

mentioned by 32% of the respondents. Other mechanism included existence of

customs unions (i.e. 14%) which was introduced among the east African countries.

It is important to note that, for effective participation of Tanzania in the International

Trade, Tanzania has made an effort to shift from formerly traditional products (such

as coffee, cotton, sisal, tea and tobacco) to non-traditional exports which is now

dominated by minerals and tourism while nontraditional agricultural exports,

particularly vegetable products, cut flowers and live animals and fish exports.

The findings from in depth interview revealed that, it was noted by complying with

the structural trade mechanism, Tanzania’s trade performance in the last decade has

been performing well in the nontraditional exports increasingly occupy a significant

share of total exports. It was interesting to note that, despite that increase, there was

little trade which transpired between Tanzania and Oman and United Arab Emirates.

On the contrary we noted that there were an increase in the trade with East African

countries, European Union and SADC countries. sources from the various literature

indicate that countries in Asia and Middle East have are also emerging as significant

markets for Tanzanian exports about with a large share of cashew nuts, cloves, tea
 97

and raw cotton going to these destinations with Japan, Hong Kong, Taiwan,

Singapore and Thailand.

4.3.1 Knowledge about the Existing Trade Mechanism in Tanzania

Trade facilitation is not a new development agenda in Tanzania. It has been part and

parcel of recent trade, fiscal and monetary reforms. Trade reforms have abolished

import and export licenses except for goods deemed sensitive for health and security

reasons (Okano 2004). There are no specific standard requirements other than those

normally expected of different types of products. Nevertheless, trade regulations that

are in force include the requirement for pre-shipment inspections for goods whose

value exceeds a certain amount of money at the point of origin to determine value

and the payable duty and tax.

Having a structural trade mechanism is one thing and having them known to the

Tanzanians and for that matter business people is quite another. In this study we

wanted to find out the extent at which these mechanisms were known and how

favorable were these mechanism in promoting the trade links and investment were

concerned. The findings which are summarized below indicate that

Table 4.8:Knowledge about the Existence of Trade Mechanism in Tanzania

The type of knowledge No Percentage

The type of trade blocks 3.6 9

The role of tariff in good produced from other countries 8 20

Quality standards 6.8 17

Advantages of quality standards for the products produced 6 15

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locally and internationally

The role of Customs unions 10.8 27

Special and differential treatment provisions 2 5

Import quotas 1.2 3

Export quotas 3.6 9

Total 40 100

Source: Interviews held with respondents

The general impression which can be drawn from the above table is that, the

responds had some knowledge regarding features of structural trade. out of 40

respondents 20% indicated that they knew role placed to the tariffs to good imported

in the country, while 27% indicated that they were more knowledgeable the role of

customs unions. These were the main areas which seem to be known by relative

large number of respondents. However the question of standards was also critical

because the respondents indicated to have an idea of what it entails. this has been one

of the area where Tanzania as a country was failing to meet the required standards

required by international markets.

Ideally the stakeholders networking were a key to the success of any business

transactions. This however was contingent upon how the business people were

organized to transact their business. Different trade organizations have set different

standards, failure of which our good can not only be rejected be it cannot fetch good

price. The question however which was asked by many respondents was who benefit

from these standards. The other question is whether these standards can be easily met

by Tanzanian in different sectors. These are some of the key questions which

Tanzania has grapple with if it is to cope and compete in the international markets.
 99

The study further wanted to establish if the existing structured trade mechanism were

favorable or unfavorable to promote trade links and investment between Tanzania

and Oman and United Arab Emirate. The responses from different categories of

respondents (manufactures, warehouse managers, traders, transporters and farmers)

summarized on the table below indicate that to processors, farmers, traders and

warehouse managers the structural trade mechanism were largely notfavorable.

Table 4.9: Response on Structural Trade Mechanism by Different Categories of

Respondents
Category of Favorable Not favorable Total
respondents N % N %
Processors 3.1 42 4.9 58 8

Warehouse managers 4.2 38 6.8 62 11

Traders 4.8 32 10.2 68 15

Transporters 10.7 51 10.3 49 21

Farmers 8.3 33 16.7 67 25

Generally speaking the impression which emerges from the above findings is that the

existing trade mechanisms were favorable in promoting trade and investments at

least from the respondents’ point of view. The majority of the respondents indicated

that whereas the establishment of the standards for example was good but it was not

favorable in Tanzania because not all kinds of business people were able to comply

with the required standards. What does this mean? This meant that the Tanzanian

were therefore disadvantaged when it comes to participation of Tanzanian in

international trade.
 100

Having a fairly good knowledge on quality standards as already highlighted above

enables farmers for example .to comply with them throughout the crop cycle, from

sowing to harvest. In this way, they can deliver uniform identifiable products to a

certified warehouse, which will issue a receipt in exchange. The importance of the

existence of standards so that farmers are able to ask for certain prices if they know

whether or not their products match the quality and price features of standardized

products. Farmers may use this receipt to apply for a loan (usually short-term) from a

bank or other financial institution to cover their urgent financial needs without

having to sell their crops immediately after harvest. In other words, obtaining a bank

loan by using a warehouse receipt as collateral gives farmers the freedom to sell at

the most appropriate and hence most profitable time. The cash earned by this sale

may then be used to repay the bank loan and cover the warehouse expenses

Theoretically achieving the required standard there must be certain agreed working

environment which include expected procedure like for example, when an

agricultural product is harvested it should be properly handled in certain storages in

order to avoid getting financial losses. The farmer stands to get a loss if there are no

suitable storage facilities. This may as well affect his or her bargaining power

particular at the time he or she does not have access to information on prices charged

elsewhere, or on the supply and demand situation. Moreover, if the product is not

standardized, the farmer cannot compare it with other products marketed elsewhere

in the country or region and will thus not have a clear overall picture of the crop

value.
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For merchants and traders, procuring small supplies of commodities from anywhere

in the region can soon become expensive. Like farmers, if they do not have suitable

warehouse areas to enable them to store and sell top quality commodities throughout

the year, prices may fluctuate markedly between periods, which is detrimental to the

farmer, merchant and consumer. All of these operations can run smoothly, and with a

clear advantage in terms of negotiation, if the stakeholders are not forced into a

financial emergency situation. Banks and credit therefore have a crucial role. Last

but not least, stakeholders have to be sure that legislation will not unexpectedly

change overnight, and that they will be protected if they are operating within their

legal rights.

Although a large proportion of respondents (i.e. 78%) think that Tanzania can benefit

from diplomatic diplomacy. Over 81% respondents who were interrogated

concerning benefitting from international trade argue that, the country was not

benefiting from preferential trade arrangements because of low capacity to export.

This it was further argued it was attributed to low productive capacity of the

economy, weak infrastructures, low level of investment and weak policy response.

Again, since the majority viewed that the government has done little than what it is

expected to do, the government is to revisit its strategy to address the situation, if it is

remain competitive globally. Perhaps failure to consolidate benefits of improved

market access can help to explain the case in point.

The Tanzanian membership in, EAC, AGOA and SADC has led to an increased

marketing avenue or Tanzanian exports. however, the structure, composition, pattern

and trends of Tanzania trade performance indicate that the membership in MTS has
 102

generally failed to support Tanzania in its drive to consolidate the benefits of

improved market access globally due to weak productive capacity of the economy,

low productivity, low access to credit and poor infrastructure which all reduce

competitiveness by increasing cost of production. Such an example help to reveal the

extent at which Tanzania has been unable to cope with the demands of the required

standards not only to EAC, AGOA and SADC but also to Oman and United Arab

Emirates.

4.4 Legal Framework in Promoting the Cooperation between Tanzania and

GCC Countries

A legal framework is a broad system of rules, procedural steps that governs and

regulates decision making, agreements and laws. In other words, the legal framework

as the name connotes is establishment of the rules of the game (i.e. legislative,

regulatory, jurisprudential and managerial rules that together establish the rights used

by officials involved in business transactions). Further the legal framework is kind of

a system of rules, laws and agreement set to establish the way the business operates.

The framework includes not only rights and obligations but also effective

mechanisms to ensure full enforcement of the law.

Recently a greater significance has been given to the role of the business

environment. The business environment is an external influence that is affected by

governments and other institutional stakeholders. In most cases, the business

environment is supported by the government because it supports employment

creation while maximizing the contribution national economy in the reduction of

poverty. The policy, legal and regulatory framework provides the means by which
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government can manage the economy so as to achieve sustainable social and

economic outcomes. That is, government develops policies, laws and regulations to

achieve a desired purpose.

Having Policies, laws and regulations is one thing and having them implemented is

quite another. Because of that existing policy, laws and regulations need to be

implemented and enforced in order to realize the intended objectives. Governments

create organizations to perform these functions (e.g. ministries, departments,

authorities, agencies). There are also other organizations that are formed to perform

specific functions in the business environment. These include chambers of

commerce, business associations, trade unions, research agencies, and private

organizations (e.g. accountancy and consultancy firms). In this study we wanted to

establish to what extent the legal framework was responsible in promoting the trade

and investment in Tanzania, Oman and United Arab Emirate.

4.4.1 Legal and Administrative Obstacles

As already highlighted above, the legal and regulatory framework aims at protecting

and assisting the development of business environment. This is mainly done through

proper functioning of the economy and the protection of basic individual rights and

economic and social functions. It was within this context that the respondents in all

three countries were asked to explain the legal and administrative difficulties they

were encountering pursing the trade and investment activities in these countries.

In Tanzania for example, we noted the existence of regulatory and legal framework

by TIC laws which provides the frameworks, members to international guarantee

 104

agencies and arbitration. The responses which are summarized below indicate that, in

all countries there were prevalence of the problem of transparence. Whereas for

example in 47% indicated lack of prevalence in Oman and United Arab Emirate 36%

indicated the prevalence of transparency as an obstacle among business people.

Other obstacles which were identified included difficulty to obtain approval or

licenses. Business community members who were interviewed in Tanzania 21%

indicated that they experienced difficulty in accessing the licenses while in Oman

and UAE only 26% indicated to have experienced the problem when they were

seeking for the approval.

Table 4.10: Legal and Administrative Obstacles by Respondents in Oman and

UAE
Obstacles Response

Tanzania Oman & UAE

Lack of transparency 47% 36%

Difficulty to obtain the approval / license 21% 27%

Delay in registering the investment 22% 17%

High cost of registration 6% 16%

Lack of assistance 4% 4%

Total 100% 100%

Source: Field data 2014

From the Table 4.10, the most glaring obstacle was difficult to obtain the license (i.e.

33 percent), while delays in registering the investment and obtaining of the licenses

was echoed by 27 percent. Such difficulty was due to number of documents to

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provide in practice, and ultimately the lack of transparency. Other obstacles included

high cost of registration (i.e. 16 percent) in Oman and United Arab Emirate while in

Tanzania it was only 6% respondents who indicated the existence of high cost of

registration.

In as far as delay in registration was concerned; 22% of the respondents in Tanzania

described the length of procedures as a result of low level of coordination with

ministries. Regarding level of assistance the respondents indicated that this was not a

big obstacle when compared with other obstacles. This was revealed by 4% of

respondents from Tanzania, Oman and United Arab Emirates. The respondents in

Tanzania noted that TIC and other significant stakeholders were there to assist

investors registering their enterprises and filing of the tax forms. Other forms of

assistance which could be accessed from Tanzania Investment Centre was

completing investment registration and Immigration Forms and facilitating obtaining

the necessary licenses, approvals, facilities or services.

It was further noted that where the relevant papers submitted to the Centre are in

order, the Centre shall complete processing the application within fourteen working

days. Otherwise where there was no such assistance was provided as per respondent

who were interrogated, the situation looked unhealthy to smooth registration of their

investment. On average over 50% respondents who were interrogated in both Oman

and United Arab Emirate indicated that foreign investors did not experience any

significant legal obstacle at the preliminary stage. However it was noted that, large

foreign companies being required to partner up with local authorities through a joint

venture scheme (particularly in oil and gas sector).

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(i) Approval procedures

An approval process or procedures is an automated process an organization uses to

approve certain action. Such an approval process not only specify the steps necessary

for a record to be approved and who must approve it at each step, but also specifies

the actions to be taken when an approval is rejected or resubmitted for approval. In

this framework, the study was interested in not only in finding out the process of the

approval process required by an investor in three countries, but also respondents

were further asked to reveal the difficulties investors encountered in obtaining the

approval. The responses which were collected from the interviews in both Oman and

United Arab Emirates indicated that they did not experience any significant difficulty

in obtaining the approval for their investment.It was noted that such category of

respondents did not necessarily have to go through the same steps in order to obtain

an approval for their investment. However, this question triggered numerous

comments from the other respondents, especially with regards to difficulties in

obtaining investment approvals and the commercial licenses necessary to carry out

the activity. The difficulties which were identified include the following namely:

(a) Lack of transparency of required documents and procedures. This implied

existence of a significant part of discretion and arbitrariness in the decision-

making process. The respondents indicated that additional requirements have

often been imposed upon them in order to obtain the approval. It was noted for

example that, in UAE to lease minimum office space or on a 12-month basis

only, was restrictive for smaller companies.

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(b) Low level of decision-making process and to a lesser extent lack of

responsiveness of public authorities such obstacle was not anticipated by

respondents but was noted as a major impediment to a timely start of their

investment operation, and throughout the operation of their investment operation

as an issue for timely payment of their bills when contracting with public

entities.

In Tanzania the respondents who were interviewed did not indicate any problem

regarding the approval procedures.

(ii) Difficulties in obtaining investment approvals

For the respondents who had investments in GCC States were asked to explain if

they had ever encountered difficulties in securing investment approval. They were

further interrogated to explain what were the limitations and required procedures?

Out of 17 respondents who were interviewed 57% said that they did not encounter

any difficulty in securing investment approval. When these investors were

interrogated to explain if they had some difficulties in employing foreign personnel,

including managerial staff, 43% of respondents acknowledged to have experienced

some problem. The specific obstacles relating to the employment of foreign

personnel, either at the managerial level was that of nationality requirements. It was

mentioned that, investors were required as an obligation to employ set percentages of

nationals in certain job categories. This looked as if it was commonly agreed and it

was implemented in all GCC States.

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The second obstacle concerns obtaining visas and work permits for foreign staff and

in some cases, their families. Inconsistencies were underlined by several respondents

with respect to the difficulty to obtain business visas before deciding to set up the

investment project, and the occasional requirement by governmental authorities that

visas and work permits for senior staff members be obtained prior to the registration /

approval of the investment whereas such registration would precisely be needed to

obtain the visa.

However, over 23 % respondents in the U.A.E underlined a certain tolerance with

regards to the use of tourist visas for first business visits in the country.Other

obstacles concern, for example, the quotas imposed to holders of licenses to invest in

economic zones. One respondent from the Oman chambers of commerce who was

interrogated mentioned that their free zone license would only entitle them to hiring

one foreign employee, therefore requiring them to fly in freelance consultants from

abroad on a case-by-case basis. In addition, labor requirement in terms of duration of

employment contracts have been referred to by one respondent in United Arab

Emirate as being restrictive in terms of predictability, as the Labor ministries may be

expecting foreign staff to be employed on a short-term basis. Finally, the recognition

/ equivalence of foreign diplomas were underlined by one respondent as being

problematic in terms of justifying the employment of foreign staff.

According to one of the respondent from Tanzania Investment Centre, Business

Registration and Licensing agency (BRELA) has a friendly package which attracts

anyone who wishes to invest in Tanzania. He for example explained that BRELA

was responsible for business registration in Tanzania which included issuing of

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certificates of compliance for foreign companies, certificates of incorporation for

local companies and certificates of registration for single proprietorship. It was

further elaborated that among other things firms which wish to operate in Tanzania

must register their businesses with the Tanzania Revenue Authority (TRA), the

National Social Security Fund (NSSF) or any of the other five social security

schemes in Tanzania and, depending on their business activities, with the Ministry of

Industry and Trade.

Other structural trade mechanism include the following, that there will be

unconditional transferability through any authorized bank in freely convertible

currency of net profits, repayment of foreign loans, royalties, fees, charges in respect

of foreign technology, remittance of proceeds and payment of emoluments and other

benefits to foreign employees working in Tanzania. Further to that, it was also noted

that any foreign business operating in Tanzania may obtain credit from domestic

financial institutions up to the limits established by the Bank of Tanzania. Last but

not least, it was revealed that there was no any restriction in enterprises entering into

technology transfers. But every Agreement for transfer of technology must be

registered with the Centre. Among other structural trade arrangements these were

some of the conditions which if upheld would promote the structural trade

mechanism.

(iii) Difficulties in employing foreign personnel

in view of the above the respondents were asked to explain if in their conducting

their business they experienced the problem of transfer of funds (e.g. repatriation of

profits). Out of 17 respondents who were interviewed in Oman and United Arab
 110

Emirates all respondents indicated that they had no problems with the transfer of

their investment-related funds. No respondent mentioned any significant obstacle

with regards to entry or repatriation of profits. The only caveat relayed to us was the

uncertainty of bankruptcy laws and the potential difficulties which may be raised at

the practical level, although no concrete example could be provided by surveyed

foreign investors.

Respondents were further asked to reveal if they faced practical restrictions

concerning access to land and if there were any possible problems encountered by a

foreign investor. The responses which were collected from the respondents indicated

that 69% respondents mentioned that they did not have issues with access to land

while 31 % of respondents identified the problem they encountered. Some of these

problems are indicated below:

(a) The limited access to residential property for foreign staff.

(b) securing lease agreements in order to obtain licenses and;

(c) The lack of available lands, especially in free zones which was increasingly

becoming increasingly saturated

It was however interesting to note that, the existing regulatory restrictions on foreign

access to land was not mentioned as an issue. The picture which emerges from the

above findings reveals that, the perspective of the private sector on investment

policies and practices towards foreign investors depend on how regulatory obstacles

may directly or indirectly affect the decision of prospective investors to invest or not

in a particular country. It is also noted that, the perception of foreign investors on the
 111

enforcement of these regulatory may be a promotion factor or inhibiting factor in as

far as facilitating the trade and investment is concerned

4.5 Chapter Summary

In this chapter we have noted that the private sector in Tanzania was not performing

well when compared with the private sector in GCC countries. We have further

noted that the existing legal frameworks and the trade mechanisms are not favorable

when compared with the legal and trade mechanism in Oman and united Arab

Emirates. The picture which emerges from the above findings among other things is

that, Tanzania’s major impediment to beneficial participation in international trade is

low level of implementation of trade supporting policy strategies. This has been

largely been due to lack of coordination between institutions that are responsible

with facilitation of international trade; inadequate government support when it comes

to international trade and limited negotiation capacity.

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CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Introduction

After making the presentations of the findings of the study in the fourth chapter, this

chapter presents the summary of the study based on the main specific objectives. The

chapter makes a general conclusion and provides the recommendations and areas for

further studies. In view of that, the chapter is organized around four main parts. The

first part is the summary followed by the second part which is the conclusion. The

third part is the recommendations while the last part highlights areas for further

studies.
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5.2 Summary

The general objective of the study was to find out the reasons why there is low level

of cooperation between Tanzania and GCC member countries (with particular

reference to Oman and United Arab Emirates). In particular, the study was guided by

three major specific objectives. Whereas the first objective revolved around

establishment of the level of readiness or preparedness of the private sector in these

countries to promote the trade links and investments, the second specific objective

examined the role of the existing structural trade mechanism in promoting the trade

links and investment in the three countries understudy.

The last specific objective was that the study to establish the role which was played

by political and legal framework in promoting the economic relationships.In as far as

the private sector readiness in Tanzania is concerned; the study findings revealed

that, the enabling environment for the growth of private sector in Tanzania is not

sufficiently developed to allow the sector to promote trade links and investment. The

study for example noted the factors such as infrastructure, low level technology,

generalized poverty and low level of entrepreneurial initiatives were among the

major obstacles which hindered the growth of the private sector in Tanzania. It was

further noted that, the nature of private sector in Tanzania was generally Tanzania

export products are characterized by generally low technological content. As a result

this deprives Tanzania a competitive edge of products in the global market.

Generally speaking Tanzania has and continued to perform relatively low in the

global environment in terms of competitiveness. This to a large extent is attributable

to limited level of investment in technology, hence implying Tanzanian low

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technological development.Despite the above shortcomings, the study revealed that

the private sector was potentially growing though at low rate and it was supported by

the presence of policies from the Ministry of Industries and Trade, and Ministry of

Foreign Affairs and international cooperation.

The presence of for example a policy on economic diplomacy was a good

government initiative to support the growth of the sector and hence reflecting the

preparedness of the private sector to promote trade and investment. Other factors

which indicated the preparedness of the sector to promote trade included, existence

of chambers of commerce and other related institutions, improvement of

infrastructure such as roads connecting different parts of the country, existence

various financial institutions to support the growth of the sector.On the other hand,

the private sector in both Oman and United Arab Emirates it was observed that

private sector had a rather buoyant and attractive business environment as a result of

huge strides since the first oil boom whereby most of its activities attract more

sophisticated recycling. It was further noted that existence of diversification from oil

product further helped to keep the private sector booming unlike the situation found

in Tanzania.It was noted that apart from the booming private sector economy which

tended to attract more trade and investment, the Oman and United Arab Emirate

business providedemployment to local people and capital formation, and in so doing

contributing to the provision of services that were previously the provided by the

government.

With regard to structural trade mechanism, the findings have revealed that the

existing mechanisms were not favorable in Tanzania when compared with the
 115

structural trade mechanism in Oman and United Arab Emirates. GCC structural trade

mechanism was noted to be a well established, structured and well functioning as per

international standards. For sure this helped in conducting international trade thus

facilitating smooth international trade. Further, the GCC countries had a strong

standard control where they were able to control the imports of products. It is not

easy to import to safe and hence high quality control mechanism.

In view of the above, the benefit accrued from the structural trade mechanism has

been relatively low compared to benefits accrued from GCC countries. One of the

major reason why the structural trade mechanism have been unfavorable has been

and continues to be low level of technological development which has affected the

quality of standards of goods and services required in the international markets

including the markets in Oman and United Arab Emirates.

5.3 Conclusions

Economic diplomacy is the process through which countries collaborate with the

outside world in an attempt to maximize their national interest in all aspect involving

foreign investment and other forms of economic benefit exchange where they enjoy

competitive advantage. In view of that different governments do take into

consideration their foreign policy, business policies, investment in technology,

flexibility of the country on their decision. Because of that economic diplomacy

involve the following actors, such as state and non-state actors. State actors include

government agency operating internationally, non -state actors include Non-

Government Organizations, business and investors which engages in international

economic activities.
 116

This study was set to examine why there were low level of cooperation between

Tanzania and Gulf Cooperation Council which constitute a regional

intergovernmental political and economic union. The study using the theories of

economic diplomacy concentrated on the three main variables namely, preparedness

of the private sector in these countries to promote the international trade links and

investment, examination of the existing structural trade mechanism in these countries

and last but not least analyzing the role played by the political and legal framework

in promoting the links between the countries under study.

The general impression which has been gathered from this study was that Tanzania

as one of the developing countries and GCC which had relatively strong economies

they were at different levels of economic development a factor which affected the

level of cooperation. As it was observed GCC countries which include Oman and

UAE enjoys Oil and gas economy which provides them with high economic power

controlling about one third of the world oil and gas resources. As if this is not

enough they also have not only a good infrastructure such as roads, air connectivity

and telecommunications, but they also have a well defined regulatory legal

framework in doing business as per international standards. Last but not least these

countries have a fairly well developed and functioning chamber of commerce which

works professionally. It was therefore not surprising to note that despite the existence

of Tanzania Investment Centre (TIC) and Zanzibar Investment Promotion Agency

(ZIPA),Tanzania the private sector had not development into its full potentiality to

promote link between these countries.

 117

It was also clear from the findings that Tanzania was still suffering from low level

technology a fact which affected the kind of products which was not able to meet the

international accepted standards. That was also coupled with lack of entrepreneurial

mind set, high prevalence of poverty, low quality goods and institutional weakness

all these factors worked against the promotion of private sector and the international

business cooperation between Oman and United Arab Emirate. The protectionist

policies were also a factor which affected the level of cooperation between Tanzania,

Oman and UAE, for example there were restrictive policies such as protectionism in

term of imports and trade, and policy which was protecting the local products. The

other policy was that of EMIRATIZATION and OMANISATION these are national

policies which are aimed at inhibiting experts and foreigner to acquire jobs.

It was also noted that different countries have different economic interests a factor

which help to determine the level of involvement in economic diplomacy. Most of

the developed countries for example engaged themselves in economic diplomacy for

the interest of attracting foreign investment and expanding foreign employment.

Further these countries get engaged in these transactions for the purpose of

increasing their market, for example countries like China, U.S.A and Britain have

economic diplomacy in most of third world countries so as to gain foreign

investment and expanding foreign investment as well as market for their goods.

What we have been witnessing in last few days is that, there is a tendency of many

people from China conducting their business in Tanzania under the cover of the

umbrella of economic diplomacy contrary to most of third world countries which

gains almost nothing from having economic diplomacy.

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5.4 Recommendation

5.4.1 Preparedness of the Private Sector

We have noted in the study findings that the private sector in Tanzania has not

sufficiently grown to facilitate the trade links and investment with Oman and UAE

countries and other developed countries as well. The major reason which was echoed

was lack of technology a fact which makes the products produced to remain below

the internationally acceptable standards. We also noted other factors such as lack of

internal market as a result of generalized poverty among the people, unreliable power

supply and weak institutions and lack of necessary competences among many other

reasons. Strictly speaking, a flourishing private sector brings about rising income

levels needed to eradicate poverty. It is therefore recommended that:

(a) There is a need for a continuing and significant effort to be made to promote an

expanding role of the private sector in its broader context and to promote

within it a greater understanding of the responsibilities for fostering economic

growth and development.

(b) The Chamber of Commerce in existence need to be more professional and

hence on the need to improve their competences is paramount in order to attain

international standards.

(c) In order to increase the role and value of foreign investors in Tanzania, a

deliberate effort need to be made to take advantage of new trade and

investment opportunities and encourage GCC countries to come and invest

 119

while at the same time encourage local business people to make use of the

existing business infrastructure to promote their business.

(d) Given the above findings there is a dire need for the Government to address

these bottlenecks by strengthening of trade supporting policy coordinating

mechanism; establish regulations to enable Public Procurement Act (2004) to

provide more preference to MSMEs and domestically located firms in public

procurement process; increase of resources to BEST to undertake its mandate

of creating an enabling regulatory environment for businesses to thrive and

operate more efficiently through reduced cost of doing business.

(e) Develop specific assistance to SMEs and provide efficient support at the entry

level, even if it is noted that specific funds may already be dedicated to SMEs

in some GCC States (for example, Khalifa Fund, Bin Rashind Establishment in

Dubai).

(f) Streamline and increase transparency in procedures, and in that respect

modernize the legal system, in order to increase attractiveness of GCC States

towards foreign investments, even beyond the boundaries of economic /

investment zones.

(g) Private sector outreach efforts bemade to provide general and tailored training

and workshop activities to member associations, in an effort to dissemination

of business information and in so doing promoting the sector.

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Structural trade mechanism

(h) Skills Competence and capacity to utilize of technology: Education levels,

skills competence are vital to the capacity of the players in the private sector

and general public to address access and fully utilize appropriate technologies

and impart new business skills to enable them to successfully produce products

which are at expected international standards.

(i) To form joint private partnership between Tanzania and private firms Oman,

United Arab Emirates which will help to build the capacity of Tanzanian in

terms of skills and application of technology in an effort to meet the required

international standards

(j) To invest in the area of science and technology by the government or private

sector in an attempt to make the goods and services are produced in an

environment which meet the expected standards are up to the expected

standards.

(k) Address the existing institutional weaknesses in Tanzania and promote

competence in handling international business affairs. that is to say there a

need to have a fairly developed functioning chamber of commerce which work

professionally.

5.4.2 Legal Framework

(a) To put in place strategic policies and legal framework this will protect products

produced locally with a view of promoting the growth of private sector.

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Further, the policy adopted by GCC countries such as a policy of

EMIRATIZATION and OMANISATION which inhibit experts and foreigner

to acquire jobs.

(b) Put in placea well-defined regulatory legal framework in doing business such

as laws of the game according to international standards.

5.5 Area for Further Studies

The development sector continues to be seen as the domain of the well to do

members of the society. This is mostly dominated by multinational corporations and

few individuals capable to compete. in developing countries like Tanzania, the

tendency has been to encourage the foreigners who are normally invited to invest in

developing countries. There are few efforts to ensure the indigenous people are

encouraged and promoted to participate in the private sector economy. What does

this mean? This means building the capacity of young individuals to participate in

the economy, promote the use science and technology if we our young people have

to act professionally and improve the quality of our goods and services. This is an

area which we need to research on if we are to compete with our counterparts in

GCC countries and others parts of the world.

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University Press.

APPENDICES
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Appendix 1: Sample Size Determination Using Krejcie and Morgan Table

The ever increasing need for a representative statistical sample in empirical research
has created the demand for an effective method of determining sample size. To
address the existing gap, Krejcie & Morgan (1970) came up with a table for
determining sample size for a given population for easy reference.

Table 1: Table for Determining Sample Size for a Finite Population

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The Table is constructed using the following formula for determining sample
size: