Interview with outgoing World Bank representative, Jim Adams

Jim Adams was the World Bank’s country director for Tanzania and Uganda from 1995 until March 2002. He is now returning to the Bank’s headquarters in Washington DC, USA, where he will be the vice-president of operational policy. He spoke to IRIN about some current topics of interest in Tanzania and Uganda - including economic growth, poverty reduction, debt relief and government spending priorities. QUESTION: Are you happy that economic growth has improved the lives of ordinary people in Tanzania and Uganda? ANSWER: Well, the Tanzanian and Ugandan stories are slightly different. We know that in Uganda, where they have done detailed house surveys, there have been real, substantial income increases since 1992. We know it’s reached down fairly far into society. We also know, however, that it hasn’t reached the very poor - the lowest 10 percent - and developing programmes to address that remains one of the issues in Uganda. Tanzania is slightly more complicated in that we don’t have the same level of household survey work. We are expecting that to be done in the next couple of months - at that point, it will be easier to discuss the specifics of what has happened - but it’s clear that the Tanzanian growth rate has been lower than Uganda's. We haven’t seen the same breadth of impact on the lower income families as we have seen in Uganda... We have certainly seen it [growth] in the cities, but less so in rural areas. Q: What are the major changes you saw in Tanzania in your seven years there? A: Two important things have been that the government has focused on a specific strategy for the reduction of poverty, and that we have managed to achieve stability in the economy. The first has involved a fairly focused attempt to improve the delivery of services in education and in health, as well as more broadly in the infrastructure areas. In the second area, inflation rate is down, we’re not seeing the same pressures on the exchange rate that we used to see, and we've seen sustained real growth at a level of 4 to 5 percent - but I think the objective is to get it up to 5 to 7 percent to see more of an impact. The other broad area where there have been improvements is privatisation [of state companies]. One has seen improved delivery of service, and they are no longer pressuring the government’s budget. Q: What are the main things to be tackled if Tanzania is to continue to progress? A: The big issue now is to make sure that government programmes are implemented effectively, and that the additional resources made available to those programmes have an impact on the lives of the average Tanzanian. For example, the government has this year allocated a significant increase in resources to the primary education sector. Those funds are being made available to schools, but the important thing is to make sure that those funds have a significant impact: that classrooms are built, that the textbooks arrive and are fairly distributed... The second piece of the puzzle, in terms of service delivery, is the health sector [and here]... there are two interesting issues. One is that the government is making more money available to the public sector, but it is also important to ensure (particularly because the NGO and Church sectors provide such a substantial proportion of support to health) that the government works closely with that sector to ensure that the overall health delivery system improves. Q: Tanzania is the third country to have qualified for the Highly-Indebted Poor Countries debt relief initiative (HIPC). Can you say why it was looked upon so favourably? A: There are a variety of conditions for debt relief, but, essentially, they come down to two main areas. One is that the overall macroeconomic performance is satisfactory, and the second is that there is a credible poverty reduction programme in place. Tanzania has had a good record on the macroeconomic side throughout the period of President [Benjamin] Mkapa’s leadership. The poverty reduction programme is also something the government has been working intensively on. The government’s work has paid off and, over the last two years, it's done a very good job of combining a strong economic programme with a credible poverty reduction programme, so there was broad and consistent support for going ahead with debt relief. Q: You have been quoted as saying that the great challenge for the Tanzanian government is to "use loans in the most productive sectors". Does the expensive military radar system that Tanzania has said it will buy come under this category? And, if not, what will be the World Bank’s response if the deal goes ahead? A: Well, I think there are two important aspects to this issue. One is the question of air safety. In that respect, I think the government, the World Bank and the donors agree that it’s important to ensure that some of the concerns that have emerged are addressed. The substantive question - which is not yet decided - is whether the proposed system actually meets that test. What we agreed with the government is that they would bring the International Civil Aviation Authority in to Tanzania, and that group would do a review of the proposed system. When that is done, we will certainly be sitting down with the government to talk through the recommendations. So, I do think that this is an issue where there is enough concern, and the government has agreed to bring this group in. Some of the government people involved do not agree with some of the concerns put forward by the Bank, and we feel that the right way to address that is to get the technical work done and sort it out. One piece of information hasn’t been as clearly stated as it should have been is that the government signed the contract for this [system] a long time ago. Part of the Bank's concern was that the budget for this was not vetted through the normal public expenditure process. I think there is now a clear government commitment that, in the future, proposals like this will go through that process. That’s certainly an important point that we wanted to establish in the context of the post-HIPC debt relief period but also, more generally, to ensure that the government’s budget process includes all major expenditures. Q: Can the World Bank block the air traffic control deal if the system is not deemed suitable? A: I think there are two aspects to that - and one doesn’t want to respond directly until the two aspects are sorted out. One is: 'Does the deal respond to real needs and does it improve air safety?' Once that is sorted out, the government has its legal obligations with respect to the deal. I don’t think we will put ourselves in the position where we will ask the government not to live up to commitments it has made. But, certainly, the discussion of this deal in the United Kingdom has been based on certain assumptions about the effectiveness and the efficiency [of the system]. And if those assumptions are not correct, we would expect and hope that the government would be prepared to go back and have that discussion with the supplier [BAE Systems] - and with the UK government, as they approved a licence for this deal under certain assumptions. Q: Agricultural output in Tanzania is well below its potential, and the World Bank has recently proposed a soil fertility programme. What are the other factors holding back this sector and what is being done about them? A: I would like to see the soil fertility programme set in the broader context. What we find in agriculture are a number constraints, some of which are in the control of the government and will take some time to address, and some of which are outside the government's control. In terms of what the government can control, we think that good progress has been made on agricultural research, but that programme has to be strengthened and reinforced. Some good progress has also been made on liberalising the policy environment for agriculture, but a lot more can - and has to be - done. The third big area that concerns us is the quality of extension services. With decentralisation, there have been a number of questions raised about how to get these more responsive to farmers’ needs, and we hope (along with other donors) to work with the government on that. Beyond the government's control, one of the issues that is very important to us is this question of opening up markets - particularly in Europe, the US and Japan - for agricultural products from Tanzania specifically, and Africa more generally. Subsidies to agriculture in the North are about US $1 billion a day. That is an enormous sum, which makes it very hard for Tanzania and other African countries to compete, so the Bank is speaking very aggressively about this and, indeed, raised it at the recent aid financing conference in Monterrey [in Mexico]. Somewhere in between is strengthening the financial sector with respect to the provision of agricultural inputs, and the financing of agricultural investments. The government has done a lot in terms of opening up the financial system to make it competitive over the last few years, but we want to make sure that the agricultural sector is fully incorporated in this. So there’s a very broad agenda in agriculture, and we see ourselves working very closely on this. One of the things that has emerged from the dialogue between the government and donors has been a recognition on the government side that more can be done on agriculture, and on the donor side that we can provide more support for the government’s activities in that sector. Q: The issue of clove farmers having to sell their cloves to the government at a fixed rate is highly contentious on Pemba island [in the Zanzibar archipelago]. It is said to be encouraging islanders to smuggle their products elsewhere. What, if anything, can be done about this? A: Because donors have not been actively involved on Zanzibar [after disputed elections in 1985], we haven’t as strong a presence or view on some of these issues as we do on the mainland. I think that’s changing now, and one of the things the World Bank has agreed to do is some economic work on Zanzibar. We do know about this problem and I suspect we are going to come out very clearly on this. We think that there is a strong case for a liberalisation of the clove markets in Zanzibar. There have been some historical reasons for that [fixed sale rule], but - much along the lines of liberalisation on the mainland - we think that paying the farmers a competitive market price for cloves is the way to increase farm incomes and overall incomes in Zanzibar, because that will stimulate production. Q: The mining sector has expanded greatly in Tanzania. Is there sufficient regulation and is the country benefiting sufficiently from mining? A: Well, those are two different questions. On the regulations side, because the new entrants are large international mining companies, most of our reviews are indicating pretty good performance in terms of safety, creating opportunities in the mining communities, and in terms of building housing, providing water supplies and health facilities. There are many good stories on that front and I don’t think we feel we have any regulation problems. The second problem is more interesting. The government has worked very hard to put in place the policy environment to encourage mining (and there has been an enormous response by the mining industry) and so, up until now, that has been a very real success story from our perspective. I think the issue the government has to look closely at (not with respect to existing arrangements, because once you’ve struck a deal, it needs to be sustained) is whether there are changes it wants to make to generate some additional funds for Tanzania. And it can do that precisely because of the success of the earlier policies. I think the intention was to get some attention and investment; that has happened and now, as we recommend across economic policy, the government should be re-calibrating. We have told the government that we would be prepared to look at some of the policies with them. It may not necessarily bring any changes, but I think the government needs to encourage investment while also making sure that it gets the proper income flow from the investments that are made. Q: Moving on to Uganda, is the World Bank confident that the benefits of the Bujagali dam and hydropower project near Jinja are worth the environmental costs? A: Yes. I think we’ve looked at that from a fairly broad perspective, in terms of the alternatives, the costs and benefits. We have come up with a judgement that we feel Bujagali is a sustainable investment (from an economic and financial point of view) but also one that - while it has some environmental costs - has fewer environmental costs than most of the realistic alternatives. Some people say that Uganda should be looking more seriously at geothermal power. We agree with that but the geothermal programme is not going to deliver the level of supply capacity that Uganda needs for economic growth not to be constrained by power shortages. People have also suggested other hydro alternatives. We have looked at those, and they are significantly more expensive than Bujagali; people have talked about the use of imported oil, but that also has environmental costs and is much more costly. In the end, we remain confident that this is the most appropriate investment for the power sector in Uganda at this time. Q: Do you have any ideas on how best to integrate marginal areas in the north and west of Uganda into the national economy, in order to consolidate peace and security? A: I would like to respond to that by identifying the problem. The reality is that these are areas which have had security problems, but also have had real problems in terms of mobilising appropriate economic activities - and that's related to the security issue. Our household budget analysis indicates quite clearly that (unlike the rest of Uganda, where the evidence of substantial poverty reduction is convincing) these are areas that have not had much poverty reduction. What we’re on in this area is a fairly large intervention of what we call social fund effort. The reason we want to do a social fund is that this provides resources for community-based organisations to put in place key elements of infrastructure and key investments. The reasons we’re arguing that we should move down that road are really twofold: One is that the government really has to develop stronger relationships with the communities in the north in order to have development efforts make progress. The government - we feel very strongly - has an obligation to build stronger links with the groups that have been doing most of the development activities [in these marginalised areas]: the NGOs, the churches and some of the community-based organisations. Our second point is that we do think - precisely because the government hasn’t functioned as well in the north as in other areas, and because of the security issues - drawing on the views and priorities of the communities is absolutely essential. So we are looking at finalising (literally over the next few months) a very significant investment in the north. Some donors are participating in this, and other donors have their separate investments, but it's clear that the north and the west have a need for additional resources for their special development needs, and there is a priority in terms of mobilising these. Parallel with that, it's going to be important for the Ugandan government to deal with the security issues. They are now working much more closely with the Sudanese in addressing that and, certainly, what we are hoping will result is an agreement that some of the sources of the insecurity in the north are addressed by the government more effectively.