RD 207-Rural industrialisation_114715-2.pptx

RD 207: Rural industrialisation 1
RD 207: RURAL
INUDSTRIALISATION
By
Chingonikaya

Introduction
 Rural industrialization as a subject is part of
Development Studies Courses
 Rural Development students, both MARD and BARD as
well as other degree programmes.
 The subject intends to provide knowledge on
entrepreneurship and development of industries from
small scale to large scale.
 Non and Agriculture based industries are introduced in
the subject.

Course contents
 Definitions and concepts of rural industrialization
 Goals, objectives and strategies of rural industrialization
 Important of rural industrialization
 Relations between agriculture and rural industrialization
 Evolution of rural industrialization in developing countries
 Industrial development
 The desire for rural industrialization
 Conceptual framework for rural industrialization

Cont…
 Industry and agriculture
 The role of government and private sectors on
rural industrialization
 Tanzania’s experience on rural industrialization
 The major constraints of rural industrialization
 The possible solutions to the constraints

Concepts of rural industrialization
 Rural industrialization is a phenomenon of
development of industries in rural areas
with a major aim of promoting a strong link
between agriculture and industrial sector
 Eapen (2001) points out that, rural
industries are to be defined not in terms of
location in rural areas, but whether they
generate development links with the rural
sector or not.

Cont.
 Bagachwa and Stewart (1990) define “rural” more
broadly as it includes small towns and at times medium
towns.
 Others, for example, Saith (1992) focuses on the
generation of non-agricultural employment opportunities
for the rural population irrespective of its location.
 However, generally, the reach to define “rural” should not
go to the extent larger urban settlements, since there will
be a danger of sucking most of financial resources by
those large urban settlements, leaving micro regions
remain underdeveloped

What is ‘rural’ and what is ‘urban’? Some
problematic definitions (Tacoli, 2004)
 The prevailing division between ‘urban’ and ‘rural’
policies is based on the assumption that the physical
distinction between the two areas is self-explanatory and
uncontroversial.
 However, there are three major problems with this view.
The first is that demographic and economic criteria used
to define what is ‘urban’ and what is ‘rural’ can vary
widely between nations, making generalisations
problematic

Variations in the definition of urban
centres
 Asia remains a predominantly ‘rural’ continent, with two-
thirds of its population living in rural areas in 1990.
 However, if both India and China were to change their
definition of urban centres to one based on a relatively
low population threshold of 2,000 or 2,500 inhabitants -
as used by many Latin American and European nations -
a large proportion of their population would change from
‘rural’ to ‘urban’.
 Given the fact that India and China have a high share of
Asia’s population, this in turn would significantly change
Asia’s level of urbanization - and even change the
world’s level of urbanization by a few percentage points

The definition of urban boundaries
 In Southeast Asia’s extended Metropolitan Regions,
agriculture, cottage industry, industrial estates, suburban
developments and other types of land use coexist side
by side in areas with a radius as large as 100 km, where
the high mobility of the population includes circular
migration and commuting.
 In sub-Saharan Africa, agriculture still prevails in peri-
urban areas, but there, as elsewhere, significant shifts in
land ownership and employment patterns are taking
place, often at the expense of both rural and urban poor
people.

cont
 In Manila’s extended metropolitan region, large swathes
of rice land have been converted into industrial,
residential and recreational uses.
 Alternatively, land may simply lie idle, with cattle grazing
on grassed-over rice fields whose owners await either
development permits or more propitious market
conditions.
 Although the 1988 Land Reform Law protects from
conversion lands eligible for redistribution from landlord
to tenant farmer, it has in fact accelerated the process of
land conversion.
 This is because landlords keen to avoid losing their land
have converted it to nonagricultural uses, and in many
cases tenant farmers have been evicted and the land left
idle.

The definition of the boundaries between ‘rural’
and ‘urban’ areas
 The urban residents and enterprises depend on an area
significantly larger than the built-up area for basic
resources and ecological functions.
 In general, the larger and the wealthier the city, the more
its industrial base and its wealthy consumers will draw on
such resources and ecological functions from beyond its
surrounding region.
 The concept of a city’s ecological footprint was developed
to quantify the land area on which any city’s inhabitants
depend for food, water and other renewable resources
such as fuelwood

Cont…
 The concept makes clear the dependence of any city on
the resources and ecological functions of an area
considerably larger than itself (although urban areas with
limited industrial bases and with most of their population
having low incomes will have much smaller and
generally more local ecological footprints than large and
prosperous cities)

The definition of “rural area”
for less and developed economies
 In developing countries, rural areas are locations where
primary agricultural activities take place characterized with
sparse population, poor social services, unemployment
and under utilization of resources and labour. IS IT
SOUND?
 In developed countries, rural areas are characterized with
medium and standard infrastructure, but the population is
low

Agriculture and industrial sector linkage
 Rural–urban linkages include flows of
agricultural and other commodities from
rural based producers to urban markets.
both for local consumers and for forwarding to
regional, national and international markets; and,
in the opposite direction, flows of manufactured
and imported goods from urban centres to rural
settlements

Cont…

They also include flows of people moving between rural and
urban settlements, either commuting on a regular basis, for
occasional visits to urban-based services and administrative
centres, or migrating temporarily or permanently.

Flows of information between rural and urban areas include
information on market mechanisms – from price fluctuations to
consumer preferences – and information on employment
opportunities for potential migrants.

Financial flows include, primarily, remittances from migrants to
relatives and communities in sending areas, and transfers such
as pensions to migrants returning to their rural homes, and also
investments and credit from urban-based institutions.

Cont…
 Specifically the linkage of rural and urban or agriculture
and industrial sectors depends on each other e.g. Supply
of labour and raw materials as well as markets

Goals of rural industrialization
 To increase local employment
 To achieve a more balanced economy
 To improve local tax base
 To utilize available local resources

Assumptions of the strategies of rural
industrialization
 The need to preempt rural to urban migration.
Urban based industrialization tends to be capital intensive
and cannot be expected to siphon off the rural backlog of
underemployed and unemployed
 The overall labour absorptive capacity of agriculture is
limited, although in some rural areas, the scope of
raising labour use in agriculture through traditional
irrigation facilities exists
 The agricultural-rural sector has to play a more active
role in the generation of non-agricultural employment
opportunities specifically in the small-scale industrial
sector

Categories of strategy of rural
industrialization

Linkage versus location

Importance of linkages

Sources of rural linkages

Mellor’s rural growth linkage

Rural growth linkage controversy

Linkage versus location
 The locational approach intends to encourage distribution of
industries from urban to rural so as to meet the objective of spatial
planning or industrial deconcentration.
 The linkage approach views it from the rural end, that is, whether
the activity generates any developmental links with the rurally
resident population or not.
 This implies a certain endogeniety in the process of growth of rural
industries.
 This approach is a strong policy instrument in an attempt to
deconsecrate industrial growth away from larger urban centres
through the growth pole strategy or industrial deconcentration policy.
 However, this strategy depends on the initiatives and capital from
rural domain.

Importance of linkages
 This category explains the concept of production
linkages as inducement mechanisms for
stimulating economic activity.
 In light of the concept, attention has to be drawn
into potential linkages that could be generated
by a fast growing agriculture.
 Of particular importance, emphasis should be
kept on expenditure linked multiplier effect of
growing agricultural incomes, viz consumption
linkages in generating rural based, small-scale,
labour intensive industries.

Sources of Rural linkages
 Any industrial activity, whether related to agriculture or
not, is linked to rural region through four types of
linkages. These are:

Backward production linkage effects

Forward production linkage effects

Consumption linkage effects

Capital and labour linkages

Backward production linkage effects
 These linkages focus on inputs, both intermediate and
capital goods, required by the unit which may be in the
nature of processing of a number of agricultural crops or
intermediates from other rural industrial units.
 The most advantage of rural based industry is its use of
locally available raw materials

Forward production linkage effects
 These refer to output utilization of the activity if it does not cater to
final demand.
 This could largely be in the nature of input requirements of
agriculture.
 However, this would depend on the nature of the agricultural
practices in use, the overall macro policy environment and the
prevailing agrarian structure.
 This provides a sense of notion that: use of fertilizers and other
chemical inputs as also heavy labour saving machinery results in
poor local multiplier effects (this discourages local responses as it
requires high capital for the acquisition of the inputs).
 On the other hand for example, increased irrigation facilities
including the use of engines and pumps for lifting water, new
varieties of seeds, mechanical threshers, a wide range of farm
implements and equipment, repair services and construction inputs,
generate larger linkages for local industries

Consumption linkage effects
 This effect, viz. the demand for consumer goods from both
agricultural as well as non-agricultural households.
 The linkage guides the investment of an industry, it has to consider
the level and distribution of rural incomes, since expenditure
patterns vary across different income classes.
 For example, in the lower deciles of the rural population an
overwhelming share of consumer expenditure is on agricultural
commodities. While, in successively higher income classes, the
proportion of expenditure on food grains declines sharply.
 Therefore, demand for nonfood grain agricultural commodities is
highly income elastic and hence the linkage effect generated by
such demand is particularly strong.

Capital and labour linkages
 One of the important linkages in the context of rural
industrialization is the utilization of local resources as
rural capital and underemployed and unemployed labour
from agricultural or other households.

Mellor’s rural growth linkages strategy
 Mellor’s framework explains an efficient technological change in
agriculture, which can lead to substantial indirect growth in non-farm
employment and incomes.
 This probably occurs partly due to an increase in the use of farm
input (Backward production linkage) as also processing,
transportation and marketing of increased agricultural output
(forward production linkage), but most importantly, from increases in
households expenditure on consumer goods and services as a
result of growth in agricultural incomes (consumption linkage).
 This induces investment in other sectors of the rural economy,
particularly rural manufacturing and services, mobilizing under
utilized labour resources, which in turn generate a demand for
agricultural output and so on, resulting in a virtuous circle of rural
development.
 The Mellor’s framework provides a simple path to a dynamic
process of rural industrialization.

Rural growth linkage controversy
 The linkage provides a controversy to rural industrialization, that
should not always depend on agricultural based raw materials.
 Growth in agricultural production and income do have an indirect
impact on rural non agricultural economic growth by rising the
demand for goods and services. For example through:
• The primacy of agricultural growth induces local non-farm
activities such as rural manufacturing
• Generation of non-farm activities basing on increased income,
lack of land, decline of crop productivity, having ample time,
and/or diversification of demands

Evolution of rural industrialization
 Lewis’s model
 Agriculture-industry linkage model
 Political economy framework (covering the
period from Physiocrats to Marx, i.e, 18th to late
19th century)
 Transformation of an agrarian, feudal economic
to capitalist, industrialized economic model
 Soviet heavy industrialization strategy model
 Mahalanobis economic development Model

Lewis’ Model
 A “labour Surplus model”.
• Lewis, in his model said that in order for the
developing countries to reduce poverty, they had to
transform the subsistence economies or rural
sector based economies or agricultural based
economies into modern sector based economies
or urban economies or industrialized economies.

 Two major sectors:
• Rural sector that consists of unemployed and
underutilized labour.
• Urban sector is of high productivity.

Agriculture-Industry Linkages Model

Under agriculture-industry linkages, their three
main linkages identified as historically played a
dynamic role in the process of industrialization of
the developed economies.
 According to Bharadwaj (1987), these linkages are:

The financing of industry;

The transfer of rural labour into industry; and

The creation of a home market for industrial
goods.

Physiocrat’s and Marx’s industrial
framework growth
 The expansion of non-agricultural activities has been viewed
primarily in terms of the changing relationship between agriculture
and industry
 Growth of division of labour and specialization in the process of
capitalist development
 Growth of technology and diversification of production in terms of
inputs and outputs
 Accumulation of surplus from agriculture through exploitation of
peasants and small craft men

Transformation of societies thinking
 Transformation of societies from primitive
to capitalist and/or communist societies
 Industries grew in small towns formed
during slavery and feudalism mode of
production

However
 Development is not just the matter of promotion
of industrial sector
 Agriculture still plays role in any economy as it:
• Supply raw materials, food, labour, market, etc.

Soviet heavy industrialization strategy
 Articulated intellectually by Preobrazhensky and
developed as the Soviet Planning model by Feldman
who was a precursor of Lewis’ model, though it
conceptualized more from Marxian lines
 Adopting the Marxian two department schema of a
capital goods sector (Department 1) and a consumption
goods sector (Department 2)
 However, such a rapid growth of heavy
industries raised the controversial issue of
“financing” of industrial growth

As a solution
 Preobrazhensky arguing that for extraction of the surplus
from agriculture to finance industrial growth is like
“primitive socialist” accumulation.
 This could be done administratively by holding down
agricultural prices or by imposing heavy indirect taxes on
industrial goods generally consumed by the
agriculturalists so as to force the peasants to part with
necessary agricultural surplus

TANZANIAN INDUSTRIALISATION

Periods of industrialization in Tanzania
 Germany colonization
 Between the wars
 Pre Uhuru class formation
 Post independency

Colonization
 Influenced style of industrialization in
Tanzania
• Essential function of a colony is production of
primary agricultural and mineral goods for
metropolitan industries and a virtually exclusive
market for manufactured goods from the colonial
power

Forms of agricultural production
 Turning of African peasant into commodity
producer for export market;
 Instituting large plantations, with some primary
industrial processing, employing large numbers
of African workers under European
management; and
 Smaller European settler farms employing
African labour

Example of style of industries in Uganda
 In Uganda, peasant cotton cultivation was encouraged,
and the relatively advanced Bugandan Feudal system
distorted by giving out free-hold land to kings and
different grades of chief down to the village chiefs.
 The chiefs then encouraged cotton production on their
land this led to tenants; own land.
 The settler-based cotton production system failed as the
peasants ignored turning into wage labour.
 This had led to British to accumulate more capital for
buying the peasants’ cotton under the British price
control. Thus, Uganda became a peasant production
colony

Industrial style of Kenya
 Kenya was deemed suitable for large scale European
settlement.
 About 8.5 million acres of suitable (fertile) land in Kenyan
highlands was alienated for African cultivators and
pastoralists to only 2000 settlers on 1500 farms.
 Labour was generated partly by force, partly by taxation
and partly by preventing access to enough land for
“peasantisation” i.e. to grow sufficient to sell to pay taxes

Industrial style in Tanzania
 Tanganyika it was never totally clear which of these
forms of production would be institutionalized.
 During the German period (1885 -1918) both settler
plantation and peasant commodity production was
begun.
 There was no preferential state support for either form.
The governor in 1907 summed up the needs of German
capital as follow:

 “The primary consideration is the delivery of raw
materials to Germany. Whether this can be
achieved through native agriculture or
plantation…. is of secondary importance… In
German East Africa (Aust deutch afrika) there
are social and political, but no economic
privileges for the European”

cont
 The first plantations experimented with tobacco and
cotton on the northern coast in the last 1880s.
 In the 1890s coffee plantations began and in 1898 sisal
production.
 Total German investment by 1918 was £26.5 million,
much higher than British investment in Kenya and
Uganda.
 Labour requirements increased rapidly from 6,000 in
1900 to 170,000 before the First World War amounting to
fully 28% of adult males.
 Whilst sisal and later tea and sugar were principally
plantation crops, cotton and coffee were mainly grown on
peasant plots

cont
 The combined effects of force and the market
were responsible for the gradual
commoditization of peasant production.
 The growth of peasant commodity production in
close proximity to the plantations meant that
wage labour for the settlers came less from the
neighboring peasantry than from distant regions.
 Regions like Kigoma, Tabora, and Singinda
were earmarked as labour reserve areas.

cont
 Migrant labour that existed during this period, was
allowed to grow food for their families.
 The migration of labour was during peak seasons that
required more labour to work in plantation, but during the
low seasons, the labour went back to their home
places/villages.
 Therefore, the plantation labour was not completely
proletarianised but continued to be involved to a certain
degree in peasant agriculture.
 The externally oriented cash crop economy gave rise to
a system of railways, roads and telecommunication
which stretched almost exclusively between the primary
produce generating areas in the interior and harbour
towns of Dar es Salaam and Tanga.

cont
 Railway and road transport workers, post and telecommunication
workers, and dockers formed a substantial section of the working
class next to the plantation workers
 To keep relations of production going and to extract both surplus
and exchange values, the colonial regime had to find ways of
instituting a two way trade:

first, to buy the cash crops from widely scattered
peasantry and resell them for export to metropolitan
capitalist countries;

second, to import cheap basic consumer goods from
abroad and sell them to the peasantry in distant parts in
the interior

Between the wars – non industrialization
 Peasant production for the market increased between
1918 and 1939 (Table 1).
 Industrial growth in Tanganyika between the wars was
minimal. Attempts to set up industries in this period
were always discouraged.
 E.g. A Japanese match factory set up in Tanganyika
failed after a heavy excise duty was instated for locally
produced matches.
 British manufacturers at that time, 1928, sold £1,400
worth of matches to Tanganyika per year.
 In early 1930s, a group of sisal interests set up three
factories to manufacture binder twine for export

cont
 Production increased rapidly from 750 tons in 1934 to
2,300 tons in 1936.
 The British rope, twine and net markets federation
reacted by complaining to the colonial office that “their
home (was) being menaced by the sale .. of binder twine
produced by the low paid African labour in Tanganyika”.
 The British government imposed a 100% duty on binder
twine.
 The heavy duty led to production of binder twine to
cease in 1938.

cont
 In Zanzibar, some local Asians proposed in 1924 the
setting up of an extraction factory from Zanzibar’s
cloves. But these cloves were normally shipped to
England where five British firms had a monopoly on
extraction. They arranged in Britain for the proposal to
be turned down.
 In cotton ginning also, Europeans were granted
monopolies in purchasing cotton. The Tanganyikan
Cotton Company (whose owners included several British
parliament members) helped squeeze out the small
Asian ginneries.
 The Abdurasul and Sons, closed their ginnery in 1939

cont
 Colonial policy and metropolitan interests were
thus served by discouraging any move towards
industrial processing or import substitution.
 All attempts to industrialize in this period were
seen as a threat to the metropolitan
bourgeoisie’s attempt to keep Tanganyika as a
source of raw materials and a market for
metropolitan manufactured goods

cont
 Industrialization in Tanzania was promoted by Asian
commercial bourgeoisie, compared to Kenya where
white settler group promoted.
 Asians were allowed to conduct trading as middle men,
but not African during colonialisation
 E.g. by 1931, 11 of the 29 cotton ginneries were owned
by Asians and by 1945, 15 out of 35.
 Asians also bought auctioned German sisal estates in
the 1920s. Karimjee Jivanjee and company, the largest
Tanganyikan Asian firm, bought sisal and coffee
plantations

cont
 By World War Two, Asians owned half the printing
presses, bakeries, all the jewelry industries, as well as
tailoring and shoemaking (small scale industries).
 But still they could not expand into large industries,
because of the colonial discouragement of
industrialization, and because of Kenyan and Ugandan
capital which was more highly developed.
 The small industrialization that did take place was based
almost always in Kenya, which came to dominate the
Tanganyikan economy

cont
 Introduction of the East African Customs Union which
was established in 1923 and expanded in 1927 to an
elimination of all inter Kenya, Uganda, Tanganyikan
Trade barriers.
 One reason for this was the need and pressure of the
Kenyan settlers for a protected market for luxury
agricultural products (such as dairy products and bacon)
through out East Africa.
 In 1939, Kenya’s industrial growth was higher than
Tanganyika.
 The then industries expanded on a level of producing
beer, soap, cement and canned fruits and vegetables,
while in Tanganyika, the only small scale pilot plants
were set up to manufacture paints, chemicals, bricks,
fibre board, tent dye and camphor.

Cont.
These industries were closed down
during the first world war.
Only flour mills and ghee and sugar
factories were set.
The Tanganyika’s needs were mostly
met by Kenya and Uganda.

READ
 The beginnings of industry and pre Uhuru
class formation
 International capital and Joint venture in
Tanzania
 Kampala agreement on industrialization in
East Africa
 Industrial ownership and growth in Tanzania

After independence
 the government of Tanganyika had a policy of
industrialization and tried to attract new investment
through tax incentives and guarantees against
nationalization.
 Just before independence the British government
invited the World Bank to send a mission to Tanganyika
and to make recommendations.
 It recommended expansion of export processing;
canned meat, wattle extract, cashew, sisal, rope,
coffee, desiccated coconut and start product based on
cassava.
 It also imposed some projects which were already
under way; beer, cigarettes, cement plant and textiles.

cont
 Further the bank recommended that the
much of the finance should come from
external sources.
 It also recommended the gradual growth of
an African business class to manage the
small and medium enterprises.
 The new government accepted most of the
proposals and included in its Five year plan
(1964 - 1969).

cont
 However, very little foreign capital came in
Tanganyika.
 Tasini Textiles was set up in 1961 by trading
companies.
 A large sugar factory (Kilombero had been
planned by the colonial government and set up
by the Commonwealth Development Corporation
(CDC).
 Michell Cotts built Tanganyika Extract to process
pyrethrum.
 Ugandan Asian companies opened Brewery in
Arusha and Sikh Saw Mills for plywood factory..
 .

cont
 Generally, it was a period of disappointment for the
Tanzanian government.
 International firms continued to invest in Kenya, and
Tanzanian’s trade deficit with its neighbours continued to
rise.
 Export from Kenya to Tanzania were three times larger than
Tanzanian’s export to Kenya in 1964.
 Tanzania’s import from Kenya was mostly manufactures
and its export to Kenya was mere primary products.
 As soon as Kenya became independence in 1963, the
Tanzania government asked for a meeting to equalize the
situation. An agreement was reached in Kampala in 1964,
which made Tanganyika more attractive to foreign capital

cont
 The tendency in the post independence period has been
towards a strengthening of the African national bourgeoisie
at the expense of the Asian Commercial bourgeoisie.
 This has occurred through a strengthening of it control
over the state apparatus.
 This had led to dramatic increase of state control over
Tanzanian economy and society, especially after the
Arusha Declaration, 1967.
 After the Arusha Declaration, the nationalization of banks,
insurance companies, plantations and some industries
was followed up by the setting up of the National
Development Corporation whose task was to start
parastatal enterprises including joint ventures with foreign
capital in the industrial, agro-industrial and commercial
sector.

International capital and Joint venture in
Tanzania
 The Kampala agreement urged that the cigarette, beer
footwear and cement industries in all three countries be
shifted so as to equalize production between Uganda,
Tanzania and Kenya.
 It also urged the allocation of some large industries to
one of the three countries in equal basis.
 Tanzania was given aluminum sheets and foils, tires
and tubes, and radio assembly.

Cont…
 International firms were eager to come in
Tanzania for investment but they needed
protection in terms of political and economic
structures.
 Some investments made by international firms
were :
• Tipper Tipper oil refinery (joint venture with Italians)
• A cement factory (joint venture with Portland Cement and
Cementia Holdings of Zurich).
• Mwanza textile mills, in 1966, joint venture project (by
Tanzanian government and Private French company
Amental)
• Philips set up a plant for radio assembly
• Etc.

Industrial development in Tanzania
since independence
 The structure of industry: The structure of industry
had evolved along two main fronts.
 First, the need to process primary products for export
either to increase the value added or to reduce their
weight.
 Second, the move to carry out import substitution in
response to growth and pattern of domestic market
(consumer goods).

Goals, objectives and strategies:
1961 - 1967
 At independence three year plan was launched (1961-
1964).
 The plan articulated some important issues that were
set to encourage investments in industrial sector:
Such issues are:

Creating favourable conditions to attract foreign
capital..

Call for East African Countries meeting for discussing
matters concerned with industrial development
especially the creation of equal balance in industrial
development to avoid overshadowing by Kenya..

1964 - 1969
 A First Five Year plan (1964-69) for industrial
development was launched.
 The plan had no different objectives from the other TYP
(1961-64).
 The plan had identified constraints to industrial
development in the country. These constraints were
mainly lack of capital and small size of market.
 The market constraint was tackled by changing the rules
of East African Common Market through allowing
introduction of tax transfer system for protecting
industries from less developed partners.
 Setting up licensing procedure which reserved each of
the partner states the specific industries which
depended on the entire regional market was also used
to solve market constraint.

cont
 The FFYP (1964-69) stated the following broad
perspective objectives:
• To raise per capita income from Tshs 392
to Tshs 900 by 1980 (One USD ~ 5 Tshs)
• To be fully self-sufficient in trained
manpower by 1980
• To raise the life expectancy from 35 – 40
to 50 years by 1980

cont
 Although, the FFYP (1964-69) proposed a
wider range of industrial investments along the
policy of import substitution, it remained silent
on the significance of the product-mix, specific
ownership patterns, choice of technology,
linkage effects, external economies and
structural transformation.
 However, during the period, industrial
development was impressive by increasing
about 50% in manufacturing sector.
 The share of industrial sector to nation was
increased from 4% to 7.5% (Skarstein and
Wangwwe, 1986).

post 1967
 In the post 1967 period the goals, objectives and
strategies of industrial development can be
categorized into two strands.
 First, is the period between 1967 and 1974 when
Arusha Declaration took effect and how this impact
was expressed in the Second Five Year Plan (1969-
1974)
 Second, is the period in which the long term industrial
strategy (1975 - 95).

The Arusha Declaration and Second
Five Year Plan
 The Arusha Declaration charted a new course of
development, in which it contained two principles
namely socialism and self-reliance.
 It concentrated much on ownership of means of
production and democracy.
 The major means of production and exchange
were identified as land, forests, minerals, water, oil
and electricity, news, media, communications,
banking and insurance, export-import trade, whole
sale trade and major industries.

cont
 Within industry, the major means of
production were identified as iron,
machine-tool, automobile, cement,
fertiliser, textile and any other big
factory on which large section of
population depended on their living or
that which provide essential
components for other industries.
 Large plantations were also considered
as means of production.

cont
 Under the Arusha Declaration, issues of
industrial activities were not set clear.
 The major industries were owned by the public.
 The foreign investment could not act as a
principal agent of industrial investment, but
instead it should be in joint venture with
government of Tanzania.
 Further, the Arusha Declaration brought in the
issue of creating employment and equity for
interpersonal and interregional.

cont
 The second Five Year plan (1969 -1974) reflected the
impact of the Arusha Declaration.
 On the ownership of the industry the SFYP (1969-74)
came out with arguments explicitly in favour of the
expansion of the public sector and elaborated on the
need to consolidate the institutional foundations for
socialist development.
 As a reflection of the Arusha Declaration, especially
equity objective, the SFYP (1969-74) explicitly
mentioned the link between industrial development and
rural development, it gave a place for the development
of small scale industries.

cont
 Establishment of parastatal known as SIDO (the Small
Industries Development Organisation) in 1973 was a
reflection of the thrust to assist and promote small-
scale industries.
 The SFYP also provided for the decentralisation of
industry whereby nine growth towns (Dar es Salaam
was not included) were identified for purpose of
implementing the decentralised industrial development.
 The product-mix was also proposed in the SFYP. It was
proposed that manufacture in export products should
be increased and that the range of manufactured
products be increased to include not only consumer
goods but also intermediate and capital goods.

cont
 The issue of product mix led to
formulation of long term plan, which is
known as Long Term Industrial Strategy
(LTIS). Actually, without it, the Third Five
Year Plan (1975-81) was expected.

Long Term Industrial Strategy:
1975-95
 The long term industrial strategy (LTIS) (1975-1995) took into
account the national goals. In this context seven national goals
were identified. These goals are:

Industrial growth: This refers to the rate at which industry’s
contribution to GDP could be achieved.

Structural changes: this entails change in existing structure
of the economy

Employment generation: industrial development is expected
to create jobs thus absorbing an increasing share of the
labour force with a view not only to curbing urban
unemployment but also employing those who would
otherwise be underemployed in agriculture

Increased equality of income distribution: the objective of
increasing the equality in income and wealth distribution
among individuals and families etc.

Cont…
 Increased equality of regional development: Optimal
allocation of industry is related both to economic and
social factors. However, it is also notable that there is
a wide range of “footloose” industries which can be
located in a variety of places without involving much
cost.
 Worker participation in industry: the party guidelines of
1971 specifically encouraged increased workers’
participation in decision making at their working
places.
 Increased self-reliance: This goal emanating from
Arusha Declaration is taken to mean reduced
dependence on outside world specifically with respect
of world trade, foreign technology, foreign capital and
foreign expertise.

RD 207-Rural industrialisation_114715-2.pptx

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