PREFACEThis report presents the outcome of a review of the Reform Design Phase of the“Property and Business Formalisation Programme” in Tanzania, in Swahili known asMkurabita (Mpango wa Kurasimisha Rasilimali na Biashara Tanzania). In conductingthe review, the review team enjoyed valuable contributions from a number ofstakeholders to the programme only to mention a few;The management and staff of the Programme Management Unit (PMU) for Mkurabitaat the President’s Office provided extensive support and made available detailedinformation and background to phase II of the programme, as well as the draft ReformDesign Programme proposal which was the main focus for the review. The study teamalso were granted additional inputs and contributions by the Institute of Liberty andDemocracy (ILD) in Peru which has been serving as the main advisor to theMkurabita team in Tanzania during the reform design phase.Both the PMU and the Royal Norwegian Embassy in Tanzania assisted in puttingtogether a comprehensive programme, provided logistical support and valuableprofessional inputs to the review process. In addition the team was providedprofessional inputs and a lot of information from consultations with numerous publicinstitutions, researchers, None-governmental-organisations (NGOs) and othersfamiliar with past and current processes related to “formalisation” of business andproperty rights.The President Office and Norad contracted a team of four professionals to jointlyconduct the review. The findings and conclusions from this review represent those ofthe team consisting of Mr Jens Claussen, Nordic Consulting Group, Norway, servingas the team leader, Professor Stein Terje Holden from the University of Life Sciences,Norway, Professor Florens Dominic Luoga, University of Dar es Salaam andProfessor Joseph Semboja, Repoa, Tanzania.

REVIEW OF REFORM PROPOSAL ......................................................................................235.15.25.35.45.55.6THE PROGRAMME LOGIC......................................................................................................23ALIGNMENT TO NATIONAL POLICIES AND STRATEGIES.........................................................24EMPOWERMENT OFPOOR ANDVULNERABLEGROUPS.........................................................27REVIEW OF PROPOSED LEGAL REFORMS...............................................................................32REFORM PROPOSAL VERSUS OTHER INTERVENTIONS............................................................35STAKEHOLDER INVOLVEMENT IN REFORM DESIGN...............................................................38

1. EXECUTIVE SUMMARY1.1 IntroductionThe Property and Business Formalisation Programme (PBFP) known asMKURABITA in Kiswahili (Mpango wa Kurasimisha Rasilimali na Biashara zaWanyonge Tanzania) is an initiative of the Government of the United Republic ofTanzania assisted by the Institute of Liberty and Democracy (ILD), Peru. The mainpurpose of the programme is to empower the poor majority in the population inTanzania by increasing their access to formal financial markets and other services byformalisation of their property rights and businesses.In October 2004 the Government of Tanzania and Norway signed a grant agreementof 7 million USD to finance the Diagnosis Phase and the Reform Design ofMKURABITA. The grant included support for a consultancy agreement between theGovernment of Tanzania and ILD who has provided professional services to theProgramme Management Unit (PMU) under the President’s Office in charge ofimplementing the first two phases of the programme.In 2005, after finalising the diagnostic study, MKURABITA was subject to anexternal review commissioned by the President Office of Tanzania and the NorwegianAgency for Development Cooperation (Norad). One of the main recommendationsfrom this review was to apply a more inclusive approach in implementation to createmore local awareness, ownership and support, and to also consider other programmeswhich in total address the same issues as MKURBITA.A midterm review was conducted in December 20061which focussed on the progressto date in the reform design phase (phase II) following the diagnostic study. The pointof departure for this review was a work-plan and a comprehensive progress reportproduced by the PMU in November 2006. It made a follow up to therecommendations from the 2005 review with further emphasis on Tanzanianownership and stakeholder involvement in the entire MKURABITA process.This report presents the finding and recommendations from the third review ofMKURABITA undertaken in February 2008. The focus of the review has been on theprocess and content of the draft reform proposal which was made available to thereview team at the inception of the review. It is important to state that the reformproposal presented was a preliminary draft. It also means that some of the tasks in thework-plan have yet to be completed and services under the ILD contract still remain.However, hopefully the timing if this review gives the Local Reform Design Team(LRDT) within the PMU a better opportunity to reflect on the findings andrecommendations and incorporate them in the reform programme as they see relevant.

1.2 Main findingsThe ultimate goal of MKURABITA is to empower the target groups and individuals,especially in the informal sector (by MKURABITA labelled “extralegal”), so thatthey can participate effectively in the formal market economy. It is based on theassumption that formalisation leads to growth in wealth and employmentopportunities since property holders and businesses are then given access to financialand other services only available to owners of formalised property and businesses.The above logic is reflected throughout the programme proposal, a verycomprehensive reform proposal which include drafting of new laws, amendments andregulations, several capacity building measures at central and local government levelsas well as development of support systems with nation wide outreach. Theprogramme proposal is a result of a major effort by the PMU and its LRDT in thedriver’s seat supported by ILD guided by a new revised consultancy agreementreflecting the recommendations from previous reviews to promote greaterinvolvement by Tanzanian professionals to ensure ownership and sustainability of theprocess. This change is in compliance withthe decisions made during their SecondAnnual Meeting by the Governments of Tanzania and Norway.

Building on the main findings from the diagnostic phase, the reform programmecontains many new elements and activities complementing ongoing reformsimplemented by Government ministries, agencies and donor supported programmes.Many of them, if implemented, will reduce barriers and remove unnecessaryprocedures which create prohibitive or discouraging opportunity costs forformalisation. As such, the programme focus to a large extent on initiatives aimed atreducing regulatory and administrative barriers to formalisation although it alsocontains initiatives aimed at increasing services to business.The main challenges for the programme relates to the process in which it wasdeveloped and the overall programme logic which has impact on the structure andproposed implementation arrangements. These challenges are addressed below.Progress in reform design phaseThe PMU has made a significant effort in producing a comprehensive and ambitiousreform proposal. It has undertaken most of the tasks planned in the work-plan. Themain tasks to be undertaken as per work-plan were to:-Draft reform packages;-Prepare institutional arrangement for formalisation;-Develop and implement a communication strategy;-Pilot and implement front runners and evaluation of proposed reforms;-Design, draft and approve legal reforms.Of the above main tasks the draft reform programme presented indicates that the firsttask is close to completion but some major additional work may be required assuggested in our findings below. A proposal for an institutional arrangement is2

enclosed to the reform programme and is further discussed in sections below. Aconsultant has been contracted to produce an inception report relating to this task.Some pilots have been undertaken and one pilot is still ongoing in Bagamoyo. Finally,draft legal reforms have been produced and annexed to the reform proposal.In total it means that the timeline suggested by the work-plan may be met althoughthis review recommends substantially more efforts to adjust and refine the proposalthrough a process which ensures active participation of those government ministriesand agencies which will implement them.Process of designing the programmeThe process of designing the programme which also has had impact on the productwas constrained by the fact that LRDT embarked upon the tasks of developing itbefore the PMU had put in place the enabling infrastructure. The Orientationdocument that was issued to members of the LRDT did not explain the concept ofconvergence analysis. As a result the LRDT embarked upon its tasks with aconceptual background that is not holistic. Consequently what is lacking in the reformpackages is the application of the convergence analysis in designing the reforms, anissue recommended by previous reviewers and the meetings between theGovernments of Tanzania and Norway.The other enabling infrastructure included the Reference Groups that was to serve asresounding boards to the LRDT to guide the design process. The groups were neveroperational and the design work have thus not benefited from peer reviews byReference Groups.There was no communication strategy to guide the process allowing it to be informedby participation of stakeholders and other reform implementing institutions. TheLRDT therefore found itself having to proceed by way of workshops to consult withstakeholders and members of the public. The process has been participatory in thesense that relevant government institutions have been informed of the process(through workshops, individual consultations and participation in Steering Committeemeetings). The main participation by stakeholders in the process has been by somecivil society organisations monitoring the implementation of one of the pilot studies.However, the institutions that will eventually implement the reforms have not activelyparticipated in formulating the reform “packages”.This lack of participation in the actual design process will become a major challengefor the Government in ensuring ownership among the relevant institutions. It has alsomeant a lost opportunity in ensuring that proposals made are realistic and can beimplemented in the time frame indicated. As an illustration, while the programmeproposal includes draft Bills and proposed amendments to existing Acts, none of themain institutions mandated by the legislation or involved in drafting and presentingBills to the Parliament have actually been involved in drafting them. The need formany of them may be questioned and some define new types of legal entities whichrequire additional amendments in existing Acts.Lessons from the pilots indicate that a lot more information is required for design of amodel for formalisation which can be replicated based on qualified information onactual outcomes and impact of different approaches. In fact little is still known on the

actual demand for formalisation and whether formalisation is the binding constraintfor growth in income and employment opportunities. However, the programmedocument still suggests that the reforms proposed should be implemented as designedand followed by “massive formalisation. In other sections of this report somerecommended approaches to formalisation are presented based on expereince fromother countries which suggest a gradual and informed approach.Programme logicThe overall goal of the programme is to promote poverty alleviation throughformalisation. The programme objective and justification falls within the PovertyReduction Strategies of the Government (MKUKUTA and MKUZA). However, thereis no evidence to suggest that the nation-wide formalisation the programme attemptsto achieve will promote poverty alleviation. Only few studies in urban and peri-urbanareas support this logic in which it predominantly relates to land security in highpopulation growth areas. It suggests that a formalisation strategy should bedemanddrivenand focus on those areas in which there are high demand (areas of observedconflict over property, areas with significant outside investor interests and mediumscale business) rather than a “supply driven approach” focusing on how to formalisethe economy.Land is an immobile asset and land markets (rental and sales markets) emerge onlywhere land is scarce but even in such locations land markets are characterised byhaving substantial transaction costs. It means the focus should be on how to reducetransaction costs and information asymmetries in the economy. Reduction oftransaction costs and information asymmetries will lead to better market access, alsofor the poor, whether they operate in the formal or in the informal economy.Land reforms may help to reduce transaction costs and enhance the functioning ofland markets with potential benefits to sellers and buyers, landlords and tenants.Recent research on land markets in Africa has documented that land rental marketsmay be particularly important for poor households, while land sales markets to a lessextent benefit the poor, who are typically unable to buy land. The potential role ofland rental markets to provide a livelihood for poor land-scarce households has notbeen addressed in MKURABITA.Like many other countries, Tanzania suffers from cumbersome and sometimesprohibitive procedures for formalisation of those entities that require licensing,registration or other government regulatory services to access formal financial andother markets. These are in most cases not among “the poor and vulnerable groups”.Based on the above this review suggests a change in the programme logicalframework. A more relevant objective for MKURABITA would be to reducetransaction costs and information asymmetries of formalisation rather than opt formassive formalisation through proactive awareness campaigns based on a notion thatit will lead to poverty reduction; an assumption for which there is limited evidence.The above is also based on the recognition that formalisation is agradual processthatdoes not involve moving from one fixed state to another and that demand forformalisationincrease with growthof the economywhich reduces incidence of

poverty,not the other way around, i.e. that formalisationleads to growth and reducedincidence of poverty.A major weakness of reform proposal is that it builds on strong assumptions for whichthere is limited evidence; i.e. more efforts are needed to test if these assumptions holdin the case of Tanzania. Two of these strong assumptions are:1) After land titling land can be used as collateral to obtain loans and thisassumption is also used as a basis for recommending rural land registrationand certification of individual land holdings.2) Land titling will increase the market value of land substantially implying thatit is assumed that well-functioning markets for land will develop after landtitling, also in rural areas.Accordingly it is recommended carry out baseline studies and follow-up surveys inthe locations where pilot experiments were introduced. What is required is a carefulimpact assessment satisfying the requirements of a comprehensive impact assessmentmethodology. A short term evaluation that is planned at the end of the design phase ofthe project is not likely to yield much of additional insights beyond what is foundthrough this review while a comprehensive survey would. The research would includean assessment of the impacts on different groups of society.Programme contentThe Programme, although comprehensive, will require changes to ensure internalconsistency in its programme structure and to complement rather than substituteongoing reforms. As MKURABITA recognises, formalising business and propertyrights by changing legal procedures and registration systems do not alone ensure thatformalised assets can be transacted in a market. Thus it also points to issues like taxreforms and changes in the financial sector. However, it needs to reflect ifMKURABITA is to focus on “initiatives aimed at increasing services to business”and/or “initiatives aimed at reducing regulatory and administrative barriers toformalisation”. It is only the latter that has been subject for the diagnostic study andthere is in general limited information on outcomes from the former. Accordingly, theprogramme should focus on the latter rather than also include the former.Another issue that needs to be resolved is whether MKURABITA is a programmeincluding all ongoing reforms or if it only focuses on gaps not currently covered byother reforms. A review of the proposal suggests that it is something in between. Thisfinding reflects the main challenge in the process of designing the reforms, i.e. toensure participation by the other relevant government agencies in actual design ofreform packages assuming these agencies are to implement the proposed reforms.The above is also linked to another design issue, i.e. the identification of who is toimplement the reforms. When presenting the reform proposal it will be of importanceto have identified who will be in charge of implementing the legal and proceduralchanges, who will provide what capacity building measures and who will develop thesupport systems. As indicated in the reform proposal many ongoing programmes arealready addressing the issues presented and undertakes the activities listed in theprogramme. However, prioritizing and sequencing them, and determining who will be

undertaking the additional needed interventions, are among the challenges theprogramme now faces if it is to serve as an operational instrument to guide therevision and implementation of ongoing programmes.The latter will require a consultative process with those ministries and agenciesidentified to facilitate adjustments of existing programmes to include the additionalactivities identified. This will require substantial time and effort since most of themhave not actively participated in the formulation of the reform “packages”. The likelyoutcome of such a process will be a “reformed” reform proposal.Implementation arrangementsThe Reform Programme document and the diagnostics report point to a need for anational level organization with sufficient mandate to supervise the formalisationprocesses, conduct studies required to put in context the challenges and providepermanent overall monitoring and oversight functions. The Programme Proposalintroduces a high level “Commission” as the legal entity to serve these purposes.The issue of implementation arrangement is linked to the issue of what theprogramme is, if it is a complementary or comprehensive programme that includesongoing reforms, if the reform “packages” then are to be “handed over” to relevantagencies and institutions, and if there is a need for additional institutionalarrangements to effectively implement them.Since the reforms are wide reaching and cross-sector, it will require an arrangementfor oversight, consultations and coordination, in particular related to monitoringprogress in all areas. It could be subject for debate if this function is best performedby an “Inter-ministerial” committee rather than a higher level “Commission”. In anyevent, it will require a function in the form of a secretariat to support the process. Thiscould be a unit within the President’s Office rather than a “political autonomous”entity (“Commission”) outside. The Programme is to reflect a policy promoted by thepolitical leadership. This stands in contrast to the proposal of establishing an“apolitical” entity.The secretariat would need to be staffed and funded to contract research and studiesrelated to the implementation outcomes and impact for the target group of pilots toinform the implementing ministries and agencies for the purpose of adjustingapproaches and reforms. It means that the entity will be a coordinator and serviceprovider for the implementing agencies rather than a decision maker and overseer ofreforms. The question remains if this is a different role than what another entityestablished for the same purpose, BEST, is undertaking today.

as a validation process with the main stakeholders like BEST, BRELA,Ministry of Lands, Ministry of Industries, Ministry of Local Government andRegional Administration and Adrhi Institute at the University of Dar esSalaam to mention a few of the most relevant institutions. Additional externalfunding may be required for undertaking such a process..•The Programme logic should be reviewed and possibly revised to take intoaccount the findings presented in this review. A more achievable operationalobjective for the Programme would be “reduction of current regulatory andadministrative barriers to formalisation” rather than poverty reduction which isa much wider scope that entails multiple sectors and interventions far beyondthose related to formalisation.•In the presentation of the Programme it should be made clear if MKURABITAis a programme including all ongoing reforms or if it only focuses on gaps notcurrently undertaken by other reforms. Furthermore, it should includesequencing of them and who will be undertaking additional activitiesidentified as needed interventions will be required if the programme is to serveas an operational instrument to guide the revision and implementation ofongoing programmes.•The Programme should also include an additional presentation of reformsalong a different set of dimensions i.e. required legal and procedural reforms,institutional and capacity building measures, and development of supportsystems.•The approach presented in the Programme includes promotion of “massiveformalisation”. However, there is no evidence to suggest that formalisation isa driver for growth in income and employment and certainly not for all entitiesand target groups in a diverse informal sector economy as the case is inTanzania. Accordingly, the suggested approach should be revisited and priorto designing a specific formalisation approach several new pilots andformative research should be undertaken to make informed decisions on whatapproach to chose for different markets, target groups and areas.•It also suggest that the Programme should be revised to consider a demanddriven approach to formalisation and targeting those areas and communitieswhere costs of complying with regulations will be less then the benefits.•The Programme should also reflect the fact that formalisation is a continuum;that entities, target groups and areas differ and so do their requirement forformalisation as well as degree of formalisation. The above suggest that theapproach should be gradual, that the process is informed by continued surveysand research on the developments. The above recommended process ofrevising the proposal may require additional external funding to assist thePMU in a programme reformulation exercise.•The question of then establishing a new entity or not will be dependent amongothers, on the outcome of the above. Accordingly, it is in our view too early todecide on whether the existing ministries and entities are the ones that should

2. SCOPE OF REVIEWThe main purpose of the review presented in this report was to assess the process ofimplementing the reform design phase (phase II) of MKURABITA as well as theoutcome of the process; i.e. the reform programme proposal (ref. Terms of Referencein annex I). The main output of phase II at the time of the review was a draft reformprogramme presented to the team when commencing their one week joint team workin Dar es Salaam 4thFebruary 2008. In addition to the report, work-plans and progressreports as well as other documentation related among others to the implementation ofpilot projects in three areas were made available.As per terms of reference the specific tasks of the review was to:-Review the changes made in the Consultancy Agreement between theGovernment of Tanzania and ILD.-Review progress made in implementing the approved work plan of theReforms Design phase.-Assess degree of alignment of reform to the poverty reductionstrategies of mainland Tanzania and Zanzibar (MKUKUTA andMKUZA) as well as other policies, strategies and programmes inrelevant sectors.-Review the extent to which key stakeholders have been involved in theReform Design processes.-Assess the extent to which the reform proposal has addressedempowerment of the poor and vulnerable groups.-Compare the reform proposal with other similar reforms in the Regionand internationally.-Based on the findings of the above provide advise on the modality ofReforms, time frame and resources requirements and present anopinion on the proposed implementation arrangements.The above has been translated into the following main tasks which are also reflectedin the structure of this report;-To assess process and progress made in designing the reformprogramme.-To assess the content of proposed reform programme.-To compare the reform programme and lessons learned from pilotsundertaken with regional and international experiences from similarprogrammes.

-To asses the proposed institutional arrangement for implementing it.The review was jointly commissioned by the President Office of Tanzania and theNorad, who contracted a team of four professionals through individual contracts toconduct the review. The team consisted of Mr Jens Claussen, Nordic ConsultingGroup, Norway, serving as the team leader, Professor Joseph Semboja, Repoa,Tanzania, Professor Florens Dominic Luoga and Professor Stein Terje Holden fromthe University of Life Sciences, Norway.The review included a one week mission in Tanzania in February 2008, where the fullteam had opportunities to consult with the Programme Management Unit (PMU) ofthe MKURABITA under the President’s Office, various government officials linkedto formalisation issues in Tanzania, researchers and other resource persons who hasconducted research and studies on the issue of “formalisation”, representatives of thebusiness community and civil society organisations, programme management ofreform programmes and other interventions linked to the “formalisation agenda”.

3. BACKGROUND AND OVERVIEW OF PROGRAMMEPBFP or MKURABITA (as it is known in Kiswahili) is an initiative of theGovernment of the United Republic of Tanzania supported by ILD. The main purposeof the programme is to empower the poor majority in the population in Tanzania byincreasing their access to finance and other services by formalisation of their propertyrights and businesses. Formalisation of their property rights and businesses isassumed to give the their properties and businesses protection under a national legalframework as well as allow them access to markets and services currently onlyavailable to larger scale formalised business and property holders.MKURABITA was conceived within the National Strategy for Growth and Reductionof Poverty (MKUKUTA for Tanzania mainland and MKUZA for Zanzibar). Theprogramme seeks to facilitate transformation of property and business entities in theinformal sector, into legally held and formally operated entities in the formal sector ofthe economy.MKURABITA targets property and business owners in the informal sector, whoseentry into the formal market economy is assumed to enhance their opportunities byusing their assets to access capital and thus improve national economic growth andreduce individual household poverty.The ultimate goal of MKURABITA is to empower the target groups and individuals,especially in the informal sector, so that they can participate effectively in the formalmarket economy. The national property and business framework developed by theprogramme is intended to enable economic policies and supporting mechanisms suchas monetary and fiscal stimuli to actually benefit the majority once most peopleoperate under a national legal framework rather than in the informal markets (in theMKURABITA terminology defined as “extralegal activity”). In this way the proposedreforms are intended to safeguard the economic interests of the majority of the peopleof Tanzania.The following are the specific objectives of the Programme:-To build an architecture of property and business rules that will bringtogether, standardise, and modernise the prevailing local customaryarrangements dispersed throughout the country, so as to create oneTanzanian property and business legal system that incorporates all sectors ofthe society.-To foster national integration by enabling the government to bring theinformal sector into the legal system in order to govern the Nation's marketactivities more effectively.-To ensure that assets of the poor, which are held and exchanged outside theexisting legal system, are adequately documented and standardised intouniversally accepted property records that can be used to create liquidity.

-To develop means to achieve broad-based support for change, for bothtraditional community leaders and the poor, towards a national propertyframework that can help realise the potential of a modern market economy.-To enable overall economic policies and supporting mechanisms such asmonetary and fiscal stimuli, to actually work once most people are inside thelegal market economy.-To safeguard the economic interests of the poor majority of the people ofTanzania from adverse impacts of globalisationThe main outcome of the first phase has been a report from the diagnostic study. TheReform Design phase (phase II) has focussed on developing a comprehensive reformproposal using the outcome of the Diagnostic Phase (Phase I) as a point of departure.It is the reform proposal which is the main focus for this review.In February 2003 the concept "Formalisation on Property Rights" was presented to theTanzanian Parliament in Dodoma. This event was later on followed by a dialoguebetween the President of Tanzania and the Minister of Development Cooperation inNorway on this issue. As a result of the dialogue, a workshop financed by theGovernment of Norway to present the agenda for a formalisation programme inTanzania was held in Dar es Salaam in September 2003.As a follow up to the workshop, the Government of Norway signed an agreement in2003 with the Government of Tanzania to finance the Planning Phase of a “Propertyand Business Formalisation Programme” (PBFP). The Grant was earmarked toprogramme design activities with an approximately 0.5 million USD in contributionsfrom Norway to the preparation stages. The planning phase led to a programmeproposal described in a programme document2.In March 2004 the Government of Tanzania requested the Government of Norway3for grant assistance of 7 million USD to finance the Diagnosis Phase and the ReformDesign of the PBFP as described in the programme document. Following an appraisalof the programme proposal commissioned by the Norwegian Agency forDevelopment Cooperation (Norad)4, the Government of Norway and the Governmentof Tanzania signed a financing agreement in October 2004. The same programmedocument also provided the basis for the consultancy agreement between theGovernment of Tanzania and the ILD, which was signed in November 2004.According to this agreement, ILD is to provide professional services as described inthe Terms of Reference annexed to the agreement.

In 2005, after finalising the diagnostic study, it was subject for an external reviewcommissioned by President Office of Tanzania and Norad5. The mainrecommendations from this review can be summarised into the following:-Apply a more inclusive approach in implementation as a means of creatingmore local awareness, ownership and support. It will create a betterunderstanding of the key findings and required actions.-Take into consideration other programmes6(BEST, SPILL, LGRP, etc.)which in total address the same issues as MKURBITA.-When selecting actions take into consideration actual capacity to implementthem and allow sufficient time to ensure that they are fully understood byrelevant stakeholders and can be sustained by them.-Distinguish between legal, institutional and procedural constraints versusother binding constraints (tax, financial sector, etc.), i.e. when selectingareas of change take into consideration that legal and procedural issuesaddressed by MKURABITA may not alone to achieve desired objectives.-In choosing reform interventions assess possible distributional effects toensure widest possible benefits of actions chosen i.e. who will benefit andhow.These recommendations have to some extent been taken into consideration in thedesign of the reforms and will be addressed further in the following sections assessingthe reform proposal.A midterm review was conducted in December 20067which focussed on the progressto date in the reform design phase (phase II) following the diagnostic study. The pointof departure for this review was a work-plan and a comprehensive progress reportproduced by the PMU in November 2006. It made a follow up to therecommendations from the review of the diagnostic phase but with particularemphasis on process more than content of reforms since the latter was still at an earlystage of being designed. The main recommendations from this review were thefollowing;-There is greater need for Tanzanian ownership and stakeholderinvolvement in the entire MKURABITA process which is not yet wellknown or understood in Tanzania.

4. THE PROCESS OF DESIGNING THE REFORMS4.1 Progress in implementing the work planThe PMU has made a significant effort in producing a comprehensive and ambitiousreform proposal. It has undertaken most of the tasks planned in the work-plan andmay be able to complete all of them within the planned time frame with some fewexceptions. There are, however several challenges a head, both related to process indeveloping the programme, related to the structure and content of proposed reforms aswell as proposed implementation arrangement.As part of a change in the approach of moving the main tasks in formulation of theprogramme, a Local Reform Design Team (LRDT) was recruited and commenced itswork in July 2007. According to the terms of reference for the LRDT they have beentasked to:-Draft reform packages;-Prepare institutional arrangement for formalisation;-Develop and implement a communication strategy;-Pilot and implement front runners and evaluation of proposed reforms;-Design, draft and approve legal reforms.In total the above constitutes the main tasks of the Work-Plan for the remaining partof the reform design phase as agreed to in the last annual review meeting between theGovernment’s of Tanzania and Norway.The above tasks are envisaged to be completed by March 2008 with the deliverablesdescribed below;Draft Reform Packages- These have been developed with drafts of:-Detailed Property and Business Reform Proposals (January 23, 2008)-Legal and Institutional Reform Outlines and Packages (December 31, 2007)Institutional Arrangement for Formalisation- This has also been developed with thedraft write-up of the “Institutional Arrangements for the Implementation of theFormalisation Programme” together with a “Draft Bill for an Act to Establish aCommission” appended to the “Legal and Institutional Reform Outlines andPackages” referred to above.Communication Strategy- According to the PMU Progress Report a consultant hasalready been engaged to develop a communication strategy for the programme and anInception Report has been submitted for consideration by the PMU.

Pilot and Implement Front Runners and Evaluation of Proposed Reforms- two Pilotshave been implemented. An earlier pilot at Handeni was implemented before theLRDT was appointed. For each of the pilots some reports have been produced amongothers from NGOs observing the process (ref. sections below describing the pilots inmore detail) like the reports from the Legal and Human Rights Committee (LHRC),the Ministry of Lands, Housing and Human Settlement Development (MLHHSD) andOxfam Tanzania. Currently a pilot is under implementation in Bagamoyo.Design and Draft of Legal Reforms- The LRDT has drafted extensive legal reformsthrough the document labelled “Institutional Arrangements for the Implementation ofthe Formalisation Programme”. It involves proposed amendments to more than 70pieces of legislation. Among others the LRDT has drafted the following Bills;-A Draft Bill for an Act to Establish a Commission-A Bill for an Act to Amend Certain Written Laws (Annex 1), containingproposed amendments to:(i)The Land Act(ii)The Land Courts (Dispute Settlement) Act(iii) The Survey Act(iv)The urban Planning Act(v)The Village Land Act-A Bill for an Act to Amend Certain written Laws (Annex 4), containingproposed amendments to:(i)The land adjudication Act(ii)The land Tenure Act(iii) The land Survey Act(iv)The Registered Land Act(v)The land Transfer Act-A Draft Bill for an Act to Provide for the Establishment and Administrationof Limited Liability Partnerships (LLPs) and to Provide for Other RelatedMatters in Tanzania Mainland (Annex 9).-A Draft Bill for an Act to Provide for the Amendments of Certain WrittenLaws for the Purposes of Introducing Limited liability Single ShareholderCompanies (LLSSCs) in Tanzania Mainland (Annex 7), containingproposed amendments to;(i)The Companies Act(ii)The Business Names (Registration) Act(iii) The Business Activities Registration Act-A Draft Bill for Miscellaneous Amendment Act 2008 of Zanzibar (Annex11).-A Draft Bill for an Act to Provide for the Establishment and Administrationof Limited Liability Partnerships (LLPs) and to Provide for Other RelatedMatters in Zanzibar (Annex 12).-Draft Regulations for a Bill for miscellaneous Employment Act (Annex 13).-Draft Regulations for Effecting the Formation of Single ShareholderCompanies in Tanzania Mainland (Annex 10).-Draft Rules for the Establishment of Commercial Court Division at thePrimary, District and resident magistrate Courts in Tanzania Mainland(Annex 8).-Draft Regulations for land Allocation in Zanzibar (Annex 6).-Procedures for CRO Application and Issuing (Annex 3).16

-Draft Regulations for Amendment of Land Regulations in TanzaniaMainland (Annex 2).The document on “Institutional Arrangements for the Implementation of theFormalisation Programme” contains very detailed proposals on the various laws to beamended. The amendments to the laws are also detailed and time-framed in thefollowing documents:-Action Plan for activities on Formalisation of Rural Real Properties(Mainland): Matrix table 1 (Appendix 1 to the Legal and InstitutionalReform Outlines and Packages).-Action Plan for activities on Formalisation of Real Estates (Mainland):Matrix Table 2 on urban Real Estate (Appendix 2).-Action Plan for Property reform in Zanzibar (Appendix 3).-Action Plan for Formalisation of Business (Tanzania Mainland):Matrix Table 4 (Appendix 4).-Action Plan for Activities on Formalisation of Business (Zanzibar):Matrix Table 5 (Appendix 5).The deliverables show that the LRDT have done an impressive amount of work andthat the March 2008 for the completion of the reform design stage may be met.The LRDT is a product of recommendations from previous reviews andunderstandings from the successive meetings between the Governments of Tanzaniaand Norway. The main objective was to ensure local ownership of the reform designprocesses. At stake was the legitimate apprehension that the control of the processesby ILD was not adequately insightful of the realities and sensitivities in Tanzania. TheLRDT was expected to bring about the deliverables above through a participatoryapproach. This would ensure that relevant stakeholders not only understand theprogramme, but are fully involved in the development and designing of the reforms.The LRDT would in this context be facilitative rather than prescriptive reformers. Itwas expected to submerge and fuse-in with the substratum (the poor and legallymarginalized business operators and property owners that form the “extralegal”sector) and strategize to arise with them in the subaltern approach together with the“archetypal” legal frameworks in forms that can be given legal recognitions and thatare ultimately developed into a single reformed legal framework.The LRDT was expected to bring on board other interventions by the differentgovernment institutions implementing ongoing reforms in a manner that clarify thecontext of the formalisation programme and join them not as adversaries orcompetitors, but as partners with the ultimate responsibilities to take-up the challengesof legal reforms that would make it possible for the formalised businesses andproperty ownerships to converge and merge into the single legal framework withoutbeing disadvantaged by the existing prescriptive rules.In order to achieve the above expectation, the LRDT was given the challenge to applythe convergence analysis and ensure that the top-down and bottom-up initiatives

merge without conflict. The joint process being the subsequent legal reforms was tomake the existing frameworks friendly and accommodative to the formalised entities.The current separate processes are perceived as being the top-down process that isundertaken by the existing interventions like those under BRELA8, BEST, SMOLE9,SPILL, the Local Governments Reform Programme (LGRP), the Law ReformProgramme (LRP) and the like. The LRDT would in this context promotecollaboration and serve as an educator and campaigner and not a fault finder andrectifier.The viability of the formalisation programme depends heavily on its correctunderstanding nationwide, particularly by government institutions and otherstakeholders in their efforts to combat poverty and implement poverty alleviationprograms. Conflicting understanding would undermine its political acceptability andnegate the bureaucracy that is crucial in devising and administering the top-downreforms.The LRDT was further expected to use the convergence analysis as a mediatingparadigm whereby the institutional interventions are to continue carrying out ongoingreforms without interferences but with an informed anticipation that at the right timethe reforms will have to be further fine tuned in order to embrace the formalised“extralegal” activities without sending it scampering back into “extra legality”. Thismay easily happen if the immediate effect of the formalisation is to expose theformalised entities to unmitigated taxation, regulatory organs with extra-judicialpowers like the health inspectors, local government rate collectors, weights andmeasures authorities and the like.The LRDT was also expected, through consultative and participatory methodologiesto foster the consensus on the choice and creation of an implementation organ that canstrategically fit in the top-down and bottom-up processes. Ideally this should be ableto provide the supportive facilities for the formalised extralegal entities and units to beable to effect legal compliances in a manner that is not onerous, certain and just. Thesubaltern and customary norms and rules will be assured of continued use and givenlegal recognition until such time the laws applicable to the current legal sector arefully reformed and are accessible by the formalised entities and units. In this context,the envisaged implementation organ would not be a super-structural overseer andcontroller of other institutions, but an infrastructural incubator of the entities and unitspromoting formalisation.The evaluation of the progress made in implementing the annual work-plan has beenmade within the backdrop of the above and which will be addressed in the followingsection.

4.2 Design processParticipatory Methodologies- The consultations made during the review revealed thatthe LRDT has applied a narrow definition of participatory methodologies. Manyrespondents explained their knowledge of the formalisation programme to have comefrom workshops run by the PMU to explain what the programme is all about and howit is likely to be beneficial. It did not serve to bring stakeholders on board and drawfrom them ideas and innovations and foster their partnership in designing reforms.All representatives of the main stakeholders outside the PMU had limited informationon what exactly is being proposed in MKURABITA because they were not activelyengaged in formulation of reforms and given an opportunity to assist in identifyingrequired additional interventions over and above what is already being implementedby ongoing reform programmes.It is conceived by many as a process in which the President’s Office throughMKURABITA will acquire powers and mandates to direct the existing Governmentinstitutions on the content and directions of reforms they currently implement. A clearmessage was that the there is a lack of understanding as to whether MKURABITA isan attempt to duplicate rather than complement and/or contribute to improvingongoing reforms.In general the above clearly indicates that too limited effort has been made to bring onboard the various institutions that are crucial for the top-down convergence toparticipate in designing the reforms. It is like assigning the person who will managethe convergence to prescribe what the manager should do. This will escalateincompatibilities between the ongoing government interventions and MKURABITA.Accordingly, PMU should create the previously recommended stakeholders forumwhere the LRDT will continually interact with the larger public and get feedback onthe reforms being proposed. At the stage reached, the draft proposals should be placedthrough a validation process with the main stakeholders like BEST, BRELA, Ministryof Lands, Ministry of Industries, Ministry of Local Government and RegionalAdministration, Adrhi Institute at the University of Dar es Salaam, etc.The same stakeholders should be engaged in the drafting process through referencegroups which was to be established as per work-plan and contract with ILD. They willserve as groups of experts who are capable of critical evaluation of proposals and whocan assist in refining the constructs developed by the LRDT in participation with allstakeholders. The reference groups will bring in objectivity to the process.Application of the Convergence analysis- The findings from the review point to thefact that other government institutions that are involved in interventions that are akinto the components of the formalisation programme find the latter an undesirableparallel. The question that often was asked by various stakeholders relates to thewisdom of giving statutory mandates to a new institution to do what is alreadystatutorily vested into existing civil service institutions.The implicit resistance to the formalisation programme is due to the fact thatMKURABITA has not been adequately conveyed to the public and governmentinstitutions. For example, for MLHHSD, the monies currently availed to the19

formalisation programme would be best spent to support SPILL which is constrainedby lack of financial resources and accordingly they may not be able to survey all thevillage lands in the country ”in the near future”.It means through SPILL formalisation is not in contemplation, rather, implementationof the laws according to means and opportunity. Clearly the two prongs could beunpacked in the sense that SPILL relates to the top-down process that is likely to takea very long time and is not aimed at impacting on the “extralegal” sector in the nearfuture. Thus strategies to untangle the “extralegal” activities can still be consideredfrom the subaltern perspectives and gradually integrated through the bottom-upprocess that should not be initially implemented through prescriptive statutory rulesthat are currently responsible for the “extra legality”. The logic is very simple. Theextralegal have no reason or incentive to align themselves into the statutory ruleswhich they find highly invasive and costly.While the LRDT appear conscious of the two distinctive processes, it is not translatedinto a programme that provides the divide between ongoing reforms and the focus offormalisation. The universe of formalisation, namely, the “extralegal” cannotimmediately be reached by the current interventions. The existing interventionsshould look at the formalisation programme as a creation of an infrastructure fromwhich it will broaden their own coverage in future. This is true for BRELA, SPILL,the National Identity Cards project, tax reforms, local government reforms and thelike.It is recommended that the PMU and the LRDT should re-orient their articulation ofthe convergence analysis or many of the current proposals will be discarded aspointed out specifically in the subsequent parts.Communication Strategy-As pointed out earlier, to absence of effectivecommunication may be the reason for the conceptions by others like BEST, BRELA,SPILL, LGRP and the like in the mainstreamed Government system ofMKURABITA as a parallel programme. This is compounded by the fact that theLRDT has not employed a participatory methodology effectively. For a broad basedand correct understanding of the formalisation concepts, purpose and implementationarrangements, as well as the understanding of the intended benefits and thebeneficiaries’ involvement of stakeholders and members of the various communitiesin the country through information and discussion workshops are not sufficient.Participatory methodologies need to be effectively complemented with an effectivecommunication strategy.Efforts to get the communication strategy developed by the assistance of a consultantare still underway. However, at the same time the reform design stage is drawing toan end. By not having effective communication fully operational at this point is aserious delay that constrains any endeavour to build a national consensus and drawthe participation of intervention institutions and other stakeholders.A communication strategy should be embarked upon hand in hand with therecommendation to draw in stakeholders and other government agencies into thereform design process, including the creation of the reference groups and stakeholderforum.

4.3 Inputs as per Consultancy AgreementThe President’s Office and ILD signed the first consultancy contract for assistance tothe implementation of MKURABITA in November 2004. This contract was a resultof a single source procurement procedure and covered services form ILD for bothphase I and II of altogether 31 months. The signing of the agreement led to theimplementation of the Diagnostic Study (Phase I) which was to a large extent led andimplemented by ILD.According to the contract between Tanzania and ILD the total programme cost wasestimated to 6.988 million USD to be fully funded by Norway. Of this amount theremuneration for services from ILD was 4.219 million USD (approximately 60%).According to the finance agreements between the Governments of Tanzania andNorway (October 2004 and the addendum no.1 of August 2005) the contributionsfrom Norway to the programme are 7 million USD based on a budget that deviatesfrom the contract between Tanzania and ILD.The review of the diagnostic phase as well as the first review of the ProgrammeDesign phase both emphasised the need to institutionalise the programme in Tanzaniawith the President’s Office managing the process and ILD instead acting as a demanddriven service provider. Following the reviews it was decided that the actual work todesign the reform programme was to be undertaken by the Local Reform DesignTeam (LRDT) recruited by the PMU rather than ILD as stipulated in the initialcontract with them.Subsequently the consultancy contract with ILD was renegotiated with revised termsof references. The new revised contract was signed in March 2007 with a contractualvalue of 0.5 million USD for the remaining 9 months of the reform design phasewhich implied a reduction in the cost of ILD services from 4.2 million USD to 3.3million USD (48% of total costs).Table 1 – MUKURABITA budget (in USD)Phase IPhase IITotalRevised contract Phase IIRevised totalTotal1,499,9645,487,8706,987,8345,487,8706,987,834ILD1,014,2643,204,9904,219,2542,310,196.003,324,460Local costs485,7002,282,8802,768,5803,177,6743,663,374

The approach in implementation of the programme has evidently changed from one inwhich ILD was in the “driver seat” to an approach were the PMU of the President’sOffice has taken charge of the process and ILD providing services as per revisedterms of reference. Since the new contract came into effect and LRDT was recruitedin July/August 2008, ILD has changed their approach first and foremost as a serviceprovider by assisting in the preparation of ToRs and work-plan for the LRDTmembers, training of the new LRDT members recruited and assistance in developingthe reform outlines including programme formats.The training was conducted with a team of nine ILD representatives visiting Dar esSalaam in November 2007 during which a two day training workshop was conductedin Bagamoyo. The training included the following:21

Some of the tasks still remaining to be completed as per ToRs are;-assistance in the formulation of a communication strategy (the recruitmentof consultant to formulate the strategy is still on process),-to provide an opinion on the implementation plan for the reform programme(the first draft of the reform programme was just completed as an when thisreview mission commenced), and-review of the cost benefit analysis of reform proposal (still not completed bythe LRDT).A preliminary report from ILD with comments to the Reform outline has beenproduced. However, this will be followed by a mission to Tanzania by ILD to interactwith LRDT and discuss the reform proposals and the other related documents. Thiswill include a review of the “Action Plan for reform proposals” after LRDT hasrevised it based on the comments provided by the ILD, review of the “Cost – BenefitAnalysis of Reforms” once submitted by LRDT and produce a final report thatcontains the final comments on the reform proposals.

5. REVIEW OF REFORM PROPOSAL5.1 The programme logicThe reform proposal consists of 260 activities classified under eightsubcomponents/objectives (property/business, rural/urban, mainland/Zanzibar) andtwo main components (property and business formalisation). They consist of threebroad types of activities; legal and procedural changes (revising existing and/orintroducing new laws), capacity building measures for public institutions (like localgovernments) and development of support systems (like land registry). Most of thelegal and procedural changes and many of the capacity building measures are thesame for all components; effectively the number of activities to be undertaken is lessthan 100.The above suggest a need to restructure or at least include an additional presentationof reforms along a different set of dimensions i.e. required legal and proceduralreforms, institutional and capacity building measures and finally, development ofsupport systems.In the study of linkages between MKURABITA and ongoing reforms10commissioned by the PMU, 11 other reforms are listed and analysed to see to whatextent MKURABITA complement ongoing reforms. They key results from theseanalyses are that there are many synergies between existing reforms andMKURABITA. When reviewing the reform proposal however, some major issueremains unclear;-is the MKURABITA a programme that meets all the required needs toachieve the overall objective,-does it incorporate all ongoing reforms or has it left out those which areconsidered unnecessary to achieve the objective; or-is it only focussing on additional interventions required to complementongoing reforms.The programme proposal is comprehensive in as much as it attempts to include wideranging reforms important for achieving the objective like reform of tax systems,promotion of a conducive environment for business including changing financialsector products and services targeting also low income households and informalbusinesses being formalised. The programme, although comprehensive, will requiresome major changes to ensure internal consistency in its programme structure and tocomplement rather than substitute ongoing reforms.

The first issue is linked to the overall programme logic; poverty alleviation throughformalisation. While secure business and property rights may be a required factor forgrowth in household income and wealth, it is not alone and not even necessarily thebinding constraint and subsequently proactive formalisation may not be a desiredapproach. As MKURABITA recognises, formalising business and property rights bychanging legal procedures and registration systems do not alone ensure thatformalised assets can be transacted in a market. Thus it also points to issues like taxreforms and changes in the financial sector. However, these areas needs to beconsidered if the are to be incorporated in the programme or if MKURABITA is tofocus on “initiatives aimed at increasing services to business” and/or initiatives aimedat reducing regulatory and administrative barriers to formalisation (ref. section belowon experience from international practises). It is only the latter that has been subjectfor the diagnostic study and there is in general limited information on outcomes fromthe former. These leads to the challenge of relating formalisation to theMKURABITA programme objective; formalisation leads to poverty alleviation, anissue further discussed in sections below.The second and third issues relates to if MKURABITA is a programme including allongoing reforms or does it only focus on gaps not currently undertaken by otherreforms. A review of the proposal suggests that it is something in between; it includessome but not all ongoing efforts under implementation. As an illustration, underBEST a number of activities are undertaken which have not been included underMKURABITA while others have. It indicates that BEST needs to reprioritise itsactivities or MKURABITA should be expanded to include all. This may also reflectthe main challenge in the process of designing the reforms, i.e. to ensure participationby the other relevant government agencies in actual design of reform packagesassuming these agencies are to implement the proposed reforms, not the President’sOffice or any other new entity (ref. section on implementation arrangement).The above is also linked to another design issue, i.e. the identification of who is toimplement the reforms. When presenting the reform proposal it will of importance tohave identified who will be in charge of implementing the legal and proceduralchanges, who will provide what capacity building measures and who will develop thesupport systems. As indicated in the reform proposal many ongoing programmes arealready addressing the issues presented and undertakes the activities listed in theprogramme. However, sequencing of them and who will be undertaking additionalactivities identified as needed interventions will be required if the programme is toserve as an operational instrument to guide the revision and implementation ofongoing programmes.The latter will require a consultative process with those ministries and agenciesidentified to facilitate adjustments of existing programmes to include the additionalactivities identified. This will require substantial time and effort since most of themhave not actively participated in the formulation of the reform “packages” (ref.chapter 4 above).

customary arrangements dispersed throughout the country, so as to createoneTanzanian property and business legal system that incorporates all sectors of thesociety. An attempt to predict the possibilities for success and sustainability of such aprogramme involves a consideration of many variables one of which being strategicfit of the programme itself in the country’s overall policy framework.Today’s development agenda for Tanzania mainland and Zanzibar is informed by twosets of national policies namely the long term development visions and medium termstrategies for poverty reduction. The long-term visions 2025 for Tanzania mainlandand vision 2020 for Zanzibar envisages transforming the economy of Tanzania andcatapulting living standards and nature of economic activities to the standards ofmiddle-income countries. Aspirations of vision 2025 for Tanzania mainland andvision 2020 for Zanzibar are the same; while Zanzibar aspires total eradication ofpoverty by the year 2020, Tanzania mainland aims at building a nation with high andshared growth, high quality livelihoods and a competitive economy among othercharacteristics.Both visions see modernization of economic activities as the principle strategy forrealising the visions while individual initiative and the private sector are seen as thecentral driving forces for renewing the economies. This focus on modernization ofeconomic activities especially private sector activities places formalisation high on thepolicy agenda because simple and effective formalisation procedures are equivalent toa conducive environment for modernization and growth.Poverty reduction strategies are organizing frameworks for poverty reduction anddevelopment. These medium term national policies are the principal vehicles layingdown actual strategies for realization of development visions. The National Strategyfor Growth and Reduction Poverty for Tanzania mainland (MKUKUTA) and NationalGrowth Strategy for Zanzibar (MKUZA) sets out strategies for modernization ofprivate sector activities.MKUKUTA for example identifies Private Sector Development as one of theprincipal sources of growth. In order to modernise private sector activities the policystipulates that during MKUKUTA period of 2005 and 2010 efforts will be directed atcreating enabling environment for growth through addressing entrepreneurshipdevelopment needs for rural private producers (on farm and non farm); agro basedindustries, and urban-based, formal and informal enterprises. Some of the specificformalisation related activities emphasized in MKUKUTA include:•Scaling up reduction of administrative hurdles due to complicated licensing,and taxation system, harassment by tax authorities and local administration;replace them with simple one stop mechanisms to reduce the high costs ofstarting and doing business.•Improving access to and ability to use productive assets e.g. (land) for thepoor, for example those in small scale agriculture and rural non farmactivities, SMEs and groups such as women and youth, micro financeactivities will be expanded and land access rights ensured for both men andwomen for small and large scale producers.

In addition, MKUKUTA recognises the role of informal sector as an importantcontributor to GDP growth. The framework stipulates that widening of the spectrumof actors in the economy particularly the informal sector, SMEs and the cooperativesas an important strategy for GDP growth. This widening of actors in the economymay also entail formalisation of some informal activities to make them part of themainstream economic activities.The role of informal sector in poverty reduction, growth and development andformalisation of the same is appreciated by not only MKUKUTA (second generationof PRSP) but also even in the first PRSP of 2000/01 – 2002/03. Section 1 of the firstPRSP addresses income poverty including GDP growth, agriculture and employment.In this strategy, informal sector is identified as significant component. The need ofbolstering is also highlighted though the strategy doesn’t set specific strategies forbolstering of informal sector. It is interesting to note that this deficiency is filled inthe second generation PRSP (MKUKUTA) that highlights the specific strategies forbolstering of informal sector activities and their formalisation. Apparently, thesechanges suggest an evolution in policy focus towards informal sector activities. Itappears that over time national policies have provided more space to informal sectoractivities.Apart from national policies, Tanzania’s development agenda is further guided bysector policies and strategies. These are detailed principles to guide developments ofspecific social and economic sectors. Sector policies are informed by national policiesand they are meant to translate country’s long and medium term development policyinto day-to-day operations in different sectors. Put it differently, today’s sectorpolicies and strategies provides blue prints on how to realise modernization agendaunderscored by national policies in the various social and economic spheres. A briefreview of a few sector policies below suggest that part of modernization efforts aim atformalisation of informal sector activities and business assets:-The National Micro Finance Policy (2001) seeks to provide financialservices to low-income individuals, households and groups in both rural andurban areas who usually find services of the conventional financialinstitutions inaccessible. Targeted beneficiaries are mainly those engaged inmicro, small and medium enterprises in commerce, industry, mining oragriculture. The impact of this policy is mainly in legal recognition ofspecific institutions (organs) as legitimate providers of micro financeservices, thus laying the ground for its clients to obtain legal identity andrecognition.-The objective of the Rural Development Policy is to archive a dynamic andsustainable economic growth in the rural areas thus contributing to povertyreduction in the rural areas. The policy recognises the importance ofproperty rights and rural commercial enterprises among other keyingredients of rural development.-The Local Government Reform Programme (LGRP) seeks to translate theoverall national social economic reforms to locally based programs based onthe participation of the local people and their institutions. The facilitativeand regulatory roles of the District and Urban Councils in matters related to

business and property rights are spelled out in this Local GovernmentReform Agenda.-The small and Medium Enterprises (SME) Development Policy recognisesthe constraints facing small and medium entrepreneurs in accessing capitaland operating within the legal framework applying to businesses, not tomention inability to access consultancy services. The policy also recognisesthe importance of this sector in the national economy. Currently, this sectorof the economy holds a big number of informal businesses and propertyowners; the sector has a potential of growing fast and be a source of some700,000 job seekers who join the labour market every year.From the above it is evident that the objective of MKURABITA is aligned to thegeneral and sector specific policies related to modernisation and growth as well aspoverty reduction strategies. However, the policies and strategies recognise thatinformal (“extralegal”) activities are important factors behind growth and that barriersto formalisation is not necessarily the binding constraint for further growth. Aconducive environment includes a number of other factors and access to financialmarkets is not necessarily a question of having registered property and assets. Equallyimportant are service providers that can reach out with relevant financial services forinformal sector activities and service low income household s and small business withso small assets that they are inapplicable as collateral be it formal or informal.

5.3 Empowerment of Poor and Vulnerable GroupsThe development objective of MKURABITA is to enable the poor in the informalsector to use their properties and business assets in the modern economy in order toraise their incomes and reduce poverty. The idea is that legally recognized propertyand business assets give access to financial markets that are essential formodernization and growth. In this section we discuss the extent to which thedevelopment objective of MKURABITA is achievable in the context of Tanzania,especially in the rural areas where the majority of the poor and much of the informalsector are located.The ultimate objective of the Programme is to reduce poverty by raising incomes ofthe poor through formalisation of property and business. Formalisation of propertyand business would raise security of both the asset holder and the lender and improveenabling environment for business transactions. In the following, the discussion of thetwo assets is made separately because the issues and level of sensitivity are different.Property (Land) FormalisationWe can identify three benefits to land formalisation, namely increased security,increased incomes and poverty reduction by land becoming a tradable commodity,and enhanced knowledge and information. Although they are interdependent we shalldiscuss each of them separately.These are linked to the issues of reduction in land-related disputes, improvement ofland markets, especially rental markets which would imply that land may bereallocated to more productive users, and increased investment on land and better land

management due to higher tenure security. However, the extent to which thesematerialize is an empirical issue that has to be assessed in each case.Increased SecurityIn the current legal framework, all land in the urban areas is public; under thetrusteeship of the President of the United Republic of Tanzania. However, land in therural areas is governed under the customary law. Therefore in the urban areas,formalisation by granting individuals the right of occupancy provides the securityneeded for private use or intentions. In the rural areas a number of issues have to beaddressed before a formal land registration (implying its privatization) can beconsidered to produce net benefits to the majority of the poor residents.-In the rural areas most of the land is communally or family owned. Theissue is how to identify individual rights in such land; both for the presentand future generations.-In the rural areas most livestock is grazed in common or public land. Theissue is how to deal with pastoralists (in the process of privatization of land).-In many parts of Tanzania, traditions or customs exclude, among others,women from inheriting or owning land. Privatization of land based on thecurrent ownership framework will legalize the current land distributioncriteria. This will result into exclusion of most women from land ownership.On the basis of these issues, and probably others, we can conclude that blanketformalisation of rural land in the current setting may not necessarily give equalopportunities to all and may therefore not necessarily provide security to some.Poverty ReductionAccording to the Programme, legally recognized land provides access to financialmarkets, and therefore raises opportunity for increased economic participation andincomes. Experience however shows that the value of land for commercial credit is afunction of its degree of convertibility into liquid asset. The latter is determined by thelevel of development made on the land and its surroundings rather than its legalstatus. In this case urban land is more valuable for commercial credit than rural land;and formalisation of urban land may benefit the poor by raising the value of propertyand assuring security. The urban poor may sell property at a premium and use thecash productively or enter into partnership with investors as is currently happening inKariakoo and other parts of Dar es Salaam and urban areas.However, the situation in the rural areas is different for the following reasons.-The market value of village land in many areas of Tanzania is low; itsproductivity potential is low. Infrastructure (roads, access to water,electricity and other facilities,) is limited and unreliable, and significantinvestments are required to convert the land into commercially viable meansof production. As a result the value of land is likely below any commerciallyviable threshold to be applied as collateral; i.e. formalisation is not the

remedy for access to financial services but rather financial services that canoperate efficiently in informal markets (like microfinance banks).-Banks prefer to focus on a few organized clients such as public employees(for consumer credit), cooperatives and contract farmers (also referred to asout grower farmers) that guarantee a critical minimum group of clients andpayment through employers/associations deductions. Even in thesesituations, experience shows that land is not used as collateral. The majorityof the rural (poor) population is left outside the financial market network.-The experience of SACCOS in recent years is also revealing. In spite oftheir popularity and outreach in the rural areas, they have avoided using landper seas collateral. They have invented more innovative instruments such asmember/social pressure and easily convertible assets such as radios,refrigerators, television sets, and occasionally houses. This is due to the factthat in any formal system converting collateral into cash carries a transactioncost that makes low value property of limited use as collateral. In additionthey have kept the levels of credit low to match the socio-economiccontexts.This discussion suggests that formalisation of rural land as a means to access creditfor promoting growth and poverty reduction has to be undertaken with great care andrequires significantly more research before considering it as a viable approach inpromoting capital formation for the rural areas. Experience shows that the focus onland may be misleading. If land has to be targeted, the focus should be on highpotential land, and even here complementary factors must be considered to be moreimportant than landper se,property rights may a constraint but not necessary thebinding constraint or the first priority on the list of factors that needs to be considered.Knowledge and InformationIn discussions with the LGRP Management the need for knowledge and informationwas put forward. Formalisation is good for both, the citizens and the Government andconsidered an important complementary issue to local government reform andcapacity building. It provides information to enable the Government to determinerevenue potential and impose appropriate tax rates/levels. This information alsoenables the Government to plan and provide the required public services to itscitizens.This raises an issue which the Programme has not yet incorporated into its equations.The cost of formalisation to owners of land must be considered; including the risks ofexposure to increased taxation, and costs associated with regulatory and otherstatutory requirements. These costs are important to make informed decisions as towhether the benefits of land formalisation exceed the costs, especially for the lowproductivity potential land.Business FormalisationAlso in terms of business formalisation we can identify three benefits fromformalisation, namely facilitating business operations, increased incomes and poverty

reduction and enhanced knowledge and information. Again these are interrelated butthe discussion will be made on each separately.Improving Business EnvironmentThe Programme has assumed that the current legal framework, fiscal and financialsystems, procedures and other support systems are a hindrance to entrepreneurshipand private sector development, especially for the informal sector; and the solution isto change them. Therefore the draft Work Plan of the reform design phase includes anumber of changes that aim to make it easy for micro, small and medium scaleenterprises to register and operate; simply put, to improve the enabling environmentfor growth of business.A 2007 study undertaken by VIBINDO, an umbrella organization for the informalsector enterprises, to determine reasons why enterprises continued to remain informalcame up with two main reasons, namely the lack of working premises anddiscouraging registration procedures. The latter was attributed to lack of commitmenton the part of BRELA staff rather than cumbersome and bureaucratic systems. Sincemany members of VIBINDO do not own working premises, the issue of registrationof premises was irrelevant to them. In addition, perhaps because they are notregistered, the results of the survey also indicated that taxation was not a big issue forsmall businesses. Therefore, changing registration procedures and the fiscalenvironment would not give an immediate and significant boost to the informalbusiness.An assumption that needs to be addressed relates to business registration as a vehiclefor accessing the financial market. Constraints in accessing credit using rural landhave already been addressed. Although in the urban areas land can be used ascollateral, most informal sector enterprises operate on rented premises. Therefore theycan not use property as collateral to secure credit.Moreover, the major problem with loan financing for the informal enterprises isbigger and more generally applicable to SME and even to medium businessenterprises. This has to do with Government involvement in the commercial financialmarket (through the treasury bills and other government papers) to finance its budget.This has tended to crowd out the private sector by raising the cost of borrowing,especially to SME and the informal enterprises in particular.This discussion suggests that many of the constraints facing the informal sectorenterprises do not relate to inadequate legal framework, procedures and supportsystems. Rather they relate to lack of commitment and interest on the part ofindividual government staff in business promotion. This negative mindset against theprivate sector may be traced back to the period of public sector driven economy, andalthough a different economic philosophy is being pursued some government officialshave not changed their (mindset) positions.This suggests the need for a private public partnership programme to improve theworking relationships using existing systems and structures. Only then can genuineconstraints to business development be identified. In addition, government budgetfinancing through the financial market needs to be factored into the reform proposalsbecause it changes the incentive system in the financial market operations and affect30

the levels of credit available for the private sector and the rates of interest (cost ofborrowing).Poverty ReductionIn order for growth and poverty reduction to be realized from formalisation, theresulting gains must exceed the resulting costs. The Programme has attempted toexplore the possible gains from formalisation even though very little empiricalevidence has been generated for this assumption; also caution must be exercised sincethis does not seem to be a straight forward matter unless also the cost side offormalisation to the enterprise is factored in.An area which the Programme has not considered fully relates to the cost offormalisation, not only opportunity costs of actual registration (fees, time used andefforts in complying with procedural requirements). As stated earlier on, formalisationmay expose informal sector enterprises to fiscal and regulatory bodies which willraise their cost of doing business. These costs have to be determined and weighedagainst the benefits to enable informed decisions to be made.Finally, there must be provisions for business exits (not only entries) with minimumcost and inconvenience. This will give adequate flexibility for firms to determine theirfuture. Exit strategy is currently not provided for in the planned reforms. Transactioncosts associated with business mergers, acquisitions and closures are all importantelements for private sector development.Knowledge and InformationAs stated for property/land registration, this aspect is considered beneficial to both thegovernment and businesses. For the government information on businesses enablesthe enhancement of revenue collection and facilitation of economic service delivery.The extent to which this will produce net benefit to the business sector is a matter offurther discussion and subject to verification.However, the decision to register all businesses down to the village level, includingfarming may need to be reviewed. Given the size of the country (talking about 7million households according to the 2002 Census) and the seasonality of somebusinesses, especially in the rural areas, the cost is bound to be high and the data maychange seasonally. To determine the benefit of formalisation to the individual it willaccordingly require more information before promoting formalisation on any scale.This call for more pilots and formative research before any an exercise of promotingformalisation is promoted through MKURABITA or other reforms. It means insteadworking on reforms which obviously removes barriers to formalisation but notpromoting any formalisation on a large scale without ensuring that the target grouphave the full understanding of the benefits as well as the costs in order for them tomake informed decisions.

MKURABITA and poverty reduction

The property and Business Formalisation Programme perceives widespread poverty to be a result of lack ofmodernization that has affected both scale and quality of production negatively. The main constraints tomodernization have been identified to be inability to access the financial market for credit financing due tounavailability of high value and secure collateral and, unfriendly business environment due to existingbureaucratic, outdated and cumbersome legal frameworks, procedures, fiscal and support systems that deprives thepoor from accessing the modern economy. The implied solutions therefore include formalisation of property/landto raise its value and security and change of the current legal frameworks, procedures, fiscal and support systemsin order to improve the enabling business environment for SME.This line of argument is correct in the urban areas where property/land registration raises value and issues ofsecurity. Such properties have been sold at premium prices to raise cash for productive use or used as contributionto partnership ventures. In Dar es Salaam such sales and partnerships have been experienced in recent years. In therural areas however, the situation is different. There the value of land is low due to limited infrastructure such asroads, water and electricity. In these areas financial institutions have preferred to work with organized groups suchas public employees (for consumer credit) and cooperatives (producer, trade and marketing) to reduce operationalcosts and the risks of default. These institutions have also preferred guarantees from employers and easilyconvertible (into liquid) assets such as radios, television sets and refrigerators rather than landper seas collateral.Therefore in the rural areas, in addition to land formalisation, work must be done in the areas of infrastructuredevelopment and organizing people around cooperatives to reduce both bank operational costs and the risk ofdefault.For business formalisation the MKURABITA line of argument is partly correct. However, the major andimmediate constraint for informal enterprises’ growth and development appears to be the lack of cooperation fromthe institutions of governance as well as fiscal and regulatory bodies. The lack of commitment from public sectoremployees to service provision for private sector development seems to be the major problem. Exploiting thebenefits of the existing systems fully before identifying the gaps for changes may produce the required quick wins.At the macro level it may be useful to address the apparent crowding out of the private sector from the financialmarket by the government as it struggles to finance a big budget from the sale of treasury bills and governmentpapers. In addition to reducing the level of credit to the private sector, especially the SME, this exercise has led torising cost of credit.

5.4 Review of proposed legal reformsThe proposed reforms imply very wide spread and comprehensive set of legislativechanges. The approach appears to be one of setting the ground ready for informalbusinesses and properties to be formalised. New laws and amendments to existinglaws are proposed. They have been prepared with limited involvement of the otherinstitutions and stakeholders when formulating them. The strategy appears to be oneof presenting them for stakeholder and public debate at a later stage in the form of acomprehensive package of proposed reforms.A review the proposed legislative reforms raise some questions on the suitability ofthe draft laws in catering for and sustaining the continued existence of the formalisedentities and units within the legal sector. Some of the proposed laws could be moreonerous and demanding to the formalised entities and units whose most attractiveaspect of the reforms could be the possibility to become formal without beinghampered by the laws.Some of the proposed legal reforms could be too expensive and cumbersome suchthat they are only feasible amongst a more literate within the business and propertyowning sectors. This includes the proposed establishment of the commercial courtdivision that cascades down to the primary courts (Annex 8). This can only beachieved in a longer terms perspective given the financial and human resourcesneeded to implement the reforms. Notwithstanding, such reforms run contrary to the

spirit of giving recognition to the customs and norms that emerge from the existing“archetypes”.The desired approach should be one that any proposed legal reforms must not upsetthe existing legal regimes until such time when the relevant institutions are ready toadminister reforms in the top-down convergence. Changes in the laws may producewidespread undesired effects if rules are changed for purely accommodative purposes.Annex 1 contains the proposedWritten Laws (Miscellaneous Amendments) Act 2008.It proposes to amend the Land Act, the Land Courts (Dispute Settlement) Act, theSurvey Act, the Urban Planning Act and the Village land Act. The content of theamendments are largely to change the various laws to accommodate the perceivedneeds of regularization.Some of the proposed amendments are straightforward and easy to accommodate likechanging designations by for example substituting the “minister” with the“commissioner” or reconstituting the memberships of committees and the like. Thelaws intended to be amended are proposed to be enacted to cater for the formalised“extralegal” entities and units. The question is on the utility of the convergenceanalysis that has been accepted as fundamental. What happens to the “archetypes” andcustomary law? Does it imply abolishment of all customary norms by drawing theunsuspecting formalised entities and units into the existing cumbersome laws? Ifcurrently the existing institutions cannot effectively reach and administer the ruralareas, can the proposed changes cause an overnight added ability to the Commissionerto handle the formalised rural entities? These are practical questions that need to beaddressed before preparing the legislative amendments.Annex 2 contains the draftRegulations for Amendment of land regulations inTanzania Mainland.The overall the proposals are aimed at bureaucratization of theregularization. It provides for the mandates of the Commissioner to declare aregularization area and the administration and management of such areas.The thinking that goes in the drafting is that the bottom-up convergence will bedirected by the top-down convergence. This is exactly the constraint that makesinterventions like SPILL to be very restricted. The idea of the bottom-up convergenceis to free officialdom constraints in the formalisation while the existing regimesgradually acquire capacity to transform and converge to the formalised entities.The proposed scheme of regularization is prescriptive. It is desirable that during theinitial stages the processes should be very flexible and facilitative rather thancompulsive and compliance based. The people should acculturate and accept a fullscale entry into the legal sector after the benefits become visible. Approach theprogramme prescriptively may risk the eventuality of formalisation and immediate de-formalisation once the entities visibility turn into an entrapment.Accordingly, MKURABATA (as well as other reforms) should take intoconsideration that the process of formalisation is a continuum, i.e. that someregulations and registrations may be considered beneficial to an entity or propertyholder at a given time depending on the nature of the situation for the entity. It is noteither “full formalisation” or not. Some business may opt for registration of its name,

not necessarily full registration of the company unless it can reap the full benefits ofthe latter which is unlikely for instance for small scale single proprietorships.Annex 3 contains theprocedures for (Customary Right of Occupancy) CROapplication and issuance.It is more of a manual than a legislative proposal. Itexplains the existing laws. These are the procedures applicable where the existinginstitutions have the reach to the expansive rural lands and populations. Their utilityunder the current set-ups where it has not been able for the existing institutions toreach those areas is questionable. The context in which Annex 3 is presented wouldrequire that all villages are turned into pilot projects so that the processes are linked-up to the existing institutions and the CROs and Certificate of Customary Right ofOccupancy (CCROs) obtained. In the absence of such projects the viability of theprocedures to bring about full-scale formalisation may remain doubtful.Annex 9 is a draftBill for an Act to provide for the Establishment and administrationof Limited Liability.An LLP is a highly sophisticated entity. In other jurisdictions thisis brought about by the partners but regulated by statutory laws in order to safeguardagainst their abuses. They are entities that are highly dependent on the satisfactorylevels of literacy of those who seek to use this specific business form. It is, forexample, ideal for professionals who cannot limit individual liability in the blanketmanner available through the company form. Its rules are very intricate.It is highly unlikely that the proposed Bill considered the possibility of the largenumbers of the individual units who are least educated and incapable of meeting thevarious conditions prescribed for the continued existence of the LLPs. The draft alsocontains rules that may be conflicting with existing laws. For example, winding uprules are usually provided for in the Companies legislation which often has specialrules for the winding up of unincorporated companies. If the LLPs are incorporatedthen it may not be desirable to have its own distinctive rules.The draft appears to be quite elitist such and its expected role to facilitate intendedentities and units can be challenged. This would have been resolved if participationfrom relevant stakeholder institutions had been ensured in the process of drafting theBill.Annex 7 is the draftBill for an Act to provide for the amendments of certain laws forthe purposes of introducing Limited Liability Single Shareholder Companies(LLSSCs) in Tanzania Mainland. LLSSCs are widely associated with tax avoidanceand tax evasion. Worldwide they are a subject of very strict prescriptions under thetax laws. In the process of drafting the Bill it appears not to have been anyconsultations with the Tanzania Revenue authority and BRELA or the consultationswere not effective. These are the core institutions to consult in such a process sincethey are also the ones which from a regulatory perspective will be affected by theproposed Law. Often restrictions are imposed on the use of the LLSSCs for thepersonal service companies and not every business venture. While the objective ofdevising a divide between assets used for businesses and those for personalsustenance is laudable, it is highly questionable if the LLSSC is the most efficient andpreferred vehicle.

5.5 Reform proposal versus other interventionsThere are a number of ongoing reforms of relevance to MKURABITA. In the reviewfrom the diagnostic phase, 14 ongoing reforms were presented with analysis of theirlikely relevance for the reform design process of MKURABITA11. In the midtermreview some of the same reforms were discussed and, as mentioned in sections above,a study commissioned by the PMU identifies 11 reforms of relevance to the designprocess12. The key results from the latter are that there are many synergies betweenexisting reforms and MKURABITA.In the following we will focus on those reforms that are of particular relevance to thereform packages proposed which will most likely be the ones involved inimplementing them and/or undertake similar activities as contained in theMKURABITA proposal.Local Government Reform ProgrammeThere is an ongoing “Local Government Reform Programme” led by the Ministry ofRegional Administration and Local Government. The LGRP commenced in 2002 aspart of the broader Public Service Reform Programme. A Constitutional amendmentof the 1990s, entailed redefinition of the relationship between the Central and LocalGovernments, in which the former retained policy making and regulatory functionswhile the latter has the autonomy to formulate and implement own plans and decideon associated budgets.While the first phase of the LGRP involved Restructuring, Governance, and HumanResources Management, phase II focus to a large extent on fiscal decentralisation.With more resources now being channelled through local government asunconditional grants, LGRP has included additional capacity building measures.The Local Government Fiscal Review of 2004 was undertaken to analyse the fundingof local government and funding relationship between local government and thecentral government as well as review of the local revenue taxing devices in place atthe moment. Emphasis is on the District rather than the Region and district and villagegovernment relations are also taken into account.LGRP is accorded high priority and enjoys substantial external support followingdevolution of authority to local government levels. The link to MKURABITA andother reforms addressing formalisation of property is evident by the fact that localland registration and formalisation of businesses may serve as an opportunity for localgovernments to enforce more efficiently local land taxes, a key issue for LGRP inassisting local governments in raising revenue.

Legal Sector Reform ProgrammeThe Legal Sector Reform Programme (LSRP) is led by the Ministry of Justice andguided by a Medium Term Strategy for 2005/6-2007/8. LSRP is implementing anumber of initiatives which are also contained in the MKURABITA reform proposal.Among them are introduction of alternative dispute resolution mechanisms,establishment of Zonal and Regional Justice Committees, and Case ManagementCommittees. All these measures are aimed to increase capacity of the legal systemand ensure improved access to justice among others by reducing costs.Strategic Plan for the Implementation of the Land Laws” (SPILL)The “Strategic Plan for the Implementation of the Land Laws” (SPILL) is a sevenyear plan implemented by the SPILL secretariat under the MLHHSD. It commencedimplementation with analysis of the different categories of land managementproblems related to the different characteristics of Regions and Districts.SPILL promotes the implementation of the new land act which includes investment inland administration infrastructure with projected cost of USD 300 million over sevenyears. Of the eleven activities identified in the programme, seven are devoted toplanning, mapping and survey requirements, two to land registration and propertyregisters, one to valuation of land and one to transport and communication. Oneimportant component is the development of a national ID registration system.SPILL has trained 2000 District Land Office personnel based on the recognition bythe Village Land Act that the village landholders are the experts when it comes tomanagement of their land. The target for SPILL has been the delivery of 50 000 newregistered properties per year to deliver Residential Licences in squatter settlements.Business Environment Strengthening for TanzaniaThe most significant programme which embraces most of the same areas asMKURABITA is the Business Environment Strengthening for Tanzania (BEST)Programme. It aims to reduce the burden on private sector operations by reformingand eliminating procedural and administrative barriers and improve the service to theprivate sector.BEST is implemented and coordinated through the Better Regulation Unit (BRU).Implementation of the government components is overseen and coordinated by aSteering Committee at the Permanent Secretary Level, comprising of key governmentand private sector stakeholders. Fast-track decision-making and hands on policydirection is provided at the Ministerial level by the National Investment SteeringCommittee (NISC), chaired by the Prime Minister with the Tanzania InvestmentCentre as Secretary. Monitoring and Evaluation structure is vested in a TripartiteReview Committee (TRC) comprising of representatives from the government,private sector and development partners.The BEST programme consists of five main components covering a number ofactivities directly linked to MKURABITA. BEST has promoted several legal reformsrelated to legislation that imposes an unnecessary burden on businesses. It hasintroduced Regulatory Impact Assessment (RIA) as part of the legislative process in

Tanzania (ref. sections below on international good practice experiences), BusinessActivities Registration Bill (which was read for the first time in the Parliament in July2005), Estate Agencies Bill, Workmen Compensation Bill, Occupational Health andSafety Bill, Social Security (Employment based) Bill, and Land MortgagesRegulations.In terms of Central and Local Government Taxation, BRU works closely withTanzania Revenue Authority (TRA) and with the Tax Policy Unit in the Ministry ofFinance to promote further reforms of the tax regime and rationalisation of localgovernment taxes and levies.In terms of land access and planning BEST includes activities related to city planning,land allocation with reform of the Lands Commissioner’s Department andestablishing Land Allocation Customer Charter, revisions of the Land Act, sitedevelopment and reforms in urban areas.Related to Business Licensing and Registration, a key component relevant toMKURABITA has been reforms of licensing procedures under the principle ofbusinessesnot to require a licenseunless a licensing procedure is necessary to protectthe public. It includes amendments to the Business Licensing Act, computerisation ofthe Business Registration and Licensing Agency(BRELA), business name systemsand decentralisation of services.Similar to MKURABITA, BEST is built on the recognition that most businesses inTanzania lack access to justice due to the complex adjudicatory framework, theinjunction/adjournment culture, as well as perceived low standards of integrity in thecourts. To enhance access to the commercial courts, cases will be transferred andoutreach extended in terms of the Commercial Courts. In addition the programme willattempt to simplify the Civil Procedure Code and introduce special rules for smallclaims.Another important activity, highly relevant to the MKURABITA, is the enhancementof the effectiveness of alternative dispute resolution guided by the Civil ProcedureCode. In addition BEST has made proposal for amendment of the arbitration act.An important capacity building component is included in BEST; namely training ofpolitical leaders, senior and middle managers in central and local government,departments and agencies, judicial officers, ‘Front-line’ staff providing servicesdirectly to the private sector and the general public. It includes introduction toCustomer Charters and capacity building on RIA and Regulatory Best Practice (RBP)in policy formulation and implementation.A component to empowering private sector advocacy is included, among others, toensure that the needs of the private sector continue to influence the development ofthe BEST programme. It includes an Advocacy Challenge Fund (ACF) targetingsupport for under-represented sectors of the economy with emphasis on micro firmsand small businesses and potential new entrants.

Relevance to MKURABITAThe above initiatives and programmes cover most of the same activities as presentedin MKURABITA reform proposal and operate under the same operational objective,to reduce barriers to formalisation although their level of ambition is not nationwideformalisation though a proactive awareness and/or nationwide formalisationcampaigns.For the many of them, coordination mechanisms have been established within thegovernment. The Cabinet has designated the Chief Secretary (the Secretary to theCabinet, and Head of the Public Service) to be responsible for reform coordination.The Chief Secretary chairs the Committee of all Permanent Secretaries, which iscommonly known as the Inter-Ministerial Technical Committee (IMTC).The IMTC is the ‘Steering Committee’ of the reform programmes, and all the reformissues are discussed at this level, where policy decisions are made on behalf of theCabinet. At the technical level, the Committee known as the Inter-MinisterialWorking Group (IMWG) convenes once every quarter of the year to approve andreview implementation activities.Whether or not MKURABITA will fall under this arrangement is unknown.

5.6 Stakeholder involvement in reform designFor other than the consultation process mentioned in sections above, stakeholderinvolvement in the reform design phase has primarily been related to the pilot studies.Norwegian Peoples Aid (NPA) facilitated participation by Legal and Human RightsCentre (LHRC) and Tanzanian Pastoralists, Hunters and Gatherers Organization(TAPHGO) in the pilot study in Handeni. Another land rights organisation, HAKIARDHI that is involved in promoting village land use planning had not collaboratedwith MKURABITA in relation to this.SPILL, the land registration and certification programme of MLHHSD has beenconsulted but did not collaborate with MKURABITA in the design of the reformseven though they carry out very similar implementation schemes themselves.Similarly, BEST, based in Ministry of Planning and with a similar agenda to reformthe business and land laws did not collaborate with MKURABITA in the design of thereforms up to now. As previously mentioned, most stakeholders did not feel theyknew what was going on and the interaction had been very limited after the designstage of the programme.What we learnt from the MKURABITA reform design team was that they had beenvery busy with drafting their reform designs and with pilot testing and that they werenow still working on preparing their Action Plan. Considering the large number ofproposed reforms this is understandable.According to the Detailed Work Plan for the period March 2007-March 2008,prepared by the Programme Management Unit in February 2007, a Reference Groupshould have been established each for Real Estate formalisation, businessformalisation, formative research, capacity enhancement and linkage to financial and

other economic opportunities. However, such Reference Groups have not yet beenformed.Furthermore, the Work Plan included establishment of; a monitoring and evaluationframework to facilitate stakeholder feedback to the Reform Design processes; astakeholders’ forum to allow regular meetings to evaluate the progress and to providefeedback to the Reform Design team; and participatory methodologies should beadopted in developing reforms, and a strategy that will promote consensus around theprocess.The renegotiation of the Terms of Reference for the ILD team may have contributedto the delays and this may also have affected the implementation of these aspects ofthe Work Plan that could have ensured a stronger stakeholder participation in theprocess. One could also say that the Work Plan was overly ambitious for what a localreform design team of five persons that just had been recruited could achieve in sucha limited time. It is understandable they would like to gain some experience and havesomething to show before they start interacting with stakeholders that have longerexperience in the field.The PMU has planned a sequence of meetings in February-March where they willinvite key stakeholders. This appears, however, to be far from enough to createstakeholder participation in the reform designs. Much more time will be needed,particularly when considering the large number of reforms proposed and their nature.

6.1 Review of land certification pilot studies in TanzaniaHanna Nasif pilotHanna Nasif is located in Kinondoni Municipality in Dar es Salaam City. The HannaNasif Ward comprises of three sub wards; Hanna Nasif, Mkunguni and Kisutu, andhas a population of 32,023 people with 8281 households. MKURABITA gotinvolved in the project in 2006 after having been contacted by an NGO, WAT –Human Settlement Trust. The actual survey process started in early August, 2006 andon 31stMarch, 2007, a field survey of all un-surveyed plots amounting to 1,423 wascompleted. A private surveyor (Integrated Property Consultancy and ServicesLimited) conducted the survey and MKURABITA facilitated the work.Survey plans were approved by the office of the Director of Survey and Mapping atMLHHDS, and submitted to the Kinondoni Municipal Land Division for processingletters of offer and subsequently issuance of certificate of Right of Occupancy for the1423 residents of Hanna Nasif by the Ministry of Land, Housing and HumanSettlement. The plan was that this should have been completed by January 2008.There are considerable economies of scale in doing this type of work and the costs pertitle was reduced from 500 000 Tsh. To 30 000 Tsh. per certificate with the approachused as compared to individual plot surveying. This means that obtaining ofcertificates also can be affordable for relatively poor households.The project document also states that the registration and certification has contributedto reduced border disputes although limited information was available in terms of howthis impact was estimated. It is not known whether the certificates will make it easierfor the owners to access credit. It is also not known whether the land certificates willincrease the value (selling price) of the properties while this is the assumption theongoing cost-benefit analysis that MKURABITA is implementing is based on.Residential Licence Project in Unplanned Settlements in Dar es Salaam

13

It is important to see the Hanna Nasif pilot in relation to the experiences of theResidential Licence project in unplanned settlements that is undertaken by MLHHDS.

The project aimed to expand from an initial pilot of 20 000 plots survey between 2002and 2004 to include an additional estimated 400 000 plots in the period 2004 to 2006.The project was started based on an initial loan but the plan was to recover the fundthrough payment for the residential licences and through land rent. The project wasimplemented through collaboration between MLHHSD and the local Municipalities.Additional socio-economic data on the owners and on investments on the plots werecollected parallel with the land surveying.The project used a high-tech approach and the estimated costs to the government ofissuing a license was estimated to be USD 9 (10 000 Tsh.) while the official cost tothe owners was USD 5 (5600 Tsh.) plus land rent (which varied with size of the plot).These costs may be considered affordable by most of the licence holders but theproject faced problems in the collection of licence fees and only 25% of the expectedfunds had been recovered by August 2006, while the aim had been 100% recovery.The recovered funds were planned to be used to expand the surveying and licensingand this caused a delay in the expansion of the project. While more than 200 000properties had been mapped, only 43 000 licences had been issued although theprocess is ongoing. As a remedy to this problem the government has tried to make itcompulsory to get the licence for the surveyed plots and it remains to be seen howsuccessful this has been.Kironde (2006) investigated the reasons why residents may or may not be willing topay for and obtain residential licences. These included:1. Exposure to a number of new payments that were not paid before. Theseinclude land rent, stamp duty and residential licence fees. Since the licencesare of short duration (two years) and have to be renewed, people are reluctantto pay even though the fees are fairly low.2. Exposure to development conditions. Licence holders have to seek buildingpermits and prepare architectural and engineering drawings, which are costlyto prepare, and they have to pay a number of fees before they can establishnew buildings on their property and getting a building permit in Dar es Salaammay take a year. Before they did what they wanted.3. Unrealistic space standards. A minimum plot size of 400 square meters wasestablished and it turned out that 87.5% of the plots were smaller than this.4. Delays in issuing licences. Offices tend to be far from the owners of licencesand there is a lot of missing information in the registries because the ownersmay not have been present when the survey was carried out.5. The Residential Licence is considered as collateral with a high risk. Many fearto use their property as collateral because they may fail to pay back the loanand risk losing the property. The property is considered more important as ashelter and social security than as an asset for securing loans. Some have triedbut failed to obtain loans from banks due to the short duration of the licence,non-accessibility of the properties and lack of assurance of how the loanshould be repaid.

6. Poor information and limited participation. The majority of the residents werenot informed before the project was implemented and were not informed inadvance when their property was to be surveyed, causing many of them to beabsent and data collection to be limited, even plot border identification wasnot accurate.7. Verification of registered data. Based on the point above it was not possiblefor the residents who were absent during measurement to verify the quality ofthe registered data.8. Short duration of licence. A two year licence that has to be renewed bypayment of additional fees is both cumbersome and may not provide thetenure security that would enhance the demand for such licences. This systemadds to the bureaucracy and reduces the suitability of licences as collateral forloans.There may be a lot to learn from these experiences and there seems to be considerableroom for improvement in the future approach to formalisation of urban unplannedsettlement areas. The added value of the Hanna Nasif pilot study is not clear,however, and it is not evident how it builds on the experiences from the ResidentialLicence project.Contrary to the Residential Licence project no baseline data were collected for thehouseholds involved in the Hanna Nasif project. Kironde (2006) revealed manyweaknesses in the baseline data collected in the Residential Licence project butnevertheless there is a substantial data base that may be built on and improved upone.g. for impact assessment in relation to the project. The value of Hanna Nasif as apilot could be enhanced if good quality baseline data could be established.Handeni pilotThe purpose of this pilot study was to test a few innovations on land use planning andregistration in order to come up with a more efficient methodology forimplementation of the Village Land Act of 1999 and secondly to gain field experienceon implementation of the Act that would produce reform proposals for the envisagedreforms in rural land management systems. Handeni was chosen because it was one ofthe Districts covered in the survey during the Diagnostic Phase by ILD.During the survey three villages in Handeni were found to have started implementingthe VLA while only nine Certificates of Customary Right of Occupancy (CCROs) hadbeen issued in a period of 2 years. This rose curiosity for MKURABITA to do a pilotproject in order to gain field experience to identify practical changes that would speedup implementation of the Act.Handeni District had already prepared the District Land Use Framework Plan; it hadalso constructed a District Land Registry and had obtained the necessary equipmentlike computer and GPS. Therefore the MKURABITA project in Handeni begun bymobilizing and sensitizing concerned village councils to participate in the exercise.The project went through the following steps:1. Educating the village councils about the VLA and training of the technical team

2. Boundary adjudication and surveys3. Preparation of Village Land Certificates (VLCs)4. Construction of Village Land Registries5. Preparation of Village Land Use Plans and its by-laws6. Survey of individual land parcels7. Issuance of Letters of offers8. Issuance of Certificates of Customary Right of Occupancy (CCROs)9. Registration of CCROsMany lessons were learnt from the Handeni pilot of which the following are the mainobservations;1. It is important to mobilize the village properly to fully participate in theprocess. It is important not to rush the process too much when doing this.2. Temporary staff like Form 4 leavers may quickly be trained such that they canimplement this type of survey work as technical support staff.3. Establishment of village borders may be challenging and may involve disputeswith neighbouring villages.4. Issuing of village land certificates (VLCs) should be decentralised from theCommissioner of Lands and to District Land offices.5. Villages should themselves take the responsibility to establish village landregistries.6. Establishment of Village Land Use Plans requires participation by all relevantstakeholder groups and preferably the relevant professional staff from Wardlevel.7. The land use plans need to be accompanied by bylaws and it is important thatthe villagers are involved in approving these to ensure that they do not violatethem.8. Forms to be filled to get individual certificates are long and cumbersome andneed to be filled in many copies. This should be simplified.9. Spot adjudication is tedious when neighbours have to be mobilized for eachapplicant who voluntarily wants to obtain a certificate.10. The process of issuing a letter of offer before issuing of the certificatesappears unnecessary and cumbersome.Some other actors were involved in the Handeni pilot. These included the Legal andHuman Rights Centre (LHRC) and the Tanzanian Pastoralists, Hunters and Gatherers43

Organization (TAPHGO). Some of their conclusions on the experience aresummarized by Mkulila (2006) and Sundet (2008)14. They perceived that the attemptto “fast tracking” the process caused more problems and contributed to land grabbing,partly due to misinterpretation of the term customary right of occupancy, causingsome to claim ownership of land where their forefathers were buried whilst someother people have been on the land for over 30 years. A group of Maasai women werealso left out of the process.Sundet (2008) also refers to a report which states that two local businessmen managedto gain access to 2000 ha of land in the process, causing others to have becomelandless. Still, Mkulila (2006) thinks that the Handeni experience with participatoryland use planning is something to build on through further modifications and testing.Participatory land use planning, if property implemented, not only as a quick PRAactivity but by establishing more permanent local teams with representatives from allkey stakeholder groups, may help to sort out or reduce land use disputes.Bagamoyo pilotThis was the second pilot area selected by MKURABITA after Handeni to further testthe Village Land Act. Unlike Handeni, Bagamoyo district has neither preparedDistrict Land Use Plan nor does it have a District Land Registry equipped withnecessary facilities like computers, printer, cabinet files, GPS, etc. However, whereasall seven villages selected for the pilot project in Handeni District had not beensurveyed and issued with a Certificate of Village Land (CVL), all six villages selectedfor the pilot project in Bagamoyo had already been surveyed with village bordersestablished but they had not established Participatory Land Use Management teamsby the time the pilot project started.MKURABITA provided assistance to establish a District Land Registry, organiseestablishment of Participatory Land Use Management teams, computers, GPSs,software, etc to implement registration and issuing of CCROs. Those receiving thecertificates have to pay 7500 Tsh. per certificate while the total cost is about 50 000Tsh. per certificate. Certificates are issued with pictures of the owner and a small mapof the plot which shows the actual shape of the plot.Plot adjudication is used as certificates are provided based on demand. The target forthe project is to prepare 3000 certificates for the 6 villages and then to leave it to thevillages themselves to finish the certification after that. At the time of this review1276 village certificates had been prepared. One of the villages, Kiwangwa, producesa lot of pineapples as a cash crop. This was the main reason why it was selected. Thevillages themselves are organising to build village land registries. No socio-economicinformation is collected from the village so they do not know the characteristics ofthose who demand certificates vs. those who do not demand them. This is unfortunate

since much more could have been learnt from these pilots if they were accompaniedwith a high quality household survey.Assessment of the pilots in a national perspectiveMLHHSD have gone far in demarcation of village borders in the country. The nextstep in terms of creating village Land Use Plans, however, is a slower process and thelocal knowledge about the land laws is very limited with a few exceptions wherevarious projects and pilot studies have disseminated information and implementedland use planning.The approach with a comprehensive participatory process, establishing permanentlocal land use planning teams with representatives from the major stakeholder groups,holds promise to reduce the number of land disputes and may also help to protect theinterests of weaker groups, like pastoralists and women, however, there is noguarantee that this will be the case. Clearer principles and guidelines may help toensure more successful local land use planning and management and may beimplemented as local bylaws.The establishment of village land use plans does not imply a need for individual plotregistration and certification and the basic question is whether such a land titlingprogramme should be recommended in the rural areas of the country, and if so, whyand where should it be implemented? The approach to registration and certificationthat has been chosen in the pilot areas is expensive, much too expensive compared tothe willingness and ability to pay among the majority of poor rural households. Thealternatives are;1. to implement with the current approach and with considerable subsidies;2. to choose a more low-technology and cheaper approach; or3. to postpone rural land certification and leave it for those few who are willingand able to pay the full price.The first alternative requires justification for why large subsidies should be used forthis (the benefits in a national perspective compared to its cost). It would requirestrong donor support for such a reform but even in the donor community this iscontroversial as many are sceptical to individual titling in customary lands. It is notadvisable to raise local demands through dissemination of promises of access to creditfrom banks if banks will not be willing to provide their services at an affordable priceto typical smallholder farmers in rural areas; for banks the only feasible clients willmost likely be larger scale commercial farmers.The second alternative, which has been implemented in other countries like Ethiopiarecently and with substantial success, may also be an alternative in parts of Tanzaniabut it would require pilot testing and adjustment to local conditions (ref. sectionsbelow).The third alternative is to continue on the existing model and provide registration andcertification based on demand with the plot adjudication approach. The pilot studieshave demonstrated that the costs of certificates with this approach can be substantially

reduced with the orchestrated approach but it is not clear how big the demand wouldbe if the owners were to pay the full price of this approach. Modern computertechnology, use of GPS, etc. have reduced the costs substantially but the costs alsovary considerably with the level of technology which again determines the accuracywith which plot borders can be mapped and demarcated. There appears to be anexcessive attraction in MLHHSD and in MKURABITA towards a higher level oftechnology than can be defended on economic grounds and very little has been donein the pilots to explore cheaper alternatives or to identify the actual willingness to payfor registration and certification based on realistic assessments of the benefits that canbe derived from it. Further research on this is clearly needed before implementationcan be recommended.The risk of promoting individual registration and certification based on demandshould not be underestimated. Poor and vulnerable groups easily loose out with thisapproach. Those who can afford can get more secure property rights and may be ableto encroach and grab land from less powerful and less wealthy households. Theapproach may therefore have negative social welfare effects. It is possible that suchnegative effects may be reduced substantially if village land use planning isimplemented at a broad scale and the laws are strengthened to better protect againstland grabbing. This is another good reason for postponing individual land titling andusing a sequential approach and careful piloting combined with systematic research inareas with higher potential for individual titling. Areas with high population densityand higher land values should first be selected for such piloting.The conclusion appears to be that first priority should be to scale up comprehensiveparticipatory land use planning with the aim to minimise land use conflicts andprotect the rights of all groups that depend on the land as a livelihood. Moresystematic piloting is needed to improve upon the participatory land use planningapproach. Proper professional research should be carried out to maximise learningfrom the pilot studies and more pilots should be implemented to test differentapproaches. Immediate action is recommended to establish baseline surveys in thepilot study areas; otherwise it will not be possible to identify impacts of landregistration and certification. The World Bank is currently planning to implementhousehold surveys in selected rural as well as urban areas to assess the potentialbenefits from land reforms. It may be possible to ask the World Bank to include theMKURABITA pilot areas in the planned baseline survey as the most cost-effectivealternative that also would help to ensure good quality data collection.The consequence is that much of the potential benefits in terms of knowledgegeneration from the pilots will be lost and most of the resources will have beenwasted. Further pilot testing with more low-cost methods, allowing learning from theexperience in other countries, is recommended but this should also be accompaniedwith professional research. The proposed research using modern impact assessmentmethods requires substantial professional inputs that MKURABITA and the otherinvolved actors, including ILD and NPA do not possess today. Researchers from localuniversities with international professional backing should be used for this type ofresearch to ensure good quality.NGOs, like NPA and HAKI ARDHI, may play important roles in the scaling up ofvillage land use planning but it is even more important to build this into or buildstrong links to the local governments and the local government reform programme46

6.2 Research and Reform Practices in other CountriesThere is a vast literature on land rights, land policies and reforms in Africa. Manyissues are debated and alternative views contested. First, Africa is a very diversecontinent and contains accordingly very diverse land tenure systems. The land tenuresystem may be seen as an endogenous institutional system that is continuouslyundergoing changes in response to various forms of pressure.According to the Evolutionary Property Rights Theory (Platteau, 1996)15changes inproperty rights may be gradual and the stage when it becomes optimal with moreindividualised property rights may only appear after a certain level of populationpressure, stable settlement patterns, land use practices, and social infrastructures havebeen established. In this perspective there can be an optimal timing for introducingmore individual property rights but the optimal timing is a function of the keycharacteristics of the society or economy under consideration.The benefits of private property rights are likely to be higher in locations with higherpopulation pressure, better market access, and more economic activity. SinceTanzania also is very diverse and diversity also is substantial in rural areas, thisshould be taken into account when proposing reforms in the land tenure system.The Evolutionary Property Rights Theory does not imply that land tenure institutionsnecessarily evolve in an optimal way. Transaction costs and political economyconditions may cause the land tenure system to respond slowly and lag behind in theadjustment or it could even be sidetracked by strong political interest groups. Policyreforms may therefore be a form of induced institutional innovation that may releasethe growth potential of an economy and/or it may be a way to change the distributionof the benefit stream coming from the resource utilisation.The new land reforms that are promoted by the World Bank, the Commission forLegal Empowerment of the Poor, the Global Land Tools Network and others aim topromote growth as well as reduce poverty, but the fact that many of the past landreforms in Africa failed implies that there still is a search for better ways to designand implement such reforms.A precondition for successful land reforms is that there is local demand and rationalebut such demand should not be created by dissemination of speculative assumptionsabout substantial wealth increases and credit access. Rather reforms should be basedon assessment of the impacts of strengthened tenure security on the amount and costsof land disputes, on land transactions, investments and productivity, or on landresource access or income benefits for different vulnerable groups like pastoralists orwomen. No systematic attempt at identifying and measuring such impacts has been

made in Tanzania yet, meaning that the judgement of costs and benefits of the reformsremains speculative.In this context it is relevant to refer to Douglas North (Nobel Prize in economics) whoin his bookStructure and Change in Economic Historyfrom 1981, distinguishesbetween a contract theory of the state and a predatory theory of the state. According tothe contract theory the state and associated institutions provide the legal frameworkthat enables private contracts to facilitate economic transactions (by reducingtransaction costs). According to the second theory the state is an instrument to transferresources from one group to another. North combines these theories and argues thatgood institutions simultaneously support private contracts and provide checks againstexpropriation by the government or other politically powerful groups. It appears thatthis perspective on the state is highly relevant also in Tanzania. Property rightsinstitutions should protect citizens against expropriation by the government andpowerful elites16With this backdrop there are important lessons that may be drawn from othercountries. In Ethiopia they have recently implemented the largest low-cost and high-speed land registration and certification programme in Africa distributing non-freehold land certificates to more than 6 million individual rural households. Theirexperiences may have relevance for other African countries, including Tanzania. Oneimportant lesson from Ethiopia is that research has been implemented to identify andmeasure the impacts of the large-scale reform in different parts of the country. Theseidentified impacts arenot based on assumptionsabout increased market value of theland buton observed impacts.Similar methods may be used to identify the effects ofthe land reforms in the pilot study areas in Tanzania.Research on land markets in AfricaRecent research on emerging land markets in Africa17show that land rental marketsreallocate land from land-rich to land-poor households in countries with skewed landdistribution while land sales markets are so thin that they have more limited impact onthe distribution of land. Land rental markets have the advantage that payments peryear are much smaller and renting of land therefore is more affordable by the poor.However, the research also documents that there are substantial transaction costs inthe land markets, but land reforms may contribute to reduce these transaction costsand this may have positive effects on efficiency as well as poverty and equity(Holden, Deininger and Ghebru 2007).While this type of research has not been carried out in Tanzania it is likely that similareffects may be found. Future research should therefore focus on the welfare and

efficiency implications of land sales and land rental markets in peri-urban and moreland-scarce rural areas in the country.The Ethiopian Experience with Low-Cost and High-Speed Land CertificationUnlike Tanzania and almost all other countries in Africa, Ethiopia was nevercolonised. It had a “feudal” system with rich landlords and poor tenants in the southof the country and a system with community-based land distribution in the northernparts of the country until 1974-75 when the military (Derg) regime took power andintroduced a radical land reform where the state took ownership of all land and landuse rights were distributed to communities and to individual resident households inthe communities based on their needs.Household size was the main determinant of land access and more or less frequentland redistributions were instituted to sustain the egalitarian land distribution overtime. A basic consequence of this reform was, however, that households becametenure insecure and less willing to invest in the land because they did not knowwhether they would keep the land after the next land redistribution.After the change in government in 1991 a new federal land policy was introduced in1997 and followed up with regional land laws as well, leaving some autonomy to thedifferent regions in the federal state. Following this the Tigray Region in northernEthiopia was the first region to implement land registration and certification in 1998-99 and was followed by other regions, like the Amhara Region from 2003, and theOromia and SNNP Regions from 2004-05. By 2006 more than 6 million landcertificates for more than 20 million plots of land had been distributed to individualhouseholds18The following are some lessons of relevance to MKURABITA;-The land reforms in Ethiopia were implemented in the densely populatedhighland areas dominated by smallholder agriculture. They have not beenimplemented in the lowland pastoralist areas.-Selling of land is still illegal and so is mortgaging of land. Land cantherefore not be used as collateral for accessing financial services.-Land certification appears to have stimulated land renting activity becausepotential landlords feel more tenure secure and have become more willing torent out their lands19. Many landlord households are female-headedhouseholds that lack the necessary non-land resources to farm the landefficiently themselves. Sharecropping is the dominant contract form and thecontracts help poor female-headed households to get food output and

income from their land while the land is operated by more efficient tenants.We did not come across any good studies of land renting in Tanzania. Thepotential benefits of land rental markets for poverty-reduction appear to beoverlooked by MKURABITA. Research on land rental markets in Africashows that land rental markets are much more pro-poor than land salesmarkets which tend to be anti-poor20.-Land certification has stimulated investments in soil conservation and treeplanting on certified land and has contributed to enhance land productivityon such land21. It is the increased tenure security which has made peoplemore willing to invest on their land.-Provision of joint certificates to husbands and wives, with space for thenames and pictures of both spouses on the certificates, appears to havestrengthen women’s land rights and this may affect their position in cases ofdivorce and death of their husband. Particularly the position of polygamouswives appears to have been strengthened through this arrangement with jointcertification which was implemented in the Oromiya and SNNP Regions ofEthiopia since 2004-05 but more time is needed to observe more substantialimpacts of this element of the reform22. It appears that land titling pilots inTanzania and even the land laws have done very little to strengthen the landrights of women.-Land registration and certification has contributed to reduce the amount ofland-related disputes both during and after the land reform was introduced.Particularly the number of border disputes has been reduced. Strong localparticipation is important to ensure this success as evidence from somelocations where implementation was poor appeared to exaggerate landdisputes23. The large majority of land-related disputes in Ethiopia areresolved through local informal conflict mediation. Trusted local elders aremediators in such disputes. This appears as a cost-effective system and localpeople have more trust in the local mediators than in the judges in theformal courts, who they often perceive to be corrupt.-The low-cost approach used in Ethiopia does not involve use of computers,GPSs or maps24. The records are registered in books kept at community(kebelle) and district (woreda) levels. The registration was broad-based andinvolved all individually held land in the communities. Students with

20 Holden, Otsuka and Place (2008). Emerging Land Markets in Africa – Implications for Poverty, Equity andEfficiency. Resources For the Future Press, New York.21 Holden, Deininger and Ghebru (2008). Impacts of low-cost land certification on investments and productivity.Paper presented at Annual Conference of Economists, University of Oslo, January 7-8, 2008.22 Holden and Tefera (2007). From Being Property of Men to Becoming Equal Owners? Impacts of LandCertification on Women in Southern Ethiopia. Final Report for UN-Habitat, Nairobi.23 Holden, Deininger and Ghebru (2007). Impact of land certification on land disputes in Tigray. Paper preparedfor the World Bank.24 There was variation across regions and even within regions in some of these practices but we cannot go intodetail on this here but focus on the dominant practices.

limited training were used and local participation was strong. Communityleaders and elders were involved and Village Land AdministrationCommittees were elected with representatives from the different sub-villages to carry out the necessary fieldwork. All neighbours were to bepresent during observation and demarcation of plot borders and to measurethe areas of plots. Only local tools were used for the measurement. A singleone-page form was used for each household-farm which could consist ofseveral separate plots of land25. For each plot the name of the location of theplot, the plot size, the land quality class, and the names of all neighbourswere recorded. More advanced technology approaches are tested in pilotareas with assistance from SIDA and USAID but no careful impactassessment has yet been implemented to assess whether these approacheswith their added quality provide benefits that compensate for the additionalcosts given the level of poverty of Ethiopian rural households and the smallsizes of their farms. The added Willingness to pay for such improvedcertificates is positive but fairly low (Deininger et al. in press; Holden andTefera 2007). It is not obvious that maps and GPS coordinates add to tenuresecurity. Local witnesses may be more important.-Demarcation of borders for communal lands was left out in the early stagesof the reform and has come as a follow-up second stage. New revised landlaws at federal and regional levels came in 2005-2007 and these provide astronger basis for implementation of land use planning and promoting moresustainable land use practices and with the local Land AdministrationCommittees getting the responsibility for implementation, monitoring andenforcement. The land registration exercise was very demanding and itwould not be wise to overload these local committees with too many dutiesat the same time. When all land has been registered and certificates havebeen distributed, there is more capacity to do other things but it is importantto recognize that the work of these committees in Ethiopia has been unpaidwork. With more permanent duties a system which provides them with aminimum of compensation needs to be introduced. It is possible that theTanzanian approach with demarcation of village borders and establishmentof land use plans before demarcation of individual holdings is moreappropriate, particularly in areas with low population density and moreextensive land use systems. How far one can go is depending on thepossibility of mobilising local support and participation in landadministration and land use planning.-An advantage with the Ethiopian reform was that it involved all privatelyused land in the included communities and such a systematic registrationand border demarcation is considerably cheaper than the demand-based plotadjudication that has been implemented in the Tanzanian pilot areas evenwhen the “whole village-approach” is used. A compulsory low-costapproach may also work in Tanzania in densely populated areas but more

testing is needed to identify an affordable technology level and whetherlocal demands and benefits are high enough to scale up such an approach.The cost of land registration and certification in Ethiopia has been estimatedto be about 1 USD per plot and 3.6 USD per household and this is muchlower than the cost estimates we were provided by MKURABITA in thepilot test areas where separate certificates were prepared for each plot. Theestimated costs in Ethiopia with high precision total stations were about 6USD per plot and about 21.6 USD per household, while an intermediatelevel of technology with handheld GPSs would cost about 1.5 USD per plotand 5.4 USD per household, only about 50% more expensive than thetraditional low-cost method (Deininger et al. in press). This is considerablycheaper than has been found in other African countries and may serve as auseful benchmark.Village Land Use PlanningVillage land use planning is now being implemented in Tanzania and several othercountries. It is a promising approach that may help to reduce and prevent landdisputes. However, it faces many challenges in how to arrive at good compromisesolutions when there are conflicts of interest and minority groups risk losing out tostronger majority groups. It may also be worth looking at some of the experiences inother countries where this approach is tried. One example is a strategy tested by theCustomary Land Security Project in central Sudan and funded by USAID. The stagesin the implementation of the approach is summarised in the box below26.

Customary Land Security Project, stages in the approach:

Commitment to the approach through local meetings to identify that there is interest.Delimiting the community domain by establishing Boundary Committee in each community responsiblefor working with neighbouring Boundary Committees.3. Securing support from seasonal right holders. This is especially important in pastoral areas or wherepastoralists seasonally access pastures in areas that otherwise are occupied by more permanent settlers.4. Establishing modern customary land management by establishing Community Land Councils in eachcommunity that are responsible for land use planning and regulation of access and use. This is acommunity-based organ that is not paid by the Government.5. Securing policy and legal support. This should be in place first and should make it feasible to establishdistrict or provincial registries of Community Land Areas and for registration of common propertieswithin those areas.6. Final registration of community domains in the relevant registries and providing legal recognition to theLand Councils as the lawful authority.7. Simple land use planning and regulation by Land Councils by zoning land into use classes.8. Restoring wrongly appropriated properties where there has been conflicts.9. Formalizing common properties.10. Establishing community-based land dispute resolution machinery.1.2.

6.3 Good practises related to business formalisation.When observing practices in efforts to encourage formalisation lessons from severalcountries and the Doing Business Studies of the World Bank27suggests that it isimportant to recognise who are to be formalised and why. Informal sector businesses(or “extra legal” business) that operates outside the formal economy are highlydiverse and there is significant variation in the composition of the informal economybetween countries and regions and within individual countries, so also for Tanzania.People work in the informal economy for a wide variety of reasons, either throughchoice or because they are forced to do so.Accordingly, informality means different things to different people and in differentdevelopment contexts. People and businesses may stay in the informal economy onlytransitionally, or for an extended time. Informal economy enterprises may be efficientor inefficient and entrepreneurs may be well-educated or poorly educated. Muchdepends on individual circumstances and government policies and theirimplementation at local levels.Accordingly, reform to promote formalisation should be based on robust research andgrounded in a good understanding of the reality of the informal economy actors underconsideration. It should not only be based on studies of barriers to enter existingformal systems but on an understanding of the desire, benefits and costs that makesbusiness operate as informal enterprises. Removing administrative barriers may notlead to voluntary formalisation if there are other considerations that have led a personto operate informally and enforcing formalisation may even constrain rather thanpromote businesses and growth. In many countries, like Tanzania, the informal sectoris a major contributor to growth in employment and wealth and for many the onlyopportunity to generate income.The main focus of attention should be on the enterprise perspective and for those thatdesire to formalise as a potential for growth. This is based on the wide recognitionthat there is a continuum between informality and formality i.e. few enterprises followall the rules governing enterprise behaviour, and few follow none of them.Formalisation is agradual processthat does not involve moving from one fixed stateto another e.g. a business in Tanzania may have registered its name in BRELA but donot pay any taxes nor declare their employees for the purpose of social insurance.Outcome of research on informal sector suggests that entrepreneurs make repeatedeconomic calculations along the lines of a cost/benefit analysis, which determines aminimum threshold of formalisation for which the costs remain lower than thebenefits, i.e. businesses will formalise to the point where the marginal costs of doingit are less than the benefits they will gain.Research and donor experience identify a number of reasons why policy makersshould give significant consideration to the informal economy:

-The informal economy in many developing countries is large both in termsof number of actors and in terms of contribution to GDP, and the informaleconomy isgrowingrather than shrinking.-The informal economy provides asafety netfor people who are unable tofind work in the formal economy, especially where population growth isoutstripping the formal labour requirements and where basic skills arelacking. Many governments are undertaking interventions to address theneeds of this segment of the economy, accepting that formalisation is oftennot a realistic or even a desired, option.-Women and disadvantaged groups, such as people living with HIV/AIDS,are disproportionately represented in the informal economy.-It is important to have good data about the size and composition of acountry’s informal economy; otherwise it is difficult to formulate evidence-based policy and reforms.The justification for formalisation from a government perspective is frequently listedas;-To provide higher quality, better paid, more sustainable employment.-To reinforce the social contract between citizens and their state, strengthenthe reliability of agreements between firms, and build investor confidence.-To broaden the tax base (potentially permitting lower taxes).-To increase information available about enterprises in order to strengthenframeworks for policy; and to reduce information asymmetries and facilitatetrade and investment.-To reduce the cash economy and provide more resources for intermediationby the formal financial sector.-To improve access to business services, formal markets, and productiveresources such as capital and land.-To increase the welfare of marginalized groups caught in the informaleconomy through confirming their rights to participate in marketopportunities.However, there is limited evidence to support the assumption that formalisationactually promotes short-run growth. Countries with high levels of per capita GDPhave smaller informal economies but there is no evidence to determine ifformalisation is a cause or an effect of development.Informality is frequently considered as a barrier to growth of an enterprise because itis then denied access to key services, denies them the ability to separate business andpersonal assets and thus increases risks which in turn constrain business growth.However, this by itself does not determine if growth promotes formalisation orformalisation promotes growth.54

As an illustration; entrepreneurs in Tanzania stated that they would formalize if theirbusiness growth was dependent on it which suggests that growth leads toformalisation rather than the other way around28. While there is no conclusiveevidence that formalisation is in itself a major cause of economic growth, there isevidence to suggest that a large informal economy is not conducive to the long-termprovision of public goods needed for growth, nor does it permit adequate socialsecurity expenditure or the creation of a society in which businesses can trade andinvest with confidence. Formal economy jobs can provide greater economic andsocial benefits than those in the informal economy, so greater formality may alsoequal better pay and protections.A large informal economy may also serve as an indicator of breakdown in the socialcontract between citizens and the state, a sign of a state which has lost citizens’ trustis failing to deliver basic services and protections. States with large informaleconomies find it hard to raise the revenue necessary for investment and the provisionof public goods. This leads to worse delivery of services and a vicious circle in whichbusinesses become even less willing to pay taxes.Research do however indicate that efforts to reduce the informal economy are likelyto help reduce poverty, becausereducing barriersto formalisation can stimulateenterprise growth and create improved working opportunities. Informal economyactors are, in relative terms, more likely to be living in extreme poverty than workersin the formal economy.The World Bank “Doing Business report” shows no single indicator as a key factor inpromoting formalisation. This is because some countries that does well in one aspectof the business environment also do well in others. However, evidence from researchconclude that countries that have lower regulatory burdens also have smaller informaleconomies. This suggests that regulatory burdens have a cumulative impact.Most research and studies recommend that formalisation should bedemand drivenbyways of creating a more enabling environment; where costs of complying withregulations are less then the benefits and this suggests a two-fold approach;-initiatives aimed at increasing services to business; and-initiatives aimed at reducing regulatory and administrative barriers toformalisation.The former includes initiatives to provide financial services (like micro-finance),better infrastructure, procurement opportunities and other support to informalbusinesses. This approach seeks to strengthen the “push” effect into the formaleconomy in the belief that greater service provision will lead to growth andformalisation. To make this approach even more effective, service may be reservedfor formal enterprises only in an effort to increase the advantages of formality.The latter approach works on the “pull” effect by reducing the costs of formality. Itincludes initiatives to improve business registration and simplify tax administration.

The main focus of MKURABITA has been on the latter while the former is on theagenda of other programmes.While improving services to informal enterprises may help them grow, there is moreevidence for the removing barriers approach to formalisation. The latter also addressthe challenge of avoiding the potential conflicts of forcing enterprises away from aposition that has been reached through rational choice as one that maximizes businessperformance. The removing barriers approach is essentially one that seeks to reducethe cost side of the equation for entrepreneurs in the cost/benefit analysis theyundertake when considering formalisation.The above has led to some stated good practice approaches in promoting businessformalisation with emphasis on reducing barriers to formalisation;-Introduce RIA for evidence based policy making and design of reforms.-Simplify official administration for businesses. Review and reducepaperwork.-Design measures to create a business-friendly culture in government andimprove the quality, quantity and accessibility of services. Consider servicecharters and one-stop-shops for business.-Simplify tax administration with single taxes for Micro-, small and mediumscale enterprises.-Avoid retroactive taxation for enterprises that formalize (penalty afterpromoted into formalisation).-Share information on what tax revenues are used for, and how businesseswill benefit from enhanced services.-Rationalize business registration and licensing regimes, and separate the onefrom the other. Use ICT to streamline the process and share information.-Separate the function of revenue generation from business registration.-Restrict licensing to those activities where it is justified on health, safety,environmental, consumer protection or other grounds.-Reduce registration fees and statutory requirements.-Identify areas for labour law reform, protecting essential rights whilemaking it easier to hire and fire workers and to employ on flexible contracts.-Make it easier to register producer associations so that the benefits offormalisation can be made available to groups comprising individuals whowould not separately have made the effort to formalize.Whatever formalisation procedures or regulations are established, most businessclimate studies point to the fact that the single most important factor is not the formallegal and procedural framework that is they key issue, but their predictability in their

application i.e. that when businesses transact with the government they can predict theoutcome without being subject to unforeseen delays or hassles by the bureaucracymaking their own preferences on how procedures and regulations are to beinterpreted.MKURABITA focuses on the reducing barriers to formalisation. As stated above thisis what has shown to be the most promising approach in promoting formalisation. It islabelled as the “pull” effect since it reduce the entry cost of those business who facesconstraints in growth by operating in the informal sector (“extralegal”).However, as suggested by studies referred to above, informal businesses makerational choices based on available information. Thus the approach promoted byMKRABITA for “massive formalisation” is not desirable nor is there evidence tosuggest that formalisation by itself leads to growth in business employment andincome. On the contrary, there is no evidence to suggest that formalisation is a driverfor growth and certainly not for all enterprises in a diverse informal sector economyas the case is in Tanzania.It is also important to recognise that formalisation is a continuum, that a businessdepending on the nature of its business and stages of growth will benefit from someregulatory requirements but not for others with the most important factor beingevidence that the legal and regulatory system is in fact enforced in a predictablemanner regardless of what ever legal and regulatory framework that is put in place.This suggest that the approach should begradual,that business associations andothers should be continuously informed of the outcomes for business formalising,which again suggests (as for formalisation of property rights) that the process isinformed by continued surveys and research on the developments. It also suggestsmore emphasis should be put on education of government officials at local andnational levels about the importance of the informal economy and the role they canplay in increasing formalisation through offering improved services.

7. TIME FRAME AND RESOURCES REQUIREMENTSThis chapter will focus on the required time frame for the suggested reforms as wellas the resource requirements and sustainable sources of funding for implementation.When this is stated it is important to clarify that the reform proposals that have beenpresented to us appear to be very preliminary and they have not undergone a thoroughscrutiny by the key stakeholders in Tanzania. These key stakeholders include otherreform programs that we have described in chapter 5.5.We have found considerable overlap between these other reform programs and theMKURABITA programme. This makes it also questionable whether we should assessthe resource requirements for the combined reforms or for those that, after a processwith interactions with these other programs, are found to be additional to thoseimplemented by the more specialised reform programs like the Business EnvironmentStrengthening for Tanzania (BEST) Programme, the Strategic Plan for theImplementation of the Land Laws (SPILL) under the MLHHSD, the LocalGovernment Reform Programme led by the Ministry of Regional Administration andLocal Government, and The Legal Sector Reform Programme (LSRP) led by theMinistry of Justice. Furthermore, it is highly likely that such an interaction process islikely to lead to substantial changes in these “additional reforms” that would make iteven more doubtful at this stage to assess the resource requirements and necessarytime frame.Law reforms have to be implemented through the particular ministries that areresponsible. This means that these ministries must be on board and take the majorresponsibility for pushing such law reforms. How long this will take depends on thenature of the reforms in terms of how comprehensive they are and how muchresistance they meet. Such resistance can be strong if strong stakeholders see theirinterests threatened by the reform. We may use the land reform in Malawi as anexample. After a long reform process the new land laws were ready to be passedthrough the Parliament in 2006. This reform had many similarities with the land lawreforms that are proposed in Tanzania. But still up to now it has not been passed,primarily because of resistance among the local chiefs who also have a strong positionin the Parliament. In Tanzania there are many stakeholder groups that would resistdevolving too much power over the land to villages and village leaders as seen by theincreasing competition for land. It may therefore not be easy to pass land laws thatsufficiently protect the rights of poor and vulnerable groups.It is possible on the basis of the pilot studies to make some rough estimation of thecosts of implementing broad land registration and titling, but it would be moreappropriate to work out the costs for implementing village land demarcation andvillage land use planning. However, since no pilot programme had specificallyfocused on this we have very limited data for doing it. SPILL has already gone far indemarcation of village borders. Further refinements are still needed when it comes todesigning an appropriate participatory village land use planning approach. Thequestion is how much outside training and supervision it would require and whether itwould be implemented by MLHHSD in collaboration with Ministry of RegionalAdministration and Local Government. After the institutional approach has been

identified it may take several years to fully implement the approach as time will berequired for proper participatory learning by doing even if initial training is provided.Donor support may be important in the initial phase of such a reform.The costs of the 7 years SPILL programme were estimated to be 300 million USD ascompared to the 7 million USD costs of MKURABITA. Village Land surveying ofabout 300 villages has costed about 3.6 million USD. The total number of villages inTanzania are more than 13 00029(a further increase from the 10 313 registered in2006). If we assume that the pilots were excessively expensive and costs can bereduced to half, the costs of extending the survey to all villages in Tanzania would beabout 78 million USD.Broad-based titling of individual holdings may be appropriate in peri-urban areaswhere pressure on land is high and conflicts common. Broad baseline surveys shouldbe carried out in such areas to better identify the problems and assess the demand forsuch reforms and assess their potential impacts. The costs of implementing suchsurveys are fairly small compared to the costs of the Diagnosis study and they wouldprovide a better basis for identifying geographical locations that should be prioritisedfor follow-up reforms. Only when the “universe” for appropriate reforms has beenidentified (based on proper cost-benefit analysis identifying private as well as socialcosts and benefits, the appropriate level of technology for the reform, and the abilityand willingness of the receivers of land titles to pay for certificates), can theadditional costs be estimated. Based on this one may also make a realistic plan forintervention.The Residential Licence project in unplanned settlements that is undertaken by theMLHHSD gives an idea about the costs and problems of cost recovery throughpayment for the licences. By proper learning from this project it should be possible toboth improve the quality of this type of reform and improve cost recovery but stillcosts are substantial. The costs of this project aiming to cover 400 000 land holdingsin Dar es Salaam has been estimated to be 6.1 million USD but there is limitedinformation on how this estimate took into account cost recovery through payment offees etc.The World Bank has made some estimates of the costs of various elements of a landreform. The costs of establishing better conflict resolution mechanisms, includingLand Tribunals in 23 districts and High Court Land Divisions to deal with land-related disputes are estimated to 5.5 million USD. The costs of establishing acoordinated Land Registration and Information system have been estimated at 4.9million USD while the costs of establishing a geodic system and mapping at scale1:50 000 based on satellite images are estimated to be 7.5 million USD.

8. IMPLEMENTATION ARRANGEMENTSThe review of implementation arrangements are based on the first draft reformprogramme proposal which still is under finalisation. This however, gives anopportunity to contribute to the discussion within the President’s Office as well asamong stakeholders on various options available, the benefits and likely challengesassociated with the different options.The Reform Programme document and the diagnostics report point to a need for anational level organization with sufficient mandate to supervise the formalisationprocesses, conduct studies required to put in context the challenges and providepermanent overall monitoring and oversight functions. According to the ProgrammeDocument two alternatives are being considered for establishing the institutional andlegal framework for the implementation of the reforms:-Alternative 1:Enact many miscellaneous pieces of legislation that providesfor all pieces of legislation that implement the reform and empower existingdepartments to oversee the reforms.-ii. Alternative 2:Enact one general law (special) that creates a nationalorgan to oversee, regulate and facilitates the formalisation processes.Alternative two implies the formation a special entity that will implement theproposed reforms. The choice made was based on an assessment of which of theexisting types of public entities in Tanzania fits best with the profile of the entity thatwould be responsible for implementing the institutional reform programme. As anoutcome of the analysis a number of initiatives and institutions that can support theformalisation processes were identified:-BRELA/Registrar Generals Office for Zanzibar can be reformed toincorporate the responsibility of informal Business registration.-The Ministries responsible for land can be restructured to form executiveagencies for land administration and management. Those agencies willthen be charged with the responsibility for informal property formalisationas well. Such an agency can enter into arrangements with the District andVillage Councils for setting up and maintaining the District and VillageLand Registry and ensuring that this information is availed at the ward,district and national levels.-RITA/Registrar Generals Office for Zanzibar can be reformed to includethe responsibility of designing and administering a national identityregistration and management system. This is also indicated in the recentpre-feasibility study on the establishment of a national integrated registrysystem for persons, property and business commissioned byMKURABITA.The programme document specifically highlights the justification for a new entitybecause of:60

-The need to mainstream the Programme with the ongoing reforms in linewith national Strategies.-The long term nature of the Programme.-The broad impacts on several key areas of public policy notably on land,labour, investments, trade and governance.-The need to adopt the bottom up approach in the design of the reform andsubsequent implementation.-The need to consider piloting of the proposed reforms during ReformDesign phase so as to draw lessons that will help in improving the reformdesign.-The importance of continuously collecting information on similar reformactivities so as to avoid duplication of efforts.-The importance of providing a national focal point for the FormalisationProgramme and other activities directly related to the programme as well asa an entry point for dialogue for targeted beneficiaries.-The need to further mobilize and manage resources for the Programme.-The need to constantly align the Programme with prevailing socio economicenvironment so as to avoid dual mandate and maintain nationally andinternationally accepted standards in the key areas of property management.Based on the above justification it is proposed to establish a new institution, acommission under the President’s Office with the following mandate;i.ii.iii.To spearhead policy, legal and institutional reforms that will transformTanzania's extralegal economy into a formal economy.To provide a permanent stewardship and oversight to the design andimplementation property and business formalisation programs.To safeguard the interests of the beneficiaries of the proposed reformsagainst adverse impacts emanating from socio-political and economictransitions.To provide a forum and a think tank that will research into effective landand business administration strategies in the context of national, regionaland global economic regimes.

The proposed entity will have the primary mission and mandate of monitoringimplementation and performance of public reforms and acting as an adviser to localand national governments on matters of policy, law, and institutional arrangements inits area of competence.There are in our view two other issues to consider in deciding on what arrangementsare required for implementation of proposed reforms;-To what extent the programme requires an additional entity to implementstated reforms.-To what extent such an entity will add value in the form of efficiency andeffectiveness in implementing them.The first issue is linked to the extent to which reforms as presented in the programmedocument actually represent new interventions or just a comprehensive list of alreadyongoing reforms; if there are new activities proposed, why can they not beincorporated into existing reform programmes managed by the current institutionsimplementing them (MLHHSD implementing SPILL, Ministry of Industry and Trade,the LGDP under the Ministry of Local Government promoting decentralisationthrough local government capacity building, etc.). In fact, BEST has in effect asimilar mandate as the proposed entity and promotes many of the same reforms andsupport many of the same capacity building interventions and developments ofsupport systems as proposed in the MKURABITA programme.The question is if the proposed new entity is to substitute or complement some of thetasks of all these other institutions. In the former case one would need to carefullyconsider the fact that the existing ministries and entities are the ones which in anycase will be the “drivers” of the proposed reforms assuming they are to bemainstreamed and not running parallel to ongoing processes and duplicate mandatesof the existing ministries.The proposal has been made without effective consultations with the Ministries andagencies. Furthermore, the proposal appears to suffer from the misconception of theconvergence analysis and therefore an improper conceptualization of the roles of theCommission and the existing institutions that are also involved in similar reforms.The proposed Bill attempt to confer wide overseer powers and mandates to impellegislative changes in a manner that most likely will be felt as intrusive to othergovernment institutions that are to implement the reforms. This will then create a lessconducive working arrangement for implementation. Accordingly, it is recommendedthat the organ of implementation should have more input and consensus before it isadopted into the reform designs.What will be required is significantly more clarity on the overall Programme, if it is acomplementary or comprehensive programme that includes ongoing reforms, if thereform “packages” then are to be “handed over” to relevant agencies and institutions,and if what additional institutional arrangements are then required to effectivelyimplement them. Since the reforms are wide reaching and cross sector, it will requirean arrangement for oversight, consultations and coordination, in particular related tomonitoring progress in all areas. It could be subject for debate if this function best

performed by an “Inter-ministerial” committee rather than a higher level“Commission”. In any event, it will require a secretariat to support the process whichcould be a unit within the President’s Office rather than a “political autonomous”entity outside. The Programme is to reflect a policy, not independent of a politicalleadership contrary to one of the arguments for establishing a “apolitical” entity.The secretariat would need to be staffed and resourced to fund formative research andstudies related to the implementation of pilots and their outcomes and impact for thetarget group to inform the implementing ministries and agencies for the purpose ofadjusting approaches and reforms. It means that the entity will be a coordinator andservice provider for the implementing agencies rather than a decision maker andoverseer of reforms. The question remains if this is a different role than what BEST isundertaking today.

ANNEX I – TERMS OF REFERENCEUNITED REPUBLIC OF TANZANIAPRESIDENT’S OFFICE – STATE HOUSEPROPERTY AND BUSINESS FORMALISATION PROGRAMMEDRAFT TERMS OF REFERENCEANNUAL REVIEW / EVALUATION OF THE PROPERTY AND BUSINESSFORMALISATION PROGRAMME1.BACKGROUND INFORMATION1.1The Government of the United Republic of Tanzania hasreceived funds from the Government of the Kingdom ofNorway to finance a Property and Business FormalisationProgramme that seeks to facilitate the transformation ofproperties and business in the informal (extralegal) sectorinto formal, legally held and operated entities in the formalsector of economy.The underlying purpose is empowerment of the majority ofTanzanian in the low income bracket to use their resourcesin enhancing their abilities and chances to participate inandbenefitfromtheemergingandmodernizing

Design, Implementation of the Reforms and CapitalFormation and Good Governance.1.4The Diagnosis was satisfactorily completed in October,2005 and the Reforms Design started thereafter.The specific objective of the Reforms design phase is todevelop specific recommendations on required changesin the current real estate and business laws and relatedlegislations as well as the institutional arrangements so as tocreate the envisaged property and business laws that willfacilitate the transformation of real estate and businessassets in the informal sector to entities in the formal sector.The cornerstone of these Reforms is the merging of theimproved legal (policy, laws and institutions) frameworkand standardized archetypes (customary practices andinstitutions governing business and real estate in theinformal sector) to produce a hybrid legal (policy, lawsandinstitutions)frameworkthathasthefollowing

1.5 The Government of Tanzania contracted the Institute ofLiberty and Democracy (ILD) to lead the processes ofimplementing the first two phases of Diagnosis andReforms Design.Upon completion of the Diagnosis phase the ILD led theinitial stages of the Reforms Design for nine months afterwhich it was decided to change the Terms of Reference ofthe Consultancy agreement as detailed in Annex I,attached.1.6 The Financing Agreement between the Government ofTanzania and Government of Norway provides for anannual review of progress.It was envisaged that there will be a review of theDiagnosis phase, a mid term review (progress of theReform Design) and a final evaluation. Both the Diagnosisphase and the Mid Term Review have been done. (1stAND2NDANNUAL REVIEW)Following the changes in the Terms of Reference for theConsultancyagreementbetweentheILDand

Tanzania and Government of Norway consultations duringthe 2008 Annual Meeting.It is for this purpose that a four members expert Team, twoappointed by each government, is formed to undertakethe review in accordance with the Scope of Work detailedbelow.2.CONTENT OF THE THIRD ANNUAL REVIEW2.1 The Third Annual Review precedes the Third Annual Meetingand the final evaluation of the Programme that is likely totake place in July/August, 2008. The review, to take placein December 2007, is intended to evaluate progress madesince the Mid Term Evaluation and the Second AnnualGeneral Meeting and provide inputs to the Government ofTanzania and Government of Norway consultations duringthe 2008 Annual Meeting.2.2 It will be governed by the provisions of Articles II, VII and IX ofthe Financing Agreement.2.3 The minutes of the 2ndAnnual General Meeting, theapproved work plan for July 2007 – March 2008 andbudget and Programme Management Unit ProgressReport there from are the main documents for the ReviewTeam.3.SCOPE OF WORKThe scope of work for the Team will consist of:3.1Review the changes made in the Consultancy Agreementbetween the Government of Tanzania and the InstituteLiberty and Democracy to determine Compliance with the

Government of Tanzania and Government of Norwegiandecisions made during the Second Annual Meeting.3.2Evaluating the progress made in implementing theapproved work plan in particular reflecting on theobjectives of the Reforms Design phase of the Programme.3.3The Evaluators will determine the strategic fit of the ReformProposals in the overall national efforts in promoting thegrowth of an inclusive formal economy largely driven bylocal private sector, including the poverty reductionstrategies of mainland Tanzania and Zanzibar, MKUKUTAand MKUZA, the National Vision 2025 of mainland Tanzaniaand Vision 2020 of Zanzibar, as well as ongoing nationalprograms in all key sectors of the economy.3.4The Evaluators will determine the extent to which keystakeholders are involved in the Reform Design processeswith a view of assessing level of acceptance andsustainability of the proposed Reform packages.3.5The Evaluators will examine the proposed Formalisationframework, Reform packages and some of the proposedimplementation interventions against the overall socio –economic modernization agenda, other ongoing andplanned programs in the areas of land and businessadministration as well as the financial sector reforms andthe government decentralization processes.3.6The Reviewers will assess the extent to which reform designhas addressed and factored in empowerment of the poorand vulnerable groups.3.7The proposed Reforms will be compared with bestpractices in the Region (East and Central Africa i.e. EACand SADC member Countries) and internationally.