Subsistema de Control

private sector finance and expertise (Jefferies 2006). PFIs can be used to deliver public investment projects through public–private partnerships in which private sector organizations design, build, finance, and operate assets to deliver a service to public sector clients (Akintoye et al. 1998). The three commonly used types of PFI arrangements are: Build, Operate, and Transfer (BOT); Build, Own, Operate, and Transfer (BOOT); and Build, Operate, and Own (BOO). In a BOT framework, the private sector builds an infrastructure project, operates it over a prescribed period (frequently 20 years or more), and eventually transfers ownership of the project to the gov- ernment without any payment being due to the private party involved. Under a BOOT contract, the private partner finances, builds, operates, and owns a specific new facility for a predetermined period of time, after which own- ership is transferred to the public authority and, often, a payment for it can be established. Under a BOO contract, the private party that constructs the infrastructure owns it outright. PPPs as an integral part of the budget process must be fully disclosed in budget documents.

Tanzania has put in place a PPP Policy, Act, Regulations, and implementation guidelines. These are, respectively, the National Public Private Partnership (PPP) Policy (2009), the Public Private Partnership (PPP) Act (2010), the PPP Operational Guidelines for Tanzania Mainland (2010), and the PPP Regula- tions (2011). Projects classified as PPP should, therefore, follow the stipula- tions and guidelines in these documents.

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11.3.3 Procurement and implementation

In practice, public investment project implementation begins with tendering and contracting processes. The implementation is usually supervised by the respective MDA/RS/LGA in accordance with the basic principles set out in the Public Procurement Act (2011) and its accompanying Regulations (2013), in a manner that maximizes economy, efficiency, transparency, and value for money.

11.4 Planning and financing business development

11.4.1 The role of the private sector

Business development is the most important component of LED planning because the attraction, creation, or retention of business activities is the best way to build or maintain a healthy local economy (Blakely & Bradshaw 2002). The private sector has a central role to play in the war on poverty, and mo- bilizing private investment is imperative for promoting the broad-based and sustained growth that will help drive poverty reduction. Increased business investment can transform communities from poverty-stricken ones into places leading the way to economic success.

Resources required to succeed in business include proper infrastructure and services (i.e. electricity, water, roads, etc.), business development services (BDS), regular means of financing, and the provision of appropriate informa- tion and skills. Successful private enterprises create wealth and employment in local communities. Private enterprise, however, requires a positive busi- ness enabling environment to flourish and deliver prosperity. The creation of such an enabling environment requires the participation of various actors, including the government, BDS providers, and financial institutions.

11.4.2 Promoting the informal economy

In developing countries such as Tanzania, economic growth is determined not only by the formal economy (the economic sectors that are legally regis- tered and pay taxes) but also by the informal economy (those activities that are not legally registered). In fact, the informal economy in Tanzania is great- er than the formal economy (Arouri et al. 2014); it is at 56.4%. The linkages

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between the formal and informal sectors of the economy need to be under- stood and considered when devising an LED strategy. In practice, the infor- mal economy interacts with the formal economy through the purchasing of formal sector goods and services and through the selling of commodities to formal economy consumers.

Formal–informal linkages can enhance the integration of informal workers and enterprises into global value chains4 _{and create new possibilities for in-}

clusion of informal actors in wider structures of economic growth and deci- sion making. Therefore, promoting and enhancing formal–informal interac- tions should be one of the key activities in transforming the micro/informal sector into a source of LED, entrepreneurship, and self-employment.

11.4.3 Planning business development

In many countries, national government functions continue to be decentral- ized, thereby increasing the responsibility of local governments to retain and attract private industry. LGAs have an essential role in creating a favourable environment for business development and success through planning and implementing programmes and projects that remove obstacles to and facili- tate investment in their local communities.

Local government can make an important contribution to LED initiatives by properly coordinating its public investment programme with the investment needs and priorities of local communities and private firms, to bring about local convergence among actors. LGAs can contribute to the enhancing of a local area’s potential through carrying out studies that pinpoint priority areas of investment and major pitfalls, as well as the feasibility studies and infrastructure project designs that will be required to make the investment opportunities identified more competitive for private sector investment. Presently, the private sector in Tanzania is composed of a very large num- ber of small and medium-sized enterprises (SMEs) and a small number of well-established, larger firms. To help fill this gap, SME growth needs to be promoted, taking into consideration the specific needs of industry. The wide-

4 A value chain describes the full range of activities that are required to bring a product or service from conception, through the intermediary phases of production, delivery to final con- sumers, and final disposal after use. This includes activities such as design, production, mar- keting, distribution, and support services up to the final consumer (and often beyond, when recycling processes are taken into account).

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ly discussed constraints to private enterprise growth in the country need to be addressed; these constraints include lack of access to finance on affordable terms, lack of competitiveness, low levels of investment, weak value chain development, and the use of inefficient production technology.

As such, some strategies that can be considered in the development planning process include the following: