Tanzania Is Poised to Become a Large Exporter of Gas After Recent Discovery of Large Gas Deposits. How Would Gas Export Make Tanzania Vulnerable to the “Dutch Disease”?. What Policies Can Be Introduced to Offset This Effect?

Topics: Natural resource, Industry, Economics Pages: 6 (2176 words) Published: September 13, 2013
In Tanzania the gas was discovery on lately 1970s but the exploration has not begun yet at that time. The gas exploration start on early 2000s and the production was begun on 2004 by generate gas from Songo Songo Island using to produce electricity power and some gas were direct to the manufactures sector industry like cement industry. The current data show that Tanzania have reserve of 30 Trillion cubic feet of gas from its onshore field and offshore field like Kiliwani, Songo Songo, Mnazi Bay, Mkuranga, Zafarani, Jodari,Chaza, Chewa and Pweza. Tanzania is the among of the richest natural resource African countries which have huge reserve of minerals like gold, diamond, copper, uranium, rubies, gypsum, limestone, vanadium, cobalt, iron, phosphate, titanium, nickel, tin ,coal and tanzanite. In Tanzania there are fourteen companies which were engages in exploration of gas those companies are BG Group, Ophir Energy, Statoil Tanzania, ExxonMobil , Petrobras, Heritage, Solo oil, JV,Shell, Orca Exploration Group and Aminex. Gas discovery and exploration in Tanzania may bring huge revenues of foreign currencies which will be using for developments programmes but country like Tanzania must be strategically on exploration, processing, transformation, transportation and exporting the gas resource. The gas exploration may bring a lot of adverse effect to the country like disagreement between the main government and the provinces for example the conflict between Tanzania government and peoples of Mtwara region and also may cause the local currency Tanzania Shillings to appreciate its exchange rate against to the foreign currency, this will make the export to be very expensive compare to import so the agriculture and manufacture sectors will decline hence lead to the Dutch disease. The Dutch disease means that when gas sector may suffocate the other sectors by making them more expensive and less competitive due to the exchange rate fluctuation. This passage will give explanation how gas export in Tanzania will bring Dutch disease and policies to be taken in order prevent Tanzania on facing Dutch disease. Tanzania is a small open economy country, the gas exploration may affect the non-resource tradable sector by over crowd the sector may cause the employment and capital decline from other sector. The severe over crowd of gas sector may increase income so will stimulate the consumption effect. This will make peoples to extra demand on imports and non-tradable good and services which only produced in the locally economy. On taking this, these sectors struggle for lack of skilled labour and other resources, increasing domestic price and making less competitiveness to the goods which are tradable example export and import goods. The tendency of gas sector to over crowd the other sectors may shaping the economy because the real demand due to the moving of resources cause adverse effect by leaving the country economy with less export and making more weak to the instability in gas prices.Tanzania gas exploration may encounter Dutch disease when economy of the country face suffering the number of problems likes low trade performance, low environment performance, low productivity, low innovation capacity and regional economic indifference and many more. Dependence on export of primary resource, the gas windfall may make the country to depend on export of unprocessed and semi-processed good which have low revenues compare with finished which have high value. The gas sector may undermine other sector this will make export good very expensive and employment will decline, because many manufacturing companies may slow production of goods. The employment will be very expensive many companies may stop production due to increasing cost of production, and hence Tanzania may depend on export of primary resources. Declining of balance of payment, Tanzania resource export may decline because the global prices are low compare to the domestic prices. The...

References: Background Notes (2012) Natural Gas Development in Tanzania- Challenge and Opportunities, http://www.theigc.org/sites/default/files/Background%20note.pdf, accessed 21 August 2013
Jim Stanford (2012) A cure for Dutch Disease: Active Sector Strategies for Canada’s Economy, Technical Paper,
Tanzania Oil and Gas: Status and Trend report. PYWP-Tanzania (2011)
Owen Barder (2006) A Policymakers’ Guide to Dutch Disease, Centre for Global Development, Working Paper Number 91
REPOA Annual Workshop at Dar es Salaam (2013) The Quest for Inclusive Development,http//Tanzania.nlembassy.org/organisation/the-ambassador/speeches,accessed 25 August 2013
DAILY NEWS Reporters (2013) Tanzania: Expert Warn Against Rushed Oil, Gas Contracts, 02 July 2013, http://www.dailynews.co.tz/index.php/local-news/19346-experts-warn-against-rushed-oil-gas-contracts, accessed 25 August 2013
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