This project is co‐funded by the Seventh Framework Programme for Research and Technological Development of the European Union EU Grant Agreement number: 290529 Project acronym: ANTICORRP Project title: Anti‐Corruption Policies Revisited Work Package: WP8 Corruption, assistance and development Title of deliverable: D88.2) Case study reports on control of corruption and EU funds D8.2.6 Case study on EU aid and anti‐corruption and governance in Tanzania Author: Max Montgomery, German Institute for Global and Area Studies (GIGA) 29 February 2016 Project co‐funded by the Europeaan Commissiion within the Seventh Framework Programme Dissemination Level PU Public X PP Restricted to other programme participants (including the Commission Services) RE Restricted to a group specified by the consortium (including the Commission Services) Co Confidential, only for members of the consortium (including the Commission Services) ABSTRACT Tanzania boasts one of the highest rates of economic growth in Sub-Saharan Africa. In the last decades it also established one of the most harmonised donors frameworks. However, the relationship between Tanzania and its donors has deteriorated significantly in recent years following several high-level corruption cases and slow progress on more complex governance reform. In response, the EU has reformed the composition of its development assistance modalities, which predominantly entailed a reduction in Budget Support, and has stopped committing further aid to Tanzania for the time being. These events indicate considerable limitations to the effectiveness of the EUs (and other donors’) measures to induce good governance through existing modi of development cooperation. KEYWORDS European Union, anti-corruption, governance, development assistance, Tanzania Max Montgomery, MSc. [email protected] German Institute for Global and Area Studies (GIGA) \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ © 2016 German Institute for Global and Area Studies All rights reserved. This document has been published thanks to the support of the European Union's Seventh Framework Programme for Research - Socio-economic Sciences and Humanities theme (EU Grant Agreement number: 290529). The information and views set out in this publication are those of the author(s) only and do not reflect any collective opinion of the ANTICORRP consortium, nor do they reflect the official opinion of the European Commission. Neither the European Commission nor any person acting on behalf of the European Commission is responsible for the use which might be made of the following information. 2 Table of Contents I. INTRODUCTION ...................................................................................................................... 3 II. EU CONDITIONALITY AND DEVELOPMENT ASSISTANCE ............................................... 4 1. Historical Developments and Legal Agreements ..................................................................... 4 2. EU Development Assistance to Tanzania 2007-2014 ............................................................. 6 2.1 EU ODA to Tanzania under the 10th EDF NIP (2008 – 2013) ........................................... 8 2.2 EU ODA to Tanzania under the 11th EDF NIP (2014 – 2020) ........................................... 9 2.3 Flow of EU ODA recorded between 2007-2014 ............................................................... 10 2.4 EU Development Assistance Modalities .......................................................................... 11 2.5 Tanzania’s Distribution Framework for Development Assistance ................................... 13 3. Framework of EU Conditionality ............................................................................................. 14 III. TANZANIAN STATE OF GOVERNANCE ......................................................................... 17 1. The Legal and Institutional Anti-Corruption Framework ........................................................ 18 1.1 Evolution and State of Legal Framework to Prevent Corruption ..................................... 20 1.2 Anti-Corruption Institutions and their Agenda .................................................................. 22 IV. ANALYSIS .......................................................................................................................... 25 1. Good Governance in the Budget Support Framework .......................................................... 25 1.1 Limitations of the Incentive Tranche ................................................................................. 26 1.2 Suspension of Budget Support ......................................................................................... 28 2. The ‘Soft’ Approach: Engagement through Political Dialogue .............................................. 30 3. Project-based Assistance to Anti-Corruption Reforms .......................................................... 31 4. EU Aid in the Nexus of Tanzania’s Political Economy of Corruption .................................... 31 V. RECOMMENDATIONS .......................................................................................................... 33 REFERENCES ............................................................................................................................... 34 3 ACCRONYMS ACP – African, Caribbean, and Pacific BRN – Big Results Now! CCM – Chama Cha Mapundizi CHADEMA - Chama Cha Demokrasia Na Maendelo CAG – Controller and Auditor General CSP – Country Strategy Paper DDTP – Deepening Democracy in Tanzania Programme DPP – Director of Public Prosecutions EAC – East African Community EDF – European Development Fund EPA – External Payment Arrears ES – Ethics Secretariat EU – European Union GBS – General Budget Support GoT – Government of Tanzania HLD – High-Level Dialogue IFMS – Integrated Financial Management System JAST – Joint Assistance Strategy LDC – Least-Developed Country MDG – Millennium Development Goal MDGC – Millennium Development Goal Contract MKUKUTA – National Strategy for Growth and Poverty Reduction NACSAP – National Anti-Corruption Strategy and Action Plan NAO – National Audit Office NIP – National Indicative Programme ODA – Official Development Assistance ONAO – Office of the National Authorising Officer PAF – Performance Assessment Framework PCCA – Prevention and Combating of Corruption Act PCCB – Prevention and Control of Corruption Bureau PEFA – Public Expenditure Financial Accountability PFM – Public Financial Management PFMRP – Public Financial Management Reform Programme PRBS – Poverty Reduction Budget Support SBS – Sectoral Budget Support SDG – Sustainable Development Goal TV – Tanzania Vision UK – United Kingdom UN – United Nations UNDP – United Nations Development Programme USAID – United Nations Agency for International Development 1 TABLES Table 1 Contributions of Major Development Partners to Tanzania ......................................................... 7 Table 2 Indicative Development Assistance under 10th EDF NIP (2008-2013) ....................................... 8 Table 3 Indicative Development Assistance under 11th EDF NIP (2014-2020) ........................................ 9 Table 4 EU ODA Committed and Disbursed to Tanzania 2007-2014 in € Millions ................................ 11 Table 5 Anti-corruption indicators in 10th EDF NIP .................................................................................... 16 Table 6 Governance Indicators for Tanzania 2007-2014 ........................................................................... 19 Table 7 PCCB Statistics 2008 - 2014 ............................................................................................................. 23 FIGURES Box 1 Grand Corruption Scandals in Tanzania 2007-2014 ....................................................................... 20 2 I. INTRODUCTION The United Republic of Tanzania1 is considered a beacon of political stability in Sub-Saharan Africa. Following decades of one-party rule, Tanzania adopted a multi-party system with competitive elections in the mid-1990s. However, since the first democratic election held in 1995, Chama Cha Mapundizi (CCM)2, the previous ruling party, has remained in power and defeated a fragmented opposition with considerable margins. The European Union (EU) and Tanzania enjoy a long-standing tradition of development cooperation forged around historical connections and a strategic partnership. These linkages were amplified following Tanzania’s political transformation, which coincided with the abandonment of a state-controlled and isolationist economic policy, and increasing its regional integration into the East African Community (EAC). As summarised by José Manuel Barroso, former President of the European Commission, "Tanzania has become one of the EU's main partners in Africa, and is also playing an increasingly important role in the stability and the inclusive and sustainable economic growth of the whole region. We now want to deepen our regular political dialogue with Tanzania and further increase our cooperation in areas like energy, anti-piracy, counter-terrorism or migration; issues which are of concern both for Africa and the European Union."3 With annual economic growth rates averaging around 6% over the last decade, Tanzania boasts one of the highest rates of economic growth in Sub-Saharan Africa and amongst African, Caribbean, and Pacific (ACP)