ABSTRACT
Tanzania’s industrialization process, like that of many other developing economies, stagnated after an initial period of vigorous growth. The early stages of import substitution were accompanied by a rapid growth of the manufacturing sector, raising its contribution to GDP from 4 per cent at independence (1961) to a peak of 12 per cent in 1977. This expansion was not, however, sustained subsequently. Forced de-industrialization resulted in a drastic fall of the sector’s share in GDP to a low of 7 per cent in 1985. A key reason for this drastic downturn was import compression, which forced steep cuts in capacity utilization and a slowdown in capacity expansion. This is similar to what Seringhaus (1991) described as the ‘typical’ case: an initial burst of industrial growth resulting from manufacturing to fill domestic demand created by displaced imports which is subsequently not sustained due to a drastic reduction in import capacity. The role of reduction and instability of import capacity in constraining growth has been demonstrated in several other studies, including those by Leff and Sato (1987), Helleiner (1986), and Ndulu (1986, 1991).
