Paper short abstract:

State-business relations in the metals sector and the political economy of small firm promotion in the 21st century.

Paper long abstract:

This paper examines the political economy of industrial policy in Tanzania from the perspective of state-business relations in the metals sector. Industrial policy has regained prominence in Tanzania in recent years as part of the focus on economic transformation that has been espoused by both the Government of Tanzania and its donor partners. Most manufacturing activity in Tanzania occurs within small firms with less than 10 employees and the promotion of MSME manufacturing has been central to industrial policy initiatives since the early 1990s. Large firms receive little direct attention within industrial policies however, they have received forms of direct and indirect support from the state. While the production of iron and steel remains in the hand of some of Tanzania's largest firms, small and micro firms play a central role in many types of manufacturing related to metals and fabrication. The output and employment of large firms in metals has expanded quite dramatically in recent years. Promotion of metal-related manufacturing is a key element of industrial policy in Tanzania but despite policy commitments to support SMEs in the sector, significant support has been channelled to protecting the larger firms. This paper traces the support provided to firms of different sizes within the sector and examines the way that the political economy of industrial policy has affected the state's ability to follow through on its commitments to promote MSMEs within the manufacturing sector.