On the basis of two case studies viz. Uganda and Tanzania, this paper examines possible paths to development. The traditional one, here called ‘broad’ industrialisation, is contrasted with agricultural-based industrialisation and service sector development as possible alternative routes for countries to improve their situation. It is argued that traditional industrialisation is not an exclusive path towards development; rather there are other options such as industrialisation based on agriculture or service sector development. For Uganda the importance of all the three sectors has been recognised. However, it is suggested that a focus on agricultural and service sector development could be more promising for the near future as there are fewer obstacles that need to be overcome. Furthermore, prioritisation of subsectors could even lead to more effective results. Within the agricultural sector it is of critical importance to develop the value-adding activities in order to increase the quality of life eventually. In the case of Tanzania, it is not so clear whether broad industrialisation or services are the key. But clearly a diversification of the economy needs to take place. Compared to Uganda, Tanzania has a clear advantage of being situated at the sea shore. Very little focus has been put on policies supporting the service sector. But, growth rates of traditional agricultural exports in Tanzania are low. Thus, there is the need to diversify into service sector exports and non-traditional value-adding activities in order to pursue a path of development.

Eva Näfe, Barbara von Toll

Published in Berlin Working Papers on Money, Finance, Trade and Development, August 2011