Challenges of Informal Cross-Border Trade Facilitation in Tanzania: Lessons from Kigoma Border

Abstract

ABSTRACT This study investigates the challenges of an informal cross-border trade (ICBT) facilitation initiative in Tanzania. Specifically, it identifies the regulatory framework governing cross-border trade (CBT), and investigates the challenges of facilitating ICBT. It is based on in-depth interviews with 51 officials from 10 trade-regulating agencies and 47 cross-border traders in Kigoma, Tanzania. The findings reveal that ICBT is largely attributed to the stringent regulatory requirements and high costs of trading via formal routes. Although different trade facilitation measures have been taken, several challenges of CBT facilitation were identified, namely: limited awareness of the existing initiatives; inadequate border facilities; lack of a mechanism to escalate traders’ challenges to the relevant agencies; limited resources; ineffective coordination; hesitation of traders to utilise trade facilitation initiatives; and informality of traders in the neighbouring countries. While we support the rational exit and dual economy views that traders operate informally to avoid the cost of formalisation, we show that trade facilitation measures adopted in the context of the World Trade Organisation (WTO) do not offer traders sufficient incentives to formalise. Accordingly, we suggest a trade regime consisting of simplified documentation and reduced trade costs to effectively accommodate ICBT in the international trading system.