Could you give us a brief historical background of the US Embassy in Tanzania, when it was established here etc.?
We have been here since 1962. I think that the most dramatic shift in the bilateral relationship between our two countries has taken place over the last five years. Tanzania, particularly during the cold war years was one of the leaders in the non-aligned movement, and it was a socialist country. So while the relationship was friendly, it was not substantive politically or/and in an economic sense. The country made a commitment to move towards Private Sector Reform in 1985 under the leadership of Ali Hassan Mwinyi. The more substantive changes have come since 1995 with the election of President Benjamin Mkapa. He made a real effort to get the macro economic framework, where it needed to be in order to attract investment. The benefits of those kinds of structural adjustments can be seen in the country, operating basically with a balanced budget. Inflation is somewhere between 6.5 - 6.8%; five years ago it was near 30%. I guess probably the more recent affirmation of the kind of macro economic changes the country has instituted, is that it has been given debt relief, under the Expanded HIPC program. They reached the decision point in April and we anticipate that with some progress in implementing its poverty reduction strategy, Tanzania will reach the completion point of the debt relief program next year. So the country is making some substantive progress in that regard.
On the micro-level, there are still some issues that have to be addressed, in creating a more business-friendly climate. Those run the range of dealing with bureaucratic impediments that make it difficult to establish a business to establishing a regulatory regime that enables businesses to function. While they have made a commitment to establish a process to deal with commercial disputes, that protocol is still not mature. Dispute resolution of commercial issues still takes some time. But having said that, the country is heading in the right direction. With the kind of changes made internally, the Tanzanian government is also facilitating a change in the relationship between our two countries. We are formally pursuing the goals reflected in President Clinton's commitment to his Africa Growth and Opportunity Initiative. All of us here have been charged with looking for opportunities to encourage greater trade and investment between our two respective countries. We have made that our mission strategy here in Tanzania.
Qualitatively there has been a shift toward the positive side, in the relationship between the United States of America and the United Republic of Tanzania. I would say that the terrorist attack on our Embassy in 1998, contrary to the intent of the culprits, had an effect opposite to that they might have imagined. Our relationship was not weakened; rather the political relationship between our two countries has gotten stronger. The level of cooperation increased exponentially, in the sense that the number of high-level visits by U.S. officials to Tanzania over the last couple of years has been at an all time high. Though one of the comments I often make, is that in the 30 days after the bombing, we probably had more high-level American visits than in the 30 years prior to the bombing.
In terms of State Visits from the U.S. and officials from Tanzania going to the US, are there any announcements of visits in the near future?
We've done a number of things since September of last year. We organized a visit for President Mkapa and it was precedent-setting in a couple of ways. First, it was one of the few trips by an African Head of State that significantly focused on the economic relationship between our two countries. Seventy-five percent of the meetings that President Mkapa and his delegation held were with representatives from the private sector. We went to New York, Atlanta, Washington, D.C., and Boston. In New York for example, Ken Chenault, the Vice-Chairman of American Express, and Carl McCall who is Comptroller for the State of New York, hosted a breakfast for President Mkapa with U.S. Corporate leaders. William Rhodes, the Vice-Chairman of Citicorp, hosted an evening event for President Mkapa, again to meet with business leaders. In Atlanta, Carl Ware, who is now one of the Vice-Chairmen of Coca Cola, hosted a similar event for President Mkapa. At Harvard we did some similar sorts of things. The other thing that was precedent setting was that President Mkapa had the largest group of accompanying African businessmen than any other African Head of State. There were about 75 Tanzanian businessmen who accompanied him.
Subsequent to the Mkapa visit, we have done a number of things. About 5 months ago, we had a group of US businessmen and companies that have offices in South Africa come to Tanzania on a Trade Mission. Those included representatives from 3M, Lucent Technologies, Motorola, to name a few. Actually just this month, we were in London where we did what we call a reverse Trade Mission. We chose London because we still have a large number of US businesses that run their Africa operations out of there. The delegation of 30 Tanzanians, half from the public and private sectors, went to London to meet with US business people there. Foreign Minister Jakaya Kikwete and Minister of Commerce and Industry, Iddi Simba led the delegation. They met with approximately 30 US companies to pitch Tanzania as an Investment Venue. From London we also went to Paris and met with our people in the U.S. Embassy, as well as the Tanzanian Ambassador to France, to talk about setting up a similar sort of activity in the Fall. On the near horizon, by the time this comes out, we would have hosted U.S. Treasury Secretary Lawrence Summers, who will be coming to Tanzania next month. The sum and substance of it is: Through high level contacts between our two countries, we will continue to look for creative ways to apprise US business interests of economic trends and opportunities in Tanzania. It is our expectation that the more we work on that, the more the Tanzanians will continue their efforts to further restructure the present regulatory environment.
Since the Tanzanian authorities and US authorities are working on the relationship and focusing on business, how would you describe the investment climate here in Tanzania? Can you give us some figures of US businesses, which have established here in Tanzania and those which are about to come in?
Overall there is a positive investment environment. Not only have we made that assessment, but other countries have also made that assessment. The South Africans are investing in Tanzania in a rather significant way. As a matter of fact, I will be headed to Maputo tomorrow for a U.S. Chief of Mission Conference, held in conjunction with the SADC Economic Conference. We will get the latest update on investment figures. I'm sure we will see some significant increases in what South Africa has invested. The primary sector attracting capital right now is the mining sector. Last year about 60 million dollars in foreign direct investment was made in the mining sector. Right now it represents somewhere in the 3 to 4% range of the GDP. Expectations are that in the next 5 years mining will be somewhere around 10% of the GDP.
Another area, one which you will probably see more activity on the part of the US, is in the Tourism Sector. Tanzania was the first African country to sign an Open Skies Agreement with the United States. Immediately prior to that, we negotiated code share agreements between KLM and Northwest, and Delta and Swiss Air. Tanzania is also on the list of countries that we are doing some things with under our Safe Skies Initiative. We have had a team come in from the Department of Transportation and the FAA, and have looked at Tanzania's 3 major airports, the one in Kilimanjaro, the one in Dar es Salaam obviously, and the one in Zanzibar. Our team has since come back to the Tanzanians with some recommendations. In short, we have rather substantial collaborations in the area of transportation, and we are continuing to look at those kinds of issues. It is our expectation that we will begin to see some significant movement over the next few years as it relates to an increase in investment and activity in the Tourism Sector.
| You mentioned bureaucracy, which is still present here in Tanzania, and which has kept a lot of investors away from Tanzania. The Government is working on this One Stop Shop Center concept. How confident are you that this is going to be successful?
There are several ways that we attempted to be helpful in this regard. Four years ago USAID developed the Investors Road Map. It was an analysis of the regulatory environment and the impediments to investment in Tanzania. That document has gone a long way in setting the perameters to the debate. I think most people would say that the "Road Map" was a very substantive contribution on our part, relative to Tanzania beginning the move to create an investor-friendly environment. That Investor's Road Map continues to be kind of a reference point. In conjunction with that, one of the things that we try to facilitate through our relationships and contacts, is to bring US business people into contact with high level Tanzanian officials. The point is to take that discussion out of the realm of the abstract by putting Tanzanians across the table from people who have the resources to invest, who can say we're interested but we have some very real issues that need to be addressed.
One of the other areas where we're trying to be helpful, which again is related to the regulatory environment, is the tax system. One month ago, a team from the U.S. Internal Revenue Service came in to do an assessment for the Tanzanian Revenue Authority, and we will continue to work with them to try to help them regularize the tax regime, to develop a more systematic approach relative to collection, fraud detection, and issues like that. The intent is to make the whole process of tax collection less capricious that it presently is. There was an announcement last week, that around the first part of July, there will be a Task Force charged with the responsibility of trying to streamline the regulatory regime in Tanzania, making this a more business-friendly environment. As a matter of fact, yesterday evening I had a meeting with one of the major folks in the private sector here in Tanzania, and asked specifically about the July meeting. He felt very good about it. His sense was that a number of people that would sit around the table, are folks who were knowledgeable in terms of the regulatory problems that exist, the needs of the business community, and the needs of investors. So he thinks it will be a significant undertaking that will yield some real changes and real benefits. And again pertaining to this agenda, President Mkapa has been very responsive. Over the last couple of months, he has re-instituted regular meetings with different sectors of the business community, and the feedback that I have gotten from folks across the board is that people are very happy that those meetings have been re-instituted. At this point the dialogue has been positive, and we think it will be particularly productive.
How do you see Tanzania as a destination point for investment within the next three years?
Three years from now we should be opening our new Embassy, which will represent a direct investment by the United States of between 40 to 50 million dollars. That will probably also mean that the neighborhood where we will be re-locating our Embassy is going to be completely transformed. I think three years from now you will see an even more vibrant consumer economy in Tanzania. And, my expectation is that if the changes in the regulatory regime continue along the path where they are headed, that you'll see a significantly greater US presence in the country. Given that Tanzania waited to make this transition from socialism to capitalism, the bad news is that today the country is significantly underdeveloped. The good news is that given the natural resources that they have, given the technological innovations that exists, they have an opportunity to leap forward a whole generation from a developmental perspective. For example, if you take the telecommunication infrastructure. You don't have to lay wires anymore; the trend is toward wireless. The complementary technologies are developing at an all time high. So it means that a country like Tanzania can have a 21st century, sophisticated, telecommunications environment in place over a three-year period. Twenty years ago, it would have taken twenty years to do that sort of thing. It is underdeveloped now, but the opportunity exists for it to leap forward generations in terms of development, because of technological advances. Another area where the future potentially bodes well for Tanzania is on the investment front. In the United States for example, you look at some of the inflated values that we see in the Stock Market. There are a number of reasons you see those inflated values, but one reason clearly is that there is too much money chasing too few real investment opportunities. For a country like Tanzania, if it continues to get its act together in creating an investment-friendly environment, there is so much cash out there it could experience a real windfall of investment. Tanzania has the natural resources, political stability, a history of multi-parties and democratic elections; it has what it takes to become an attractive venue for investment.
Our sense is that if Tanzania continues to head in the right direction, over the next few years I think it will grow exponentially. With regularization of the tax regime and changes in the tax rate, even some of the underground activity taking place, will come above ground. Tanzania has the potential to become Africa's next economic success story. A key to its success is its stability. It is a country wherein you have a tradition of democratic elections and multi-parties. It has been politically stable for 30 years, and there is no reason to believe it won't be for the next 30, 60, or 100 years. In addition, it is the gateway to six land-locked countries; it's the only country that is a member of both SADC and the EAC. So it has a potential to be a primary entry point, an access point to economies in the southern part of Africa and in the eastern region of the continent. Given what those represent in terms of potential markets, 250 million people to the south, 80 million people in this eastern region, Tanzania is a good starting point to explore some significant market opportunities.
Which sector do you feel that investors will be very interested in?
From the mining sector you have a couple of points of entry, the most direct being mining itself, and then you have all the ancillary stuff that come into play, like heavy equipment, trucks, earth movers, etc. The folks of Caterpillar who are based in South Africa, are interested in coming up here to explore some of those kinds of opportunities. As I mentioned, Caltex is looking to resume their involvement in Tanzania. They are a big company, so they will play big. AES is going to close on the acquisition of Canadian interest in the Songo Songo project, which is an energy production project. These are just a few of the opportunities. To sum up my assessment of Tanzania, I would use the words of the host of the game show "The Price is Right" and say "come on down". I think it is worth the look. |
