 Improving
the investment climate |
Tanzania has vast potentials of unexploited natural resources deriving mainly from the period of almost three decades of a state run economy, characterised by a lack of qualified labour and capacity to exploit resources. In order to create a conducive investment climate, a mentality change was needed. Under socialism, government institutions and parastatal companies were not profit oriented but rather serving the state itself. Social services such as education, health, water and housing were offered either free of charge or heavily subsidised by the government, which in the long run failed to sustain development of a welfare state and a concept of individual initiatives. However, during the past ten years, Tanzania has successfully managed to orient its agencies and public companies into commercial institutions that generate capital, opportunities and open doors to private investors with substantial profit margins.
Among the sectors which are said to be having big returns due to their enormous potentials, are tourism valued at 650bn dollars by experts, and mining because of the claims that a third of the country's area is covered by a "greenstone belt", a rock showing gold bearing potential.
 Tanzania Investment Centre |
In order to lure foreign investors since the government's economic liberalisation decision in early 1990s, a number of initiatives have been undertaken, such as the establishment of Tanzania Investment Centre (TIC) early this year as a one stop centre drastically reducing bureaucratic red tape in investment processing. "The single stop centre is a concept, which exists in other countries. What we are trying to establish is a kind of house, where an investor doesn't have to move around all over the town looking for all ministries and departments concerning their investment processing," Tanzania's Honoured Prime Minister Frederick Sumaye said. The TIC, formerly known as Investment Promotion Committee (IPC), was formed in 1990 partly as an investment regulator but changed its name and role after parliament passed the 1997 Investment Act. The new Act spelled out clearly TIC's role in the liberalisation of the economy, and since then the emphasis has been put on how to promote the country as an investment destination. A number of incentives have been introduced, such as tax exemption on capital goods, removal of restrictions against foreign exchange repatriation, introduction of an open general licence to remove barriers in importation of goods, a right for a foreign investors to hold an external bank account, and a favourable land lease arrangement which allows foreigners to hold title deeds for a period of between 33 and 99 years.
But perhaps the most important of all developments undertaken by Tanzania government to improve the investment climate is to sign international agreements which assure private investors that their property shall never again be nationalised as was the case in 1967 when Arusha Declaration was adopted to turn the country into a socialist state.
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Many foreign investors who came to Tanzania before 1998, might have found it pretty hard to process their investment projects as lengthy bureaucratic red tape were dominant. According to TIC Executive Director Samuel Sitta , "Before the new changes, the investment processing document, IPC, had about 16 pages to be filled in by prospective investors, but today the number of pages has been reduced to four." He continued "We are in our third year now, in a new location and we are trying to, based on the Mauritius example, operate this centre as a one stop centre". Signs of development are confirmed also by investors, donors and western financial institutions, who have commended the administration for showing commitment in improving the investment climate and liberalising the economy. "Given that Tanzania has gone through this transition from socialism to capitalism, the bad news is that today, the country is significantly underdeveloped, but 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 developmental perspective," US Ambassador Charles Stith said. So forth, Tanzania has not only managed to adjust itself to the regional demands, but also to the global changes.
| Agriculture : a good card to play |
Generally speaking, areas of investment opportunities in Tanzania are extensive and range from agriculture, energy and minerals, tourism, construction, manufacturing, telecommunications, transport, and perhaps last but not least, privatisation of over 390 state enterprises. Agriculture, which is the most important sector in Tanzania's economy as it accounts for over 75 percent of foreign earnings making over 50 percent of GDP while employing over 80 percent of the estimated over 31 million people, is also said to be a lucrative area for investors, although the sector has been much neglected by the government. Particularly cashew nuts and coffee have remained the country's top foreign currency earners contributing 18 percent each on the country's over 540m dollars exports earnings in 1998/99.
Problems worth of mentioning which have kept foreign investors away are such as poor infrastructure, high utility tariffs and numerous taxes, that are being addressed by a taskforce formed jointly by the government and private sector. Two main voluntary associations for businessmen and farmers, Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA) and Confederation of Tanzania Industries (CTI) have in recent days played a major role in determining government fiscal policy and international trade protocols. "We are supposed to pressurise the government to create an enabling environment whereby the current industries which are already operating are enabled to be competitive. Opening up our markets is something we subscribe to but at the same time, every country in the world including the United States of America will try to ensure that at least the potentially competitive units operating within the economy are enabled to be competitive so that you have a liberalisation process which goes side by side with incentives to become competitive." Ravi Chande the CTI 2nd vice chairman said. He continued, that his association with over 200 manufacturers as its members, is being involved fully by the government in economic management and fiscal policy formulation. |
