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Report on the Implementation of the Investment Policy Review - United Republic of Tanzania

Report by UNCTAD, 2011

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This report is a review of the progress made in implementing the Investment Policy Review of the United Republic of Tanzania (IPR), published in 2002. The report notes that there has been a great deal of activity related to improving the investment climate in the United Republic of Tanzania since the completion of the IPR. However, progress implementing the recommendations has ben mixed.

UNITED NATIONS


REPORT ON THE IMPLEMENTATION
OF THE INVESTMENT POLICY REVIEW


UNITED REPUbLICOF TANzANIA


UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT


Printed at United Nations, Geneva
GE.11-50461 – March 2011 – 530
UNCTAD/DIAE/PCB/2010/6






United Nations Conference on Trade and Development


















REPORT ON THE IMPLEMENTATION
OF THE INVESTMENT POLICY REVIEW






UNITED REPUBLIC OF TANZANIA




























UNITED NATIONS
New York and Geneva, 2011




Report on the Implementation of the Investment Policy Review
United Republic of Tanzania





ii


Note


UNCTAD serves as the focal point within the United Nations Secretariat for
all matters related to foreign direct investment. This function was formerly
carried out by the United Nations Centre on Transnational Corporations
(1975–1992). UNCTAD’s work is carried out through intergovernmental
deliberations, research and analysis, technical assistance activities,
seminars, workshops and conferences. The term “country” as used in this
study also refers, as appropriate, to territories or areas; the designations
employed and the presentation of the material do not imply the expression
of any opinion whatsoever on the part of the Secretariat of the United
Nations concerning the legal status of any country, territory, city or area or
of its authorities, or concerning the delimitation of its frontiers or boundaries.
In addition, the designations of country groups are intended solely for
statistical or analytical convenience and do not necessarily express a
judgement about the stage of development reached by a particular country
or area in the development process.


The following symbols have been used in the tables:
̇ Two dots (..) indicate that data are not available or are not separately


reported. Rows in tables have been omitted in those cases where no
data are available for any of the elements in the row. ̇ A dash (-) indicates that the item is equal to zero or its value is negligible. ̇ A blank in a table indicates that the item is not applicable. ̇ A slash (/) between dates representing years, for example 2004/05,
indicates a financial year. ̇ The use of a dash (-) between dates representing years, for example
2004–2005, signifies the full period involved, including the beginning and
end years. ̇ Reference to dollars ($) means United States dollars, unless otherwise
indicated. ̇ Annual rates of growth or change, unless otherwise stated, refer to
annual compound rates. ̇ Details and percentages in tables do not necessarily add up to the totals
because of rounding. ̇ The material contained in this study may be freely quoted with
appropriate acknowledgement.






UNCTAD/DIAE/PCB/2010/6
Copyright © United Nations, 2011


All rights reserved




Report on the Implementation of the Investment Policy Review
United Republic of Tanzania






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Contents


Abbreviations................................................................................... vi
1. Introduction ................................................................................1
2. Summary of findings..................................................................1
3. Strengthen the investment framework.....................................4


3.1. Employment and labour laws..............................................4
3.2. Commercial disputes, contract law, the Arbitration Act


and the Companies Act ......................................................4
3.3. Tourism and fishing.............................................................5
3.4. The Fair Trade Practices Act of 1994, and the Fair


Trade Practices Commission .............................................5
3.5. 1997 Investment Act ...........................................................6
3.6. Bilateral investment treaties and double taxation treaties ..7


4. Reduce the cost of doing business..........................................8
4.1. Business licensing and registration ....................................9
4.2. Taxation ........................................................................... 10
4.3. Land ..................................................................................11
4.4. Labour...............................................................................12
4.5. Import and export procedures...........................................13
4.6. Commercial dispute resolution .........................................13
4.7. The Tanzanian National Business Council and the


National Investment Steering Committee.........................15
5. Ensure continued success of privatization...........................16


5.1. Privatization of utilities and infrastructure .........................16
5.2. The Asia-Africa Investment Technology


Promotion Centre .............................................................17
5.3. The National Development Corporation ...........................18
5.4. Redundancies due to privatization....................................18


6. Implement effective infrastructure development..................19
6.1. Airports..............................................................................19
6.2. Dar es Salaam Port and trade corridors ...........................19
6.3. Multi-facility economic zones ............................................22


7. Stimulate human resource development and linkages........24
7.1. Higher education...............................................................24
7.2. Training programmes based on priority sectors ...............24




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7.3. In-house training ...............................................................25
7.4. Linkage programmes ........................................................25


8. Build a dynamic private sector ...............................................26
8.1. National science and technology policy............................26
8.2. Technology institutions .....................................................26


9. Enlarge markets through regional integration......................27
9.1. The EAC and import and export procedures ....................27
9.2. Tariffs and non-tariff barriers ............................................28
9.3. Transportation infrastructure.............................................28
9.4. Regional FDI promotion....................................................29
9.5. WTO and tariff protection..................................................29


10. Impart a new strategic thrust to investment promotion.......30
10.1. Investor targeting ..............................................................30
10.2. Agriculture.........................................................................31
10.3. Manufacturing ...................................................................32
10.4. Existing investors ..............................................................32
10.5. National Investment Task Force .......................................33


11. FDI attraction and performance..............................................33
12. Conclusions and recommendations ......................................34


Tables


Table I. Summary of implementation achievements
Strengthen the Investment Framework ...........................37 
Table II. Summary of implementation achievements Reduce the


Cost of Doing Business ..................................................38 
Table III. Summary of implementation achievements Ensure


Continued Success of Privatization ................................39 
Table IV. Summary of implementation achievements Implement


Effective Infrastructure Development..............................40 
Table V. Summary of implementation achievements Stimulate


Human Resource Development and Linkages ...............41 
Table VI. Summary of implementation achievements Build a


Dynamic Enterprise Sector .............................................42 




Report on the Implementation of the Investment Policy Review
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Table VII. Summary of implementation achievements Enlarge
Markets Through Regional Integration ...........................43 


Table VIII. Summary of implementation achievements Impart a New
Strategic Thrust to Investment Promotion ......................44


Table IX. Summary of implementation achievements
Blue Book on Best Practice in Investment
Promotion and Facilitation ..............................................45




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Abbreviations


AAITPC Asia-Africa Investment and Technology Promotion Centre
ASYCUDA Automated System for Customs Data
BEST Business Environment Strengthening for Tanzania
BIT bilateral investment treaty
BOT build–operate–transfer
BRELA Business Registrations and Licensing Agency
BRU Better Regulation Unit
COMESA Common Market for Eastern and Southern Africa
COSTECH Commission for Science and Technology
DTT double taxation treaty
EAC East African Community
EDZ economic development zone
EPZ export processing zone
EPZA Export Processing Zones Authority
FCC Fair Competition Commission
FDI foreign direct investment
ICRTD Institutions Collaborating in Research and Technology Development
IPR Investment Policy Review
LDC least developed country
MFEZ multi-facility economic zone
NDC National Development Corporation
NISC National Investment Steering Committee
PPP public–private partnership
RITES Rail India Technical and Economic Services
R&D research and development
SADC Southern African Development Community
SEZ special economic zone
SIDO Small Industries Development Organization
SMEs small and medium-sized enterprises
SPILL Strategic Plan for Implementation of New Land Laws
TCCIA Tanzania Chamber of Commerce, Industry and Agriculture
TIC Tanzania Investment Centre
TNBC Tanzanian National Business Council
TRA Tanzania Revenue Authority
UNCTAD United Nations Conference on Trade and Development
UNESCO United Nations Educational, Scientific and Cultural Organization
VAT value-added tax
VETA Vocational Education and Training Authority
WTO World Trade Organization




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Investment Policy Review series






1. Egypt
2. Uzbekistan
3. Uganda
4. Peru
5. Mauritius
6. Ecuador
7. Ethiopia
8. United Republic of Tanzania
9. Botswana
10. Ghana
11. Lesotho
12. Nepal
13. Sri Lanka
14. Algeria
15. Benin
16. Kenya
17. Colombia
18. Rwanda
19. Zambia
20. Morocco
21. Viet Nam
22. Dominican Republic
23. Nigeria
24. Mauritania
25. Burkina Faso
26. Belarus
27. Burundi
28. Sierra Leone
29. El Salvador






1. Introduction


An Investment Policy Review (IPR) of the United Republic of
Tanzania was published in 2002. The report recommended a
strategic thrust for investment promotion, along with strategies for
creating a more attractive environment for investors such as
strengthening the investment framework and reducing the cost of
doing business. It also addressed equally important areas such as
continued privatization, stimulating human resource development,
infrastructure development, and building a dynamic enterprise
sector.




In 2005, UNCTAD also prepared the Blue Book on Best
Practice in Investment Promotion and Facilitation, with the financial
support of the Japan Bank for International Cooperation. The Blue
Book identified an eight-point action plan designed to guide the
United Republic of Tanzania in the process of improving its
investment climate.




In 2009, the Government requested that UNCTAD conduct
a review to assess progress made in implementing the
recommendations set out in the IPR. To this end, a mission was
conducted in March 2010, the findings of which are detailed in this
report.1 The implementation of the Blue Book action plan is also
assessed in this report.


2. Summary of findings


Over the eight years since the IPR was published, foreign
direct investment (FDI) inflows have increased steadily, at an annual
average of 28 per cent since 2003. Overall progress in
implementation has, however, been mixed.






1
This report was prepared by Paige Griffin under the direction of Chantal


Dupasquier and the supervision of James Zhan. Substantive support and
contributions were provided by Hans Baumgarten and Alexandre de
Crombrugghe.




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• There has been good progress made in modernizing the
investment framework. Of the ten laws recommended for
redrafting in order that they better apply to modern business
practices, six were enacted. Unfortunately, the law that was
highlighted as the most important to the reform process, the
1997 Investment Act, was not revised. Furthermore, this law
encapsulated four other areas of legislative reform
(employment, commercial, tourism and fishing, and
arbitration) that were recommended by the IPR, which
meant that those areas were not addressed.


• The implementation of measures to reduce the cost of
doing business had its greatest success in improving the
system for commercial dispute resolution. Some progress
was made in improving import and export procedures – a
primary source of the high costs of doing business in the
United Republic of Tanzania. Business start-up procedures
have been simplified, but many of the planned
improvements are yet to be implemented.


• Privatization has brought mixed results in the United
Republic of Tanzania. The privatization of state-owned
enterprises not related to infrastructure or utilities was
considered largely successful. In infrastructure and utilities,
the outcome was less positive, and as such, the
recommendation to speed up privatization of these entities
was not pursued. Instead, a more cautious approach has
been taken. The Government has recently passed a public–
private partnership (PPP) law in preparation for more
privatization of utilities and infrastructure. However, this has
not been accompanied by guidelines or policies on how to
carry out the law, and as a result, many infrastructure
projects have been delayed.


• Many of the recommendations revolving around
infrastructure development have been acted upon, to the
extent that plans have been formulated and serious interest
by investors has been secured. The barrier to further
progress in most cases has been the lack of PPP policy and
guidelines.





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• For the most part, the area where progress has been
deficient is in human resource development. Noticeably
absent are training programmes based on private sector
needs, and incentives for companies to provide “in house”
training. The curriculum of the Government-funded
Vocational Education and Training Authority (VETA) is
designed without any private sector input, and as a result
lacks relevance. Furthermore, there are no incentives for the
private sector to train their workers. Effort has been made to
implement linkage programmes through the Small
Industries Development Organization (SIDO), but more is
required to meet the recommendation.


• Progress in addressing recommendations related to building
a dynamic private sector has been good, although full
implementation was only attained in one of the three
recommendations in this area. Two new science and
technology policies were introduced but have yet to be
implemented, and the restructuring of the Commission for
Science and Technology (COSTECH) is under way but has
not been completed. The United Republic of Tanzania has
been successful in encouraging private sector involvement
in technology dissemination and in research and
development (R&D).


• More than half of the recommendations dealing with
regional integration have been at least partially, if not fully,
implemented. The United Republic of Tanzania was able to
take advantage of the East African Community (EAC)
customs union, and is gradually harmonizing taxation with
that of other EAC member States. However,
recommendations such as encouraging export orientation in
domestic industries, attracting investors interested in
exporting to the region, and attracting investors from the
region, were not fully acted upon.


• Recommendations related to investment promotion
focused on three strategic thrusts. No action was taken to
target smaller investors motivated by “first mover”
advantage. In part, implementation was hindered by a lack
of targeting at the firm level. Promotion strategies have




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been created for sectors and subsectors. Parameters for
targeting investors within these sectors have been
established, but genuine individual investor targeting has
been limited. The other recommendation focused on land
access for commercial development in agriculture – an area
which is being addressed, albeit at a slow pace.


3. Strengthen the investment framework


The United Republic of Tanzania has made significant
progress in moving from a centrally planned economy to a market-
based regime. The reform process has been maintained at a rate
that has outpaced reforms to the statutes. As a result, the IPR
identified several key legislative areas affecting FDI which should be
brought in line with the reformed investment climate.2


3.1. Employment and labour laws


The IPR was primarily concerned with the difficulty that
investors in the United Republic of Tanzania were facing in
terminating or laying off employees. Investors were wary of creating
jobs and hiring permanent workers until the worker’s competence
had been proved. The IPR also noted that the labour laws from
before the 1990s were onerous and complex. During the drafting of
the IPR, the Ministry of Labour was working to reform labour laws.
Initially, this entailed simplifying existing legislation and processes. A
new law – the Employment and Labour Relations Act – was
introduced in 2004, becoming effective in 2007 (see section 4.4).


3.2. Commercial disputes, contract law, the Arbitration Act
and the Companies Act




Commercial dispute settlement and contract enforcement
were identified as problematic for investors. The laws were
considered outdated and inconsistent, and were found to have gaps
with regard to modern business organizations, modern commercial




2
It should be noted that the mainland Tanzanian and Zanzibari Governments do


not have the same laws and regulations, and that they enforce them separately.
For the purposes of the report, only the mainland is being assessed.




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practices, and modern business systems and technologies.
Commercial dispute settlement and arbitration is dealt with in the
1997 Investment Act, which has yet to be updated. Contract
enforcement is codified in the Law of Contract Act, 1961, which also
has not been updated.


The new 2002 Companies Act, which came into effect in
2006, repealed the Companies Ordinance (Cap. 212), 1932. Some
salient aspects of the new Act are reducing the minimum number of
people required to establish a company to two, and reducing the
amount of information required in the memorandum to the registrar
(a document necessary for business registration). In the past, new
companies were required to list explicitly all activities of the
company. This has been simplified so that companies can now
describe their intended activities in more general terms. Changing
the activities or reducing capital investment no longer requires court
approval, unless there is a challenge by shareholders or creditors.3


3.3. Tourism and fishing


As strategic priorities, both tourism and fishing have been
governed by outdated laws which were drawn up in a less
internationally competitive market. To begin to attract FDI to these
sectors, once FDI in lead sectors such as mining was established,
the IPR recognized the importance of modernizing the regulations
governing these sectors. In line with the recommendation, the
Government replaced the Hotel Act, 1963, and the Tourist Agency
Licensing Act, 1969, with the Tourism Act, 2008. It also replaced
Fisheries Act No. 6 of 1970 with Fisheries Act No. 22 of 2003.


3.4. The Fair Trade Practices Act of 1994, and the Fair Trade
Practices Commission




The Fair Trade Practices Act of 1994 was passed to
address competition issues that the newly established market
economy was facing. In 2001, it was amended and became the Fair
Competition Act. At that time, the Act addressed economic
regulation and competition together. The Appellant Mechanism
Tribunal was not established in accordance with the Act and the


3
Price Waterhouse Coopers Tanzania (2007). Companies Act 2002 Overview.




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Commissioner acted in the capacity of advisor, while one person
made rulings. The IPR recommended that the Fair Competition Act
be reviewed and the Fair Trade Practices Commission be
strengthened.


A new Competition Act was introduced in 2003, which
separated economic and competition regulation, and established the
Fair Competition Commission (FCC) along with other regulatory
bodies for areas such as marine and surface transport, energy and
water, communications and aviation. Companies or individuals can
now approach the FCC or the other regulatory bodies listed above
with complaints, and if unsatisfied with the decision, can appeal
through the Appellant Tribunal established by the new Act. The
Tribunal is chaired by a High Court judge, with final decisions being
made jointly by five commissioners. There have been a total of 15
cases (seven in 2009).


The FCC has been strengthened, although there has been
some decline in resources since the World Bank shifted
responsibility for funding to the Government in 2009. Training uses
up a large portion of the budget, as many of the staff recruited are
not well versed in competition-related issues and regulations. The
FCC does recoup approximately 5 to 10 per cent of its budget
through fines for anticompetitive offenses. In addition to the ability to
impose fines, the FCC can impose compliance orders and order
companies to pay compensation for damage.


3.5. 1997 Investment Act


The IPR found that the 1997 Act was rapidly becoming
obsolete. It no longer had relevance to issues such as the functions
of the Tanzania Investment Centre (TIC), and it contained
references to Acts no longer in existence (e.g. the Sales Tax Act
which was replaced by the VAT Act) and to the Certificate of
Incentives. As a result, the IPR recommended that the Act be
replaced by a new and up-to-date Act. Other areas that the IPR felt
required review were the minimum investment thresholds, which
may exclude some investments. The IPR recommended that these
be lowered to levels that would be competitive with other African
countries. It also prescribed a review of the vague and unspecified
investment incentives included in the Act which could lead to




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arbitrariness or discrimination among investors. So far, the Act has
not been revised, however, TIC has created a Certificate of
Incentives which provides clear, specific incentives for investors.


3.6. Bilateral investment treaties and double taxation treaties


To increase the attractiveness of the United Republic of
Tanzania as a destination for foreign investment, the IPR
recommended that the number of bilateral investment treaties (BITs)
and double taxation treaties (DTTs) be increased, with special
emphasis on current and potential sources of FDI such as France,
Japan and the United States. In addition, it was recommended that
the countries considered should also include dynamic, developing
countries from Asia, such as Malaysia, Singapore and Thailand, as
well as South Africa.


There has been some progress made in this area,
particularly as it relates to regional agreements. As a member of the
East African Community, the United Republic of Tanzania has
participated in the common market since July 2010. Included in the
protocol establishing the common market is the gradual
harmonization of taxation between all member States. Although the
Blue Book advised ratification of the EAC DTT, it is still under
negotiation, following a review after the entry of Burundi and
Rwanda into the EAC. The United Republic of Tanzania is also a
member of the Common Market for Eastern and Southern Africa
(COMESA), and since 2008 it has been a member of the Southern
African Development Community (SADC) Free Trade Area; both of
these organizations contain agreements on investment and double
taxation. Given the scope of these regional trade and investment
agreements, it is difficult to assess precisely the extent of their
implementation.


In addition to the good progress made regionally in this
area, there has been some momentum in signing new BITs and
DTTs, notably with South Africa, which was specifically
recommended in the IPR. The new BITs and DTTs in force include
the following:4




4
UNCTAD (2009). International Investment Agreements Database. June.




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BITs DTTs


Signed In force Agreement Signed
Denmark April 1999 October


2005


Italy August 2001 April 2003


South
Africa


Income September
2005


South
Africa


September
2005




Switzerland April 2004 April 2006
Zimbabwe July 2003


4. Reduce the cost of doing business


The cost of doing business is fairly high in the United
Republic of Tanzania. The IPR emphasized the importance of
steadily pursuing policies and procedures that would reduce these
costs. In 2002, the Tanzanian Government launched the Business
Environment Strengthening for Tanzania (BEST) programme. BEST
is a five-year multi-sector programme intended to reduce the
administrative and regulatory burden of doing business, to improve
the commercial judicial system, and to strengthen the advocacy role
of the private sector. As part of the programme, the Better
Regulation Unit (BRU) was established to oversee implementation.
The IPR identified the BEST programme as a clear path to reducing
the cost of doing business and to creating an enabling investment
climate. In particular, the IPR strongly supported the idea that a
BRU be established to implement the BEST programme.


The progress made in the reforms was highlighted when, in
2005–2006, the United Republic of Tanzania was ranked tenth out
of 175 economies for improvements made in easing the conditions
for doing business.5 In the period since, however, progress has
slowed, although work is ongoing. The IPR recommended that
priority be given to the following areas of the BEST programme:
regulatory improvements in business licensing and registration,
taxation, land, labour, import and export procedures, commercial




5
World Bank (2007). Doing Business 2007.




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dispute resolution, and using private sector organizations to help
identify and remove barriers.


4.1. Business licensing and registration


Since 1999, the Business Registrations and Licensing
Agency (BRELA) has retained responsibility for business start-up
processes. In the past, these processes were viewed as revenue
streams. In the process of streamlining and reforming these
processes and the accompanying regulations, there has been a shift
towards more facilitation and less revenue collection. The new
Business Activities Registration Act of 2007 has been introduced,
and is being implemented jointly by BRELA and BRU. The Business
Activities Registration Act of 2007 will eliminate the general licence
for businesses, leaving only sector-specific licences such as mining
licences. In the past, BRELA’s only activity was licensing
businesses, but under the Business Activities Registration Act of
2007, BRELA will register businesses as well. Presently, however,
the only registration system in place is a business name registration,
which provides, for a fee, the legal right for a business to be the sole
user of the name in question. Although deemed to be voluntary, no
transaction can be carried out using an unregistered business name
(e.g. opening a company bank account). Therefore, registration is, in
effect, required.


The BRELA registration and licensing system is currently
undergoing computerization. The system is being piloted in several
of BRELA’s regional offices. It will ultimately connect all regional
offices with the headquarters in Dar es Salaam. In addition to these
services, BRELA provides tax identification numbers, which are
expected to become a computerized system linked to the Tanzania
Revenue Authority (TRA). Although the Business Activities
Registration Act of 2007 is still relatively new, and therefore not fully
implemented, it is clear that progress in easing and simplifying the
business start-up process has been made.


In order to broaden the measurement of performance
beyond financial indicators, the Blue Book recommended that all
executive agencies administering business regulations and
inspections should develop performance charters. Most public
agencies, including BRELA and TRA, have “client charters” that




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specify the time and cost for all procedures and services offered.
Performance is measured against these, but the monitoring systems
need to be improved.


4.2. Taxation


In this area, BRU is not applying the BEST programme.
Instead, the World Bank has provided $7 million in funding to review
the taxation system. There have been some regulatory changes in
the interim. In 2006, the Revenue Authority Act, Cap. 399 was
introduced, which, according to TIC, has reduced the number of tax
requirements. The Act introduced a system that allowed investors to
defer a portion of their tax payments due in advance.


Tax incentives for investors seem to be operating smoothly,
however TIC is concerned that TRA’s allegations that abuses are
occurring will lead to the removal of goods deemed to be capital
goods. TRA has implemented an Audit on Exemptions Unit to
address possible abuses, while TIC is working with TRA to ensure
that investors are not unfairly harassed. In general, progress has
been made in modernizing and simplifying tax regulations, and more
progress can be expected once the review is completed.


The Blue Book recommended amending the Tax Revenue
Appeals Act of 2000. Although a new Act came into force in 2006,
this Act did not include specific advice to amend the Act so that the
person objecting should pay only the amount of tax that is not in
dispute. The reason behind this is that some objections were not
based on serious facts – objections have been used as a tactic to
delay payment of taxes – hence the need to ensure that only serious
appeals are handled.


The Blue Book also recommended enhancing transparency
in tax administration. In this regard, much has been done by TRA. A
quarterly stakeholders’ forum has been put in place, with the
participation of representatives from the private sector, tax
consultants, and various representatives of government
departments. TRA has also introduced a taxpayers’ charter
informing the public of TRA initiatives and new developments with
regard to tax, and a taxpayers’ service centre to handle enquiries
and suggestions and to provide a hotline for complaints. A whistle-




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11


blowing mechanism has also been included in TRA’s strategic
planning and should be implemented soon.


4.3. Land


Access to land is a delicate issue in the United Republic of
Tanzania, and for investors it is also one of the most problematic.
There are currently two land laws, which were enacted in 1999: (a)
the Land Act No. 4 and (b) the Village Land Act No. 5. By 2003,
neither Act had been implemented. Recognizing the need for
prioritization to implement the many elements of the Acts,
consultants were hired to develop a detailed strategic plan. The
Strategic Plan for Implementation of New Land Laws (SPILL) was
completed in April 2005. Several projects were identified as
necessary for implementation of SPILL. These included land
registration and land information, a geodetic network and mapping,
implementation of the Village Land Act, house registration in
unplanned urban settlements, a dispute-resolution mechanism, and
capacity-building. A $30 million project to implement SPILL was
funded through the World Bank’s Tanzania Private Sector
Competitiveness Project, with implementation planned for the period
from 2006 to 2012. Thus far, pilots have been conducted in building
a computerized registration system for house registration in Dar es
Salaam, village land certification (delineating village boundaries),
and setting up dispute courts and land tribunals.6


To facilitate land access for investors, TIC has created a
“land bank”. Through the land bank, TIC would maintain reserved
tracts of land for investors. These tracts would have the appropriate
infrastructure and leasing permits already in place. The project has
been delayed, however, as the Government and TIC are stalled in
negotiations on whether TIC should pay rent for the unused
reserved land. There is also some question as to how the
programme would work in relation to export processing zones, and
who would fund the infrastructure development in the reserved
tracts of the land bank.




6
A sub-component of the World Bank’s Tanzania Private Sector Competitiveness


Project, the "Tanzania Land Policy and Genesis of Land Reform" pilot project is
being implemented by the National Land Use Planning Commission.




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One factor which might help investors in the nearer term is
the land database currently under development. This would record
land ownership (deed, title) and type of zoning for development.
While this may ease the process of leasing land, it will not address
the problem of short maximum-lease terms. At 33 years, the
maximum land-lease term is sufficient in order to develop the land
for an agro-business but is not sufficient to guarantee to investors
that they will be able to retain possession and reap the benefits of
development after the first lease expires. Further exacerbating the
problems in commercial agriculture development is the requirement
for presidential approval for projects of more than 300 hectares.
Ultimately, land access continues to be an issue, and although the
Government has attempted to introduce clearer regulations, the lack
of progress in implementing the laws has meant that land policy
continues to be a barrier to investment.


4.4. Labour


The Employment and Labour Relations Act was introduced
in 2004 and became effective in 2007. It addressed such issues as
leave, wages, severance pay, maternity, contracts, and collective
bargaining.


Some of the provisions related to termination and hiring
include a probation period where unfair termination does not apply
to workers employed for six months or less, and “fair” termination
being deemed to be related to the employee’s conduct, capacity or
compatibility or being based on the operational requirements of the
employer. Furthermore, an employment contract can be for an
unspecified period of time, for a specified period of time, or can be a
contract for a specific task.


Labour regulations pertaining specifically to foreign
investors are contained in the Investment Act of 1997. Because no
new investment Act has been introduced, these regulations have
remained unchanged. There are two kinds of work permit for
foreigners. The class A permit is given to investors and their family
members. The class B permit is issued for qualified labour. The
maximum number of foreign employees with a class B permit per
investment allowed under the 1997 Act is five. There is, however, a
provision in the Act allowing investors to request and be allowed




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more. For example, permit records from 2008 indicate that, on
average, 6.7 class B permits were granted per investment. Given
the skill shortage, five foreign workers is rather low for a
management team of any sizeable enterprise of the type that the
United Republic of Tanzania would like to attract.


To increase local labour skills, an additional
requirement has been placed on the use of expatriate labour: the
direct assistants of foreign employees must be Tanzanian.
Unfortunately, the workers’ level of skills is usually low, requiring
companies to invest significantly in training. Without training, the
assistants could not contribute to business operations at a
management assistant level. Added to this cost is the 6 per cent
VETA tax that must be paid on each salary (see sections 7.2 and
7.3).


4.5. Import and export procedures


A serious concern impacting the costs of doing business
relates to customs processes. One issue is the lack of clarity about
which agencies are responsible for the various customs functions.
To address this issue, the Government is considering establishing a
body to oversee all port organizations. The customs system, which
is not operating smoothly, is also contributing to the high costs of
doing business in the United Republic of Tanzania. An initiative is
under way to streamline the clearance and customs processes of
the five agencies involved. Unfortunately, the lack of
computerization across all agencies is slowing progress in this area.
For example, Port Authority operations are not computerized, and all
data is recorded manually on paper. Although UNCTAD’s
Automated System for Customs Data (ASYCUDA++) is in use, it
does not seem to be connected to all the customs-related areas that
would normally provide input to the system.


4.6. Commercial dispute resolution


The IPR found that accessibility to the Commercial Court,
court procedures, and corruption were all problems facing investors
when seeking dispute resolution. As a result, the IPR recommended
that these areas receive special attention in Tanzanian reform




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efforts. In addition, the Blue Book specifically advised improving
capacity in the area of administrative support to commercial courts.


BRU is working to implement BEST in the commercial court
system. Thus far, BRU has been able to integrate the commercial
courts into the Court of Appeals and has enabled cases to be heard
by the High Court. In the past, if there was a dispute, the Ministry
was the highest authority; under the new process, the case will
move through the judicial system. The cost has been lowered, too,
from 20,000 TZS to 2,000 TZS. New commercial courts have been
opened in Mwanza and Arusha, which has improved access
substantially. Two others, in Dodoma and Tanga, are in the process
of opening. A Civil Justice Technical Working Group, funded through
BEST, is working to close loopholes in the operations of the
commercial courts. The challenge that continues to face the court
system is capacity. Resolving a case is a lengthy and time-
consuming process for investors. Furthermore, bank premiums for
loans have increased, because in the event that a borrower defaults,
it is difficult to recoup losses through the court system in a timely
manner.


Outside the court system, the Government has formulated
another approach to dispute resolution. The Investor Complaints
Bureau was established in 2010 and is chaired by the Government’s
Chief Secretary. This is a body which allows investors to circumvent
the commercial courts and seek resolution more directly. Both
investors, and TIC on behalf of investors, can address their
concerns to the Investor Complaints Bureau. One example is an
incident where the Ministry of Infrastructure and Development
wanted to monopolize roadside billboards, for which it planned to
sell usage permits. Investors took their concerns about this matter to
TIC, which in turn approached the Investor Complaints Bureau.
Resolution was provided at a high level and in a more efficient and
timely manner than could be achieved through the FCC or
commercial courts.


Progress seems to be occurring in the struggle to combat
corruption.7 Contributing to this improvement are the new ethics


7
World Bank governance indicators show that in 2002, in the area of control of


corruption, the United Republic of Tanzania was in the 14th percentile; in 2008,




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committees, which begin at the district level and report upwards
through the regional-level and district-level judicial boards. The
committees address corruption issues through a bottom-up
approach, which helps to ensure that concerns at each level are
brought to the attention of senior government officials. In 2009, the
Internal Affairs Unit was created, which, once operational, will
introduce a whistle-blowing mechanism. Internal perception surveys,
which solicit recommendations, are also contributing to efforts to
reduce corruption. Many of the corruption complaints centre upon
Customs. In the past, Customs was under the authority of TRA.
Many of the complaints of corruption within TRA were related to
Customs. Recently, Customs has been given autonomy from TRA,
which has eliminated TRA involvement in Customs processes and
resulted in some reduction in the reported incidence of corruption in
this area.


4.7. The Tanzanian National Business Council and the
National Investment Steering Committee




The Investment Policy Review considered the Tanzanian
National Business Council (TNBC) and the National Investment
Steering Committee (NISC) to be vital to the improvement of the
investment climate. Where the TNBC was concerned, it
recommended continued efforts to remove barriers to efficient
business operation, and vigorous follow-up to problems identified
subsequently. The Blue Book suggested strengthening the
monitoring system used for tracking measures agreed upon by the
TNBC. In the case of the NISC, the IPR recommended that in its
role as a mechanism for resolving problems and removing barriers,
it should also strongly pursue links with the business community and
actively monitor the business climate.


The TNBC has been found to be a useful forum. The
primary benefit of the TNBC is the meetings that it holds between
the private and public sector prior to the Government’s decision on
the annual budget. This allows the private sector to provide input.
Although the TNBC forum is commendable, there is a lack of follow-




it has improved significantly to be in the 36th percentile. This is slightly above
the regional average and significantly above the income category average of
24th percentile.




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up or tracking of the agreements and decisions reached in the
meetings, which causes the TNBC to fall short of achieving the
outcome hoped for in the IPR and Blue Book recommendations.
This shortcoming is primarily due to the fact that the TNBC lacks a
fully functional secretariat.


The NISC is an organization that is focused more on new,
strategic, individual investment projects, and on ensuring that any
obstacles to this type of FDI are overcome, rather than on solving
existing investor issues. Chaired by the President of the United
Republic of Tanzania and attended by multi-sector ministers, NISC
meetings result in actionable, final decisions. The NISC meets twice
a year but can also be convened as important issues arise, such as
a potential large investment. Among the decisions made in these
meetings is whether large investors who have been deemed to be
strategically important should be accorded additional incentives.
This type of interaction, although useful, is not what was envisaged
in the IPR recommendation. By focusing on potential new investors,
the NISC is not the investor problem-resolution organization
envisaged by the IPR; this role appears to have been taken by the
recently created Investor Complaints Bureau. Furthermore, it has
not forged links with the business community either, nor is it
monitoring the business climate as recommended.


5. Ensure continued success of privatization


5.1. Privatization of utilities and infrastructure




In 2002, the IPR found that the privatization programme was
successful and urged the Government to move more quickly in
privatizing utilities. Since then, the results of privatization have been
more mixed. Whereas privatization of manufacturing, the financial
sector, hotels and other sectors has been largely successful, with
only a few negative experiences (e.g. turning a manufacturing plant
into a warehouse), privatizations of infrastructure and utilities have
not been as successful. In 2003, a 10-year lease with a firm from
the United Kingdom for supplying water in Dar es Salaam was
terminated after only two years, as improvements in services and
infrastructure had failed to materialize. The privatization of railways
has been problematic too. In 2006, Tanzania Railways was leased




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to Rail India Technical and Economic Services (RITES), giving
RITES a 51 per cent stake in the operation of Tanzania Railways’
passenger and freight services for 25 years. In 2010, both the
Government and RITES, dissatisfied with the partnership, were
seeking early termination of the agreement. The sale in 2002 to
South African Airways of a 49 per cent stake of Air Tanzania
Company Limited was initially considered to be a success. However,
differences in business approaches led to the dissolution of the
partnership in 2006 and to the Government buying out South African
Airways. In addition to these examples, and in common with many
developing countries,8 the United Republic of Tanzania has faced
difficulties in privatizing the landline telecommunications and
electricity sectors.


Ultimately, the Government worked determinedly to privatize
utilities, as the IPR recommended. However, given the failures, it is
proceeding much more cautiously in re-admitting private investment
in utilities. In the past, in the absence of a PPP policy, decision-
makers turned to a standard procurement policy approach that
favours low bidders. This is a radical difference from PPP
guidelines, which tend to favour a more balanced approach between
value and price and which may mean the lowest bid is not
necessarily the optimal choice. Some of the past mistakes, such as
lack of due diligence, and using the lowest bid as a key selection
criterion, are expected to be rectified by the new PPP law which was
enacted in 2009. The only component missing is the PPP policy to
implement the law, which is expected in the near future.


5.2. The Asia-Africa Investment Technology Promotion
Centre




With regard to the search for appropriate partners for
assistance in developing utilities and infrastructure, the IPR
identified the Asia-Africa Investment Technology Promotion Centre
(AAITPC) as a potential partner to link investors in Asia with
government projects in the United Republic of Tanzania. The best-
known example to have come through the AAITPC is the RITES
investment in Tanzania Railways. Other institutions with the same




8
For further information, see UNCTAD (2008). World Investment Report:


Transnational Corporations and the Infrastructure Challenge.




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core concept of furthering partnerships in trade and investment have
been created, overshadowing the AAITPC. For the most part,
however, China and India cooperate through bilateral institutions
and agreements with the Tanzanian Government.


5.3. The National Development Corporation


The National Development Corporation (NDC) is an
important actor in building infrastructure through private investment.
It is mandated to initiate, develop and guide the implementation of
projects in partnership with the private sector, and to initiate
development of export processing zones. The IPR felt that in view of
the importance of the NDC in bringing infrastructure development
and investors together, it should be assured of appropriate
resources and be staffed by personnel with the appropriate skills
and technical knowledge. In order to help NDC acquire the
necessary capacity, the IPR recommended the secondment of
private sector executives to NDC. Such a programme has not been
implemented. Furthermore, with the exception of the current
director, whose background is in the cement industry, all previous
directors have been hired from the public sector.


The IPR also recommended that there should be strong
cooperation between NDC and TIC. Cooperation is occurring,
particularly in work involving investor profiling. TIC also works
closely with NDC and the Export Processing Zones Authority
(EPZA) (formerly part of the NDC) to attract investors to the export
processing zones (EPZs).


5.4. Redundancies due to privatization


Given the IPR’s recommendations to move forward with
privatization, the resulting unemployment was a concern. Therefore,
the IPR recommended that privatization policies needed to include
policies to manage the redundancies that would occur when
unviable enterprises were closed or restructured. This aspect of
privatization was handled in the 1993 and 1999 amendments to the
Public Corporations Act of 1992, which stipulated that a public
corporation being prepared for divestiture would be required to
prepare a two- to three-year manpower development plan. No new
policies have been introduced since this amendment, however this




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concern has proved to be unfounded. The low skill level in the
United Republic of Tanzania means that these workers are
considered to be quite valuable, and as such, they have easily found
employment in private enterprises.


6. Implement effective infrastructure development


Infrastructure was identified by the IPR as an opportunity to
attract foreign investment and other forms of involvement. The IPR
highlighted airports, Dar es Salaam Port, and EPZs as opportunities
suited to FDI.


6.1. Airports


The IPR recommended that the Government use its
experience with the privatization of Kilimanjaro International Airport
to develop a partnership model that is attractive to foreign investors
and beneficial for the country. Kilimanjaro International Airport was
privatized in 1998, through a 25-year lease contract with the
Kilimanjaro Airports Development Company owned by United
Kingdom firm Mott MacDonald and Tanzanian firm Inter-Consult.
Dissatisfied with progress in improvements, the Government took
over in 2009. This experience, however, has not stopped plans to
find a private operator for Nyerere International Airport in Dar es
Salaam.


6.2. Dar es Salaam Port and trade corridors


The potential of Dar es Salaam Port was recognized by the
IPR. The IPR encouraged the Government to pursue transforming it
into a major shipping and cargo centre. Among the possibilities, the
IPR felt that it could become a top provider of port services, through
either a joint venture or hiring the appropriate experts.


The challenges facing the Tanzania Port Authority, which
owns and operates the port, include storage capacity, non-
computerized processing (including customs handling), and a
history of corruption. Despite being poorly outfitted and losing
market share to other regional ports, Dar es Salaam Port’s cargo
volume continues to grow. This indicates that port services continue




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to be in high demand, and that growth could be much higher if the
proper infrastructure and management were in place. Cargo has
been increasing at a rate of 15 per cent annually since 2004.9
Unfortunately, the development of container storage has not kept
pace, creating significant delays. It has been estimated that by the
beginning of 2009, Dar es Salaam Port had lost 30 per cent of its
traffic to the ports of Mombasa (Kenya) and Beira (Mozambique).10


Recent steps to alleviate the capacity problems include the
establishment of inland container depots. A dry port at Isaka is being
built from an existing railway terminal; and construction of another
dry port is planned in Mbeya, to service Malawi. Customs
procedures – which have been one of the primary culprits for delays
in unloading cargo and in the clearance of containers – would be
carried out at these dry docks, alleviating some of the port
congestion. As described in section 4.6, strides have also been
made in streamlining customs procedures and in computerizing
those processes which will help reduce congestion. The effect of
implementing dry docks and of streamlining procedures has been to
improve port operation. Waiting times at sea have been reduced
from 14 to 4 days for all but oil tankers.11 The end of the exclusivity
clause for Tanzania International Container Terminal Services is
expected to further alleviate bottlenecks at Dar es Salaam Port, as it
will allow other investors to establish and operate container
terminals at Dar es Salaam and other Tanzanian ports. In 2008, the
Port Master Plan was completed, which, once implemented, will
improve port operations, particularly the plans for a second
container terminal. Overall, no progress has been made in involving
investors in the development of the port, although future port
development plans do include private sector participation.


In addition to improving port operations through private
sector investment, the IPR recommended the creation of trade
corridors between the United Republic of Tanzania and
neighbouring landlocked countries that use Dar es Salaam Port. It
was suggested that this could be initiated through “inland ports”


9
Tanzania Port Authority. Quayside. Vol. 2. January/March 2010.


10
Reuters Africa (2009). Tanzania’s key port plans expansion to combat


bottlenecks. 17 December.
11


Tanzania Port Authority. Quayside. Vol. 2. January/March 2010.




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either wholly owned by the Tanzania Port Authority or through joint
ventures. The “inland ports” would be transfer points for goods
destined for Dar es Salaam Port and goods destined for
neighbouring interior countries. The IPR expected this to reduce the
cost of goods and to transform Dar es Salaam Port into a major
trade hub for the region.


There are plans for construction of the 850-km Mtwara
Development Corridor. The primary objective of the corridor is to
address power shortages in the country by developing the
Mchuchuma-Katewaka coal field in the southwest and building a
thermal plant and transmission systems to feed the national grid.12 A
secondary objective of the project is to be a springboard for other
transportation and infrastructure projects, as these can be expected
to improve trade. Some examples are expansion of Mtwara Port,
upgrading of the Mtwara airport to an international airport,
construction of a road or rail connection from Nkatha Bay in Malawi
to the United Republic of Tanzania, a Mtwara Port to Mbamba Bay
road improvement project, and construction of the Unity Bridge13
which crosses the Rumuva River into Mozambique. Similarly, there
are future plans to develop a northern corridor that would connect
Tanga Port in the north to mining in the Lake Natron region in the
northwest and in Kenya. In addition, plans are being made for a
central corridor that would connect the agricultural regions to the
major cities and to some nickel-mining areas near the border with
Burundi.


The Government plans to develop the Mtwara and other
corridors using the PPP approach. Forty-eight companies from 13
countries have expressed interest in the various Mtwara Corridor
projects. The NDC plans to assess the project with interested
parties and to begin bidding and negotiating terms. One of the
biggest hurdles to overcome is the lack of an implemented PPP
policy. As mentioned in section 5.1, a law was passed in 2009, but
policy and operational guidelines are not in place yet. Without these,




12
According to the NDC website, the electrification plan for the south-west region


entails the construction of transmission lines connecting to the national grid,
including a 280km transmission link to Mufindi, a 200km transmission link to
Makambako, and a 400km transmission link to Mbeya.


13
Inaugurated in April 2010.




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the Mtwara Development Corridor has been unable to move to the
next stage.


6.3. Multi-facility economic zones


Frequently, EPZs are used to attract FDI in countries where
infrastructure is a challenge; industrial parks are then developed
separately to encourage domestic production. The IPR
recommended that, rather than pursuing two separate initiatives, the
United Republic of Tanzania should develop multi-facility economic
zones (MFEZs) which would combine domestic production and
export-oriented industries in one facility. Through cost-sharing with
the private sector, and implementation of the regulatory environment
envisaged by the BEST programme combined with efficient
administration, MFEZs could provide the best possible business
environment within a limited geographical area. Furthermore, if the
initial MFEZ proved successful, new strategically placed MFEZs
could be established, and MFEZ status and facilities could be
extended to other areas of large-scale economic activity, such as
the creation of townships in large-scale mining areas.


In 2006, the EPZA developed two types of zones. The first
was the standard EPZ, which required companies to export 80 per
cent of production. The second, more closely aligned with the IPR
recommendation, is the special economic zone (SEZ). In SEZs,
companies have no export requirements, they can sell to the local
market, and do not have to be in manufacturing. In 2008, the EPZA
sought the assistance of the World Bank to develop a five-year plan
to merge EPZs and SEZs and create economic development zones
(EDZs) to incorporate the incentives of both EPZs and SEZs.
Another plan being formulated is one whereby “township” economic
zones will be created, mirroring China’s approach to industrial
organization.


The incentives offered in EPZs are not dependent upon
“zone” incentives but rather on the amount of exports. Companies
that export most of their output receive more incentives than those
servicing the domestic market. In general, the incentives are the
same as those given by the TIC, but the infrastructure component
could be expected to be the difference in attracting investment. One
important difference between the EPZA and the TIC can be found in




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the area of regulations. The 2006 EPZ Act specifies incentives
available to the EPZA to attract investors, whereas the 1997
Investment Act does not. This may mean that TIC is having a more
difficult time in assuring investors of incentives, compared to the
EPZA.


Existing EPZs have, for the most part, been developed
through local, private investors, and a few joint ventures. The
developers are responsible for infrastructure within the zone, with
the Government responsible for providing the necessary
connections to infrastructure outside of the zone. As is the case with
Dar es Salaam Port and the Mtwara Corridor Development Project,
EDZ development is being delayed by the lack of a PPP policy and
operating guidelines.


Currently, there are three EPZ sites and one SEZ ready for
lease.14 There are 18 companies operating under EPZ status in
industrial parks, and 15 single factory units with EPZ status. EPZ
enterprises are nearly evenly divided between local and foreign
companies. The foreign companies are primarily from China,
Denmark, India and Japan. The majority of companies are in
engineering, followed by textiles, agro-processing and mineral
processing. In addition, there are 14 sites designated for EDZ
development. Priority is being given to the zones at the ports of
Mtwara and Tanga, at the coastal town of Bagamoyo (50 km north
of Dar es Salaam), and at the northern, inland town of Arusha.
Bagamoyo, with a completed feasibility study and master plan, is
farthest along in terms of development, and is the top priority of the
EPZA. It is envisioned that this EDZ will encompass 9,000 ha, which
is large when compared to the standard 2,000 ha set aside for other
EDZs. The Bagamoyo EDZ will be one of the first “township” style
EDZs, and will include construction of a new port and airport.




14
The available EPZ industrial sites include Millennium Business Park at Ubungo


(Dar es Salaam), Hifadhi at Ubungo (Dar es Salaam), and Vector Health at
Kisongo (Arusha). The available SEZ is Benjamin William Mkapa SEZ.
(Information from EPZA website, accessed 31 May 2010).




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7. Stimulate human resource development and
linkages




As in other developing countries, skills shortages pose
problems for investors in the United Republic of Tanzania. The IPR,
in an effort to address this shortage, made several
recommendations related to addressing the needs of the private
sector through curriculum changes, training programmes in
partnership with the private sector, and the development of
domestic–foreign partnership programmes.


7.1. Higher education


Although there is a shortage of skilled workers in the United
Republic of Tanzania, there is also the problem of workers having
skill sets that do not meet the needs of a modern, market economy.
The IPR recommended expanding the provision of higher education
and revising curriculums to better meet the private sector’s needs.


There has not been an expansion in higher education or
technical training, but there has been some attempt to reform
technology-related education. COSTECH, in partnership with
UNESCO, is working on this aspect of university education reform,
including adding an element of entrepreneurship training to science
departments in universities.


7.2. Training programmes based on priority sectors


The IPR recommended that a programme be developed
which, with private sector input, would identify the skills needed by
workers in priority sectors and establish funding systems for training.
Such an initiative has not been undertaken. The Government
provides training through VETA. The curriculums are developed
without the benefit of private sector collaboration, and are therefore
not meeting the needs of the private sector. Possibly, a first step
towards establishing a coordinated and integrated policy approach
to technical and vocational training that would better meet private
sector needs is the recently initiated programme to bring technical
and vocational training under the umbrella of the Ministry of
Education.




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There are also several private associations that provide
training. The Tanzania Chamber of Commerce, Industry and
Agriculture (TCCIA), with support from international development
agencies, provides training for SMEs, focusing on transforming
subsistence farmers into commercial farmers and on business
management. Although these programmes are not exactly the
solution envisaged by the IPR, they may help in formalizing
business in agricultural activities.


7.3. In-house training


The IPR urged the Government to encourage companies to
provide or increase existing in-house training programmes for staff,
as well as to offer training opportunities over and above the
immediate workplace training needs. The IPR proposed tax
deductions for training expenses as an effective incentive. As
outlined above, the Government has opted instead to manage
training through VETA. The private sector is not satisfied with this
approach. Its concerns centre upon the absence of demand-driven
curriculums, as this is failing to produce appropriately trained
graduates. Another concern is the funding of VETA. VETA is funded
by a 6 per cent tax on salaries. Given its lack of inputs into
designing the curriculums and the absence of visible skills
improvements, the private sector has raised concerns about paying
a tax to fund the initiative. Adding to the general climate of
discontent are reports that only 2 per cent of the tax is delivered to
VETA, while the other 4 per cent is sent to the central Government.


7.4. Linkage programmes


To improve the skills and experience of Tanzanian workers,
the IPR recommended developing linkage programmes based on
sectors. Although energy, mining and agribusiness are all of
fundamental importance to attracting FDI, the IPR recommended
beginning with the easier tourism sector. No “sector” linkage
programme has materialized.


There are three linkage programmes. The TCCIA hosts
regional trade fairs to help promote business linkages, and engages
in “matchmaking” when foreign delegations visit. SIDO, under the
Ministry of Trade, Industry and Marketing, provides workshops for




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small and medium-sized enterprises (SMEs) on business linkages,
and encourages SMEs to become suppliers to large companies.
Finally, UNCTAD launched a business linkages programme in June
2009 in collaboration with TIC. These three programmes would
benefit from coordination and sector emphasis.


8. Build a dynamic private sector


An effective approach to maximizing gains from the private
sector is improving the capacity of domestic enterprises to learn,
adapt and assimilate new technology. Accordingly, the IPR made
several recommendations to encourage the development of a
dynamic enterprise sector in the United Republic of Tanzania.


8.1. National science and technology policy


Tanzanian science and technology policy has lagged behind
other areas in policy reform. The IPR identified this as an area
where modernizing the policy could provide gains in the
development of a dynamic private sector. In 2007, a national
research policy was developed; this was followed by a national
science, technology and investment policy in 2008. Neither policy
has been implemented, however an inter-ministerial committee has
been created to manage implementation. COSTECH, the
implementation arm of the Ministry of Science and Technology,
actively participates in policy discussions and gives
recommendations. COSTECH is working to increase these policy
advocacy activities and to foster closer cooperation with the Ministry
of Science and Technology.


8.2. Technology institutions


The existing technology institutions structure has become
outdated and is in need of a major overhaul and significant
restructuring. The IPR recommended initially proceeding with an
analysis of institutions, identifying those that are providing essential
services and simply require strengthening, and those that are
ineffective and should cease operations. It also recommended that
in the restructuring, private sector involvement in dissemination of
technology and R&D should be actively encouraged.




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8.2.1. Restructuring institutions




To increase R&D coordination and reduce overlap among
institutions, Institutions Collaborating in Research and Technology
Development (ICRTD) was created. This seems to have had a
positive effect on the operations of the various institutions. Through
consultation with stakeholders, a strategic plan to restructure
COSTECH has been developed, too. In the past, COSTECH
managed technology as part of scientific education. Going forward,
COSTECH is shifting to diffusion of technology that is linked to
economic development, with a focus on the commercialization of
technologies and on adapting technologies for local use. As part of
the development of the strategic plan, gaps in expertise within
COSTECH were identified. These included the lack of MBAs and
entrepreneurs to direct the Commission in developing its economic
growth approach, and the absence of policy advocacy and
communication skills.


8.2.2. Private sector involvement


SIDO, the organization working with SME development, has
technology dissemination, access and transfer components to its
programme. To address this area of responsibility, SIDO has
recently opened incubation centres to help disseminate technology
from other institutions. Some examples include exposing domestic
SMEs to SMEs from India and South Africa. The Tanzania Private
Sector Foundation encourages R&D by providing a grant to support
enterprises that perform R&D. It is also working with the
Government to create a list of R&D opportunities for the private
sector. Although there is no regulatory requirement for technology
transfer, some transfer has been occurring naturally. For example,
banks have been outsourcing ATM operation and maintenance to
domestic companies.


9. Enlarge markets through regional integration


9.1. The EAC and import and export procedures


In order for the United Republic of Tanzania to increase its
attractiveness to FDI, the IPR recommended that the Government




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work to realize the benefits of regional integration, particularly within
the EAC. Areas identified as good starting points included
encouraging export orientation in indigenous industry, attracting
export-oriented FDI to exploit the larger EAC market, and attracting
intraregional FDI. It was only in 2010 that the EAC became a full-
fledged customs union and a common market between Kenya,
Uganda and the United Republic of Tanzania.15 The United Republic
of Tanzania has worked to attract export-oriented FDI, but the
destinations for these exports are principally the European and
Asian markets.


One obstacle identified by the IPR that the United Republic
of Tanzania must overcome in order to realize the benefits of the
EAC is the deficiencies in the Tanzanian import and export
procedures. As detailed in section 6.2, there has been an effort to
streamline and computerize the customs processes. Indications are
that this effort, combined with the five-year transition period which
has been spent readying customs for the new EAC customs union
procedures, has prepared the United Republic of Tanzania for the
transition.


9.2. Tariffs and non-tariff barriers


The IPR warned that while the EAC and the customs union
would have positive effects on Tanzanian trade, the Government
would have to proceed cautiously in eliminating tariffs and non-tariff
barriers to avoid import surges. In particular, the Government would
need to recognize problems that foreign and domestic
manufacturers would face in competing with Kenya. There are not
any specific programmes to help Tanzanian manufacturers,
although there has been a five-year transition period, which gave
some time for manufacturers to prepare.


9.3. Transportation infrastructure


SADC was another opportunity for intraregional FDI
identified by the IPR. It was felt that, in the short term, realizing the


15
Kenya, Uganda and the United Republic of Tanzania began implementing a


customs union in January 2005, while newer members Burundi and Rwanda
began implementation in 2009. The initial five-year transition period ended in
2010 for the original members and will end in 2014 for the other two members.




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benefits of SADC would be unlikely. With improvements in transport
infrastructure in the south, however, it could become a gateway to
the region in the longer term. As outlined in section 6.2, the Mtwara
Development Corridor and the associated transportation projects
(Mtwara port, the Unity Bridge to Mozambique, the Mtwara-
Mchuchuma road improvement) will address many of the
shortcomings of the transport infrastructure in the southern region.


9.4. Regional FDI promotion


To further exploit the benefits of membership in the regional
communities, it was recommended that the United Republic of
Tanzania encourage regional FDI promotion events, particularly for
the EAC. Two types of trade fairs are held annually in the EAC. The
first is the Trade and Investment Forum, which aims to attract
international investors to the EAC member countries. Held on a
rotational basis, the first forum took place in Kigali, Rwanda, in
2008; this was followed by Kenya in 2009. The other trade fair, the
Jua Kali/Nguvu Kazi Expo, which has been held since 2006, targets
SMEs in the region and provides them with the opportunity to
display their products and expand their marketing within the EAC.


In order to facilitate business in the region, the Blue Book
recommended issuing joint EAC business visas. Such visas do not
exist yet, but under the common market, once a person receives
resident status in one of the member States, he or she is free to
travel within the EAC. This, however, does not simplify the visa
application process for potential foreign investors visiting the region.


9.5. WTO and tariff protection


The “window of opportunity” offered by the World Trade
Organization (WTO) creates an opportunity for the United Republic
of Tanzania to encourage import substitution industries. The IPR
recommended taking full advantage of this period, while keeping in
mind the short-term nature of these measures to help
manufacturers. The United Republic of Tanzania has continued to
pursue policies which foster its industries, and plans to continue
doing so until the country graduates from least developed country
(LDC) status.




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10. Impart a new strategic thrust to investment
promotion




In 2001 and 2002 the global economy was in a period of
slowdown. The IPR recognized this, and cautioned the United
Republic of Tanzania not to expect waves of FDI into its economy.
Accordingly, the IPR recommended that the United Republic of
Tanzania approach investment promotion with a series of strategic
thrusts in selected areas. These thrusts would be driven by a
“Sustained Programme of Action” with the objective of yielding
positive, measurable results in two to five years.


10.1. Investor targeting


The TIC launched a five-year programme in 2007, which
includes a branding programme to promote the country as a
destination for FDI, and a plan for targeted promotion.
Implementation of the country branding programme is being
conducted in cooperation with embassies. The TIC set out the four
key sectors on which to focus the promotional activities, namely
agriculture, the extractive industries, infrastructure and tourism. In
agriculture, the focus is on biofuels, floriculture and horticulture, and
textile fibres such as cotton. The TIC has had some success in
attracting investors to mining.16 Infrastructure – a top priority for the
country – is being tackled by the TIC too. The focus is on electricity
(independent power producers, and tapping the potential in coal and
hydropower), ports (favouring build-operate-transfer (BOT)
agreements), railways, and fibre optics (now that the infrastructure
exists, the TIC is interested in attracting large-scale end-users such
as call centres). There has been success in the area of tourism, with
investors attracted to safari tourism. Going forward, the TIC would
like to begin attracting investors in other areas, such as coastal
development.




Parameters have been established for targeted promotion
efforts. When targeting investment in a specific sector, the TIC
undertakes research on the potential of local and international


16
Normally, smaller deposits in developing countries attract, for the most part,


junior mining companies; however, the TIC was able to secure investment from
Barrick Gold, a company that is ranked fourth in the world for gold production.




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markets, on infrastructure support projects, and on the existence of
potential investors in that sector. These parameters are reviewed
every three years. A couple of initiatives have targeted specific
investors and resulted in attracting FDI. These were Vodacom in
1999 in the telecommunications sector, and Barrick Gold in 2001 in
the mining sector. Future projects in which the TIC plans to target
specific investors include a gas pipeline project, a biofuel refinery,
and development of information and communications technology
(ICT) infrastructure for the country. The latest economic downturn
has shifted the TIC’s targeting to include more emerging markets,
such as India and China. The primary obstacle that the TIC faces in
moving ahead in this area is the missing PPP policy.




Thus far, the results of the investor targeting have been
disappointing. Training could be part of the reason for the lacklustre
performance, as the number of trained staff is insufficient. Another
problem is the lack of more precise targeting. Rather than targeting
investors at the firm level, targeting is more broadly applied at the
sector and country level. Lastly, the lack of a PPP policy is
hampering promotion in infrastructure projects.


10.2. Agriculture


The United Republic of Tanzania has an abundance of land
appropriate for agriculture, but access for large-scale investment is
a bottleneck, as outlined in section 4.4. To address this issue, the
IPR recommended selecting five areas of land that would be made
available to potential investors of large-scale commercial farming
operations. Outside of the proposed TIC “land bank”, no action has
been taken to set aside land for agricultural investment.




The Blue Book noted that the United Republic of Tanzania
had a number of different policy documents on agriculture, and
recommended establishing a strategy for growing agriculture and
agro-processing in the country. In response to the 2008 increases in
commodity prices, the Government decided that a new focused
effort was needed in order to develop the agriculture sector. As a
result, in 2009, the TNBC passed the Kilimo Kwanza resolution. Its
goal was modernization and commercialization of the sector. The
resolution contains 10 pillars, two of which include creating




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incentives to stimulate investment in agriculture and ensuring land
availability for agriculture.


10.3. Manufacturing


Attracting manufacturing investment, given the country’s
present state of development and limited domestic market, may
pose difficulties. The IPR proposed that the TIC target investors that
would be suited to operating in a small-sized market, with the
chance to gain a “first mover” advantage. These investors would be
interested in moving quickly to enter the Tanzanian market and
consolidate their position in it. That is not to say that the TIC should
not also consider targeting large transnational corporations (TNCs).
The IPR highlighted the consumer goods sector, in which TNCs
have historically been pioneers in emerging markets. To attract this
type of investor, the IPR recommended targeting at the firm level.


Although the TIC has used firm-level targeting (as
mentioned in section 10.1), this tool is not being used regularly. The
primary method used is promotion at the sector or country level.
Furthermore, each ministry has an investment promotion strategy,
accompanied by respective budgets, with which they seek to attract
FDI. The TIC collaborates with the ministries only if requested.


10.4. Existing investors


The IPR recommended that the TIC should encourage
established foreign investors to reinvest in the domestic economy,
while at the same time encouraging enterprises in Kenya and other
bordering countries to expand their operations into the United
Republic of Tanzania. The TIC has implemented an aftercare
programme for established investors. Each of the TIC staff members
manages a portfolio of investors whom they visit periodically,
encouraging expansion of their investment. The staff members also
work to remove any impediments to reinvesting when issues are
raised by investors. Thus far, the TIC’s programme has yielded
some success in encouraging investors to expand. There is,
however, no outreach programme for potential regional investors or
for promoting expansion by enterprises from bordering countries into
the United Republic of Tanzania.




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10.5. National Investment Task Force


Each of the strategy thrusts was considered the best
opportunity for attracting FDI, which would also prove beneficial for
the United Republic of Tanzania. However, the IPR acknowledged
that a full assessment was needed to confirm the feasibility of the
recommended thrusts. To conduct this assessment, the IPR
recommended a National Investment Task Force be formed, with
members drawn from the private and public sectors. The task force
would carry out assessments, which would include feasibility plans
and detailed implementation plans for promoting each strategic
thrust. The IPR identified the TIC and the Zanzibar Investment
Promotion Agency as likely agencies to lead the effort, with the
National Investment Steering Committee receiving the findings of
the task force. To date, although the Land Task Force and the Tax
Task Force have been set up, no task force to assess the feasibility
of the strategy thrusts as recommended by the IPR has been
established. There has also been no action, other than that
identified in section 10.1, to formulate strategic thrusts resembling
those recommended in the IPR.


11. FDI attraction and performance


Since the mid-1990s, FDI inflows have increased
significantly (fig. 1). From that point on, the privatization programme
was pursued in earnest, market-oriented reforms were implemented,
and the 1997 Investment Act was put in place. From 1990 to 1995,
FDI inflows totalled $232 million, compared to $1.3 billion from 1996
to 2000. From 2000 onwards, FDI inflows accelerated, growing at an
annual average rate of 28 per cent from 2003 to 2008.




Since the end of the 1990s, mining has been – and
continues to be – the main source of FDI inflows. In 2000,
AngloGold began operations in the United Republic of Tanzania,
followed by Barrick Gold in 2001. From 2001 to 2009, Barrick Gold
alone opened four mines. FDI stock surged from $2.78 billion in
2000 to $5.94 billion in 2007.17 During this period of growth, over $2




17
UNCTAD. World Investment Report 2010.




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billion out of the $3 billion increase was due to mining.18 Other
examples of FDI include the arrival of Vodacom in 1999, and some
smaller projects in manufacturing and tourism.


Figure 1. Annual FDI inflows, 1990—2009
(in millions of dollars)


0


100


200


300


400


500


600


700


800


19
90


19
91


19
92


19
93


19
94


19
95


19
96


19
97


19
98


19
99


20
00


20
01


20
02


20
03


20
04


20
05


20
06


20
07


20
08


20
09




Source: UNCTAD. World Investment Report 2010.


12. Conclusions and recommendations


There has been a great deal of activity related to improving
the investment climate in the United Republic of Tanzania since the
completion of the IPR. However, as the record illustrates, progress
implementing the recommendations has been mixed. Of the 49
recommendations, a third have been fully implemented, a third have
been partially implemented, and a third have not been implemented.
Noticeable gains have been made in improving the investment
framework and in reducing the cost of doing business. The progress
in these areas, although good, has been limited by slow
implementation. A similar situation exists regarding progress in


18
World Gold Council (2009). The Golden Building Block: Gold Mining and the


Transformation of Developing Economies.




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infrastructure development, where the absence of an implemented
PPP policy remains a bottleneck for many projects. Human resource
development and investment promotion are the areas in which the
least progress was made. The education and training system has
largely remained unchanged since the IPR was drafted. In
investment promotion, with the exception of improved aftercare
services, none of the recommendations were implemented.




All of the recommendations, if implemented, could boost FDI
inflows. Of the recommendations that were not fully implemented,
five are of particular importance. These include:


• 1997 Investment Act: Investment reform is overdue. The
delay in enacting a new investment law is affecting not only
the conditions of FDI such as minimum investment size,
enterprise establishment and incentives, but also those
factors that contribute to creating an attractive investment
climate such as commercial dispute resolution, contract
enforcement, arbitration, and expatriate labour.


• Infrastructure development: It is imperative that a fully
formulated and implemented PPP policy and guidelines be
established in the immediate future. Poor infrastructure is
one of the primary stumbling blocks to attracting FDI. The
United Republic of Tanzania has made significant headway
in developing strategies, formulating plans and securing
investor interest in infrastructure development, but the
projects have stalled while awaiting the PPP policy.


• Human resources development: Not only is the current
training through VETA not meeting the needs of the private
sector; it is not meeting the needs of the employable
population either, which is having trouble securing jobs due
to irrelevant training. The Government should completely
overhaul VETA, beginning with the curriculums. The
curriculums should be changed, based on the needs of the
private sector. There should be quarterly or six-monthly
meetings between VETA administrators and representatives
from the private sector to assess the programme. If the 6
per cent tax is to remain in force, 100 per cent of it should
go directly to VETA. The VETA tax should be lowered or




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removed for companies providing in-house training. For this
initiative, clear guidelines on what will constitute in-house
training and what the corresponding tax reduction will be
should be published.


• Land: A large project to modernize the land system of the
United Republic of Tanzania is under way, the results of
which are expected to be seen in the long term. In the
interim, the United Republic of Tanzania is failing to realize
investment opportunities in the agriculture sector. Disputes
about rents for land that would be unlikely to generate
revenues without some type of development investment are
preventing forward momentum in securing FDI in
commercial agriculture. As such, the Government needs to
move this initiative forward and reserve land as the IPR
recommended. In this respect, it should look to resolve the
issue over financing the TIC’s “land bank”.


• Investment promotion: The TIC appears to have the
strategies, the tools and the established parameters for
targeting investors. However, there does not appear to be
much activity in this area. After the early success in the
mining sector, firm-level investor targeting seems to have
tapered off. To attract FDI in the current economic
environment, in areas outside of the mining sector, the TIC
needs to more frequently use the targeting tools that it has.
Blanket promotion efforts to a sector or to investors by
region are not sufficient. TIC staff working on investment
promotion should be trained and well versed in targeting
techniques. There also needs to be a more coordinated
approach to FDI promotion. With each ministry pursuing FDI
promotion alongside the TIC’s activities, it is likely that there
is significant overlap and redundancy of effort. Resources
could be marshalled more efficiently and effectively by
placing FDI promotion firmly under the auspices of the TIC
and implementing a coordination mechanism with the
individual ministries involved in FDI promotion.




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Table I. Summary of implementation achievements
Strengthen the Investment Framework




Key to table: ºººº ººº ºº º
+


surpassed expectations
fully or largely accomplished
partially accomplished
no change or reversal
different policy direction taken


Sector/Area IPR recommendation Result Comment
Legislative Employment and Labour:


introduce new, modern law ººº Employment and Labour Relations Act, 2004


Legislative Commercial Dispute:
introduce new, modern law º No new law


Legislative Contract Law: introduce
new, modern law º No new law


Legislative Arbitration Act: introduce
new, modern law º No new law


Legislative Companies Act - introduce
new, modern law ººº Companies Act, 2002


Legislative Competition Act of 1994:
introduce new, modern law ººº Competition Act, 2003


Legislative 1997 Investment Act:
introduce new, modern law º No new law


Legislative Tourism: introduce new,
modern regulations ººº Tourism Act, 2008


Legislative Fishing: introduce new,
modern regulations


ººº Fisheries Act No. 22, 2003
Competition Strengthen Fair Trade


Practices Commission


ººº


The Competition Act, 2003
established the Fair
Competition Commission,
replacing the Fair Trade
Practices Commission.
Has powers to enforce
rulings on anticompetitive
offences. An appellant
tribunal was established
for appeals.


BITs and
DTTs


Increase the number. Sign
agreements with the United
States, France, Japan; with
developing countries from
Asia such as Malaysia,
Singapore and Thailand;
with African countries.


ºº
The number did increase
(2 new BITs and 1 new
DTT), however none were
signed with the countries
recommended in the IPR.




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Table II. Summary of implementation achievements
Reduce the Cost of Doing Business


Sector/
Area IPR recommendation Result Comment


Regulatory Improve business
licensing and
registration ºº


New Business Activities
Registration Act, 2007 was
introduced but has not yet been
fully implemented.


Regulatory Simplify and update
taxation regulations
ºº


Revenue Authority Act, Cap. 399
reduced the number of tax
requirements. Tax system still
undergoing review. Full overhaul
not completely implemented.


Regulatory Improve access to land
for investors
º


2 new acts introduced in 1999:
Land Act No. 4 and Village Land
Act No. 5. Not implemented. Land
access for investors has not
changed.


Regulatory Modernize labour
regulations pertaining to
foreign workers brought
in through FDI projects


º These regulations are encapsulated in the 1997 Investment Act which has not been
changed.


Trade Streamline
import/export
procedures ºº


Project to streamline customs and
clearance processes partially
implemented. Computerized many
but not all of the agencies handling
customs procedures.


Judiciary
system


Improve access to
commercial dispute
resolution


ººº Commercial courts integrated into Court of Appeals. New commercial courts in two regions, with two
more planned.


Judiciary
system


Simplify and streamline
court procedures ººº Established Civil Justice Technical Working Group to close loopholes


in court operations.
Judiciary
system


Address corruption
ººº Established a new Ethics Committee and an Internal Affairs Unit. TRA and customs activities


have been separated.
Public–
private
sector
cooperation


TNBC and NISC should
work to remove barriers
to efficient business
operation ºº


TNBC holds meetings with private
and public sector participants, but
the absence of a secretariat has
hindered follow-up on decisions.
NISC used more to make decisions
among multi-sector ministries on
large-scale potential investors. No
obvious private sector input.




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Table III. Summary of implementation achievements
Ensure Continued Success of Privatization








Sector/Area IPR recommendation Result Comment
Utilities and
infrastructure


Move more quickly in
privatizing utilities


+


Moved rapidly at first,
however problems led to
a more cautious approach
being taken. Moving
slowly until PPP
guidelines are formulated.
PPP law has been
passed.


International
cooperation


Partner with AAITPC
to link investors in
Asia with government
projects in the United
Republic of Tanzania


+


Cooperation with China
and India is largely
conducted through
bilateral institutions and
agreements.


Domestic
coordination


Improve capacity of
the NDC through a
secondment
programme


º No programme has been implemented.
Domestic
coordination


Strong cooperation
between NDC and TIC ººº NDC and TIC work together on investor


profiling.
Employment


Include policies to
address redundancies
in privatization policies


+


The 1999 Amendment
requires a manpower
development plan,
however further policies
addressing redundancies
not implemented. Has not
been found to be a
problem, as employees
are better trained than the
population as a whole and
in high demand.




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Table IV. Summary of implementation achievements
Implement Effective Infrastructure Development








Sector/Area IPR
recommendation Result Comment


Airports


Develop partnership
model to attract FDI
to airport projects ºº


The PPP guidelines will
establish modalities for
partnerships once
implemented.


Dar es Salaam
Port


Transform port into
major shipping and
cargo centre


ºº Port is undergoing expansion but is not fully
implemented.


Trade corridors


Establish trade
corridors between the
United Republic of
Tanzania and
landlocked countries
in the region.


ºº
Plans have been made
and investor interest has
been secured, but
construction has not
begun.


Multi-facility
economic
zones


Develop MFEZs,
instead of EPZs and
industrial parks ºº


Have begun working to
establish EDZs, which
operate in a similar way to
MFEZs. Although plans
and strategies for one
EDZ have been
completed, no EDZs have
been built.




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Table V. Summary of implementation achievements
Stimulate Human Resource Development and Linkages














Sector/Area IPR recommendation Result Comment
Higher
Education


Expand provision of
higher education and
technical training


º There has been no expansion.
Higher
education


Revise curriculums to
meet private sector
needs ºº


COSTECH is working with
UNESCO to reform
technology-related
education. But overall,
curriculums have not
been revised.


Training


Develop training
programmes based on
priority sectors, with
private sector input


º
No new training
programmes have been
implemented. VETA
continues to be the only
training system and is
provided without private
sector input.


Training


Encourage in-house
training programmes


º No programmes or incentives promoting in-
house training.


Linkages


Develop linkage
programmes based on
sectors ºº


SIDO provides workshops
on linkages, and
encourages SMEs to
become suppliers to
larger companies.
UNCTAD started a
business linkages
programme with TIC.




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Table VI. Summary of implementation achievements
Build a Dynamic Enterprise Sector














Sector/Area IPR recommendation Result Comment
Policy


Modernize science
and technology policy
ºº


Two policies developed:
the 2007 National
Research Policy, and
the 2008 National
Science, Technology
and Investment Policy.
Neither has been
implemented.


Institutions


Overhaul and
restructure outdated
technology institution
structure ºº


Introduced the ICRTD
to oversee the network
of institutions.
Restructuring
COSTECH is under
way but not completed.


Institutions


Private sector
involvement ºº


SIDO incubation
centres opened to help
disseminate
technology. Grants to
companies that perform
R&D.




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Table VII. Summary of implementation achievements
Enlarge Markets Through Regional Integration


Sector/Area IPR
recommendation Result Comment


Regional
integration


Encourage export
orientation in
indigenous industry


º No specific programme targeting domestic firms.
Regional
integration


Attract export-
oriented FDI to
exploit larger EAC
market º


No specific programme to
attract this type of
investor. Exports are
principally destined for the
European Union and for
Asian markets.


Regional
integration


Attract investors from
the region º No targeting of investors from the region.


Regional
integration


Within context of
EAC new customs
union, streamline
import/export
procedures


ºº
The system for the EAC
customs union was
implemented in July 2010.
Overall, progress has
been made in
streamlining procedures.


Regional
integration


Proceed cautiously in
eliminating tariffs and
non-tariff barriers with
Kenya


ººº Has addressed the issue by implementing gradually
under a five-year
transition period.


Transportation
infrastructure


To realize benefits of
SADC membership,
improve infrastructure
in the south ºº


Mtwara Development
Corridor, once
implemented, will link the
United Republic of
Tanzania to SADC
members and facilitate
trade


FDI promotion


Encourage regional
FDI promotion events ººº Two EAC trade fairs are held annually with


Tanzanian participation
Tariff
protection


Take advantage of
the WTO’s “window
of opportunity” to
encourage import
substitution industries


ººº
The United Republic of
Tanzania continues to
pursue policies which
foster industries, and will
do so until it graduates
from LDC status.




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Table VIII. Summary of implementation achievements
Impart a New Strategic Thrust to Investment Promotion












Sector/Area IPR
recommendation Result Comment


Agriculture


Set aside five areas
of land for potential
investors.


º No land has been set aside for commercial
agricultural development.


Manufacturing


TIC should target
smaller-scale
investors motivated
by “first mover”
advantage


º
TIC does not normally
target at the firm level.
Mining was an exception.


Existing
investors


Provide aftercare and
encourage existing
investors to reinvest
and expand


ººº
Periodic visits and calls to
investors. Promote
expansion and help
remove obstacles to
expansion.


Implementation Form a National
Investment Taskforce
to perform
assessments of these
strategic thrusts and
manage
implementation


º
Although two task forces
were formed, no task
force for the purpose of
FDI strategy assessment
has been formed.




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Table IX. Summary of implementation achievements
Blue Book on Best Practice in Investment Promotion and


Facilitation


Sector/Area IPR
recommendation Result Comment


Judiciary
system


Improve capacity of
administrative
support to
commercial courts ºº


Opened regional offices to
improve access to
commercial courts. The
number of backlog cases has
been reduced, and
administrative management
has been sped up.


Regulatory Develop performance
charters for executive
agencies that
administer business
regulation and
inspections


ºº
Most public agencies have
“client charters” that specify
the time and cost for all
procedures and services
offered. Performance
monitoring systems need to
be improved.


Regulatory Enhance
transparency in tax
administration


ººº


Automation and online
access to tax procedures
have improved transparency.
The TRA has also created an
ethics committee
encouraging internal whistle-
blowing and has opened an
anti-corruption hotline for
clients to report abuses or
irregularities.


Policy Establish a strategy
for growing
agriculture and agro-
processing in the
United Republic of
Tanzania


ºº
The Government adopted
“Kilimo Kwanza” as a
strategy, with an action plan
to develop the agricultural
sector including its
industrialization. However,
there is no comprehensive
strategy for agro-processing.


Regulatory Strengthen the
monitoring system for
tracking measures
agreed upon by the
Tanzania National
Business Council


º
The TNBC lacks a
functioning secretariat to
follow up on decisions taken
by the Council.




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Sector/Area IPR
recommendation Result Comment


Legislative Amend the Tax
Revenue Appeals Act
(2000)


+


The Tax Revenue Appeals
Act of 2006 did not amend
the measure proposed by the
Blue Book to allow an
objecting party to pay only
the amount of tax that is not
in dispute. The TRA argued
that if objectors had this right,
they could abuse the appeal
process to delay payment
and severely limit their ability
to collect taxes.


Regional
integration


Bring into force the
East African
Community double
taxation treaty ºº


The EAC double taxation
treaty has not been ratified
by all members yet.
However, since the coming
into force of the common
market in July 2010, tax
systems are being
harmonized for the original
three members.


Regional
integration


Jointly issue EAC
member state
business visas


º


There are no joint EAC
business visas. Under the
common market, once a
person receives resident
status in one of the member
states, he or she is free to
travel within the EAC,
including for business.
Nevertheless, this does not
simplify the visa application
process for potential foreign
investors visiting the region.






UNITED NATIONS


REPORT ON THE IMPLEMENTATION
OF THE INVESTMENT POLICY REVIEW


UNITED REPUbLICOF TANzANIA


UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT


Printed at United Nations, Geneva
GE.11-50461 – March 2011 – 530
UNCTAD/DIAE/PCB/2010/6




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