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Cablegate: Tanzania: Investment Climate Statement 2008

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RR RUEHWEB

DE RUEHDR #0032/01 0151213
ZNR UUUUU ZZH (TAO)
R 151213Z JAN 08
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC 7220
INFO RUEHNR/AMEMBASSY NAIROBI 0886
RUEHKM/AMEMBASSY KAMPALA 3114
RUEHLGB/AMEMBASSY KIGALI 1060
RUEHJB/AMEMBASSY BUJUMBURA 2624
RUEHSA/AMEMBASSY PRETORIA 3609
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHDC
RUCPCIM/CIMS NTDB WASHDC

UNCLAS DAR ES SALAAM 000032

SIPDIS

SIPDIS
DEPT FOR EB/IFD/OIA JNHATCHER AND AMKAMBARA
DEPT ALSO AF/EPS, AF/E FOR JLIDDLE
TREASURY FOR DO/JWALLACE
PASS TO USTR FOR WJACKSON

E.O. 12958: N/A
TAGS: EINV EFIN ETRD ELAB KTDB OPIC PGOV USTR TZ
SUBJECT: TANZANIA: INVESTMENT CLIMATE STATEMENT 2008

REF: 07 SECSTATE 158802

Following is the 2008 Investment Climate Statement (ICS) for
Tanzania. The ICS will also be transmitted to ES/IFD/OIA via e-mail
and included in Chapter 6 of the 2008 Country Commercial Guide for
Tanzania.

-------------------------------
Openness to Foreign Investment
-------------------------------
The Government of Tanzania (GOT) has a favorable attitude toward
foreign direct investment (FDI) and made significant efforts to
encourage foreign investments. According to the United Nations
Conference on Trade and Development (UNCTAD) World Investment Report
2007, Tanzania had the highest inflows of FDI in the East Africa
region in 2006. There is no restriction in foreign exchange and
foreign investors are not denied national treatment. The GOT has
lent its support to an open investment regime, mobilization of
private capital initiatives (PCI), and further liberalization of the
financial sector in line with the World Bank's recommendations. An
increased number of privatized public enterprises have been awarded
to foreign investors.

The Tanzanian Investment Center (TIC), established by the Tanzanian
Investment Act of 1997, is the focal point for all investors'
inquiries and facilitates project start-ups. TIC continues to
improve investment facilitation services, provide joint venture
opportunities between local and foreign investors, and disseminate
investment information. The TIC received the highest positive
scores on the UNIDO Africa Foreign Investor Survey 2005. Companies
holding TIC certificates of incentive are allowed 100 foreign
ownership; VAT and import duty exemptions; and repatriation of 100
of profits, dividends, and capital after tax and other obligations.

The GOT demonstrated its pro-investment attitude anew in September
2007 when President Jakaya Kikwete led a trade and investment
mission to the United States to promote Tanzania's investment
opportunities for the second year in a row. The mission included
Government agencies and private sector investors from the
manufacturing, tourism, transport, minerals and agriculture sectors.
In 2007 the GOT also undertook official investment promotion trips
to Germany, China, Indonesia, the United Arab Emirates, India,
Sweden, Italy, Japan, South Korea, the United Kingdom, Australia,
Malaysia, Egypt, and Iran.

Among investment and trade opportunities in Tanzania that remain
undeveloped are the energy sector, including coal reserves and
natural gas deposits; and the transportation sector. The GOT
accepts foreign investment in Built, Operate and Transfer (BOT)
projects and has launched a concession system aimed at attracting
foreign investors to build infrastructure. Investment Tax
Incentives are stable and predictable.

Land ownership remains restrictive in Tanzania. Occupation of land
by non-citizens is restricted to land for investment purposes
regardless of the sector. Under the
1990 Land Act, however, a foreign investor may occupy land up to 99
years through derivatives rights.

In February 2005, the GOT established the Better Regulation Unit
(BRU) to manage the implementation of the Business Environment
Strengthening for Tanzania (BEST) program. In June 2006, Tanzanian
Parliament passed a law to establish Special Economic Zones (SEZs)
to augment investments in the light industry, agro-processing
industry and agriculture sectors. Green field foreign direct
investments are allowed through this SEZ legislation. The GOT
continues to promote Export Processing Zones (EPZ) to attract
investments in agribusiness, textiles and electronics and Spatial
Development Initiatives (SDI). The EPZs are tax free zones.

Investments on the Dar es Salaam Stock Exchange (DSE) are open to
foreign investors, but capped at 60 percent. Foreign investors are
barred from participating in government securities. The financial
sector has expanded with an increase in foreign-affiliated financial
institutions and banks operating in Tanzania. As of August 2007,
the Bank of Tanzania listed a total of 23 Commercial Banks licensed
and operating in Tanzania, over half of which are foreign-affiliated
banks. Competition among these foreign commercial banks has
resulted in significant improvement in the efficiency and quality of
financial services provisions.

Kenya, Tanzania, and Uganda signed a Customs Union Protocol in 2004,
putting in place a three-tier tariff system paving the way for a
common market within the East African Community (EAC). Rwanda and
Burundi acceded to the EAC on June 18, 2007 and became full members
on July 1, 2007. EAC member states agree to allow zero-rated entry
of raw materials from other EAC members, levy a 10% duty on
semi-processed goods, and levy a 25% duty on finished goods.
Although the EAC member countries continue to discuss economic
integration, non-tariff barriers--such as the administration of
duties and other taxes, and corruption--remain a problem.

---------------------------------
Conversion and Transfer Policies
---------------------------------
Regulations permit unconditional transfers through any authorized
bank in freely convertible currency of net profits, repayment of
foreign loans, royalties, fees charged for foreign technology and
remittance of proceeds. The only official limit on transfers of
foreign currency is on cash carried by individuals traveling abroad,
which cannot exceed USD 10,000 over a period of forty days.
Tanzania occasionally experiences shortages of foreign exchange, but
this problem has been greatly eased by the growth of bureau de
changes returns. Bureaucratic hurdles continue to impact the length
of time it takes to process and effect a transfer, which can range
from days to weeks.

--------------------------------
Expropriation and Compensation
--------------------------------
The GOT may expropriate property only for the purpose of national
interest and after due process. The Tanzanian Investment Law
guarantees:
- Payment of fair, adequate and prompt compensation;
- A right of access to the Court or a right to arbitration for the
determination of the investor's interest or right and the amount of
compensation;
- Any compensation payable under this section shall be paid promptly
and authorization for its repatriation in convertible currency,
where applicable, shall be issued.

GOT authorities do not discriminate against U.S. investments,
companies or representatives in expropriation. Since 1985, the
Government of Tanzania has not expropriated any foreign
investments.

-------------------
Dispute Settlement
-------------------
Tanzania is a member of both the International Center for the
Settlement of Investment Disputes (ICSID) and the Multilateral
Investment Guarantee Agency (MIGA). The ICSID was established under
the auspices of the World Bank by the Convention on the Settlement
of Investment Disputes Between States and Nationals of Other States.
The MIGA is also World Bank-affiliated and issues guarantees
against non-commercial risk to enterprises that invest in member
countries. GOT regulations maintain that a dispute between a
foreign investor and the Tanzanian Investment Center (TIC) which is
not settled through negotiations may be submitted to arbitration.
There are four options open to the parties:

- Arbitration in accordance with the rules and procedures of the
International Center for Settlement of Investment Disputes,

- within the framework of the bilateral or multilateral agreement on
investment protection to which the Government and the country of
which the investor is a national are parties.

- Arbitration in accordance with the World Bank's Multilateral
Investment Guarantee Agency (MIGA), in which Tanzania is a
signatory,

- Or in accordance with any other international machinery for
settlement of investment disputes agreed upon by the parties.

The Commercial Court of Tanzania was established in 1999 as a
division of the High Court under the 1999 amendments of the Civil
Procedure Code Act of 1966 and the Law Reform Commission of Tanzania
Act of 1980.
----------------------------------------
Performance Requirements and Incentives
----------------------------------------
The GOT uses Trade-related Investment Measures (TRIMs) to promote
development objectives, encourage investments in line with national
priorities to attract and regulate foreign investment. Trade
development instruments that Tanzania has adopted include Export
Processing Zones (EPZs); Investment Code and Rules; Export
Development/Promotion and Export Facilitation.

EPZs were established by the EPZ Act 2002 and are open to both
domestic and foreign investors. In July 2006, Dr. Adelhelm Meru was
appointed the first Director General of the Export Processing Zones
Authority (EPZA), which is housed in the Ministry of Industry,
Trade, and Marketing. The EPZA is charged with designating suitable
areas for the location of EPZs throughout Tanzania. The EPZA also
oversees incentive packages directed at increasing investment. The
incentives include exemption of corporate tax; withholding taxes on
rent, dividends and interest; the remission of customs duty,
value-added tax (VAT) and other taxes on raw materials and goods of
capital nature; as well as the exemption from VAT on utilities,
wharf charges, and levies imposed by local authorities--all for a
period of ten years.

Tanzania is still in transition from a largely public sector economy
to one in which the private sector is taking the leading role. The
Investment Code, as a trade policy instrument, seeks to compensate
for distortions which impede the flow of foreign investments due to
market imperfections. It is a necessary interim instrument for
stimulating both foreign and domestic investments especially in
agriculture and industry (where the level of domestic investments is
still low) while initiating measures for strengthening the enabling
the business environment and working for the emergence of a vibrant
market economy. As part of the Investment Code, Tanzania offers a
well-balanced package of investment benefits and incentives that are
applied uniformly to all investors (domestic and foreign
investors):

- Zero Custom Duty and deferred VAT on capital goods for investments
in sectors such as mining, export processing zones, infrastructure,
road construction, bridges, railways, airports, generation of
electricity, telecommunications and water services.

- 100% Capital allowance deduction in the years of income for the
above mentioned types of investments.

- No remittance restrictions. The GOT does not restrict the right
of a foreign investor to repatriate returns from an investment.

- Investments in Tanzania are guaranteed against nationalization and
expropriation. Any dispute arising between the Government and
investors can be settled through negotiations or may be submitted
for arbitration before the international organizations.

- Allowing interest deduction on capital loans; removal of the
5-year limit for carrying forward losses of investors.

- Five percent Customs Duty and VAT tax deferral on capital goods
for priority sectors including livestock, aviation, commercial
buildings, commercial development and micro finance banks, export
oriented projects, geographical special development areas, human
resources development, manufacturing, natural resources including
fisheries, rehabilitation and expansion projects, tourism and tour
operators, transport, radio and television broadcasting.

The Zanzibar Investment Promotion Agency (ZIPA) and the Zanzibar
Free Economic Zones Authority (ZAFREZA) offer roughly equivalent
incentives as those offered by the Mainland's TIC and EPZ policies.

---------------------------------------------
Right to Private Ownership and Establishment
--------------------------------------------- -
Tanzanian regulations allow foreign and domestic private entities to
establish and own business enterprises and engage in legal forms of
remunerative activity. The Business Registration and Licensing Act
established licensing regulations for business operations. It
provides the right to freely establish private entities, to own
property both movable and immovable, and to acquire and dispose of
property including interest in business enterprises and intellectual
property.

Under Tanzanian law, occupation of land by non- citizens is
restricted to lands for investment purposes under the Tanzania
Investment Act 1997 and the revised new Land Act 1999. Land in
Tanzania is government property and citizens or non-citizens only
lease the land from the government for 33, 66, or 99 years depending
on the nature of the investment. The law does not allow individual
Tanzanians to sell land to foreigners. Foreigners can only lease
land in Tanzania through the Tanzania Investment Center (TIC).

------------------------------
Protection of Property Rights
------------------------------
Movable Property and Land Rights: Secured interests in property,
both movable and real, are recognized and enforced under different
laws in Tanzania. There is no one comprehensive law to secure
property rights.

The concept of mortgage exists and the Ministry of Lands and Human
Settlements Development handles registration of mortgages and rights
of occupancies. The Office of the Registrar of Titles is
responsible for issuing titles and registering mortgage deeds.
Title deeds are recognized as mortgage for securing loans from banks
and upon failure to pay back the loans the banks can sell an
attached plot.

Intellectual Property Rights: Adherence to key international
agreements on intellectual property rights in Tanzania began only in
recent years. In 1999, Tanzania passed the Copyright and
Neighboring Rights Act Number 7 of 1999, the current legislation in
Tanzania addressing the protection of intellectual property rights
(IPR) and protection for expressions of folklore. This legislation
conforms to international copyright and property rights conventions
and provides adequate protection for intellectual property, patents,
copyrights, trademarks and trade secrets. This is one of the steps
Tanzania has taken to implement and enforce the WTO Trade-Related
aspects of Intellectual Property Rights (TRIPS). This law provides
one of the means under which Tanzanians and foreign nationals may
secure, exercise, and enforce exclusive intellectual property
rights. The Act also establishes the Copyrights Society of Tanzania
(COSOTA) which has the duty and powers to promote and enforce these
rights, collect and distribute royalties on behalf of its members,
maintain registers of works, productions and association of its
members, search to identify and publicize rights of owners and
defend them.

The establishment of both the Commercial Court of Tanzania (in 1999)
and a special Land Court (under section 167 of Lands Ordinance
number 4 of 1999), as special divisions of the High Court, has been
a positive step towards protection and effective enforcement of
property rights.

The Commercial Court deals with efficient litigation of commercial
cases including those related to infringements of IPR and trade in
counterfeit and pirated goods. Several cases have already been
heard and decisions rendered from these high court divisions.
Although the GOT has made efforts to address the deficiencies in
commercial cases, the Commercial Court still lacks expertise in
commercial law, including intellectual property rights and
international business or financial transactions.

The Tanzanian Fair Competition Commission (FCC) has initiated
amendments to the outdated Merchandise Marks Act, which provides the
legal framework for handling counterfeits. The amendments provide
for the appointment by the Minister of Trade of a Chief Inspector to
conduct investigations into suspected importers or shops. The FCC
has taken positive steps towards combating counterfeits. In just
one month (October 2007) the FCC confiscated and destroyed 303
cartons of counterfeit kiwi shoe polish worth about USD 20, 000;
counterfeit Britmax fluorescence tube lights worth USD 18,000; and
counterfeit electric extension cables worth over USD 48,000.

Tanzania has not yet signed or ratified the WIPO internet treaties.

--------------------------------------
Transparency of the Regulatory System
--------------------------------------
The GOT has made progress in formulating policies and effective laws
to foster competition. Tanzania has enacted three laws to govern
competition and regulate economic activity: the Fair Trade Practices
Act 1994, the Energy and Water Utilities Regulatory Act (EWURA)
2001, and the Surface and Marine Transport Regulatory Act (SUMATRA)
2001. The GOT is expediting the implementation of a Competition Law
under the coordination of the Fair Commission for Trade and related
regulatory institutions and promotes consumer protection through
broad-based public awareness on consumer's rights and obligations.

The current institutionalization of the public-private sector
dialogue through various forums such the Investors Round Table (IRT)
process, ensures that the bureaucratic hurdles hindering private
investments are addressed. Since the adoption of the IRT process in
July 2002, Government Ministries, Departments and Agencies have
broadened reforms. The IRT serves as an advisory board on best
practices in trade and investment to the top national leadership.

Tanzania is implementing a taxpayer's charter that enables taxpayers
to complain against problems or malpractice within the Tanzania
Revenue Authority (TRA) officers. The tax policy reform agenda
includes abolition of nuisance taxes, harmonization of regulatory
framework, clear incentive regime and gradual reduction in rate
structure. The GOT has broadened tax incentives and incorporated
them in the relevant tax laws to attract more investments. The
current tax policy does not impede or distort investment.

The GOT established a Law Reform Commission (LRC) to take and keep
under review laws and regulations, and to examine the legal and
regulatory requirements relating to trade and investments. The GOT
is also modernizing the business-licensing regime to reduce
impediments to investment. The Tanzania Investment Center (TIC) has
become a 'one-stop shop' that provides fast track assistance to
obtain approvals and permits such as work permits, industrial
license and trading licenses.

The judicial system continues to function slowly and imperfectly and
is easily influenced by privileged individuals. These factors
increase the cost and difficulty of doing business in Tanzania. In
order to overcome shortfalls in the judicial system, the GOT is
adopting anti-corruption measures and legal reforms to reduce
bureaucratic snags and redundant laws and regulations.

--------------------------------------------- ------
Efficient Capital Markets and Portfolio Investment
--------------------------------------------- ------
The Capital Markets and Securities Authority (CMSA) Act of 1994
facilitates the free flow of capital or financial resources to
support the product and factor markets. The CMSA opened the Dar es
Salaam Stock Exchange (DSE) to foreigners. The DSE improves access
to medium and long-term capital, and concurrently promotes a wider
ownership of stocks and other equities. Corporate enterprises can
recapitalize and grow when listed on DSE. Individuals can invest in
shares and gain profitable returns; the maximum limit for foreign
participation is 60 percent. Foreigners are not allowed to
participate in government securities.

Foreign investors can get credit on the local market for capital
injection within the country and for importation of capital goods
for use within the country. While credit is allocated on market
terms, it has been uneconomical to borrow from local
sources/commercial banks due to high interest rates. Bank lending
rates range from 14 percent to 24 percent for ordinary borrowers.
Corporate borrowers can negotiate lower rates. The Multilateral
Investment Guarantee Agency (MIGA)'s Guarantees against political
risk, International Finance Corporation (IFC) facilities, U.S. Exim
Bank are available for financing projects.

The financial sector has expanded with a significant increase in the
number of foreign-affiliated financial institutions and banks
operating in Tanzania. By August 2007, there were a total of 23
Commercial Banks licensed and operating in Tanzania, of which more
than half are foreign-affiliated banks. The private sector players
have access to a variety of commercial credit instruments including
documentary credits (letters of credits), overdrafts, term loans,
and guarantees.

The Central Bank in Tanzania (the Bank of Tanzania or BoT)
administers and provides special export credit guarantees from which
joint venture initiatives between local and foreign investors can
benefit. In November 2006, EXIM Bank (Tanzania) Ltd obtained a new
credit line from PROPARCO, the private sector arm of the Agence
Francaise De
Development (AFD), the official French Development Institution.
This line increased EXIM Bank's capacity to support long-term
foreign currency lending both in Euros and US dollars to SMEs and
corporations. In Tanzania, PROPARCO's operations represent a total
of USD 36 million, mainly to banks, the tea and manufacturing
sectors.

Foreign investors can open accounts and make deposits in registered
private commercial banks. Interest earned by non-residents or
foreign investors from deposits in banks registered by the Central
Bank of Tanzania is exempt from income tax, in accordance with the
Income Tax Act 2004. Foreign exchange regulations have been
eliminated to allow an enabling environment to attract investors and
simplify international transactions. Profits, dividends, and
capital can be readily repatriated. Several venture capitals have
been established to meet the demand for equity injections into
growing businesses.

The Banking and Financial Institution Act 2006 established a Credit
Reference Bureau and permits banks and financial institutions to
release information to licensed reference bureaus in accordance with
regulations and allows credit reference bureaus to provide to any
person, upon legitimate business request, a credit report.
International reserves at the BoT stood at almost 2 billion US
dollars in 2006, which is the highest for over 30 years and
equivalent to almost seven months of imports. This has helped BoT
to intervene whenever minor fluctuations have led to a slight
depreciation of the Tanzanian Shilling.

-------------------
Political Violence
-------------------
Tanzania is one of the most politically stable countries in Africa
and the prospects for serious and sustained violence are very low.
Since gaining independence, Tanzania has enjoyed a remarkable degree
of peace and stability. In 1992, the constitution was amended to
allow for multiple political parties; in 1995, the first multi-party
election
took place.

As the country underwent the transition from a socialist to a
democratic entity beginning in 1992, occasional conflicts took
place, particularly during election campaigns. In
2001, demonstrators clashed with police on Pemba (Zanzibar) and
several persons were killed. However, the 2005 general elections
were primarily peaceful and marked by an absence of major violence.
In January 2007, the two main political parties on Zanzibar opened a
dialogue and most observers expect that further clashes on Zanzibar
are unlikely; the chance for conflict on the Mainland remains
remote.

-----------
Corruption
-----------
Corruption is one of the areas of major concern encountered by
foreign investors. The administration of President Kikwete, who
took office in December 2005, has made the fight against corruption
one of its priority areas. While giving or receiving a bribe
(including bribes to a foreign official) is a criminal offense in
Tanzania, the enforcement of laws, regulations and penalties to
combat corruption has overall been largely ineffective. Areas where
corruption persists include government procurement, privatization,
taxation, ports, and customs clearance.

The Customs Department, the Port Authority, and the Tanzania Revenue
Authority (TRA) remain a great hindrance to importers throughout
Tanzania. Unpredictable and lengthy clearance delays and bribes to
expedite service are commonplace. In late December 2007, amidst the
elections crisis in Kenya which closed Kenyan ports and caused many
businesses to consider Dar es Salaam Port as an alternative, the TRA
announced new plans to reduce delays by fully automating the customs
system and hastening cargo clearances.

While Transparency International (TI) has consistently rated
Tanzania as one of the worst countries in the world for corrupt
business practices, TI's 2007 Corruption Perceptions Index (CPI)
again showed a slight improvement in Tanzania's anti-bribery
activities. (Note: The CPI score tracks perceptions of corruption
seen by business and country analysts, ranging from zero as highly
corrupt, to 10, not corrupt). The CPI showed Tanzania edging up
from 1.9 points in 1999 to 2.5 in 2006, and 3.2 in 2007.

The GOT launched the National Anti-Corruption Strategy (NACS) and
sector-specific action plans for all ministries, independent
government departments, executive agencies and local authorities on
December 10, 2006. The Anti-Corruption Bill was passed on April 17,
2007 and became operational on July 1, 2007. It is commonly
referred to as the Prevention and Combating of Corruption Bureau
(PCCB) Act. On January 9, 2008, Tanzanian President Jakaya Kikwete
ousted the Governor of the Bank of Tanzania (BoT) in response to a
special audit report on the BoT's repayment of Tanzania's external
debts. In what will be the first major corruption case for the
PCCB, Kikwete directed the Attorney General, the Inspector General
of Police and the Director of the PCCB to investigate all companies
and individuals who were involved in the scandal, and to take
appropriate action.

--------------------------------
Bilateral Investment Agreements
--------------------------------
Currently, the United States of America and Tanzania do not have a
bilateral investment agreement.

On November 27, 2007, the East African Community (EAC) member
states--including Tanzania--signed an interim economic partnership
agreement (EPA) with the European Union. Tanzania is also a member
of the Southern Africa Development Community (SADC), and the GOT has
said it will consider economic partnerships with both the EAC and
SADC. Tanzania quit the Common Market for Eastern and Southern
Africa (COMESA) in 2000.

--------------------------------------------- -
OPIC and Other Investment Insurance Programs
--------------------------------------------- -
The U.S. Overseas Private Investment Corporation's (OPIC) program is
available to citizens of the United States; corporations,
partnerships, or other associations created under the laws of the
United States; foreign corporations at least 95 percent owned by
U.S. investors; and foreign entities that are 100 percent
U.S.-owned.

OPIC signed an incentive agreement with the GOT in December 1996.
While the number of U.S. subsidiaries and affiliated companies that
could qualify for OPIC financing remains small, a few companies have
used OPIC programs in Tanzania. OPIC insurance products cover three
political risks:

-- Currency Inconvertibility - deterioration in the investor's
ability to convert profits, debt service and other investment
returns from local currency into U.S. Dollars and to transfer those
U.S. Dollars out of host country.

-- Expropriation - loss of an investment due to expropriation,
nationalization or confiscation by the host government; and

-- Political Violence - loss of assets or income due to war,
revolution, insurrection or politically motivated civil strife,
terrorism and sabotage.

Tanzania is an active member of the Multilateral Investment
Guarantee Agency (MIGA), a member of the World Bank Group, that
promotes foreign direct investment in developing countries by
offering political risk insurance (guarantees) to investors and
lenders, and by providing technical assistance to help developing
countries attract and retain foreign investment.

The Export-Import Bank (Ex-Im Bank) of the United States, the
official export credit agency of the United States, supports the
purchases of U.S. goods and services by creditworthy Tanzanian
buyers that cannot obtain credit through traditional trade finance
sources. The agency offers export credit insurance and guarantees
of commercial loans. The Ex-Im Bank helps U.S. companies sustain
and create jobs by financing U.S. exports. The Ex-Im Bank has
established a cooperative agreement with the EXIM Bank of Tanzania
Limited to facilitate access to guarantees by investors within
Tanzania.

Tanzania is also a member of the International Center for Settlement
of Investment Disputes (ICSID). Investments in Tanzania are
guaranteed against nationalization and expropriation.


-------
Labor
-------
Private companies can hire or fire employees whose performance is
not desirable. The limited availability of skilled labor remains a
major problem for businesses in Tanzania. There are no legal
requirements to use specific employment agencies for recruitment and
no imposed conditions on employment of host country nationals. The
applicable labor laws are the Employment Ordinance Act CAP.366;
Security of Employment Act CAP 574 No. 62; Workmen's Compensation
Ordinance CAP 263; and Severance Allowance Act CAP 487 No.47 of
1962.

The labor and immigration formalities allow foreign investors to
recruit up to 5 expatriates; more work permits can be granted on
meeting specified conditions. As an incentive under the EPZ Act,
the GOT can provide work permits for management and technical staff
when these skills are unavailable locally. The number of such
personnel is determined in consultation with the Ministry of Labor.

The Ministry of Labor published a government order on November 16,
2007 establishing new minimum wage requirements. The new law, which
went into effect January 1, 2008, divides the labor force into eight
sectors: health services; agricultural services; trade industries,
and commercial services; transport and communication services;
mining services; fishing and marine services; domestic and
hospitality services; and private security services. The law, which
sets a different minimum wage for each subsector, was ordered by the
Minister of Labor under recommendation by the newly-formed Minimum
Wage Board.

Partly in response to objections filed by the Confederation of
Tanzania Industries (CTI), in December 2007 the Ministry of Labor
issued an amendment to the order, lowering the minimum wage for
companies employing 300 plus workers and exporting 25 percent or
more of its products to 80,000 Tsh from the 150,000 Tsh originally
established in the order. Companies in the Export Processing Zones
(EPZs) and Special Economic Zones (SECs) and labor-intensive
industries such as textiles, will benefit from this
amendment--although the established rate is still a 40% increase
over the previous universal minimum wage of 48,000 Tsh.

While there continues to be a deficit of skilled labor, the number
of university graduates in Tanzania, especially in business
management and IT, is growing. However, many foreign investors
still find that local labor is not sufficient to fill management and
administrative positions.


--------------------------------------
Foreign Trade Zones/Free Trade Zones
--------------------------------------

Refer to EPZ information above. Efforts are progressing to make
Zanzibar Port a free port. In addition, free economic zones have
been established in three areas of Pemba and Zanzibar. Tanga and
Kigoma ports will also soon become free trade zones.


-------------------------------------
Foreign Direct Investment Statistics
-------------------------------------


The Bank of Tanzania (BOT) reported Foreign Direct Investment (FDI)
trends in Tanzania as follows:

Year 2000: USD 463.4 million
2001: USD 467.2 million
2002: USD 430 million
2003: USD 526.8 million
2004: USD 469.9 million
2005: USD 325 million
2006: USD 501.5 million

FDI into Tanzania has been principally in the mining, manufacturing,
tourism, construction and transportation sectors. In 2006, the
value of FDI increased to USD 501.5 million from USD 325 million in
2005. The increase was mainly due to investment for expansion in
the mining sector.

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