Identifier
Created
Classification
Origin
06DARESSALAAM1694
2006-10-17 04:00:00
UNCLASSIFIED
Embassy Dar Es Salaam
Cable title:  

TANZANIA: ANNUAL AGOA ELIGIBILITY REVIEW

Tags:  AGOA ECON ETRD TZ 
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VZCZCXRO0981
PP RUEHLMC
DE RUEHDR #1694/01 2900400
ZNR UUUUU ZZH
P 170400Z OCT 06
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC PRIORITY 4928
INFO RUEHLMC/MCC WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
UNCLAS SECTION 01 OF 04 DAR ES SALAAM 001694 

SIPDIS

SIPDIS

DEPT AF/E FOR B YODER; AF/EPS FOR J POTASH
PASS TO USTR FOR C HAMILTON
ALSO TO MILLENNIUM CHALLENGE CORPORATION FOR G BREVNOV

E.O. 12958: N/A
TAGS: AGOA ECON ETRD TZ
SUBJECT: TANZANIA: ANNUAL AGOA ELIGIBILITY REVIEW

REF: STATE 163056

UNCLAS SECTION 01 OF 04 DAR ES SALAAM 001694

SIPDIS

SIPDIS

DEPT AF/E FOR B YODER; AF/EPS FOR J POTASH
PASS TO USTR FOR C HAMILTON
ALSO TO MILLENNIUM CHALLENGE CORPORATION FOR G BREVNOV

E.O. 12958: N/A
TAGS: AGOA ECON ETRD TZ
SUBJECT: TANZANIA: ANNUAL AGOA ELIGIBILITY REVIEW

REF: STATE 163056


1. Current AGOA Status: Eligible

Country Background Summary
--------------

2. The population of Tanzania in 2005 was estimated at 38.3
million, up from an estimated 36.6 million in 2004. In 2005,
Tanzania's GNI was USD 12.1 billion while GNI per capita was
USD 340. From October 2005 to October 2006, Tanzania
continued its economic reform program, generating a slightly
lower economic performance than in the previous
twelve months. The Ministry of Planning, Economy and
Empowerment projects GDP growth rate for 2006 at 5.9 percent,
compared to a growth rate of 6.7 percent for 2005. Growth in
the agriculture, tourism, transport and communication sectors
fueled Tanzania's economic
performance. The Government of Tanzania (GOT) is a stable,
multi-party democracy; however, the ruling party dominates
both the executive and legislative branches. Tanzania
continues to strengthen its market-based economy and
eliminate barriers to U.S. trade and investment. The
Government of Tanzania is pursuing economic policies to
reduce poverty, encourage good governance and protect worker
rights. Poverty and corruption remain issues. Tanzania is a
Millennium Challenge Compact eligible country. END SUMMARY.

Comments on Eligibility Requirements
--------------

I. Market-based Economy


A. Major Strengths Identified

The Government of Tanzania (GOT) continued to privatize
and liberalize its economy.

-- As of December 2005, a total of 196 enterprises were
privatized during 2005 and 184 non-core assets were
sold the same period. As of June 30, 2006, the Parastatal
Regulatory Commission (PSRC) reported a cumulative total
of 920 concluded divestiture transactions. In early 2006,
a private company took over operations of the Tanzania
Railway Corporation concession.

-- The GOT continued its proactive efforts to attract
domestic and foreign investors by simplifying FDI
regulations. The value of Foreign Direct Investment in
2005 was USD 325.0 million.

-- The GOT undertook tax administration reforms which led
to significant improvement in revenue performance. The

revenue-
to GDP-ratio increased from 13.3 percent of GDP in 2004 to
13.5 percent of GDP in 2005.

-- Tanzania's infrastructure notably in rural road
transportation continued to improve due to routine and
spot maintenance, as well as the rehabilitation of existing
culverts and bridges.


B. Major Issues/Problems Identified

-- With the inauguration of President Jakaya Kikwete's
administration in January 2006, the Prevention of Corruption
Bureau (PCB) renewed its efforts to curb corruption; however,
anti-corruption efforts, particularly in the judicial system,
continued to advance slowly and to create concerns for
foreign investors, including U.S. firms.

-- Tanzania's economy remained vulnerable due to a drought in
late 2005 that continued through the first quarter of 2006,
affecting both the agricultural and energy sectors (nearly 50
percent of the power supplying Dar es Salaam is
hydroelectric). The economy was also slowed by the rising
world market prices of oil and other essential commodities.

-- In 2005, both the cost of starting a business and the
number of days to start a business continued to decrease,
based on the Millennium Challenge Corporation Scorecard for
candidate countries. However, there was only a slight
decrease in the expense of obtaining a business license,
while the cost of electricity remained high. In addition,
power rationing has been in effect for up to 12 hours per day
in Dar es Salaam and many regions for three to six days per
week since late May 2006.


II. Political Reforms, Rule of Law, and Anti-Corruption

DAR ES SAL 00001694 002 OF 004




A. Major Strengths Identified

-- President Jakaya Kikwete was elected to a five-year term
and took office in December 2005. President Kikwete has made
the elimination of corruption and advocacy for good
governance among his top priorities. Tanzania signed the
Millennium Challenge Threshold Agreement in May 2005,
accepting a USD 11.9 million program which is being
implemented by USAID. This two-year program will: 1)
strengthen rule of law for good governance; 2) address
corruption in the public procurement system; 3) establish a
Financial Intelligence Unit; and 4) strengthen the capacity
of civil society.

-- In 2006, under President Kikwete's administration,
Mainland Tanzania continued on the path toward a more open
press, able to report on political, business and economic
issues with little fear of retribution.

-- The Anti-Corruption Bill prepared by the Prevention of
Corruption Bureau and the Law Reform Commission in 2004 has
been approved by the Cabinet and will be submitted to
Parliament in November 2006. This bill will strengthen the
Prevention of Corruption Bureau and facilitate the
prosecution of public officials accused of bribery or
corruption.

-- The GOT continued efforts to strengthen the judiciary
system which has been historically under-funded. In 2005, the
budget received by the judiciary was 55 percent of its
allocated budget, an increase from 2004 when the judiciary
branch received only 49 percent of its allocation.

-- In coordination with the President's office, the
judiciary took steps to promote anti-corruption, organizing
seminars to sensitize magistrates and court clerks to
corruption issues under the National Anti-Corruption Strategy
Program.


B. Major Issues/Problems Identified

-- The national judiciary is formally independent; however,
the judicial branch is often slow and inefficient. Also,
occasionally on the Mainland and more often in
semi-autonomous Zanzibar, the judicial systems are subject to
executive interference.

-- While the new administration is working to augment
transparency and good governance, corruption remains one of
the major difficulties encountered by foreign investors,
including U.S. firms, in Tanzania.

-- Press freedoms in Zanzibar remained restricted, with the
media dominated by state-run newspapers, radio and
television. However, Mainland newspapers and
television/radio programs are available in Zanzibar.


III. Poverty Reduction


A. Major Strengths Identified

-- The GOT's Poverty Reduction Strategy--the National
Strategy for Growth and the Reduction of Poverty (NSGRP) also
known as "Mkukuta"--was adopted in 2004 through a broad
participatory process. The Mkukuta focuses on 1) growth and
reduction of poverty; 2) improved quality of life and social
well being; and, 3) good governance and accountability.

-- The GOT also has developed a broad policy framework,
"Vision 2025," which sets targets for economic growth and
poverty eradication by the year 2025.

-- In November 2005, Tanzania was selected by the Millennium
Challenge Corporation (MCC) as a qualified MCC Compact
country. The GOT submitted a MCC Compact proposal to the
Millennium Challenge Corporation in August 2006, which is
currently undergoing a due diligence study by MCC on economic
feasibility and sustainability.


B. Major Issues/Problems Identified

-- In 2005, Tanzania's GDP per capita income remained low,
approximately USD 340. Recent macroeconomic growth has yet
to make significant inroads to reduce rural poverty. The
economic growth rate has slowed slightly in the first three
quarters of 2006 due to electric power shortages and an

DAR ES SAL 00001694 003 OF 004


inflation rate of nearly 6 percent.

-- Basic infrastructure in the power and water sectors
remains poor; some progress was made in the last twelve
months in road and bridge construction. Tanzania's overall
trade volume is comparatively low at approximately 22 percent
of GDP.


IV. Workers' Rights/Child Labor/Human Rights


A. Major Strengths Identified

-- Workers in Tanzania have the right to associate, form
unions, and bargain collectively and these rights are well
respected.

-- Implementing regulations for the Employment and Labor
Relations Act passed by the Union Parliament in April 2004
were being drafted with input from NGOs, trade unions, and
employers. The 2004 Act establishes criminal punishment for
employers of child laborers as well as forced laborers. Once
these regulations are in effect, the Act can become fully
operational.

-- Tanzania has ratified the eight core conventions of the
International Labor Organization (ILO),including Convention
182 on the Worst Forms of Child Labor. The GOT recently
reformed labor laws in order to make progress under the
auspices of the international Program for the Elimination of
Child Labor.

-- Tanzania has focused on combating the worst forms of child
labor in agriculture, mining, and prostitution. The GOT
continues to work well with NGOs to fight child labor.

-- The GOT took steps to improve its human rights record
over the last twelve months. In 2005-2006, judicial officers
began to accelerate cases in the higher courts.

-- The Minister of State for Union Affairs and the Chief
Minister of Zanzibar agreed once the Union Parliament amends
the Human Rights Commission legislation to include a review
by the Zanzibar House of Representatives, the Commission
would function in Zanzibar as well as on Mainland Tanzania.

-- Over the past twelve months, there were no reports of
killings in police custody.



B. Major Issues/Problems Identified

-- During the year, there were reported cases of police
officers' threats, torture or other mistreatment of suspected
criminals and prisoners.

-- Prison conditions remained harsh and life threatening.
Arbitrary arrest and prolonged detention remain problems.

-- The judicial system in many instances did not provide
expeditious or fair trials.

-- Starting in July 2006, the GOT began to send home illegal
immigrants (those without Tanzanian resident permits) to
neighboring countries. The first phase, ending in October
2006, will be voluntary; thereafter, non-Tanzanians who do
not regularize their immigration status will be forcibly
expelled. Some cases were also reported of the GOT refusing
persons who were seeking asylum in Tanzania.



V. International Terrorism/U.S. National Security


A. Major Strengths Identified

-- The GOT continues to cooperate closely with the U.S.
Government in the War on Terrorism.

-- To combat terrorist financing, the GOT continues to
fulfill its obligations according to the UN 1267 Sanctions
Committee.

-- In 2005, the Ministry of Finance finalized an Anti-Money
Laundering bill which has been approved by the Cabinet and
will be introduced into the next session of Parliament in
November 2006.


B. Major Issues/Problems Identified

DAR ES SAL 00001694 004 OF 004



-- None

RECOMMENDATION ON TANZANIA'S AGOA ELIGIBILITY
--------------
Tanzania continues to be eligible for AGOA. Under President
Kikwete, the GOT has shown stronger commitment than ever
before to AGOA eligibility criteria. Privatization and
reforms to improve the business environment have accelerated,
as Tanzania continues on a path toward a fully market-based
economy. The GOT made efforts to strengthen the rule of law
and protect workers rights in 2006, including improvements in
the judiciary, finalizing the Anti-Corruption bill and the
Anti-Money Laundering bill. The GOT worked closely with the
Millennium Challenge Corporation to submit its Compact
proposal on time, which itself is an indication of Tanzania's
commitment to stimulate the economy and reduce poverty.
Finally, the GOT continued to cooperate with the U.S. in the
war on terrorism through the training, discussion and
implementation of bilateral and regional cooperation on
counterterrorism efforts. Important areas for further
improvement include timely prosecution of senior officials
implicated in corruption, and improvement in Tanzania's human
rights record, particularly in regards to trafficking in
persons and expanding press freedoms in Zanzibar.
DELLY