Identifier
Created
Classification
Origin
06DARESSALAAM444
2006-03-08 15:50:00
UNCLASSIFIED
Embassy Dar Es Salaam
Cable title:  

TANZANIA: INPUT FOR 2006 PRESIDENT'S REPORT ON AGOA

Tags:  ETRD ECON PGOV PHUM TZ 
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UNCLAS SECTION 01 OF 03 DAR ES SALAAM 000444 

SIPDIS

DEPT AF/E FOR B YODER, C PELT AND AF/EPS FOR M NORMAN
DEPT PASS TO USAID FOR AF/W
ALSO TO USTR FOR W JACKSON

E.O. 12958: N/A
TAGS: ETRD ECON PGOV PHUM TZ
SUBJECT: TANZANIA: INPUT FOR 2006 PRESIDENT'S REPORT ON AGOA

REF: STATE 026707

SUMMARY
--------
UNCLAS SECTION 01 OF 03 DAR ES SALAAM 000444

SIPDIS

DEPT AF/E FOR B YODER, C PELT AND AF/EPS FOR M NORMAN
DEPT PASS TO USAID FOR AF/W
ALSO TO USTR FOR W JACKSON

E.O. 12958: N/A
TAGS: ETRD ECON PGOV PHUM TZ
SUBJECT: TANZANIA: INPUT FOR 2006 PRESIDENT'S REPORT ON AGOA

REF: STATE 026707

SUMMARY
--------------

1. Since 2003, Tanzania's exports under the African Growth
and Opportunity Act (AGOA) have reached a plateau at around
USD 3.7 million per annum. In 2005, textiles and apparel
accounted for nearly 74 percent of Tanzania's total AGOA
exports. Tanzania's textile industries face several
challenges including high-production costs due to unreliable
power supply, rising fuel costs, and the end of third-country
fabric provisions in September 2007. The remaining exports
from Tanzania under AGOA are agricultural products, forestry
products and handicrafts. There are several key impediments
facing Tanzanian exporters trying to benefit from the
opportunities offered by AGOA including logistical
constraints, supply side constraints, financing constraints,
compliance with phyto-sanitary requirements and lack of
buyer-seller linkages with the U.S. market.


2. USAID Tanzania has focused its limited economic growth
resources on technical assistance for agricultural producers
of cash crops such as cashews and coffee - both eligible
under General Services Preferences (GSP). The East and
Central Africa (ECA) Trade Hub, which covers Tanzania, has
focused its efforts primarily on the handicraft sector in
Tanzania, working with four or five handicraft producers over
the past three years. At least three of these handicraft
firms have succeeded in exporting their products to the U.S.
market. In addition to the successes in the handicraft
sector, post is intent on expanding technical assistance from
the ECA Trade Hub to address the key barriers confronting
Tanzania's exporters. As part of this effort, post is in the
planning stages for a regional AGOA workshop to address
impediments to accessing the U.S. market, tentatively
scheduled for late spring 2006. END SUMMARY.

Market Economy/Economic Reform/Elimination of Trade Barriers
-------------- --------------

3. -- Economic Situation: After embarking on a comprehensive
economic reform program in the late 1980s, Tanzania has
achieved strong macro-economic performance over the past
several years with an average GDP growth rate of

approximately six percent and inflation around five percent.
The Government of Tanzania (GOT),in partnership with donors
such as the International Monetary Fund, has made significant
progress in reducing state control and regulation.
Agricultural marketing has been liberalized; foreign exchange
controls lifted, prices deregulated; and with the exception
of major utility and infrastructure parastatals, almost all
state-owned enterprises have been privatized. Emerging from
its socialist past, Tanzania's nascent private sector is
still weak. The economy is largely agrarian, with
agricultural products accounting for 60 percent of Tanzania's
exports. As a result of three consecutive years of drought
and the failure of short rains in 2005, more than three and a
half million Tanzanians suffer from food insecurity. Sectors
in Tanzania which have grown considerably over the past
several years and continue to grow quickly include tourism,
mining, construction and telecommunications.

-- Trade Liberalization: In January 2005, Tanzania entered
the new East African Community Customs Union, under which
tariffs between Tanzania, Uganda and Kenya will be phased out
over five years. The Customs Union also established a common
external tariff which generally lowered Tanzania's overall
tariffs, although tariffs were raised on some U.S. exports.
Tanzania has taken an increasingly open stance toward foreign
investment, developing a new foreign investment code and
taking steps in early 2006 toward single licensing for
businesses. U.S. investment in Tanzania is slowly rising,
but is hindered by bureaucratic inefficiencies, corruption,
and poor infrastructure, including unreliable power supply.
The requirements to own land or offer it as collateral also
remains an important impediment to new investment.

Political Pluralism/Rule of Law/Anti Corruption
-------------- --

4. -- Political Pluralism: Tanzania opened the door to
multi-party democracy in 1992 and has enjoyed an unbroken
string of relatively peaceful transfers of power since
independence. The President, Vice President and the
Parliament of the Union Government of Tanzania are all
elected officials. Tanzania held general elections for the
Presidency and for all Members of Parliament in December 2005
that were considered by domestic and international observers
to be generally free and fair. In October 2005, the
semi-autonomous archipelago of Zanzibar which is under the
United Republic of Tanzania government, held separate
elections for the Zanzibar president and local officials that
were marred by some voting irregularities. However, the
elections for Union representatives from Zanzibar, also held
in December 2005, were considered to be fair. In both the
Mainland and Zanzibar elections, opposition parties were
allowed to register as legal parties (18 parties on the
Mainland, 6 parties in Zanzibar) and could participate in the
political process.

-- Rule of Law: The law provides for an independent
judiciary; however, the judiciary suffers from corruption,
inefficiency, and executive influence. Criminal trials are
open to the public and the press and the GOT took more steps
in 2005 to address judicial inefficiency and corruption.
Tanzania has improved its arbitration of commercial disputes,
establishing a Commercial Court in 1999. The Court still
lacks capacity and there have been a few lengthy cases of
intellectual property rights and prolonged debt repayment
cases involving U.S. corporations.

-- Anti-Corruption: Despite significant changes in the past
decade, corruption remains a pervasive problem throughout the
government and was particularly apparent during the election
campaign period. Newly-elected President Kikwete has taken a
strong stance against corruption and pledged to show his
commitment in "deeds, not just words." The GOT participates
in the World Bank Anti-Corruption Commission, and has
indicted senior officials and mid-level members of the
judiciary for corruption. The GOT also participates in the
Millennium Challenge Threshold program (approved in January
2006) and in November 2005, became eligible for Millennium
Challenge Corporation compact funds. The GOT continued to
use specialized agencies to fight corruption during the year.
The Good Governance Coordination Unit (GGCU) is charged with
implementing anti-corruption legislation, and coordinating
anti-corruption efforts; however, this three person unit is
under-resourced. The Prevention of Corruption Bureau (PCB)
continued to refer cases to the director of public
prosecution (DPP),although prosecution of corruption cases
remained slow and inefficient.

Poverty Reduction
--------------

5. Despite macro-economic stability and steady GDP growth
over the past five years, inroads against poverty have been
minimal. Approximately one-third of the population still
lives below the World Bank's poverty line. In 2005, Tanzania
completed it Poverty Reduction Strategy Paper (PRSP),known
in Swahili as "Mkukuta." According to the World Bank,
"Mkukuta" marked a significant achievement, reflecting
widespread consultations and country ownership. The
Tanzanian PRSP identifies four key areas of priority for
poverty reduction: (i) education, (ii) water, (iii) roads,
and (iv) energy. Tanzania remains dependent on donor-funded
projects in each of these areas and dependent on foreign aid
for approximately 40 percent of its budget (approximately USD
1.6 billion per year).

Human Rights/Labor/Child Labor:
--------------

6. -- Human Rights: Although a variety of human rights
problems persist in Tanzania, each generally affects a few
individuals or small groups as opposed to being widespread.
The GOT made several significant improvements in some
important areas, including demonstrating more respect for
citizens' right to change their government peacefully.
Government efforts helped reduce mob killings during the
year, the number of newspapers, radio stations, and
journalists grew, and there were no reports that police used
force to disburse student demonstrations. Despite these
improvements, some problems increased, such as government
harassment of political opposition parties prior to the 2005
general elections, particularly on Zanzibar.

-- Labor: The GOT passed (but has not yet enacted) new labor
laws in 2004 strengthening workers rights and prohibitions
against child labor. The law provides for collective
bargaining and workers and employers practiced it freely
during the year; however, the law does not apply to the
public sector. While the Trade Unions Act allows workers to
form and join unions without prior authorization, in practice
many private sector employers adopted anti-union polices or
tactics that limited this right and there is no law to
protect workers from anti-union discrimination. On Zanzibar,
the law prohibits all workers from striking. On the
Mainland, workers have the legal right to strike after
complying with certain legal requirements. The law prohibits
forced or compulsory labor, and new laws specifically
prohibit forced labor by children and closed loopholes in the
constitutional ban. Although enforcement remained weak, the
GOT implemented some measures including increasing the number
of labor inspectors. The GOT has ratified ILO Conventions 29
and 105 on prohibitions on forced or compulsory labor.

-- Child Labor: Tanzania has ratified all eight ILO core
conventions and has been a member of the ILO's International
Program on the Elimination of Child Labor since 1994.
Tanzania is currently participating in the ILO's "Timebound
Program to Eliminate the Worst Forms of Child Labor," which
seeks to eliminate child labor in targeted sectors. Since
January 2002 through June 2005, over 20,000 children were
prevented or withdrawn from the worst forms of child labor in
mining, domestic labor, commercial agriculture and commercial
sex. The minimum employment age is inconsistent with the age
for completing educational requirements as the law provides
for seven years of compulsory education through the he age of

15. The GOT has ratified Conventions 128 and 182 on minimum
age and the worst forms of child labor.

AGOA-Related Outreach
--------------

7. -- Post had an AGOA exhibit from June 30 to July 10, 2005
at the Dar es Salaam International Trade Fair which attracted
more than 1,500 exhibitors from 30 countries around the
world. The 2005 USA Trade Pavilion provided information on
AGOA and face-to-face consultations with business
representatives interested in learning more about
opportunities to access the U.S. market.

-- The Southern Africa Trade Hub in Botswana sponsored Louis
Accaro, Executive Secretary of the Tanzania Private Sector
Foundation, to attend the U.S. sub-Saharan Africa Trade and
Economic Cooperation Forum in Dakar, Senegal, July 18-20,

2005. Post sponsored Rose Swai, Economic Assistant and AGOA
specialist, to attend the Forum as well.

-- The USAID Trade Hub in Nairobi sponsored the participation
of four Tanzanian handicraft producers in the regional
Handicraft Conference in Addis Ababa, Ethiopia in October

2005. Post also sponsored the participation of Katharine
Bernsohn, Economic Officer, in order to learn more about
regional AGOA success stories and the preparations necessary
to host a regional AGOA conference.

-- The USAID Trade Hub in Nairobi sponsored representatives
from Tengeru Flowers and Indigo Women Links to participate in
the World Floral Expo in Miami, Florida in January 2006. The
Nairobi hub also sponsored three handicraft producers to
attend the Sources Show in Los Angeles: Edith Mushi of
Kipepeo, Joyce Mbwette of Footloose and Flotea Massawe of
Marvelous Batik.

-- Post is planning to sponsor a regional AGOA workshop in
Dar es Salaam in late spring of 2006 to address and discuss
obstacles to increasing Tanzanian exports under AGOA. While
Tanzania's AGOA exports have continued to hover around USD
3.7 million for the past two years, post believes that new
sectors need to be encouraged including cut roses and plant
cuttings, honey, beeswax and palm oil. Also USAID Tanzania
is working to further develop the processing of cashews and
coffee exports, two sectors where Tanzania has shown the
ability to export greater volumes to the U.S. market.

-- The Dar es Salaam regional workshop would focus on
overcoming key obstacles currently facing Tanzanian producers
such as lack of information and historic trading ties with
the U.S. market, logistical concerns including transportation
(e.g. lack of direct flights to the U.S),supply side
concerns (e.g. filling a container),and compliance with
phyto-sanitary standards.
DELLY