Identifier
Created
Classification
Origin
07DARESSALAAM355
2007-03-14 04:02:00
UNCLASSIFIED
Embassy Dar Es Salaam
Cable title:  

TANZANIA: INPUT FOR 2007 PRESIDENT'S REPORT ON AGOA

Tags:  EAID ECON ETRD TZ 
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VZCZCXRO4539
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHDR #0355/01 0730402
ZNR UUUUU ZZH
P 140402Z MAR 07
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC PRIORITY 5704
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY PRIORITY
RUEHDS/AMEMBASSY ADDIS ABABA PRIORITY 3150
RUEHJB/AMEMBASSY BUJUMBURA PRIORITY 2503
RUEHKM/AMEMBASSY KAMPALA PRIORITY 2956
RUEHLGB/AMEMBASSY KIGALI PRIORITY 0924
RUEHNR/AMEMBASSY NAIROBI PRIORITY 0559
RUEHLMC/MILLENNIUM CHALLENGE CORP MCC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
UNCLAS SECTION 01 OF 03 DAR ES SALAAM 000355 

SIPDIS

SIPDIS

DEPT FOR EB; AF/E FOR BYODER, AF/EPS FOR THASTINGS
ADDIS FOR AU MISSION
PASS TO COMMERCE/ITA
MCC FOR GBREVNOV
DEPT PASS TO USTR FOR WJACKSON

E.O. 12958: N/A
TAGS: EAID ECON ETRD TZ
SUBJECT: TANZANIA: INPUT FOR 2007 PRESIDENT'S REPORT ON AGOA

REF: STATE 022438

DAR ES SAL 00000355 001.2 OF 003


Summary
--------
UNCLAS SECTION 01 OF 03 DAR ES SALAAM 000355

SIPDIS

SIPDIS

DEPT FOR EB; AF/E FOR BYODER, AF/EPS FOR THASTINGS
ADDIS FOR AU MISSION
PASS TO COMMERCE/ITA
MCC FOR GBREVNOV
DEPT PASS TO USTR FOR WJACKSON

E.O. 12958: N/A
TAGS: EAID ECON ETRD TZ
SUBJECT: TANZANIA: INPUT FOR 2007 PRESIDENT'S REPORT ON AGOA

REF: STATE 022438

DAR ES SAL 00000355 001.2 OF 003


Summary
--------------

1. In calendar year 2006, Tanzania's exports under the
African Growth and Opportunity Act (AGOA) still hovered at
approximately USD 3.7 million in AGOA-qualified exports to
the United States. The U.S. Congress' December 2006
extension of the third country fabric provisions could boost
Tanzania's textile and apparel industries' output in 2007,
particularly if the electric power supply problems that
plagued the manufacturing sector in 2006 do not reoccur in

2007. Other than textiles and apparel, which together
represented about 79 percent of the country's total 2006 AGOA
exports, Tanzania also exported agricultural and forestry
products, minerals, and handicrafts under AGOA. Tanzanian
exporters faced certain constraints, including logistical
hurdles on the supply side, lack of accessible financing
opportunities for small and medium businesses and compliance
with phyto-sanitary requirements. Nevertheless, the Ministry
of Industry and Trade, under the guidance of Minister Basil
Mramba, newly appointed in October 2006, has made it a
Ministry priority for 2007 to reassess and revise the GOT's
AGOA strategy in order to significantly increase AGOA exports
in the next 12 to 24 months. End summary.

Status
--------------

2. Tanzania is AGOA eligible, including for textile and
apparel benefits.

AGOA Trade and Investment
--------------

3. United States Trade Representative office will update
this section with 2006 information.

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

4. After embarking on a comprehensive economic reform
program in the late 1980's, Tanzania achieved strong
macro-economic performance over the past several years with
an average Gross Domestic Product (GDP) growth rate of
approximately six percent and inflation around five percent.
In 2006, the GDP fell slightly to 5.8 percent due primarily
to a drought and subsequent problems to maintain stable
production of electric power to the major cities. In recent

years, the Government of Tanzania (GOT),in partnership with
donors, has made significant progress to reduce or eliminate
state controls and regulations. Agricultural marketing has
been liberalized, foreign exchange controls lifted, and
prices deregulated. With the exception of major utility and
infrastructure parastatals, almost all state-owned
enterprises have been privatized.


5. The GOT continues to upgrade its investment policies to
improve Tanzania's competitive advantage and to benefit from
investment flows targeting the East African region. In
January 2005, the East African Community (EAC) Customs Union
entered into force, under which tariffs between Tanzania,
Uganda and Kenya will be phased out over five years. The
Customs Union also set a common external tariff that
generally lowered Tanzania's overall tariffs, although
tariffs were raised on some U.S. exports. In November 2006,
the heads of state of the three EAC nations agreed that
Burundi and Rwanda be admitted to the EAC by July 1, 2007, if
all pre-conditions are met. From that date, Burundi and
Rwanda would become full participating members of the Customs
Union.


6. Tanzania's new investment code has offered competitive
incentives and in 2006, progress was made toward single
licensing for businesses. However, U.S. investment is still
hindered by bureaucratic inefficiencies, corruption, and poor
infrastructure including the unreliable power supply.
Requirements to own land or use it as collateral also remain
an key impediment to new investment.

Trade Liberalization
--------------

DAR ES SAL 00000355 002.2 OF 003



7. Continued banking reforms during 2006 helped increase
private-sector growth and investments. Lower tariffs on
certain basic materials, increasing levels of foreign
investment and trade with the EU, the U.S., India, China and
other partners, contributed to Tanzania's improved economic
indicators. The WTO Trade Related Intellectual Property
Rights (TRIPS) agreement was signed into law in 2006.

Political Pluralism Rule
--------------

8. 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 December 2005
elections for Union president and members of parliament were
considered by international observers to be generally free
and fair. In October 2005, the semi-autonomous archipelago
of Zanzibar held separate elections for the Zanzibar
president and councilors that were marred by violence and
serious irregularities. The opposition parties on both the
Mainland and in Zanzibar were allowed to register as legal
parties and participate in the political process, although
opposition leaders complained of an uneven playing field due
to lack of resources.

Rule of Law and Anti-Corruption
--------------

9. 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. Tanzania has improved its arbitration of
commercial disputes, establishing a Commercial Court in 1999.
While the GOT took steps in 2006 to address judicial
inefficiency and corruption, in particular, by increasing the
budget of the judicial branch, overall the judiciary remains
understaffed, a key cause of delays within the court systems.


10. Since his election in December 2005, President Jakaya
Kikwete has taken a strong public stance against corruption.
He named a new head of the Prevention of Corruption Bureau
(PCB),an agency under the President's Office, and replaced
the Director of Public Prosecutions (DPP). However, few
high-level corruption cases went to trial in 2006. The GOT
took steps to revise the current anti-corruption law by
adding stronger penalties, protection for whistle-blowers,
and giving the PCB power to prosecute senior-level government
officials without permission from the DPP, as is currently
the case. In February 2007, the anti-corruption bill was
tabled in the parliament for a first reading and will be
discussed in full parliamentary session in April 2007. The
GOT sits on the World Bank Anti-Corruption Commission and has
participated in the Millennium Threshold Account program
since May 2006. Tanzania qualified for a Millennium
Challenge Corporation (MCC) Compact in November 2005 and
submitted a proposal to the MCC in August 2006 which is now
in the final stages of the due diligence process.

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

11. In the last three years, Tanzania has shown steady
economic performance, with macro-economic stability,
consistent GDP growth, adequate reserves, and a sustainable
external debt position. In 2006, the overall balance of
payments position remained positive due to inflows of donor
assistance and debt relief of USD 3.8 million under the
Multilateral Debt Relief Initiative (MDRI). However, inroads
against poverty have been minimal. In 2005, Tanzania
completed its Poverty Reduction Strategy Paper which
identified four key priority areas for poverty reduction: (i)
education; (ii) water; (iii) roads; and (iv) energy. The GOT
included in its MCC compact proposal large infrastructure
projects for water, roads and energy, which will potentially
accelerate poverty reduction.

Labor/Child Labor
--------------

12. Tanzania has ratified all eight International Labor
Organization (ILO) core labor conventions including
Conventions 138 and 182 on minimum age and the worst forms of
child labor. The GOT passed new labor laws in 2004

DAR ES SAL 00000355 003.2 OF 003


strengthening workers' rights and prohibitions against child
labor. The new law prohibits forced or compulsory labor,
including forced labor by children. Implementation began in
2006 with the recruiting and training of more labor officers
and inspectors. The law provides for collective bargaining
in the private sector, and workers and employers practiced it
freely during the year. While the law allows workers to form
and join unions without prior authorization, in practice,
many in the private sector adopted anti-union policies or
tactics that limited this right. Tanzania does not have a
law to protect workers form from anti-union discrimination.


13. Tanzania continues to participate in the ILO's
"Timebound Program to Eliminate the Worst Forms of Child
Labor". A second phase of this project, funded in 2005, will
broaden the project's scope to include combating exploitative
child land in fishing on both the Mainland and in Zanzibar.
The minimum employment age remains inconsistent with the age
for completing educational requirements since the law
provides for seven years of compulsory education through the
age of 15.

AGOA Successes
--------------

14. On May 11 and 12, 2006, post coordinated with USAID's
East and Central African Trade Hub in Nairobi, to implement a
successful two-day AGOA workshop in Dar es Salaam on
"Enhancing Trade Capacity and Competitiveness."
Representatives of nearly 80 Tanzanian exporters and
businesses attended the focus sessions on buyer-seller
linkages, phyto-sanitary standards, and shipping, logistics
and customs. The outcomes included better understanding
among the attendees of financing options and of U.S customs
regulations, including the Container Security Initiative;
improved communication and subsequent cooperation among small
handicraft producers in Mainland Tanzania; and the
introduction of Zanzibari spices and essential oils as a
potential AGOA export products.


15. One Tanzanian company, Cello Industries, Ltd. which was
introduced to AGOA through the workshop, began exporting
plastic products (lawn furniture, kitchenware, etc.) in
mid-2006. As of March 2007, the company is selling 60 types
of plastic products to U.S. buyers under AGOA. The company
presently employs 300 workers, but if the sales to the U.S.
continue to rise, has plans to expand the factory and employ
up to 500 workers by 2008. Cello Industries also
successfully markets its products in Dubai, the East African
Community countries and the Common Market for Eastern and
Southern Africa (COMESA) countries.
DELLY