THE UNITED REPUBLIC OF TANZANIA TANZANIA INVESTMENT CENTRE

INVESTMENT FOR AFRICAN DEVELOPMENT: Making it happen

NEPAD/OECD INVESTMENT INITIATIVE, Imperial Resort Beach Hotel ENTEBBE, UGANDA 25th 27th May 2005,
Presented by:

Samuel J. Sitta Executive Director Tanzania Investment Centre E-mail: sitta@tic.co.tz Website: www.tic.co.tz

CONTENTS/OVERVIEW
1. 2. 3. 4. Introduction Economic Policy Reform Investment Policy Framework Private Sector Development Initiatives
a) National Investment Steering Committee (NISC) b) Tanzania National Business Council (TNBC) c) Investment guarantees & settlement of disputes Remaining regulatory, legislative & administrative impediments to private investment Tanzania Investment Regime Challenges and The way Forward Conclusion
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5. 6. 7. 8.

ECONOMIC REFORMS AND THE DEVELOPMENT OF THE NATIONAL INVESTMENT PROMOTION POLICY
Economic reforms initiated in 1986:  Trade liberalization  First Investment Code June 1990  Private investment allowed in allocated areas Some of the problems met in implementing the 1990 Investment Policy & the Act as per studies carried out:  Restrictive investment environment  Lack of coordination of sectorial policies and the investment policy  Existence of several laws and regulations that conflicted with the investment code  Existence of a non commercialised society  Existence of a non facilitative civil service
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CORRECTIVE MEASURES TAKEN TO FURTHER IMPROVE THE TANZANIAN INVESTMENT CLIMATE

Major highlights of the Studies carried (i) Review of the investment Policy and Law, prepared by Dr. H. Sinare and Dr. F. Ringo under the auspices of Economic and Social Research Foundation (ESRF) - 1996 and (ii) Investors Road Map (1996) prepared by The Services Group, a team from USA.   Both reports addressed policy, legal, procedural administrative barriers to investment in Tanzania and

The reports forced GoT departments to re-examine their processes and make appropriate changes; main changes where as follows:   Adoption of the New Investment Policy 1996 Enactment of the new investment code 1997 & establishment of Tanzania Investment Centre (TIC) One Stop Shop for investors Harmonized key legislation Removed restrictions on investment areas Enhanced economic and social reforms from 1996 onwards.

  

TANZANIA ECONOMIC REFORMS The Government has implemented reforms aimed at transforming its economy from one based on a large State-owned sector and central planning to a market-and private-sector-based economy. 16 major reform legislations were enacted between 1990 and 2004.
These reforms have helped Tanzania to improve efficiency and weed out ills that impede growth.

TANZANIA ECONOMIC REFORMS

Major reform legislations enacted between 1990 and 2002 are as follows:                The Income Tax Act 2004 The Companies Act No. 12 of 2002 The Export Processing Zones Act No. 11 of 2002 The Commission for Human Rights & Good Governance Act No. 7 of 2001 The Land Act 1999 The Mining Act 1998 The Privatisation Trust Act No. 7 of 1997 The Financial Laws Miscellaneous Amendments Act 1997 The Tanzania Investment Act No. 26 of 1997 The Tanzania Revenue Authority Act No. 11 of 1995 The Immigration Act No. 7 of 1995 Capital Market and Security Act No. 5 of 1994 and as amended by Capital Market and Security Act No. 4 of 1997 The Public Corporations Act 1992 and Amendment Act 1993 The Foreign Exchange Act 1992 The Banking and Financial Institutions Act No 12 of 1991 The Loans and Advances Realization Act 1991

TANZANIA INVESTMENT CENTRE (TIC)

 TIC established in 1997 to be The Primary Agency of the Government to coordinate, encourage, promote and facilitate investment.  One-Stop Facilitative Centre with officers from Ministry of Trade & Industry, Business Registration & Licensing Authority (BRELA), Lands, Immigration, Labour and TRA stationed at the TIC.  TIC Relationship Managers regularly visit investment projects to follow up on implementation and obtain feedback to resolve any business problems.  Facilitates investors to acquire land by offering them land derivative titles on behalf of the Govt.
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TIC CLIENTS CHARTER OUR COMMITMENT TO INVESTORS

TIC is committed to facilitating investors Application  Company Registration  Business licensing  Certificate of incentives  Resident Permit Class A  Resident Permit Class B  Special Pass Days taken 3 3 7 14 14 1

 TIC voted Africas Best IPA of the year 2004

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TANZANIA INVESTMENT CENTRE

Currently TIC is installing the computer workflow management system towards paperless office operation.
Customers Africa America Europe Tanzania Asia Business Development Services

Optical Scanner Internet PowerShift eCRM eTrack Project Management (QuickPlace) Domino WorkFlow Engine Domino.Doc Document Management

Signed Documents

Certificate of Incentives processing

Respective Government Agencies/ Approval / Routing / Project Tracking & Management

Pre-Investment

Investment

TIC Systems Architecture Domino Workflow January 2005

Operational

In addition it is also re-designing and updating its website so as to constantly provide current and update investment information including new legislations/regulations to investors
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NATIONAL INVESTMENT STEERING COMMITTEE (NISC)

Spearheading investment policy formulation, Fast track solutions to investors problems of investors, Identify and supervise the elimination of legal impediments to investment Chaired by the Hon. Prime Minister, Other members of the committee are Ministers for Finance, Agriculture, Lands, Industry and Trade, Presidents Office Planning & Privatisation; Governor of BoT; Attorney General and Executive Director-TIC (Secretary).
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NATIONAL BUSINESS COUNCIL (TNBC)

 National Business Council seeks to enhance Public/Private sector smart partnership.  The Business Council is chaired by the President and the Chairman of Tanzania Private Sector Foundation is Vice Chairman.  TNBC organizes and facilitates Investors Round Table Meetings (IRT); Local and International  The TNBC has resolved a number of business impediments including enactment of a new business friendly land law and abolition of many nuisance taxes.
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INVESTMENT GUARANTEES AND SETTLEMENTS OF DISPUTES

Tanzanian law offers guarantees nationalization and expropriation, against

Tanzania is a member of both the International Centre for Settlement of Investment Dispute and Multilateral Investment Guarantee Agency, Free/Unconditional Transfer of Capital, Profits, dividends and other benefits for investors and employees working in Tanzania
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REGULATORY TREATMEMENT OF FDI IN TANZANIA (RESTRICTIONS ON INVESTMENT

S/No. 1. Restriction General Restrictions on entry Entry of FDI Current Status New Developments

Yes (threshold of USD 0.3m and USD 0.1m for foreign & local respectively No restrictions Signed No restrictions However at DSE foreigners are not required to exceed 65% share purchase in a Listed Company

Foreign purchase of Shares IMF Article VIII status Liquidation proceeds transfer Abroad 2. Sectoral Limitations to FDI Financial Services Other Services

Some restrictions
No restrictions, however no incentives offered for some services Minimal restrictions No restrictions No restrictions 13

Initiatives are underway to establish Special Economic Zones (SEZ)

Primary Sectors Manufacturing Acquisition of real estates for FDI purposes

REGULATORY TREATMEMENT OF FDI IN TANZANIA (RESTRICTIONS ON INVESTMENT

S/No. Restriction 3. Post entry restrictions Access to local finance Access to privatisation Access to public procurement Taxation Discriminatory licensing in public utilities Nationality-based restrictions on boards Discriminatory practices Entry of key personnel Performance requirements Current Status New Developments
Land Act 1999 has also been amended so that land can be used as collateral by local and foreign investors to get bank loans

No restrictions
No restrictions No restrictions No restrictions No restrictions No restrictions

New income Tax 2004

No No restrictions Not required

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REGULATORY PRACTICES OTHER THAN RESTRICTIONS

S/No. 1. Regulatory Practices Practices encouraging FDI FDI-targeted tax & and other incentives Number of bilateral investment treaties (of which with OECD members) Number of bilateral tax treaties (of which with OECD members) Enhancing Policy Transparency Publications of regulations Notification prior to regulatory changes Negative list of restricted sectors silent and consent authorisation Current Status Yes 20 (12) 12 (7) Yes Yes Yes Yes New Developments

Initiatives are underway to harmonise EAC investment Regimes Pending negotiations 10

Pending negotiations 8

2.

Publication through various media including newly parliamentary website at: www.parliament.go.tz Government website at: www.tanzania.go.tz and Treasury at: www.mof.go.tz A good example is at the TICs One Stop Centre operation, when seeking authority from other Govt. MDAs 15

MDAs = Ministries, Departments and Agencies

BILATERAL INVESTMENT TREATIES. LIST OF BIT SIGNED AS OF JANUARY 2005

S/No OECD Countries Year of Signing S/No Non OECD Countries Year of Signing

1 2 3 4 5 6 7 8 9 10 11 12

Denmark Finland Germany Italy Korea Netherlands Sweden Switzerland United Kingdom Canada Korea

1999 2001 1965 2001 1998 2001 1999 1965 1994 1995 1998

1 2 3 4 5 6 7 8

South Africa Zambia India Egypt Mauritius Zimbabwe Malawi* OPEC Fund*

1959 1968 1979 1997 2003 2003 2003 2003

Swiss Confederation 2004

* Partial Agreement
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Source: Government of Tanzania

BILATERAL TAX TREATIES. LIST OF DTTs SIGNED AS OF JANUARY 2005

S/No OECD Countries Year of Signing S/No Non OECD Countries Year of Signing

1 2 3 4 5 6 7

Canada Denmark Finland Italy Norway Sweden Korea

1995 1976 1976 1973 1976 1976 2003

1 2 3 4 5 6 7 8 9 10 11 12 13

Zambia South Africa India Kenya (EAC) Uganda (EAC) Zimbabwe UAE Russia Seychelles Mauritius Egypt Yugoslavia Oman
* Under negotiations

1968 1959 1979 2004 2004

Source: Government of Tanzania

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TANZANIA INVESTMENT REGIME

Investment framework in Tanzania is characterised by: Relative ease of entry and establishment No ownership restrictions or performance requirements. A fiscal stability clause, Section 19(2) of TI Act 1997 that guarantees investors that incentives provided will not be amended or modified to the detriment of the investors enjoying those benefits. No restrictions on the repatriation of profits or disinvestments in Tanzania Investors have the right to make transfer payments in freely convertible currency

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TANZANIA INVESTMENT REGIME

Investors are allowed to obtain land for investment purposes through the TIC that issues derivative rights (under the new Land (Amendment) Act (2004) ) . Under Section 24 of the TI Act 1997, TIC certificate holders have the right of an initial automatic quota of employing up to five persons during the start up period. Only in a few cases are foreigners required to pay an extra tax other wise the corporate tax stands at 30 percent, and VAT is 20 percent for all companies except for those that have specific incentives. Govt. has passed the Employment and Labour Relations Act (2004) with the purpose of having a labour regime whose policies, laws and regulatory structures promote employment, protect labour and at the same time allow enterprises to grow and compete in the modern economy. The country also benefits from specific bilateral initiatives particularly USA, under the familiar AGOA program, and the EU under EBA. 19

RECENT DEVELOPMENTS
The establishment of the Customs Union Protocol, which was signed on 2nd March 2004, is one of the greatest achievements of the new EAC. A number of specialized taskforces have been formulated and revision of regulations through task forces such as the Tax Reform Taskforce, the Land Reform Taskforce, and the Labour Reform Taskforce, etc. These task forces include members from different government departments, civil society, and the business community. Tanzania has also signed a number of international agreements governing the protection of foreign investment in Tanzania including bilateral investment treaties (BIT) and double taxation treaties (DTT). Negotiations are currently in the process to conclude agreements with Zimbabwe, Malawi, Mauritius and South Africa.
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ATTRACTIONS
1. Beautiful country with friendly people 2. Favourable Investment Environment
A. Successful Macroeconomic performance B. Effective One Stop facilitative Centre (TIC) C. National Investment Steering Committee D. Tanzania National Business Council forsmart partnership

3. Abundant Investment Opportunities 4. Talented and skilled labour force. 5. Willingness to listen
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PERCEPTIONS HINDERING FDI BUREAUCRACY

No. of Days to start a business
250 200
146 153 122 97 92 85 45 46 215

150 100 50 0

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35

40

DR C Le so th o Ma law Mo i za mb iq u e Na mi bia S/A fric a Ta nz an ia Za mb ia Zim ba bw e

An go la Bo t sw an a

Ch i na

Source: Doing business in 2004 (World Bank) 22

US A

TANZANIA ECONOMIC STATISTICS

1997 Population (millions) GDP (factor cost ) Tshs bn Real GDP Growth, % change GDP per Capita (at c/prices-Tshs 000) Exchange rate (Tshs/US$) ann. Avg. Inflation annual average (%) Investment/GDP ratio (%) FDI (US$ mn) 29.1 4,282 3.3 147 612 16.1 14.7 158 1998 30.0 5,125 4.0 171 665 12.9 16.0 172 1999 30.9 5,978 4.7 193 745 7.8 15.4 542 2000 31.9 6,705 4.9 210 808 6.0 17.6 282 2001 32.9 7,635 5.6 232 876 5.2 17.0 467 2002 34.5 8,629 6.2 256 967 4.5 18.9 240 2003 36.0 9,110 5.6 300 1039 4.4 18.5 248
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Source: National Bureau of Statistics 2004 - Tanzania

GDP GROWTH RATE AND INFLATION IN TANZANIA (1997 2004)

8 7 6
GDP Gowrh %

18 16 14
Infl ation rate %

5 4

12 10 8

3 2 1 0 1997 1998 1999 2000 2001 2002 2003 2004

Years

6 4 2 0

GDP Growth
Source: Bank of Tanzania - 2005

Inflation
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TIC REGISTERED PROJECTS FROM 1995 TO 2004

500 450
No. of Registered Projects

1800 1600 1400 1200 1000 800 600 400 200 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Val ues of Projects in US $ Million
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400 350 300 250 200 150 100 50 0

Years
No. of Registered Projects Values of Projects (US$ Million)

FDI INFLOWS TO TANZANIA FROM 1992-97 TO 2003

600 500 400
282 US$ Million 542 * 467 *

300 200 100 0 1992-97 1998 1999 2000 2001

172 90@

240

248

2002

2003

@ Annual average from 1992 to 1997 * Sharp increase was due to huge investment in mining projects
Source: World Investment Report - 2004

Despite declining world FDI inflows, FDI into Tanzania has been increasing in the past five years, with an average of US$ 356 million annually.
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THE WAY FORWARD

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THE BEST PROGRAMME

The Government and Donors (DFID, SIDA, DANIDA and the Royal Netherlands Govt. have set-up a basket fund late 2003 for the Business Environment Strengthening of Tanzania (BEST). This is a five year programme commenced this year (2004) to year 2008 at a cost of US$ 18 million. The BEST programme piloting continuous improvement of an enabling environment for private sector operations. Creating a better policy, administrative, legal, regulatory and judicial framework
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SUMMARY OF THE INTERLINKED COMPONENTS OF THE BEST PROGRAMME

S/No.

COMPONENTS
Achieving Better Regulation

MAIN OUTPUTS
Unnecessary regulations removed Sustainable process established for ensuring business-friendly laws, regulations and administrative procedures Improved efficiency and transparency of government institutions dealing with business

Improving Commercial Dispute Resolution Strengthening the Tanzania Investment Centre Changing the Culture of Government Empowering Private Sector Advocacy

Improved accessibility to the court system for formal and informal business Speed and quality of service provided by court system for business improvement Increased number and value of local and foreign investment in Tanzania Enhanced promotion of Tanzania as investment destination Improved customer service ethos for services provided to the private sector by the public and judicial service

Improved capacity of private sector stakeholders to identify regulatory problems and solutions and advocate for an improved business environment

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THE WAY FORWARD

The establishment/formation of programmes such as Business Environment Strengthening for Tanzania (BEST) Export Processing Zone (EPZ) Special Economic Zones (SEZ) Spatial Development Initiatives (SDIs) Tanzania National Business Council (TNBC) National Investment Steering Committee (NISC) Among others, is a manifestation of the Govts commitment towards establishing a private sector led economic growth.
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THE WAY FORWARD

Proactively championing Regional Integration to create bigger markets and investments with enhanced benefits and faster growth to all. As follow up action to the UNCTAD Investment Policy Review 2003, TIC has commissioned two research studies (i.e. Tanzania comparative/competitive advantages study and a study to evaluate the growth and impact of investment) in order to target more precisely investment promotion & facilitation activities. New licensing legislation (under BEST programme) Labour laws being amended
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Visit us on: http://www.tic.co.tz

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