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

2
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
3
 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 and
administrative barriers to investment in Tanzania
 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. 4
 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.

5
 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
6
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.
7
 TIC CLIENTS CHARTER
OUR COMMITMENT TO INVESTORS
TIC is committed to facilitating investors
Application Days taken
 Company Registration 3
 Business licensing 3
 Certificate of incentives 7
 Resident Permit Class ‘A’ 14
 Resident Permit Class ‘B’ 14
 Special Pass 1
 TIC voted Africa’s Best IPA of the year 2004

8
 TANZANIA INVESTMENT CENTRE
C ustom ers

Currently TIC A frica A m erica E urope Ta nza nia A sia

B usine ss D e ve lopm ent S ervice s

is installing
the computer
workflow Inte rnet
D om ino.D oc
O ptica l
S canner
S ig ned
Docum e nts

management
D ocum e nt
M a nagem ent
P ow erShift eC R M

system eTrack
P roject
M a nagem ent
Certificate of Incentives processing

R espective G o ve rnm ent

towards
(Q uickP lace )
A genc ie s/ A ppro va l / R o uting /
P roject Tracking & M anagem e nt
Dom ino
W orkFlow

paperless
E ng ine
P re-Inve stm ent

office Inve stm ent

operation. T IC
Syste m s Arch ite ctu re
D o m ino W orkflo w
O peratio nal

Jan ua ry 2 0 05

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

9
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, President’s Office Planning &
Privatisation; Governor of BoT; Attorney
General and Executive Director-TIC
(Secretary).
10
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.
11
 INVESTMENT GUARANTEES AND
SETTLEMENTS OF DISPUTES
•Tanzanian law offers guarantees against
nationalization and expropriation,
•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

12
 REGULATORY TREATMEMENT OF FDI IN
TANZANIA (RESTRICTIONS ON INVESTMENT
S/No. Restriction Current Status New Developments

1. General Restrictions on entry

•Entry of FDI Yes (threshold of USD
0.3m and USD 0.1m
for foreign & local
respectively

However at DSE foreigners are

•Foreign purchase of Shares No restrictions not required to exceed 65%
•IMF Article VIII status share purchase in a Listed
Signed Company
•Liquidation proceeds transfer No restrictions
Abroad
2. Sectoral Limitations to FDI
•Financial Services Some restrictions
•Other Services No restrictions, Initiatives are underway
however no incentives to establish Special
offered for some Economic Zones (SEZ)
services

•Primary Sectors Minimal restrictions

No restrictions
•Manufacturing
•Acquisition of real estates for No restrictions
FDI purposes 13
 REGULATORY TREATMEMENT OF FDI IN
TANZANIA (RESTRICTIONS ON INVESTMENT
S/No. Restriction Current Status New Developments

3. Post entry restrictions Land Act 1999 has also been

•Access to local finance No restrictions amended so that land can be
used as collateral by local and
•Access to privatisation No restrictions foreign investors to get bank
loans
•Access to public No restrictions
procurement
•Taxation No restrictions

•Discriminatory licensing in No restrictions

New income Tax 2004
public utilities
•Nationality-based No restrictions

restrictions on boards
•Discriminatory practices No

•Entry of key personnel No restrictions

•Performance requirements Not required

14
 REGULATORY PRACTICES OTHER THAN
RESTRICTIONS
S/No. Regulatory Practices
1. 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)
2. Enhancing Policy Transparency
•Publications of regulations
•Notification prior to regulatory
changes
•Negative list of restricted sectors
•“silent and consent” authorisation
Current New Developments
Status
Initiatives are underway to
Yes harmonise EAC investment
Regimes
20 Pending negotiations 10
(12)
Pending negotiations 8
12
(7)
Publication through various
media including newly
Yes parliamentary website at:
www.parliament.go.tz
Yes Government website at:
www.tanzania.go.tz and
Treasury at: www.mof.go.tz
Yes
Yes A good example is at the
TIC’s One Stop Centre
operation, when seeking
authority from other Govt.
MDAs
MDAs = Ministries, Departments and Agencies 15
 BILATERAL INVESTMENT TREATIES. LIST
OF BIT SIGNED AS OF JANUARY 2005
S/No OECD Countries Year of S/No Non OECD Year of
Signing Countries Signing
1 Denmark 1999 1 South Africa 1959
2 Finland 2001 2 Zambia 1968
3 Germany 1965 3 India 1979
4 Italy 2001 4 Egypt 1997
5 Korea 1998 5 Mauritius 2003
6 Netherlands 2001 6 Zimbabwe 2003
7 Sweden 1999 7 Malawi* 2003
8 Switzerland 1965 8 OPEC Fund* 2003
9 United Kingdom 1994
10 Canada 1995
11 Korea 1998
12 Swiss Confederation 2004

Source: Government of Tanzania * Partial Agreement

16
 BILATERAL TAX TREATIES. LIST OF DTTs
SIGNED AS OF JANUARY 2005
S/No OECD Countries Year of S/No Non OECD Year of
Signing Countries Signing

1 Canada 1995 1 Zambia 1968

2 Denmark 1976 2 South Africa 1959
3 Finland 1976 3 India 1979
4 Italy 1973 4 Kenya (EAC) 2004
5 Norway 1976 5 Uganda (EAC) 2004
6 Sweden 1976 6 Zimbabwe
7 Korea 2003 7 UAE
8 Russia
9 Seychelles
10 Mauritius
11 Egypt
12 Yugoslavia
13 Oman

Source: Government of Tanzania * Under negotiations

17
 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

18
 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.

20
 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 for“smart
partnership”
3. Abundant Investment Opportunities
4. Talented and skilled labour force.
5. Willingness to listen

21
 PERCEPTIONS HINDERING FDI
BUREAUCRACY
No. of Days to start a business
250 215

200
146 153

150 122
97 92
100 85

45 46
38 40
50 35

0
i

ia
a

bia

i na
la

ia

e
a

A
C

l aw
tho
an

iqu

bw
fric

an

US
DR
go

mb
mi

Ch
so
Ma
t sw

nz

ba
An

mb

S/A

Za
Na
Le

Ta

Zim
Bo

za
Mo

Source: Doing business in 2004 (World Bank)

22
 TANZANIA ECONOMIC STATISTICS

1997 1998 1999 2000 2001 2002 2003

Population (millions) 29.1 30.0 30.9 31.9 32.9 34.5 36.0
GDP (factor cost ) Tshs 4,282 5,125 5,978 6,705 7,635 8,629 9,110
bn

Real GDP Growth, % 3.3 4.0 4.7 4.9 5.6 6.2 5.6
change
GDP per Capita 147 171 193 210 232 256 300
(at c/prices-Tshs 000’)
Exchange rate 612 665 745 808 876 967 1039
(Tshs/US$) ann. Avg.
Inflation 16.1 12.9 7.8 6.0 5.2 4.5 4.4
annual average (%)
Investment/GDP ratio 14.7 16.0 15.4 17.6 17.0 18.9 18.5
(%)
FDI (US$ mn) 158 172 542 282 467 240 248

Source: National Bureau of Statistics 2004 - Tanzania 23

 GDP GROWTH RATE AND INFLATION
IN TANZANIA (1997 – 2004)
8 18

7 16

14
6
12
5

Inflation rate %
GDP Gowrh %

10
4
8
3
6
2 4
1 2

0 0
1997 1998 1999 2000 2001 2002 2003 2004
Years
GDP Growth Inflation

Source: Bank of Tanzania -

2005 24
 TIC REGISTERED PROJECTS
FROM 1995 TO 2004
500 1800
450 1600
400 1400

Values of Projects in US $ Million

No. of Registered Projects

350
1200
300
1000
250
800
200
600
150
100 400
50 200
0 0
1995

1996

1997

1998

1999

2000

2001

2002

2003

2004
Years
No. of Registered Projects Values of Projects (US$ Million)

25
 FDI INFLOWS TO TANZANIA
FROM 1992-97 TO 2003
US$ Million 542 *
600
467 *
500

400
282
300 240 248
172
200
90@
100

0
1992-97 1998 1999 2000 2001 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.

26
THE WAY FORWARD

27
 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
28
 SUMMARY OF THE INTERLINKED COMPONENTS
OF THE BEST PROGRAMME
S/No. COMPONENTS MAIN OUTPUTS

Achieving Better Unnecessary regulations removed

Regulation
Sustainable process established for ensuring business-friendly laws,
regulations and administrative procedures
Improved efficiency and transparency of government institutions
dealing with business

Improving Improved accessibility to the court system for formal and informal
Commercial Dispute business
Resolution Speed and quality of service provided by court system for business
improvement
Strengthening the Increased number and value of local and foreign investment in
Tanzania Investment Tanzania
Centre Enhanced promotion of Tanzania as investment destination
Changing the Culture Improved customer service ethos for services provided to the private
of sector by the public and judicial service
Government

Empowering Private Improved capacity of private sector stakeholders to identify

Sector regulatory problems and solutions and advocate for an improved
Advocacy business environment 29
 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 Govt’s
commitment towards establishing a private sector
led economic growth.
30
 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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