This record is a partial extract of the original cable. The full text of the original cable is not available.

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