VZCZCXRO0981
PP RUEHLMC
DE RUEHDR #1694/01 2900400
ZNR UUUUU ZZH
P 170400Z OCT 06
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC PRIORITY 4928
INFO RUEHLMC/MCC WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS SECTION 01 OF 04 DAR ES SALAAM 001694 
 
SIPDIS 
 
SIPDIS 
 
DEPT AF/E FOR B YODER; AF/EPS FOR J POTASH 
PASS TO USTR FOR C HAMILTON 
ALSO TO MILLENNIUM CHALLENGE CORPORATION FOR G BREVNOV 
 
E.O. 12958: N/A 
TAGS: AGOA ECON ETRD TZ
SUBJECT: TANZANIA: ANNUAL AGOA ELIGIBILITY REVIEW 
 
REF: STATE 163056 
 
¶1.  Current AGOA Status:  Eligible 
 
Country Background Summary 
-------------------------- 
¶2.  The population of Tanzania in 2005 was estimated at 38.3 
million, up from an estimated 36.6 million in 2004.  In 2005, 
Tanzania's GNI was USD 12.1 billion while GNI per capita was 
USD 340.  From October 2005 to October 2006, Tanzania 
continued its economic reform program, generating a slightly 
lower economic performance than in the previous 
twelve months.  The Ministry of Planning, Economy and 
Empowerment projects GDP growth rate for 2006 at 5.9 percent, 
compared to a growth rate of 6.7 percent for 2005.  Growth in 
the agriculture, tourism, transport and communication sectors 
fueled Tanzania's economic 
performance.  The Government of Tanzania (GOT) is a stable, 
multi-party democracy; however, the ruling party dominates 
both the executive and legislative branches.  Tanzania 
continues to strengthen its market-based economy and 
eliminate barriers to U.S. trade and investment.  The 
Government of Tanzania is pursuing economic policies to 
reduce poverty, encourage good governance and protect worker 
rights.  Poverty and corruption remain issues.  Tanzania is a 
Millennium Challenge Compact eligible country.  END SUMMARY. 
 
Comments on Eligibility Requirements 
------------------------------------- 
¶I. Market-based Economy 
 
¶A. Major Strengths Identified 
 
The Government of Tanzania (GOT) continued to privatize 
and liberalize its economy. 
 
--  As of December 2005, a total of 196 enterprises were 
privatized during 2005 and 184 non-core assets were 
sold the same period.  As of June 30, 2006, the Parastatal 
Regulatory Commission (PSRC) reported a cumulative total 
of 920 concluded divestiture transactions.  In early 2006, 
a private company took over operations of the Tanzania 
Railway Corporation concession. 
 
--  The GOT continued its proactive efforts to attract 
domestic and foreign investors by simplifying FDI 
regulations.  The value of Foreign Direct Investment in 
2005 was USD 325.0 million. 
 
--  The GOT undertook tax administration reforms which led 
to significant improvement in revenue performance. The 
revenue- 
to GDP-ratio increased from 13.3 percent of GDP in 2004 to 
13.5 percent of GDP in 2005. 
 
--  Tanzania's infrastructure notably in rural road 
transportation continued to improve due to routine and 
spot maintenance, as well as the rehabilitation of existing 
culverts and bridges. 
 
¶B. Major Issues/Problems Identified 
 
-- With the inauguration of President Jakaya Kikwete's 
administration in January 2006, the Prevention of Corruption 
Bureau (PCB) renewed its efforts to curb corruption; however, 
anti-corruption efforts, particularly in the judicial system, 
continued to advance slowly and to create concerns for 
foreign investors, including U.S. firms. 
 
-- Tanzania's economy remained vulnerable due to a drought in 
late 2005 that continued through the first quarter of 2006, 
affecting both the agricultural and energy sectors (nearly 50 
percent of the power supplying Dar es Salaam is 
hydroelectric).  The economy was also slowed by the rising 
world market prices of oil and other essential commodities. 
 
-- In 2005, both the cost of starting a business and the 
number of days to start a business continued to decrease, 
based on the Millennium Challenge Corporation Scorecard for 
candidate countries.  However, there was only a slight 
decrease in the expense of obtaining a  business license, 
while the cost of electricity remained  high.  In addition, 
power rationing has been in effect for up to 12 hours per day 
in Dar es Salaam and many regions for three to six days per 
week since late May 2006. 
 
 
II. Political Reforms, Rule of Law, and Anti-Corruption 
 
DAR ES SAL 00001694  002 OF 004 
 
 
 
¶A. Major Strengths Identified 
 
-- President Jakaya Kikwete was elected to a five-year term 
and took office in December 2005.  President Kikwete has made 
the elimination of corruption and advocacy for good 
governance among his top priorities.  Tanzania signed the 
Millennium Challenge Threshold Agreement in May 2005, 
accepting a USD 11.9 million program which is being 
implemented by USAID.  This two-year program will:  1) 
strengthen rule of law for good governance; 2) address 
corruption in the public procurement system; 3) establish a 
Financial Intelligence Unit; and 4) strengthen the capacity 
of civil society. 
 
--  In 2006, under President Kikwete's administration, 
Mainland Tanzania continued on the path toward a more open 
press, able to report on political, business and economic 
issues with little fear of retribution. 
 
--  The Anti-Corruption Bill prepared by the Prevention of 
Corruption Bureau and the Law Reform Commission in 2004 has 
been approved by the Cabinet and will be submitted to 
Parliament in November 2006.  This bill will strengthen the 
Prevention of Corruption Bureau and facilitate the 
prosecution of public officials accused of bribery or 
corruption. 
 
--  The GOT continued efforts to strengthen the judiciary 
system which has been historically under-funded. In 2005, the 
budget received by the judiciary was 55 percent of its 
allocated budget, an increase from 2004 when the judiciary 
branch received only 49 percent of its allocation. 
 
--  In coordination with the President's office, the 
judiciary took steps to promote anti-corruption, organizing 
seminars to sensitize magistrates and court clerks to 
corruption issues under the National Anti-Corruption Strategy 
Program. 
 
¶B. Major Issues/Problems Identified 
 
-- The national judiciary is formally independent;  however, 
the judicial branch is often slow and inefficient.  Also, 
occasionally on the Mainland and more often in 
semi-autonomous Zanzibar, the judicial systems are subject to 
executive interference. 
 
-- While the new administration is working to augment 
transparency and good governance, corruption remains one of 
the major difficulties encountered by foreign investors, 
including U.S. firms, in Tanzania. 
 
--  Press freedoms in Zanzibar remained restricted, with the 
media dominated by state-run newspapers, radio and 
television.  However, Mainland newspapers and 
television/radio programs are available in Zanzibar. 
 
 
III. Poverty Reduction 
 
¶A. Major Strengths Identified 
 
-- The GOT's Poverty Reduction Strategy--the National 
Strategy for Growth and the Reduction of Poverty (NSGRP) also 
known as "Mkukuta"--was adopted in 2004 through a broad 
participatory process.  The Mkukuta focuses on 1) growth and 
reduction of poverty; 2) improved quality of life and social 
well being; and, 3) good governance and accountability. 
 
-- The GOT also has developed a broad policy framework, 
"Vision 2025," which sets targets for economic growth and 
poverty eradication by the year 2025. 
 
-- In November 2005, Tanzania was selected by the Millennium 
Challenge Corporation (MCC) as a qualified MCC Compact 
country.  The GOT submitted a MCC Compact proposal to the 
Millennium Challenge Corporation in August 2006, which is 
currently undergoing a due diligence study by MCC on economic 
feasibility and sustainability. 
 
¶B. Major Issues/Problems Identified 
 
-- In 2005, Tanzania's GDP per capita income remained low, 
approximately USD 340.  Recent macroeconomic growth has yet 
to make significant inroads to reduce rural poverty.  The 
economic growth rate has slowed slightly in the first three 
quarters of 2006 due to electric power shortages and an 
 
DAR ES SAL 00001694  003 OF 004 
 
 
inflation rate of nearly 6 percent. 
 
--  Basic infrastructure in the power and water sectors 
remains poor; some progress was made in the last twelve 
months in road and bridge construction.  Tanzania's overall 
trade volume is comparatively low at approximately 22 percent 
of GDP. 
 
 
IV. Workers' Rights/Child Labor/Human Rights 
 
¶A. Major Strengths Identified 
 
--  Workers in Tanzania have the right to associate, form 
unions, and bargain collectively and these rights are well 
respected. 
 
-- Implementing regulations for the Employment and Labor 
Relations Act passed by the Union Parliament in April 2004 
were being drafted with input from NGOs, trade unions, and 
employers.  The 2004 Act establishes criminal punishment for 
employers of child laborers as well as forced laborers.  Once 
these regulations are in effect, the Act can become fully 
operational. 
 
-- Tanzania has ratified the eight core conventions of the 
International Labor Organization (ILO), including Convention 
182 on the Worst Forms of Child Labor.  The GOT recently 
reformed labor laws in order to make progress under the 
auspices of the international Program for the Elimination of 
Child Labor. 
 
-- Tanzania has focused on combating the worst forms of child 
labor in agriculture, mining, and prostitution.  The GOT 
continues to work well with NGOs to fight child labor. 
 
--  The GOT took steps to improve its human rights record 
over the last twelve months. In 2005-2006, judicial officers 
began to accelerate cases in the higher courts. 
 
-- The Minister of State for Union Affairs and the Chief 
Minister of Zanzibar agreed once the Union Parliament amends 
the Human Rights Commission legislation to include a review 
by the Zanzibar House of Representatives, the Commission 
would function in Zanzibar as well as on Mainland Tanzania. 
 
-- Over the past twelve months, there were no reports of 
killings in police custody. 
 
 
¶B. Major Issues/Problems Identified 
 
-- During the year, there were reported cases of police 
officers' threats, torture or other mistreatment of suspected 
criminals and prisoners. 
 
-- Prison conditions remained harsh and life threatening. 
Arbitrary arrest and prolonged detention remain problems. 
 
-- The judicial system in many instances did not provide 
expeditious or fair trials. 
 
-- Starting in July 2006, the GOT began to send home illegal 
immigrants (those without Tanzanian resident permits) to 
neighboring countries.  The first phase, ending in October 
2006, will be voluntary; thereafter, non-Tanzanians who do 
not regularize their immigration status will be forcibly 
expelled.  Some cases were also reported of the GOT refusing 
persons who were seeking asylum in Tanzania. 
 
 
¶V. International Terrorism/U.S. National Security 
 
¶A. Major Strengths Identified 
 
-- The GOT continues to cooperate closely with the U.S. 
Government in the War on Terrorism. 
 
-- To combat terrorist financing, the GOT continues to 
fulfill its obligations according to the UN 1267 Sanctions 
Committee. 
 
-- In 2005, the Ministry of Finance finalized an Anti-Money 
Laundering bill which has been approved by the Cabinet and 
will be introduced into the next session of Parliament in 
November 2006. 
 
¶B.    Major Issues/Problems Identified 
 
DAR ES SAL 00001694  004 OF 004 
 
 
 
-- None 
 
RECOMMENDATION ON TANZANIA'S AGOA ELIGIBILITY 
-------------------------------------------- 
Tanzania continues to be eligible for AGOA.  Under President 
Kikwete, the GOT has shown stronger commitment than ever 
before to AGOA eligibility criteria.  Privatization and 
reforms to improve the business environment have accelerated, 
as Tanzania continues on a path toward a fully market-based 
economy.  The GOT made efforts to strengthen the rule of law 
and protect workers rights in 2006, including improvements in 
the judiciary, finalizing the Anti-Corruption bill and the 
Anti-Money Laundering bill.  The GOT worked closely with the 
Millennium Challenge Corporation to submit its Compact 
proposal on time, which itself is an indication of Tanzania's 
commitment to stimulate the economy and reduce poverty. 
Finally, the GOT continued to cooperate with the U.S. in the 
war on terrorism through the training, discussion and 
implementation of bilateral and regional cooperation on 
counterterrorism efforts.  Important areas for further 
improvement include timely prosecution of senior officials 
implicated in corruption, and improvement in Tanzania's human 
rights record, particularly in regards to trafficking in 
persons and expanding press freedoms in Zanzibar. 
DELLY