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 
-------- 
¶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