VZCZCXYZ0001
RR RUEHWEB

DE RUEHDR #0675/01 2890835
ZNR UUUUU ZZH
R 160835Z OCT 09
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC 8933
RUEHNR/AMEMBASSY NAIROBI 1399
RUEHKM/AMEMBASSY KAMPALA 3520
RUEHJB/AMEMBASSY BUJUMBURA 2984
RUEHLGB/AMEMBASSY KIGALI 1448
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS DAR ES SALAAM 000675 
 
SIPDIS 
 
DEPT FOR AF/S AND AF/EPS GABRIELLE MALLORY 
STATE PASS TO USTR FOR CONSTANCE HAMILTON 
COMMERCE FOR KEVIN BOYD 
TREASURY FOR ANTHONY IERONIMO 
 
E.O. 12958: N/A 
TAGS: EAGR EAID ECON ETRD PHUM ENRG TZ
SUBJECT: AGOA ELIGIBILITY REVIEW 
 
1.(U)Country Background Summary:  Tanzania remains AGOA- 
eligible.  Tanzania has sustained high rates of broad-based 
economic growth with generally low inflation over the past 
decade due to sound macroeconomic policies and structural 
reforms, as well as a favorable global environment and debt 
relief.  Real GDP growth averaged about 7 percent a year 
during 2000?08; however, the Bank of Tanzania has forecast a 
slowdown to 5% in 2009, due to the impact of the global 
economic crisis.  However, foreign reserves remain strong, 
tourism appears to be rebounding and banks are well- 
capitalized.  Inflation was kept solidly in check for much of 
the last decade, but accelerated in 2008 (13.5 percent at 
year-end), driven mainly by effects of the spike in 
international food and fuel prices and adverse regional food 
supply shocks.  Inflation has remained in double digits in 
2009 due to drought in many food-producing regions.  In 
contrast, non-food inflation has remained modest at 
5.8 percent.  Over two decades, Tanzania has been transformed 
from a centrally planned/command economy to a more market- 
oriented system, through successful implementation of trade 
liberalization measures.  The government has taken deliberate 
steps to encourage private sector-led growth through 
restoration of market forces and reduced interference in 
commercial activities; however, there was little progress on 
reforms in 2008-09. 
 
2.(U)Despite strong macroeconomic performance, progress on 
poverty reduction has been mixed.  From 2001-2007, there were 
substantial improvements in education and health outcomes, a 
significant increase in household assets, and improved 
residences, but the incidence of income poverty declined only 
modestly. 
 
3.(U)The Government of Tanzania (GOT) is a stable, multiparty 
democracy.  The ruling party (former single party) dominates 
the executive and legislative branches.  Tanzania continues to 
make progress in strengthening its market-based economy and 
eliminating barriers to U.S. trade and investment.  The GOT 
pursues economic policies to reduce poverty, encourage good 
governance, and protect worker rights.  Despite these efforts, 
poverty is widespread and corruption remains a major problem. 
 Tanzania's $698 million Millennium Challenge Compact entered 
into force in September 2008.  The Compact aims to remove 
constraints to economic growth through targeted investments in 
Tanzania's transport, energy and water sectors. 
 
Comments on Eligibility Requirements 
 
¶I. Market based Economy 
 
Major Strengths Identified 
 
4.(U)Performance under the IMF?s Policy Support Instrument has 
been broadly satisfactory and the program remains on track. 
In particular, the floor for net international reserves was 
surpassed by a wide margin and the exchange rate has remained 
stable.  Central Bank governor Benno Ndulu credits IMF 
pressure for helping GOT keep to a very conservative 
regulatory stance, which left Tanzanian banks with very high 
liquidity ratios and low non-performing loan percentages 
through the global economic crisis. 
 
¶5. (U)Regional integration remains an important objective. 
Negotiations within the East African Community (EAC) toward 
the establishment of a common market have progressed, with a 
projected entry into force in January 2010. 
 
¶6. (U)FDI grew to USD 744 million in 2008, continuing several 
years of steady growth, but is expected to decline in 2009 
because of the global financial crisis. 
 
Major Issues/Problems Identified 
 
7.(U)Tanzania?s business environment remains difficult, in 
part because of bureaucracy and corruption.  Efforts to reform 
business regulations have slowed.  Poor infrastructure in 
transport, communications and energy remains a major 
bottleneck. Businesses, farmers and households, particularly 
in rural areas, lack access to credit.  Less than 10 percent 
of Tanzanians participate in formal banking, agricultural and 
commercial interest rates often reach 20 percent, and the use 
of land for collateral is difficult due to complex ownership 
laws.  Several privatization efforts of large parastatal 
companies failed in the last several years; the government has 
reassumed control over national airline ATCL, national telecom 
utility TTCL, and Kilimanjaro airport manager KADCO among 
others. 
 
II. Political Reforms/Rule of Law/Anti-Corruption 
 
Major Strengths Identified 
 
¶8. (U)The Tanzanian press has reported freely on cases of 
alleged corruption.  The government is following up on the 
findings of the Public Procurement Regulatory Authority 
(PPRA), which has stepped up its audits of procurement 
agencies, with the objective of better enforcing existing 
regulations.  Following the introduction of a reinforced legal 
framework, the Prevention and Combating of Corruption Bureau 
(PCCB) is investigating several cases of alleged grand 
corruption. 
 
¶9. (U)The Government of Tanzania attacked the problem of 
counterfeit products with vigor, including by confiscating 
illicit goods.  Through public reports and seminars, the 
government sensitized the public to the cost of counterfeits 
in terms of harmful side effects and lost revenues. 
Additionally, the Tanzania Bureau of Standards introduced an 
Import Standardization Mark to verify the quality of imported 
products. 
 
Major Issues/Problems Identified 
 
¶10. (U)The national judiciary is formally independent, but 
remains underfunded, corrupt, inefficient, and subject to 
executive interference, especially in the lower courts. 
Corruption and impunity within the police force continue to be 
problems.  However, the Inspector General of Police has made 
the fight against corruption as well as the 
professionalization of the police force top priorities. 
 
¶11. (U)Foreign investors and businesses, including U.S. firms, 
continue to report encountering pervasive corruption in 
Tanzania. Few corruption cases result in arrests or 
convictions.  The national anti-corruption authority PCCB has 
no jurisdiction in the autonomously-governed archipelago of 
Zanzibar. 
 
III. Poverty Reduction 
 
Major Strengths Identified 
 
¶12. (U)The country is making progress towards achieving MDG 
targets (consistent with targets articulated in Tanzania?s own 
poverty reduction strategy), especially in reducing child 
mortality and increasing access to primary education.  With 
the majority of the population engaged in smallholder farming, 
an increased focus on rural growth, and the implementation of 
improved policies, strengthened institutions, and additional 
funding under the new ?Kilimo Kwanza?, or ?Agriculture First? 
initiative, the MDG goal of eradicating extreme poverty and 
hunger is more likely to be achieved. 
 
¶13. (U)With donor support, Tanzania continues to increase 
government investment in health, education, and sectors that 
stimulate economic growth, especially infrastructure.  More 
than half of USG?s Millennium Challenge Compact funds will be 
spent to build and upgrade critical roads that will help rural 
farmers access markets, clinics and schools. 
 
Major Issues/Problems Identified 
 
¶14. (U)GDP per capita remains low, at USD 442; recent economic 
growth has yet to make significant inroads in reducing rural 
poverty.  Infant and child mortality rates are still among the 
highest in the world, literacy rates are still low, and more 
than one third of all children under five years of age are 
malnourished.  Tanzania?s annual population growth rate of 
about 2.9 percent will put pressure on existing social service 
delivery and employment. 
 
IV. Workers? Rights/Child Labor/Human Rights 
Major Strengths Identified 
 
¶15. (U)The Trade Unions Act of 2000 recognizes workers' 
freedom of association, the right to bargain collectively, and 
the right to strike, and these rights are generally respected. 
 
 
¶16. (U)The government of Tanzania continued to make 
substantial progress under the auspices of the International 
Program for the Elimination of Child Labor.  During the year, 
the government developed a child rights curriculum, the first 
of its kind in Africa, which will be used in training 
institutions, government agencies, and other organizations. 
In 2009, the government drafted a National Plan of Action on 
Child Labor, began formulating an implementation plan for its 
Child Development Policy, and drafted a unified law on 
children's rights. 
 
Major Issues/Problems Identified 
 
¶17. (U)Police officers tortured, threatened, and otherwise 
mistreated suspected criminals and prisoners during the year. 
 There were reports of killings in police custody.  Prison 
conditions remained harsh and life threatening.  Prolonged 
pretrial detention remained a problem. 
 
¶18. (U)Tanzanian law prohibits forced or compulsory labor and 
prohibits the exploitation of children in the workplace.  The 
Employment and Labor Relations Act of 2004 establishes 14 as 
the minimum age for contractual employment.  However, child 
labor remains a problem.  Girls are often forced to work as 
domestics and boys in agriculture. 
 
¶V. International Terrorism/U.S. National Security 
 
Major Strengths Identified 
 
¶19. (U)Tanzania has put in place the necessary legal 
foundation for the criminalization of money laundering and 
terrorist financing as well as measures to report suspicious 
transactions.  A comprehensive Anti-Money Laundering Law and a 
National Anti-Money Laundering / Counter Terrorism strategy 
was established in 2006 with support from USG.  Tanzania 
established a legal institutional framework and launched an 
operational Financial Intelligence Unit (FIU) within its 
Ministry of Finance and Economic Affairs.  The Tanzanian FIU 
is now functional and is receiving, analyzing and 
disseminating suspicious transaction reports on Money 
Laundering / Terrorist Financing.  Through various seminars 
and workshops, Tanzania is raising awareness and enhancing 
understanding of AML/CTF. 
 
20.(U)Tanzania has ratified United Nations Conventions against 
illicit traffic in narcotics Drugs and Psychotropic substances 
(the Vienna Convention) as well as the UN Convention Against 
Transnational Organized Crime (the Palermo Convention).  The 
GOT continued its participation in several multi-year programs 
to strengthen law enforcement and military capacity, improve 
aviation and border security, and combat money laundering and 
terrorist financing.  Tanzania cooperated with the United 
States and complied with its obligations under UN Security 
Council resolutions. 
 
Major Issues/Problems Identified 
 
¶21. (U)The government of Tanzania has yet to prosecute a 
single money-laundering case under its new law.  Zanzibar 
still does not have an Anti-Money Laundering law. 
 
ANDRE