VZCZCXRO9474
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHDR #0844/01 3411426
ZNR UUUUU ZZH
R 071426Z DEC 09
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC 9111
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHJB/AMEMBASSY BUJUMBURA 3024
RUEHKM/AMEMBASSY KAMPALA 3562
RUEHLGB/AMEMBASSY KIGALI 1494
RUEHKI/AMEMBASSY KINSHASA 0342
RUEHNR/AMEMBASSY NAIROBI 1453
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHLMC/MCC WASHINGTON DC

UNCLAS SECTION 01 OF 02 DAR ES SALAAM 000844 
 
SIPDIS 
SENSITIVE 
 
DEPARTMENT FOR AF/E JTREADWELL, INR JBERNTSEN, FEHRENREICH 
 
STATE PASS USAID, USTR FOR WILLIAM JACKSON, USTDA FOR KATHRYN 
DORMINEY 
 
COMMERCE FOR ROBERT TELCHIN 
TREASURY FOR REBECCA KLEIN 
 
E.O. 12958: N/A 
TAGS: BEXP ECON ELTN EAID PGOV PREL TZ
SUBJECT: TANZANIA RAIL: GOT WEIGHS PROPOSALS TO FIX THE CENTRAL 
LINE 
 
REF: Dar es Salaam 772 
 
DAR ES SAL 00000844  001.2 OF 002 
 
 
¶1. (SBU) SUMMARY.  The Government of Tanzania, in looking at ways to 
improve its crumbling rail infrastructure, is considering an upgrade 
to U.S. standard gauge of its Central Line, running from Dar es 
Salaam to northwest Tanzania.  A USTDA-supported study, conducted by 
U.S. rail firm BNSF, argues strongly for the merits of that option, 
both for Tanzania's benefit and that of its landlocked neighbors 
Rwanda and Burundi.  Our contacts in the donor community, however, 
criticize the BNSF study's assumptions and conclusions, and argue 
that Tanzania's development interests would be better served by 
improvements to the existing rail network or other transport 
priorities.  The GOT has publicly affirmed a commitment to adopting 
standard gauge but has not outlined a strategy or timeline for the 
change.  In our view, there are valid concerns about the GOT's 
ability to prioritize and about the availability of funding for a 
massive investment in rail.  END SUMMARY. 
 
¶2. (U) Tanzania's rail systems have been deteriorating for decades 
because of poor management and inadequate funding for operations and 
maintenance.  Rail currently accounts for only seven percent of the 
goods entering and leaving the port of Dar es Salaam; the resulting 
over-reliance on trucks causes more rapid wear and tear on 
Tanzania's already poor road network.  The two most important 
railways, the Central Line, built by Germany in the early 1900s and 
connecting Dar es Salaam with northern and western Tanzania, and 
TAZARA, the 1970s Chinese project providing a link to Zambia, are 
plagued by slow and unreliable service.  As part of its long-term 
transportation strategy, the GOT, together with donors, has 
undertaken studies of potential improvements to the Central Line. 
 
¶3. (U) In 2009, U.S. rail firm BNSF conducted a study, co-funded 
with USTDA and on behalf of Tanzania's Ministry of Infrastructure 
Development, of upgrading to U.S. "AREMA" standard the portion of 
the Central Line that links Dar es Salaam with Isaka in Tanzania's 
northwest (near Lake Victoria).  BNSF's study concluded that such an 
upgrade would be both feasible and favorable compared to the 
alternatives of improving the condition of the current (meter gauge) 
rail or upgrading to a European "UIC" standard.  The study estimated 
a cost of between USD 900 million to 1 billion for the Dar es 
Salaam-Isaka upgrade.  The study asserts that Tanzania's adoption of 
a standard gauge would also benefit Rwanda and Burundi, which would 
realize economies by constructing standard gauge rail links to 
Isaka. 
 
¶4. (SBU) Other donors with experience in the transport sector, in 
particular the World Bank, have raised with us several concerns 
about the proposal that Tanzania adopt standard gauge.  In 
particular, donors doubt that adequate financing, from public or 
private sources, would be available to support conversion to a new 
gauge and AREMA standards.  The GOT's management of its 
transportation budget is already problematic; commitments to road 
contracts are greater than the amount budgeted, in part as a result 
of election year priorities.  Moreover, Tanzania's poor track record 
with public-private partnerships and its difficult business 
environment would likely deter serious private sector investors.  To 
the extent that other donors support investment in Tanzania's rail 
sector, it would be for improvements to the current system, which 
they argue could be done much more cheaply and with sufficient 
impact to meet a substantial proportion of Tanzania's rail needs. 
 
¶5. (SBU) Donors have raised several additional criticisms of the 
assumptions and conclusions in BNSF's study.  These include 
unreasonably high forecasts for growth in rail traffic and cost 
savings realized, underestimation of the potential carrying capacity 
of the current system, and underestimation of the likely price tag 
for conversion to standard gauge.  Moreover, the critics argue that 
the study ignores the parts of the Central Line that connect to the 
main route to Isaka, all of which would need to be converted or have 
connections built to remain viable.  The study's conclusions also 
rely on improvements in efficiency at the Port of Dar es Salaam, 
which the GOT has been unable to achieve to date despite claims for 
several years that port efficiency is a government priority. 
Critics say the study glosses over the tremendous obstacles to 
 
DAR ES SAL 00000844  002.2 OF 002 
 
 
cross-border arrangements (including financing) needed to enable the 
Rwanda-Tanzania link, which is a key element of the proposal. 
 
¶6. (SBU) GOT officials have publicly affirmed their commitment to 
switching to a standard gauge system.  Infrastructure Minister 
Kawambwa and East African Community Minister Kamala told a November 
conference that the entire East Africa region would move to standard 
gauge, although each country would do so "according to its own 
schedule."  Kawambwa added that Tanzania would seek financing at an 
investors' forum in Tunis in January 2010.  President Kikwete 
recently told visiting Deputy Treasury Secretary Neal Wolin that 
Tanzania had a basic agreement on rails with Rwanda and Burundi 
(reftel).  BNSF representatives have told us that Rwandan President 
Kagame is the principal force for the development of rail links with 
its neighbors and has pressured his counterparts to adopt the AREMA 
standard. 
 
¶7. (SBU) Comment: Although we are not in a position to evaluate 
fully the technical claims of BNSF's study or its detractors, 
concerns about the GOT's ability to prioritize (in the 
transportation sector or across government) are real.  Similarly, 
lack of available financing is a potentially serious obstacle. 
Improved transport links with landlocked Rwanda and Burundi would 
support closer regional integration (and likely benefit Tanzania's 
economy), but proponents have not yet entirely made the case that a 
massive investment in rail is now the best way to achieve these 
ends. 
 
LENHARDT