Tanzania

Country profile

Geography

Tanzania, officially known as the United Republic of Tanzania, is one of the birthplaces of humanity. Located in East Africa and south of the equator, it is a member of the British Commonwealth. Its trade contacts with Arabia, Persia and India can be traced back more than 2,000 years. It borders Kenya and Uganda in the north; Zambia, Malawi and Mozambique in the south; Rwanda, Burundi and Congo in the west; and the Indian Ocean in the cast. The country covers an area of 945,000 square kilometers, and has a total population of 53.5 million (2015). There arc 133 counties in 31 provinces throughout Tanzania, including 26 provinces on the mainland and five in Zanzibar. Dar cs Salaam, as the capital and the largest city of Tanzania and an important port in East Africa, is the political, economic and cultural center, and has a population of 4.3 million. The annual average temperature is 25.8°C. Arusha is a national tourist city and an important center of diplomatic and international relations in Tanzania. It hosts the United Nations International Criminal Tribunal, where trials were held for the genocide in Rwanda, and the headquarters of the East African Community.

Natural resources

Tanzania is rich in mineral resources. The major mineral reserves that have been detected include gold, diamond, iron, nickel, uranium, phosphate, coal and various gemstones, making it the fifth most richly endowed country in Africa.

Table 6.5 Chinese-funded companies in Zimbabwe

Name of company (in Chinese)	Name of company (in English)
	Tian Ze Tobacco Company P/L
	Zimasco
	Sogecoa Zimbabwe P/L
	Sino-Zimbabwe Cement Co.
	Zimbabwe Nantong International
	China National AERO-Technology Import & Export Corporation
	NOR1NCO Zimbabwe Office
	Zimbabwe Jiangsu Int. P/L
	Hualong Construction
	Zimbabwe Liaison Office for Huawei Tech. Investment Co.
	Chinese Medical Team
	China Jiangxi Corporation
	China Shougang International
	Jingniu Glass
	ZTE Corporation
	Number Seventeen Metallurgical Construction P/L
	China Machinery & Engineering Corporation
	China CAMC Engineering Co.
	MCC
	Shanxi Road & Bridge International Engineering Co.
	Poly Group
	Sinohydro Corporation Zimbabwe Office
	China International Water & Electric Corp.
	Eurostak Electric Co.
	Connick Investment (PVT)
	China-Zim International
	Minerals Corporation
	China Nanchang Engineering P/L

(Continued)

Table 6.5 (Cont.)

Name of company (in Chinese)	Name of company (in English)
	Jin En International (Zim) (PVT)
	Zimbabwe Lian Feng Company P/L
	China-Aid Agricultural Technology Demonstration Centre In Zimbabwe
	Sinotex United Import and Export Co.
	China Jin Bei Li Mining Co.
	FUNO (PVT) Sino Non-Ferrous Resource (PVT) Co.
	(Zim-China) Wanjin Agricultural Development Co.
	Hamque Investment Co.
	Timsite Enterprises (PVT) Gold Diamond Mine
	Development P/L
	China-Africa Sunlight Energy
	San He Mining Zimbabwe P/L
	Jinding Mining Zimbabwe (PVT)
	China Railway 7th Bureau Group Co.

Tanzania’s natural gas reserves arc abundant, with proven gas reserves of 1.62 trillion cubic meters. Tanzania is rich in tourism resources as it is home to Lake Victoria, Lake Tanganyika and Lake Malawi, as well as Kilimanjaro, Africa’s highest peak, and a number of natural wildlife parks.

Coastal areas in the cast and parts of the low-lying inland areas of Tanzania have a tropical grassland climate, while the inland plateau in the west has a tropical mountain climate. The temperature difference is relatively small throughout the year, with the average temperature varying between 21 °C and 25°C. The more than 20 islands of Zanzibar have a tropical marine climate, humid all year long with an annual average temperature of 26°C. It is very hot from December to March or April of the following year, and cool from June to

September. The country has relatively little rainfall on the whole, with 80% of its territory having less than 1,000 millimeters of precipitation per year.

Population and ethnicity

Tanzania has a total population of about 53.5 million (2015), of which Zanzibar has 1.3 million. There arc 126 ethnic groups in the country and those with a population of over 1 million arc the Sukuma, Nyamwczi, Chaga, Hehc, Makondc and Haya. There arc also some descendants of Arabs, Indo-Pakistanis and Europeans. The urban population accounts for 26% of the total and the rural population for 74%. The average annual population growth rate is about 2.7%. The more densely populated cities arc Dar es Salaam (about 4.36 million), Mwanza (about 700,000), Arusha (about 410,000), Dodoma (about 410,000) and Mbeya (about 380,000). There arc about 50,000 Chinese in Tanzania, mainly in Dar cs Salaam. Chinese enterprises in Tanzania hire more than 3,000 employees, mainly working on contracted highway, bridge, housing and water supply projects. According to the Chinese Chamber of Commerce in Tanzania, overseas Chinese in Tanzania arc mainly engaged in investment and trade activities. The fields of investment cover motorcycles, footwear, tablewarc, luggage, woven bags, steel pipes, plastic pipes, sanitary articles, agricultural and mining development, power generation and infrastructure construction. Trade involves the wholesale of all kinds of daily necessities and the products arc also sold to neighboring countries, such as other East African Community members.

Political system

There is the government of Tanzania and the government of Zanzibar. The former adopts the presidential system with its Cabinet comprising the president, vice president, prime minister, the president of Zanzibar and ministers. The current government of Tanzania was established on December 10, 2015, with 19 ministers and 15 deputy ministers.

The main members are: President John Pombc Joseph Magufuli; Vice President Sarnia Suluhu; Prime Minister Kassim Majaliwa; Minister of Foreign Affairs, East African Community, Regional and International Cooperation Augustine Mahiga; Minister of Finance and Planning Philip Mpango; Minister of Industry, Trade and Investment Charles Mvijagc; Minister of Agriculture, Livestock and Fisheries Mwigulu Nchemba; Minister of Natural Resources and Tourism Jumanne Magambe; Minister of Energy and Minerals Sospctcr Muhongo; Minister of Works, Transport and Communication Makamc Mbarawa; Minister of Health, Community Development, Gender and Seniors and Children Ummy Mwalimu; Minister of Education, Science, Technology and Vocational Training Joyce Ndali-chaco; Minister of Lands, Housing and Fluman Settlements William Lukuvi; Minister of Information, Culture, Artists and Sports Nape Nnauyc; Minister of Defense and National Service Hussein Mwinyi; Minister of Home Affairs Charles Kit-wanga; and Minister of Constitutional Affairs and Justice Harrison Mwakycmbe.

The current Zanzibar government was formed in May 2016, with the main members being President Ali Mohamed Shein and Second Vice President Seif Iddi (the post of first vice president is temporarily vacant).

The constitution was enacted in April 1977 and has been amended 14 times. The 8th Amendment in 1992 clearly states that Tanzania is a multi-party democracy and pursues a policy of socialism and self-reliance. In 1994, the 11th Amendment stipulated that the United Republic has one president and one vice president. The president is head of state, head of government and commander-in-chief of the armed forces, and is directly elected by a simple majority for a term of five years. The president can be re-elected once. The president and the vice president must come from the same political party and from the mainland and Zanzibar, respectively. The vice president cannot be concurrently president of Zanzibar or prime minister of the United Republic, and may serve no more than two five-year terms in a row. The president appoints the prime minister, who presides over the United Republic government. The 13th Amendment in 2000 redefined the political system, recognizing that the principles of socialism and self-reliance in the original constitution represented democracy, self-reliance, human rights, freedom, equality, fraternity and unity. After the 2010 general election, there were constant calls for constitutional changes in Tanzania. In November 2011, the Constitutional Amendment Act was passed by the Parliament. In April 2012, the Constitutional Amendment Committee was established. In June and December of that year, the first and second drafts of the new constitution were introduced successively, proposing the establishment of the Tanganyika, Zanzibar and United governments, the reduction of joint affairs, the restriction of presidential powers and other major amendments. The draft was adopted in October 2014 but it was decided that the two-govemment structure would continue. A referendum was scheduled for April 2015, but was postponed indefinitely for technical reasons.

Zanzibar’s current constitution was enacted in 1979 and then revised. In accordance with the Zanzibar Constitution revised in 2010, the president is the head of the Zanzibar National Unity Government and the position of chief minister was replaced by the first and second vice presidents. The Zanzibar election is held simultaneously with the presidential election of the United Government. Presidential candidates of Zanzibar arc nominated by the various political parties of Zanzibar and elected directly by all Zanzibar voters. Whoever wins more than half of the votes will be elected as president for a term of five years and may be re-elected for a second term. The president has the power to decide on government affairs, and the first and second vice presidents report to the president. The first vice president shall be a member of the political party that wins the second highest number of seats in the House of Representatives, while the second vice president shall be a member of the same political party as the president, be appointed by the president, act as the president’s principal aide and take charge of government affairs in the House of Representatives. Hc/she shall also act in the capacity of the president in the case of the president’s death or inability to perform his/her official duties. The president and the vice presidents shall appoint ministers in the Cabinet according to the proportion of seats in the House of Representatives held by different political parties. The Zanzibar government has the power to handle internal affairs of Zanzibar except 22 items of joint affairs, such as foreign affairs, national defense, police affairs, taxation, banking, currency, foreign exchange, aviation, ports and post and telecommunications.

The Parliament is unicameral and the National Assembly is the highest legislative body. Parliamentary elections arc held at the same time as the presidential elections, every five years. The president has the power to appoint 10 members of Parliament. The current Parliament, the eleventh since independence, was established in November 2015. The current Speaker is Job Yustino Ndugai.

The Zanzibar House of Representatives is Zanzibar’s legislature, with legislative power over Zanzibar’s internal affairs, not joint affairs. Current members were elected in March 2016. There are a total of 85 representatives, including 81 from the Revolutionary Party. The Speaker is Zubeir Ali Maulid.

The judiciary system comprises the Constitutional Court, the Court of Appeal, the High Court, the District Court, the Procuratorate, the Judicial Officers’ Committee and the Permanent Committee of Inquiry. Zanzibar Island and Pemba Island each have an Islamic court to deal with cases of violation of Islam. The Chief Justice is Mohamed Chandc Othman and the Attorney General Frederick Mwita Wcrcma.

Zanzibar exercises independent jurisdiction, but appeals arc heard by the Court of Appeal of the United Republic. The Chief Justice is Hamid Mahmoud Hamid and the Attorney General Idi Pandu Hassan.

Diplomatic relations

Tanzania was once known as a frontline state and made a significant contribution to the political liberation of the African continent. It pursues a foreign policy of non-alignment, good-neighborliness and friendship, and advocates the development of friendly and cooperative relations with all countries on the basis of non-interference in each other’s internal affairs and mutual respect for sovereignty. In recent years, it has been more pragmatic, emphasizing economic interests and developing relations with all donor countries, international organizations and transnational corporations, so as to seek more foreign aid and foreign investment. It focuses on building friendship with its neighbors, vigorously promotes regional economic cooperation and actively participates in the mediation of regional issues in which it has a stake. It attaches importance to relations with Asian countries and learns from their development experience. It is a member of the United Nations, the Non-Aligned Movement, the Commonwealth, the African Union, the East African Community, the SADC and the Indian Ocean Rim Association. It has diplomatic relations with 115 countries.

Tanzania and the United States established diplomatic relations in 1961. Relations between the two countries have been improving in recent years. The United States attaches importance to the role of Tanzania as a major country in its region and its development potential, supports its economic refonn and, as an important donor, has exempted bilateral debts. In February 2008, President Bush visited Tanzania and announced that the United States would provide US$698 million in aid within five years to improve the country’s infrastructure, including roads and the power and water supplies. This was the largest aid that the United States had provided to an individual country since the establishment of the Millennium Challenge Account in 2005. Tanzania opposes the establishment of a US military command in Africa. In May 2009, President Jakaya Kikwete visited the United States, and President Obama met with him, making him the first African head of state that Obama met with after becoming President of the United States. In June 2011, US Secretary of State Hillary Clinton visited Tanzania, promising a total of USS 100 million in aid for agricultural development, food security and the fight against HIV/AIDS. President Obama called President Kikwete to congratulate Tanzania on the 50th anniversary of the independence of its mainland. In May 2012, President Kikwete went to the United States for a work visit. In July 2013, President Obama paid a state visit to Tanzania.

Tanzania has a close relationship with the United Kingdom, which is Tanzania’s main trading partner and donor, with annual aid of about US$80 million. The United Kingdom cancelled all debts that Tanzania owed to it in support of the debt relief efforts of international financial institutions such as the International Monetary Fund and the World Bank.

Pursuing the policy of "making friends widely, making no enemies, promoting peace and seeking development” in regional affairs, Tanzania attaches importance to developing good-neighborly and friendly relations with neighboring countries and has close relations with Kenya, Uganda, Ethiopia and other countries. It attaches importance to exerting influence in regional affairs and devotes itself to maintaining regional peace and stability. It actively participated in mediating a post-election crisis in Kenya and a political crisis in Zimbabwe, played active roles in mediation in the Democratic Republic of Congo and Madagascar, paid attention to the peace process in Somalia, provided training for an African Union peacekeeping force in Somalia, and participated in the mediation of South Sudan and Burundi. It also participated in the United Nations peacekeeping missions in Darfur (Sudan), the Democratic Republic of Congo, Cote d’Ivoire and South Sudan.

Tanzania attaches importance to developing relations with Asian countries. In December 2004, President Benjamin Mkapa paid an official visit to Vietnam. In September 2004, India’s president A.P.J. Abdul Kalam paid a state visit to Tanzania. In September 2006, Tanzania’s prime minister Edward Lowassa visited Thailand and Vietnam. In May 2011, India’s president Manmohan Singh visited Tanzania and announced US$190 million in economic aid. Japan provides about US$100 million per year in free aid and sends experts and volunteers to Tanzania. In late May and early June 2013, President Kikwete attended the Fifth Tokyo International Conference on African Development and held talks with Japanese prime minister Shinzo Abe. In March 2014, Japan announced the deployment of investment advisers to 10 African countries, including Tanzania, to promote Japanese investment in these countries. Tanzania has good relations with the Democratic People’s Republic of Korea (DPRK, or North Korea). Former presidents Julius Nycrcre and Ali Hassan Mwinyi and Zanzibar’s President Salmin have all visited the country. The main projects that DPRK helped Tanzania with were the Revolutionary Party Dodoma Conference Building, rice farms and Pemba Kojani Stadium.

China established diplomatic relations with Tanganyika on December 9, 1961, and with Zanzibar on December 11, 1963. On April 26, 1964, Tanganyika joined forces with Zanzibar, and China naturally continued its diplomatic relations with them. April 26, 1964 was designated as the date when China established diplomatic relations with the United Republic of Tanzania. Since the establishment of diplomatic relations, bilateral relations have been good and close, with frequent mutual visits.

In recent years, the two countries have had close high-level exchanges. In March 2013, President Xi Jinping visited Africa for the first time since taking office and made Tanzania the destination of his first state visit during the trip. He held talks with President Kikwete and met with Zanzibar’s president Shein and former Tanzanian president Mkapa. President Xi delivered a speech to Africa at the Nycrcrc International Convention Center and laid a wreath at the Chinese Expert Cemetery in Tanzania. In May 2013, Yang Huanning, Vice Minister of Public Security of China, visited Tanzania, and the security authorities of the two countries decided to strengthen cooperation to improve security and crack down on transnational organized crimes such as the ivory and drug trades. Since President Xi’s visit, high-level mutual visits have been frequent. In October 2013, Tanzania’s prime minister Mizcngo Pinda visited China and the two sides signed 12 bilateral agreements covering energy, power transmission and transformation, export industrial zones, real estate and science and technology. During his work visit to China from May 27 to June 2, 2013, President Shein, on behalf of the revolutionary government of Zanzibar, signed development agreements and training agreements on health, oceans, information technology and communications with the Chinese government. From June 21-26, 2014, China’s Vice President Li Yuanchao visited Tanzania at the invitation of Vice President Mohamed Gharib Bilal of Tanzania. It was another important visit by a Chinese leader to Tanzania following President Xi’s visit in March 2013. It was also an important event marking the 50th anniversary of the establishment of diplomatic relations between China and Tanzania. In October 2014, President Kikwete of the United Republic of Tanzania paid a state visit to China at the invitation of President Xi. The two heads of state agreed to work together to promote the development of a China-Tanzania comprehensive cooperative partnership for mutual benefit.

Advantages of Tanzania in attracting foreign investment

POLITICAL AND SOCIAL STABILITY

In recent years, Tanzania has enjoyed political stability and vigorously developed friendly relations with its neighbors. It is one of the few African countries that enjoys stability at home. There are 126 ethnic groups in Tanzania, and no ethnic conflict has ever occurred. Christians and Muslims in Tanzania are generally at peace. Tanzania has a relatively sound democratic system and has been praised by the West as a model of democracy in Africa. Thus, it is not likely to sec political unrest. Although Tanzania’s general election in 2015 saw more tension than before, the country’s overall peace and stability has not been affected.

RICH NATURAL RESOURCES

Tanzania is rich in agricultural, mineral and tourism resources. In terms of agriculture, forestry and fisheries, Tanzania has 44 million hectares of arable land and 33.5 million hectares of forests and woodlands. A total of 80,000 hectares of artificial forest and 11.4 million hectares of natural forests arc for commercial felling. The country also has 64,000 square kilometers of territorial waters and 223,000 square kilometers of an exclusive economic zone on the Indian Ocean, as well as 58,000 square kilometers of freshwater lakes. This means that the country has huge potential for seawater and freshwater fishing. In terms of mining, Tanzania is rich in mineral resources with proven mineral reserves of gold, diamonds, iron, nickel, phosphate, coal and various kinds of precious stones. The total amount ranks fifth in Africa. Tanzania’s natural gas reserve is also enormous. The proven reserve is 1.62 trillion cubic meters. In terms of tourism, Tanzania enjoys unique tourist resources. It has not only scenic spots such as Lake Tanganyika, Lake Victoria, Lake Manyara and the Lake Malawi National Park, but also Mount Kilimanjaro, the East African Great Rift Valley, and other magnificent natural landscapes, as well as the Serengeti National Park, Mikumi Wildlife Camp and other famous wildlife viewing areas.

GOVERNMENT INCENTIVES

The Tanzanian government sets most-favored industries and priority industries for foreign investment. The most-favored areas include agriculture and agriculture-based industries, mining, oil and gas, tourism, infrastructure, transportation, aviation, communications, finance and insurance services. For investment projects in these areas, capital goods are exempted from import duties. Priority areas for investment include energy, the chemical industry, manufacturing, textile and leather production, natural resource development, fisheries, forestry, human resources, construction, real estate development, management consulting, television and radio, and export-oriented projects. For investment projects in these areas, capital goods are subject to import duties of only 5%. Tanzania has also established a national investment center in accordance with the Investment Act adopted in 1997, to provide one-stop services for foreign investors.

EXTENSIVE OUTREACH IN THE REGION

Tanzania is located in the middle of the east coast of Africa, which is a clearly advantageous position. As a member of the East African Community, Tanzania’s favorable position is good for it to reach out to neighboring countries, so it is of strategic significance to invest in Tanzania. It is worth mentioning that Tanzania has reached open-market agreements with the United States and the EU, so products from Tanzania can be exported to the United States and the EU conveniently and duty-free.

Areas of investment with great potential

Promising areas of investment in Tanzania include:

MANUFACTURING

Tanzania hopes to take advantage of its location to become a manufacturing base in East Africa. In recent years, with the discovery of a large amount of natural gas reserves in Tanzania, foreign capital has begun to be optimistic about Tanzania, and more people have come to do business. At present, the proportion of industrial value-added in Tanzania’s GDP has increased from 10% to 22.2%, but people still rely heavily on imports for basic production and life activities. The potential is huge for local industrial products to replace imports.

AGRICULTURE

The government of Tanzania attaches great importance to the development of agriculture, which is a most-favored area for foreign investment. In June 2009, President Kikwctc put forward an “agriculture first” development philosophy and raised the agricultural budget to 10% of the total budget. In January 2011. the Tanzanian government proposed a blueprint for the Southern Agricultural Growth Corridor to attract foreign investment in agriculture, planting and agricultural product processing. Tanzania has 44 million hectares of arable land.

TOURISM

In recent years, tourism in Tanzania has played an increasingly important role in its national economy, and the government has promoted it as an important component of the national poverty reduction strategy. It encourages foreign investment in tourism, and values the leading role of private enterprises in the development of tourism. The government plays a catalytic role in providing and improving infrastructure and channeling investment. Tanzania is rich in tourism resources and has unique advantages in developing tourism, but it is faced with such problems as backward tourism infrastructure, lack of tourism professionals and insufficient tourism marketing and publicity.

INFRASTRUCTURE

Poor infrastructure seriously affects the economic development of Tanzania, and infrastructure has become the major sector attracting foreign investment to

Tanzania, including roads, power, bridges and ports, etc. In the early 1990s, Chinese enterprises started to undertake projects in Tanzania, and after 20 years of development they have gradually occupied more than 80% of the projectcontracting market in Tanzania. At present, there arc more than 30 Chinese project-contracting enterprises and more than 2,500 Chinese technicians and management personnel in Tanzania. Due to large-scale infrastructure construction, Tanzania has high demand for cement, ceramic tiles and other building materials. Chinese building-material and equipment manufacturers can actively participate in contracting and investment in Tanzania.

MINING

According to available data, Tanzania has great potential for mineral resource development, with most of the proven mineral reserves within 200 meters of the surface, and there are many open-pit mineral deposits easy to exploit. Gold is now Tanzania’s largest resource for export and foreign exchanges. Gold has been mined for 50 years in the country, but the mining capacity is less than 10% of the total reserves. For reasons such as capital and technology, Tanzania is unable to develop its rich mineral resources on its own, and foreign investors arc expected to bring in capital and technology for exploration, mining and processing of mineral products. The Tanzanian government attaches great importance to the development of the mining industry, and mining projects are eligible for preferential investment policies. In terms of foreign investment options and ownership caps, the Tanzanian government imposes no restriction other than an ownership cap of 20% for governments. Foreign investment can also enjoy a 100% return of capital, free remittance of the obtained dividends and bonuses and other preferential policies.

According to the World Economic Forum’s Global Competitiveness Report 2014-2015, Tanzania ranks 121st out of the 144 most competitive countries and regions in the world.

Development plan of the Tanzanian government

In 1999, the Mkapa government formulated the National Development Vision 2025 of Tanzania (hereinafter referred to as “Vision 2025”), defining the economic development objectives for the next 25 years. In 2011, the government formulated and submitted to the Parliament the first five-year development plan of the country based on Vision 2025 (fiscal years 2011/2012-2015/2016), and it was implemented after being reviewed and adopted by the Parliament. Vision 2025 establishes Tanzania’s strategic goal of a per capita income of USS3,000 by 2025, which will make Tanzania a middle-income country.

The guiding principle of the first five-year development plan is to “release the development potential of Tanzania,” and the main objectives include: removing obstacles to economic growth, building national strength to realize optimal economic growth and reduce poverty as soon as possible, building the

African countries 271 capacity to seize opportunities brought about by national and regional integration and globalization, and creating more jobs for youths.

The plan has established four strategic pillars: maintaining the current economic stability and consolidating the achievements already made; making good use of resources to develop the economy, with priority given to green agriculture, animal husbandry, fisheries and industries that use domestic raw materials and natural resources; making effective use of its advantageous position to build Tanzania into a leader of economic, trade and service development in the Great Lakes region; and developing human resources, expanding the application of science and technology and improving the benefits and efficiency of economic services, government bodies and social activities.

The plan defined six priority areas for development: agriculture, infrastructure, industry, tourism, human resources and information communications.

It also defined supporting measures to ensure the achievement development in the above-mentioned areas, including sound economic, financial and budgetary support; good governance; and a good investment environment and health services. Specific economic targets set in the plan arc an annual growth rate of 8-10%, an inflation rate lower than 5%, exports that account for more than 25% of national income, domestic income accounting for more than 19% of national income, foreign exchange reserves sufficient to cover imports of goods and services for more than six months, a per capita income of US$650 and a drop in dependence on foreign aid from 25% to 10%.

Macro economy

Tanzania’s economy, dominated by agriculture and animal husbandry, has a simple structure, a weak foundation and a low development level. The country is one of the 48 least developed countries of the world, as announced by the United Nations. About 34% of the country’s population lives in poverty. In

Table 6.6

Source: World Bank.

terms of economic growth, over the past five years the average annual GDP growth of Tanzania was about 7%, and international organizations such as the World Bank expect it to remain at around 7% in the next few years. In the fiscal year 2013/2014, Tanzania’s GDP rose by 7% to about US$43.8 billion, or about US$768 per capita. In terms of industrial structure, in fiscal year 2013/ 2014 the contributions of agriculture, industry and services to GDP were 21.7%, 22% and 51.1%, respectively. In terms of fiscal balance, in fiscal year 2013/2014 the country’s budgetary revenue was USS7 billion, the budgetary expenditure was US$10,128 billion and the deficit was 7% of GDP. In terms of external debts, as of June 2014, Tanzania’s external debt balance was about US$14,021 billion, accounting for 32% of its GDP; its internal debt was US$3,961 billion, or 11% of its GDP. Tanzania’s borrows mainly from the United States, the EU, Japan, India and China. In 2014, the inflation rate of Tanzania was 7.6% and the unemployment rate of 2012 was estimated at 10.7%.

Foreign aid plays an important role in Tanzania’s national economy. In recent years, Tanzania has received about US$900 million in foreign aid every year. Development partners provide aid to Tanzania through, among other methods, general budget support. Major development partners include the United Kingdom, India, South Africa, the Netherlands, Kenya, the United States, Canada, Italy, Germany, the International Monetary Fund, the World Bank, the EU and the AFDB. Tanzania has been accepted by the International Monetary Fund and the World Bank into the Heavily Indebted Poor Country Initiative.

Current status of industrial capacity cooperation

Foreign investments in Tanzania

According to the World Investment Report 2015 issued by UNCTAD, the inflow of foreign capital in Tanzania in 2014 was US$2.14 billion; by the end of 2014, Tanzania had absorbed US$17.01 billion of foreign investment stock. Foreign investment concentrates in mining, tourism, agriculture, manufacturing and communications. The Tanzanian government encourages foreign investors to invest more in agriculture, education and health care, as well as the construction of roads, railways, airports and hotels. At present, the United Kingdom, China, India, Kenya and South Africa arc major sources of foreign investment in Tanzania, among which investments from emerging economies such as China, South Africa and India arc more active. According to data from 2013, China was Tanzania’s second largest source of foreign capital, following the United Kingdom. Major transnational companies investing in Tanzania are: Geita Gold Mine, a joint venture between South Africa’s Anglo Gold and Ghana’s Ashanti Goldfields; the Golden Pride mining company, funded by Australia’s Resolute; Bulyanhulu Gold Mine, funded by Canada’s Barrick Corp.; a gold mining company created by Plaserdome in the northern Mara region; and a gold mining company funded by Canada in Tulawaka and Mcremeta.

China-Tanzania cooperation in industrial capacity

In October 2014, President Kikwete visited China, and the two heads of state witnessed the signing of eight bilateral agreements. With the launch and completion of projects such as the Bagamoyo Port and various natural gas power generation, transmission, transformation and pipeline projects, China-Tanzania economic and trade cooperation entered a period of rapid development.

At present, there are more than 500 Chinese enterprises in Tanzania, including nearly 100 state-owned enterprises, mainly engaged in project contracting and large-scale investment and concessional loan projects. Investment by Chinese enterprises in Tanzania has been unprecedentedly active, mainly involving mining, manufacturing, processing, power generation and power transmission, infrastructure construction and real estate development, agriculture, trade and logistics. Major projects include sisal farms, modem agricultural industrial parks, coal-iron-clcctricity integration projects, the Bagamoyo Port comprehensive development zone, natural gas power stations, Songca Hydropower Station and many large real estate development projects. The total investment in projects under construction and to be built is expected to exceed US$1.5 billion.

Tanzania is one of the first African countries to join China’s international capacity-cooperation process. At the end of April 2016, the National Development and Reform Commission sent a delegation to Tanzania to inspect China-Tanzania industrial cooperation. On April 28, the Commission signed a framework agreement with the Tanzanian Prime Minister’s Office on industrial capacity cooperation. Industrialization is at the heart of Tanzania’s first five-year plan and it is perfectly in line with China’s proposal of international industrial capacity cooperation.

As one of the closest peers of China in Africa, Tanzania has a time-honored friendship with China which was built with the Tanzania-Zambia railway project. China and Tanzania have cooperated much more in terms of industrial capacity than other countries, and such cooperation has been growing even more rapidly in recent years. In 2011, the trade volume between China and Tanzania was less than US$2 billion, and investment was only US$700 million. In comparison, in 2014 the two figures rose to US$4.3 billion and US$4 billion. In addition, China has provided more than US$2 billion of concessional loans for infrastructure construction and major projects urgently needed to improve people’s livelihoods in Tanzania.

At present, China has become the largest trading partner and the second largest source of investment of Tanzania. Chinese enterprises in the country employ about 150,000 local workers, and more than 350,000 Tanzanian people arc engaged in work related to trade with China. Infrastructure is one of the sectors receiving the most investment from Chinese companies in Tanzania. China now has a share of nearly 70% of Tanzania’s infrastructure market. In addition, telecommunications, manufacturing and mining arc industries where Chinese enterprises enjoy advantages.

So far, 117 companies have settled in Tanzania’s export processing zones, including 12 from China. The Export Processing Zone Authority, which is in charge of the special economic zones (SEZs) and export processing zones in Tanzania, expects to attract more Chinese investment. Both countries want more Chinese to build factories in Tanzania, especially in the Bagamoyo economic development zone, a joint venture between China and Tanzania that covers a new port to be built. In March 2016, the Tanzanian Investment Promotion Exhibition & Conference was held in Changzhou City in Jiangsu Province, China, and a number of Tanzanian government officials and business representatives attended to promote the Bagamoyo SEZ and other projects, looking for Chinese partners for their development. In order to boost the overseas development of advantageous industrial capacity, Hebei Province issued the "Plan for Promoting Transfer of Iron, Steel, Cement, Glass and Other Advantageous Industrial Capacities Abroad,” pointed out destinations and roadmaps for the Going Global Campaign in three major industries and put forward the goal of realizing the transfer of 5 million tons of steel production capacity, 5 million tons of cement production capacity and 3 million weight boxes of glass production capacity abroad by 2017. By 2023, the industrial capacity of 20 million tons of iron and steel, 30 million tons of cement, and 10 million weight boxes of glass should be transferred from Hebei out of China. The private Hebei Zhuangda Glass Company set up a 600,000-weight-box glass production project in Dodoma, Tanzania, and it was put into operation in 2015.

The Chinese government encourages Chinese enterprises to carry out investment cooperation with Tanzania, and further promote economic and trade cooperation between the two countries. China’s Economic and Commercial Representative Office in the United Republic of Tanzania encourages, supports and actively guides Chinese enterprises in Tanzania in forming self-regulatory business associations, and more than 10 such organizations have been set up. All arc registered according to law in Tanzania, and their activities have achieved good results. The Chinese Economic and Commercial Representative Office in Tanzania has called for new enterprises to join these organizations according to the nature of their business, abide by the self-disciplinary rules and strive to polish the image of Chinese enterprises and people in Tanzania.

In addition, that representative office will continue to guide all Chinese enterprises and overseas Chinese people in Tanzania to fulfill their social responsibility, bring benefits to the local communities, promote the economic development of Tanzania, help the country achieve its poverty reduction goals and contribute to the further development of China-Tanzania relations.

Areas and priorities of cooperation

In 2015, Tanzania’s international investment index was 47.12, ranking 33rd out of 108 sample economies. This shows that the overall market environment of Tanzania is above average, with great potential, and relatively attractive to foreign investment. Among the 11 factors covered by the index, the top contributors to the

African countries 275 country’s appeal as an investment destination are market potential, infrastructure, the investment and financing environment and the macro economy. The market potential of Tanzania is enormous, while the domestic investment and financing environment and the macroeconomic conditions arc relatively good, providing a reliable environment for investors. Infrastructure is an important indicator of a country’s potential for industrial capacity cooperation. Financial stability, force majeure and trade also made above-average contributions while factor demand and the natural environment arc relatively weak, meaning that investors should not be too optimistic about these two aspects.

Then, further predictions are made, based on economic models, concerning the probability of change in 2015. A calculation is made to measure whether the change of each index exceeds a predetermined value. If it docs, the probability is high; otherwise, it is low. The results arc shown in Figure 6.8. Here we can sec that the probability of change for force majeure, market potential, politics, the macro economy, the investment and financing environment, and infrastructure is significantly higher than 0.5, meaning that close attention needs to be paid to these aspects.

Tanzania is in need of massive infrastructure production capacity, and the government has a clear plan to vigorously develop infrastructure.

Policy analysis

When President Xi Jinping visited Tanzania in March 2013, in the presence of the two heads of state, China and Tanzania formally signed the China-

Figure 6.7 Contribution of various factors to Tanzania’s appeal as an investment destination, 2015.

Source: International Investment Research Center of Wuhan University.

Figure 6.8 Probability of change in each factor in Tanzania, 2015.

Source: International Investment Research Center of Wuhan University.

Tanzania Investment Protection Agreement, which entered into force on March 18, 2014. The Tanzanian government divides the areas in which it encourages investment into most-favored areas and priority areas. The most-favored areas include agriculture and agriculture-based industries, mining, oil and gas, tourism, infrastructure, transportation, aviation, communications, finance and insurance services. For investments in these areas, the capital goods are exempted from import duties. Priority areas for investment include energy, the chemical industry, manufacturing, textile and leather production, natural resource development, fisheries, forestry, human resources, construction, real estate development, management consulting, television and radio, and export-oriented projects. For investments in these areas, capital goods are subject to import duties of only 5%. Tanzania had also established a national investment center to provide one-stop services for foreign investors in accordance with the Investment Act adopted in 1997.

Preferential tax policies for dominant and pioneering industries

The Tanzanian government allows foreign enterprises investing in dominant and pioneering industries in Tanzania, and foreign enterprises and joint ventures with an investment of over US$300,000, to apply for a certificate of investment preferences with the Tanzanian Investment Center. This certificate represents eligibility for the following preferences:

• 1. Private property is protected from non-commcrcial risks.
• 2. The income of the enterprise prior to investment recovery is exempted from income tax; the income tax rate after investment recovery is 30%, and the dividend-withholding tax is 10%.
• 3. Reduced import duties on fixed assets (5% for investment projects in pioneering industries and 0 for investment projects in dominant industries), and exemption from import duties for capital goods in preferential sectors such as mining.
• 4. Work permits for five foreigners in each enterprise.
• 5. Foreign enterprises may transfer 100% of the foreign exchange earned, profits and capital out of Tanzania without restriction.
• 6. The dividends and bonuses received by foreign shareholders may be freely remitted out of the country.
• 7. Five-year loss compensation.
• 8. Exemption from interest-withholding tax, 10% of dividend-withholding tax, which is exempted for enterprises in export processing zones.
• 9. Ease of getting residence and work permits, and production and trade licenses.
• 10. Preferential policies for export processing zones and planned economic development zones.

According to the Tanzanian Export Processing Zone Act promulgated in April 2002, enterprises in export processing zones arc entitled to financial preferential policies, non-financial preferential policies and procedural preferential policies.

Regarding preferential financial policies, the following taxes and fees arc exempted by the local government: export processing zone product tax, 10-ycar company tax, utility value-added tax and wharf dues, 10-ycar rent, dividend and interest tax; customs duties, value-added tax on raw materials and value-added tax on capital products; customs duties on one motor vehicle, one ambulance and fire-fighting equipment and vehicles, as well as two buses.

Under the non-financial preferential policies, cxport-processing-zone enterprises can obtain good, modem and reliable services; 20% of the products arc allowed to be sold in the domestic market; the company has five work permit places for foreign personnel automatically at the start-up stage; there is an inspection exemption before shipment and arrival at Hong Kong; a temporary visa valid for 60 days is issued for key technical personnel, management personnel and staff-training personnel brought to the enterprise at the initial stage of establishment; export credit can be obtained on the premise that the relevant stipulated conditions and procedures are met; and unconditional transfer of profits and dividends is allowed.

The procedural preferential policies simplified the investment-project decision-making procedures and project approval procedures, and involve customs inspection at the site of the export processing zone.

Regarding foreign currency exchange, foreign investors may, subject to the relevant provisions of Tanzania’s Anti-Money Laundering Act and Foreign Exchange Act, freely convert their lawful income into foreign currency at authorized banks. Legal income includes net profits and dividends of investment income, service charges for foreign loans, taxes and fees earned under the technology transfer agreement, remittance (after tax) or interest sold or paid off by the licensed enterprise, and wages and other welfare expenses incurred by licensed enterprises employing expatriates.

Preferential policies for prioritized SEZs

The Tanzania Export Processing Zone Authority divides investors in the four prioritized economic development zones into four categories and offers corresponding preferential policies.

Type A investors enjoy tax exemption for investment in infrastructure, machinery, equipment, trucks, construction materials, spare parts and consumables and other assets used for infrastructure construction in economic development zones; exemption from corporate tax of enterprises invested in economic development zones for the first 10 years; application of corporate tax rates stipulated in the Income Tax Law after the expiration of the 10-year tax exemption period; exemption for the enterprises in economic development zones from the rent tax and dividend and interest tax in the first 10 years; exemption from property tax; exemption from tariffs, VAT and other taxes payable on the importing of one commercial vehicle, one ambulance, one truck, one fire-fighting vehicle and two corporate commuter buses; exemption from the stamp duty in economic development zones; and five works permits in the initial stage and more after that upon application with relevant authorities and the immigration authority, which may grant the permits after comprehensively considering various factors, such as the opinions of local people, the complexity of the technology used by the investor, and the agreement between the applicant and the investor; and exemption from value-added tax on public utilities and services.

Type B investors enjoy exemption from customs duties, value-added tax and other taxes on raw materials, spare parts and asset materials for investment in business activities, services and production of export products at the development zones; exemption from interest tax on foreign loans; exemption from the customs duties, VAT and other taxes payable on import of one commercial vehicle, one ambulance, one truck, one fire-fighting vehicle and two corporate commuter buses; inspection exemption before shipment and arrival at Hong Kong; on-site customs clearance; and business visas for key technicians, managers and trainers for up to two months and residence permits after that upon application in accordance with the Immigration Act of 1995.

Again, five work permits can be obtained initially and more after that following appropriate checks.

Type C investors can receive export credit for eligible export-oriented enterprises; exemption from tariffs, value-added tax and other taxes on raw materials, spare parts, assets and consumables related to the production of the economic development zones; exemption from corporate tax for enterprises in economic development zones for the first 10 years; application of corporate tax rates according to the Income Tax Law after the expiration of the 10-year tax exemption period; exemption from rent tax, dividend and interest tax in the first 10 years; exemption from all taxes levied by the local government in the first 10 years for enterprises in economic development zones; exemption from inspection before shipment and upon arrival; on-site customs clearance; business visas for key technicians, managers and trainers for up to two months and residence permits upon application in accordance with the Immigration Act of 1995; and exemption from value-added tax on utilities and services.

Again, five work permits can be obtained initially and more after that following appropriate checks.

Regarding Type D investors, in addition to the preferences for Type A investments, they may also enjoy the preferential treatment stipulated by law for special industries.

In general, the Tanzanian government, with the support of the International Monetary Fund and the World Bank, has implemented an economic overhaul plan and enacted laws and regulations to promote and protect foreign investment. The Tanzanian government has issued new Investment Law and Export Processing Zone acts, which provide more preferential policies for foreign investment. If a foreign enterprise invests in Tanzania, it may enjoy tax exemptions and cuts, policy support and financial assistance. For example, 100% of the capital is refundable (full return of capital input through tax reduction and exemption), dividends and bonuses earned by foreign shareholders may be freely remitted out of the country, foreign investors arc exempted from income tax prior to the recovery of capital investment, and they arc also exempted from the dividend-withholding tax in export processing zones.

Cooperation cases

The China-Tanzania Joint Shipping Co. involves a total investment of 3 million pounds, and has two 15,000-ton freighters.

The total length of the Tanzania-Zambia Railway is 1,860 kilometers.

The Tanzania-China Friendship Textile Co. involves a total investment of US$29.12 million and has an annual output of 33 million meters of fabrics.

The Tanzania-China United Pharmaceutical Co. involves a total investment of US$2.05 million and produces 1 billion antibiotics tablets per year.

The China Agricultural Reclamation (Group) Tanzania Co. involves a total investment of US$15,051,300, and has a total sisal cultivation area of 13,558 acres.

The China (Tanzania) Investment Development and Trade Promotion Center provides warehousing, economic and trade consultation, exhibitions and other services.

The China-Tanzania Joint Venture Light Truck Co. involves a total investment of USS 1 million, and has an annual output of 100 light trucks.

The Jiefang Motor Tanzania Co. involves a total investment of US$1.5 million, and sells a total of 3,500 vehicles.