Luncheon Meeting In Honour of H E Mr Benjamin Mkapa, Hon'ble President of Tanzania
December 16, 2002, New Delhi

Speech by The Hon’ble President of The United Republic of Tanzania, His Excellency, Mr Benjamin William Mkapa

Mr. Yogendra Kr Modi,
Senior Vice President, FICCI;

Mr Arun Bhart Ram,
Chairman, CII International and Vice Chairman;

Distinguished Members and Business People;
Invited Guests,
Ladies and Gentlemen.

It is a great pleasure for me to be with you here this afternoon I want to thank you, our hosts, for arranging such a hospitable environment for our meeting, and for receiving us so warmly. This is a correct reflection of the long and rewarding relationship between India and Tanzania at all levels. The challenge before us is to take this relationship to higher ground as Tanzania provides an increasingly improved investment and trade environment for the active and heightened participation of Indian firms.

I thank you, Mr Modi, for your kind words of welcome. You have made us all from Tanzania feel quite at home, and we are most grateful.

I have come to India to put another brick in the partnership for development we are designing and building between our two friendly countries, and to create the basis for a "smart partnership" between our two countries. And you, the Indian business people, must be a key component of that new architecture of our partnership and relationship.

I am here to assure you, at this highest level of government, that we will do all we can to make it possible and profitable for you to invest in Tanzania. We can, and should, work together. For, in this cause, the interests of my government are linked to your interests, and the two can be made mutually reinforcing. You need fair returns on your investments, and I need successful investments that pass on to us knowledge and skills, create jobs for our people and generate revenue for the Treasury.

I thank all the Indian companies that have responded favourably to our earlier efforts to invite Indian investments to our country. Records of the Tanzania Investment Centre (TIC) show that India is among the 15 leading foreign investors in Tanzania. Until the end of last month there were 86 Indian investment projects registered with TIC, worth almost USD 550 million, and with possibilities to create over 11,000 jobs. All these pioneering Indian companies that have been in Tanzania for many years now deserve our very special words of gratitude. It is now time for more Indian companies to invest in Tanzania, and take advantage of the excellent relations between our two countries.

India and Tanzania are natural and historical trading partners across the Indian Ocean. We note with pleasure increasing trade between India and Africa, which grew by almost 300 percent over the last 9 years. At present, Tanzania is India's 5th largest trading partner in Africa. We can make it the first, and I am counting on you.

An Improved Investment Climate

Ladies and Gentlemen,

We have created an attractive incentive regime for private investors, including a stable, predictable and conducive macro-economic framework. We offer tax incentives, and all investments are protected against arbitrary nationalisation and expropriation. A commercial court has been established to handle commercial cases expeditiously and in fairness, while misunderstandings are also subject to international arbitration.

In the last seven years, the government has thoroughly revised its various policies and legislation to create a more conducive climate for private sector growth and investment. Above all, the government maintains a healthy and on-going dialogue with the private sector, local and foreign.

The Tanzania of today is very different from that of the 1970s and 80s when we were almost totally a centrally planned economy. We came to realise, at considerable cost, that governments are not very good at doing business. So we decided to leave business to business people and concentrate instead on the traditional functions of state, including social services, law and order, administration, and promulgation and enforcement of regulatory mechanisms.

In 1986, with the support of the International Monetary Fund (IMF) and the World Bank, we embarked on far-reaching economic reforms aimed at:

• Guaranteeing sustainable low levels of inflation;
  
• Ensuring higher revenue collection through widening the tax base on the one hand, and prudent fiscal management on the other;
  
• Producing positive rates of growth;
  
• Ensuring stable exchange rates and currency;
  
• Creating a conducive environment for greater private sector participation in the economy;
  
• Withdrawing the public sector from direct participation in productive and commercial activities; and
  
• Generally creating a stable and conducive macro-economic framework for investment and growth
  
• Current State of the Economy

Ladies and Gentlemen,

These economic reforms have produced sustained economic growth averaging more than 4 per cent over the last few years. Last year the GDP grew at 5.6 per cent, and is projected to rise to 5.9 per cent in 2002, making Tanzania one of the fastest growing economies in Africa. Inflation has fallen dramatically from almost 30 per cent in 1995 to 4.5 per cent at the end of October this year It is now our firm policy that inflation should always be under 5 per cent. Gross foreign reserves at the Central Bank have also improved significantly, from an equivalent of 1.5 months of imports of goods and non-factor services in 1995 to 6 months of such imports now.

The currency has largely stabilised and is freely convertible. International transactions are fully liberalised. Investors can repatriate profits and dividends, as well as service loans, pay royalties, and make other such payments without any unnecessary restrictions.

Foreign investment and Privatisation

Ladies and Gentlemen,

Tanzania has witnessed a steady increase of Foreign Direct Investment (FDI) inflows. Foreign investments grew from USD 150.8 million in 1995 to USD 224.8 million in 2001. This growth is attributable to the country's investment climate, which has not only offered attractive incentive packages but also functioned in a stable and predictable manner. This, in turn, has allowed investors to obtain a more predictable forecast on the returns of their investments.

In addition, improvements in the macroeconomic fundamentals and the country's uninterrupted political stability have made Tanzania a competitive foreign investment destination. Over the last several years Tanzania has consistently featured in comparative studies as being among the most promising and reforming nations of Africa, earning the trust and confidence of investors.

Considerable progress has been made in the implementation of the privatisation policy as a whole. By June 2002, a total of 259 public enterprises - two thirds of all public enterprises - and 210 non-core assets had been placed in the hands of the private sector.

Major Investment Areas

Ladies and Gentlemen,

Tanzania has an abundant wealth of natural resources that offers a wide range of investment opportunities. We are also well placed geographically. Six landlocked countries use Tanzanian ports, the operations of which are also being privatised.

We have plenty of arable land, and land suitable for ranching and irrigation, of which only a small part is currently under use. We reckon only 1/6 of arable land is being used now. A new Land Policy was approved by Parliament 4 years ago, and a new Land Act of 1999, is now in force, to strengthen the security and protection of the land rights of investors. We are currently reviewing this legislation to see how it can be improved further to facilitate the emergence of a thriving mortgage market.

We have large proven reserves of base metals and other precious and semi-precious minerals and gemstones. Great potential exists, therefore, in lapidary and jewellery manufacturing industry. Large deposits of natural gas have been discovered - and I recognise the role of India's Oil and Gas Corporation in that discovery. Exploration for hydrocarbons continues.

Tanzania presents an illustration of the impact on investments brought about by correct policies and a conducive investment climate. That Tanzania is well endowed with mineral resources must, with hindsight, have been a fairly well known fact for years. But in the 1970s and 80s there was hardly any serious prospecting or mining going on. Today, thanks to a deliberately created structural enabling environment, to a competitive mining policy, to an equally competitive mineral legislation and tax regime, and to a sound macro-economic framework, there has been a tremendous surge in prospecting and mining activities over the last ten years.

• Prospecting and mining licences increased 38 times, from 9 only in 1990 to 341 in 1997.
  Production of diamonds increased ten-fold, from 25,540 carats in 1994 to 254,271 carats in 2001.
  
• Production of gold increased 94 times, from 320 kg in 1995 to 30,088 kg in 2001.
  
• Total mineral exports rose 21 times from USD 15 million only in 1996 to USD 312 million in 2001.
  
• Gold exports alone rose 1,315 times, from USD 200,000 only in 1982 to USD 263 million in 2001.
  
  

Ladies and Gentlemen,

Tanzania has unsurpassed tourist attractions in terms of quality, diversity and product-mix. We are the land of Kilimanjaro, the highest mountain in Africa; the Serengeti, which is probably the best-known wildlife sanctuary in the world unequalled for its natural beauty and scientific value; the Ngorongoro Crater, described as the "eighth wonder of the world"; Selous, the largest national game reserve in the world and the oldest in Africa; and an 880 km coastline of pristine beaches and numerous possibilities for water sports; and, of course, the exotic spice islands of Zanzibar. The tourism potential of Tanzania is abundant and un-exhausted, providing many and varied opportunities for Indian investors.

A lot is already happening with tourism. New hotels are coming up, and allied services are expanding. The number of tourist arrivals has increased from only 153,000 in 1990 to 525,122 in 2001. Tourism revenues have likewise shot up from USD 65 million only in 1990 to USD 725.0 million in 2001. There is a consistent annual average growth rate of around 10 per cent in tourist arrivals, providing good prospects for investors in this sector.

The industrial sector has been important to Tanzania for many years, and a new Industrial Policy has been formulated to give new life to both privatised as well as new industries. Investors in this sector with additional capital and industrial technology can invest in areas such as food processing, electrical equipment, ICT, pharmaceutical industry, beverages, textiles, other consumer goods as well as any other manufactured products.

Political Stability, Good Governance and Legal Framework

Ladies and Gentlemen,

Above all, Tanzania is a most peaceful and stable country, one of the few African countries to enjoy an unbroken record of political stability and concord among its people. Our national unity and social cohesion puts Tanzania apart from most other African countries.

Protection of foreign investment is a key and sensitive element to investors. Tanzania has a transparent legal framework that facilitates the promotion and protection of all investments. Similarly, the government has taken into consideration and is a party to several regional and global arrangements, which promote and protect foreign investments, including through insurance cover. We are also members of the Convention Establishing the Multilateral Investment Guarantee Agency (MIGA).

Conclusion

Ladies and Gentlemen,

I know even after all I have told you this afternoon, and what you will soon hear from my colleagues, some people from their individual experiences or reasons may still tell you Tanzania is not a good place to invest. But anyone who has followed
closely the political and economic history of Tanzania will tell you that what we have done - especially in the last few years - is a veritable revolution. What I do want to assure you is that we will leave no stone unturned to make it easier and profitable for those who want to have a stake in the new Tanzania. I will also keep up the dialogue with investors to review improvements to the investment climate.

I have given you statistics of increasing foreign investments in Tanzania. These rapid increases in Foreign Direct Investment to Tanzania are additional evidence that things are improving. For, these are investments by the private sector. They would not be made if Tanzania were not a good investment destination.

Ladies and Gentlemen,

I would like to end by inviting Indian investors once again to take advantage of the investment opportunities and the right climate for investments in our country. And I would like, in a very special way, to thank you, our hosts, FICCI and ClI, for all you have done to promote trade and investment relations between our two countries. Our motto is to be better than yesterday, less than tomorrow. With your support, our efforts will bear fruit and tomorrow will be better than today and yesterday.

I thank you for your kind attention.