Cablegate: Agoa Eligibility Review - Tanzania

VZCZCXRO1878
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHDR #0650/01 2830641
ZNR UUUUU ZZH
R 090641Z OCT 08
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC 7943
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHNR/AMEMBASSY NAIROBI 1018
RUEHKM/AMEMBASSY KAMPALA 3206
RUEHLGB/AMEMBASSY KIGALI 1137
RUEHJB/AMEMBASSY BUJUMBURA 2699

UNCLAS SECTION 01 OF 03 DAR ES SALAAM 000650

SIPDIS

AF/EPS FOR ANN BREITER AND GABRIELLE MALLORY
PASS USTR FOR CONNIE HAMILTON

E.O. 12958: N/A
TAGS: ETRD EAGR ECON PGOV PREL ELAB PTER TZ
SUBJECT: AGOA ELIGIBILITY REVIEW - TANZANIA

REF: STATE 85086

1. This cable is in response to reftel.

2. Country: Tanzania
Current AGOA Status: Eligible

Country Background Summary: Tanzania's population increased to
approximately 40.3 million in 2007. 2007 Gross National Income
(GNI) was $16.2 billion and GNI per capita was $400. Over the past
two decades, Tanzania has been transformed from a centrally
planned/command economy to a 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 less
interference in commercial activities. These measures, including
privatization of state-owned companies, reduction of tariff and
non-tariff barriers and fiscal/monetary reforms, have opened doors
for expansion of private sector operations in all spheres of
business. Growth averaged 7 percent from 2001-2007; the economy
grew 7.1 percent in 2007 and is predicted to grow at 7.8 percent in
2008.

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, to encourage good governance, and to 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

-- Privatization efforts continued. The government replaced the
Presidential Parastatal Sector Reform Commission (PSRC) with the
Consolidated Holding Corporation (CHC), which has the mandate of
finalizing the divestiture of remaining public firms and monitoring
and evaluation of the performance of those already privatized.

-- In August 2008, the government announced plans to float an
additional 21 percent of its 51 percent stake in the National
Microfinance Bank. The remaining 49 per cent shares of the bank are
owned by a consortium led by the local National Investment Company
(NICOL) and Rabobank of the Netherlands.

-- Performance under the International Monetary Fund's Policy
Support Initiative program remains good. All assessment criteria
for the third review (quantitative targets for end-December 2007)
were met and the structural reform program remains broadly on
track.

-- Regional integration remains an important objective. Negotiations
within the East African Community (EAC) toward the establishment of
a common market have begun, although they have proceeded slowly.
The five members of the EAC have signed an interim trade agreement
with the EU. In July 2008 the EAC signed a Trade and Investment
Framework Agreement (TIFA) with the U.S.

-- Foreign Direct Investment (FDI) into Tanzania has increased,
principally in the mining, manufacturing, tourism, construction and
transportation sectors. In 2007, the value of FDI increased to USD
600 million from USD 552 million in 2006. The increase was mainly
due to investment for expansion in the mining sector.

Major Issues/Problems Identified

-- Poor infrastructure in transport, communications and energy
remains a major bottleneck that requires increased and sustained
investment. The country is implementing a Medium Term Transport
Sector Infrastructure Investment Plan but many areas remain
untouched.

-- Businesses and households, particularly in rural areas, lack
access to credit.

II. Political Reforms/Rule of Law/Anti-Corruption

Major Strengths Identified

DAR ES SAL 00000650 002 OF 003

-- Encouraged by the president's public support of press freedom,
the press was able to expose evidence of corruption; widely
publicized scandals led to the resignation of four ministers,
including the Prime Minister, and the dismissal of the governor of
the Bank of Tanzania.

-- 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.

-- Efforts to improve credibility and combat inefficiency saw the
judiciary create evening shifts for the hearing of additional court
cases. The courts also provided alternative sentences to women
during the year due to lack of adequate prison facilities.

-- There were several prosecutions of magistrates on counts of
corruption between 2007 and 2008.

Major Issues/Problems Identified

-- The national judiciary is formally independent, but the judiciary
remained underfunded, corrupt, inefficient, and subject to executive
interference, especially in the lower courts.

-- Foreign investors and businesses, including U.S. firms, continue
to encounter corruption in Tanzania.

-- Fourteen months of negotiations between the ruling CCM and the
opposition CUF failed to resolve the political stalemate in the
semi-autonomous archipelago of Zanzibar following the isles' flawed
2005 election.

III. Poverty Reduction

Major Strengths Identified

-- With donor support, Tanzania continues to increase government
investment in health, education, and sectors that stimulate economic
growth, especially infrastructure.

Major Issues/Problems Identified

-- GDP per capita remains low; recent economic growth has yet to
make significant inroads to reduce rural poverty.

IV. Workers' Rights/Child Labor/Human Rights

Major Strengths Identified

-- The GOT continued to make substantial progress under the auspices
of the International Program for the Elimination of Child Labor.
Tanzania has focused on combating the worst forms of child labor in
agriculture, mining, and prostitution.

-- In April 2008 the government produced guidelines for child labor
intervention at the district and community levels.

-- In August 2008 the government completed its Child Labor Report,
which was derived from the 2007 Integrated Labor Force Survey
Report.

-- The Trade Unions Act of 2000 recognizes workers' freedom of
association, the right to bargain collectively, and the right to
strike.

-- The Government's human rights record improved during the year
2007/08. Unlike in previous years, there were no reports of
killings in police custody.

-- Tanzania increased focused on combating the worst forms of child
labor in agriculture, mining, prostitution and domestic labor.

Major Issues/Problems Identified

-- Police officers tortured, threatened, and otherwise mistreated
suspected criminals and prisoners during the year.

-- Prison conditions remained harsh and life threatening.

-- Arbitrary arrest and prolonged detention remained problems.

DAR ES SAL 00000650 003 OF 003

-- The Constitution prohibits forced or compulsory labor, but does
not explicitly prohibit forced labor by children; however, the
Employment Ordinance establishes 15 years as minimum age for
contractual employment, but does not apply to children working on
family farms or herding livestock.

-- Workers in Tanzania have the right to associate, form unions, and
bargain collectively and these rights are well respected.

V. International Terrorism/U.S. National Security

Major Strengths Identified

-- In November 2006, the Tanzanian Parliament passed the Anti-Money
Laundering (AML) bill. The AML law established the legal groundwork
for Tanzania to create a Financial Intelligence Unit (FIU) and to
bolster the GOT's ability to combat financial crime, including
counterterrorist financing.

-- Tanzania opened its interagency Counterterrorism Center in 2007.
The Center will build the GOT's capacity to prevent and respond to
terrorist attacks. In cooperation with the United States, Tanzania
worked to identify terrorist networks in order to prevent acts of
terrorism.

-- 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

None.

ANDR

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