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