International Investment in Tanzania - OECD by wuxiangyu

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									                   THE UNITED REPUBLIC OF TANZANIA
                     TANZANIA INVESTMENT CENTRE


                  “INVESTMENT FOR AFRICAN
                DEVELOPMENT: Making it happen”

                     NEPAD/OECD INVESTMENT INITIATIVE,
                         Imperial Resort Beach Hotel
                            ENTEBBE, UGANDA
                             25th – 27th May 2005,
Presented by:
Samuel J. Sitta
Executive Director
Tanzania Investment Centre
E-mail: sitta@tic.co.tz
Website: www.tic.co.tz
           CONTENTS/OVERVIEW
1.    Introduction
2.    Economic Policy Reform
3.    Investment Policy Framework
4.    Private Sector Development Initiatives
     a) National Investment Steering Committee (NISC)
     b) Tanzania National Business Council (TNBC)
     c) Investment guarantees & settlement of disputes
5.    Remaining regulatory, legislative & administrative
      impediments to private investment
6.    Tanzania Investment Regime
7.    Challenges and The way Forward
8.    Conclusion

                                                           2
ECONOMIC REFORMS AND THE DEVELOPMENT OF
THE NATIONAL INVESTMENT PROMOTION POLICY

Economic reforms initiated in 1986:
   Trade liberalization
    First Investment Code June 1990
    Private investment allowed in allocated areas
Some of the problems met in implementing the 1990
    Investment Policy & the Act as per studies carried out:
     Restrictive investment environment
     Lack of coordination of sectorial policies and the
    investment policy
     Existence of several laws and regulations that conflicted
    with the investment code
     Existence of a non commercialised society
     Existence of a non facilitative civil service
                                                                  3
      CORRECTIVE MEASURES TAKEN TO FURTHER
    IMPROVE THE TANZANIAN INVESTMENT CLIMATE
Major highlights of the Studies carried
(i) Review of the investment Policy and Law, prepared by Dr. H.
    Sinare and Dr. F. Ringo under the auspices of Economic and
    Social Research Foundation (ESRF) - 1996 and
(ii) Investors Road Map (1996) prepared by The Services Group, a
     team from USA.
    Both reports addressed policy, legal, procedural          and
     administrative barriers to investment in Tanzania
    The reports forced GoT departments to re-examine their
     processes and make appropriate changes; main changes where
     as follows: -
       Adoption of the New Investment Policy 1996
       Enactment of the new investment code 1997 & establishment
        of Tanzania Investment Centre (TIC) One Stop Shop for
        investors
       Harmonized key legislation
       Removed restrictions on investment areas
       Enhanced economic and social reforms from 1996 onwards.      4
     TANZANIA ECONOMIC REFORMS


  The Government has implemented reforms
  aimed at transforming its economy from
  one based on a large State-owned sector
  and central planning to a market-and
  private-sector-based economy.
  16 major reform legislations were enacted
  between 1990 and 2004.
These reforms have helped Tanzania to improve
  efficiency and weed out ills that impede
  growth.



                                                5
         TANZANIA ECONOMIC REFORMS
Major reform legislations enacted between 1990 and 2002
  are as follows:-
   The Income Tax Act 2004
   The Companies Act No. 12 of 2002
   The Export Processing Zones Act No. 11 of 2002
   The Commission for Human Rights & Good Governance Act No. 7 of
    2001
   The Land Act 1999
   The Mining Act 1998
   The Privatisation Trust Act No. 7 of 1997
   The Financial Laws Miscellaneous Amendments Act 1997
   The Tanzania Investment Act No. 26 of 1997
   The Tanzania Revenue Authority Act No. 11 of 1995
   The Immigration Act No. 7 of 1995
   Capital Market and Security Act No. 5 of 1994 and as amended by
    Capital Market and Security Act No. 4 of 1997
   The Public Corporations Act 1992 and Amendment Act 1993
   The Foreign Exchange Act 1992
   The Banking and Financial Institutions Act No 12 of 1991
   The Loans and Advances Realization Act 1991
                                                                      6
TANZANIA INVESTMENT CENTRE (TIC)

 TIC established in 1997 to be “The Primary Agency
  of the Government to coordinate, encourage,
  promote and facilitate investment.
 “One-Stop Facilitative Centre” with officers from
  Ministry of Trade & Industry, Business Registration &
  Licensing Authority (BRELA), Lands, Immigration,
  Labour and TRA stationed at the TIC.
 TIC Relationship Managers regularly visit investment
  projects to follow up on implementation and obtain
  feedback to resolve any business problems.
 Facilitates investors to acquire land by offering them
  land derivative titles on behalf of the Govt.
                                                           7
     TIC CLIENTS CHARTER
 OUR COMMITMENT TO INVESTORS
TIC is committed to facilitating investors
Application                   Days taken
 Company Registration            3
 Business licensing              3
 Certificate of incentives       7
 Resident Permit Class „A‟      14
 Resident Permit Class „B‟      14
 Special Pass                     1
 TIC voted Africa‟s Best IPA of the year 2004

                                                 8
    TANZANIA INVESTMENT CENTRE
                                              Customers

Currently TIC        Africa         America   Europe       Tanzania       Asia
                                                                                                Business Development Services

  is installing
  the computer
  workflow               Internet
                                                                                 Domino.Doc
                                                                                                    Optical
                                                                                                    Scanner
                                                                                                                       Signed
                                                                                                                       Documents

                                                                                 Document

  management                                      PowerShift eCRM
                                                                                 Management




  system                                                                         eTrack
                                                                                 Project
                                                                                 Management
                                                                                                   Certificate of Incentives processing

                                                                                 (QuickPlace)                                   Respective Government

  towards                                                      Domino
                                                               WorkFlow
                                                                                                                                Agencies/ Approval / Routing /
                                                                                                                                Project Tracking & Management



  paperless                                                    Engine
                                                                                                        Pre-Investment




  office                                                                                                 Investment



  operation.           TIC
                       Systems Architecture
                       Domino Workflow
                                                                                                         Operational

                       January 2005




In addition it is also re-designing and updating its website so as
to constantly provide current and update investment
information including new legislations/regulations to investors

                                                                                                                                                                 9
NATIONAL INVESTMENT STEERING
      COMMITTEE (NISC)
• Spearheading investment policy formulation,
• Fast track solutions to investors problems of
  investors,
• Identify and supervise the elimination of legal
  impediments to investment
• Chaired by the Hon. Prime Minister,
• Other members of the committee are Ministers
  for Finance, Agriculture, Lands, Industry and
  Trade, President’s Office Planning &
  Privatisation; Governor of BoT; Attorney
  General and Executive Director-TIC
  (Secretary).

                                                    10
NATIONAL BUSINESS COUNCIL (TNBC)

 National Business Council seeks to enhance
  Public/Private sector “smart partnership”.
 The Business Council is chaired by the
  President and the Chairman of Tanzania
  Private Sector Foundation is Vice Chairman.
 TNBC organizes and facilitates Investors
  Round Table Meetings (IRT); Local and
  International
 The TNBC has resolved a number of business
  impediments including enactment of a new
  business friendly land law and abolition of
  many nuisance taxes.
                                                11
   INVESTMENT GUARANTEES AND
     SETTLEMENTS OF DISPUTES
•Tanzanian law offers guarantees        against
nationalization and expropriation,
•Tanzania is a member of both the International
Centre for Settlement of Investment Dispute
and Multilateral Investment Guarantee
Agency,
•Free/Unconditional Transfer of Capital,
Profits, dividends and other benefits for
investors and employees working in Tanzania

                                                  12
 REGULATORY TREATMEMENT OF FDI IN
TANZANIA (RESTRICTIONS ON INVESTMENT
S/No.   Restriction                        Current Status          New Developments

1.      General Restrictions on entry
        •Entry of FDI                      Yes (threshold of USD
                                           0.3m and USD 0.1m
                                           for foreign & local
                                           respectively

                                                                   However at DSE foreigners
        •Foreign purchase of Shares        No restrictions         are not required to exceed 65%
        •IMF Article VIII status           Signed
                                                                   share purchase in a Listed
                                                                   Company
        •Liquidation proceeds transfer     No restrictions
        Abroad
2.      Sectoral Limitations to FDI
        •Financial Services                Some restrictions

        •Other Services                    No restrictions,        Initiatives are underway to
                                           however no incentives   establish Special
                                           offered for some        Economic Zones (SEZ)
                                           services

        •Primary Sectors                   Minimal restrictions
                                           No restrictions
        •Manufacturing
        •Acquisition of real estates for   No restrictions
        FDI purposes                                                                                13
  REGULATORY TREATMEMENT OF FDI IN
TANZANIA (RESTRICTIONS ON INVESTMENT
S/No. Restriction                    Current Status    New Developments

3.    Post entry restrictions                          Land Act 1999 has also been
      •Access to local finance       No restrictions   amended so that land can be
                                                       used as collateral by local and
      •Access to privatisation       No restrictions   foreign investors to get bank
                                                       loans
      •Access to public              No restrictions
      procurement
      •Taxation                      No restrictions

      •Discriminatory licensing in   No restrictions   New income Tax 2004
      public utilities
      •Nationality-based             No restrictions

      restrictions on boards
      •Discriminatory practices      No

      •Entry of key personnel        No restrictions
      •Performance requirements      Not required




                                                                                         14
     REGULATORY PRACTICES OTHER THAN
              RESTRICTIONS
S/No.   Regulatory Practices                   Current              New Developments
                                               Status
1.      Practices encouraging FDI
                                                                    Initiatives are underway to
        •FDI-targeted tax & and other          Yes                  harmonise EAC investment
        incentives                                                  Regimes

        •Number of bilateral investment        20                   Pending negotiations 10
        treaties (of which with OECD           (12)
        members)
        •Number of bilateral tax treaties      12                   Pending negotiations 8

        (of which with OECD members)           (7)
2.      Enhancing Policy Transparency                               Publication through various
                                                                    media including newly
        •Publications of regulations           Yes                  parliamentary website at:
                                                                    www.parliament.go.tz
        •Notification prior to regulatory      Yes                  Government website at:
        changes                                                     www.tanzania.go.tz and
                                                                    Treasury at: www.mof.go.tz
        •Negative list of restricted sectors   Yes
        •“silent and consent” authorisation    Yes                  A good example is at the
                                                                    TIC’s One Stop Centre
                                                                    operation, when seeking
                                                                    authority from other Govt.
                                                                    MDAs
                                               MDAs = Ministries, Departments and Agencies
                                                                                                  15
    BILATERAL INVESTMENT TREATIES. LIST
       OF BIT SIGNED AS OF JANUARY 2005
S/No    OECD Countries           Year of   S/No     Non OECD            Year of
                                 Signing            Countries           Signing
1       Denmark                  1999      1        South Africa        1959
2       Finland                  2001      2        Zambia              1968
3       Germany                  1965      3        India               1979
4       Italy                    2001      4        Egypt               1997
5       Korea                    1998      5        Mauritius           2003
6       Netherlands              2001      6        Zimbabwe            2003
7       Sweden                   1999      7        Malawi*             2003
8       Switzerland              1965      8        OPEC Fund*          2003
9       United Kingdom           1994
10      Canada                   1995
11      Korea                    1998
12      Swiss Confederation 2004

Source: Government of Tanzania                    * Partial Agreement
                                                                                  16
    BILATERAL TAX TREATIES. LIST OF DTTs
         SIGNED AS OF JANUARY 2005
S/No     OECD Countries          Year of   S/No     Non OECD             Year of
                                 Signing            Countries            Signing

1        Canada                  1995      1        Zambia               1968
2        Denmark                 1976      2        South Africa         1959
3        Finland                 1976      3        India                1979
4        Italy                   1973      4        Kenya (EAC)          2004
5        Norway                  1976      5        Uganda (EAC)         2004
6        Sweden                  1976      6        Zimbabwe
7        Korea                   2003      7        UAE
                                           8        Russia
                                           9        Seychelles
                                           10       Mauritius
                                           11       Egypt
                                           12       Yugoslavia
                                           13       Oman

Source: Government of Tanzania                    * Under negotiations
                                                                                   17
 TANZANIA INVESTMENT REGIME
Investment framework in Tanzania is characterised by: -
• Relative ease of entry and establishment
• No ownership restrictions or performance requirements.
• A fiscal stability clause, Section 19(2) of TI Act 1997 that
   guarantees investors that incentives provided will not be
   amended or modified to the detriment of the investors
   enjoying those benefits.
• No restrictions on the repatriation of profits or
   disinvestments in Tanzania
• Investors have the right to make transfer payments in
   freely convertible currency



                                                                 18
   TANZANIA INVESTMENT REGIME
• Investors are allowed to obtain land for investment purposes
  through the TIC that issues derivative rights (under the new Land
  (Amendment) Act (2004) ) .
• Under Section 24 of the TI Act 1997, TIC certificate holders have
  the right of an initial automatic quota of employing up to five
  persons during the start up period.
• Only in a few cases are foreigners required to pay an extra tax
  other wise the corporate tax stands at 30 percent, and VAT is 20
  percent for all companies except for those that have specific
  incentives.
• Govt. has passed the Employment and Labour Relations Act
  (2004) with the purpose of having a labour regime whose policies,
  laws and regulatory structures promote employment, protect
  labour and at the same time allow enterprises to grow and compete
  in the modern economy.
• The country also benefits from specific bilateral initiatives
  particularly USA, under the familiar AGOA program, and the EU
  under EBA.                                                      19
  RECENT DEVELOPMENTS
• The establishment of the Customs Union Protocol, which was
  signed on 2nd March 2004, is one of the greatest
  achievements of the new EAC.
• A number of specialized taskforces have been formulated and
  revision of regulations through task forces such as the Tax
  Reform Taskforce, the Land Reform Taskforce, and the
  Labour Reform Taskforce, etc. These task forces include
  members from different government departments, civil
  society, and the business community.
• Tanzania has also signed a number of international
  agreements governing the protection of foreign investment in
  Tanzania including bilateral investment treaties (BIT) and
  double taxation treaties (DTT). Negotiations are currently in
  the process to conclude agreements with Zimbabwe, Malawi,
  Mauritius and South Africa.

                                                                  20
               ATTRACTIONS


1. Beautiful country with friendly people
2. Favourable Investment Environment
  A. Successful Macroeconomic performance
  B. Effective “One Stop facilitative Centre” (TIC)
  C. National Investment Steering Committee
  D. Tanzania National Business Council for“smart
      partnership”
3. Abundant Investment Opportunities
4. Talented and skilled labour force.
5. Willingness to listen
                                                      21
PERCEPTIONS HINDERING FDI
     BUREAUCRACY




             Source: Doing business in 2004 (World Bank)
                                                           22
       TANZANIA ECONOMIC STATISTICS

                                 1997        1998       1999    2000    2001    2002    2003
  Population (millions)          29.1        30.0       30.9    31.9    32.9    34.5    36.0
  GDP (factor cost ) Tshs        4,282       5,125      5,978   6,705   7,635   8,629   9,110
  bn

  Real GDP Growth, %             3.3         4.0        4.7     4.9     5.6     6.2     5.6
  change
  GDP per Capita                 147         171        193     210     232     256     300
  (at c/prices-Tshs 000’)
  Exchange rate                  612         665        745     808     876     967     1039
  (Tshs/US$) ann. Avg.
  Inflation                      16.1        12.9       7.8     6.0     5.2     4.5     4.4
  annual average (%)
  Investment/GDP ratio           14.7        16.0       15.4    17.6    17.0    18.9    18.5
  (%)
  FDI (US$ mn)                   158         172        542     282     467     240     248

Source: National Bureau of Statistics 2004 - Tanzania                                           23
  GDP GROWTH RATE AND INFLATION
      IN TANZANIA (1997 – 2004)




Source: Bank of Tanzania - 2005
                                  24
TIC REGISTERED PROJECTS
    FROM 1995 TO 2004




                          25
            FDI INFLOWS TO TANZANIA
              FROM 1992-97 TO 2003
                                         *
                                                                 *




                  @




@ Annual average from 1992 to 1997
* Sharp increase was due to huge investment in mining projects
Source: World Investment Report - 2004



• Despite declining world FDI inflows, FDI into Tanzania has been
  increasing in the past five years, with an average of US$ 356
  million annually.

                                                                     26
THE WAY FORWARD




                  27
      THE BEST PROGRAMME
• The Government and Donors (DFID, SIDA,
  DANIDA and the Royal Netherlands Govt. have
  set-up a basket fund late 2003 for the Business
  Environment Strengthening of Tanzania
  (BEST).
• This is a five year programme commenced this
  year (2004) to year 2008 at a cost of US$ 18
  million.
• The BEST programme piloting continuous
  improvement of an enabling environment for
  private sector operations.
• Creating a better policy, administrative, legal,
  regulatory and judicial framework
                                                     28
 SUMMARY OF THE INTERLINKED COMPONENTS
        OF THE BEST PROGRAMME
S/No.   COMPONENTS             MAIN OUTPUTS

        Achieving Better       Unnecessary regulations removed
        Regulation
                               Sustainable process established for ensuring business-friendly laws,
                               regulations and administrative procedures
                               Improved efficiency and transparency of government institutions
                               dealing with business


        Improving              Improved accessibility to the court system for formal and informal
        Commercial Dispute     business
        Resolution             Speed and quality of service provided by court system for business
                               improvement
        Strengthening the      Increased number and value of local and foreign investment in
        Tanzania Investment    Tanzania
        Centre                 Enhanced promotion of Tanzania as investment destination
        Changing the Culture   Improved customer service ethos for services provided to the private
        of                     sector by the public and judicial service
        Government

        Empowering Private     Improved capacity of private sector stakeholders to identify regulatory
        Sector                 problems and solutions and advocate for an improved business
        Advocacy               environment
                                                                                                       29
      THE WAY FORWARD
The establishment/formation of programmes such as
• Business Environment Strengthening for Tanzania
  (BEST)
• Export Processing Zone (EPZ)
• Special Economic Zones (SEZ)
• Spatial Development Initiatives (SDIs)
• Tanzania National Business Council (TNBC)
• National Investment Steering Committee (NISC)
Among others, is a manifestation of the Govt’s
  commitment towards establishing a private sector
  led economic growth.
                                                     30
      THE WAY FORWARD
• Proactively championing Regional Integration
  to create bigger markets and investments with
  enhanced benefits and faster growth to all.
• As follow up action to the UNCTAD Investment
  Policy Review –2003, TIC has commissioned
  two research studies (i.e. Tanzania
  comparative/competitive advantages study and a
  study to evaluate the growth and impact of
  investment) in order to target more precisely
  investment promotion & facilitation activities.
• New licensing legislation (under BEST
  programme)
• Labour laws being amended
                                                    31
32
Visit us on: http://www.tic.co.tz
                                    33

								
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