OECD Investment Policy Reviews

1990-0910 (online)
1990-0929 (print)
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OECD Investment Policy Reviews present an overview of investment trends and examine a broad range of policies and practices affecting investment in the economies under review. This can include investment policy, investment promotion and facilitation, competition, trade, taxation, corporate governance, finance, infrastructure, developing human resources, policies to promote responsible business conduct, investment in support of green growth, and broader issues of public governance. The reviews take a comprehensive approach using the OECD Policy Framework for Investment to assess the climate for domestic and foreign investment at sub-national, national or regional levels. They then propose actions for improving the framework conditions for investment and discuss challenges and opportunities for further reforms.

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OECD Investment Policy Reviews: Tanzania 2013

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23 Dec 2013
9789264204348 (PDF) ;9789264204331(print)

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This review of investment policy in Tanzania evaluates the current policy situation and makes recommendations for  enabling Tanzania to attract higher investment to exploit its full potential and become a regional trade and investment hub. The review finds that while private investment in Tanzania has considerably risen since the early 1990s, further progress can be made to improve the business climate and attract more investment in key sectors, such as infrastructure and agriculture.

Informed by the subsequent chapters of this report, this overview provides policy options to address these challenges. In particular, investors’ rights and obligations could be rationalised and made more accessible and regulations on foreign investment and investment incentives reviewed. The land legislation could be revised and land rights registration accelerated, notably by providing stronger incentives for registration. The short-term and long-term costs and benefits of the regulatory restrictions imposed by crop boards and of export bans could be closely analysed.

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  • Foreword

    The Investment Policy Review of Tanzania is one of five reviews carried out in member states of the Southern African Development Community (SADC) on the basis of the OECD Policy Framework for Investment (PFI). Undertaken by the NEPAD-OECD Africa Investment Initiative with the support of USAID, it reflects the growing co-operation between the OECD and its African partners.

  • Preface by Dr. Florens M. Turuka, Permanent Secretary, Prime Minister's Office, United Republic of Tanzania

    In recent years, the Government of the United Republic of Tanzania has implemented various socio-economic reforms with a view to improve the business environment and investment climate in the country. The main objective of such interventions is to make Tanzania an increasingly attractive, robust and viable investment destination for both domestic and foreign investors. The ultimate goal is to ensure that Tanzania achieves higher rates of inclusive economic growth commensurate to her competitive advantage in terms of abundant natural resources as well as strategic geographical location as a logistical hub to the rest of the continent, which provides investors with access to regional and global markets. Furthermore, Tanzania has enjoyed uninterrupted peace, political stability and tranquillity since independence. These key attributes, coupled with the existence of robust institutions for investment promotion and facilitation, have contributed to making Tanzania’s investment climate unique and increasingly attractive.

  • Preface by Mr Rintaro Tamaki, Deputy Secretary-General, OECD

    Tanzania is currently one of the strongest performers of the non-oil-producing countries in Sub-Saharan Africa with a Gross Domestic Product (GDP) growth that has exceeded 6% for ten consecutive years and stood at 6.9% for 2012-13. Domestic and foreign private investment has significantly risen over the last two decades as Tanzania has steadily improved its investment environment and striven to increase opportunities for foreign and domestic investors, notably by opening to international trade and investment and liberalising its financial sector. In 1996, the National Investment Promotion Policy opened most sectors to foreign and private participation.

  • Abbreviations and acronyms
  • Executive summary

    Tanzania’s legal regime for investment had opened up considerably to foreign investors by the mid-1990s with the passage of the 1996 National Investment Promotion Policy and the 1997 Tanzania Investment Act (TIA). The establishment of the Tanzania Investment Centre in 1997 was another stride in building a more efficient framework for business establishment. More recently, the Government Roadmap for Improving the Investment Climate was launched in 2009 with the stated aim of improving Tanzania’s overall Doing Business ranking from three digits performance to two. Government has also sought to attract investment into specific sectors, including agriculture with the Kilimo Kwanza ("Agriculture First") strategy and the development of the Southern Agricultural Growth Corridor (SAGCOT). Government now plans to review its Investment Promotion Policy and Investment Act so as to tackle remaining challenges, which are manifold.

  • Overview of progress and policy challenges in Tanzania

    Major economic reforms which have liberalised trade, enhanced the role of the private sector and led to the creation of Tanzania Investment Centre, have generated a steady GDP growth in Tanzania since 2000. Nevertheless, the regulatory framework for investment could be further improved, and investment incentives are not systematically evaluated. The investment regime could be further rationalised through strengthening of the Tanzania Investment Centre as a one stop shop to have full mandate for approval of investment permits. Tanzania still lacks adequate enabling infrastructure and the private sector does not actively participate in infrastructure development. Access to land can be a lengthy process for foreign and domestic investors alike, and land tenure remains insecure for smallholders. In addition, restrictions on agricultural trade hinder investment in agriculture. Informed by the subsequent chapters of this report, this overview provides policy options to address these challenges, in view of enabling Tanzania to attract higher investment and to potentially become a regional trade and investment hub.

  • Investment policy in Tanzania

    Tanzania’s legal regime for investment became considerably more open to foreign investors in the mid-1990s. However this legal framework still remains quite complex, and to some extent outdated. The investment climate could for instance be substantially improved by updating the legal framework for international commercial arbitration, and strengthening mechanisms for enforcing intellectual property rights. In addition access to land, and arbitration mechanisms for land disputes, are very complex and constitute a prohibitive barrier to private investment by both foreign and domestic enterprises. Clarity for investors is also limited by the fact that regulations on foreign investment by sector are dispersed over several different legal instruments, and by weak enforcement and implementation of the investment policy framework. Nonetheless there is significant scope for Tanzania to build on several ongoing policy reforms and initiatives, as highlighted in this chapter.

  • Investment promotion and facilitation in Tanzania

    With the establishment in 1997 of the Tanzania Investment Centre (TIC), Tanzania has made vast strides in building a more efficient framework for setting up businesses. This chapter examines various measures adopted by the government to reduce administrative burdens on investors, both under the umbrella of the TIC and outside of it. Yet further progress is needed in terms of: determining a precise and long-term investment strategy; streamlining investment promotion functions across different bodies; improving TIC’s statistical capacity; better addressing the needs of SMEs; and increasing domestic investment linkages. Tanzania’s framework of investment incentives and EPZs also urgently needs to be rationalised and subjected to more stringent cost-benefit analysis. Finally while laudable efforts for facilitating public-private dialogue, there remains some confusion and controversy among the different bodies that serve as intermediaries between the government and the private sector.

  • Infrastructure investment policy in Tanzania

    Better channelling investment toward infrastructure represents a central challenge for Tanzania, and the potential of infrastructure investment, both as a facilitator for development and as an attractive investment channel, remains underexploited. This chapter first charts the state of the country’s key infrastructure sectors, which suggests that electricity provision and the energy sector more broadly present particular challenges. Elaboration of very clear guidelines for development of the natural gas sector, which has high potential for meeting domestic energy generation challenges, has become highly necessary and the government has begun taking several steps in this regard. The regulatory and policy framework for infrastructure development and investment is then investigated in detail, with sector-specific examples. Persistent structural problems include a heavy dominance of inefficient parastatals in infrastructure provision, accompanied by a very poor track record for privatisation and private involvement in utilities in the past. Adequate implementation of the recent regulations for private sector involvement in public infrastructure provision, as well as placing parastatals in a more competitive environment, will be crucial in coming years.

  • Promoting sustainable investment in Tanzania's agriculture

    This chapter highlights key policy challenges to be addressed to attract sustainable investment in agriculture, drawing from the OECD Policy Framework for Investment in Agriculture.While agriculture accounts for almost a quarter of GDP, investment in the sector has remained very low over the last decade as both small and large-scale investors continue to face major constraints.Access to land is still a long and difficult process for companies due to the weak decentralisation of land allocation, overlapping responsibilities of various government institutions, weak governance, and low land registration levels. The relatively high taxes charged to agricultural producers and traders lower their incentives to invest and access to agricultural inputs remains limited. Investment by smallholders is also constrained by a limited access to credit. Finally, trade flows are hindered by weak administration capacities and regulatory restrictions that increase uncertainty for investors. Revising the land legislation, accelerating land registration and carefully assessing the costs and benefits of agricultural taxes and trade restrictions could help attract higher investment in agriculture.The policy framework must ensure that agricultural investments generate sustainable growth. Despite a strong recognition of customary land rights, centralised land management and low land registration rates increase the risks for local communities not to be compensated for land acquisition by large-scale investors, which leads to an increasing number of land conflicts. Although environmental impact assessments are compulsory, they remain biased as project proponents can influence the process. Successful business partnerships between large investors and local communities that do not involve direct land acquisition could be expanded and environmental legislation better enforced to bring inclusive and sustainable development.

  • The Monitoring African Food and Agricultural Policies (MAFAP) Project

    The Monitoring African Food and Agricultural Policies (MAFAP) project, implemented by FAO in collaboration with OECD with major funding from the Bill and Melinda Gates Foundation, seeks to provide African policy makers and their development partners with the best possible information on the impacts of policies and investments affecting agriculture and food security. It aims to support decision-making at national, regional and pan-African levels, and thereby contribute to the CAADP of the New Partnership for Africa Development (NEPAD).

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