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OECD Investment Policy Reviews: Tanzania 2013

image of OECD Investment Policy Reviews: Tanzania 2013

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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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.

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