VII. INVESTMENT CLIMATE Tanzania enjoys the reputation of welcoming foreign and local investments and it is to this end in August 1990, it promulgated the National Investment Promotion and Protection Act (NIPPA), and established in 1991 the Investment Promotion Centre (IPC) to control, direct, monitor and regulate investments. NIPPA provides for priority investment areas, confers on investors generous incentives and attractive benefits and spells out guarantees against nationalization as well as providing assurances for disputes settlement. Tanzania during 1985-1991 witnessed intensive structural and adjustment programs initiated by IMF and World Bank, which were largely successful in bringing about a real gross domestic product growth of about 3.1 percent. Almost three years of successive drought have dampen GDP growth which during 1993 was estimated to grow at 3.2 %. Hardest hit has been the agricultural sector, from which over 83% of Tanzania's 25 million people derive employment, sustenance, and is responsible for nearly 48% of foreign exchange earnings. Openness to Foreign Investment While Tanzania is known for its attitude towards local and foreign investments, the recently announced changes to NIPPA, where existing incentives including exemption of import duty, sales tax and tax holiday are likely to be abolished or substantially change could seriously damage Tanzania's attractiveness to foreign investments. Conversion and Transfer Policies Although Tanzania continues to be plagued by chronicle shortage of foreign exchange, the advent of Bureau de Change shops in 1993, have greatly facilitated conversion and speedy up transfer of profits, dividends and other investment returns. Repatriations and externalizations which were held up for years, can now take place in weeks. Expropriation and Compensation Expropriation: Tanzania history of expropriation ended up in 1973 with the nationalization of European firms in Arusha and Kilimanjaro regions. That was a bitter lesson for Tanzania which saw production coffee fall.. Since then, there has been no further expropriation which can safely be considered now as something of the past. Compensation: There has been no recent cases of expropriation but generally, the Government of Tanzania (GOT) record of dealing with compensation issues, is considered fair and adequate. It offers payment in either local or convertible currencies but the only problem that has always arisen is delays in repatriation of money owing largely due to chronic shortages of foreign exchange. Disputes Settlement There has been no recent dispute for settlement involving Tanzania. Past records however, have shown series of amicable settlements out of courts or tribune. Tanzania is a member of both ICSID and MIGA. Political Violence Under one-party democracy, Tanzania has enjoyed political peace and tranquility for nearly 30 years. With the introduction of political pluralism in 1991, racial toleration is in serious jeopardy and could easily become explosive. The hatred has largely been directed to Asians because of being successful in commerce and for perpetuating and continuing corruption in the country. Performance Requirements/Incentives GOT has not instituted business, work, investments or incentives performance requirements. This however has been a bone of contention between indigenous Tanzanians and Tanzanians of Asian and Arab origins. Indigenous Tanzanians are claiming with certain degree of truth, through corrupt practices GOT is allowing Asians and Arabs to marginalize them. GOT handling of the matter has been to say the least "very poor". Right to Private Ownership and Establishment The right to private ownership and establishment in Tanzania, is guaranteed by laws and constitution. This right includes freedom to establish a company, to own property both movable and immovable, acquire property and dispose of property including business enterprises and intellectual property. Protection of Property Rights The laws in Tanzania protect property rights, facilitate acquisition of property rights and disposal of property rights including intellectual property rights. Regulatory System: Laws and Procedures There are in place transparent policies, effective laws and procedures to foster competition, labor management, to avoid distortions, impediments and utilizations of country's resources. Bilateral Investment Agreements According to the Ministry of Justice and Constitutional Affairs Tanzania has a bilateral investment agreement with United Kingdom. OPIC and Other Investment Insurance Programs OPIC Insurance Program is available to Tanzania and currently about three projects are under consideration for OPIC Insurance. The biggest OPIC insured project is Sheraton Hotel Construction scheduled for completion in 1995. Labor Although labor is plentiful in Tanzania, it is unskilled and there is dearth of people with management skills. Foreign Trade Zones/Free Ports There is no foreign trade zone in Tanzania but a free port is in the process of being established in Zanzibar. Capital Outflow Policy Tanzania, a third world country and according to the World Bank the second poorest county in the world does not encourage capital outflow. Major Foreign Investors IPC has only been able to provide the Embassy the following investment information for the period between September, 1990 to February, 1994. Sector Approved New Exp/Reh Local Agric & Livestock 58 38 27 14 Natural Resources 43 34 9 17 Tourism 93 75 18 35 Manufacturing 229 142 84 145 Petroleum & Mining 21 17 4 3 Construction 15 14 1 5 Transport 41 28 13 14 Services 6 3 3 3 Computers 2 1 1 - Decontrolled areas (financial) 4 4 - - Grand Total 512 352 160 236 Sector Foreign Joint Total Total Venture Employm. Investm. Agric. & Livestock 15 29 22656 43282.3 Natural Resources 7 19 5790 16692.2 Tourism 19 39 10353 105670.3 Manufacturing 21 63 24291 178415.9 Petroleum & Mining 2 16 2157 24349.2 Construction 1 9 754 6677.2 Transport 6 21 2901 27702.1 Services 2 1 1319 2824.0 Computers 1 1 20 281.0 Decontrolled areas (financial) 2 2 158 7789.0 Grand Total 76 200 70399 413683.7 Note: Total approved investment to-date translated is about U.S. $ 1.2 billion. As can be seen above, the information is only available by sectors. Generally, countries in Far East, India, Pakistan, North Korea, Singapore are leading. The only known U.S. company with a huge investment is Sutton Resources, which has joined with a Canadian firm to form Kabanga Nickel Company engaged in mining tin ores and nickel in Ngara, Kagera region.