Wednesday, November 5, 2008

TIC: Why foreign investors shun us

By Samuel Kamndaya

The failure to implement pro-business reforms is driving prospective foreign investors away from Tanzania, a top official warned yesterday.

Mr Emmanuel Ole Naiko, the Chief Executive Officer of the Tanzania Investment Centre, said countries with less "attractive opportunities and resources" were receiving more foreign direct investment.

Mr Ole Naiko was speaking during the launch of the World Investment Report 2008, which revealed the transfer of huge FDI to other countries in East and Central Africa.

He said the culture of politicking and negative public sentiments against foreign investors were among factors impeding the inflow of investments.

Public and private sector leaders entrusted with promoting development, he said "are good at talking and writing well-crafted development action plans but poor at executing them".

He warned against the growing perception that Tanzania "can do without foreign investors who are just out to grab our country�s riches".

Mr Ole Naiko said the country's ability to attract FDIs had remained static in the past two years.

According to the report, Tanzania attracted foreign investments worth $600 million (over Sh600 billion) last year, up from $522 million (over Sh522 billion) in 2006. Mr Ole Naiko said his agency was targeting $700 million (Sh700 billion) by next year.

Tanzania lags behind neighbours Kenya, Democratic Republic of Congo (DRC), and Zambia and also Madagascar. Kenya attracted one of the largest investments over the period, rising from $50 million (over Sh50 billion) to more than $700 million (over Sh700 billion).

"Our problem is that we engage ourselves too much in debate but, for sure, we are very poor when it comes to implementation," Mr ole Naiko said.

He was surprised that Zambia and Madagascar had surpassed Tanzania in attracting foreign investment.

Each recorded FDI flows of more than $1 billion in 2007. The report entitled, 'World Investment Report 2008 � Transnational Corporations and Infrastructure Challenges', attributes the higher investment in Zambia to an upsurge in the copper mining industry.

Top on the list is Nigeria, with FDI worth $12.5 billion. Egypt is second with $5.7 billion and Morocco and Sudan are third and fourth, with $2.6 billion and $2.4 billion, respectively.

Equatorial Guinea and Algeria recorded $1.7million each, as Tunisia received $1.6million in foreign investment. Madagascar and Zambia each recorded FDI inflows of $1 billion. Ghana had $0.9 million, leaving Kenya and DRC, to rake in $0.7 million.

The investment promotion authorities said Tanzania was less attractive because of slow implementation of reforms started six years ago.

East Africa received the least FDI on the continent, $4 billion in 2007, a $1.6 billion increase over the 2006 level of $2.4 billion. West Africa got $5.5 billion, North Africa and South Africa, $12 billion and $7 billion, respectively.

Kenya's FDI share rose from only $51 million in 2006 to $728 million last year due to large privatisation sales in the telecommunication and railway sectors.
Mauritius improved from $105 million to $339 million mainly due to tourism and policy reforms, which have enabled the registration of investments within three days.

Like Rwanda, which recorded increase in FDI from $16 million in 2006 to $67 million, Mauritius does not restrict skilled labour recruitment.

Uganda's FDI declined while Burundi recorded no FDI for the whole year.

"There is no reason why Zambia and Madagascar should beat us," said Mr Ole Naiko. He cited the potential investment areas as the abundant deposits of nickel, cobalt iron ore, gold/silver, industrial minerals like soda ash and petrochemical minerals such as coal.

"It is very difficult to understand that a newly independent country such as Mozambique has managed to develop its coal mines so fast, leaving us debating who should develop Mchuchuma coal and Liganga iron ore deposits," Mr Ole Naiko said.

Six years ago, he said, public and private sector leaders came up with an action plan that identified impediments to investment but nothing much has changed. The country did not make any major reforms in business regulations last year, dropping by three slots in this year's World Bank Doing Business report.

Tanzania dropped three points each in the categories of ease of doing business and paying taxes. It also dropped by two points in starting a business and employment.

Mr Ole Naiko said the public was generally ignorant of the motives for investment and cited a recent uproar over "mere changes in company names".

While trade between China and Africa is growing, with an initial $5 billion China Africa Development Fund set aside, TIC boss Ole Naiko said the Chinese were being segregated in Dar es Salaam's Kariakoo area.

"People in Kariakoo hate the Chinese just because they see them doing small businesses, while in the minds of locals, they are supposed to be big investors."