Abu S. Shonchoy (Presenter) Research F ellow, Institute of Developing Economies, JETRO and
AGENDA - JETRO
Transcript of AGENDA - JETRO
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An Overview of the Investment Climate
and Investment Opportunities in
Tanzania
AGENDA
Tanzania Economy
Why Tanzania
Investment Opportunities
Trend of Investments
Investment Facilitation Services
Investment Incentives
Conclusion
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TANZANIA’S ECONOMIC OVERVIEW
• According to the World Bank, Tanzania’s economy has been growing steadily for the past 10 years. In 2012, the economy expanded by 6.9%, which is close to its more recent historical average.
• A survey done in collaboration between this institution and KPMG revealed that the economy was performing better in 2013 than in 2012 and business leaders were positive about the prospects for 2014.
• Rapid and stable growth of economy over the past few years is explained by several factors. These include rapid expansion in sectors like communication and increasing domestic demand due to rapid population growth.
GDP BY SECTOR (PERCENTAGE OF GDP) • Based on year 2012 estimates,
the country’s GDP was composed of following major sectors :
agriculture: 27.7%
industry: 25.1%
services: 47.2%
• Agriculture products: coffee, sisal, tea, cotton, pyrethrum, cashew nuts, tobacco, cloves, corn, wheat, cassava, bananas, fruits & vegetables.
• Industries: agricultural processing including sugar, beer, cigarettes & sisal twine, salt, cement, oil refining, shoes, apparel, wood products& fertilizer.
• Services: financial services, telecommunication, trade and tourism.
2007 2011 Agriculture. forestry.
fishing & hunting 30 27.7
Mining and quarrying 3.9 3.7
Manufacturing 8.6 10.2
Electricity. gas and water 2.2 2.4
Construction 8.6 8.8
Wholesale and retail
trade. hotels and
restaurants 15.7 16
Transport. storage and
communication 7.2 8.2
Finance. real estate and
business services 12.3 11.4
General government
services 8.7 8.8
Other services 2.8 2.7
Gross domestic product
at basic prices / factor
cost 100 100
Source: Data from National Authorities; estimates (e) and prediction (p) based
on authors' calculations
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ANNUAL AVERAGE REAL GDP GROWTH RATE
• Annual Average Real GDP Growth Rate 7.0% (2003 – 2012)
• The annual growth rate in GDP measures the change in the value of the goods and services produced by the country economy during the period of a year
0
1
2
3
4
5
6
7
8
9
10
Real GDP growth (%)
Southern Africa - Real GDPgrowth (%)
Africa - Real GDP growth (%)
Source: AfDB, Statistics Department AEO. Estimates (e); projections (p)
MACROECONOMIC INDICATORS
In summary between 2011 and 2014:
Real GDP Growth Rate projected to increase from 6.4% to 7%.
Real GDP per capita growth also projected to grow from 3.4 % to 3.9%.
Consumer Price Index (CPI) inflation is projected to decrease from 12.7 % to 6.9 %.
Budget balance as % of GDP is expected to decrease from -6 to -3.1.
Current account balance as % of GDP projected to decrease from -11.9 to -10.8.
2011 2012(e) 2013(p) 2014(p)
Real GDP
Growth
6.4 6.4 6.9 7
Real GDP
per capita
growth
3.4 3.3 3.8 3.9
CPI
inflation
12.7 16.1 8.4 6.9
Budget
balance %
GDP
-6 -9.1 -3.9 -3.1
Current
account
balance %
GDP
-11.9 -11.1 -11.9 -10.8
Source: Data from National Authorities; estimates (e) and
prediction (p) based on calculations
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POPULATION TRENDS
• The population of Tanzania has more than tripled from 12.3 million in 1967 to 44.9 million in 2012
• A young population age structure, with 43.9 percent of the population aged below 15 years, and 3.9 percent aged 65 years and above.
• The median age of the Tanzania’s population is 18 years.
• Dar es Salaam accounts for 10 percent of the total Tanzania Mainland population
Source: National Bureau of Statistics
WHY INVEST IN TANZANIA?
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10 Most Attractive Investment Destinations in Africa...
Tanzania’s Advantages:
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Tan
zan
ia’s
inh
ere
nt
adva
nta
ges
Government’s Commitment
Good Governance & Political Stability
Predictable Investment Climate
Preferred Investment Destination
Strategic Geographical Location
Gateway to Potential Markets
Attractive Investment Regime
Strong Public-Private Partnerships & Interactions
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Source: World Bank; Doing Business Index 2012;
• Ever since the mid 1990s Tanzania has
followed a path of liberalisation and
privatisation. It has welcomed foreign
investment and managed to attract more
FDI than Kenya or Rwanda, particularly in
areas such as agriculture, tourism, mining
and FMCG
• The government is continuing to pursue
Public Private Partnerships (PPP) for
infrastructure, agriculture, energy and
other strategic investments. Privatisation
and modernisation of key assets is a main
focus area
• Policies and laws defining incentives for
investment are continuously being updated
and improved
• Relative to the rest of Africa, Tanzania
continues to be competitive in the World
Bank’s Doing Business Index. In the
category “enforcing contracts“ Tanzania is
the best performing country in Sub-
Saharan Africa
Enforcing Contracts (Doing Business Index 2012)
Ranking of Sub-Saharan African countries
Foreign Direct Investment (FDI), USD billion, 2000-2010
1. Government Commitment to Investments & Private Sector Development
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• Tanzania is a stable, multiparty
democracy with a Competent Executive
under President, Democratic Parliament
and An Independent Judiciary.
• Presidential elections are held every 5
years. The current President will be
stepping down in 2015, followed by the
tradition of free and fair elections between
different candidates and parties
• Became independent in the early 1960s.
Since then, we been without civil wars or
ethnic rivalries. High Observant to Good
governance practices and Freedom of
Expression where; Media, Civil Societies
and opposition parties are able to operate
freely and challenge the ruling party openly.
• According to Transparency International,
Tanzania ranks as one of the least corrupt
countries in the region
Source: Mo Ibrahim Foundation, Press Freedom Index 2011
Ranking of countries in Mo Ibrahim Governance Index, 2011, (Score/100)
Ranking of countries in Global Press Freedom Index, 2011, Rank
<<1>> Tanzania is one of the most open and stable democracies in Africa 2. Tanzania: Governance & Political Stability
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• With GDP growth averaging 7% per year, Tanzania is
one of the fastest growing economies in East Africa
• Other growth indicators over the last decade:
– The number of tourists to Tanzania has grown
by more than 70% to 780,000
– Consumption expenditure has grown by 96%
– The number of cell phone subscribers has
increased from 110,000 to 21 million
– FDI of more than US$5billion was invested in
the country’s booming agriculture, mining,
FMCG and other industries
Source : World Bank
Average annual GDP growth, %, 2001-2010
+175%
Number of tourists visiting Tanzania, thousands
Dar es Salaam
3. Tanzania: fastest growing Economy
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Due to its Predictable Fiscal Investment Regime, there is increasing number of
foreign direct investments in the country. Meanwhile, economic and structural
reforms have led to substantial progress in establishing a functioning market
economy, making it among the Top 10 fastest-growing economies in the world.
4. Predictable Fiscal Investment Regime
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5. Tanzania Ranked as #1 Investment
Destination for Corporates in the EAC
Source: RMB Global Markets Data – September 2013
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Trend of FDI flows into East African
Countries (US $ Million)
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EAST AFRICA
COMMUNITY
(About 130M People)
AGOA (USA)
Africa Growth and
Opportunity Act
Over 6,000 items
China
(Over 4,000 Items)
Negotiated EPA with
European Union SADC
(About 300m People)
Japan, Canada etc
6. ACCESS TO POTENTIAL MARKETS
Tanzania enjoys Preferential Market Access with;
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3 MAJOR PORTS; GATEWAY TO SIX (6) LAND-LOCKED COUTRIES
(Uganda, Rwanda, Burundi, DR Congo, Zambia & Malawi)
Potential Sectors with Investment Opportunities
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2 Livestock
3 Manufacturing
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Health and Education
5 Mining
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Tourism 7
Natural Resources
1 Agriculture & Agro-processing
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Economic Infrastructure
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1. AGRICULTURE
Facts & Figures • Arable Land available 44 mn hectare, but
land under cultivation is 10.2 mn hectares. Available land is 29.4 mn hectare, with high Potential Land at 2.3 mn hectare.
• Reasons to invest in the country include availability of long term lease of 99 years, existance of integrated Road Project to connect rural areas and numerous rivers and lakes for irrigation. Processing and marketing of cash crops is allowed.
Opportunity Available • Cultivation of major cash crops including
Coffee, Cotton, Tea, Tobacco &Cashew and food crops such as Maize, Rice, Pulses & Wheat.
• Global Companies in Large Scale Farming include Brooke Bond United Kingdom for Tea & Illovo, South Africa for Sugar.
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
2007 2009 2011
Tanzania Rice Imports (Million USD)
CAGR 25%
2. LIVESTOCK Facts & Figures
• National stock is 15 million, out of which only 2% is commercial stock.Ranching accounts for 1% of total beef. Less than 5% of all hides are processed to leather. We are net importers of milk and related products. Deficit of around 170 million litres of milk per annum.
• Low per capita consumption of eggs ad meat at 17 eggs and 1 kg of meat respectively. Ony 50% of hatching capacity of 30 mn eggs utilised.
Opportunity Available • Establishment of beef processing plant in
country . Commercial scale poultry and dairy farms are also required .
• 40% export levy on unprocessed skins creates a significant competitive advantage for processing industry in the country.
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3. MANUFACTURING Facts & Figures • Large Agriculture Sector contributing Up to
50% GDP from agriculture, but little value addition resulting into high post harvest losses of upto 40%.
Poor packing technicques and raw material exports to countries such as China and India
Opportunity Available • Huge potential for direct exports to USA
(AGOA) and EU (EBA). Also opportunity for Exports after value additon in China and India.
Cashew, coffee have high export potential.
Other potential manufacturing industries in Agro Processing and dairy products,
Textiles, clothing and leather products. Chemicals and fertiliser. Cement and Iron and Steel.
Tanzania sugar demand & production, 2001-2020 (Tons/year)
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200
400
600
800
1000
1200
2001 2004 2007 2010 2013 2016 2019
304
508
628
>600,000 tons
supply gap by 2020
Production
>300,000 tons
current supply
gap
4. ECONOMIC INFRASTRUCTURE Facts & Figures • Tanzania has road network totalling 85,000
km; only 5% of the road network is bituminised. Country uses three international airports as well as 5 major domestic airports. Major ports include Dar es Salaam, Tanga and Mtwara; as well as several lake ports.
• The railway system has a track length of 3,685 km, including the TRL and TAZARA lines. Hydropower accounts for approximately half of Tanzania's total power generation. Tanzania’s energy demand is expected to grow by between 5% and 8.5% each year for the next 5 years
Opportunity Available • Huge untapped opportunity in the power
generation sector. Large road construction works as well as PPP opportunities.
• Investment opportunities in developing inland container depots ; development of extended railway lines and sea and lake ports.
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5. MINING
Facts & Figures • Tanzania's mining industry is envisaged to
double in value to $1.28bn from $0.64bn between 2010 and 2015 [study by Business Monitor International].
• Tanzania ‘s gold production currently stands at ~40 tons a year.
• Basemetals found in a belt running from Kagera through Kigoma to Mbeya, Ruvuma and Mtwara regions.
• Gemstones are found in eastern and western belts running from Kenya border in the northern part to Mozambique in the south and Mbeya and Rukwa regions. They include apatite,niobium, tanzanite which is 1000 rarer than diamonds.
Opportunity Available • Mining and exploration activities. Tanzania is
estimated to have over 40 Trillion Cubic Feet (TCF) of recoverable natural gas. Gemstone carving and cutting, Polishing and Jewellery making are also important investment areas.
6. NATURAL RESOURCES
Facts & Figures • Jatropha grows in north east, south west
regions. Oil palm grows in eastern, western, central regions. Fresh water lakes in Victoria, Tanganyika, Nyasa. Marine resources along 800 km coastline. Fish resources of 730,000 metric tons/annum.
• Honey is organic with good demand from Europe, Japan and Middle East.
• 33.5 million hectares of woodlands, out of which 39% are gazetted as forest reserves. 80,000 hectares under managed plantation forestry and 1.6 million hectares under water catchments
Opportunity Available • Huge Potential for Bio Fuel to reduce oil
import bill. Good prospect for pulp, paper
and wood products . Opportunity to produce honey for local and export markets.
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7. TOURISM
Facts & Figures
• Tanzania is a renowned tourist destination and has allocated more than 25% of its total area to wildlife parks and game reserves.
• It has 16 national parks, 17 game reserves, 50 game-controlled areas, and several other iconic attractions like Mt. Kilimanjaro and Zanzibar.
• Has 3 Key tourist circuits, with Northern circuit comprising Serengeti National Park, Southern circuit that has Selous Game Reserve and Beach Tourism providing some of the finest unpolluted beaches in Africa
• Zanzibar and Pemba , the exotic ‘Spice Islands’ are famous for their history, deep-sea game fishing and beaches
Opportunity Available • Construction of hotels & lodges,
Recreational facilities like amusement parks, deep-sea fishing, sea and lake cruising.
• Other opportunities for conference and eco- tourism, tour operators & transport services
8. HEALTH AND EDUCATION
Facts & Figures
• Low Teacher to Pupil Ratio: 1 teacher for 13.6 pupils in USA, 1 teacher for 16.8 pupils in China, 1 teacher for 18.7 pupils in UK , 1 teacher for 33.5 pupils in South Africa and 1 teacher for 50.8 pupils in Tanzania.
• Low Physician to Patient Ratio: 27.7 physicians for 10,000 patients in UK, 24.2 physicians for 10,000 patients in USA, 14.6 physicians for 10,000 patients in China, 7.6 physicians for 10,000 patients in South Africa and 0.1 physicians in for 10,000 patients Tanzania
Opportunity Available
• Over 5,000 students going abroad/annum, while many patients from Africa go to India.Potential to emerge as Centre for Excellence in East Africa.
• Opportunitiesfor Universities, Technical College, Specialised Hospitals and Research Centres.
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TREND OF NUMBER OF PROJECTS REGISTERED WITH TIC FROM 2005-2013
0
550
678 701
871
572
509
825
869 885
0
100
200
300
400
500
600
700
800
900
1000
YEAR 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: TIC data
FDI INFLOWS TO TANZANIA FROM 2007 – 2012 (US$ MILLION)
Source: UNCTAD - World Investment Report – 2013
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DISTRIBUTION OF TIC REGISTERED PROJECTS IN 2013
0
50
100
150
200
250
300
Source: TIC data
OWNERSHIP OF PROJECTS REGISTERED BY TIC IN YEAR 2013
30
Source; Tanzania Investment Centre, 2013
LOCAL PROJECTS 47%
FOREIGN PROJECTS 21%
JOINT VENTURE 32%
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Source: TIC Database (2013)
TOP TEN (10) LEADING COUNTRIES WITH REGISTERED INVESTMENTS IN TANZANIA
(BY VALUE OF MILLION US$) FROM 2006 - 2012
S/N Country No. Of Projects Jobs Value(Mln. USD) Trend (%)
1 UK 934 271,202 5,180.56 35.86
2 China 455 72,068 2,175.53 15.06
3 India 365 51,419 1,916.63 13.27
4 Kenya 455 50,786 1,504.80 10.42
5 USA 218 48,469 998.65 7.25
6 Netherland 162 13,747 950.44 6.58
7 S.A. 208 20,406 706.85 4.89
8 Canada 195 25,489 539.21 3.73
9 German 146 14,763 313.34 2.17
10 Oman 89 6,157 112.65 0.78
TOTAL 3,227 574,507 14,398.66 100.00
TANZANIA INVESTMENT CENTRE
INVESTMENTS WITH JAPAN INTEREST FROM 1997 - DEC. 2013
S/N Sector No. of Projects Jobs
Value in Miln
US$
1. Economic Infrastructure 1 0 2.815
2. Tourism 2 21 1.55
3. Manufacturing 2 52 4.805
4. Services 1 0 22.6
Total 6 73 31.77
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WHERE TIC COMES IN...
INVESTMENT AVENUES IN TANZANIA
1.Tanzania Investment Centre (TIC)
General investment promotion and facilitation
(Manufacturing, Tourism, Agriculture,
Infrastructure, etc.) Special incentives for
“Strategic investors”
2. Export Processing Zones Authority (EPZA)
Provides promotion and facilitation services in
special zones (EPZs & SEZs). Offers special
incentives for export oriented manufacturing
investments.
3. Zanzibar Investment Promotion Authority (ZIPA)
Investment promotion, facilitation, Free Economic
Zones and Free Ports in Zanzibar
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ROLES OF TANZANIA INVESTMENT CENTRE
• Tanzania Investment Centre was established by an
act of parliament (Tanzania Investment Act (TIA),
1997) with the following objectives;-
• To promote various investment opportunities
available in Tanzania
• To facilitate investors to obtain relevant permits,
approvals and licenses required to establish
business
• To advise the government on investment policy and
related issues.
WINDOWS FOR GRANTING FISCAL INCENTIVES
A) PPP Projects
Receive Fiscal Incentives through PPP Law
B) Priority Sector Projects
Receive Fiscal Incentives through Investment Law
C) Specialized Sector Projects
Receive fiscal incentives through specific laws (e.g. EPZ/SEZ/Mining/Gas etc.)
D) Service Sector Projects
Do not receive fiscal incentives but can process Non-fiscal Incentives through TIC
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INVESTMENT FACILITATION SERVICES
Senior Government officials from the following
Ministries/Government Departments have been stationed at
TIC to assist investors to obtain various licenses and permits
they need in order to start business.
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1
2
• Registrar of Companies
• Immigration
3
4
• Business Licensing
• Land
5
6
• Labour
• Tanzania Revenue Authority
For Guidance and more info, visit our new web portal…
www.tic.co.tz
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Our new website provides a one-stop platform for foreign investors to access information relevant to making investments in Tanzania
Key benefits of the new system for domestic & foreign investors:
1. Transparency - the administrative process clearly detailed and made public for FREE
2. Time-required - indicates the time in number of hours or days required to complete a step in the process
3. Information on fees - it states clearly the official fees that may need to be paid for a particular administrative step
4. Multi-language - the information is available in over 60 different languages
5. Direct contact - up to date contact information on who the responsible official is
6. Detailed Guidelines- Investment Opportunities in Tanzania
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OUR COMMITMENT TO INVESTORS
Application Maximum Time taken
Company Registration 3days
Industrial License 1day
Business licensing 1day
Certificate of incentives 7days
Resident Permit Class ‘A’ 14days
Resident Permit Class ‘B’ 14days
Special Pass 1day
Appointment with TIC staff Immediately
Arranging appointments 24hours
Investor Access pass (Airports) 3days
NATIONAL INVESTMENT STEERING COMMITTEE (NISC)
In an effort to improve the business environment and foster
economic growth through increased investment the
Government formed a National Investment Steering
Committee chaired by the Hon. Prime Minister.
Other members of the committee are Minister of Finance,
Minister of Industry and Trade, Minister of Agriculture, Minister
of Lands, Minister for Investment and Empowerment, Attorney
General, Governor of the Bank of Tanzania and the Executive
Director TIC (Secretary).
This committee is entrusted with the role of investment policy
formulation and solving problems of investors on a fast track
basis.
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INCENTIVES UNDER THE TIA, 1997
A) Tax incentives
Projects capital goods i) Import duty – 0% ii) Value added tax – 0% Deemed capital goods i) Import duty – Exempted by 75% ii) Value added tax – Reduced to 10% Capital allowance i) Agriculture – 100% ii) Mining - 100% iii) Manufacturing – 50% iv)Fish farming - 50%
INCENTIVES UNDER THE TIA, 1997
A) Tax incentives (continue) v) Tourist services – 50% vi) Hotels - 50% Others - Depreciation allowance ranging from 37.5% to
5% depending on the class of the depreciable asset. B) Non Tax incentives Automatic immigration quota of up to 5 expatriates at the
initial stage of the projects Unconditional transferability through any authorized dealer
bank in freely convertible currency of ; net profit, loan payment (servicing a foreign loan) royalties , fees and charges in respect of any technology transfer agreement,
payment of emoluments and other benefits to foreign personnel.
C) Strategic investor status In addition to existing investment incentives a potential
investor may apply for a strategic investor status to seek additional investment incentives
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CASE EXAMPLE: DANGOTE INDUSTRIES (TANZANIA) LIMITED
• With an estimated population of about 42 million, Tanzania's per capita cement consumption of 50.0 kg per annum fall way below global average.
• The improving performance of the economy has fuelled strong growth in cement demand and the prospects remain favourable, given the linear relationship between economic growth and cement consumption.
• Dangote Cement PLC is setting up a 1.5 MTPA Integrated Cement plant in port city of Mtwara in Tanzania. This project will cost 750 Million US$ and will turn Mtwara town into a booming city.
• With good Limestone and Gypsum deposits, Tanzania provided sound investment opportunities in the sector and also offered an ideal opportunity for Dangote Cement to foray and consolidate its operations in Eastern Africa.
• The massive investment is expected to also create about 6000 jobs direct and about 12,000 indirect employments upon completion.
CASE EXAMPLE: DANGOTE INDUSTRIES (TANZANIA) LIMITED
• The factory will be completed in the second quarter of 2015.
• Upon completion of the industry, it is expected that Tanzania will be a net exporter of cement
• There is a projected strong demand from neighbouring countries of Burundi, Rwanda and Democratic Republic of Congo.
• Dangote was registered at TIC in 2006 and got strategic investor status in December 2011.
• Performance contract was signed with Government in June 2013; while land title was issued through TIC in 2012.
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C O N C L U S I O N
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We welcome you to invest in Tanzania.
Tanzania Investment Centre is ready and will be happy to work
with you and accord due assistance to conform to both legal and
regulatory requirements, until your investment project is fully
established as per your plans.
THANK YOU FOR YOUR ATTENTION
Contacts Executive Director Tanzania Investment Centre P.O.Box 938 Dar es Salaam Tel: +255 22 2116328-32 Fax: +255 22 2118253 Email: [email protected] Website: www.tic.co.tz
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