SPEECH BY H.E. JAKAYA MRISHO KIKWETE, PRESIDENT OF THE UNITED REPUBLIC OF TANZANIA, AT THE LAUNCH OF THE COST OF

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1 SPEECH BY H.E. JAKAYA MRISHO KIKWETE, PRESIDENT OF THE UNITED REPUBLIC OF TANZANIA, AT THE LAUNCH OF THE COST OF DOING BUSINESS 2007 REPORTKilimanjaro Kempinski Hotel, Dar es Salaam, Friday, 6 th October, 2006 Hon. Dr. Juma Ngasongwa, Minister for Planning, Economy and Empowerment, Ms. Judy O Connor, World Bank Country Director for Tanzania and Uganda, Mr. Nigel Twose, Senior Manager, Investment Climate, Private Sector Development Unit, World Bank Group, Mr. Elvis Musiba, Chairman, Tanzania Private Sector Foundation, I feel greatly honoured to be given the opportunity to join you here today at the launch of this important report on the Cost of Doing Business I am delighted to see in the audience key stakeholders in business, prominent advocates of the private sector, innovative and forward-looking Tanzanian entrepreneurs, a large set of my colleagues in the government and our development partners. What is particularly important is that as diverse as all of us here are, we are united by important common objectives: to make Tanzania a more business friendly place, to improve the competitiveness of our economy and eventually better the living standards of all Tanzanians. I pay special tribute to the World Bank for preparing this Report. The report is tremendously useful to the business community, which needs to make wise choices as to where to put their money; to policymakers, who need to devise policies attractive to investments; to the civil society, which needs to advocate for equitable opportunities for all; and to donors, who need to make assessments as to where assistance is most deserving.

2 As a country, we have come a long way! To even be able to discuss the cost of doing business for the private sector in Tanzania is an achievement in itself! Only less than twenty years ago, that concept was alien in Tanzania and to Tanzanians. In the presence of such an informed audience, there is little need for me to describe in detail the achievements that Tanzania has made throughout the past two decades of reforms. Suffice it to say that we have succeeded. Reforms have worked and have produced positive results. The Tanzanian economy is now on sound and solid footing. GDP growth is steady and promising. Last year the economy grew by 6.8 percent. Inflation is in single digit and, specifically it was 5 percent last year (2005). We intend to get to 4.5 per cent by June next year. Forex reserve situation is healthy, assuring us 6.6 months of imports. Government revenue is steadily increasing, and the government is resorting less and less to bank borrowing. Financial service sector reforms are now deeply entrenched. There are now 28 private banks, forex bureaus and private insurance companies operating in the country. There is also a growing stock market. The process of reform, aimed at improving on the performance of the economy and anchoring properly the place and role of the private sector, is continuing. I know, our biggest challenge is to sustain these gains and advance to greater heights of success. It is a daunting challenge, we are excited about it and ready to rise to the challenge. Inevitably, this requires us to ensure among many things, that the cost of doing business is steadily being reduced. Fortunately for us, in Government, we

3 understood early on that there are some specific measures we need to take to improve business environment and engender the growth of the economy and to our private sector. Indeed, we have been taking those measures and continue to do so. One of the first steps taken, was the creation of Tanzania Investment Centre (TIC) in 1997, a successor institution to the Investment Promotion Centre of The TIC is the primary agency of the Government in coordinating, encouraging, and facilitating investment in Tanzania, in addition to advising the Government on investment policy and related matters. With the TIC, all important investment services such as registration, taxation, immigration, issuance of incentives and licensing are provided under one roof. This way investors are spared the hustle and time they would spend moving from one office to another. Indeed, it takes less than 14 days from the day someone lodges an application for investment to the day he or she is presented with a certificate of registration. These improvements in efficiency speak for themselves when one looks at the performance of TIC in the last 10 years. During that time TIC approved 2,321 projects worth USD billion. These projects have an employment potential of 447,290 people. FDI grew from USD 150 million in 1995 to USD 430 million in I am confident that these positive trends are set to continue. We are determined to ensure that this remains the case. I am also hopeful that this year s report on Doing Business in Tanzania will go a long way towards encouraging more investors to look at Tanzania as an attractive investment destination. Ladies and Gentlemen

4 We are determined to improve more on the investment and business environment in the country. It is for this reason that today, the Government is engaged in key reforms aimed at improving the investment and business climate in Tanzania. The five year Business Environment Strengthening for Tanzania (BEST) Programme developed in 2002 in the case in point. The BEST programme aims at lowering the cost of doing business by eliminating legal, regulatory, administrative and institutional barriers that inhibit the development of a competitive private sector. We have also drafted a Business Activities Registration Bill, which is now ready to be tabled before Parliament. The Bill introduces significant changes distinguishing business registration from business licensing, and makes it extremely simple and costless for any entrepreneur to register his business. These reforms are beneficial to both international and local investors and create room for local and foreign investors to engage in business with less bureaucracy. Ultimately, we intend to make it simple to open, operate and close business. Also, with the support of the World Bank, through the recently initiated US $ 95 million Tanzania Private Sector Competitiveness Project, we are now expanding the scope of the land reforms. The idea is to be able to develop an efficient registration process for land titles. The Ministry of Lands, Housing and Human Settlements Development is also being supported to strengthen the land information systems and to improve the survey and mapping infrastructure of the country. Modernisation and harmonisation of land and business registries is also an important priority in our quest to reduce the cost of doing business. New resources are also being brought to the reform of Commercial Law and Justice and the establishment of a National Individual Identification system. All these measures will add up to making business transactions easier to initiate, manage, execute and enforce in Tanzania. We want ours to be a credible, predictable and, obviously profitable, business environment.

5 We all know that free-market and competition without regulation is chaos. So, we have recently made significant improvements in establishing a modern regulatory framework to oversee fair competition and regulation of those sectors that exhibit natural monopoly characteristics. The institutions that have been created in this regard include the Fair Competition Commission (FCC); the Energy and Water Utilities Regulatory Authority (EWURA); the Surface and Marine Transport Regulatory Authority (SUMATRA); the Tanzania Civil Aviation Authority (TCAA); and the Tanzania Communication Regulatory Authority (TCRA). A Fair Competition Tribunal has also been established, with the mandate to resolve conflicts related to unfair trade and business practices. My government is committed to see that these regulatory authorities act both responsively and responsibly. We want regulation that does not stifle business. We are also involved in simplifying our tax system, and in making it easier for taxpayers to comply with its requirements. With the Customs Modernization Project, for instance several improvements in customs clearance have recently been introduced in two of our major national ports of entry: at the Dar-es-Salaam port and at the Mwalimu Julius Nyerere International Airport. We now have a computerised customs management system which complies with most foreign trade procedures. We have also installed oil flow meters and mobile container scanners. These improvements have reduced clearance time of consignments from an average of 3 days and 18 hours to merely 2 hours at the airport, and from an average of 6 days and 9 hours to 2 days and 12 hours at the Dar es Salaam port. This positive trend obviously reduces the cost of doing business. But it is something we intend to continue to do more to enhance performance and efficiently. Given that I am addressing the Tanzania private sector, the World Bank and prominent government officials, today is the best opportunity for me to take pride of the achievements of our country but also to state the challenges that lie ahead of us and to spell our commitment clearly and loudly. We remain committed to stay the course of reform, to continually improve upon the business climate and to promote private sector development.

6 We believe that achieving these goals will require us to: - Create a regulatory and legal environment that encourages private sector investments and entrepreneurship; - Provide infrastructure and services that provide a high quality and reasonable cost platform for business activity; - Provide the right macro-level environment for sustained investment and business growth; - Engage in sound and informed dialogue with business to understand business s competitive needs and priorities for public sector action, and to address those priorities with urgency; - With collaboration from business, create standard for Tanzania s performance, and improve Tanzania s rankings on global indices. We can only succeed in these efforts with the continued support and cooperation of all of you here, business community, development partners and the civil society. Clearly, economic reforms take place in the political context. Failure to implement or even explain the content and objectives of reforms to the electorate has brought down governments in many places. Thank god that that has not been the case here. Our people have been patient and understanding despite the difficult nature of some of the measures we had to undertake. Distinguished Participants,

7 I want to thank all of you for believing in Tanzania s potential. All that we need now is to focus our efforts to turn these potentials into more goods and services produced, more exports, more jobs, and faster growth. We all know that we will be presented by a number of difficulties in that quest to being competitive. Infrastructure development appears to be critical. We are taken action. At the moment also the question of energy is giving us a bit of a run but we are addressing it adequately and its effects on competitiveness will only be temporary. We are on right track and we think we can effectively deal with all the impediments to competitiveness and barriers to operate business effectively and efficiently. If, as this report state, we reduced the cost to register new businesses by 40 percent, nothing can stop us from doing more. If, as this report indicates, we dropped the customs clearance times from 51 to 39 days for imports and 30 to 24 days for exports, it shows that we have the capacity to do more. This report gives us encouragement as it tells us that we are doing something right, but we can do better only that we must not get derailed. We should stay the course, and stay we shall. I thank you all for your kind attention and may I now say that the Cost of Doing Business 2007 Report is now officially launched.