Sino-Tan relations shift to economic ties

 

THE Sino-Tanzanian ties have always been on a healthy mode, based mainly on a political background, which was fogged by the founding fathers of modern China and Tanzania.

However, in the last ten years the mutual and diplomatic relationships enter into a new level shifting from the traditional political to economical ties.

Yes, one will agree, the future looks bright, and it will continue to be so. But behind the recent pragmatic shift from political to economical orientated ties is credited to the current government.

Statistically speaking, the trade between China and Tanzania was insignificantly low in the last ten years compared to today. The relationship was mainly judged on aid, grants and technical support.

In 2007, the total trade volume between China and Tanzania was US$290 million, of which China’s exports were US$180 million and imports US$110 million.

However, in 2013 the trade between the two countries increased to over 20 times to US$3,7 billion though, the biggest slice of about 80 per cent went to China.

The trade imbalance saw China, which exports mainly industrial goods to Tanzania; generate US$3,1 billion while US$600 million went to Tanzania – an increase of more than 45 percent for both sides.

Tanzanian President, Jakaya Kikwete, while in a state visit to China last year said; “though both governments are working on narrowing (the) trade deficit gap, at the moment Dar es Salaam should concentrate on China’s FDIs.

“If you want to go quickly, go alone, but if you want to go far, go together,” Mr Kikwete said when delivering his keynote speech at the third China-Tanzania Investment Forum in Beijing last October.

The outcome of the ever increasing economic ties is by design not by chance. Some years back, Tanzanians managed to negotiate with China for special tariffs treatment.

According to China’s Ministry of Commerce, the 2013 historic growth reflected by impact of zero tariff treatment granted for up to 90 per cent of goods exported from Tanzania to China.

That way, as Abdulrahaman Shimbo, Tanzania’s Ambassador to China, says; the trade imbalance may ease as Beijing imports more value added goods from Dar es Salaam.

“The existing trade surplus in China’s favour will be addressed in about four years, as China will import more goods from Tanzania, especially minerals, gas and value-addition agricultural products,” Shimbo says.

The envoy adds: “We can improve the imbalances through FDIs in manufacturing and processing, thus increasing Tanzania’s exports to China.”

Tanzania has worked hard to improve its investment environment and revived efforts to address the country’s unreliable electricity, which has been considered one of the biggest obstacles to running a business in the country.

The fruits of that labour are starting to pay off. Immediately after the second China-Tanzania Investment Forum, in Dar es Salaam, the Tanzania Investment Centre registered FDI worth US$533.9 million in three months.

The value of projects registered by Chinese investors from July to September 2014 stood at US$533.9 million compared to US$124.14 million for projects registered from July to September in 2013.

Though the figures from the third China-Tanzania Investment Forum, which was held last October, are not out, the amount of foreign direct investment is expected to increase following the attendance of 500 Chinese firms and potential investors.

Officials from both sides noted that both nations have expressed a willingness to work out ways to increase trade volumes in a way that benefits both partners.

For instance, China chooses Tanzania as among three countries in Africa that will act as models for China’s investment programmes on the continent.

The other two are Ethiopia and Mozambique. Under the five years programme hundreds of businesses and billions of dollars will take the partnership to a new level of cooperation to create 500 Chinese industries in Tanzania.

The programme, that would turn Tanzania into a Chinese industry hub, will see 100 industries established in a year, boosting the country’s manufacturing output, which at the moment ranks as the top foreign revenue earning sector.

 Ambassador Shimbo says the investment, with 100 industries a year, is good news for the country.

“While this is a point of maturity in bilateral relations that we share with China, the coming of these industries is a challenge (to Tanzania) in terms of our preparedness to welcome these investors,” he says.

The Export Processing Zone Authority has already been given directives to prepare, but there are some areas that are ready, while others are not.

The Retired Lieutenant General says its pace of development over the past 10 years has been phenomenal and Tanzania can learn from its example.

Ambassador Mbelwa Kairuki, director for Asia and Australasia at the Ministry of Foreign Affairs and International Cooperation, says there was a misconception among many that Tanzania gains little from China.

Kairuki said that in 2014 while the volume of trade amounted to US$3,7 billion, 6,000 people from Tanzania went to China to do business. In the same year the country attracted private capital of over US$2,5 billion and loans of US$1,9 billion from China.

On infrastructure development, China is assisting with the construction of the US$10 billion Bagamoyo Mega Port that will have the capacity of handling 20 million containers a year.

The Mtwara-Dar es Salaam gas pipeline which is nearing completion would increase gas supply to the business capital of Tanzania while open a room to further connection to the rest of East Africa.

On housing projects, National Housing Corporation (NHC) signed a US$1,7 billion deal with two Chinese companies for three housing projects, among them a financial square to be built at Upanga in Dar es Salaam.

Currently, Dar es Salaam, which is the commercial city of the country, lacks a financial centre making it difficult to make optimal use of its strategic geographical location to become the regional trade and financial hub.

“The three projects are self-financing after we conducted a necessary risk analysis,” Mr Nehemiah Mchechu, Chief Executive Officer of NHC says. A recent study by Tanzania’s Research for Poverty Alleviation shows Tanzanians believe that China’s economic and political influence on Tanzania is mostly positive.

Tanzanians say China has more influence on Tanzania than the US, UK, India and South Africa, or international organizations such as the World Bank. The study shows that more Tanzanians prefer China as a model for Tanzania’s development, at 35 percent, with the US at 30 percent, the UK at 6 percent, India at 4 percent and South Africa at 10 percent.

Lu Youqing, China’s ambassador to Tanzania, says the founding fathers of the two countries played fundamental roles in cementing the cordial relations that exist and that this relationship needs to be nurtured. Up to the end of December 2013, the Tanzania Investment Centre had registered more than 522 Chinese projects with a value of about US$2, 5 billion.

Large inflows were recorded in the manufacturing sector, which accounted for 354 out of the 522 projects registered. China established diplomatic relations with Tanganyika and Zanzibar on December 9, 1961 and December 11, 1963 respectively.

When Tanganyika and Zanzibar were united and became Tanzania on April 26, 1964, it was natural for China to extend its diplomatic ties with Tanzania. – Daily News Tanzania

April 2015
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