Tanzania, China narrow trade gap

growth in fdi in manufacturing likely to correct imbalance with african nation, envoy says

Both Tanzania and China are working to correct a trade imbalance that heavily favors Beijing, officials say.

Those measures are expected to help return balance to the trade gap in the next four years by increasing investments and bilateral trade between Beijing and Dar es Salaam.

Figures for 2013 show that total trade between the two countries stood at $3.7 billion while the biggest slice of over 80 percent went to China.

The trade imbalance saw China, which exports mainly industrial goods to Tanzania, generate $3.1 billion while $600 million went to Tanzania - an increase of more than 45 percent for both sides.

The Tanzanian growth, according to China's Ministry of Commerce, reflected the impact of zero tariff treatment granted for up to 90 percent of goods exported from Tanzania to China.

The 2013 Sino-Tanzania trade volumes represented a historical high. But still the imbalances need to be addressed by increasing the Tanzanian volume in order to have efficient trade cooperation, officials say.

The major problem causing the huge trade gap between the two countries centered on Tanzania's main exports to China being unprocessed agricultural products, hide and skins and forestry products.

This is unlike the situation with many of Africa's oil and mineral-led economies, which registered surplus on exports.

Ways to bridge the deficit include promoting the services sector by wooing Chinese tourists and increasing Beijing's foreign direct investments in Tanzania.

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 favor 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."

Some have expressed a fear that China's long-term trade imbalance with Tanzania and its growing demand for raw materials would lead to de facto exploitation of a historic partner.

But 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 labor are starting to pay off. Immediately after the second China-Tanzania Investment Forum, the Tanzania Investment Centre registered FDI worth $533.9 million in three months.

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

Though the figures from the third China-Tanzania Investment Forum 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 chose Tanzania among three countries in Africa that will act as models for China's investment programs on the continent. The other two are Ethiopia and Mozambique.

These three would then act as a showcase for China's investments so the rest of the Africa could have examples to follow.

The developers of the investment programs envision that in the next two years, Tanzania would have achieved a higher level given that about 100 investors were expected to invest in Tanzania.

Up to the end of December 2013, Tanzania Investment Centre had registered more than 522 Chinese projects with a value of about $2.5 billion. Large inflows were recorded in the manufacturing sector, which accounted for 354 out of the 522 projects registered.

The investment opportunities in Tanzania are numerous, officials say. For example, despite the country being Africa's No 3 in terms of head of cattle, after Ethiopia and Botswana, the country derives little benefit from that sector because of inadequate means to process and sell the meat. Instead, Tanzania imports over 800,000 metric tons of meat every year.

Some of the Chinese investors are now focused on investing in meat processing, which stands to benefit Tanzania's livestock farmers, who mostly live in the country's rural areas and have an oversupply of cattle.

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