International: Tanzania Textile Industry Development and Investment Potential
1. National Profile of Tanzania
Tanzania is located in eastern Africa, south of the equator, and borders the Indian Ocean to the east. It has a coastline of about 1400 kilometers, three seaports, namely Danga, Dar es Salaam and Mtwara, and three lake ports namely Mwanza, Keira and Kigoma. Among them, the port of Dar es Salaam is the main port in Tanzania and the second largest port in East Africa. Its annual throughput is about 14 million tons. More than 95% of Tanzania's international trade is carried out through this port. Import and export trade services for landlocked countries.
The Tanzanian government attaches great importance to domestic infrastructure construction, and is accelerating the expansion of the Dar es Salaam Port. After completion, it will optimize the transportation of goods from the Dar es Salaam port to the inland areas, and enhance Tanzania's location advantages in East Africa. The roads and railways in Tanzania are in disrepair for a long time, and the operation capacity is poor. There are currently four international airports. From March 2021, Tanzania has opened direct flights from the capital Dar es Salaam to Guangzhou, China.
Tanzania is one of the fastest growing countries in Africa and one of the most stable economies in East Africa. In 2020, Tanzania will achieve a GDP of US$63.2 billion, an economic growth rate of 1.03%, and a per capita GDP of US$1,090. The African Development Bank predicts that Tanzania's economy will recover strongly in 2021, with an expected growth rate of 4.1% and 5.8% in 2022. From the current point of view, public investment is the main driving force for economic growth in Tanzania, including hydropower projects and the development of standard gauge railway infrastructure. The Tanzanian government is stepping up reforms and actively taking measures to improve the domestic business environment to promote private sector investment.
2. Current status of the textile industry
The Tanzanian government attaches great importance to the development of the textile and garment industry. The Ministry of Trade and Industry of Tanzania released the "2016-2021 Cotton to Clothing (C2C) Development Strategic Plan" in 2016, which is called the development of Tanzania's cotton, textile and garment industries. The blueprint aims to strengthen the development of the domestic textile and garment industry and reduce dependence on second-hand clothing imports. At present, the textile and garment industry in Tanzania is still in the initial stage of development, with a weak industrial foundation and an incomplete upstream and downstream industrial chain. There are only a few textile and garment factories in the country, mainly distributed in Dar es Salaam, Morogo Luo (Morogoro), Arusha (Arusha) and Mwanza (Mwanza).
Cotton is an important economic crop in Tanzania. According to the data from the United States Department of Agriculture, Tanzania's cotton production will be 82,000 tons in 2020-2021, 70% of which will be exported. The main export destinations are Bangladesh, India and Indonesia. In the past few decades, Tanzania's cotton industry has developed slowly, its international competitiveness has been declining, and the gap with other major cotton producing countries in the world has been widening. Currently, the production and quality of cotton in Tanzania need to be improved urgently.
According to the Tanzania National Bureau of Statistics, Tanzania's textile and clothing exports in 2018 were US$230 million, mainly to China, Kenya and the United States. Among them, exports to China were 38.06 million US dollars, accounting for 16.7%, and exports to Kenya and the United States accounted for 11.3% and 8.0% respectively. The main product exported by Tanzania's textile industry is cotton, with an export value of US$85.48 million in 2018, accounting for 37%. China is also Tanzania's largest source of textile and clothing imports. In 2018, Tanzania imported US$302 million of textile and clothing, and China accounted for 50%. India and Pakistan ranked second and third respectively. From the perspective of imported product categories, Tanzania mainly imports other textile products (including home textile products), with an import value of 123 million US dollars, accounting for 40.6%.
3. Cooperation between China and Tanzania textile industry
China is Tanzania's largest trading partner and largest source of foreign investment. In 2020, the bilateral trade volume between China and Tanzania will reach US$4.587 billion, a year-on-year increase of 10%. China is also an important textile and clothing trading partner of Tanzania. According to Chinese customs statistics, the bilateral trade volume of textile and clothing between China and Tanzania in 2020 was 763 million US dollars, an increase of 10.6% over 2019. At the same time, China is also Tanzania's largest textile and clothing export market. From the perspective of product categories, China's textile industry exports to Tanzania mainly include knitted garments and accessories, chemical fiber yarns and fabrics. The main product China imports from Tanzania is hemp fiber raw materials, with an import value of 28.86 million US dollars, accounting for 80.9%.
4. Trade and investment policy
foreign trade policy
Tanzania is a member of the WTO, as well as a member of the East African Community and the Southern African Community. Tanzania has reached relevant agreements on market opening with the United States and the European Union. Products invested and produced in Tanzania can be exported to the US and EU markets without tariffs. As a member of the East African Community, Tanzania enjoys tax-free trade among member states, a shared external tariff rate (CET) for imports from third countries, and zero tariffs on imported raw materials. In addition, Tanzania has signed a trade agreement with China. Since 2014, China has unilaterally granted 97% of Tanzanian products import duty-free treatment.
In terms of tax incentives, the Tanzanian government stipulates that wholly foreign-owned or joint ventures with an investment of more than 300,000 US dollars can apply for an "investment incentive certificate" from the Tanzanian Investment Center and enjoy the following tax incentives: used for production and export and identification of export goods Raw materials can enjoy import tariff rebates; export goods are not subject to value-added tax; income tax is exempted until the company's profits are offset against capital investment; foreign-funded enterprises can enjoy 100% capital return, and foreign shareholders can freely remit dividends and dividends; Permits, such as residence permits, work permits, etc.; projects with investment incentive certificates, each enterprise can get 5 jobs for foreigners, etc.
foreign exchange management
Although Tanzania implements foreign exchange control, the policy is relatively loose, and foreign exchange under the current account has been freely convertible. For investment projects, the Tanzanian government guarantees that the following items can be freely exchanged and remitted through approved commercial banks: net profits and dividends from investment and business operations, expenses incurred in obtaining foreign loans, technology transfers registered in accordance with the Investment Law Royalty and fees incurred on agreements, remittances from the sale or liquidation of a business (net of all taxes and other liabilities) or interest on investments, etc.
5. Summary and recommendations
(1) The textile and garment industry is one of the priority industries in Tanzania. The Tanzanian government has established a textile and garment export processing zone to provide a number of preferential support measures for overseas investment enterprises.
(2) Tanzania's textile and garment industry is in the initial stage of development, with a weak industrial foundation and an incomplete industrial chain. The production of cotton is mainly for export, and the cotton used in the domestic textile industry is very limited. It is urgent to increase the added value of cotton products and change the situation of low economic benefits of direct export of raw cotton. In addition, the output and quality of cotton need to be improved urgently. The upstream and downstream of the cotton industry There is a certain space for cooperation.
(3) Tanzania is one of the main beneficiaries of the US African Growth and Opportunity Act (AGOA). Textile and apparel exports to the US market enjoy tariff-free benefits, creating convenient conditions for the development of an export-oriented economy.
(4) Tanzania has backward infrastructure, high transportation costs, and insufficient energy supply such as electricity. At the same time, there are uncertainties in investment policies, and the implementation of preferential policies cannot be implemented in a timely manner, which has affected the confidence of investment companies, and the business environment needs to be improved and improved.