Tanzania Wants to Make You Rich

Thursday marked the 16th anniversary of the bombings of the U.S. embassies in Kenya and Dar Es Salaam, Tanzania. In prepared remarks, Secretary of State John Kerry called the occasion “a somber reminder of the continued terrorist threat that we face” in Africa and around the world. Kerry also noted that this week’s now-concluded U.S.-Africa Leaders Summit “confirmed our shared commitment” to global security. But officials in Africa, Washington, and in the business community hope that that shared commitment also extends to the world of global capitalism. And the summit showed that they have every reason to be optimistic.

On Tuesday, President Barack Obama announced $14 billion of trade deals between the United States and Africa. The targeted sectors include clean energy, aviation, and infrastructure. The White House is also kicking in another $12 billion to boost PowerAfrica, Washington’s signature electrification initiative for the continent.

Deals like these were the chief purpose of this week’s U.S.-Africa Leaders Summit in Washington, D.C. Tanzania, for one, intends to transform its rural economy and develop its natural gas sector -- and make American investors rich in the process. That’s the vision its trade ministers laid out during their trip to Washington.

At an invitation-only breakfast, Tanzanian trade ministers met an eager coterie of U.S. government officials and business executives eager to plant the seeds of lucrative partnership. There are plans to increase iron-ore exports, boost on- and off-shore oil and gas exploration, and build more energy pipelines. Perhaps the most aggressive salesman for the country’s future was Dr. Adelhelm Meru, the director general of Tanzania’s Export Processing Zones Authority. His plan: special economic zones (SEZs), districts where business regulations are light, licensing is easy, and corporate taxes are nonexistent -- for the first 10 years at least.

The 2,000 hectares worth of zones are spread across Tanzania and host some 118 companies, many of which peddle in agribusiness such as cotton, coffee, cashews, and oilseeds. Meru estimates that 44 percent are homegrown companies while 42 percent are foreign owned. Most of the rest are joint ventures in which foreign companies partner with local entities. The Japanese textile company Sumimoto, for example, makes malaria-preventive mosquito nets and employs some 8,000 Tanzanians.

A largely agrarian country, Tanzania’s economy is vulnerable to both shifting winds and turbulent markets where rising prices for basic supplies, such as seeds and fertilizer, regularly imperil its food security. This is a place where only 14 percent of the population has access to electricity, thanks to a combination of insufficient infrastructure and sometimes-unreliable governance. About half of Tanzania’s 48 million raise livestock for a living, a risky proposition for a country prone to droughts like the disastrous one of 2009 and 2010 that killed some 65 percent of central Tanzania’s commodity animals. As Mwangi S. Kimenyi and Josephine Kibe wrote for FP in 2013, the country is full of mineral and natural gas wealth. But foreign investors were scared off by the socialist policies of Tanzania's first president, Julius Nyerere, who advocated collective land ownership. But Tanzanian industries were largely privatized in 1992, albeit with government financing.

After the get-to-know you breakfast Tuesday, some of the delegation headed to “Doing Business in Tanzania,” a standing-room only seminar convened by the Corporate Council on Africa, a nonprofit that regards itself as a key interlocutor between U.S. businesses and African countries. Its members include Coca Cola, General Electric, and Proctor and Gamble.

Meru was introduced at the event as a key figure in Tanzania’s trade relationship with China, who is now eager to bring the U.S. in on the fun and traveled to Washington “to tell American investors how easily they can get rich” in Tanzania. He pitched the SEZs as “bureaucracy-free zones” where companies receive investment incentives, such as cost sharing for water, seeds, and fertilizer, and, of course, those coveted 10-year tax breaks.

Some of that sounds a bit too good to be true, particularly when one considers how desperate the Tanzanian treasury is for new tax revenue. Not to mention stability is still far from a given. Just last May, violent protests broke out over the government’s allocation of mineral revenue in the historically underdeveloped, neglected Mtwara region. President Jakaya Kikwete seems to have made amends but the region’s gas-extraction sector is still dominated by international behemoths such as Stavanger, Norway-based Statoil and ExxonMobil.

Will international investment trickle down to Tanzanians? Meru promises that his government will look out for local farmers and ensure that his people are not exploited. His plan aims to get domestic companies independent of foreign partnerships over the next 25 to 30 years. For now: as the Wall Street Journal reported, foreign investments include more than $5 billion from Coca-Cola over six years, $2 billion from General Electric by 2018, and about $300 million from Proctor and Gamble.

If capitalism driven by and benefiting locals can emerge and flourish in Tanzania remains to be seen.



Azerbaijan Talks Tough as Nagorno-Karabakh Conflict Heats Up

One day after President Ilham Aliyev of Azerbaijan threatened war with neighboring Armenia via Twitter, Azerbaijan's Defense Ministry issued a statement saying that the country is prepared for war in the disputed territory of Nagorno-Karabakh.

The recent bout of fighting cost Azerbaijan 12 troops and Nagorno Karabakh three, each side confirmed on Saturday. Exactly what set off the latest violence between the former Soviet republics is unclear but both point to the other as the aggressor.

The Nagorno-Karabakh border remains heavily militarized. Azerbaijan and Armenia each have 20,000 troops dug into World War I-style trenches on their respective sides. Exchanges of sniper shots are common but the recent fighting has raised the stakes. On Wednesday Aliyev visited the frontlines, spending time with an Azerbaijani military unit. The day after the president's return from the front, he launched a sabre-rattling Twitter tirade, announcing Azerbaijan's preparedness for war.



The two countries already fought a brutal, six-year war over Nagorno-Karabakh that wracked up at least 30,000 casualties and displaced hundreds of thousands of people. A cease-fire brokered by Russia in 1994 ended formal hostilities but international efforts to reach a last solution have failed and the conflict has been in limbo for the last 20 years.

The heart of the conflict lies in the ethnic and political divisions that existed when Armenia and Azerbaijan were Soviet republics. Despite being part of Soviet Azerbaijan, Nagorno-Karabakh was home to a large ethnic Armenian population. In 1988, the Armenians of Karabakh -- encouraged by politicians in Yerevan, the Armenian capital -- demanded unification with Soviet Armenia. Then, in December 1989, Armenia and Nagorno-Karabakh declared unification and war broke out with Azerbaijan. Armenia was able to hold Nagorno-Karabakh and, following the 1994 cease-fire, retained control over the territory. Azerbaijan keeps claiming the land as its own and considers it an occupied territory.



Following its defeat, Azerbaijan launched a silent arms race to break Armenia's economy. Funded by its hydrocarbon wealth, Baku, Azerbaijan's capital, has been on a military spending spree, allocating $3.44 billion for defense in 2013. Its defense budget has skyrocketed 493 percent since 2004, according to the Stockholm International Peace Research Institute (SIPRI). Armenia has done its best to follow suit, spending $427 million on defense -- a 115 percent increase from 2004, according to SIPRI. But lacking Azerbaijani natural-resource wealth, Armenia has turned to Russia for military aid to bolster its security. In return, Moscow has taken its pound of flesh from Yerevan by establishing a major military base in Armenia.

With tensions high after the recent clashes, both Russia and the United States have made calls for calm along the border and for reviving the OSCE Minsk Group process -- which was established to bring a lasting solution to the conflict following the 1994 cease-fire. Russian President Vladimir Putin has set up meetings with the Azerbaijani and Armenian presidents for Friday and Saturday, in a bid to broker a cease-fire. But a lasting solution will require more than just Russian pressure. Moreover, with U.S.-Russia relations at an all-time low, international cooperation on Nagorno-Karabakh looks confined to the trenches for the immediate future.