Quick Facts Population: 42.5 million GDP (PPP): $53.7 billion 7.5% growth 7.2% 5-year compound annual growth $1,263 per capita Unemployment: Inflation (CPI): 10.3% FDI Inflow: $744.0 million Tanzania's economic freedom score is 58.3, making its economy the 97th freest in the 2010 Index. Its score remains the same as last year. Tanzania is ranked 11th out of 46 countries in the Sub-Saharan Africa region, and its overall score is slightly lower than the world average. Continuing reform has led to some progress in reducing poverty. Annual growth has averaged around 7 percent over the past five years, yielding improvements in various social and human development indicators. Tanzania has above-average scores in fiscal freedom, investment freedom, and government spending. Foreign and domestic investors receive equal treatment, although poor infrastructure, government control, and corruption remain deterrents. Government spending is moderate, and a relatively low level of debt has allowed the economy to undertake infrastructure projects without jeopardizing the stability of public finances. Tanzania's tariff barrier has been reduced to less than 10 percent, but inefficient customs and other non-tariff barriers limit overall trade freedom. The judiciary is underdeveloped and vulnerable to the political whims of the executive. Corruption is pervasive despite ongoing reform efforts, and restoring the government's credibility remains critical. Background: The United Republic of Tanzania was formed in 1964 by the union of Tanganyika and Zanzibar, each of which had recently achieved independence. Zanzibar retains considerable local autonomy, including its own legislature and president. Tanzania's first president, Julius K. Nyerere, pursued socialist economic policies that severely constrained economic growth and development during his nearly 25 years in office. Under his successors, the historically state-led economy is becoming more market-based, but it remains hindered by poor infrastructure and the country's high rate of HIV/AIDS. Jakaya Kikwete, previously Tanzania's foreign minister, has served as president since winning election in December 2005. Tanzania remains very poor. Agriculture employs 80 percent of the population and accounted for over 40 percent of GDP in 2007. Business Freedom: 45.5 (score) The overall freedom to conduct a business is seriously limited under Tanzania's regulatory environment. Starting a business takes an average of 29 days, compared to the world average of 35 days. Obtaining a business license takes more than the world average of 18 procedures and 218 days, and costs are high. Bankruptcy proceedings are fairly straightforward but relatively lengthy. Trade Freedom: 70.5 Tanzania's weighted average tariff rate was 9.7 percent in 2008. Some import and export restrictions, import taxes, import permit and licensing requirements, inefficient and slow customs administration, weak enforcement of intellectual property rights, and corruption add to the cost of trade. Ten points were deducted from Tanzania's trade freedom score to account for non-tariff barriers. Fiscal Freedom: 80.3 Tanzania has moderate tax rates. Both the top income tax rate and the top corporate tax rate are 30 percent. Other taxes include a value-added tax (VAT), a transfer tax on motor vehicles, and a fuel levy on petroleum products. In the most recent year, overall tax revenue as a percentage of GDP was 13.0 percent. Government Spending: 82.6 Total government expenditures, including consumption and transfer payments, are relatively low. After five years of growth, government spending in the most recent year equaled 24.1 percent of GDP. Privatization and restructuring of state-owned enterprises have progressed. Monetary Freedom: 70.8 Inflation has been high, averaging 9.2 percent between 2006 and 2008. The government influences prices through regulation, subsidies, and state-owned enterprises and utilities. Ten points were deducted from Tanzania's monetary freedom score to account for policies that distort domestic prices. Investment Freedom: 65.0 Foreign and domestic investors receive equal treatment under the law in most sectors. There is no limit on foreign ownership in an enterprise, and investment is not screened. The Tourism Act of 2007 bars foreigners from engaging in some tourism-related businesses. Burdensome bureaucracy, inadequate infrastructure, and corruption are ongoing deterrents to investment. Enforcement of commercial law through the courts is difficult. Foreign exchange and capital transactions are permitted with few restrictions. Profits, dividends, and capital can be repatriated. The state owns all land, and investors may lease but not own land. Financial Freedom: 50.0 Tanzania's financial system is relatively small but developing. Direct government influence has gradually diminished, and privatization is ongoing. Credit is allocated largely at market rates, and a range of commercial credit instruments are available to the private sector. There are minimal restrictions on foreign banks, which account for around 50 percent of the banking system's assets. More than 20 commercial banks are licensed and operating, and over 50 percent are foreign-affiliated. A controlling stake in the National Commercial Bank was sold to a foreign bank in 2001. The National Microfinance Bank was partially privatized in 2005, and further sales of the state's remaining 51 percent share have been planned. In 2008, the government implemented a leasing finance law in order to ease access to finance and facilitate the growth of leasing services. Pension funds, which remain poorly supervised, have been growing rapidly in recent years. Capital markets are rudimentary, reflecting the lack of efficiency and depth in the financial sector. Property Rights: 30.0 The legal system is slow and subject to corruption. A commercial court has been established to improve the resolution of commercial disputes. Recent reforms have been aimed at establishing a reliable system of transferable property rights. Legislation conforms to international intellectual property rights conventions, but violations are not seriously investigated, and courts lack experience and training in IPR issues. Freedom From Corruption: 30.0 Corruption is perceived as widespread. Tanzania ranks 102nd out of 179 countries in Transparency International's Corruption Perceptions Index for 2008. Despite improvements during the past decade, corruption remains pervasive throughout the government. The enforcement of laws, regulations, and penalties to combat corruption is largely ineffective. Areas where corruption persists include government procurement, privatization, taxation, ports, and customs clearance. The government launched a series of high-profile corruption prosecutions in late 2008. Labor Freedom: 58.4 Tanzania's labor regulations are restrictive. The non-salary cost of employing a worker is moderate, but dismissing an employee is difficult. Courtesy of: heritage.org Labda tusubiri REDET watuletee utafiti wao!