India-Tanzania target increased cooperation across spheres

In a remarkable development for their bilateral relations, India and Tanzania are set to sign around 15 agreements spanning government-to-government as well as private-sector collaborations.. These initiatives span from white shipping information sharing to cultural exchanges, underscoring the commitment to multifaceted ties.

Furthermore, this partnership holds substantial potential for India, encompassing investment opportunities in diverse sectors. From pharmaceuticals to automobile manufacturing, machinery, and chemicals, Indian businesses can explore and expand their presence in the Tanzanian market.

The shared goal is to boost bilateral trade, with both nations aiming for a $10 billion trade volume within the next three years, reflecting the robust economic, commercial, and business relations between the two nations. IBT explores potential growth areas for India in Tanzania and analyzes the advantages and investment opportunities that India will gain through agreements with Tanzania.

In a significant development for international relations, India and Tanzania are set to sign a series of agreements encompassing various areas of cooperation ranging from cooperation in white shipping information sharing, maritime industries, digital domain, culture and sports. In a recent development, Tanzania’s President, Samia Suluhu Hassan, was on an official visit to India recently. The Tanzanian Foreign Minister, January Yusuf Makamba, has described this visit as a pivotal moment for Tanzania, emphasizing the expectation of elevating bilateral relations into a strategic partnership.

The last presidential visit from Tanzania to India occurred over eight years ago, underscoring the importance of this renewed engagement. Among the anticipated announcements are commitments to enhance trade and investment between the two nations, with approximately 15 agreements spanning government-to-government as well as private-sector collaborations.

This partnership holds substantial potential for India. The nation’s commitment to Official Development Assistance (ODA) is evident in its contribution of US$ 1 billion to water projects in Tanzania, with further extensions in this critical area on the horizon. The fact that India is Tanzania’s largest trading partner and a major source of investment reflects the robust economic, commercial, and business relations between the two nations.

The Tanzanian president will also address a business forum in New Delhi, offering opportunities for new deals and partnerships between Tanzania and Indian companies. The primary objective of this visit is to boost trade volumes and address any barriers or challenges impeding its expansion. The goal is to achieve a bilateral trade volume of US$ 10 billion within the next three years.

Advantages of India’s Business Engagement with Tanzania

A notable aspect of this partnership is India’s initiative for trade settlement in national currencies. This move has several advantages, including more favourable exchange rates and the preservation of foreign exchange reserves. Technical details are currently being worked out by central bank teams from both nations to ensure this initiative fosters greater trade between the two countries.

According to the Ministry of External Affairs, India and Tanzania have developed strong economic, commercial, and business relations. According to Tanzanian statistics, India ranks as the third-largest trade partner, following China and the UAE, and is the fifth-largest investor in Tanzania. Notably, India is the largest market for Tanzania exports, while China stands as the primary source of imports. 

On the flip side, according to Indian statistics, India is Tanzania’s largest trading partner. In the 2022-23 fiscal year, the bilateral trade volume reached US$ 6.48 billion, with Indian exports valued at US$ 3.94 billion and Tanzania exports at US$ 2.54 billion.

India’s major exports to Tanzania encompass a range of products, including petroleum products, engineering goods, medicines, and chemicals. On the other hand, Indian imports from Tanzania comprise items such as gold, dried leguminous vegetables, cashew nuts, soybeans, timber, coffee, spices, and precious stones. These robust trade relations underscore the diverse exchange of goods and commodities between the two nations.

Beyond trade and economic cooperation, India and Tanzania are also enhancing their defense collaboration. This includes capacity building, training, technology transfer, joint patrols, and military exercises. Defense cooperation forms a significant pillar of their strategic partnership. The specifics of the equipment needed by Tanzania will be determined in future discussions between technical teams, with potential agreements on the horizon.

Potential Growth Areas for India with Tanzania

When considering the prospects of collaboration between India and Tanzania, it’s vital to look into potential growth areas. This analysis sheds light on opportunities that can drive economic cooperation between the two nations.

Pharmaceutical

The Indian pharmaceutical industry has found success in Tanzania, and there is significant potential for further expansion. Furthermore, there is a promising opportunity for exporting chemicals, agrochemicals, ceramic tiles, sanitary wares, automobiles and spare parts, machinery, iron and steel, and power and electrical equipment to Tanzania.

However, it’s essential to acknowledge the challenge posed by aggressive marketing from competitors like China, Kenya, South Africa, and Turkey. Notably, Kenya and South Africa enjoy advantages as fellow members of the East African Community (EAC) and the Southern African Development Community (SADC), respectively.

Petroleum

In 2013-14, India held the distinction of being the largest exporter of petroleum products with an export value of US$2.45 billion. However, there was a noticeable decline in exports, reducing to US$851.38 million in 2021-22. Encouragingly, in 2022-23, India’s petroleum product exports rebounded to US$2.23 billion.

The decline in exports was due to Reliance selling a majority stake in GAPCO. Competition from Middle Eastern refineries and quoting products in Metric Tons disadvantaged Indian superior quality products.

A significant positive change occurred after a meeting with the Energy Minister of Tanzania in October 2021. After a meeting with Tanzania’s Energy Minister in October 2021, the Mission advised shifting the policy to procure petroleum products in barrels/liters, which has benefited Tanzania. Following the Minister’s request, a delegation from Reliance visited Tanzania, resulting in a partial policy change to import in barrels. This change has boosted India’s share in the sector.

Automobiles

Indian automobiles, notably Bajaj and TVS two and three-wheelers, have gained significant popularity in Tanzania, with these brands leading the market. Other brands also enjoy a decent market share in segments such as tractors, buses, trucks, and pickup vans. However, in recent years, China has rapidly increased its market share, particularly in heavy and electric vehicle segments.

To boost Indian automobile exports, setting up small-scale assembly lines is crucial. This move provides a 15% tax advantage in the local market. Bajaj has already benefited from this scheme. Many foreign companies, including Chinese ones, have established assembly lines where they import automobiles in a complete knockdown (CKD) mode and assemble them in Tanzania.

Machinery and Chemicals

Tanzania currently lacks significant machinery manufacturing plants, relying on imports for various types of Indian machinery. To further enhance this sector, the establishment of assembly plants in Tanzania presents a promising opportunity. The demand for machinery is particularly high in agro, leather processing, and packaging industries.

Furthermore, there is considerable potential for the export of industrial and agricultural chemicals to Tanzania, primarily due to the government’s policies promoting industrialization and agro-mechanization. In the 2022-2023 fiscal year, India exported chemicals worth US$102.06 million to Tanzania, but there is untapped potential in this sector, especially as China is less competitive in this regard. This sector presents a valuable avenue for Indian businesses to explore and expand in the Tanzanian market.

Investment Prospects in Tanzania

From the perspective of India, there are promising opportunities to enhance its presence and investments in Tanzania. President Samia’s administration has actively worked to create a favourable climate for foreign investments, providing an excellent platform for Indian businesses. The recent surge in foreign investments, notably over US$ 8 billion, registered by the Tanzania Investment Centre from 2021 to 2023, reflects the country’s growing appeal as an investment destination for Indian companies.

One area with great potential is the healthcare sector, exemplified by Apollo Group’s interest in establishing super speciality and cancer hospitals. These initiatives present opportunities for Indian healthcare providers to expand their footprint in Tanzania, serving the needs of the local population.

Moreover, the modernization and development of Tanzania’s ports offer a strategic avenue for India’s investment. Indian companies could play a pivotal role in this initiative, given Tanzania’s position as a key trade corridor for landlocked nations like Uganda, Rwanda, Burundi, Zambia, Malawi, and the eastern part of the Democratic Republic of Congo. The involvement of Adani Group in port operations and related services showcases India’s interest and expertise in this sector.

Additionally, Tanzania’s evolving industrial landscape presents an excellent opportunity for India to establish a medium-sized Industrial Park in Dar es Salaam. Indian businesses, particularly those involved in the production of animal vaccines, agro-machinery, IV fluids, ceramics, IT, and services, could find a conducive environment within the park to expand their operations.

As India’s pharmaceutical industry has excelled in the export of medicines, and since there is potential for chemical exports, Tanzania’s growing market is ripe for further exploration. The competitive edge of Indian products in this sector, especially when compared to China, should be leveraged to increase exports.

In the realm of India-Tanzania relations, a horizon of vast possibilities is dawning, the India-Tanzania partnership is poised for transformation and growth. With a focus on diverse sectors and a commitment to strengthening bilateral ties, this collaboration holds vast potential. As both nations move forward, the shared goal is not just diplomatic but to create a platform for progress, innovation, and mutual prosperity.