Tanzania sees '09 FDI slowing due to global crisis

By George Obulutsa

ZANZIBAR (Reuters) - Foreign investment in Tanzania may grow 8 percent in 2009 from $600 million last year, but less than an earlier estimate of $700 million, due to the global economic slump, a senior official said on Monday.

Tanzania Investment Centre (TIC) executive director Emmanuel Ole Naiko said the slowdown, which has led to a credit freeze and a fall in commodity prices, has also prompted many firms to put investments on hold until the situation improves.

"We expected this number to grow to $700 million this year, but unfortunately because of this global crisis, I am looking at $640 million to $650 million," Naiko told Reuters on the sidelines of an international investors' meeting in Tanzania.

Tanzania's economy depends largely on mining, agriculture and tourism. It is seen as one of the more appealing frontier markets and its relative stability in a volatile region has made it attractive to investors.

Tanzania is also increasingly attracting investments to its financial services, telecommunications, manufacturing and transport sectors.

Despite the gloomy world prospects, Naiko was upbeat that the effects of FDI reduction would be cushioned by existing investors expanding operations in the economy's major sectors.

"We will probably find a decline, but the decline will be covered by expansion ... by the foreign investors who are already here. We are not going to grow as fast as we anticipated, but it will not be as bad as some other countries."

Earlier this month, Tanzania's President Jakaya Kikwete said U.S.-based Century Aluminum Co had postponed plans to build a $3.5 billion smelter in Tanzania, and Canadian miner Xstrata Plc halted plans for a $165 million nickel mining and extraction plant in the northwest of Tanzania.