Tanzania 2010 FDI up 8.5 pct, sees small rise in 2011

DAR ES SALAAM, July 26 (Reuters) - Foreign direct investment in Tanzania rose 8.5 percent in 2010 to $700 million, largely driven by the tourism, manufacturing and farming sectors, a senior investment official said on Tuesday.

Tanzania Investment Centre's (TIC) acting executive director, Raymond Mbilinyi, said east Africa's second-largest economy saw a jump in investment inflows despite a 9 percent overall decline in FDI in the rest of Africa last year.

He said FDI into Tanzania had rebounded last year from $645 million in 2009.

"Mining, manufacturing, commercial building and agriculture have been driving the growth of foreign direct investment into the country," Mbilinyi told Reuters in an interview, adding that he expected to see a modest increase in 2011.

TIC's former executive director told Reuters last year he expected FDI to jump to $800 million in 2011 after a forecast rise to $750 million in 2010.

Mbilinyi said Africa was still lagging behind the rest of the world in attracting FDI.

"The post-crisis recovery in FDI has been slow to take off and is unevenly spread, with especially the poorest countries still in FDI recession," he said during a presentation to launch the U.N. Conference on Trade and Development's annual world investment report.

The International Monetary Fund cut its 2011 growth forecast for Tanzania to 6 percent from 7.2 percent in March, saying frequent power outages would hurt output while food and fuel prices could push inflation higher.

Mbilinyi said the government had formed a committee tasked with looking at ways to improve the investment climate.

"There are several challenges that the government is addressing to improve the investment climate, including the ongoing power shortages," he said. (Reporting by Fumbuka Ng'wanakilala; Editing by Yara Bayoumy)