Trade with FDIs prudently, Tanzania aviation industry players caution government

The alert follows airports authority granting Dubai Air Travel Agency access to a $120 worth newly built international airport

MONDAY March 13, 2023


By Adam Ihucha

The Tranquility News Correspondent, Tanzania

A key driver of aviation industry has exhorted the Zanzibar government to accord foreign and local firms an equal treatment in investment opportunities.

Tanzania Aviation Operators Association (TAOA) pleaded with the Zanzibar to refrain from enacting policies that favour foreign or local companies in investment prospects, as they would be deemed discriminatory, and thus illegal under the World Trade Organization (WTO) rules.

“Much as we explicitly appreciate and support the ongoing reforms by the Zanzibar Government under the President, Dr Hussein Ali Mwinyi, however, we’ve reservations on the way the Zanzibar Airports Authority had awarded exclusive rights to a foreign firm to render ground handling services at terminal III,” said TAOA Chief Executive Officer, Ms Lathifa Sykes.

Truly, on September 14, 2022, the Zanzibar Airports Authority (ZAA) issued a directive granting the Dubai National Air Travel Agency (DNATA) exclusive access to the $120 million worth state-of-the-art Abeid Amani Karume International Airport new terminal.

The ZAA also ordered all ground handling firms that used to operate at Zanzibar’s Abeid Amani Karume International Airport until December 1, 2022 to vacate the newly constructed Terminal III, instructing airlines to make arrangements to work with DNATA.

Zanzibar Airports Authority (ZAA) on September 14, 2022, granted the Dubai National Air Travel Agency (DNATA) exclusive access to a state-of-the-art Abeid Amani Karume International Airport Terminal III. PHOTO | MAPS PRODAFRICA

DNATA is one of the world’s largest air service providers, offering ground handling, cargo, travel, and flight catering amenities across five continents.

“There was no transparency in the tendering process. We’re not even sure if it was advertised, in the first place, for both local and foreign companies to bid in a fair ground,” Ms Sykes argued.

The TAOA CEO added: “We’re worried because the ground-handling firms that used to operate have since been locked out of Terminal III and just a fortnight ago, they have embarked on laying off 200 workers as a measure to cut overhead costs. The penalties for non-compliances with WTO rules are extensive.”

Apart from those being laid off, some whose contracts are about to expire, will also not be renewed as the employers seek to cut off what they have termed as a huge ‘wage bill’.

This comes after the Labour Commission of Zanzibar approved the retrenchment of the workers following ground handlers complying with the commission’s demands.

The Zanzibar President, Dr Hussein Ali Mwinyi (Centre), poses for a picture with representatives of investors in the Abeid Amani Karume International Airport. PHOTO | TRAVEL PR NEWS

“The Labour Commissioner has given you a go ahead with the retrenchment exercise at your institution. Please, ensure all due payments are made as required by the law,” reads the letter from the Commissioner, Mr Mahammed Ali Salum.

One of the casualties, the Zanzibar Aviation Services & Travel Trade (ZAT), has been operating at the airport for the past 27 years, with a concession agreement that runs to 2030 with a client base that features world class airlines and over 300 employees.

Prior to the order, some of the airlines that ZAT handled included Etihad, Qatar Airways, Oman Air, Turkish Airlines, Lot polish, Air Tanzania, Precision Air, Tui and Ethiopian Airlines.

On the other hand, Transworld, which also has been operating at the airport for the past six years, had Kenya Airways, Air France, KLM, Edelweiss, and Eurowings as part of its clientele profile.

While Foreign Direct Investments (FDIs), Ms Sykes argued, may contribute significantly to human capital formation, the transfer of state-of-the-art technologies and capital to spur economy, but all depend on domestic regimes.

The TAOA Chief Executive Officer, Ms Lathifa Sykes, argues that domestic regimes determine contribution of foreign Direct Investments to human capital and transfer of technologies and capital to spur economy. PHOTO | FILE

“Yet, the benefits of FDIs are not accrued automatically and evenly across countries, sectors and local communities; this the reason we advise the Zanzibar government to trade carefully, otherwise it may find itself displacing locals,” said the TAOA CEO, citing 200 people who would lose jobs in a blink of an eye as a vivid example of impartial policy could be.

She said reforms like liberalisation of national policies matter a lot in attracting a larger number of FDIs, but to reap full FDIs benefits for development requires policies that create a fair playing field.

“Zanzibar needs to establish a transparent, broad and effective enabling policy environment for investment, to build human and institutional capacities and to implement them in a bid to create inclusive economy that leaves no one behind,” she explained.

Developing countries, emerging economies and countries in transition have come increasingly to see FDIs as a source of economic development and modernisation, income growth and employment.

Countries have liberalised their FDIs regimes and pursued other policies to attract investment.

Zanzibar Aviation Services and Travel Trade has been operating at Zanzibar Airport for 27 years and was supposed to run it to 2030. PHOTO | ZAT

They have addressed the issue of how best to pursue domestic policies to maximise the benefits of foreign presence in the domestic economy.

Given the appropriate host-country’s policies and a basic level of development, a preponderance of studies shows FDIs trigger technology spillovers, assist human capital formation, contribute to international trade integration, help to create a more competitive business environment, and enhance enterprise development.

“All of these contribute to higher economic growth, which is the most potent tool for alleviating poverty in developing countries,” Ms. Sykes notedΩ



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