Britain approves US $40 million air system

The United Kingdom government on Thursday approved the sale to Tanzania of a controversial US $40 million air traffic control system by the UK-based BAe Systems, despite criticism from aid agencies, international financial institutions and Tanzanian politicians.

Tanzanian President Benjamin Mkapa has said the country needs the new system to replace obsolete technology, but the World Bank and International Monetary Fund (IMF) have previously criticised the proposed system, saying it is unsuitable and over-expensive. The World Bank has estimated that a suitable system should cost about $10 million.

The deal has been at the centre of a row in the UK over the government's commitment to tackling poverty in Africa, with British Prime Minister backing the sale despite opposition from International Development Secretary Clare Short and Chancellor of the Exchequer Gordon Brown.

Short and Brown argued that the sale should be stopped since the high cost of the system could threaten Tanzania's sustainable economic development by diverting spending from health, education and agriculture.

The international NGO Oxfam said it was deeply disappointed [that British Prime Minister] Tony Blair has agreed to the sale. "In giving the green light, Mr Blair has shown that when it comes to the crunch, he will put corporate profits before fighting poverty," the Financial Times newspaper on Friday quoted Oxfam as saying.

Supporters of the deal argue that a Tanzanian air traffic control system would raise US $3 million to US $5 million for the East African country and boost its struggling economy. Despite an economic reform programme that has won the praise of donors, Tanzania remains one of the world's poorest countries, and is ranked 140th of 162 countries on the UN Human Development Index 2001.

Minister for Foreign Affairs and International Cooperation Jakaya Kikwete said the proposed system would enable Tanzania to charge duty on aircraft flying within its airspace and would help generate increased revenue from tourism, Radio Tanzania reported on Thursday.

"We've all along been saying that we need that particular type of system to boost the safety of our airports," Reuters on Tuesday quoted Margaret Munyagi, Director-General of the Tanzania Civil Aviation Authority, as saying.

The sole independent review of the system commissioned by the World Bank and undertaken by the International Civil Aviation Organisation (ICAO) said further expensive modifications would be needed to achieve such a boost in revenue, the Guardian reported on Friday. The ICAO review also said the system was four times too expensive and had unnecessary military capability for a country with only eight military aircraft, it added.

Although some UK government ministers have been pressuring BAe Systems to lower the US $40 million price tag of the system, the government had no control over the terms of a commercially negotiated contract, the Guardian newspaper reported on Friday.

The Financial Times quoted a BAe source as saying that the company would not be willing to change the commercially negotiated price. "We have been granted an export licence for the deal we put on the table," the source said.

Meanwhile, Tanzanian opposition leader Ibrahim Lipumba has also criticised the lack of public debate on the issue within the country.

"This is something that has never been debated in public; it is very opaque - no information has been released," the Financial Times newspaper quoted Lipumba, head of the Civic United Front (CUF), as saying.

Despite rules forbidding indebted countries taking out commercial loans, the IMF has allowed Tanzania to finance the deal with a US $40 million loan from UK bank, Barclays, according to the Guardian.

The loan is to be repaid at rates higher than those normally offered to developing countries by the IMF and World Bank, but below the rates normally charged by banks such as Barclays, it added.

"Barclays Bank should not be lending this money to a poor and debt-ridden country. It threatens to push Tanzania back into the mire of debt," the paper quoted Oxfam policy director Justin Forsyth as saying.

The government of Tanzania pledged last month to use the debt relief it has won under the Heavily Indebted Poor Countries (HIPC) initiative to "strengthen support for education, health, water, roads and other priority sectors". Oxfam has noted that $40 million would pay for basic health care for 3.5 million people.

The BAe deal could still be prevented from going through, however, if Tanzania is deemed to have breached a commitment to review the project made to the World Bank in November after the East African country received US $3 billion in debt relief, according to the Guardian.

Opponents of the deal say the Tanzanian government pledged to withhold payment for the system until it had undertaken a full review, the report added.