Zanzibar - Economy

Economy

Ancient pottery implies trade routes with Zanzibar as far back as the time of the ancient Assyrians. Traders from Arabia, the Persian Gulf region of modern-day Iran (especially Shiraz), and west India probably visited Zanzibar as early as the 1st century. They used the monsoon winds to sail across the Indian Ocean to land at the sheltered harbor located on the site of present-day Zanzibar City.

The clove, originating from the Moluccan Islands (today in Indonesia), was introduced in Zanzibar by the Omani sultans in the first half of the 19th century. Zanzibar, mainly Pemba Island, was once the world's leading clove producer, but annual clove sales have plummeted by 80 percent since the 1970s. Zanzibar's clove industry has been crippled by a fast-moving global market, international competition, and a hangover from Tanzania's failed experiment with socialism in the 1960s and 1970s, when the government controlled clove prices and exports. Zanzibar now ranks a distant third with Indonesia supplying 75 percent of the world's cloves compared to Zanzibar's 7 percent.

Zanzibar exports spices, seaweed, and fine raffia. It also has a large fishing and dugout canoe production. Tourism is a major foreign currency earner.

The Government of Zanzibar legalized foreign exchange bureaux on the islands before mainland Tanzania moved to do so. The effect was to increase the availability of consumer commodities. The government has also established a free port area, which provides the following benefits: contribution to economic diversification by providing a window for free trade as well as stimulating the establishment of support services; administration of a regime that imports, exports, and warehouses general merchandise; adequate storage facilities and other infrastructure to cater for effective operation of trade; and creation of an efficient management system for effective re-exportation of goods.

The island's manufacturing sector is limited mainly to import substitution industries, such as cigarettes, shoes, and processed agricultural products. In 1992, the government designated two export-producing zones and encouraged the development of offshore financial services. Zanzibar still imports much of its staple requirements, petroleum products, and manufactured articles.

There is also a possibility of oil availability in Zanzibar on the island of Pemba, and efforts have been made by the Tanzanian Government and Zanzibar revolutionary Government to exploit what could be one of the most significant discoveries in recent memory. Oil would help boost the economy of Zanzibar, but there have been disagreements about dividends between the Tanzanian mainland and Zanzibar, the latter claiming the oil should be excluded in Union matters. A Norwegian consultant has been sent to Zanzibar to investigate its oil potential.