Nairobi — Canada is moving to safeguard its business interests in Tanzania, in the face of an outcry over the lopsided contracts dished out in the latter's mining sector.

The two countries have agreed to begin negotiations towards what is known in Canada as a Foreign Investment Promotion and Protection Agreement (Fipa).

The bilateral Fipa aims to provide "greater predictability and certainty" for Canadian investors considering investment opportunities in Tanzania.

"Canada's objective in entering these negotiations is to secure a comprehensive, high-quality agreement to protect investors through the establishment of a framework of legally binding rights and obligations," said Canada's Department of Foreign Affairs and International Trade on its website.

The move comes at a time when Tanzania is reviewing mining contracts it entered with a dozen foreign multinational firms in the early 1990s.

Canada is the largest foreign investor in the country. Given the country's economic reforms and increasing openness to foreign direct investment, Canada see Tanzania as having significant investment opportunities for its investors in a variety of sectors including mining, telecommunication and infrastructure among others.

A commission formed by President Kikwete to look into how to enhance the mining sector's economic contribution presented its report recently. It is expected to recommend a generally higher level of taxation in the sector.

However, those opposed to the reforms say that raising mining taxes in Tanzania will work against the government's efforts to attract foreign investment. Instead, according to Tanzania Chamber of Mines, the government should improve on infrastructure in order to attract more foreign companies.

"The future holds bright prospects for the country, but not through further taxation, because that will reduce Tanzania's global competitiveness in attracting investment in mining," the chamber says.

According to mining experts, the country has about one billion ounces of gold yet to be exploited. At present, only four per cent of Tanzania's gold potential is being exploited despite the country being Africa's third largest gold producer.

In November last year, President Kikwete named an 11-member committee to review all mining contracts the country signed with foreign investors after complaints that most mining contracts are tailor-made to suit the investors and not the local economy.

According to statistics from the chamber, the Tanzanian government received a total of $255.5 million in statutory taxes and royalties from large mining operators between 1997 and 2005.

The chamber further stated that, between 1997 and 2005, their member mining companies produced gold worth $2.54 billion and remitted $74.7 million to the government in royalties.

The Chamber of Mines' revenue estimates runs counter to reports that Tanzania has been losing millions of dollars due to under-declaration of profits by foreign mining companies.