The impact of foreign direct investment on the international competitiveness of Tanzania's agricultural sector
The impact of foreign direct investment on the international competitiveness of Tanzania's agricultural sector

Summary/Abstract: The agricultural sector in Tanzania, being an important source of employment, production and exports, is one of the key sectors of the country's economy. It is also a promising destination for foreign direct investment (FDI), which opens an opportunity to further modernise and increase its productivity. The aim of the study presented in this paper is to assess the impact of FDI on the competitiveness of the agricultural sector in Tanzania. We investigated the interaction between FDI into the agricultural sector in Tanzania, the investment attractiveness of this sector, the revealed comparative advantage (RCA) in agricultural exports, and GDP. The Vector Error Correction Model (VECM), Granger causality test and impulse response function analysis were used in the study. The modelling was carried out on the basis of data covering the period of 1999–2022, retrieved from the databases of the World Integrated Trade Solution (WITS) and the World Bank Group. The study uses the investment attractiveness index, which has not been adopted to research Tanzania's agricultural sector before. This indicator might be considered as a barometer of the effectiveness of the investment policy and might serve as the basis for creating predictive and reporting tools useful for both investors and policy-makers. The research results indicate that the increase in FDI stocks fosters the development of the agricultural sector in Tanzania. However, FDI does not improve its competitiveness in the long or short term.

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