The impact of foreign direct investment on the agricultural productivity in Tanzania

In recent years Tanzania has experienced alarming increase of Foreign Direct Investment (FDI) inflows to the economy. The FDI inflows have reached up to USD 2.2 billion dollars by 2015. It was observed that despite dramatic increase of FDI inflow into the country, the agricultural sector only received USD 1.7 million which is just 3.6 percent of total FDI stocks between 2008 and 2011. This study sought to investigate the existing gap in empirical analysis of FDI inflows and agricultural productivity in Tanzania using Autoregressive Distributed Lag (ARDL) approach. This was achieved by analyzing the impact of FDI inflows in the agricultural productivity from 1980-2014. The results revealed that FDI inflows negatively impact the agricultural productivity both in long run and short run. It was also found that the depreciation of the Tanzanian shilling (TZS) negatively impact the agricultural productivity in the long run. The Gross Fixed Capital Formation (GFCF) on other hand had also significant long run negative impact on the agricultural sector. While trade openness had a negative effect on agricultural productivity in short run but no effect in long run. The study recommends that the government should incorporate other sector such as infrastructure, commercials and market strategies so as to enhance further development of agriculture sector. Furthermore it needs designs policy that promotes FDI inflows into the sector and stabilize exchange rate so as to create environment for agriculture sector to flourish.