The impact of trade facilitation on transit trade in Tanzania’s economy

This study evaluates the effect of trade facilitation in the transit trade for the period of 1985 to 2009 in Tanzania. Econometrics analysis of the determinants of transit trade flow in Tanzania was used. Empirical analysis is carried out using Ordinary Least Square (OLS) method on time series data. Estimates shows that trade facilitation improve the transit trade flow in Tanzania and to the landlocked countries. This is essentially with the investment in physical infrastructure and regulatory reform to improve the business environment. The findings provide evidence that, the improvement of road condition by 5 percent leads to increase in transit trade flow by 1.6 percent. Again the improvement of customs environment by 10 percent causes the increase in transit trade flow by 2.25 percent. In contrast, the impact of port on transit trade in Tanzania is insignificant. This proved that, the performance of port depends on the other factors such as the roads, railways conditions as well as customs environment. The study concludes that, the general development of transit trade in Tanzania may be enhanced by trade policy mechanisms on trade related issues. These mechanisms should focus on hard and soft infrastructure. Therefore, policymakers should ensure that regular maintenance of infrastructure takes place, and that transport supply capacities are improved. Transit and landlocked countries should develop coherent and comprehensive transport policies to support the transit corridors required to facilitate trade.