The Effect of Mining, Manufacturing and Agricultural Foreign Direct Investment on Economic Growth of Tanzania

Abstract

This study assessed the effect of foreign direct investment (FDI) inflow on economic growth in Tanzania. Specifically, the study sought to establish whether FDI from mining, manufacturing and agriculture sectors significantly impact economic growth in Tanzania. The study used annual time series data covering twenty-one (21) years from 2000 through 2020. The data were obtained from the Tanzania Bureau of Statistics, Bank of Tanzania, and World Bank Reports. The study employed an autoregressive distributed lag (ARDL) bounds co-integration test to capture the long-run and the causal links among the variables of interest. Findings from co-integration test indicates a long-run interrelationship among the variables of interest. Furthermore, results from both short-run and long-run estimates show that both FDI inflows from the mining sector had a positive and significant effect on economic growth, while FDI inflows in manufacturing and agricultural sectors had a negative and statistically significant effect on economic growth in the case Tanzania over the period under the study. The results imply that the government should design comprehensive policies that will continue attracting more FDI in the mining sector without compromising the impact of FDI from other sectors