The Role of Foreign Direct Investment on Economic Growth in Tanzania: Empirical Evidence from Emerging Sectors

Abstract

The study analyzed whether foreign direct investment in emerging sectors (“transport and storage”, “Real estate”, “information and communication” and “Electricity and gas”) can influence economic growth in Tanzania. In order to analyze time series data from 1999 to 2020, the study employed dickey-fuller and Philips peron tests for stationarity, ARDL bound test for co-integration, Auto Regressive Distributed Lag (ARDL) model to estimates long run relationship and then diagnostic tests were applied to check validity and reliability of variables. The study revealed among sectors under study FDI inflow in transport and storage sector contribute positively to economic growth while FDI inflow to other sectors have insignificant impact to economic growth. Thus, in order to combat such outcomes, the government is advised to attract more foreign investment to the sectors with undesirable impacts with productive strategies in order to improve sectors performance on economic growth through establishment of favorable investment policies to create conducive investment environment.