The Impact of Foreign Direct Investment on Agricultural Productivity and Poverty Reduction in Tanzania

Msuya, Elibariki (2007): The Impact of Foreign Direct Investment on Agricultural Productivity and Poverty Reduction in Tanzania.

Abstract

In this paper, the impact of Foreign Direct Investment (FDI) on agricultural productivity and poverty reduction are examined. Factors that hinder FDI flow to agriculture in Tanzania are assessed. Specifically, the role of FDI in improving an agricultural firm’s efficiency in Tanzania and reforms required for more effective investment promotion in agriculture are examined. The study uses literature review to draw its conclusions and policy recommendations. It is observed that FDI has a positive impact on productivity especially to smallholder farmers who are linked in integrated producer schemes. The study recommends rethinking of the smallholder institutional setup for increasing productivity and FDI flow to the agricultural sector. An important implication of the results is that FDI to Tanzania and specifically to agriculture, has a much more far- reaching economic and social impact than in other sectors.

• Item Type: MPRA Paper
• Institution: Kyoto University
• Language: English
• Keywords: FDI; Smallholders; Integrated Producer Schemes; Agricultural Productivity; Poverty Reduction; Tanzania
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q0 - General > Q01 - Sustainable Development; F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q13 - Agricultural Markets and Marketing ; Cooperatives ; Agribusiness

References

[1]. Admassie, A. and Matambalya, F. A. (2002). Technical efficiency of small- and medium-scale enterprises: evidence from a survey of enterprises in Tanzania. Eastern Africa social science research review Vol.18(2) 2002: 1-30 [2]. Amani, K, Nyange, D.A., Kweka, J.P. and V. Leyaro (2003). Trade Policies and Agricultural Trade in the SADC Region: Challenges and Implications. Report for Food, Agriculture and Natural Resources Policy Network. January 2003. [3]. Bank of Tanzania (BOT), (2006), Monthly Economic Review; October 2006. Retrieved from www.bot-tz.org [4]. Blomström Magnus, and Kokko Ari, (2003). “The Economics of Foreign Direct Investment Incentives”. EIJS Working papers 168. Retrieved from http://www.hhs.se/eijs [5]. Borenzstein, Eduardo, Jose De Gregorio, and Jong-Wha Lee. 1998. “How does Foreign Direct Investment Affect Economic Growth?” Journal of International Economics. 45: 115-135. [6]. Buckley Peter J., Clegg Jeremy and Wang Chengqi, (2006). “Inward FDI and host country productivity: evidence from China’s electronics industry”. Transnational Corporations, Vol. 15, No. 1 [7]. Chantal Dupasquier and Patrick N. Osakwe. (2005). “Foreign Direct Investment in Africa: Performance, Challenges and Responsibilities”. Africa Trade Policy Center (ATPC), Work in Progress No. 21. Retrieved from http://www.uneca.org/atpc/ [8]. Dollar, David, and Aart Kraay. (2000). "Growth is Good for the Poor." Development Research Group. Washington, D.C.: World Bank. Retrieved from http://www-wds.worldbank.org/ [9]. Elizabeth Asiedu, (2003), Foreign Direct Investment to Africa: The Role of Government Policy, Governance and Political Instability, JEL Classification: F23, O55 Department of Economics, University of Kansas [10]. ESRF, (2002). Focus on Morogoro region, ESRF Quarterly Economic report 5(1): 22 - 27. [11]. FAO, (2001). “Agricultural Investment and Productivity in Developing Countries”. Economic and Social Development Paper 148. Retrieved from www.fao.org [12]. Hansen Eske S., Jervelund Christian and Olsen Anne R., (2006). “Estimating Impacts on Productivity and Labor Demand from Foreign Direct Investments: A firm level approach” Conference at Schæffergården June 18-20, Retrieved from http://www.econ.ku.dk/massimo/Conference/ [13]. Ikara Moses, M., (2003). “Foreign Direct Investment (FDI), Technology Transfer, and Poverty Alleviation: Africa’s Hopes and Dilemma”. ATPS Special Paper Series No. 16; ATPS Communications Department, Nairobi, Kenya. [14]. IPP, (2005). “Low productivity affects Tanzania, says Industry Minister”. Retrieved from www.ippmedia.com [15]. Klein, M., Aaron, C., and Hadjimichael, B. (2003). “Foreign Direct Investment and Poverty Reduction”. World Bank, Retrieved from http://lcgbangladesh.org [16]. Mangisoni Julius, (2006). “Markets, Institutions and Agricultural Performance in Africa”. African Technology Policy Studies Network (ATPS); Special Paper Series No. 27. Nairobi, Kenya. [17]. Mkenda Kalinda, (2005). “The Impact of Globalisation on Tanzania’s Labour Market: Evidence from the Manufacturing Sector”. A paper prepared for a Policy Dialogue for Accelerating Growth and Poverty Reduction in Tanzania, ESRF. Retrieved from http://www.tzonline.org [18]. Msuya, E. E. and Ashimogo, G. C., An estimation of technical efficiency in Tanzanian sugarcane production: A case study of Mtibwa sugar company outgrower’s scheme. Journal of economic development Vol. (1) 2006 of Mzumbe University, Tanzania. [19]. Ngowi Honesty, (2005). “Institutional Reforms to Attract Foreign Direct Investments (FDIs) As a Strategy for Economic Growth” 26th AAPAM Annual Roundtable Conference, Mombasa, Kenya. Retrieved from Http://Unpan1.Un.Org/Intradoc/Groups/Public/Documents/Aapam/Unpan025714.Pdf [20]. Ngowi Honesty, (2002). “Foreign Direct Investment Entry Modes in Tanzania: Types, Driving Forces and Implications”. Tanzanet Journal Vol. 3 (1): 1-12 Retrieved from http://tanzanet.org [21]. Rao D.S. Prasada, Timothy J. Coelli and Mohammad Alauddin, (2004) “Agricultural productivity growth, employment and poverty in developing countries, 1970-2000”. ILO, Employment Strategy Papers. Retrieved from http://www.ilo.org/public/english/employment/strat/download/esp9.pdf [22]. Rutihinda Cranmer, (2007). “Impact of Globalization on Small and Medium Size firms in Tanzania”. ABR & TLC Conference Proceedings, Hawaii, USA. Retrieved from http://www.cluteinstitute.com/Programs/Hawaii-2007/Article%20293.pdf [23]. R&AWG, (2005). “Poverty and Human Development Report 2005”, Mkuki and Nyota Publishers, Dar es Salaam, Retrieved from www.povertymonitoring.go.tz [24]. Tambulan Tulus, (2004). “The impact of foreign direct investment on poverty reduction: a survey of literature and a temporary finding from Indonesia”. Faculty of Economics, University of Trisakti, Indonesia. Retrieved from http://www.trisakti.ac.id/ [25]. UNCTAD, 2006. “The World Investment report 2006; FDI from Developing and Transition Economies: Implications for Development”, Geneva Retrieved from http://www.unctad.org [26]. UNCTAD, 2007. “Asian Foreign Direct Investment in Africa; Toward a New Era of Cooperation among Developing Countries”. New York and Geneva. Retrieved from http://www.unctad.org/ [27]. URT, (2005), Tanzania FDI report 2004. www.bot-tz.org [28]. URT, (2006a). Tanzania Economic Survey 2005, www.tanzania.go.tz [29]. URT (2006b). “Agricultural Sector Achievements of the Third Phase Government 1995 – 2005”, Ministry of Agriculture Food Security and Cooperatives. Retrieved from http://www.kilimo.go.tz [30]. World Bank (2000): “Agriculture in Tanzania since 1986: Follower or Leader of Growth”; IFPRI, Washington. [31]. Yu CHEN and Sylvie DÉMURGER, (2002). “Foreign Direct Investment and Manufacturing Productivity in China”. CERDI Retrieved from http://www.bm.ust.hk/