Impact of Foreign Direct Investment on Agricultural Productivity

MP A R
Munich Personal RePEc Archive

The Impact of Foreign Direct Investment on Agricultural Productivity and Poverty Reduction in Tanzania
Msuya, Elibariki Kyoto University

2007

Online at http://mpra.ub.uni-muenchen.de/3671/ MPRA Paper No. 3671, posted 07. November 2007 / 03:23

The Impact of Foreign Direct Investment on Agricultural Productivity and Poverty Reduction in Tanzania
Elibariki Msuya, mzeeba@hotmail.com Kyoto University, Japan

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.

1.

Introduction

FDI has been shown to play an important role in promoting economic growth, raising a country’s technological level, and creating new employment in developing countries (Blomström and Kokko, 2003; Klein, Aaron, and Hadjimichael, 2003; Borenzstein, De Gregorio, and Lee. 1998). It has also been shown that FDI works as a means of integrating developing countries into the global market place and increasing the capital available for investment, thus leading to increased economic growth needed to reduce poverty and raise living standards (Rutihinda, 2007; Dollar and Kraay, 2000;... [continues]

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