International Finance

Topics: Investment, Macroeconomics, Foreign direct investment Pages: 8 (2189 words) Published: November 19, 2012
The assignment requires one to select one major economic sector in Tanzania and •Evaluate the FDI’S flow and
the importance of FDI’s in that sector during the past 4 years. •Identify the likely impairing factors to FDI’s in that sector. •Recommend what the government should do to attract more FDI’S

After selecting the one major economic sector which is Agricultural sector, data were requested which will provide the end results of this assignment.  
Table of Contents
1.Introduction: Tanzania’s Economy4
2.Evaluation of Tanzania’s FDI’s flow5
3.Importance of FDI in Agriculture in the past 4 years7
Market Access:8
4.Factors Impairing FDI’s in Tanzania8
Poor Infrastructure8
Access to finance9
Regulatory framework9
5.Recommendation to attract more FDI’s10

1.Introduction: Tanzania’s Economy
Tanzania is one of the world's poorest economies in terms of per capita income, with GDP growth of average 7% per year between 2000 and 2008 on strong gold production and tourism. However, the economy heavily depends on agriculture, which accounts for more than one-fourth of GDP, provides 85% of exports, and employs about 60% of the work force. Tanzania also depends on the World Bank, the IMF, and bilateral donors to provide funds to rehabilitate Tanzania's aging economic infrastructure, including rail and port infrastructure that are important trade links for inland countries. With the recent banking reforms that have helped increase private-sector growth and investment, and the government has increased spending on agriculture to 7% of its budget. Continued donor assistance and solid macroeconomic policies supported a positive growth rate, despite the world recession. Also, in 2008, Tanzania received the world's largest Millennium Challenge Compact grant, worth $698 million. Dar es Salaam used fiscal stimulus and loosened monetary policy to ease the impact of the global recession. GDP growth in 2009-10 was a respectable 6% per year due to high gold prices and increased production. Tanzania's economy was forecast to grow by 7.2 percent in 2012, up from an estimated 6.0 percent this year, provided weather conditions improve as reported by the International Monetary Fund (IMF). However, Tanzania's economy will grow by a median 6.7 percent this year from 7.0 percent last year, weighed down by chronic energy shortages, as reported by a Reuter’s poll. The median forecast by a poll of 11 analysts showed gross domestic product would rebound to 7.1 percent next year in east Africa's second-largest economy. The downside risks to the growth outlook emanate mostly from the power rationing that has been going on in the country. It has compelled firms to resort to less productive sources of power. The Washington-based body earlier this year cut its 2011 growth projection for Tanzania from 7.2 percent because of widespread power outages triggered by drought in the predominantly hydropower producing country. Africa's fourth biggest gold producer, Tanzania mainly depends on tourism, mining and agriculture and is increasingly attracting higher investor interest in telecommunications, energy, manufacturing, financial services and transport.

2.Evaluation of Tanzania’s FDI’s flow
The Government of Tanzania (GOT) generally has a favorable attitude toward foreign direct investment (FDI) and has made significant efforts to encourage foreign investment. After several years of growing FDI, new FDI declined sharply from USD 6.68 billion in 2008 to USD 2.3 billion in 2009. The number of new foreign projects registered at TIC dropped to 503 last year from 768 in 2008. There is no restriction in foreign exchange. Foreign investors generally receive national treatment; however, the Tourism Act of 2007 bars foreigners from engaging in some...
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