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

Abstract

FDI plays crucial role in stimulating development of various sectors in economy such as provision of skilled labour, employment creation, source of capital, management and technological transfer. Over the past 30 years, the share of FDI in World’s economy has been transformed from manufacturing sector to service sector thus creating various emerging sectors.The study employed time series secondary data for 22 years from 1999 to 2020, then used dickey-fuller and Philips perron tests for stationarity, Auto Regressive Distributed Lag (ARDL) bound test for co-integration, ARDL model to estimates long-run relationship lastly, diagnostic tests were applied to check validity and reliability of variables. The study revealed that FDI inflow in transport and storage sector have weak positive impact on economic growth while FDI inflow to other sectors have insignificant impact to economic growth. Thus, to combat such outcomes, the government is advised to attract more foreign investment to sectors with undesirable impacts with productive strategies to improve sectors performance on economic growth through establishment of favourable investment policies such as tax policies to avoid double taxation, capital account liberalization policies and financial institution policies to create conducive investment environment.