Foreign Direct Investment (FDI) and Diversity in Tanzanias' Economy

TABLE OF CONTENTS

Abstract

Acknowledgement

Introduction

Description

Challenges

Current Status

Methodology

Conclusion

References

Abstract

The function of Foreign Direct Investment [FDI] in Tanzania is a serious matter which has been uncared for till recently. This came as a result of forcing the Asians to live East Africa especially during the era of Iddi Amini Dada the former president of Uganda after chasing Asians in his country. Most of Foreign Investors scared to invest in East Africa as they feared their property that could be nationalized as Iddi Amini did.

For Tanzania itself however, Foreign Direct Investment epitomizes a crucial additional source of the investment capital and make a payment to the Tanzania’s economic growth and development. This thesis denotes one of the initial endeavors to scrutinize the implications of the inflows of FDI and Diversity to Tanzania’s economy. The psychoanalysis of this thesis is undertaken in perspective of the current literature and the efforts which are made by the government of Tanzania to encourage more inflow of Foreign Investors in the country, and people’s opinions on FDI in the country. Also this thesis will focus on the challenges the private investors come across in their efforts to promote investment in Tanzania.

Acknowledgments

This thesis is prepared for the assignments as one of the fulfillments of the Bachelors program at Atlantic International University [AIU]. I am very grateful to Dr Gilroy Newball my advisor, Madam Jessica Hernandez, and Madam Ofelia Hernandez my Tutors, Dr Valcin all from AIU Who have helped me to reach at this great stage I have stepped on. My colleagues Emmanuel Kibanga, Odong Patrick, Lamax all are AIU students who have shared with me different views, my friends who are business personnel Henry Mramba, Victoria Masuki, and Dorcas Lyamuya, Kidu Mathias a Student at St Lawrence London College Kampala Main Campus, for their opinions which enabled me a lot to complete my research and Lastly but not the least Mr. Zephaniah Gabusha may the lord bless you all abundantly.

Introduction

The function and implications of FDI in Tanzania is a serious matter which has been uncared for till recently. For Tanzania itself however, Foreign Direct Investment epitomizes a crucial additional source of the investment capital and make a payment to the Tanzania’s economic growth and development. This thesis denotes one of the initial endeavors to scrutinize the implications of the inflows of FDI and Diversity to Tanzania’s economy.

This thesis is structured as follows:- the first part will focus at Foreign Direct Investment and Diversity as an overview and the policies and strategies made by the Tanzania’s Government to promote FDI and the challenges which delay FDI inflow in the country. Then it will be followed by the merits of FDI on economic growth and then the constraights which are facing Tanzania’s Private sectors as a result of promoting FDI.

The merits and demerits of FDI on Tanzania’s economic growth will also be discussed in this thesis.

In addition to that the conclusion section will focus at attempts to spot out the critical policy issues crop up in the thesis.

Description

“Trade and investment are only a means to an end not an end in themselves”[Sims and Lake 2000].

Foreign Direct Investment

Before we move forward let’s have a look at what is meant by Foreign Direct Investment. Foreign Direct Investment refers to as an investment which is made by a domestically owned company or an individual in one country to directly invest across borders.

The company or an individual known is an investor who takes a decision of investing abroad may decide to amalgamate with other companies in the host country or by setting up a subsidiary company in the host country.

Bjorvatn [2000] defines Foreign Direct Investment as “an investment made to acquire a lasting interest in a foreign enterprise with the purpose of having an effective voice in its management.

The International Monetary Fund [IMF] and OECD, defines FDI as the aim of obtaining a lasting interest by a resident entity of one economy [Direct Investor] in an enterprise that is resident in another economy [Direct Investment Enterprise]. In the illustration of the lasting interest, means the existence of long term relationship between the direct investor and direct investment firms and a momentous degree of influence on the management of the latter. Source: the Concepts & Recommendations adopted by IMF’s Balance of payments [1993], 5th Ed.

It is not that everybody who feels to invest in another country can do so No, there is the accepted threshold which is accepted worldwide for a foreign direct investment relationship which is well stated by the OECD and must be not less than 10% of the voting stock. This is well stated in the IMF’s Balance of Payment Manual 5th Edition that the direct investor or investment enterprise must own at least 10% of the enterprise’s capital

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