Influence of Investment on Export Performance in Tanzania

Abstract

The main aim of this paper was to examine empirically the influence of investment on export performance in Tanzania. Investment in the form of foreign direct investment inflow (FDI), foreign portfolio investment inflow (FPI), gross domestic fixed investment (GDI) and agriculture value added (AVA) are analysed on how they impact export performance, using multiple regression. Parameter, cumulative sums, heteroscedasticity, multicollinearity, normality and stationarity tests were conducted to validate the model. The study reveal FDI inflow, GDI and AVA are significantly and positively related to export performance. This means that FDI inflow increase also exports increase and vice versa. Same applies to GDI and AVA. The results value of R2 is 84.78% which is significant level to explain about our model. Therefore, the study recommends that with the current industrialization drive in Tanzania, the Government needs to attract FDI into agricultural sector and other sectors in which the country enjoys comparative advantage, to boost agro-processing industries, fish processing industries and mineral value additions industries which promote growth of high-value exports and reduce trade deficit. Also, gross domestic investment on infrastructures (transport, energy and telecommunication) need to go hand in hand in order to increase economic activities, exports and reduce trade deficit. Keywords: Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), Gross Fixed Domestic Investment (GDI) and Export Performance.