The Impact of Foreign Direct Investment on Agricultural Productivity and Poverty Reduction in Tanzania

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.FDI; Smallholders; Integrated Producer Schemes; Agricultural Productivity; Poverty Reduction; Tanzania