Foreign direct investment (fdi) and its impact on employment creation: the case of manufacturing sector in tanzania

Harold M.L. Utouh and M Koteswara Rao

The purpose of this paper is to provide an analytical insight of Foreign Direct Investment (FDI) on employment creation in Tanzania, centring on manufacturing sector which is held as a conduit for social economic development. It analyses the concerted efforts on the part of the government in attracting conspicuous FDI, and in particular, the relationship between the increase in FDI and employment generation. Tanzania started to adopt economic reforms and open policy in the mid of 1980. However, the speed of the Tanzanian government to establish policy to attract FDI was more felt in 1990s and since then the degree of successful efforts to attract FDI has increased.                                                 
Methodology - The data used in this study consists of total employment, GDP and inward foreign direct investment (FDI). These annual data covered the period from 1980 to 2012 because it is only in this period that the data is available. The methodology to test the effects of the variables i.e., FDI, GDP and Employment creation has been confined to the least squares technique. The co-integration of the variables has been ascertained via application of Augmented Dickey Fuller Test and is found to hold in the long run.
Findings – the findings indicate that FDI has a positive and significant effect on employment generation in Tanzania and GDP is translated to have influenced the economic growth.
Practical implications Conducive business environment, more liberalised economy, institutional restructuring and enhanced private sector-led development will lead to the increase in foreign investment. Local entrepreneurial capacity should be empowered if the country wishes to have a sustainable growth and employment creation. 
Originality - The paper presents original findings based on research related to FDI and employment creation in the sector of manufacturing industries.

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