Econometric Analysis of FDI in the Mining Sector to Tanzania’s Export Capacity

This study concentrated in examining the role FDI in the Mining Sector to Tanzania’s Export Capacity during 1989-2009. The study uses Ordinary Least Squares (OLS) as analytical techniques for this purpose. The results from OLS show that the total exports performance to the rest of the world is negative and insignificant, which implies that the contribution of FDI in mining have been weakly and exerting negative pressure on Tanzania’s export performance over the period. The result on the relationship between Tanzania export performance and FDI in mining shows to be statically insignificant however it confirms the hypothesis of the positive relationship among the variables, this kind of results can justify that the benefits deriving from mining transformation do not turn up within the period when the investments are made, but possibly it takes some time for this to record. It is therefore, suggested that there is a need to sustain current inflows and attract new FDI, but can be adjusted by enhancing the domestic investments in mining sector; addressing the supply and demand side constrains; accelerating growth in the sector by the interventions in reviewing and implementation of Mining Policy by targeting at value addition and improve export performance; facilitate exports of final products made of minerals rather than focusing on exporting raw gold, Tanzanite, diamond and other minerals; improve physical infrastructure both transport and communication sectors; think in terms of quality, not quantity ,provide a link between small scale producers and large scale mining companies to ensure that both parties are benefiting from the sector; facilitate research and development in the mining sector; align mining policies and other local and environmental policies to ensure sustainable development in the sector; and Provide a transparent and appropriate incentive and regulatory framework.