Short-Term Effects of COVID-19 on Foreign Direct Investment Influxes: Evidence from the United Republic of Tanzania

Abstract

The COVID-19 outbreak in 2019 caused health and economic challenges at a global scale, similarly, the outbreak affected Foreign Direct  Investment (FDI) inflow in many countries including the United Republic of Tanzania (URT) in 2020. Additionally, the economic prospects  were also damaged by a stumpy in oil prices. The United Nations Conference on Trade and Development (UNCTAD) predicted that FDI will  decline by 25% to 40% due to pandemic containment measures. This study intended to investigate the extent to which COVID-19 has  affected FDI inflow in the URT over the near term. Specifically, the study focused on two factors: first, the number of FDI projects  registered; second, the number of jobs created by FDI projects (in all sectors or agriculture alone). This study adopted both quantitative  and qualitative approaches. The fixed effect model was used in the ex post facto study design. This study used Excel and STATA software in handling and processing the data. The study shows a significant overall decline in FDI influxes, particularly after COVID-19. Similarly to  this, the majority of FDI observed in the manufacturing and construction sectors goes toward building infrastructure, which could help  create new jobs, increase household incomes, and increase domestic spending to help the economy. An increase in FDI per unit has no  appreciable effect on the number of projects over years across sectors, according to the study's finding the FDI value is not statistically  significantly different from zero at the 5% level of significance. Likewise, on average there is no significant effect of a unit increase in FDI  on the number of jobs created over years across sectors. It is recommended that Government should attract more FDI in order to  stimulate investment and hence promote jobs and economic development.