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Regional Integration and Poverty: the case of Tanzania

Research reports

This report examines the direct and indirect effects of regional integration on poverty in Tanzania through trade, investment or development cooperation. Comparisons of trade and investment flows pre and post regional integration show the potential impact on trade and investment flows, while an examination of the poverty focus of regional integration is conducted by examining the distribution of intra regional exports and investment for Tanzania in the sectors with most direct potential for poverty reduction, particularly agriculture. Key stakeholders of regional integration such as firms and institutions were interviewed to supplement information from the secondary sources.

Findings show regional integration has increased intra-regional trade but not FDI in Tanzania. Regional Integration may have reduced poverty through increased exports of agriculture products. Regional blocs (SADC and EAC) have not been a significant source of FDI to Tanzania, and generally, the efficacy of FDI in poverty reduction has been limited partly by its concentration on sectors that have less linkage to the rest of the economy (especially FDI in the mining sector). Regional integration can also address poverty reduction through Regional cooperation on development projects/programs, which we find to be significant but limited in scope.

Overall, the limited impact of Regional Integration on poverty can be explained, among others, by the infancy of the integration process. In addition, since poverty in Tanzania is basically a rural phenomenon, the unfavourable economic conditions of the rural sector (lack of functioning markets, low level of skills and reliance on subsistence agriculture with constrained tradable crops) limit the benefit of Regional integration to the poor. Nevertheless, realisation of the potential for Regional integration to reduce poverty will depend much on how the above conditions are addressed (including measures to increase economy-wide competitiveness) more than the efforts to hasten the integration progress. The private sector should be made conversant about the modalities and opportunities of regionalisation, including government’s measures to support export entrepreneurship.

Josaphat Kweka and Phillip Mboya