International Finance

The nomenclature of the world-wide frugal compass Is the formula that the world Is flat and that It comes In a full circle besides where corporal power has transcended barriers and territorial borders, Terrorism remains as the swearing of existence. Terrorism Is that plague that reeks In every bodied dominated land. It wasnt only the twin WET towers plummeting at the darted vision of scourge only it was the networked hardship of mans economic progress.The planetary news of today is resplendent of the clatter of bullets, the absolutism of armed tanks and most deductionantly, the break by dint of of mans bestial brutality. Truncated calls, crashing stock securities industrys, shady economists the economic world witnessed the horror on 9/1 1, 26/11 etc. Brokers lay crestfallen, investors chose survivals over super profits supra all, the line of reasoning of man fai conduct. The first question that digest be gawked on is how does the thriftiness of the world suffer s ubsequently the aftermath of a bratwurstist occupation?In the advent of superior ball-shapedization, countries favor entry Into the food markets by avering on exporting goods and services, which leads to the feasibility of fast and broad outlook of world(a) markets It go out also boil down the heavy dependence on noble remissive personal faceless(prenominal), which bound the axe offer much understandability, flexibility for reacting to unforeseeable market changes and fast adjustments. irrelevant direct investing or FDA remains one of the distinguish backstabbers for an aspiring planetary economy.Major investings in major countries of the world stand on shaky ground when much(prenominal) even outts happen in the light of the economy. When it comes to spherical economics, transaction approachs and economies of scale, contrary Direct Investment is a precedency among financial planners, tho the risky affair of dwindling among what is to e injected in the econ omy and what is to be exported be deemed to be worrisome. Global Markets relieve oneself the trend to reprimand distress to a greater extent severely than rewarding success, which grant made risk minimizing strategies a pathway for pedigree promoters and planners.The yester courses in the beginning the first fatal b humble of terrorism to the global business stadium saw a stupendous vexth of International ventures entirely after the wrath experienced by the supranational markets it took into concentrating of municipal affiliations and concentrations. This was evident by the fall of supranational monetary saving and faith. Money launder has consequence to the modern day malaise of terrorism financing. Tightening money wash laws in the United states still remain ineffective at the gawking graciouskind of a global lingoing giant- HASH having fallen prey to such accusations.Hashs depositing activities in Saudi-Arabian Arabia, specifically activities pertaining to r eferencing banking with AY Rajah fix were brought under the radar. An investigation claimed that the Saudi bank had financed terrorist activities In purview of the September 11 investigations. In fact, it is direct Infamously kn witness as the- Early Financial benefactor of the al- Qaeda. Although, thither was a hiatus In the banking transactions of HASH and AY Rajah bank further two the banks hold resumed their dealings. Two Bangladesh banks hasten been accused on salary grounds.Tighter norms and stringent Basel laws could be the trump card but the strain structures pertaining to world(prenominal) business suffer witnessed a setback in emplacement of worsening international ties it is well evident by the declining education of international studies in the United States, as per the stats relating to enrollments in International Business signifiers and Foreign language courses. During the past few ears, managers ready moved from the focus of proactive exploration concern ing international opportunities in the global argonna to a kinda defensive posture that emphasizes on the vulnerability of international operations and global threats.The September 11 attack alone caused around 40 one thousand thousand of insurance losses in USA. There was an liquidity command intercommunicate by the federal reserve a capacious with the delay of major global stock markets like NYSE, FETES etc. The nightm ares of the Ells (Foreign institutional Investors has vindicatory begun with the sharp pullulate ups of the gold and other commodities prices. As the sawhorse recovered, it sort of showed how the economy could accept a domino effect in Just a indorsement of a terror attack.Although stocks recovered from the short bearish phase of the 26/11 attack in Iambi it cant offer a solution for the flitting involuntary losses in the global economy. The worst part is that how can a manager appropriate against such termss? The cost of tender labor, wealth and resou rces? It is not Just the nucleotide existence marred or the sabbatical day beingness a black day but it is the vulnerability of corporate giants in front of the tryst with terrorism. The cost natural(p) for provisioning against such losses cannot be anticipated.They can seep through and through every advent of the business whether its the hijacked plane or the bakery which repairs bombarded the vivid conception of terror cripples the masculinity of business. The real question that looms on every maven business maker is that who is supposed to bear this impossible to inappropriate cost? The judicature or the various international bodies? Yes, there is indeed something scarier than the lofty crisis, and it is the tremendous crisis of human empathy and brotherhood. What might seem as the biggest looming threat to the business of the world can actually be a way to action this common malaise forever.It is the world cooperation of various international bodies and government b odies including transnational corporations to turn an end to this plaguing condition. In the face of such a terror the rescue can only be the pooled efforts of every individual who dreams of international cooperation and benefit. Rather than basking on the indifference curve, it might be the time of our corporate lives to pull our socks even spicyer(prenominal)er(prenominal) so that each individual with its witness competence forms the army of seamless unity and strength.International FinanceChapter 4 Practice Problems Percentage Depreciation gain the spot rate of the British outsmart is $1. 73. The anticipate spot rate one year from right away is assumed to be $1. 66. What pctage depreciation does this reflect? ($1 66 $1 73)/$1 73 = 4. 05% ($1. 66 $1. 73)/$1. 73 4 05% pass judgment depreciation of 4. 05% percent Inflation effectuate on telephone exchange place Assume that the U. S. inflation rate finds high relative to Canadian inflation. another(prenominal) thi ngs being equal, how should this allude the (a) U. S. demand for Canadian horses, (b) supply of Canadian dollars for sale, and (c) residuum value of the Canadian dollar? Demand for Canadian dollars should change magnitude, ? Supply of Canadian dollars for sale should decrease, and ? The Canadian dollars value should increase. 1 use up Rate Effects on Exchange order Assume U. S. sideline rank fall relative to British gratify rates. early(a) things being equal, how should this tint the (a) U. S. demand for British pounds, (b) supply of pounds for sale, and (c) equilibrium value of the pound? ? Demand for pounds should increase, ? Supply of pounds for sale should decrease, and ? The pounds value should increase. Income Effects on Exchange Rates Assume that the U.S. income level rises at a much higher rate than does the Canadian income level. Other things being equal, how should this motivate the (a) U. S. demand for Canadian dollars, (b) supply of Canadian dollars for sal e, and (c) equilibrium value of th Canadian dollar? f the C di d ll ? ? Assuming no effect on U. S. interest rates, demand for dollars should increase, ? Supply of dollars for sale whitethorn not be affect, and ? The dollars value should increase. Trade lying-in Effects on Exchange Rates Assume that the Nipponese government relaxes its controls on imports by Japanese companies.Other things being equal, how should this affect the (a) U. S. demand for Japanese waste, (b) supply of hankering for sale, and (c) equilibrium value of the yen? ? Demand for yen should not be affected, ? Supply of yen for sale should increase, and ? The value of yen should decrease. 2 Effects of Real Interest Rates What is the expected descent between the relative real interest rates of two countries and the flip rate of their currencies? ? The higher the real interest rate of a plain relative to another country, the soakeder go away be its home property, other things equal. speculative Effects on Exchange Rates Explain why a public forecast somewhat future interest rates could affect the value of the dollar today. Why do some forecasts by well-respected economists cast no seismic disturbance on todays value of the dollar? ? Speculators can use anticipated interest rate movements to forecast alternate rate movements. ? Th may purchase f i securities b They h immaterial iti because of their f th i expectations about currency movements, since their yield testament be affected by changes in a currencys value. ? These purchases of securities require an exchange of currencies, which can immediately affect the equilibrium value of exchange rates. It was already anticipated by market participants or is not different from investors original expectations. Interaction of Exchange Rates Assume that there are substantial smashing flows among Canada, the U. S. , and Japan. If interest rates in Canada decline to a level below the U. S. interest rate, and inflationary expectation s remain unchanged, how could this affect the value of the Canadian dollar against the U. S. dollar? ? If interest rates in Canada decline, there may be an increase in capital flows from Canada to the U. S. ? In addition, U. S. investors may strain to capitalize on higher U.S. interest rates, while U. S. investors reduce their investments in Canadas securities. ? This places protrudeward wardrobe on the Canadian dollars value. 3 Interaction of Exchange Rates How might this affect the value of the Canadian dollar against the Japanese yen? ? Japanese investors that previously invested in Canada may , p deepen to the U. S. Thus, the reduced flow of gold from Japan would place downward press on the Canadian dollar against the Japanese yen. Relative wideness of Factors affecting Exchange Rate Risk Assume that the level of capital flows between the U.S. and the country of Krendo is negligible and will continue to be. But there is a substantial measuring rod of job between the U. S. and the country of Krendo. Which affect, high inflation or high interest rates will be seen in the value of the Krendos currency? Krendo s The inflation effect will be stronger than the interest rate effect because inflation affects trade flows. ? The high inflation should cause downward pressure on the kren. Speculation unrelenting Demon marge expects that the Mexican peso will depreciate against the dollar from its spot rate of $. 5 to $. 14 in 10 days. The pursual interbank lending and acceptation rates exist U. S. dollar Mexican peso conducting Rate Borrowing Rate 8. 0% 8. 3% 8. 5% 8. 7% Assume that Blue Demon slang has a borrowing capacity of either $10 trillion or 70 million pesos in the interbank market, depending on which currency it wants to borrow. How could Blue Demon jargon attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy. 4 Speculation 1. Borrow MXP70 million 2.Conve rt the MXP70 million to dollars MXP70,000,000 ? $. 15 = $10,500,000 3. Lend the dollars through the interbank market at 8. 0% annualized over a 10-day period. The bill accumulated in 10 days is $10,500,000 ? 1 + (8% ? 10/360) = $10,500,000 ? 1. 002222 = $10,523,333 4. Repay the peso loan. The payment amount on the peso loan is MXP70,000,000 ? 1 + (8. 7% ? 10/360) = 70,000,000 ? 1. 002417 = MXP70,169,167 5. Based on the expected spot rate of $. 14, the amount of dollars compulsory to repay the peso loan is MXP70,169,167 ? $. 14 = $9,823,683 6.After repaying the loan, Blue Demon Bank will have a speculative profit of $10,523,333 $9,823,683 = $699,650 Speculation Assume all the preceding development with this exception Blue Demon Bank expects the peso to appreciate from its present spot rate of $. 15 to $. 17 in 30 days. How could it attempt to capitalize on its expectations without using deposited funds? Estimate the profits that could be generated from this strategy. Speculat ion 1. Borrow $10 million 2. Convert the $10 million to pesos (MXP) $10,000,000/$. 15 = MXP66,666,667 3. Lend the pesos through the interbank market at 8. % annualized over a 30-day period. The amount accumulated in 30 days is MXP66,666,667 ? 1 + (8. 5% ? 30/360) = 66,666,667 ? 1. 007083 = MXP67,138,889 4. Repay the dollar loan. The repayment amount on the dollar loan is $10,000,000 ? 1 + (8. 3% ? 30/360) = $10,000,000 ? 1. 006917 = $10,069,170 5. Convert the pesos to dollars to repay the loan. The amount of dollars to be received in 30 days (based on the expected spot rate of $. 17) is MXP67,138,889 ? $. 17 = $11,413,611 6. The profits are (could be) $11,413,611 $10,069,170 = $1,344,441 5International FinanceThe nomenclature of the global economic arena Is the grammatical construction that the world Is flat and that It comes In a full circle but where corporate power has transcended barriers and territorial borders, Terrorism remains as the curse of existence. Terrorism Is tha t plague that reeks In every corporate dominated land. It wasnt Just the twin WET towers plummeting at the darted vision of terror but it was the networked failure of mans economic progress.The global news of today is resplendent of the clatter of bullets, the monocracy of armed tanks and most importantly, the breakthrough of mans bestial brutality. Truncated calls, crashing stock markets, cautious economists the economic world witnessed the horror on 9/1 1, 26/11 etc. Brokers lay crestfallen, investors chose survivals over super profits preceding(prenominal) all, the business of man failed. The first question that can be gawked on is how does the economy of the world suffer after the aftermath of a terrorist action at law?In the advent of superior globalization, countries favor entry Into the markets by relying on exporting goods and services, which leads to the feasibility of rapid and broad outlook of global markets It will also reduce the heavy dependence on high remissive animal(prenominal) faceless, which can offer much understandability, flexibility for reacting to unforeseeable market changes and rapid adjustments. Foreign direct Investment or FDA remains one of the line backstabbers for an aspiring global economy.Major investments in major countries of the world stand on shaky ground when such events happen in the light of the economy. When it comes to global economics, transaction costs and economies of scale, Foreign Direct Investment is a precedency among financial planners, but the risky affair of dwindling between what is to e injected in the economy and what is to be exported are deemed to be worrisome. Global Markets have the trend to reprimand failure more severely than rewarding success, which have made risk minimizing strategies a pathway for business promoters and planners.The yester years onwards the first fatal blow of terrorism to the global business arena saw a stupendous growth of International ventures but after the wrath expe rienced by the international markets it took into concentrating of domestic affiliations and concentrations. This was evident by the fall of international monetary saving and faith. Money laundering has led to the modern day malaise of terrorism financing. Tightening money laundering laws in the United states still remain ineffective at the gawking reality of a global banking giant- HASH having fallen prey to such accusations.Hashs banking activities in Saudi Arabia, specifically activities pertaining to referencing banking with AY Rajah Bank were brought under the radar. An investigation claimed that the Saudi bank had financed terrorist activities In purview of the September 11 investigations. In fact, it is nowadays Infamously known as the- Early Financial benefactor of the al- Qaeda. Although, there was a hiatus In the banking transactions of HASH and AY Rajah bank but both the banks have resumed their dealings. Two Bangladesh banks have been accused on salary grounds.Tighter norms and stringent Basel laws could be the trump card but the Course structures pertaining to international business have witnessed a setback in military position of worsening international ties it is well evident by the declining education of international studies in the United States, as per the stats relating to enrollments in International Business Courses and Foreign language courses. During the past few ears, managers have moved from the focus of proactive exploration concerning international opportunities in the global arena to a rather defensive posture that emphasizes on the vulnerability of distant operations and global threats.The September 11 attack alone caused around 40 cardinal of insurance losses in USA. There was an liquidity need turn to by the federal reserve along with the delay of major global stock markets like NYSE, FETES etc. The nightmares of the Ells (Foreign institutional Investors has Just begun with the sharp break up ups of the gold and other comm odities prices. As the dollar recovered, it rather showed how the economy could have a domino effect in Just a upshot of a terror attack.Although stocks recovered from the short bearish phase of the 26/11 attack in Iambi it cant offer a solution for the evanescent involuntary losses in the global economy. The worst part is that how can a manager appropriate against such costs? The cost of human labor, wealth and resources? It is not Just the infrastructure being marred or the sabbatical day being a black day but it is the vulnerability of corporate giants in front of the tryst with terrorism. The cost born for provisioning against such losses cannot be anticipated.They can seep through whatever advent of the business whether its the hijacked plane or the bakery which gets bombarded the vivid liking of terror cripples the masculinity of business. The real question that looms on every sensation business maker is that who is supposed to bear this impossible to inappropriate cost? The government or the various international bodies? Yes, there is indeed something scarier than the sublime crisis, and it is the sublime crisis of human empathy and brotherhood. What might seem as the biggest looming threat to the business of the world can actually be a way to labour this common malaise forever.It is the world cooperation of various international bodies and government bodies including international corporations to bring an end to this plaguing condition. In the face of such a terror the rescue can only be the pooled efforts of every individual who dreams of international cooperation and benefit. Rather than basking on the indifference curve, it might be the time of our corporate lives to pull our socks even higher so that each individual with its own competence forms the army of seamless unity and strength.International Finance abstractedness The assignment requires one to select one major economic sphere of influence in Tanzania and Evaluate the FDIS flow and t he importance of FDIs in that sector during the past 4 years. Identify the likely impairing factors to FDIs in that sector. Recommend what the government should do to run more FDIS manner After selecting the one major economic sector which is Agricultural sector, selective information were requested which will interpret the end results of this assignment. ? Table of Contents 1. installation Tanzanias Economy4 2. Evaluation of Tanzanias FDIs flow5 . Importance of FDI in horticulture in the past 4 years7 Capital7 applied science8 Market entranceway8 4. Factors Impairing FDIs in Tanzania8 Poor base8 qualification8 Bureaucracy8 Corruption9 Seasonality9 Access to finance9 Regulatory framework9 5. Recommendation to attract more FDIs10 6. Conclusion10 References. 12 1. Introduction Tanzanias Economy Tanzania is one of the worlds poorest economies in terms of per capita income, with GDP growth of clean 7% per year between 2000 and 2008 on strong gold drudgery and tourism.However, the economy heavily depends on factory farm, which accounts for more than one-fourth of GDP, provides 85% of exports, and employs about 60% of the work force. Tanzania also depends on the innovation Bank, the IMF, and bilateral donors to provide funds to rehabilitate Tanzanias aging economic infrastructure, including rail and port infrastructure that are important trade links for inland countries. With the recent banking reforms that have helped increase private-sector growth and investment, and the government has increased spending on agriculture to 7% of its budget.Continued donor assistance and solid macroeconomic policies supported a validatory growth rate, despite the world recession. Also, in 2008, Tanzania received the worlds largest millennium Challenge Compact grant, worth $698 million. Dar es Salaam used financial stimulus and loosened monetary policy to ease the impact of the global recession. GDP growth in 2009-10 was a respectable 6% per year due to high gold pric es and increased production. Tanzanias economy was forecast to grow by 7. 2 percent in 2012, up from an estimated 6. 0 percent this year, provided weather conditions remediate as reported by the International pecuniary Fund (IMF).However, Tanzanias economy will grow by a normal 6. 7 percent this year from 7. 0 percent last year, weighed down by chronic energy shortages, as reported by a Reuters poll. The median forecast by a poll of 11 analysts showed gross domestic product would rebound to 7. 1 percent conterminous year in east Africas endorse-largest economy. The downside risks to the growth outlook emanate by and large from the power rationing that has been going on in the country. It has compelled firms to drop off to less productive sources of power. The Washington-based body earlier this year cut its 2011 growth task for Tanzania from 7. percent because of widespread power outages triggered by drought in the preponderantly hydropower producing country. Africas fourth big gest gold producer, Tanzania in the first place depends on tourism, mining and agriculture and is more and more attracting higher investor interest in telecommunications, energy, manufacturing, financial services and transport. 2. Evaluation of Tanzanias FDIs flow The Government of Tanzania (GOT) generally has a favorable situation toward foreign direct investment (FDI) and has made significant efforts to encourage foreign investment.After several years of growing FDI, new FDI declined sharply from USD 6. 68 billion in 2008 to USD 2. 3 billion in 2009. The number of new foreign projects registered at TIC dropped to 503 last year from 768 in 2008. There is no barricade in foreign exchange. Foreign investors generally receive national discussion however, the Tourism Act of 2007 bars foreigners from engaging in some tourism-related businesses. The Dar Es Salaam Stock Exchange forbids companies with more than 60 percent foreign ownership from listing.There are no laws or regulatio ns authorizing private firms to limit or prohibit foreign investment, participation, or control, and firms generally do not cumber foreign participation in practice. The global economic crisis had minimal impact on the Tanzanian financial sector due to its relatively low global integration, however phaeton arrivals dropped up to 20 percent, new tourist projects fell by 50 percent, and FDI dropped within the natural resource sector, resulting in layoffs at gold mining firms and stalled mineral and gas exploration and emergence projects.The Tanzanian Investment Center (TIC), established by the Tanzanian Investment Act of 1997, is the focal point for all investors inquiries, screens foreign investments, and facilitates project start-ups. file with TIC is not mandatory, but offers incentives for joint ventures with Tanzanians and wholly owned foreign projects preceding(prenominal) USD 300,000. The review process takes up to 10 days, and involves multiple GOT agencies, which are infa llible by law to cooperate fully with TIC in facilitating foreign investment, but in practice can create bureaucratic delays.TIC continues to improve investment facilitation services, provide joint venture opportunities between local and foreign investors, and dispense investment information. TIC does not have specific criteria for screening or sanction projects, but considers factors such as foreign exchange generation and savings, import substitution, employment creation, linkages to the local economy, technology transfer, and expansion of production of goods and services. Among investment and trade opportunities promoted by the TIC are agriculture, mining, tourism, telecommunications, financial services, and energy and transportation infrastructure.The Economic treat Zones Act 2006 authorized the establishment of Special Economic Zones (SEZs) to augment investments in the light industry, agro-processing industry and agriculture sectors. Greenfield foreign direct investments ar e allowed through this legislation. The Export Processing Zones Authority continues to promote Export Processing Zones (EPZ) to attract investments in agribusiness, textiles and electronics and Spatial Development Initiatives (SDI). Investors in EPZs are eligible for appraise exemptions. Investments on the Dar es Salaam Stock Exchange (DSE) are overspread to foreign investors, but capped at 60 percent.Foreign investors are interdict from participating in government securities. The financial sector has continued to expand, with an increase in foreign-affiliated financial institutions and banks operating in Tanzania. As of December 2009, the Bank of Tanzania listed a total of 27 commercial banks licensed and operating in Tanzania, over half of which are foreign-affiliated banks. Competition among these foreign commercial banks has resulted in significant improvement in the efficiency and quality of financial services.Tanzania expected to increase foreign direct investment (FDI) by 16 percent in 2010 from $645 million last year as the global economy recovers. Foreign direct investment in 2009 dropped from $679 million the year sooner as a result of the global financial crisis. The FDI inflows into east Africas second largest economy were expected to surge to $800 million in 2011. Tanzanias economy mainly depends on tourism, mining and agriculture. Its telecommunications, energy, manufacturing, financial services and transport sectors are attracting move up investor interest.It is expected that most of the investments in 2010/11 will focus on tourism, agriculture and telecoms. The government is implementing investment reforms to woo foreign capital. According to the World Banks Doing Business in the East African Community 2010 report, Tanzania fares poorly in key areas such as closing and starting a business, defend investors, approach shot to credit, cross border trade and return of construction permits. 3. Importance of FDI in Agriculture in the past 4 y ears Tanzania has more than 44 million hectares of arable land, and a wide variety of bionomical zones, climates and water resources.The country could feed most of the East, Central and Southern African countries with food deficits. 80% of the population in Tanzania lives in hoidenish areas and are in some way or another depending on agriculture. The rustic sector is vital to Tanzanias economy and therefore also to the reducing and eradication of poverty. Other advantages of FDIs in untaught sector in Tanzania are as follows Capital First and foremost FDI brings much need capital to Tanzania. This helps the country to pass rates of domestic investment higher than their domestic savings.Besides, the financial resources that FDI brings in are in long term and non-debt creating. Technology There are a number of ways in which FDI through TNCs can help develop indigenous technology. Firstly TNCs usually bring in modern technology in agriculture and practices to Tanzania and help i t leaven its existing technology. Market Access TNCs in the agricultural sector has enabled Tanzania to give exploit its comparative advantage in international trade and frankincense gain access to global markets. 4. Factors Impairing FDIs in Tanzania Poor Infrastructure Lack of stable power has led to power outages throughout the country.It has compelled firms to resort to less productive sources of power. These power outages triggered by drought due to high reliance in the predominantly hydropower. Another significant constraint to astir(p) FDI in Tanzania through agriculture is poor infrastructure within Tanzania. poor investment in the road network has resulted in just 4,000 kilometers of Tanzanias 85,000 km road network being paved. Most of these unpaved roadstead are feeder roads in rural areas, and many routes become impassable after heavy rains. The countrys two rail line systems are also unreliable, with dilapidated infrastructure and outdated rolling stock. Capacity T IC currently lacks the capacity to address the complicated and non-transparent investment clearance processes, to realize comprehensive and timely data for the research needed to facilitate both policy making and investment decision-making. Bureaucracy Bureaucratic intransigence continues to pose a severe obstacle to doing business in Tanzania as in the rest of East Africa. Investors looking to startup businesses in Tanzania often recoil about the level of red tape associated with issues such as the issuance of business licenses, company registration, building permits, land certificates and taxation. Corruption Corruption is an endemical problem in Tanzania and is often cited as one of the biggest hindrances to doing business. The World Bank 2006 Enterprise Survey indicates that 49. 5% of the surveyed companies reports that they expect to make informal payments to achieve specific goals. According to the 2006 IFC-World Bank Enterprise Survey, 20% of the companies surveyed expect t o give gifts or make informal payments to get an operating license, and 32% to get a construction permit. SeasonalityMore than 75% of Tanzanian enterprises are heavily affected by seasonality, whereby farmers sell their produce when prices are lowest and buy excitants for the contiguous cropping season when prices are highest. Access to finance Most enterprises in the rural areas are small scale and engage in or rely on agriculture. Bearing the above constraint, these small enterprises have a relatively high risk, high transaction costs and low volumes, limiting access to capital. Regulatory framework The economic growth potential of investments in agricultural land is questionable due to an inadequate regulatory framework governing (FDI) in the sector.FDI in agricultural sector in Tanzania can even jeopardize local resource users land rights. In such that farmers are giving away their most valuable assets to profit-seeking entities, based on information asymmetries and persuasio n. 5. Recommendation to attract more FDIs Including the ongoing reforms to woo investments, TIC continues to improve investment facilitation services, provide joint venture opportunities between local and foreign investors, and disseminate investment information.In order to attract more FDIs in the agricultural sector and to increase productivity and high quality output, effort is needed to understand and eliminate the barriers to smallholders that inhibit the growth of productivity. The structural problems facing smallholders such as limited access to information, to input and output and financial markets need rethinking that will attract more FDI to the sector. Such an arrangement would involve smallholders being better organised in producer associations.Producer associations can improve productivity, reduce costs through supply chain linkages and improve competitiveness. They manage to do so by improving access to necessary and affordable input (technologies and credit). The sec ond challenge is to build integration of production, transport, processing and marketing to take advantage of supply and demand value addition. Third is to ensure the conception of innovation and knowledge on a continuing basis without subjecting members to high consultancy fees given the socio-economic conditions of smallholders. 6. ConclusionApart from general determinants such as macroeconomic stability, efficient institutions, policy-making stability and a good regulatory framework, the smallholder institutional apparatus has positive impact on FDI flow into the sector. It has been observed that crops whose smallholders are well organized attracted more FDI. An important implication of the result is that FDI to the agricultural sector is not solely driven by policies and incentives to foreign investment and that the institutional setup of smallholder farmers can play an important utilisation in promoting investments to the sector.In the short and specialty term, efforts to foster integration and creation of strong bonds between smallholders and investors through incorporate producer schemes can increase FDI to the sector and thus increase productivity. Other determinants such as investment regulatory frameworks, policies that promote macroeconomic economic stability, and improved physical infrastructure also have a role to play both in the short and long run. In the long run, more FDI can be attained by developing strong institutions in all sectors. ?