Strategies to Attract Foreign Direct Investors Collaborating with Small and Medium Contractors in Tanzania Construction Sector

Abstract

Foreign Direct Investment (FDI) is an investment which is made to serve the business interest of the investor in a company, which is in a different nation distinct from the investor’s country of the origin. The study objective is to assessing strategies to attract foreign investors to collaborate with Small and Medium Contractors (SMCs) in construction sector in Tanzania. The focus was mainly on the investment aspects and not in the issues such as gender equity, discrimination or the environmental consequences of foreign investments. Evidence shows that a number of countries have deepened the development impact of FDI through measures that stimulate large and small enterprises to work together (Lorraine Ruffing, 2006).Debra and Ofori(2006) observed that many construction firms in developing countries are small and medium sized organizations. The researcher believes that by knowing the strategies which attract FDI to collaborate with SMCs can bring about changes on SMC’s perception about FDI’s. And this kind of diversity can contribute to SMCs operational improvement both technical and managerial. The researcher also believes the factors which get positive opinions can be adopted by SMCs as strategies to attract foreign investors to collaborate with them.. Data was collected from foreign investors who have offered subcontracts to SMCs, outsourcing some of their operations to them or partnering via strategic alliances or joint ventures. Response data was subjected to descriptive statistics and subsequently rates analysis were used to collect foreign investors’ opinions. The results of data analysis indicated that foreign investors would prefer SMCs who work on certain standard, who have specialized skills and who lowered their prices during subcontracting bargaining in their operations and rated those factors as very important. In operation factors they as well rated best practices guideline, technology capability, managerial capability, market information skills and institutional capacity as important in SMCs. The main motivation factors for foreign investors to work with SMCs are resources, raw materials, appropriate delivery practices and culture of long term thinking rated as very important. And the factors which strongly agreed that attract foreign investors to continue collaborate with SMCs are political stability, mutual trust and integrity between them and SMCs, Productivity of Local Firms, Reliability and Price on SMCs services and Local Knowledge assessing.

Keywords; Foreign Direct Investment, Small and Medium Contractors, Strategies