The Determinants and Competitiveness of Rice Export in Tanzania: A Vector Error Correction Model

Abstract

The rice export industry in Tanzania is seemingly performing poorly despite the country being the leading rice producer amongst the East African Community (EAC) member states. The extensive government interventions which have occurred in the industry and the existence of inward-looking trade policies such as the Common External Tariff within EAC would have resulted in increased rice exports especially, through the intra-regional trade, however this has remained more of an oratorical rather than practical attainment the reasons for which are not known with certainty. This paper is an attempt to fill this knowledge gap. The paper investigates the determinants of rice exports in Tanzania. Specifically, it examines the influence of price and non-price factors on rice exports and assesses the competitiveness of Tanzanian rice in the EAC export market. The paper uses secondary data obtained from government institutions and other international data repositories. The Vector Error Correction Model is used to capture the dynamics of rice export in Tanzania and the competitiveness of rice exported is assessed using the Revealed Comparative Advantage Model. The results show that real exchange rates, international rice prices, quantity produced and the average GDP per capita of the main importers of Tanzania rice in EAC were the key determinants of rice export performance though the commodity was found to be less competitive within the EAC and neighboring countries such as Zambia, Malawi and Mozambique which also import rice from Tanzanian. To improve rice export performance and enhance competitiveness, the country should increase production to take advantage of existing demand for rice from EAC countries and other neighboring countries.