Impact of Zanzibar Investment Promotion Authority Approved Projects on Gross Domestic Product of Zanzibar

The aim of this paper was to examine the impact of Zanzibar Investment Promotion Authority (ZIPA) approved projects on Zanzibar Gross Domestic Product (GDP). The study applied the Ordinary Least Square (OLS) method to estimate the results on yearly secondary data from 1990 to 2019. The estimated results showed that one percent increase in number of projects, capital approved and government expenditure will lead the GDP to increase by 17.7%, 27.3% and 32.5% respectively at 5% level of significant. Unfortunately, net export (EXP) shown to be significant but negatively related with GDP of Zanzibar. A one percent increase in EXP will lead to decrease in GDP by 26.8%. Therefore, it is concluded that ZIPA approved projects have positive significant impacts to Zanzibar GDP. The study then recommends for ZIPA to function in accordance with its role as elaborated in act No. 14 of 2018 since the better performance of this institution will leads to more invested projects with huge amount of capital resulting into more employment creation, rising of household expenditure and the national GDP. domestic investment and economic growth in the short term. These results provide an evidence that domestic investment, exports and labors are seen as a source of economic growth in Malaysia. Reference [7] conducting a study using a unit root and cointegration techniques to determine the long run relationship between GDP and investment for 90 countries using data from World Bank for the period 1960-1992. In the first step of our analysis we found GDP and investment integrated of different orders for 33 countries. The analysis shows no cointegration between GDP and investment for 25 countries and cointegration for 25 countries with both variables of order I (1). The other 7 countries with both variables of order I (0) are in long run relation and do not need cointegration test. To determine the direction of causal effect between GDP and investment we used Granger causality test as the third step of analysis. We found causality in the short run for 15 countries and in the long run for 23 countries. Bi-directional causality is found for 10, unidirectional causality from GDP to investment for 18 and from investment to GDP for 10 countries. The causality from GDP to investment is positive for 11 countries and from investment to GDP for 6 countries. Bi-directional causality is mostly positive between the two variables. Reference [8] investigate the relationship between public investment and private investment using a sample size of 116 countries during the 1980-2006 period. The results suggest that on average public investment has a negative impact on private investment. In addition, they find that the crowding-out effect of public investment through weak public institutions on average outweighs the crowding in effect coming through the channel of increasing in the marginal productivity of private investment. Also [9] examines the interaction between public and private investment by using Granger-causality and cointegration tests and probity analysis using a sample of 25 developing countries. The results obtained shows that the higher the share of Government involvement in an economy, the lower the trade openness, the more restrictions there are on the use of foreign currencies and more stable and developed macro and monetary environment. It is obviously that public investments may crowd out private investments. Reference [10] conducted a study on the relationship between public and