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Effects of Infrastructure Development on Foreign Direct Investment in Kenya

Author

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  • Carol Teresa Wekesa
  • Nelson H. Wawire
  • George Kosimbei

Abstract

Kenya’s foreign direct investment (FDI) inflows as a percentage of GDP have been increasing negligibly over the last 4 years, increasing from 0.4 per cent in 2010 to 0.9 per cent in 2013. And yet evidence shows that quality infrastructure lowers the cost of doing business and thus attracts FDI. Kenya has visible signs of infrastructure inadequacy and inefficiencies despite the fact that since the year 2000, there has been increased budgetary allocation to the infrastructure sector. This study, therefore, sought to determine the effects of transport, energy, communication and water and waste infrastructure development on FDI inflows in Kenya. The study used annual time series data sourced from Central Bank of Kenya, World Bank and the United Nations Conference on Trade and Development (UNCTAD). Using multiple regression analysis, it was established that improved transport infrastructure, communication infrastructure, water and waste infrastructure, exchange rate, economic growth and trade openness are important determinants of FDI inflows into Kenya. Hence, for Kenya to attract more FDI, continued infrastructural development is key since quality infrastructure affords investors a conducive investment climate in which to operate.

Suggested Citation

  • Carol Teresa Wekesa & Nelson H. Wawire & George Kosimbei, 2016. "Effects of Infrastructure Development on Foreign Direct Investment in Kenya," Journal of Infrastructure Development, India Development Foundation, vol. 8(2), pages 93-110, December.
    • Handle: RePEc:sae:jouinf:v:8:y:2016:i:2:p:93-110
    DOI: 10.1177/0974930616667875
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    References listed on IDEAS

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    5. World Bank, 2009. "World Development Indicators 2009," World Bank Publications - Books, The World Bank Group, number 4367, April.
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    Citations

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    Cited by:

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    2. Eric Mokwaro Bosire, 2020. "Foreign Direct Investments into Eastern Africa Region: The Infrastructure Development Nexus," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 370-381.
    3. Chukwuebuka Bernard Azolibe & Jisike Jude Okonkwo & Patrick Kanayo Adigwe, 2020. "Government Infrastructure Expenditure and Investment Drive in an Emerging Market Economy: Evidence from Nigeria," Emerging Economy Studies, International Management Institute, vol. 6(1), pages 61-85, May.
    4. Kashif Munir & Mehwish Iftikhar, 2021. "Impact of Transport and Technological Infrastructure in Attracting FDI in Pakistan," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 7, pages 93-106.
    5. Muhammad Athar Nadeem & Zhiying Liu & Haji Suleman Ali & Amna Younis & Muhammad Bilal & Yi Xu, 2020. "Innovation and Sustainable Development: Does Aid and Political Instability Impede Innovation?," SAGE Open, , vol. 10(4), pages 21582440209, November.
    6. Stéphane Mbiankeu Nguea, 2021. "The Impact of Infrastructure development on Foreign Direct Investment in Cameroon," Economics Bulletin, AccessEcon, vol. 41(3), pages 1113-1124.
    7. Bruno Emmanuel Ongo Nkoa, 2018. "Determinants of foreign direct investment in Africa: An analysis of the impact of financial development," Economics Bulletin, AccessEcon, vol. 38(1), pages 221-233.
    8. Pavel V. POPOV & Marina V. LEDENEVA & Victoria V. BATMANOVA, 2021. "Influence Of Logistics Infrastructure Of Russian Federal Districts On Their Social And Economic Indicators," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 21(2), pages 29-40.
    9. Bayissa Badada & G. Delina & Sun Baiqing & Ramaswamy Krishnaraj, 2023. "Economic Impact of Transport Infrastructure in Ethiopia: The Role of Foreign Direct Investment," SAGE Open, , vol. 13(1), pages 21582440231, March.

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    Keywords

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    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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