An International Centre of Excellence in Public Policy and Research

FDI as a Source of Economic Growth in Kenya

KIPPRA, under its Trade and Foreign Policy Department, is undertaking a research study on: “Foreign direct investment as a source of economic growth in Kenya” with the following objectives:

  1. To assess the role of trade agreements in attracting foreign direct investment in Kenya
  2. To assess the impact of trade and investment policies on foreign direct investment in Kenya.
  3. To assess the effect of foreign direct investment on industrialization in Kenya.

The study will utilize data from World Bank’s, World Development Indicators, UNCTAD’s World Investment Report 2023 and other relevant databases. The study will also employ a mix of empirical estimation techniques to assess the role of trade agreements in attracting foreign direct investments in Kenya.  The Computable General Equilibrium (CGE) approach to policy analysis will be employed as a key analysis tool in delivering this objective. The CGE policy simulations will be anchored on the current 2021 Social Accounting Matrix (SAM) for Kenya.

Additionally, current trade and investment policy commitments by the government will be considered as interventions upon which foreign direct investment outcomes in the country will be assessed. Specifically, trade and investment commitments in various Budget Policy Statements (BPS), Finance Acts, and the Government’s Bottom-up Economic Transformation Agenda (BETA) Plan will be examined. Policy simulations will be made to assess their impact on foreign direct investment outcomes in the country. The analysis will also be reinforced by estimation of gravity models. The analysis will be supported by regression analysis with foreign direct investment being the key independent variable and industrialization being the dependent variable.

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