The role of business licensing as a factor influencing foreign direct investment in Kenya

Abstract

Foreign direct investment is important in a developing country where there exist a high level of unemployment and generally a need to improve the livelihood of the people. In this context therefore, there is need for a country to develop a conducive business environment that will attract the same the foreign investors and establishment of one stop shop where all enquiries pertaining to both local and foreign investment in the country will be available, is such one step. Licensing process in a country will also affect the rate of investment by foreign investors. Towards the realization of the same objective, a descriptive research design was adopted in which questionnaires were distributed to Kenya Investment Authority and the Ministry of Local government offices. The respondents had attained different academic qualification and years of experiences in dealing with implementation of the institutions strategies for attracting direct foreign investment in the country. As a result, they were found to be knowledgeable to the research subject area. The findings of the study were that foreign investors are majorly concerned with the operating cost of their businesses and as well as the security of their investment. The respondents pointed out that before 2008, the country had multiple licensing agencies which in most cases had duplicating functions but it was also realized that this has been remedied by the coming up of a central bureau of licensing new businesses. The licensing process of foreign investor has been hampering the level of FDI coming to the country over time. The respondents observed that after the country coming up with a one stop shop where all prospective investors –both local and foreign- seek advice and all requirements pertaining to licensing in the office. Attraction of direct foreign investment to a country is of importance in terms of creating employment and increasing the general economic development of the country. Therefore, it is important that a country establishes all necessary mechanism that will attract these investors. The necessary conditions such as efficient communication and road network should be availed and the cost of production also are made affordable through a supply of affordable labour, raw materials and power for running the factories.