The effect of health on foreign direct investments inflows in Kenya

Abstract

FDI is one of the development indicators in developing countries. Many of these countries (Kenya included) seek ways to improve on the foreign direct inflows. They do this by identifying the factors that influence FDI and controlling or improving on these factors so as to attract foreign investors. Some of the determining factors of FDI in Kenya have been identified to be; infrastructure, insecurity, openness of the economy to trade, legal framework and governance. This study has examined the effect of health on foreign direct investment inflows in Kenya for the period 1970 - 2003. Life expectancy and morbidity rates are used as proxies for health. The results indicate that both life expectancy and morbidity rates influence FDI inflows into the country significantly, although morbidity has a greater impact on FDI than life expectancy. Other explanatory variables included in the model, apart from GDP per capita have also been found to significantly affect FDI. Infrastructure, openness of the economy to trade and education positively impact on FDI. While insecurity and GDP per capita influences FDI negatively. The study has also made several policy recommendations including seeking ways to increase public investments on health, developing infrastructure, building more schools and institutions of higher learning so as to cater for the increasing number of students and lastly improving security in the country.