Investor perception of the effectiveness of Kenya investment authority's strategies for attracting and retaining foreign direct investments.

Abstract

Foreign Direct Investments (FDIs) provide essential stimulus for driving economic growth and creating vibrant market economies however, attracting and retaining them is a major challenge for many countries. From statistics, by the year 2003, the volume of FDI's in Kenya had fallen far below one third on comparison to Uganda and Tanzania. This culminated in this study on Kenya Investment Authority (KIA) which is mandated by an Act of Parliament to attract and retain investments in Kenya. The specific objectives of the study were to determine the investor perception of the effectiveness of KIA's strategies for attracting and retaining foreign investments and to establish whether the effectiveness of these strategies is related to investor characteristics. The study was conducted through a survey of 42 FDIs out of 147 in Nairobi in the manufacturing and service sector that were facilitated by KIA between January, 2003 and December, 2006. Data were collected using a 5-point Likert-type scale. Disproportionate stratified random sampling was use to select respondent firms from the target population. Descriptive statistics in the form of mean scores were used to test both objectives. From the findings of this study, amongst all KIA strategies only a few strategies greatly influenced the investors' decision to invest and or retain their investments in Kenya rendering them most effective. It is therefore critical for KIA to continuously monitor and evaluate the effectiveness of its strategies resulting in the revision or replacement of the non effective strategies. From the study also, it is apparent that the effectiveness of investment promotion and retention strategies tends to have a relationship with some of the investor characteristics. It was recommended that KIA consider realigning these strategies to focus on FDI's with characteristics which are positively influenced by them.