Factors that influence the contribution of foreign Direct investment to the growth of Telecommunications sector in Kenya

Abstract

Foreign Direct Investment not only provides countries with much needed capital for domestic investment, but also creates employment opportunities, help transfer of managerial skills and technology all contributing to economic development. Governments, having appreciated the critical role the FDI plays, have established mechanisms geared towards attracting it. In theoretical literature, the role of FDI is that of a carrier of foreign technology that can boast economic growth (Findlay (1978) Romer (1993). FDI in Kenya Telecommunication sector have dropped as a result of the rigid policy on company ownership and investments. There is a need therefore for the Kenyan government to work towards implementing measures that will attract FDIs in Kenya. The study aims were to identify the factors that affect the role of FDIs in the growth of the telecommunication sector in Kenya. This was aimed at shedding light to the various beneficiaries of foreign. direct investment i.e. the government, the labor force, macro economists and institutions, macro & micro enterprises among others. There population for the study was leading Internet Services Providers, Data Carrier Network Operators and Mobile telephone operators in Kenya. The population of study targeted by the researcher comprised of key personalities in the telecommunications sector, principal personalities in the mobile telephony companies and those drawn from the Internet Services Providers and Data Carrier Network Operators. The research design was a survey with the major instrument of this survey being self administered questionnaires. The researcher took a sample of 35 respondents whereby 32 of them responded to the questionnaire constituting 84% response rate. From the findings Foreign Direct Investment not only provides countries with much needed capital for domestic investment, but also creates employment opportunities, help transfer of managerial skills and technology all contributing to economic development. There is a need therefore for countries to work towards creating an attractive environment for FDls. This will be achieved by working on measures like: - Infrastructure, The licensing regime for all the providers, the governmental policies towards FDls and corruption.