Regulation of Foreign Investment in Kenya 1963-81: an Empirical Study

Abstract

Kenya was a British dependence since 1897 in more ways than just the political fact of colonial government. Even after independence in 1963, the capitalist ideology and economic structure pursued by the colonial regime has been maintained with the well to do African bourgeoisie taking over political power from the non-Africans. Private Foreign Investment was one of the economic mainstays particularly in Industry, at independence. It still is a dominant factor in the present Economy. Although the government of independent Kenya has not used legislation much in regulating PFI, it has nevertheless, sought to impose some form of regulation on such investment. This study argues that despite such attempts, the active encouragement of PFI has meant that the government has been less than enthusiastic in pursuing its regulation with vigour and that, on the whole, PFI has been able to establish and operate in Kenya with minimal and often insignificant regulatory constraints. The study examines the government's three-pronged main thrust at regulation of PFI viz. the PFI approval process prior to establishment; the attempt to acquire corporate control over investment through Africanization of equity and management; and use of financial and fiscal measures. The study argues that these measures are undermined by the policy environment that often rwscounter to their intended objectives. It calls for a review of the broad economic and social policies pursued by the government in order to remove the policy-induced distortions that afflict the attempts to regulate PFI thus rendering them largely ineffective.