Foreign direct investment promotion strategies and performance of investment promotion agencies in Kenya

Abstract

The Kenyan government created Investment Promotion Agencies to assist in attraction and retention of FDI’s due to the negative FDI direction and decline in economic development. The slow economic growth and deteriorating investor confidence after the 2007 general election saw decline in FDI inflows and poor political instability. Despite all the problems and attempts by the government to improve on the FDI inflows, the economy is still vulnerable to external shocks, which can erode the significant gains it has achieved. To the researcher knowledge there is limited empirical studies done linking the FDI promotion strategies and performance of IPAs in Kenya. Having determined few studies on this area have been done, this study sought to determine the relationship between FDI promotion strategies and performance of investment promotion agencies in Kenya. A cross sectional descriptive survey design was adopted for the purpose of this study. A cross sectional descriptive survey design was deemed appropriate for this study because the study covered the whole population and not only a single case. The study covered the promotional strategies adopted by Investment promotion agencies to attract FDIs in Kenya and explore the relationship with these organizations’ performance. The population size was the 3 major Investment Promotion Agencies in Kenya, these included Kenya Investment Authority (ken invest), Exports Processing Zones authority (EPZA), Export Promotion Council (EPC). A census study was conducted due to the small size of the population of the study. The study used both primary and secondary source of data. Primary data was obtained through the use of semi structured questionnaires with both close ended and open ended questions. Descriptive statistics was used to analyze the data because this study was modeled on a descriptive framework. Descriptive statistics namely mean scores; standard deviation and frequency distribution was used to analyze the data. Content analysis was used to analyse qualitative responses and presented in prose form. The study established that promotion strategies adopted focused on, investor facilitation and investor servicing and investment generation, policy advocacy and image building. Thus the study revealed that investment promotion strategies can play a powerful economic development role as it influences not only the attractiveness of location for inward investment, but also the benefits accruing to the local economy. On the relationship between FDI promotion strategies and performance of Investment promotion Agencies in Kenya the study established that FDI promotion strategies improved partnering opportunities for local firms, improved brand and location awareness, improved technology transfer, led to more project acquisition, increased capital inflows in the country, increased number of projects acquired and also boosted the financial performance of the organizations, therefore the study concludes that FDI promotion strategies enhance the performance of Investment promotion Agencies in Kenya.