FDI determinants: Kenya and Malaysia compared

Abstract

This paper examines in a comparative context the determinants of foreign direct investment in Kenya and Malaysia as well as its impact on economic growth in order to inform policy debates. Kenya in the recent past has committed itself to emulating the development experiences of Malaysia in order to inform its industrialization efforts. The study uses time series data for the period 1960–2009, which is analyzed in a vector autoregressive model. The results do provide support for the role of FDI in Malaysia's industrial success but not for growth in Kenya. From a policy view point, Malaysia's success in attracting huge FDI inflows compared to Kenya during this period is due to differences in macroeconomic stabilization, and trade policies as well as infrastructure and institutional factors