FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH IN KENYA

Abstract

Economic growth in Kenya has been fluctuating over the years, but it has generally decreased gradually but significantly. The fluctuating and at times decreasing economic growth is denying Kenya an opportunity to create more jobs, reduce poverty and attract investments. This study therefore sought to investigate the effect of foreign direct investment on economic growth in Kenya. This study used an explanatory research design. The study was conducted in Kenya and sampling was done along the years. The study used secondary time series data from the year 1971 to 2017. Secondary data on foreign direct investment and economic growth was obtained from Kenya National Bureau of Statistics (KNBS), the World Bank and the Central Bank of Kenya. The collected quantitative data was edited and coded and entered into a Stata version 14 for analysis. Both descriptive and inferential statistics were used to analyze quantitative data. In descriptive statistics, the study used frequency distributions, mean, standard deviation and percentages. In relation to inferential statistics, the study made use of analysis of variance, correlation analysis and univariate regression analysis. The inferential statistics were used to evaluate the relationship between the dependent and the independent variables. The correlation analysis was used to establish whether there is an association between the dependent and the independent variables. A univariate regression analysis was also carried out to determine the weight of the relationship between dependent variable and the independent variable. The study found that foreign direct investment has a positive and significant influence on economic growth in Kenya. The government of Kenya should improve conditions that can make the Kenyan market more attractive to invest in. These strategies should include the use of tax subsidy and tax relief and tax holiday. In addition, the government should focus on improving infrastructure including roads, railway, wa