A Legal and Policy Perspective of Foreign Investment in Kenya: A Case Study of Kenya Investment Authority

TABLE OF CONTENTS

DECLARATION ...................................................................................................... i i

APPROVAL ............................................................................................................. iii

DEDICATION .......................................................................................................... iv

AKN OWLEDGEMENTS ................................................................ , ........................ v

TABLE 0 F CONTENTS ......................................................................................... vi

DEFINITIONS 0 F KEY TERMS ....................................................................... viii

ABBREVIATIONS ................................................................................................... ix

CHAPTER ONE ........................................................................................................ I

1.0 General Introduction .............................................................................................. 1

1.1 Background to the study ........................................................................................ I

1.2 Definitions ............................................................................................................. 2

1.3 Statement of the problem ....................................................................................... 3

1.4 Objectives of the study .......................................................................................... 3

1.4.3 Research hypothesis ........................................................................................... 3

1 . 5 Significance of the Study ....................................................................................... 3

1.6 Methodology .......................................................................................................... 4

I. 7 Scope of Study ...................................................................................................... .4

I . 8 Literature Review .................................................................................................. 5

CHAPTER TWO: .................................................................................................... II

2.0 The Legal Basis for Foreign Investment in Kenya .............................................. II

2.1 Foreign Investment policy ................................................................................... 11

2. 3 Regulatory Framework ........................................................................................ 19

CONCLUSION ........................................................................................................ 3 7

CHAPTER THREE ................................................................................................ . 3 7

3.0 Benefits and Problems of Foreign Investment .................................................... 37

3 .I Introduction ......................................................................................................... 38

3.2 Benefits ................................................................................................................ 38

VI

3.3 Problems .............................................................................................................. 40

Conclusion ................................................................................................................. 44

CHAPTER FOUR .................................................................................................. .46

4.0 Steps That Can Be Taken to Improve the Foreign Direct lnvestment.. .............. .46

4. I Domestic Actions ............................................................................................... .46

4.2 Regional actions ................................................................................................. .48

4. 3 Intemational actions .......................................................................................... .49

Conclusion ................................................................................................................. 49

CHAPTER FIVE ..................................................................................................... 50

5.0 Recommendations and General Conclusion ........................................................ 50

Conclusion ................................................................................................................. 5 I

APPENDICES .......................................................................................................... 53

BIBLIOGRAPHY .................................................................................................... 54

CHAPTER ONE 1.0

General Introduction 1.1 Backg1·ound to the study After gaining political independence in the 1960s, African countries like most developing nations were very skeptical about the virtues of free trade and investment. Consequently, in the 1970s and 1980s several countries in the region imposed trade restrictions and capital controls as part of a policy of .import-substitution industrialization aimed at protecting domestic industries and conserving scarce foreign exchange reserves. There is now substantial evidence that this inward-looking development strategy discouraged trade as well as foreign direct investment (FDl) and had deleterious effects on economic growth and living conditions in the region. Kenya has had a long history of economic leadership in East Africa as one of the largest and most advanced economies in the region. Inconsistent efforts at structural reforms and poor policies over the past couple of decades, however, have generated a prolonged period of decline in development indicators and significantly eroded the leadership position, at a time when other countries in the region have made significant strides. While Kenya was a prime choice for foreign investors seeking to establish a presence in Eastern and Southern Africa in the 1960s and 1970s, poor economic policies or inconsistent efforts at structural reforms, rising problems of corruption and governance, and the deterioration of public services have discourage foreign direct investment FDI since the 1980s (Fischer et al, 1998).