The Extent to Which Investment is the Main Driver of Economic Growth in Kenya
Overview
This paper examines the role of investment as the primary driver of economic growth in Kenya, a developing nation with a GDP of $95 billion and lower-middle-income status. The author applies Dunning's Eclectic Paradigm (OLI Framework) to explain why Kenya attracts both foreign and domestic investment, arguing that investment expands means of production and creates employment opportunities.
What this essay covers
- Introduction: Kenya's economic context, World Bank rankings, GDP statistics, and pre-COVID growth rates
- Theory section: The Eclectic Paradigm of Dunning and its three dimensions (Ownership advantage, Location, Internationalization)
- Analysis of Kenya's investment climate: Geographic advantages, transportation hubs, port connectivity, and multinational enterprise dominance
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THE EXTENT TO WHICH INVESTMENT IS THE MAIN DRIVER OF ECONOMIC GROWTH IN KENYA
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Introduction
As a developing nation and a former British colony, coupled with its solid international ties both in the Western and Eastern spheres, Kenya's economic growth has benefited extensively from investment, be it local or foreign. The country is ranked 56th in the World Bank ease of making business rating, an improvement from 2019's 61 ratings (MEAC, 2020). With an estimated GDP of $95 billion, the country attained lower-middle-income status and has successfully established a dynamic and diverse economy (DOS, 2021). Prior to the Covid-19 pandemic, the country had an annual average growth rate of 5.9%, making it one of the fastest-growing economies in Africa, with a Gross Fixed Capital Formation (GFCF) of $19.538 billion. Based on this figure in comparison with the GDP, investment is the country's main economic driver because it expands the means of production and improves job opportunities.
Theory – The Electric Paradigm of Dunning
On the other hand, economic growth increases the number of goods and services produced per head of the population within a given time frame. Thus, investment is when an entity in one country has or controls business in the same country or another country (Sloman & Garratt, 2016, p. 212).