INFRASTRUCTURE AND FOREIGN DIRECT INVESTMENT IN KENYA

Provision of infrastructure is one of the key roles of governments and is mostly associated with the level of economic growth and development of the respective country. However, with the limitation in budgetary resources, especially in developing countries, infrastructure development cannot be achieved through budgetary allocations alone without some other external financing sources. Consequently, Multinational Corporation considers the domestic characteristics of the host countries before making investment decisions. This book sought to establish the relationship between infrastructure and FDI in Kenya, using the Vector Error Correction and Granger causality techniques.Since infrastructure comprises of various sub-indicators, the study used the Principal Component Analysis (PCA) to come up with a general measure of infrastructure. The findings are important particularly to policy makers as well as multinational Corporations looking to establish business in developing countries, specifically Kenya.