EDITORIAL: FDI inflows drop worrying


Globally foreign investment fell two per cent to $1.75 trillion, a development that was attributed to weak economic growth. FILE PHOTO | NMG

That foreign direct investment (FDI) inflows to Kenya is on a six-year low — as United Nations Conference on Trade and Development (Unctad) data shows — should be a cause for serious concern for East Africa’s largest economy.

Data shows that the inflows have been on a consistent decline, even as overall flows to the region continues to grow. The decline this year is quite significant – a 36 per cent drop to Sh40.7 billion, compared with 13 per cent increase in inflows to the region. 

Six years ago, Kenya attracted more foreign investments than neighbouring Tanzania, Uganda, Ethiopia and Rwanda. The situation is different today, with all these countries now doing better than Kenya.

It inspires little confidence that Kenya’s attractiveness is now comparable to that of Somalia, a country that is effectively at war.

READ: Foreign Direct Investment inflows to Kenya in 6-year low

Notably, the continuous slump in Kenya’s appeal counteracts the apparent improvement in overall investment climate.

It is indeed puzzling that improvement in World Bank’s Ease of Doing Business index has not translated to better fortunes for Kenya. Certainly, there is more that the government can do to change the situation.

Kenya must make other considerations, including new policies that can help attract foreign direct investments.