Trade facilitation and foreign direct investment flows in Kenya

Abstract

This chapter examines the effects of trade facilitation on foreign direct investment (FDI) in Kenya. Using bilateral FDI data for the period 2001–2012, a fixed effects Poisson pseudo maximum likelihood estimation of the gravity model was used in the analysis. The results indicate that improvements of indicators related to the business environment, the quality of port infrastructure, the number of days required for enforcement of contracts and the activities that improve logistics performance, are essential drivers of FDI flows in Kenya. Kenya should therefore enhance efforts to implement trade facilitation measures with a view to deepening integration in global trade and production networks, in order to increase FDI.