The Micro and Macroeconomic Determinants of Private Investment in the Manufacturing Sector in Kenya
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Date
2000-06
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A.A.U
Abstract
Kenya continues to record low levels of growth in private investment. This is
despite the new paradigm that recognizes market mechanism and private
enterprise as more efficient in generating the economic dynamism that leads to
growth. This study set out to find the macro and micro economic factors that
affect investment particularly in the manufacturing sector in Kenya.
Econometric techniques of time series and also a survey were employed to
analyze this phenomenon. High on the list of the macroeconomic factors
negatively determining private investment is the high and unstable interest
rates, increasing public debt, dilapidated infrastructure, insufficient expenditure
on education development, low levels of credit to the private sector, the low
level of GOP and generally, a harsh macroeconomic environment. These
factors not only affect the manufacturers but also the Agriculture and the
Service sectors. On the micro level, the macro factors also playa role coupled
with other numerous socio-political and economic factors e.g. insecurity,
corruption and contraband trade. If Kenya is to rid herself from the current
economic quagmire and achieve her stated goal of becoming a Newly
Industrialized Country (NIC) by the year 2020, then it needs to borrow a leaf
from the "Asian Tigers" and tackle these issues urgently.
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Keywords
Macroeconomic Determinants, Private Investment