Policy Brief No. 15 of 2007 on Enhancing Investment Performance for Sustained Economic Growth in Kenya

Abstract

The Kenya Vision 2030 aims at achieving a high and non-inflationary real Gross Domestic Product (GDP) growth of 10 per cent by 2012, and sustaining it thereafter. To achieve this growth, Kenya needs to increase public and private sector investment by at least 10 per cent of GDP over the next five years. Previously, the Economic Recovery Strategy (ERS) 2003- 2007) had recognized that to achieve wealth and employment creation , the government should create an enabling environment to encourage domestic and foreign investors. Specifically, the ERS emphasized on investment in infrastructure and human resource development. It was estimated that Kenya required to increase Gross Fixed Capital Formation (GFCF) from about 16 per cent in 2002 to 22.2 per cent in 2007, the bulk (16.2%) of this to be undertaken by the private sector. Despite these objectives and targets, the Private Sector Development Strategy 2006-2011 notes that investor confidence has recently experienced a downward trend resulting in decelerated Foreign Direct Investment and slow growth in local investments . Domestic financing of investment has been declining, thus widening the domestic investment financing gap. Some investors have even re-located to neighbouring countries.