Foreign and local investment in East Africa, interactions and policy implications : case studies on Mauritius, Uganda and Kenya -- research paper

The present study examined these questions statistically using a 50-year database on 110 countries. To explore what these trends represented to actual firms and national economies, the study also conducted case studies of Mauritius, Uganda, and Kenya and a rapid survey of about a 5% sample of firms. A key hypothesis of the research was that an improvement in the business climate that stimulated local investment might attract FDI. Key conclusions and recommendations are as follows: (1) FDI has a strong stimulus effect on domestic investment and economic growth, but it is not a panacea. (2) A holistic approach to encouraging investment is needed. It has to take into account how each country compares on five key factors: access to resources; secure mobility of people, goods, information, and capital into, around, and out-of the country; sound institutions -- stable government, security of life and property, rule of law, viable financial services, and modern education and health systems; the economic characteristics of the location; investment incentives and business facilitation; and the international policy environment. (3) Priorities and sequencing will be different for each country and sector, depending on how it measures up to the competition. In Kenya and Uganda, for example, the priorities need to be institution building, infrastructure, security, and cost reductions. That all three countries have developed a macroeconomic framework is not enough, as most other countries have done likewise. (4) A multilateral investment framework will probably not help the three case study countries attract investment. Such a framework tells policymakers what investors want, but not how to get their country there ahead of the rest. (5) The above factors provide a framework for monitoring by each country. Instead of relying on low-level investment promotion units to market their countries, governments need to do regular self-evaluations, based on internal and external dialogue and monitoring. Includes references.