| dc.description.abstract | This paper assesses the determinants of demand for private investment for the period
from 1970 to 2003. It deviates from previous studies by incorporating infrastructure, user
cost of labor and liberalization as variables that affect private investment. It recognizes
that private investment in Kenya constitutes 60% of the total investment. Since 1980s, the
share of private investment to total GDP has been declining due to various
macroeconomic imbalances despite government efforts in the economic reforms as
advocated for by the Bretton woods institutions. Specifically, the paper specifies and
estimates a time series model with private investment as the dependent variable so as to
determine the significance of the explanatory variables. Policy implications are also
analyzed based on the study results.
The study utilized secondary data obtained from international financial statistics (IFS),
statistical abstracts and economic surveys. Inorder to use the data satisfactorily, several
tests including unit root tests and causality tests were done. The study results show that
private investment decisions seem to be determined by the infrastructural facilities
proxied by the bitumen road length in this study, and liberalization effects dummy (equal
to 1 from 1992 on wards) among other variables.
Most of the variables conform to economic theory. The study was successful in obtaining
its objectives and recommends that in order to provide a sound environment to attract
domestic investors and maintain a stable flow of private investment in the economy, the
government musUJeate and preserve a consistent, credible and stable policy
environment. Efficient infrastructural facilities should be provided since it is a prerequisite
for any viable private investment and the overall economic development.
Liberalization of firms that render key services should be done with a lot of caution, to
ensure that the efficiency of factors of production and quality of output is not
compromised. | en |
