Globalization of Energy Production in Kenya: a Case Study of Selected State Agencies and Ministry of Energy & Petroleum

Abstract

Kenya has a serious shortage of power with only less than 25% of the population having access to the electricity. As the commercial and political hub of East Africa, Kenya is also intending to exponentially grow its economy in a short period. Government of Kenya (GOK) made 5000MW+ Plan in 2013 to support its economic development strategy. Due to high consumption of energy, the country has to increase its installed power capacity; however, increase of installed capacity needs large amount of investment. With the contradiction between social development and funding shortage, Kenya shifted its eyesight from domestic market into international investors. With introduction of PPP (Public-private Partnership) model, IPP (Independent Power Producer), BOT (Build, Operate & Transfer) and BOO (Build, Operate & Own) were widely applied under globalization trend, bringing about huge overseas funding as well as rich management experience and advanced technology. This study selected the power development strategy in the international business expansion of Kenya as the main topic and sought to find the strategies adopted by the GoK and other power sectors to absorb FDI under globalization background. The findings includes following points: challenges faced by the GoK to absorb FDI; strategies adopted by the GoK; International business environment etc. This study made analysis on the power development strategy adopted by the GoK and sought to find suitable solutions for the nation to attract international investors and absorb overseas funding with reference to the Porter’s Diamond Model, and then made conclusions that globalization is the key progress to boom the power industry in Kenya. The study found that the GoK made relatively attractive policies to absorb FDI, such as Foreign Investments Protection Act was made in 1964, which covers Farming and Animal Husbandry, Tourism, Infrastructure, Transportation, Power, Water Resource, Manufacturing, Training and Financing etc. Various encouragement policies were made for the promotion of investment such as investment allowance, depreciation, exemption of custom duty etc. These policies played an important role in the process to encourage foreign investors to invest in Kenya. The GoK have made excellent international business practice with the reference to globalization strategy. When Kenya is confronted with globalization, it took advantage of location, climate, project contracting models etc. and defeated other opponents with a successful practice of international business to absorb enough overseas finding. As the foundation of other industries, the power sector gained tremendous development to provide enough force for whole national economy. One of the beneficiaries is the 5000 MW+ Plan made by the MoE, many power plants are under construction, which will supply endless power to all industries. Globalization is a must in Kenya based on the classical theories, which also led to the successful practice. Both the theories and practice supported the study with enough data collected from state power agencies in Kenya. More and more people will benefit from this successful practice of the GoK with the model being copied and referred by other nations and regions.