Rutto Reuben Kipkirui
Rutto Reuben Kipkirui
School Of Business & Economics
RESEARCH TOPIC:
Effect Of Foreign Direct Investments, Human Capital And Infrastructure Development On Kenya’s Manufacturing Exports To COMESA.
ABSTRACT:
Growth of manufacturing sector in Kenya has not been attained to desired levels, this is largely attributed to heavy reliance on agricultural exports. This sector could be improved by enhancing manufacturing exports to regional trade blocs; such as COMESA. Kenya is an active participant in regional trade and the main exporter to COMESA. Between 2010 and 2015, manufactured exports from Kenya to COMESA were valued at US$ 1.85 billion, accounting for 37.4% of total exports to the region during the period. Many studies have been conducted to establish the determinants of general exports and bilateral trade in Kenya. However, the studies fell short of considering the importance of macroeconomic variables such as Human Capital Development (HCD), Foreign Direct Investment (FDI) and Infrastructure Development (ID). The general purpose of the study was therefore to estimate the effects of HCD, FDI and ID on Kenya’s manufactured exports to COMESA. The specific objectives were to determine the effects of FDI, HCD and ID on Kenya’s manufacturing exports to COMESA. Gravity model was used and correlation study design adopted. Panel data was sourced from secondary sources for eighteen COMESA members for the period 2005–2016. Unit root tests were estimated using Im-Pesaran and Shin, and Levin-Li-Chu tests. Hadri LM test was used to choose between Feasible Generalized Least squares and Generalized Equation Estimation methods. Hausman Test was used to choose between fixed and random effect models. Results indicated that FDI was a significant determinant of Kenya’s manufacturing exports (p – value 0.0380< 0.05) indicating that for a one percent increase in FDI, manufactured exports increases by 0.0774 percent. The regression results further documented that HCD had positive and significant effect on Kenya’s manufactured exports (p –value 0.0000 < 0.05). The findings further show that for a one percent increase in Human Capital Development, Kenya’s manufactured exports to COMESA increased by 2.4183 percent. The research results further proved that manufactured exports was significantly affected trade by infrastructure development with (p – value 0.0010 < 0.05). It implies that for a one percent increase in Infrastructure Development.