Identification
Survey ID Number
KEN-KNBS-FIS-2010-v01
Title
Foreign Investment Survey 2010
Country
| Name | Country code |
|---|---|
| Kenya | Ken |
Abstract
The Asian economic crisis in the 1990s that saw the hitherto flourishing economies of the “Tigers” crash, and the 'domino effect' on other economies was attributed partly to the quality of economic data used for making business decisions. It was realized that economic data compiled by different countries was not comparable in terms of definitions and compilation methodology. To address this problem, various initiatives aimed at improving the quality of data, were launched and spearheaded by major world bodies. They included, among others, the International Monetary Fund (IMF), the World Bank (WB) and the United Nations Conference on Trade and Development (UNCTAD). The main focus of these initiatives is harmonization of definitions and compilation methods, in line with international standards so that all data covering all economic sectors are comparable. On the regional front, the regional blocs including the East African Community (EAC), Macro-Economic and Financial Management Institute of Eastern and Southern Africa (MEFMI), the Common Market for Eastern and Southern Africa (COMESA) and the African Union (AU) also have programs aimed at harmonizing economic data compilation methods and definitions.
In Kenya, economic analysts have held the view that emerging markets and liberalization of economies prompted large inflows of private capital into the country. These flows have macroeconomic effects that demand urgent policy responses. With limited data on the level and composition of these flows, policy makers are constrained in making timely and appropriate policy responses. This data gap motivated the Kenya National Bureau of Statistics (KNBS) in partnership with other key stakeholders to carry out the survey on foreign investment in Kenya. A sample of 900 enterprises was taken out of an estimated population of 3,500 enterprises with foreign transactions/positions.
The specific objectives of the survey was to collect data necessary to improve the quality of Balance of Payments (BOP) statistics and initiate compilation of International Investment Position (IIP) statistics; collect data necessary for assessment of investors' perceptions of the investment climate in the country, with a view to identifying ways to improve it, and comply with international standards of compilation and reporting of BOP and IIP statistics.
The main analytical tool for Foreign Investment Survey was a questionnaire administered to companies with foreign assets and liabilities. Additional information was sought from banks and other financial institutions to collect data on foreign exchange transactions through the financial institutions. The survey was designed to capture data on foreign capital for the reference period 2007 and 2008 as well as investor perceptions on the business environment in Kenya.
The overall survey implementation was overseen by a National Coordinator assisted by three Regional Coordinators. The data collection exercise was done through face to face interviews and follow ups. The research assistants explained the various aspects of the questionnaire to the person responsible for finance in the target enterprises. In some instances, the research assistants were required to extract information from the enterprises' books of accounts and/or financial statements.
An intensive training of the BOP staff on data editing was conducted which involved reconciliation of reported flows and positions data, as well as extraction of IIP data from submitted balance sheets. BOP data extracted from income and cash flow statements from the surveyed enterprises was used in filling the gaps and validating submitted data.
The major findings from the survey are as follows:
Foreign Liabilities
Kenya's stock of Foreign Liabilities increased by 26.3 per cent from KSh 340,128 million in 2007 to KSh 429,585 million in 2008 with FDI accounting for 63.8 per cent of the total liabilities at KSh 274,004 million. The stock of external liabilities analysed by the regional economic blocs reveal that Europe accounted for 69.7 per cent of the total liabilities with the European Union accounting for 67.1 per cent. Asia, America and Africa accounted for 18.5 per cent, 6.2 per cent and 5.6 per cent, respectively. The stock of Foreign Liabilities from India and China more than doubled over the period. In 2008, Manufacturing followed by Information and Communication and Financial and Insurance Sectors had the highest stock of FDI liabilities.
The country's foreign capital inflows in 2008 totaled KSh 92,253 million compared to KSh 110,480 million recorded in 2007. The 16.5 per cent decline in the inflows may be partly attributable to post election violence and the negative effects of global economic and financial crisis in 2008. The inflows were mainly in the form of debt instruments and Foreign Direct Investment which accounted for 51.4 per cent and 26.4 per cent of the total inflows respectively. The findings indicate that United Kingdom, France, Netherlands, Japan and India are the main sources of foreign private capital inflows. Manufacturing, Information and Communication, and Financial and Insurance sectors were the leading beneficiaries of FDI inflows.
Total outflows of foreign liabilities increased by 26.8 per cent from KSh 27,992 million in 2007 to KSh 38,799 million, in 2008, the highest being trade credits. Outflows of Other Investment and Direct Investment accounted for 70.8 per cent and 29.0 per cent respectively, in 2008. The major destination of FDI outflows in 2008 were US, United Kingdom, France and Germany jointly accounting for 72.1 per cent of the total outflows.
Foreign Assets
The stock of external assets stood at KSh 41,935 million in 2008 compared to KSh 64,555 in 2007 a decline of 35.0 per cent. The reduction in assets was as a result of reductions in loan advances position abroad. The major investment destinations for Kenyan enterprises were Uganda, Tanzania and United Kingdom.
Investor Perceptions
The tax regime, particularly tax administration; insecurity and corruption; cost and efficiency of road and inland transport; cost and supply of electricity had a significant negative effect on business operations. The results of the survey also revealed that interest rates, inflation rate and exchange rate were perceived to have a net negative effect on investment decisions. However, access to international markets; regional finance and internal finance was perceived to have a net positive effect. This suggests that apart from the domestic market, investors still place great importance on international markets. The survey findings indicate that both telecommunication and internet use had a significant impact on investment decisions.
Enterprises reported that they were likely to increase the range of products and services, staff training, recruitment of local staff, investment in technology, export of the products and improvement of existing facilities in the medium term. Those who planned to expand investment in technology comprised 78.1 per cent of the respondents while those intending to improve existing facilities and staff training were 72.9 per cent and 72.8 per cent of the enterprises, respectively. More than half of the enterprises plan to expand their businesses in the next three years.
Conclusion and Recommendations
It is evident from available data that, as a result of increased globalization and liberalization, the size and role of Foreign Private Capital with regard to investment and growth of the economy has gained more significance, and is expected to continue playing an important role in the economy. There is need to consistently carry out similar surveys in future to strengthen the information base on foreign investment while improving on data quality for economic management and planning purposes to achieve Vision 2030 and the Millennium Development Goals (MGDs).
From investors' perspective, corruption led to delays in product registration, port clearance and overall increase in cost of doing business. The survey findings with regard to insecurity and crime suggest that policy measures should be targeted at creating a safe and secure environment for business and investment.
The survey revealed that investors perceived the interest rates to be high and thus the need for the monetary and fiscal policies to address the issues of cost of credit to investors.
The significance of technology on businesses as evidenced by the highest number of investors planning to expand investments in technology is consistent with the historical relationship between technology and business operations.
In Kenya, economic analysts have held the view that emerging markets and liberalization of economies prompted large inflows of private capital into the country. These flows have macroeconomic effects that demand urgent policy responses. With limited data on the level and composition of these flows, policy makers are constrained in making timely and appropriate policy responses. This data gap motivated the Kenya National Bureau of Statistics (KNBS) in partnership with other key stakeholders to carry out the survey on foreign investment in Kenya. A sample of 900 enterprises was taken out of an estimated population of 3,500 enterprises with foreign transactions/positions.
The specific objectives of the survey was to collect data necessary to improve the quality of Balance of Payments (BOP) statistics and initiate compilation of International Investment Position (IIP) statistics; collect data necessary for assessment of investors' perceptions of the investment climate in the country, with a view to identifying ways to improve it, and comply with international standards of compilation and reporting of BOP and IIP statistics.
The main analytical tool for Foreign Investment Survey was a questionnaire administered to companies with foreign assets and liabilities. Additional information was sought from banks and other financial institutions to collect data on foreign exchange transactions through the financial institutions. The survey was designed to capture data on foreign capital for the reference period 2007 and 2008 as well as investor perceptions on the business environment in Kenya.
The overall survey implementation was overseen by a National Coordinator assisted by three Regional Coordinators. The data collection exercise was done through face to face interviews and follow ups. The research assistants explained the various aspects of the questionnaire to the person responsible for finance in the target enterprises. In some instances, the research assistants were required to extract information from the enterprises' books of accounts and/or financial statements.
An intensive training of the BOP staff on data editing was conducted which involved reconciliation of reported flows and positions data, as well as extraction of IIP data from submitted balance sheets. BOP data extracted from income and cash flow statements from the surveyed enterprises was used in filling the gaps and validating submitted data.
The major findings from the survey are as follows:
Foreign Liabilities
Kenya's stock of Foreign Liabilities increased by 26.3 per cent from KSh 340,128 million in 2007 to KSh 429,585 million in 2008 with FDI accounting for 63.8 per cent of the total liabilities at KSh 274,004 million. The stock of external liabilities analysed by the regional economic blocs reveal that Europe accounted for 69.7 per cent of the total liabilities with the European Union accounting for 67.1 per cent. Asia, America and Africa accounted for 18.5 per cent, 6.2 per cent and 5.6 per cent, respectively. The stock of Foreign Liabilities from India and China more than doubled over the period. In 2008, Manufacturing followed by Information and Communication and Financial and Insurance Sectors had the highest stock of FDI liabilities.
The country's foreign capital inflows in 2008 totaled KSh 92,253 million compared to KSh 110,480 million recorded in 2007. The 16.5 per cent decline in the inflows may be partly attributable to post election violence and the negative effects of global economic and financial crisis in 2008. The inflows were mainly in the form of debt instruments and Foreign Direct Investment which accounted for 51.4 per cent and 26.4 per cent of the total inflows respectively. The findings indicate that United Kingdom, France, Netherlands, Japan and India are the main sources of foreign private capital inflows. Manufacturing, Information and Communication, and Financial and Insurance sectors were the leading beneficiaries of FDI inflows.
Total outflows of foreign liabilities increased by 26.8 per cent from KSh 27,992 million in 2007 to KSh 38,799 million, in 2008, the highest being trade credits. Outflows of Other Investment and Direct Investment accounted for 70.8 per cent and 29.0 per cent respectively, in 2008. The major destination of FDI outflows in 2008 were US, United Kingdom, France and Germany jointly accounting for 72.1 per cent of the total outflows.
Foreign Assets
The stock of external assets stood at KSh 41,935 million in 2008 compared to KSh 64,555 in 2007 a decline of 35.0 per cent. The reduction in assets was as a result of reductions in loan advances position abroad. The major investment destinations for Kenyan enterprises were Uganda, Tanzania and United Kingdom.
Investor Perceptions
The tax regime, particularly tax administration; insecurity and corruption; cost and efficiency of road and inland transport; cost and supply of electricity had a significant negative effect on business operations. The results of the survey also revealed that interest rates, inflation rate and exchange rate were perceived to have a net negative effect on investment decisions. However, access to international markets; regional finance and internal finance was perceived to have a net positive effect. This suggests that apart from the domestic market, investors still place great importance on international markets. The survey findings indicate that both telecommunication and internet use had a significant impact on investment decisions.
Enterprises reported that they were likely to increase the range of products and services, staff training, recruitment of local staff, investment in technology, export of the products and improvement of existing facilities in the medium term. Those who planned to expand investment in technology comprised 78.1 per cent of the respondents while those intending to improve existing facilities and staff training were 72.9 per cent and 72.8 per cent of the enterprises, respectively. More than half of the enterprises plan to expand their businesses in the next three years.
Conclusion and Recommendations
It is evident from available data that, as a result of increased globalization and liberalization, the size and role of Foreign Private Capital with regard to investment and growth of the economy has gained more significance, and is expected to continue playing an important role in the economy. There is need to consistently carry out similar surveys in future to strengthen the information base on foreign investment while improving on data quality for economic management and planning purposes to achieve Vision 2030 and the Millennium Development Goals (MGDs).
From investors' perspective, corruption led to delays in product registration, port clearance and overall increase in cost of doing business. The survey findings with regard to insecurity and crime suggest that policy measures should be targeted at creating a safe and secure environment for business and investment.
The survey revealed that investors perceived the interest rates to be high and thus the need for the monetary and fiscal policies to address the issues of cost of credit to investors.
The significance of technology on businesses as evidenced by the highest number of investors planning to expand investments in technology is consistent with the historical relationship between technology and business operations.
Unit of Analysis
Companies with foreign assets and liabilities
Banks and other Financial institutions
Banks and other Financial institutions
Version
Version Description
Version One
Coverage
Geographic Coverage
In carrying out the Foreign Investment Survey(FIS), a purposive sample of 900 enterprises was drawn on the basis of gross turnover, and enterprises known (through other KNBS surveys) to have foreign exchange transactions. The list of enterprises comprised leading companies across different sectors of the economy based on information from regulatory institutions. This procedure was adopted, firstly due to the insufficient funding to carry out a complete census of FAL enterprises, and secondly, it proved to be the most efficient technique to obtain a representative sample. Because of the limitations of the purposive sampling technique so adopted, up rating mechanism was not applied to the results of the survey. After undertaking about two more cycles of FIS, KNBS will then systematically determine total population size of FAL enterprises in the country, for use in probability sampling and up-rating of survey results.
Universe
Surveying of enterprises with FAL was a challenge mainly due to lack of a comprehensive enterprise register. In order to surmount this challenge, a list of enterprises with FAL (enterprise frame) was generated by harmonizing various lists. These lists include register of enterprises maintained by KNBS, tax records of Kenya Revenue Authority (based on size of turnover on the assumption that there is some correlation between turnover and the possibility of having foreign assets and liabilities, and Export Processing Zones Authority (EPZA) enterprises. More enterprises were obtained in consultation with Export Promotion Council (EPC), Kenya Investment Authority (KenInvest), Central Bank of Kenya, Commissioner of Insurance, some foreign embassies, the Nairobi Stock Exchange and Communication Commission of Kenya. The harmonized list then formed the FAL sampling frame of 3,500 enterprises.
Producers and sponsors
Primary investigators
| Name | Affiliation |
|---|---|
| Kenya National Bureau of Statistics | Ministry of State for Planning, National Development and vision 2030 |
Producers
| Name |
|---|
| Central Bank of Kenya |
| Kenya Investment Authority |
| Ministry of Finance |
| Capital Markets Authority |
| Export Processing Zones Authority |
| International Monetary Fund |
| Macroeconomic and Financial Management Institute of Eastern and Southern Africa |
| Common Market for Eastern and Southern Africa |
| United Nations Conference on Trade and Development |
Funding Agency/Sponsor
| Name | Abbreviation | Role |
|---|---|---|
| Statistical Capacity Building Project | STATCAP | Financial Facilitation |
Sampling
Sampling Procedure
Survey Implementation Overview
The main analytical tool for Foreign Investment Survey was a questionnaire administered to companies with foreign assets and liabilities (FAL). Additional information on flows was sought from commercial banks and non-financial institutions (NFIs). The survey was designed to capture data on foreign private capital for the reference period 2007 and 2008 and investor perceptions on the business environment. The implementation of the survey was broadly in five stages namely; (1) survey design and sourcing of funds (2) training of personnel and data collection (3) data capture and editing (4) data analysis and report writing and (5) dissemination of the results. The training of Foreign Investment Survey personnel was carried out in two sessions, one for the trainers/supervisors and the other for the research assistants. The data collection exercise took two months from February to March 2010.
Pre-survey activities included sensitization of potential respondents through press advertisement and software development for the survey database through MEFMI.
Sample Selection
Surveying of enterprises with FAL was a challenge mainly due to lack of a comprehensive enterprise register. In order to surmount this challenge, a list of enterprises with FAL (enterprise frame) was generated by harmonizing various lists. These lists include register of enterprises maintained by KNBS, tax records of Kenya Revenue Authority (based on size of turnover on the assumption that there is some correlation between turnover and the possibility of having foreign assets and liabilities, and Export Processing Zones Authority (EPZA) enterprises. More enterprises were obtained in consultation with Export Promotion Council (EPC), Kenya Investment Authority (KenInvest), Central Bank of Kenya, Commissioner of Insurance, some foreign embassies, the Nairobi Stock Exchange and Communication Commission of Kenya. The harmonized list then formed the FAL sampling frame of 3,500 enterprises.
In carrying out the Foreign Investment Survey(FIS), a purposive sample of 900 enterprises was drawn on the basis of gross turnover, and enterprises known (through other KNBS surveys) to have foreign exchange transactions. The list of enterprises comprised leading companies across different sectors of the economy based on information from regulatory institutions. This procedure was adopted, firstly due to the insufficient funding to carry out a complete census of FAL enterprises, and secondly, it proved to be the most efficient technique to obtain a representative sample. Because of the limitations of the purposive sampling technique so adopted, up rating mechanism was not applied to the results of the survey. After undertaking about two more cycles of FIS, KNBS will then systematically determine total population size of FAL enterprises in the country, for use in probability sampling and up-rating of survey results.
Survey Instruments
Data collection instruments were developed and agreed upon by the various stakeholders represented in the Foreign Investment Technical Committee (FISTC) established to oversee the implementation of survey activities.
The Questionnaire: The design of the FIS questionnaire was guided by the information to be required and the format closely follows of questionnaires of MEFMI member countries undertaking foreign private capital surveys. The information sought through FIS questionnaire was general information of the enterprises, data on foreign liabilities and assets, international trade in services for the period 2007 and 2008 and investor perceptions on the investment climate in the country.
Enumerators' Manual: In order to ensure consistency and good quality of data collected, the Foreign Investment Survey Technical Committee (FISTC) developed an Enumerator Manual. The Manual was designed for training, and also for use as a reference manual by Research Assistants and Supervisors in the course of the survey.
Field Activities
Survey Administration
The survey involved distribution of questionnaires to respondents and face-to-face interviews and extensive follow-up. It was therefore costly in terms of personnel time. The overall survey process was overseen by a national coordinator assisted by three regional coordinators. A total of thirty six research assistants, organized into twelve teams, were deployed to administer the questionnaires. Each team comprised three research assistants and a supervisor. The teams were deployed according to the estimated concentration of the target enterprises to be covered within a particular area.
The main analytical tool for Foreign Investment Survey was a questionnaire administered to companies with foreign assets and liabilities (FAL). Additional information on flows was sought from commercial banks and non-financial institutions (NFIs). The survey was designed to capture data on foreign private capital for the reference period 2007 and 2008 and investor perceptions on the business environment. The implementation of the survey was broadly in five stages namely; (1) survey design and sourcing of funds (2) training of personnel and data collection (3) data capture and editing (4) data analysis and report writing and (5) dissemination of the results. The training of Foreign Investment Survey personnel was carried out in two sessions, one for the trainers/supervisors and the other for the research assistants. The data collection exercise took two months from February to March 2010.
Pre-survey activities included sensitization of potential respondents through press advertisement and software development for the survey database through MEFMI.
Sample Selection
Surveying of enterprises with FAL was a challenge mainly due to lack of a comprehensive enterprise register. In order to surmount this challenge, a list of enterprises with FAL (enterprise frame) was generated by harmonizing various lists. These lists include register of enterprises maintained by KNBS, tax records of Kenya Revenue Authority (based on size of turnover on the assumption that there is some correlation between turnover and the possibility of having foreign assets and liabilities, and Export Processing Zones Authority (EPZA) enterprises. More enterprises were obtained in consultation with Export Promotion Council (EPC), Kenya Investment Authority (KenInvest), Central Bank of Kenya, Commissioner of Insurance, some foreign embassies, the Nairobi Stock Exchange and Communication Commission of Kenya. The harmonized list then formed the FAL sampling frame of 3,500 enterprises.
In carrying out the Foreign Investment Survey(FIS), a purposive sample of 900 enterprises was drawn on the basis of gross turnover, and enterprises known (through other KNBS surveys) to have foreign exchange transactions. The list of enterprises comprised leading companies across different sectors of the economy based on information from regulatory institutions. This procedure was adopted, firstly due to the insufficient funding to carry out a complete census of FAL enterprises, and secondly, it proved to be the most efficient technique to obtain a representative sample. Because of the limitations of the purposive sampling technique so adopted, up rating mechanism was not applied to the results of the survey. After undertaking about two more cycles of FIS, KNBS will then systematically determine total population size of FAL enterprises in the country, for use in probability sampling and up-rating of survey results.
Survey Instruments
Data collection instruments were developed and agreed upon by the various stakeholders represented in the Foreign Investment Technical Committee (FISTC) established to oversee the implementation of survey activities.
The Questionnaire: The design of the FIS questionnaire was guided by the information to be required and the format closely follows of questionnaires of MEFMI member countries undertaking foreign private capital surveys. The information sought through FIS questionnaire was general information of the enterprises, data on foreign liabilities and assets, international trade in services for the period 2007 and 2008 and investor perceptions on the investment climate in the country.
Enumerators' Manual: In order to ensure consistency and good quality of data collected, the Foreign Investment Survey Technical Committee (FISTC) developed an Enumerator Manual. The Manual was designed for training, and also for use as a reference manual by Research Assistants and Supervisors in the course of the survey.
Field Activities
Survey Administration
The survey involved distribution of questionnaires to respondents and face-to-face interviews and extensive follow-up. It was therefore costly in terms of personnel time. The overall survey process was overseen by a national coordinator assisted by three regional coordinators. A total of thirty six research assistants, organized into twelve teams, were deployed to administer the questionnaires. Each team comprised three research assistants and a supervisor. The teams were deployed according to the estimated concentration of the target enterprises to be covered within a particular area.
Weighting
In carrying out the Foreign Investment Survey(FIS), a purposive sample of 900 enterprises was drawn on the basis of gross turnover, and enterprises known (through other KNBS surveys) to have foreign exchange transactions. The list of enterprises comprised leading companies across different sectors of the economy based on information from regulatory institutions. This procedure was adopted, firstly due to the insufficient funding to carry out a complete census of FAL enterprises, and secondly, it proved to be the most efficient technique to obtain a representative sample. Because of the limitations of the purposive sampling technique so adopted, up rating mechanism was not applied to the results of the survey. After undertaking about two more cycles of FIS, KNBS will then systematically determine total population size of FAL enterprises in the country, for use in probability sampling and up-rating of survey results.
Data Collection
Dates of Data Collection
| Start |
|---|
| 2010 |
Data Collection Mode
Data collection exercise took 60 days from February to March 2010. The survey involved distribution of questionnaires to respondents and face-to-face interviews and extensive follow-up. The overall survey process was overseen by a national coordinator assisted by three regional coordinators. A total of thirty six research assistants, organized into twelve teams, were deployed to administer the questionnaires. Each team comprised three research assistants and a supervisor. The teams were deployed according to the estimated concentration of the target enterprises to be covered within a particular area. The Research Assistants visited the enterprises and explained to the respondents how to fill the questionnaires. The questionnaires were then left with the respondents, and were collected later on a mutually agreed date. In some instances the Research Assistants were required to extract some information from enterprises' books of account and/or financial statements. Field editing was also done by the Research Assistants prior to submitting the completed questionnaires to the Supervisor.
Metadata production
DDI Document ID
KEN-KNBS-FIS-2010-v01