Foreign Investment Survey 2013

The Foreign Investment Survey (FIS) 2013 is the second survey on capital flows conducted in Kenya, covering the reference periods of 2009 through 2011. The furst survey covered the reference periods of 2007 to 2008.

The opening up of economies has led to many forms of cross border activities among them private capital flows. These flows have significant effects on the economy. Therefore, accurate and timely information on the level and composition of private capital flows are important for appropriate response by policy makers. The recent global financial crisis and the economic turbulence in the Euro Area support the need for accurate and timely financial data.

The information sought is necessary for investment promotion, macroeconomic policy management and complying with international codes and standards of compilation, and reporting of Balance of Payments (BOP) and International Investments Position (IIP). The FDI relationship covers direct investment in subsidiaries, associates, and branches directly or indirectly owned by the foreign investor. The survey will also capture both foreign assets and liabilities of resident enterprises.

In view of the recent global financial crisis and the economic turbulence in the Euro Zone Area, Kenya requires up to date information on the levels and stocks of foreign capital in order to make appropriate policy decisions to cushion the economy against the negative effects of such shocks. The need to build time series data will also be useful for policy planning and decision making to achieve Vision 2030 and other important targets.

There is also need to comply with international codes and standards as required by International Monetary Fund (IMF) and other international bodies for international comparisons.

International and national data show that private investment has become increasingly important to economic development. This reflects growing reliance on the private sector to promote Kenya's growth and development. Foreign private capital complements domestic savings, supports expansion of production and export capacity, assists transfer of technology, contributes to employment creation and helps in the development of links necessary for market access. With the liberalization of the economy, inward investments (inflows) into Kenya have increased. Inflows may be in the form of:
· Foreign Direct Investment (FDI): This is the most important inflow as it supplements domestic investment thereby spurring economic growth and employment.
· Medium and long-term loans and short-term debt. This is important in supplementing domestic savings for economic growth.
Portfolio investment. This is vital in Kenya due to growth of the stock market. Foreign portfolio investors boost long term investment and capital market development.
After removal of capital controls, Government's ability to monitor private investment through administrative records declined significantly. Alternative sources of data such as international transactions reporting system (ITRS) and investment desks have not been adequate in providing information on private capital flows. In line with international best practice, regular surveys on enterprises are the most effective means of collecting the requisite data to enhance monitoring of private capital flows.
The data collected in this survey will assist the Government to:
· Formulate appropriate macroeconomic policies to encourage private capital flows: Flows have significant economic impact. As inflows in Kenya increase, so do their potential impact on Kenya's economy. Therefore, as private investment increases, so does the need for Government to measure it, to better understand its source, scale, type, and hence economic effect. Better-informed policy reduces macroeconomic instability, and thus benefits investors in their medium to long term planning.
· Promote and facilitate investment, and assess investor confidence: Information on scale, source, type and sector and; investor perception helps Government agencies understand better who is investing in Kenya, problems faced by investors, and hence enable them to provide more effective assistance and support. Through dialogue, this promotes closer public-private co-operation to national and mutual advantage, to help projects yield long-term benefits.
· Comply with international standards in data monitoring and presentation: The Government needs this information for the compilation of Balance of Payments and International Investment Position in line with international standards. The information is also required by researchers and international institutions such as IMF and World Bank.

The specific objectives of the survey include:
a) To collect data necessary to improve the quality of BOP statistics and compilation of IIP statistics in accordance with international standards.
b) To collect data necessary for assessment of investors' perceptions of the investment climate in the country, with a view to identifying ways to improve it.