Special Economic Zone Developments and Foreign Direct Investment in Kenya

Abstract

Special Economic Zones (SEZs) aim to encourage economic progress, foster industrialization, and boost international trade, while also creating employment opportunities and encouraging technological advancements. While there is substantial global research that attest to the impact on SEZs, few studies focus on the unique conditions and dynamics of the Kenyan economy and its SEZs. The study’s objective was to examine the contribution of SEZs economic developments in Kenya; to evaluate how SEZ development influences some of Kenya’s key economic indicators; and determine the effect of SEZ on FDI’s in Kenya. The study was based on the Cluster, Internalization and Eclectic Paradigm theories and utilized descriptive research design method. Secondary data was used for analysis with statistical inferences conducted. The findings showed that while SEZs do not significantly contribute to broader economic development, they are essential in creating job opportunities and are effective in driving exports. Further it was also found out that monetary policies such as variations in exchange rate and interest rates are significantly affected by the presence of SEZs. In conclusion, Special Economic Zones in Kenya play a significant role in attracting Foreign Direct Investment. The study recommended that Kenya adopt a flexible monetary policy capable of quickly adapting to changing economic conditions, strengthen their GDP strategies through diversification and innovation, enhancing export performance by creating a more favorable trade environment, and infrastructure development within SEZs is vital to the effectiveness of SEZs. This research will inform policymakers, investors, and government agencies involved in economic development and investment promotion