FDI and Export Participation of Local Firms in Africa: The Case of the Kenyan Garment Industry

Takahiro Fukunishi

No 232, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: FDI in the garment sector has been the single case of large-scale manufacturinginvestment in African low-income countries since the 1990s. While FDI has triggered the development of local industries in many developing countries, it has not yet been realized in Africa. This paper describes the spillover process in the Kenyan garment industry and investigates the background of local firms' behavior through firm interviews and simulation of expected profits in export market. It shows that credit constraint, rather than absorptive capacity, is a primary source of inactive participation in export opportunity. Only firms which afford additional production facilities without sacrificing stable domestic supply may be motivated to start exporting. However, in comparison with successful Asian exporters, those firms were not as motivated as Asian firms due to the large gap in expected profits.

Keywords: Textile industry; Foreign investments; Exports; Manufacturing exports; FDI spillover; Sub-Saharan Africa; Kenya (search for similar items in EconPapers)
JEL-codes: F21 L67 O14 O33 (search for similar items in EconPapers)
Date: 2010-04-01
New Economics Papers: this item is included in nep-afr, nep-int and nep-sea
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Citations: View citations in EconPapers (2)

Published in IDE Discussion Paper = IDE Discussion Paper, No. 232. 2010-04-01

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