KENYA should overhaul the business regulatory environment to aggressively attract foreign direct investments in order to attain sustainable economic growth over the next 50 years, a World Bank report has suggested.
The bank warned in its latest Kenya Economic Update report that short term inflows that continue to trickle in are not reliable as are shaped by investor risk aversion which may change abruptly in response to unfavorable changes in political and economic landscapes.
The capital flows through the Nairobi Securities Exchange accounted for between 50 and 60 per cent of transactions.
"The short term flows tend to be more volatile and sensitive to changing conditions in global financial markets. Although Kenya has so far escaped turbulence in financial markets, there is no guarantee that it will do so in future" the report reads.
The bank said FDI as a ratio of gross domestic product has remained flat for over a year at 0.6 per cent, well below her smaller neighboring economies of Rwanda, Uganda and Tanzania.
"The inability to attract FDI is closely associated with the regulatory environment which is hostile to investment," the report says.
According to the World Bank data, he country's ease of doing business has consistently declined to position 129 out of 189 countries in the present 2013/14 financial year from position 72 in 2007/8.
Latest data shows that FDI inflows, although rose to $249 million (Sh21.58 billion) last September from $177 million(Sh15.34 billion) in December 2012, remained flat at 0.6 per cent of the total economic output.
Kenya has invested heavily in key infrastructure like roads, energy, railway and port with the view of easing investment environment