SCHOOL OF HUMAN RESOURCE

DEVELOPMENT
DEPARTMENT OF COMMERCE AND
ECONOMIC STUDIES
ASSIGNMENT
UNIT: INTERNATIONAL BUSINESS
MANAGEMENT HCBA 3221
PRESENTED BY
CHERUBINUS OKETCH AORO
REG. NO HD333 C004 0486/2014

LECTURER: DR GLADYS ROTICH

Topic One: As Political systems change, Economic systems follow. Citing examples discuss with
PARTICULAR REFERENCE to International Business.
Introduction.
Political Systems
The economic and legal systems of a country are often shaped by its political system (Kreinin
1997). As such, it is important to understand the nature of different political systems before
discussing the nature of economic and legal systems. By political system we mean the system of
government in a nation. Political systems can be assessed according to two related dimensions.
The first is the degree to which they emphasize collectivism as opposed to individualism. The
second dimension is the degree to which they are democratic or totalitarian. These dimensions
are interrelated i.e. systems that emphasize collectivism tend to be totalitarian, while systems that
place a high value on individualism tend to be democratic. However, there is a gray area in the
middle. It is possible to have democratic societies that emphasize a mix of collectivism and
individualism. Similarly, it is possible to have totalitarian societies that are not collectivist.
Collectivism and Individualism
The term collectivism refers to a system that stresses the primacy of collective goals over
individual goals. Hirschman (1994). When collectivism is emphasized, the needs of society as a
whole are generally viewed as being more important than individual freedoms. In such
circumstances, an individual's right to do something may be restricted on the grounds that it runs
counter to "the good of society" or to "the common good."
Socialism
Socialists trace their intellectual roots back to Karl Marx (1818 - 1883). Marx argued that the
few benefit at the expense of the many in a capitalist society where individual freedoms are not
restricted. To correct this perceived wrong, Marx advocated state ownership of the basic means
of production, distribution, and exchange (i.e., businesses). His logic was that if the state owned
the means of production, the state could ensure that workers were fully compensated for their
labor. Thus, the idea is to manage state-owned enterprise to benefit society as a whole, rather
than individual capitalists. Giddens (1971)
In the early 20th century, the socialist ideology split into two broad camps, Communists and
Social democrats. The communists believed that socialism could be achieved only through
violent revolution and totalitarian dictatorship, while the social democrats committed themselves
to achieving socialism by democratic means and turned their backs on violent revolution and
dictatorship. Both versions of socialism waned during the 20th century.
The communist version of socialism reached its high point in the late 1970s, when the majority
of the world's population lived in communist states. Many believe it is now only a matter of time
before communism collapses in China, the last major Communist power left. Although China is
still nominally a communist state with substantial limits to individual political freedom, in the
economic sphere the country has recently moved away from strict adherence to communist
ideology. The Economist (1995)
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Social democracy has had perhaps its greatest influence in a number of democratic Western
nations including Australia, Britain, France, Germany, Norway, Spain, and Sweden, where social
democratic parties have from time to time held political power. Other countries where social
democracy has had an important influence include India Brazil and even here in Kenya.
Consistent with their Marxists roots, many social democratic governments nationalized private
companies in certain industries, transforming them into state-owned enterprises to be run for the
"public good rather than private profit." E.g. the state-owned companies in Kenya had a
monopoly in the telecommunications, electricity, railway, as well as having substantial interests
in the airline industry through Kenya Airways.
However, experience has demonstrated that far from being in the public interest, state ownership
of the means of production often runs counter to the public interest. In many countries, stateowned companies have performed poorly. Protected from significant competition by their
monopoly position and guaranteed government financial support, many state-owned companies
became increasingly inefficient e.g. Kenya Railways. In the end, individuals found themselves
paying for the luxury of state ownership through higher prices and higher taxes e.g. Kenya
Power and Lighting Company Ltd. As a consequence, parties that were more committed to free
market economies were elected to spearhead most economies. These parties devoted
considerable effort to selling state-owned enterprises to private investors (a process referred to as
privatization). E.g. Kenya selling stakes in Kenya Power & Lighting Company Ltd, Kenya
Airways etc.
Individualism
In a political sense, individualism refers to a philosophy that an individual should have freedom
in his/her economic and political pursuits. In contrast to collectivism, individualism stresses that
the interests of the individual should take precedence over the interests of the state.
Individualism is built on two central tenets. The first is an emphasis on the importance of
guaranteeing individual freedom and self-expression. The second tenet of individualism is that
the welfare of society is best served by letting people pursue their own economic self-interest; as
opposed to some collective body (such as government) dictating what is in society's best interest.
The only part of the conduct of any one, for which he is amenable to society, is that which
concerns others. In the part which merely concerns himself, his independence is, of right,
absolute. Over himself, over his own body and mind, the individual is sovereign. Mill (1865)
Adam Smith put it in a famous passage from the Wealth of Nations, an individual who intends
his own gain is led by an invisible hand to promote an end which was no part of his intention. By
pursuing his own interest he frequently promotes that of the society more effectually than when
he really intends to promote it. Smith
In individualism, therefore, individual economic and political freedoms are the ground rules on
which a society should be based. This puts individualism in direct conflict with collectivism.
Collectivism asserts the primacy of the collective over the individual, while individualism asserts
just the opposite. This underlying ideological conflict has shaped much of the recent history of
the world. The Cold War, for example, was essentially a war between collectivism, championed
by the now-defunct Soviet Union, and individualism, championed by the United States.
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Democracy and Totalitarianism

Democracy and totalitarianism are at different ends of a political dimension. Democracy refers
to a political system in which government is by the people, exercised either directly or through
elected representatives. Totalitarianism is a form of government in which one person or
political party exercises absolute control over all spheres of human life and opposing political
parties are prohibited. Democracy and individualism go hand in hand, as do the communist
version of collectivism and totalitarianism.
Democracy
The pure form of democracy, is based on a belief that citizens should be directly involved in
decision making. Most modern democratic states practice what is commonly referred to as
representative democracy. In a representative democracy, citizens periodically elect individuals
to represent them e.g. Kenya. These elected representatives then form a government, whose
function is to make decisions on behalf of the electorate. A representative democracy rests on the
assumption that if elected representatives fails to perform this job adequately; they will be voted
down at the next election.
Wesson (1990) stated that to guarantee that elected representatives can be held accountable for
their actions by the electorate, an ideal representative democracy has a number of safeguards that
are enshrined in constitutional law. These include:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)

An individual's right to freedom of expression, opinion, and organization;

A free media;
Regular elections in which all eligible citizens are allowed to vote;
Universal adult suffrage;
Limited terms for elected representatives;
A fair court system that is independent from the political system;
A nonpolitical state bureaucracy;
A nonpolitical police force and armed service; and
Relatively free access to state information.

Totalitarianism
In a totalitarian country, all the constitutional guarantees on which representative democracies
are built--such as an individual's right to freedom of expression and organization, a free media,
and regular elections are denied to the citizens. Political repression is widespread and those who
question the right of the rulers to rule find themselves imprisoned, or worse killed.
Four major forms of totalitarianism exist in the world today.
a) Communist totalitarianism. Communism is a version of collectivism that advocates that
socialism can be achieved only through totalitarian dictatorship. Communist dictatorships
have collapsed since 1989 with major exceptions noted being China, Vietnam, Laos,
North Korea, and Cuba, although all of these states exhibit clear signs that the
Communist Party's monopoly on political power is under attack.
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b) Theocratic totalitarianism. Theocratic totalitarianism is found in states where political

power is monopolized by a party, group, or individual that governs according to religious
principles. The most common form of theocratic totalitarianism is based on Islam and is
exemplified by states such as Iran and Saudi Arabia. These states restrict not only
freedom of political expression but also freedom of religious expression, while the laws
of the state are based on Islamic principles.
c) Tribal totalitarianism. Tribal totalitarianism is found principally in African countries
such as Zimbabwe, Ethiopia, Uganda, and Kenya. The borders of most African states
reflect the administrative boundaries drawn by the old European colonial powers, rather
than tribal realities. Consequently, the typical African country contains a number of
different tribes. Tribal totalitarianism occurs when a political party that represents the
interests of a particular tribe (and not always the majority tribe) monopolizes power. Such
one-party states still exist in Africa.
d) Right-wing totalitarianism. Right-wing totalitarianism permits individual economic
freedom but restricts individual political freedom on the grounds that it would lead to the
rise of communism. One common feature of most right-wing dictatorships is an overt
hostility to socialist or communist ideas. Many right-wing totalitarian governments are
backed by the military, and in some cases the government may be made up of military
officers.
Economic Systems
It is clear now that there is a connection between political ideology and economic systems. In
countries where individual goals are given primacy over collective goals, we are more likely to
find free market economic systems. In contrast, countries where collective goals are given
preeminence, the state may have control over many enterprises, while markets in such countries
are likely to be restricted rather than free. There are four broad types of economic systems:
a)
b)
c)
d)

A market economy.
A command economy.
A mixed economy.
A state-directed economy.

Market Economy
In a market economy all productive activities are privately owned. The goods and services that
a country produces, and the quantity in which they are produced, are not planned by anyone.
Production is determined by the interaction of supply and demand and signaled to producers
through the price system. If demand for a product exceeds supply, prices will rise, signaling
producers to produce more, if supply exceeds demand, and prices will fall, signaling producers to
produce less.
For a market to work in this manner there must be no restrictions on supply. A restriction on
supply occurs when a market is monopolized by a single firm. Romer (1994)

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Command Economy
In a command economy, the goods and services that a country produces, the quantity in which
they are produced, and the prices at which they are sold are all planned by the government.
Consistent with the collectivist ideology, the objective of a command economy is for government
to allocate resources for "the good of society." In addition, all businesses are state owned, the
rationale being that the government can then direct them to make investments that are in the best
interests of the nation as a whole, rather than in the interests of private individuals.
While the objective of a command economy is to mobilize economic resources for the public
good, just the opposite seems to have occurred. In a command economy, state-owned enterprises
have little incentive to control costs and be efficient, because they cannot go out of business.
Moreover, the abolition of private ownership means there is no incentive for individuals to look
for better ways to serve consumer needs; hence, dynamism and innovation are absent from
command economies. Instead of growing and becoming more prosperous, such economies tend
to be characterized by stagnation.
Mixed Economy
This is found between market and command economies. In a mixed economy, certain sectors of
the economy are left to private ownership and free market mechanisms, while other sectors have
significant state ownership and government planning. For example, Kenya has extensive stateowned health systems that provide universal health care to all citizens (it is planned to be paid
for through higher National Hospital Insurance Fund).
In mixed economies, governments also tend to take into state ownership troubled firms whose
continued operation is thought to be vital to national interests.
State-Directed Economy
A state-directed economy is one in which the state plays a significant role in directing the
investment activities of private enterprise through "industrial policy" and regulating business
activity in accordance with national goals. Japan is cited as examples of state-directed economy.
A state-directed economy differs from a mixed economy since the state does not routinely take
private enterprises into public ownership. Instead, it nurtures private enterprise but proactively
directs investments made by private firms in accordance with the goals of its industrial policy.
Borrus et al (1986). Industrial policy often takes the form of state subsidies to private enterprises
to encourage them to build significant sales in industries deemed to be of strategic value for the
nation's economic development.
The intellectual foundation for a state-directed economy is based on the so-called infant industry
argument. This argument suggests that in some industries, economies of scale are so large and
incumbent firms from developed nations have such an advantage that it is difficult for new firms
from developing nations to establish themselves. Industrial policy is seen as a means of
overcoming this economic disadvantage. Moreover, it is argued that state-directed industrial
policy may allow a country to establish a leading position in an emerging industry where scale
economies will ultimately be of great importance. Lester (1993)
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IMPLICATIONS OF CHANGES IN POLITICAL AND ECONOMIC SYSTEMS FOR

INTERNATIONAL BUSINESSES
The implications for international business of the political, economic, and legal environment of a
country clearly influences the attractiveness of that country as a market and/or investment site.
The benefits, costs, and risks associated with doing business in a country are a function of that
country's political, economic, and legal systems. Secondly, the political, economic, and legal
systems of a country can raise important ethical issues that have implications for the practice of
international business.
Attractiveness
The overall attractiveness of a country as a market and/or investment site depends on balancing
the likely long-term benefits of doing business in that country against the likely costs and risks.
Below I consider the determinants of benefits, costs, and risks.
Benefits
The long-run monetary benefits of doing business in a country are a function of the size of the
market, the present wealth (purchasing power) of consumers in that market, and the likely future
wealth of consumers. While international businesses need to be aware of this distinction, they
also need to keep in mind the likely future prospects of a country. In 1960, for example, South
Korea was viewed as just another impoverished Third World nation like Kenya. By 1996 it was
the world's 11th largest economy, measured in terms of GDP. International firms that recognized
South Korea's potential in 1960 and began to do business in that country may have reaped
greater benefits than those that wrote off South Korea.
By identifying and investing early in a potential future economic star, international firms may
build brand loyalty and gain experience in that country's business practices. These will pay back
substantial dividends if that country achieves sustained high economic growth rates. In contrast,
late entrants may find that they lack the brand loyalty and experience necessary to achieve a
significant presence in the market. In the language of business strategy, early entrants into
potential future economic stars may be able to reap substantial first-mover advantages, while late
entrants may fall victim to late-mover disadvantages. Liberman & Montgomery (1988)
Costs
A number of political, economic, and legal factors determine the costs of doing business in a
country. With regard to political factors, the costs of doing business in a country can be increased
by a need to pay off the politically powerful in order to be allowed by the government to do
business. The Kenya government is currently warming up to the Chinese for political favors and
business while at the same time providing the west with conflicting signals as regards doing
business in the country. The need to pay what are essentially bribes is greater in closed
totalitarian states than in open democratic societies where politicians are held accountable by the
electorate (although this is not a hard-and-fast distinction). Whether a company should actually
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pay bribes in return for market access should be determined on the basis of the legal and ethical
implications of such action.
With regard to economic factors, one of the most important variables is the sophistication of a
country's economy. It may be more costly to do business in relatively primitive or undeveloped
economies because of the lack of infrastructure and supporting businesses. At the extreme, an
international firm may have to provide its own infrastructure and supporting business if it wishes
to do business in a country, which obviously raises costs.
As for legal factors, it can be more costly to do business in a country where local laws and
regulations set strict standards with regard to product safety, safety in the workplace,
environmental pollution etc. It can be more costly to do business in a country that lacks wellestablished laws for regulating business practice. In the absence of a well-developed body of
business contract law, international firms may find that there is no satisfactory way to resolve
contract disputes and, consequently, routinely face large losses from contract violations. When
local laws fail to adequately protect intellectual property, this can lead to the "theft" of an
international business's intellectual property, and lost income.
Risks
The risks of doing business in a country are determined by a number of political, economic, and
legal factors. Political risk has been defined as the likelihood that political forces will cause
drastic changes in a country's business environment that adversely affect the profit and other
goals of a particular business enterprise. Robock (1971). Political risk tends to be greater in
countries experiencing social unrest and disorder or in countries where the underlying nature of a
society increases the likelihood of social unrest. Social unrest typically finds expression in
strikes, demonstrations, terrorism, and violent conflict. Such unrest is more likely to be found in
countries that contain more than one ethnic nationality e.g. Kenya, in countries where competing
ideologies are battling for political control, in countries where economic mismanagement has
created high inflation and falling living standards e.g. Zimbabwe, or in countries that straddle the
"fault lines" between civilizations.
Social unrest can result in abrupt changes in government and government policy or, in some
cases, in protracted civil strife. Such strife tends to have negative economic implications for the
profit goals of International business enterprises. For example, in the aftermath of the 1979
Islamic revolution in Iran, the Iranian assets of numerous US companies were seized by the new
Iranian government without compensation.
On the economic front, economic risks arise from economic mismanagement by the government
of a country. Economic risks can be defined as the likelihood that economic mismanagement will
cause drastic changes in a country's business environment that adversely affect the profit and
other goals of a particular business enterprise. Economic risks are not independent of political
risk. Economic mismanagement may give rise to significant social unrest and hence political
risk. Nonetheless, economic risks are worth emphasizing as a separate category because there is
not always a one-to-one relationship between economic mismanagement and social unrest. One
visible indicator of economic mismanagement tends to be a country's inflation rate. Another
tends to be the level of business and government debt in the country.
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On the legal front, risks arise when a country's legal system fails to provide adequate safeguards
in the case of contract violations or to protect property rights. When legal safeguards are weak,
firms are more likely to break contracts and/or steal intellectual property if they perceive it as
being in their interests to do so. Thus, legal risks is defined as the likelihood that a trading
partner will opportunistically break a contract or expropriate property rights. When legal risks in
a country are high, an international business might hesitate entering into a long-term contract or
joint-venture agreement with a firm in that country. For example, when the South Sudan
government passed a law requiring all foreign investors to enter into joint ventures with South
Sudan companies and also employ only South Sudanese, there was uproar within the East
African Community. The South Sudan legal system did not provide for adequate protection of
intellectual property rights, creating a real danger that their South Sudanese partners might
expropriate the intellectual property of foreigners to the core of their competitive advantage.
Overall Attractiveness
The overall attractiveness of a country as a potential market and/or investment site for an
international business depends on balancing the benefits, costs, and risks associated with doing
business in that country. The costs and risks associated with doing business in a foreign country
are typically lower in economically advanced and politically stable democratic nations and
greater in less developed and politically unstable nations. Economic growth appears to be a
function of a free market system and a country's capacity for growth. Other things being equal,
the benefit, cost, risk trade-off is likely to be most favorable in the case of politically stable
developed and developing nations that have free market systems and no dramatic upsurge in
either inflation rates or private-sector debt. It is likely to be least favorable in the case of
politically unstable developing nations that operate with a mixed or command economy or in
developing nations where speculative financial bubbles have led to excess borrowing.
Country differences give rise to some important and contentious ethical issues.
(1) The ethics of doing business in nations that violate human rights,
(2) The ethics of doing business in countries with very lax labor and environmental
regulations,
(3) The ethics of corruption.
Ethics and Human Rights
There are two sides to the ethical dilemma facing international firms. Some argue that investing
in totalitarian countries provides comfort to dictators and can help prop up repressive regimes
that abuse basic human rights. In contrast, some argue that Western investment, by raising the
level of economic development of a totalitarian country, can help change it from within. They
note that economic well-being and political freedoms often go hand in hand. Myers (1996)
Since both positions have some merit, it is difficult to arrive at a general statement of what firms
should do. Unless mandated by government, each firm must make its own judgments about the
ethical implications of investing in totalitarian states on a case-by-case basis. The more
repressive the regime, and the less amenable it seems to be to change, the greater the case for not
investing.
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Ethics and Regulations

A second important ethical issue is whether an international firm should adhere to the same
standards of product safety, work safety, and environmental protection that are required in its
home country. This is of concern to many international firms based in Western nations, where
product safety, worker safety, and environmental protection laws are among the toughest in the
world. Should Western firms investing in less developed countries adhere to tough Western
standards, even though local regulations don't require them to do so?
There is no easy answer. What if adhering to Western standards would make the foreign
investment unprofitable, thereby denying the foreign country much-needed jobs? What is the
ethical thing to do? To adhere to Western standards and not invest, thereby denying people jobs,
or to adhere to local standards and invest, thereby providing jobs and income? As with many
ethical dilemmas, there is no easy answer. Each case needs to be assessed on its own merits.
Ethics and Corruption
A final ethical issue concerns bribes and corruption. Should an international business pay bribes
to corrupt government officials to gain market access to a foreign country? To most international
businesses, bribery seems to be a corrupt and morally repugnant way of doing business in most
developing countries, so the answer might initially be no. Some countries have laws on their
books that prohibit their citizens from paying bribes to foreign government officials in return for
economic favors e.g. in the United States, the Foreign Corrupt Practices Act of 1977 prohibits
US companies from making "corrupt" payments to foreign officials to obtain or retain business.
However, other economists have argued that corruption can reduce the returns on business
investment. Pranab (1997). In a country where corruption is common, the profits from a business
activity may be siphoned off by unproductive bureaucrats who demand side payments for
granting the enterprise permission to operate. This reduces the incentive that businesses have to
invest and may hurt a country's economic growth rate. Mauro (1995)
Conclusion
The potential benefits, costs, and risks of doing business in a country are a function of its
political, economic, and legal systems.
The attractiveness of a country as a market and/or investment site depends on balancing the
likely long-run benefits of doing business in that country against the likely costs and risks. The
benefits of doing business in a country are a function of the size of the market (population), its
present wealth (purchasing power), and its future growth prospects. By investing early in
countries that are currently poor but are nevertheless growing rapidly, firms can gain first-mover
advantages that will pay back substantial dividends in the future.
The costs of doing business in a country tend to be greater where political payoffs are required to
gain market access, where supporting infrastructure is lacking or underdeveloped, and where
adhering to local laws and regulations is costly.

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The risks of doing business in a country tend to be greater in countries that are (1) politically
unstable, (2) subject to economic mismanagement, and (3) lacking a legal system to provide
adequate safeguards in the case of contract or property rights violations. Country differences give
rise to several ethical dilemmas. These including (1) should a firm do business in a repressive
totalitarian state, (2) should a firm conform to its home product, workplace, and environmental
standards when they are not required by the host country, and (3) should a firm pay bribes to
government officials to gain market access?
Question 2. Why was the organization of Kenyan in the Diaspora formed and what are its
goals?
The Kenya Diaspora Alliance (KDA) traces its roots to the reform efforts dating back to the late
1990s during which time the Diaspora became more actively involved in their home country
affairs. The Kenya Diaspora has always organized for Kenya under various organizations, but
never before come together to create a formidable force. During the late 1990s, organizations
such as the Mzalendo Movement, Kenya Coalition, Kenya Community Abroad [KCA], and other
smaller outfits were born. Kenya Community Abroad would prove more aggressive and for
many years to come, was the dominant diaspora organization. KCA led the struggle for dual
citizenship, voting abroad for Kenyan Citizens and recognition of the role that Kenyans abroad
were and continue to play in Kenyas social, economic and political development.
KCA leadership proposed dual citizenship and voting rights into the new constitution and was
actively involved in the Bomas of Kenya debates as representatives of the Kenyan Diaspora. The
results, of course, would take nearly 8 years to be realized.
Kenya Community Abroad (KCA) was founded in March 1997 with a view to giving Kenyans
abroad a platform on which to exchange views and help bring change back to Kenya.
Among the stated objectives at the time of formation were to:
1) Provide a forum where people of Kenya who reside abroad can engage in intelligent
discourse on economic, political and social issues that affect Kenyans abroad and home;
2) Fight for transparency and accountability in the Kenya government;
3) Facilitate the dissemination of important policy decisions to the Kenya citizenry;
4) Campaign for the rule of law and democratic governance in Kenya and campaign for a
modern civil society based on equality before the rule of law;
5) Campaign for sound and just economic policies in Kenya aimed at empowering the
Kenyan populace;
6) Provide a forum for the sharing of the unique Kenyan cultural heritage in all its diversity
and particularly inculcate in Kenyans born abroad the rich history and ethos of the people
in their land of ancestry;
KCA believes that:
1. Fellow Kenyans need and deserve a clean and honest government that will bring
economic, political and social growth. The Kenyan Community Abroad believes in
taking the government away from a few individuals and putting it back in the hands of
the people's institutions - Legislature, Executive and the Judiciary, where it belongs;
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2. That Kenya is, and shall continue to be, a Republic, and shall be indivisible and shall be
governed by a democratically elected government;
3. That Kenyans are a one people in their ethnic and religious diversity and that their
destinies are yoked with that of their motherland;
4. That the challenges that face Kenya as a nation and as a distinguished member of the
society of nations transcend any ethnic or regional interests and that KCA shall only
champion the cause of one nation and one people;
5. That Kenya must pursue and openly cultivate the growth of democratic institutions
enshrined in the new Kenyan Constitution;
6. That all Kenyans are equal and all have a stake in the welfare of their nation and they
have a right to pursue for themselves and their family an honest living under the laws of
Kenya;
7. In the sanctity of human life as the highest level of creation and in the UN Universal
Declaration of Human Rights of 1948 and in the various human rights covenants and
other international human rights instruments.
What incentives can the Kenyan Government put in place to attract investment of earnings
from Kenyans in the diaspora?
Transfer of funds from migrant to relatives or friends in their country of origin are an important
feature of the modern economic life. Remittances are an important source of global development
finance since they provide a much sought after foreign exchange to recipient countries and they
supplement the domestic incomes of millions of poor families across the world. They have a
direct impact on poverty reduction because they flow directly to poor households. Diaspora are
major source of Foreign Direct Investments (FDI), market development, Technology transfer,
philanthropy, tourism, political contribution and more intangible flows of knowledge, new
attitudes, and cultural influence.
There is significant potential for the optimization of remittance from the Diaspora through a
number of initiatives by the Kenyan government, the Diaspora themselves and the local
community. Remittance flows are second largest source behind Foreign Direct Investments
(FDI) of external funding for developing countries. They are one of the least volatile sources of
foreign exchange for developing countries and are expected to rise significantly in the long term.
Therefore the government needs to come up with the following incentives to attract more
Diaspora remittances to the country.
Government incentives to attract investments from the Diaspora
The following strategies can be implemented to achieve the above objectives.
1. Promote continuous dialogue with Kenyans Abroad
For a long time, there has been mistrust amongst Kenyans Abroad, those at home and the
Government. This is due to inadequate efforts to create an ideal platform through which
Kenyans Abroad, Government and other stakeholders can dialogue on issues of mutual
benefit. The government can implement strategies aimed at enhancing constructive dialogue
and conducting civic education between Kenyans Abroad and other stakeholders to create better
understanding and a common ground as the basis for mutual engagement.
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2. Enhance capacity to offer Consular Services

The Government can strengthen and enhance the capacity of Kenya missions abroad to through
deployment of additional staff to missions with high concentration of Kenyans Abroad in
order to effectively deal with diverse issues that affect them. The Government can further
open new missions and honorary consulates in strategic locations to take consular services
closer to Kenyans residing in those areas.
3. Reduce the high cost of remitting money
The recent developments in the information and communication technologies in the country
have resulted to a mobile based payment and money transfer system popularly known as MPesa, Airtel Money, Nation Hela and Tangaza Pesa among others. The system is now being
used by Kenyans Abroad in some selected countries to send money back home. The use of
mobile money transfer as one of the many alternatives to remit money back home, if expanded
to other countries, will go a long way in lowering the cost of money transfer. The Government
can explore alternative channels of remitting money and also engage financial institutions
involved in money transfer to negotiate lower costs of remittances.
4. Develop a n i n c e n t i v e f r a m e w o r k t o p r o m o t e D i a s p o r a p a r t i c i p a t i o n
i n national development
The Government can develop incentives and tailor - made investment packages to encourage
Kenyans Abroad to direct their remittances towards productive ventures both at the National
and County levels. Further, the Government can: harmonize investment promotion and
facilitation initiatives targeting Kenyans Abroad; undertake policy advocacy on targeted
investment opportunities in partnership with umbrella bodies through the Kenya Missions
Abroad; establish intermediary facilities to provide investment management services; and
develop specific investment products and incentives that specifically target Kenyans Abroad
such as the Government securities and Public Private Partnership (PPP) engagements.
5. Enhance mechanisms for protecting Kenyans abroad
Pursuant to the Constitution of Kenya, the Government committed to protect its nationals both
within and outside the country. To this end, the Government c a n undertake the following
measures: negotiate and sign bilateral labour agreements with host countries; strengthen
regulatory framework for employment agencies; review the labour institutions Act, 2007;
conduct pre-departure training for migrant workers and students going for further studies
abroad; conduct awareness creation for Kenyans going abroad through travel advisories; and
facilitate registration of Kenyans Abroad through the Kenya missions; and, revamp labour
recruitment system to make it more professional and accountable.
6. Develop a n integrated database on Kenyans Abroad
In order to improve access to timely and quality information on Kenyans Abroad and in turn
enhance their engagement, the Government can develop and implement an Integrated
Diaspora Information System. Kenya missions can then sensitize Kenyans Abroad to create
awareness on benefits of registration.
7. Tap into Diaspora expertise and skills
The Government can put in place structures, programmes and incentives to attract and utilize
qualified and skilled Human Resource from Kenyans Abroad. In this regard, the Government
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will develop and update on a regular basis skills inventory of Kenyans Abroad.
Similarly, the government can put in place mechanism and measures to promote transfer of
knowledge and skills virtually through online support in order to build local capacity of the
Kenyan nationals. In this regard, information can be made available to Kenyans Abroad on
skills shortages and corresponding employment opportunities in Kenya. The Government can
also introduce and operationalize an award and recognition scheme for Kenyans Abroad who
have excelled in their area of specialization
8. Leverage o n t h e use o f I n f o r m a t i o n a n d C o m m u n i c a t i o n
T e c h n o l o g y (I.C.T) Enabled Services
In order to enhance efficiency in engagement with the Kenyans Abroad, the Government will
develop and operationalize an interactive Diaspora web portal and offer online consular
services at the ministry headquarters and missions abroad.
9. Develop reintegration mechanisms for returnees
The Kenyans Abroad returnees are often faced with the challenge of assimilation to the
society. In collaboration with other stakeholders, the government can implement the
following interventions: develop a framework for the transferability and portability of social
security benefits, negotiate bilateral instruments to facilitate the transfer of Social security
benefits; formulate programs to absorb returnees; debriefing and counselling of returnees (reintegration programme) especially those who have undertaken security/military training and
set up help desks in government institutions and other agencies that interact with Kenyans
abroad.
10. Harmonize and conduct pre-departure training
In partnership with stakeholders, the Government can develop a framework for skills
upgrading and pre-departure orientation of potential emigrants in order to improve their
competitiveness in the international job market. Further, public education programmes aimed
at creating awareness to parents/students travelling for study abroad as well as other
individuals leaving Kenya to reside abroad will be undertaken.
11. Develop Legislative Framework
The Government can review the Labour Institutions Act, 2007 to make provision for Kenyan
private employment agencies to register with Kenya Association of Private Employment
Agencies (KAPEA) before receiving accreditation. The Government can further gazette
Regulations and Guidelines on operations of private employment agencies and attestation of
foreign contracts of service.
12. Promote participation in democratic processes by Kenyans Abroad
The Constitution of Kenya laid a firm foundation by entrenching Diaspora fundamental rights
to participate in countrys democratic processes. In particular, the Constitution guarantees
Kenyans Abroad Dual Citizenship and right to vote during national elections. Holding dual
citizenship provides an important and sustainable connection between Kenyans Abroad and
their host country. Similarly, dual citizenship enhances Diaspora participation in development
of their motherland. In this light, the government can, in subsequent general elections
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endeavor to increase registration coverage with a view to enhancing voting by Kenyans

Abroad.
13. Promotion of Philanthropic Initiatives
A number of international forums have underscored the need for appropriate frameworks to
enhance Diaspora engagement in supporting post-crisis recovery among other initiatives.
The Government of Kenya can therefore encourage and facilitate Associations of Kenyans
Abroad or even individual Kenyans to form non-profit making foundations to support
philanthropic initiatives in the country, both at the national and county levels.
Other initiatives and incentives can include:
a) Eradication of corruption and the institutionalization of clear legal protection thus sustain
a robust climate for increased Foreign Direct Investments.
b) Develop national programmes providing investment guarantees to the Diaspora.
c) Effort should be put on lowering transaction costs, improving data collection, extending
the availability of financial services to the poor people and rural areas.
d) Encourage collective remittances to support community development and employment
generation.
e) Sponsor research on patents and uses of remittances.
f) Create a government body with a sole focus of acting as a liaison between Kenya and its
Diaspora; Kenyas Investment Promotion Centre can accomplish this role.
g) Introduction of international government bonds with central bank guarantee targeted at
Kenyan Diaspora.
References
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Mill J. S., On Liberty (London: Longman's, 1865), p.6.
Wesson R., Modern Government-Democracy and Authoritarianism, 2nd ed. (Englewood Cliffs,
NJ: Prentice Hall, 1990).
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Romer P. M., "The Origins of Endogenous Growth," Journal of Economic Perspectives 8, no. 1
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(Summer Special Issue, 1988), pp. 41 - 58.
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Myers S. L., "Report Says Business Interests Overshadow Rights," New York Times, December
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Mauro P., "Corruption and Growth," Quarterly Journal of Economics, no. 110 (1995), pp. 681 712.
Kenya

Diaspora

Policy

Document.

Available

at

http://www.kenyaembassy.com/pdfs/Final_National_Diaspora_Policy_Revised_13.06.20
14.pdf
Central Bank of Kenya Website: https://www.centralbank.go.ke/index.php/diaspora-remittances
Kenya Diaspora Alliance Website: http://kenyadiasporaalliance.org/
Kenyans Abroad Website: http://www.kenyansabroad.org/

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