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Almost simultaneously, two developing countries – Kenya and Vietnam – set out to promote industrial development through FDI. Vietnam embarked on a targeted strategy aimed at selecting FDI that could specifically aid the country's strategic export sectors through linkages to local industry. In contrast, Kenya embarked on a cross-the-board FDI attraction policy with no specific sector orientation and with few specific linkage policies. This paper asks how FDI has contributed to local industry development in the two countries. Based on an analysis of firm level data from the World Bank Enterprise Survey, the paper compares the two countries' ability to generate spillovers from FDI spillovers and discusses what explains differences and similarities. The paper finds that in spite of the obvious differences between the two countries in terms of local industrial development and policy, firm and industry factors appeared to be better predictors of variations in spillovers than country level factors. Among the policy implications drawn are that developing countries should focus their FDI policies on firms and industries that have high linkage and hence spillover potential rather than adopting cross-the-board policies. [ABSTRACT FROM AUTHOR]

This paper examines in a comparative context the determinants of foreign direct investment in Kenya and Malaysia as well as its impact on economic growth in order to inform policy debates. Kenya in the recent past has committed itself to emulating the development experiences of Malaysia in order to inform its industrialization efforts. The study uses time series data for the period 1960–2009, which is analyzed in a vector autoregressive model. The results do provide support for the role of FDI in Malaysia's industrial success but not for growth in Kenya. From a policy view point, Malaysia's success in attracting huge FDI inflows compared to Kenya during this period is due to differences in macroeconomic stabilization, and trade policies as well as infrastructure and institutional factors. [ABSTRACT FROM AUTHOR]