Foreign Direct Investment is basically a business investment made by a foreign investor where he has control over the purchased company (Huang, 2003). Here, one has the advantage to access the resources, markets and also likely to have a reduction in the cost of production. Most countries globally compete in terms of businesses which is dependent on the infrastructure, capital, technology and so much more. In this case, where are going to study the global business competitiveness of two countries. One in Africa, and another one in Asia.
In Africa, we can take an example of Kenya while in Asia, we can take a look at China. Kenya is country in East Africa and its economy has been growing fairly well despite many challenges along its journey to economic growth. The Global Competitiveness Index (GCI) 2014/2015 report, ranked Kenya at position 90 among 144 countries. This report shows that Kenya has moved up by 6 places as compared to the 2013/2014 report (Schwab, 2010).
The report measures policies and factors that were put in place which were seen necessary to benefit its citizens. The Kenyan Labour Market has been constantly rising making its rise in the GCI ranking. This was because of the support given from the well-developed financial markets set by the international standards(Schwab, 2010). This shows that Kenya is doing fairly well in the business market. However, this picture is not displayed this way when a comparison between Kenya and China is made.
China has experienced a very rapid economic transformation which has attracted a very large number of international investors(Huang, 2003). Cash is on the flow and their labour market is doing so well. This has enabled millions of the Chinese population to be lifted out and away from poverty. The Chinese economy has been very astonishing. By the year 2000, the Chinese GDP was almost a quarter of the Japanese GDP. This was however a very different case as by the year 2010, china emerged as the second largest economy in the whole world(Howe, 1978).
A comparison between the two countries can thus be able to show clearly the distinctiveness between the two business economies. The Chinese companies are in a position to produce or manufacture their own goods(Barnett, 1981). They thus ensure that their products are labor-intensive and are of low-value. It has not confined its competitiveness in the traditional areas only but has also ensured that the modern areas keep up with the business growth. It borrowed modern technologies from the developed countries and has thus grown to be a very great competitor to the well developed countries(Howe, 1978). Kenya on the other hand lags very far behind. Its economy runs mainly on agricultural produce(Versi, 1995). This dependence poses a great risk to the county’s economy as it fluctuates depending on the weather changes. The business market is thus not very well stable as it is prone to change at any point in time(Versi, 1995). In addition to that, Kenya has absorbed very little foreign technology which it has incorporated into its systems of production. The country is thus still dependent on imported products(Daniels, 2010). This is evident in the case of motor vehicle. Kenya imports all its vehicle, the best that can be done within the country is vehicle assembling. This thus makes it lag behind economically.
China has also made a very great step towards ensuring that higher education is achieved by the majority of the willing population. The country boasts of over 2000 universities which have a yearly enrollment of over 6 million students. It has also established the Bachelor, Doctoral, Masters Degrees as well as non-degree programs. It has also set open these chances for the foreign students thus emerging 3rd in all countries globally in the number of foreign students in their institutions. The quality of education is also very high warranting the large number of foreigners(Howe, 1978). Kenya on the other hand also produces the same programs in their universities. The difference is that the intake is still quite low as the number of universities is also low. The number of foreigners who have the chance of studying in the Kenyan universities is also critically low(Daniels, 2010). One major issue is that the quality of education being offered by the Kenyan. As per one Kenyan newspaper on 17th February, 2015, Kenya is rated as having the most but not best educated people. This is one disturbing fact that Kenyans are living with now unless something is done on the education system.
China’s health system is also very efficient(Barnett, 1981). It is known to have some of the world’s best doctors and thus having most of medical solutions as compared to the Kenyan medical field. This can be seen by the number of Kenyans as well as citizens from other countries who fly to China in search of medical attention.
China is among the countries in the world that have very well developed infrastructure. These include mainly the roads. China has very many modern well-built roads which have been built using various latest technologies that are not existent in Kenya yet(Huang, 2003). Kenya on the other hand is faced with a great challenge on road infrastructure. It is thus turning onto the Chinese construction companies to participate in the construction of most of their roads. Most of the Kenyan roads in the recent past have been built and are still being built by the Chinese construction companies(Stern, 2001). This has led to a very high improvement in the transport infrastructure in Kenya.
The Chinese economy has continued to rise fairly well. The prices of goods and services are rising slowly and steadily. The Chinese government has mixed the administrative and the economic measures in order to stabilize the economy(Huang, 2003). Kenya on the other hand has also experienced a stable economic growth where the economy grew by 4.7% in 2014 and is predicted to grow to up to 5% by 2016. This thus shows that the two countries have steady growing economies according to their capacities.
Both the two countries have been ranked as being the best in offering the best business innovation and sophistication in product delivery to the owners of businesses. Kenya however is not performing very well in terms of labour market efficiency thus making Uganda the best ranked in this in the region. The labour is in most cases very readily available while the market is very low(Stern, 2001).According to (Howe, 1978), China faces an inverse of this as labour and market balance. The market size is also of a reasonable size as they have wide domestic as well as international markets compared to Kenya where they mostly are dependent on the domestic market and very few international market.
These among others are some of the comparisons that can be used to distinguish the Global business competitiveness of the two markets. The above named factors have a very great impact on the Foreign Direct Investment (FDI). Every investor, especially foreign investors, want to start an investment in a place where they have the assurance of performing well. They normally come in with a lot of expectations and are ready for disappointments at some point. They don’t expect this however to be the order of the day.They pay attention to the good-market efficiency, labour-market efficiency, the macroeconomic environment, technological readiness, the market size, business sophistication and innovation. The infrastructure is also paid attention to. No investor wants to come in and manufacture goods which won’t be transported because of poor roads.
Looking at the analysis above between Kenya and China, China has an added advantage of attracting a great number of foreign investors as compared to Kenya. It has a fairly good environment that most investors pay attention to compared to Kenya. The number of foreign investments in Kenya will thus be quite low because of a poor global business competitiveness.