The Standard Gauge Railway: A Chinese infrastructure FDI in Kenya

Andreas Carl Larsson & Erik Roswall

Student thesis: Master thesis

Abstract

In recent years, China has emerged as an active investor in the Kenyan infrastructure sector. Above all, this has become apparent by the Chinese construction of the Standard Gauge railway (SGR), Kenya’s most expensive infrastructure project, and the largest inward FDI to date. The contract was signed between the Kenyan government and a Chinese state-owned company, China Road and Bridge Corporation (CRBC). The FDI has been a source of both appraisal and concern amongst the Kenyan community, as well as foreign observers. The apparent controversy of the SGR construction follows a skepticism against Chinese foreign investments, which is considered to be part of a broader state agenda. Other areas of concerns can be related to the large costs involved, which has been borrowed by Kenya from the Exim Bank of China, as well as the environmental footprints, potential human rights violations and corruption. By identifying the different viewpoints, the paper aims to assess the validity of both the appraisal as well as the criticism of the Chinese investment. This is done by an exploratory case-study research that asks how the SGR construction has affected Kenya’s sustainable development, based on Peter Dickens framework on the impacts of Multinational Enterprises. The research was conducted by interviewing ten experts active in different academic and professional disciplines. The results indicate that there have been both positive and negative impacts even though it became evident the negative ones outweighed the positive ones. The theoretical framework of Modernization and Dependency theory is deemed outdated as it fails to explain the multifaceted aspects of Chinese investments in Kenya. Which is why the paper suggests that the theories could be improved by contemplating a new reality where outward FDIs no longer derives solely from Western countries, but equally from emerging economies such as China, which not seldom includes both state control and ownership. Those are aspects not originally considered by the theories, but highly relevant in terms of local impacts, something that is demonstrated by the SGR construction.

EducationsMSc in International Business and Politics, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2020
Number of pages126