Effect Of Capital Expenditure On Kenya’s Manufactured Exports To Uganda And Tanzania

Manufacturing had been identified as the first of the big four pillars in the Third Medium Term Plan (MTP) (2018- 2022) of Vision 2030. Its implementation would not only support higher economic growth and faster job creation but also reduce the high cost of living thereby contributing to the high quality of life of all citizens by contributing at least 10 per cent of Kenya’s GDP p.a. Nevertheless, little information existed on how various macroeconomic aggregates contributed to the growth of the manufactured exports in the country, therefore, creating a knowledge gap for policymakers when making significant decisions for boosting the growth of manufactured exports in Kenya. This study, thus, sought to determine the effect of capital expenditure on Kenya’s manufactured exports to Uganda and Tanzania between 2007 and 2018. This study was anchored on Linder’s hypothesis of trade and employed the gravity model. It adopted a correlational study design and used secondary panel data from the World Bank, Central Bank of Kenya, Kenya National Bureau of Statistics, and Kenya Export Promotion and Branding Agency. According to the equation, both random and fixed effect models were estimated. Results of the random effect model for Kenya’s exports to Uganda and Tanzania indicated that the effect of KXM was positive and significant (β3 = 0.588, p-value 0.000< 0.05). This study therefore recommends that the Government of Kenya and other stakeholders invest more in education, healthcare, and R&D, incentivize novel sectors like the information and communication technology sector, and deter corruption in development projects.