Long term impacts of counterfeiting and piracy on increased Foreign Direct Investment and employment in Kenya

  • 27 January 2017

Intellectual property rights (IPR) have longterm impacts on FDI, exports and employment. BASCAP's report on FDI in Kenya (2013) calls attention to these correlations and their repercussions on economic growth in Kenya, and proposes policy recommendations to advance the state's IPR regime.

The effectiveness of a state’s protection and enforcement of intellectual property has a direct correlation on the amount of FDI it receives. High levels of FDI contribute to longterm positive impacts upon employment, exports, local economic development and increased productivity.

IP protection in Kenya

The report shows that intellectual property rights are not adequately protected or enforced in Kenya. It is estimated that up to 30% of pharmaceutical drugs sold in the country are counterfeit. Software, music and consumer goods industries are similarly affected by counterfeiting and piracy. This results in a parallel illicit economy that takes away from legitimate employment, siphons tax revenues and creates products potentially unsafe for consumers.

A state’s poor protection and enforcement of IPR deter many MNCs from injecting FDI. Not surprisingly Kenya’s levels of FDI are considerably below average, and the country suffers high unemployment and low worker productivity. Kenya has been shown to perform poorly both in comparative and absolute terms on several IPR indices including the International Property Rights Index (IPRI) 2012. Advancing IPR could reverse this trend and its related negative impacts.

Key policy recommendations

Countries must demonstrate to investors that they have put in place the right policies and infrastructure to attract FDI. IPR protection and enforcement is a significant part of this, and for Kenya could potentially result in an increase in FDI from $460-$600 million, potential increases in exports from $750-$1,500 million, and potential increases in employment ranging from 355,000 to 625,000 new jobs.