The study concluded that infrastructure development in East Africa plays a greater role though faced by several limitations hindering its growth and expansion. The coefficient for foreign direct investment, gross capital formation and infrastructure development were-8.66, 0.2198 and-1.5294 respectively. The results indicated that foreign direct investment had negative and statistically insignificant relationship with economic growth, gross capital formation had positive and statistically significant relationship with economic growth and Infrastructure development negative and statistically significant relationship with economic growth. Hausman Specification test was conducted to assess whether to use the fixed effect or random effect panel estimation. The study was modelled using the Endogenous Growth Theory. The main objective of this study was to investigate the effect of foreign direct investment on economic growth in East Africa. For this reason, it is not clear whether or not foreign direct investment affect economic growth in East Africa. However, owing to the fact that there are limited studies on foreign direct investment, various studies indicate divergent views on the effect of foreign direct investment on economic. The average annual flows of FDI into Africa doubled in the 1980's compared with the 1970s. The low economic growth rate coupled with high population growth makes poverty alleviation in Africa increasingly difficult.
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