• July 8th, 2011
  • Posted by athanne

Kenya Business Review: Trade Policy in Kenya

300x250 2 Kenya Business Review: Trade Policy in Kenya

Trade Policy in Kenya explains that international trade has become increasingly important to Kenya’s economy. Kenya participates in two regional trade agreements: the East African Community and the Common Market for Eastern and Southern Africa. It is the leading market destination for Kenyan exports, accounting for thirty eight percent of total exports. Kenya’s exports to the East African Community account for just more than twenty two percent of total exports. Combined the Common Market for Eastern and Southern Africa and East African Community regions import more than half of total Kenyan exports, which are mainly comprised of horticultural products, coffee, tea, petroleum products, and manufactured goods.

Factors Affecting Trade Policy in Kenya

The factors affecting Trade Policy in Kenya include the following;

  • Exports,
  • Imports

Exports as one of the Factors Affecting Trade Policy in Kenya

Exports are one of the Factors Affecting Trade Policy in Kenya. Overall, Kenya’s exports are heavily dependent on the food and beverage sector, although the share of total exports by the sector has declined significantly from 54.2 percent in 2002 to 42.8 percent in 2007. In its place, manufactured goods have increased from 23.9 percent of total exports in 2001 to 35.8 percent in 2007. Regarding commodities, tea exports have increased over time from 28.4 percent of total exports in 2001 to 38.5 percent in 2007 and tea accounts for roughly half of total food and beverage sector exports. Cut flowers and petroleum products are two potential growing export sectors for Kenya. Cut flowers increased its share of total exports by about 10 percent over the 2001-2007 time periods. Conversely, the share of total exports represented by petroleum products decreased slightly over the same time period, although with significant fluctuations over the years.

 Kenya Business Review: Trade Policy in KenyaKey Markets for Kenyan Exports in Trade Policy in Kenya

The key Markets for Kenyan Exports in Trade Policy in Kenya are COMESA, EAC, and the EU are Kenya’s key trading partners.  By country, Kenya top export partners are Uganda, the United Kingdom, Netherlands, and Egypt. These four countries account for roughly 37 percent of Kenya’s total exports. Tanzania, Pakistan, and Rwanda follow, contributing 9 percent to Kenya’s total exports. In general, COMESA, the US, and the EAC to a lesser degree have been growing markets for Kenya since 2001-2002 while Kenyan exports to the EU have decreased over time.

Imports as one of the Factors Affecting Trade Policy in Kenya

Imports are one of the Factors Affecting Trade Policy in Kenya. Imports to Kenya are mainly comprised of industrial supplies, and fuel and lubricants. Table 3 shows the trend in imports to Kenya since 2001.  While most categories stayed consistent over time transport equipment decreased from roughly 20 percent in 2001-2002 to 16 percent in 2007. Food and beverages also decreased from more than 10 percent in 2001 to roughly 6 percent in 2007.

Legal Framework of Trade Policy in Kenya

The legal framework of Trade Policy in Kenya states that the Kenyan Ministry of Trade and

Industry drafted a Trade Policy report as part of the country’s overall development strategy Kenya Vision 2030. Kenya Vision 2030 aims at making Kenya a newly industrializing “middle income country providing high quality life for all its citizens by the year 2030.

 The Ministry’s Trade Policy Report aims to realize these goals through the following actions intended to enhance overall trade policy:

• Promotion of decent, protected and recognized informal trades

• Establishment of vibrant businesses supported by well established and functioning infrastructure and social amenities

• Expansion of Kenyan exports to generate jobs and prosperity

• Transformation of Kenya into a regional service hub

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• Enhancement of E-opportunities

Barriers faced by Kenya to External Markets in Trade Policy in Kenya

 The barriers faced by Kenya to external markets in Trade Policy in Kenya include;

  • Nontariff Barriers,
  • Sanitary and Phytosanitary Measures and Standards,
  • Infrastructure

Nontariff Barriers

Nontariff Barriers are one of the barriers faced by Kenya to external markets in Trade Policy in Kenya. The EU, which is the largest importer of African goods, maintains restrictions affecting textiles, agricultural goods, and coal. Other barriers affecting market access to the EU are rules of origin, accumulation, environmental regulations, and other issues. Other Nontariff Barriers faced by Kenya are broader in scope. In order of importance, they are; poor infrastructure, including roads, railways, telecommunications, political instability, and insufficient product diversification, including dependency on raw materials.

Sanitary and Phytosanitary Measures and Standards.

Sanitary and Phytosanitary Measures and Standards are one of the barriers facing Trade Policy in Kenya. Quality controls imposed by the EU and other export markets, including sanitary and phytosanitary measures on agricultural products and technical barriers to trade imposed on non-food products serve as another NTB facing Kenyan exports. Kenya needs to build compliance capacity to maintain trade with outside markets. The country lacks the institutional capacity and technical expertise to carry out conformity assessments for product standards and production processes. The existing laboratories are not considered capable of testing and verifying product standards due to the lack of necessary technical information, equipment, and trained staff.

468x60 001 Kenya Business Review: Trade Policy in Kenya

Infrastructure

Poor infrastructure is a major inhibitor to Trade Policy in Kenya. Trade flows within Kenya and across the region are heavily affected. Infrastructure issues noted as urgent in Kenya include: inadequate road maintenance causing major delays, trucks subjected to passing through six weighbridges along the transit corridor with poor working conditions at the weighbridges,  the level of automation of the Rift Valley Railways systems are low thus causing delays, inadequate pipeline capacity to transport fuel, forcing trucks to travel all the way to Mombasa to collect fuel and adding on to costs of petroleum products.

Read more in Business Training in Kenya.

Recommendations on Trade Policy in Kenya

Strengthen the capacity of all government agencies involved in trade policy and trade facilitation.

Enhancing the market access for Kenyan goods will definitely boost Trade Policy in Kenya

 

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