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Logistics critical to Kenya-Asia trade success

By Meshack Kipturgo | Published Tue, July 8th 2014 at 00:00, Updated July 7th 2014 at 23:16 GMT +3

An efficient logistics chain remains a key tool for countries seeking a competitive advantage. Every thriving economy relies on an efficient supply chain that nurtures global trade and embraces competitiveness.

Various countries have gained trade muscle and boosted their economies by controlling the supply chain to ensure it positively impacts trade.

For instance, Singapore, despite being a small country, is the most efficient country in logistics and in the 2011 Ease of Doing Business Index, was ranked first. Japan would not have cut its niche as a manufacturer of popular automobiles and electronics without a well-managed global supply chain. It is currently home to six of the top 20 largest vehicle manufacturers, with Toyota being the highest-sold vehicle globally.

Highest population

Currently, Kenya, in search of diversity among its trade partners, has set its sights on the East. Asia is the fastest-growing economic region and the largest continental economy by gross domestic product (GDP) in the world. China is the largest economy in Asia and the second-largest economy in the world. In addition, Asia has the highest population, with over 1 billion inhabitants in China.

The potential trade and impact into the Kenyan economy as a result of this new trade partnership is immense. However, the question is, does Kenya have the capacity to reap the fruits of doing business with this trade giant?

On the Kenyan logistics front, key concerns include existence of non-tariff barriers, state of infrastructure, insecurity and the rising cost of fuel.

The high cost of goods in the local market is to a large extent attributed purely to logistics. These are critical concerns that have directly impacted the cost of doing business in Kenya and threatened the country’s position as East Africa’s business hub.

Neighbouring countries such as Tanzania, Uganda and Rwanda have identified this gap as well and they are working in overdrive to sway investors into their markets by embarking on great infrastructural developments.

Tanzania has invested billions of dollars in the construction of the Bagamoyo Port, a new airport terminal and the Tanga-Musoma railway, while Rwanda is pursuing investments in the air cargo industry, including an airport free trade zone.

All these initiatives are set to shift trade flow away from Kenya. We must not be caught napping.

Thankfully, there are steps that the Government has taken to expand our current infrastructure, as well as regional partnerships that would smoothen trade among East African Community partners, including the recently launched single window system, standard gauge railway, and infrastructure developments and expansion particularly at the Mombasa Port and Jomo Kenyatta International Airport.

Emerging demands

However, to effectively tackle the current and emerging demands from our international markets, the Kenyan market needs to provide its potential investors with a safe and convenient environment to do business, such as building a dual carriageway on the Northern Corridor from Mombasa all the way to the Malaba border.

Partner countries in Rwanda and Uganda should also be convinced to extend the same dual carriageway.

At the same time, there’s need to fast track the construction of the free port to enable Kenya meet growing market demands. An airport free trade zone would also greatly boost our air cargo logistics.

Regionally, it is prudent that East African countries partner and negotiate with the global markets as one. Going it alone would overwhelm or exhaust the limited resources in the EAC.

In the meantime, tackling the current trade hindrances while planning long term for business growth will go a long way towards attracting more investments in Kenya, as well as make East Africa a vibrant trading region.

The writer is Siginon Group managing director.

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