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Kenya weighs its options as Brexit and Trump signal start of new global order

By Lee Mwiti | Updated Tue, December 20th 2016 at 00:00 GMT +3
The UK’s decision to exit the European Union and Donald Trump’s election as US president have shaken the world order. PHOTO: COURTESY

The UK’s decision to exit the European Union and Donald Trump’s election as US president have shaken the world order.

Analysts have described these two events as having the most profound effect on the global economic and political order since World War II.

This six-year war, also called the Great War, created two new global economic blocs that went on to define world trade. The victors of the war – the Western Allies and Soviet Union – went their separate ways in a virulent economic struggle that defined the Cold War era.

While the US created the Marshal Plan to aid and trade with its allies, the Soviet Union came up with the Council for Mutual Economic Assistance (Comecon), also to spur trade among its satellite communist states.

Africa, and Kenya in particular, had to choose which bloc to trade and relate with. Kenya went with the West. But now, the global economic order as we know it is set to change.

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Significant consequences

The British followed their populist Labour Party leaders and voted to exit from the European Union, with significant consequences for Africa.

And with Donald Trump in the White House, nations are scampering to build new trade relationships in response to the ‘America first’ economic order Trump promised during campaigns.

With the major markets of the UK and US poised to emphasise populist nationalism over international trade linkages, President Uhuru Kenyatta recently captured the need for Kenya to look for new alliances away from the West.

On November 25, the President hosted a delegation of 30 trade ministers and corporate leaders from Latin America and the Caribbean.

The president presided over the meeting, dubbed the Latin America-Caribbean-Africa summit (LacAfrica), and in his opening statement said: “This summit, which brings Latin American and Caribbean countries together in a historical way, will act as an avenue for Africa to respond to the changing world order brought about by Brexit and Trump. Kenya will from now forge new partnerships with the Caribbean and Latin worlds.”

In a speech that was later read on the President’s behalf by Trade Principal Secretary Chris Kiptoo, Mr Kenyatta noted trade volumes between Kenya and the two regions is worryingly low, and called for something to be done to improve the situation.

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“Whereas we have been seeing the Chinese, Indians, Americans and Europeans up their investments in Kenya, and also trade with these countries grow, investments and trade from Latin America have remained stagnant. It is time we put this to an end,” he said.

Entry route

In his own speech, Dr Kiptoo said by 2015, the trade volume between Africa and Latin America stood at $51 billion (Sh5.1 trillion), and has been stagnant for the last 10 years.

Further, trade has been largely skewed in favour of Latin America and Caribbean countries.

Of the Latin American and Caribbean countries that Kenya has traded with, only Colombia has a deficit that is skewed in Kenya’s favour. The deficit between Kenya and Colombia stands at $12 million (Sh1.2 billion) in favour of Kenya.

Kiptoo added that last year, of the $6 billion (Sh600 billion) Kenya exported, 70 per cent went to just 12 countries – no Caribbean or Latin American country was a recipient.

About 30 companies from Brazil, Uruguay, Chile, Colombia, Jamaica, Argentina and Costa Rica attended the November summit.

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In his remarks, the President stressed that Kenya is the gateway to African trade.

“Africa is working on a Tripartite Free Trade Area, which will see regional blocs ... integrate to form a single market. The Free Trade Area has a combined population of 600 million people and a gross domestic product of about $1 trillion [Sh100 trillion]. Kenya will be your entry route to this market,” he said.

The President went on to paint a flowery picture of the country’s economy, espousing the strengths of sectors like agriculture, manufacturing and financial services.

He also threw in the tantalising news of Kenya’s rise in the World Bank’s Ease of Doing Business index, where the country moved from position 108 in 2015 to 92 this year.

The visitors were impressed and pledged their support. The Jamaicans were first to show interest in improving trade relations.

Emerging markets

Tomae Chief Executive Delroy Howell, who was also representing the Jamaican minister for trade, was categorical about the investments he wanted to make, and Jamaica’s interest in trading with Kenya.

“Jamaica is looking for partnerships that are reliable and share the same ideologies. The US and Britain are mature markets that are being shaped by intolerant left-wing politics that we in emerging markets don’t want anything to do with. Kenya and Jamaica must up trade among themselves and keep off nations whose politics prohibit trade,” he said.

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Mr Howell’s company announced during the summit that it would be making a major announcement about a direct investment in the county’s energy sector.

Argentinian mobile service provider, PayPhone, also indicated its interest in investing in the mobile technology sector.

And as the conference rolled to an end, a major agreement was achieved between Kenya and the Latin American and Caribbean countries of an “open sky”.

Uhuru confirmed the nations had agreed to have direct two-way flights that would be the beginning of open trade. More partnerships were agreed on in the areas of ICT, manufacturing and finance.

Whether the current economic situation that has been ignited by Mr Trump and Brexit will last long remains to be seen.

But Kenya is taking no chances, and is betting on Latin American and Caribbean countries as it joins the rest of Africa in seeking new partnerships as a new global economic order sets in.

 

 

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