Kenya warned on pitfalls of Free Trade Zones

Imported vehicles at the Mombasa port. Mombasa is set to get a free trade zone for motor vehicles. [File, Standard]
Free Trade Zones (FTZs) can lead to the growth of illicit trade, fraud and money laundering if not well monitored, experts have warned.

According to the International Trademark Association (INTA), a global association of brand owners and professionals dedicated to supporting trademarks and related intellectual property, FTZs have also emerged as a conduit for counterfeit goods.

Speaking during the Trade Week 2018 in Nairobi, last week, Hazel Okoth, an advocate and member of INTA, said Kenya needed to place measures that would ensure such malpractices do not occur.

“Moreover, limited institutional capacities to oversee FTZs activities in many countries has led to the growth of illicit trade and other forms of criminality such as fraud and money laundering,” said Ms Okoth, noting that customs authorities needed to be empowered to closely check what was going into the FTZ.

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Under consideration

An FTZ is one of the special economic zones (SEZs) which Kenya intends to use to power into a high middle-income economy by 2030.

In an FTZ, goods may be, upon arrival, stored, handled, manufactured, or reconfigured and re-exported under relaxed customs regulations without being subjected to customs duty. Such areas are usually found around a country's major seaports and international airports. A good example is the famed Dubai free port. 

There are reports that Mombasa could get a free trade zone for motor vehicles before the end of this year.

“In addition, under the Dongo Kundu Special Economic Zone, a free port is under consideration on an approximately 3,200-acre parcel of land to the West of the port of Mombasa,” said Treasury Cabinet Secretary Henry Rotich in the 2018 Budget Policy Statement.

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Major theme

This would be a big boost to the ongoing development initiatives in which the Government is keen on completing Phase I of the second container terminal at the port of Mombasa to enhance cargo handling and storage and reduce the time to clear cargo.

Illicit trade was a major theme in this year’s trade week. Having cast its eyes on growing manufacturing from the current 10 per cent of gross domestic product (GDP) to 15 per cent by 2022, as part of his Big Four agenda, President Uhuru Kenyatta has since established a multi-agency team, whose function is to fight illicit trade.

“Since May 11, a crackdown on illicit trade has led to the seizure of goods worth Sh7.5 billion,” said deputy to the Head of Public Service Wanyama Musiambo. The goods seized cut across different manufacturing sectors.

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importsfree trade zonesfree portMombasa portInternational Trademark Association