Kenya getting chocked by poor trade policy

According to the World Economic Forum Report of 2016, Kenya posted weak results in its trade competitiveness relative to its EAC partners.

The report measures a country’s competitiveness using 12 different parameters on 138 different countries and largely influences investor decisions on which countries to invest in and destinations of Foreign Direct Investment.

The report places Kenya at position 122 out of 138 countries in terms of having a competitive macro-economic environment for investment, way below her regional partners Tanzania, Uganda and Rwanda, and only slightly better than Burundi at 124 despite the latter’s political upheavals and instability.

The stability of the macroeconomic environment is important for business and significant for the overall competitiveness of a country. Macroeconomic disarray harms the economy.

Firms cannot operate efficiently when inflation rates are out of hand. Yet Kenya’s problems do not begin nor end at the macroeconomic environment.

This horrifying report comes against the backdrop of Kenya hosting several high-profile international trade meetings starting with the WTO Ministerial Conference in December 2015, closely trailed by the UNCTAD trade and investment meeting and more lately the TICAD meeting.

Kenya has similarly accommodated several high-profile delegations and heads of states where several bilateral trade agreements and MoUs were signed.

An impression has thus been systematically articulated that Kenya is on top of its game trade-wise, and that the whole world is scrambling for a business opportunity with Kenya.

But is that so? A cursory glance at recent developments suggests otherwise and underpins the findings in this report.

The waters are troubled. The message is loud and clear that unless Kenya makes a conscious decision to reorient its domestic trade policies in order to benefit from international trade engagements, the future is blurred.

Kenya’s neighbours are way ahead in the game, and more publicity stunts and public relation postures will not help Kenya in creating a suitable investment environment in order to compete favourably in the regional and global market.

Unsurprisingly, Kenya has lost its position as the leading Foreign Direct Investment destination in the region, which position has predictably been taken by Tanzania. Even Uganda today is more attractive to Foreign Direct Investment than Kenya.

Kenya’s trade policy alignment has of late been more populist and aimed at pleasing the populace and giving a ‘good name’ to the political leaders concerned whereas the economy is choking on the toxic fumes of poor policy placement.

The results are there for all of us to see. Less than a month ago, Sameer Africa, the only tyre manufacturing company in Kenya closed its doors, opting for offshore production in India and China.

Prior to this, Cadburys folded up and headed to South Africa, as Eveready moved northwards to Egypt. Kenya Fluorspar, Tata Chemicals, Colgate Palmolive and Reckitt Benckiser are some of the other companies that have previously found Kenya unsuitable for doing business and halted their operations here, opting for other investment-friendly countries.

The reasons advanced by these companies are nearly identical; high cost of energy, cheap imports of similar or substitute goods, corruption and restrictive domestic regulations.

And with the fate of flower farmers on the brink as a result of the stalemate of signing the Economic Partnership Agreement between EAC and the EU, Ethiopia and Tanzania are waiting with open arms and bated breath to receive the expected exodus of flower farming companies should Kenya lose its preferential access to the EU market.