Expert comment: Bridging Kenya's trade deficit
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The currently ongoing Kenya Trade Week and Exposition places this weekâs focus squarely on matters trade. Themed âPowering Kenyaâs Big 4 Agenda through Tradeâ, the main topic on debate is measures that Kenya can undertake in order to reduce her trade deficit. Per the Kenya Bureau of Statistics, Kenyaâs trade deficit in the 2016/2017 financial year stood at Sh1.1 trillon, or approximately $11.3 billion. Granulated, this arises from exports of Sh594 billion as against imports of Sh1.7 trillion.
In cognisance of the increasing trade deficit, GoK has formulated the National Export Development Promotion Strategy (NEDPS) that seeks to introduce measures that incentivise Kenyan exports. This, as noted in NEDPS, will focus on, inter alia, establishing market access opportunities and promoting competitiveness of Kenyan products. As marketed by GoK, NEDPS target is increasing export contribution to Kenyaâs GDP to 25% by 2022. Currently, exports contribute approximately 8% to GDP. To achieve this, Kenya plans to boost exports in key sectors, being manufacturing, agriculture, trade in services and oil and gas, among others.
Indeed, GoKâs target is ambitious. However, as ambitious as this may seem, GoK has proactively placed its focus on matters trade, with a view to establishing a trade conducive environment. On the one hand, for instance, in an attempt to boost Kenyaâs export market, the Special Economic Zones (SEZ) Act 2015, effective 15 December 2015, seeks to ensure that export processing zones have a tangible impact on the Kenyan economy. Through the SEZ regime, Kenya provides incentives to potential investors on a wide array of areas, including ease of setting up, investment and investor protection, simplified tax regime, and favourable labour regulations.
However, the above notwithstanding, bridging the trade deficit requires focus on our imports as well as our exports. Rather, a two pronged attack is needed. From an economic standpoint, this refers to implementing both import substitution development strategies, as well as well as export promotion strategies.
On the import side, it is necessary that domestic industries are incentivised to ensure that rather than import, local production is supported. This may require using trad e tariffs, import quotas as well as subsidies to promote and protect local industries. However, this carries with it a risk. An adequate balance must be reached whereby in the interest of protecting local industries, Kenya is cognizant that protectionism policies may affect local industries abilities to compete in international markets.
Similarly, on the export side, export promotion strategies involve policy measures that include export subsidies, tax concessions targeted at incentivising exports, and quality control. On this front, marketing plays a key role, through which Kenya can position herself as a source of high quality and authentic products.
All factors considered, follow-through is required. By growing local value add capacity, and at the same time marketing Kenyaâs products globally, the trade deficit may indeed be bridged.Poll of the day Most Popular 1 Uhuru meets Joho thrice during Coast visit, they discuss legacy 2 New rules bar Police from doing business 3 Uhuru-Joho secret meetings, Avocado ban lifted, Sonko on the spot: Your Breakfast Briefing 4 Son of ex-Woman Rep to be jailed for raping minor in US 5 Waluke held at Milimani basement cells 6 Soldiers patrol Zimbabwe capital after election violence 7 How government abandoned ambitious police housing project 8 KWS on the verge of collapse, audit firm PwC says in new report 9 Corridors of Power 10 Halting 2022 politics was part of unity deal â" Raila Must read How government abandoned ambitious police housing project New rules bar Police from doing business Uhuru-Joho secret meetings, Avocado ban lifted, Sonko on the spot: Your Breakfast Briefing Kibera evictions another case of elite trampling on poor's rights Refugees in Kakuma to get permanent shelter s Uhuru meets Joho thrice during Coast visit, they discuss legacy Latest News Waluke denies Sh297m fraud charge in NCPB maize contract 'Disappointed' Kenya to petition CAA, IAAF over athletes' troubles in Lagos Soldiers patrol Zimbabwe capital after election violence Uhuru-Joho secret meetings, Avocado ban lifted, Sonko on the spot: Your Breakfast Briefing Suspected OLF rebel charged with having gun, illegal stay Uhuru, Sudan minister discuss South Sudan peace process Popular in classifieds POPULAR SEARCHES IN THE STAR CLASSIFIEDS
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