Trade reforms can make Kenya a key player in the global investment market

Opinion and Analysis

Delegates follow proceedings during the Kenya International Investment Conference 2014 at the KICC in Nairobi last month. Kenya should follow up on the meeting by strengthening key investment drivers. PHOTO | FILE 

By BENARD AYIEKO

In Summary

• We must do more to market Kenya to potential investors as the preferential investment destination in the region and on the continent.

Today Kenya is ranked as a middle income country with a Gross Domestic Product in excess of $50 billion, becoming the fourth largest economy in sub-Saharan Africa behind Nigeria, South Africa and Angola. These three countries have massive natural resources.

Kenya is primed to join this league of natural resource-rich economies with recent oil and natural gas find in the north and along the Indian Ocean coastline.

Kenya is on the global map as a favourable investment destination in Africa.

The just-concluded Kenya International Investment Conference, KIICO 2014, underscores efforts the government is taking to make Kenya a global investment destination of choice.

As an investment hub for East and Central Africa, the country through Kenya Investment Authority — a statutory body charged with investment promotions —should follow up on KIICO 2014 in liaison with stakeholders by strengthening key investment drivers related to depth of capital markets, taxation, investor protection and corporate governance, human and social environment, entrepreneurial culture and business opportunities, which encompass aspects such as innovation capacity, the ease of doing business and the development of high-tech industries.

By improving key trade drivers, Kenya will attract stronger investor attention, emulating the BRIC countries (Brazil, Russia, India and China).

This will stimulate the economy to generate more employment opportunities for the youth and women, thereby helping to transform their living standards commensurate with her middle income status.

Though Nairobi sits at the apex of status as most strategic cities for investment by multinational companies eyeing the African market, Kenya’s foreign direct investment level remains low compared to its sub-Saharan counterparts.

The fact that there are investment opportunities in manufacturing, ICT, infrastructure, tourism, mining, agriculture, oil and building and construction sectors among others, is not enough.

We must do more to market Kenya to potential investors as the preferential investment destination in the region and on the continent. By doing this we shall make Kenya a darling of local, regional and global investors.

This perhaps explains why President Kenyatta, while officially opening the Kenya International Investment Conference, took more than two hours to personally respond to questions from dignitaries, distinguished entrepreneurs and participants on why Kenya is the most preferred investment recipient in Africa.

Beside investment, Kenya should focus on trade promotion. The synergy created by positive growth in trade and investment to an economy cannot be gainsaid.

The commercial section of her embassies, high commissions and consulates globally provide the best platform to strengthen bilateral trade relations with other countries, in particular emerging economies.

Kenya’s ability to import should match her ability to export, especially in areas she has comparative advantage.

Economists argue that trade is a stimulator of economic growth and development. Trade is heavily regarded as the engine of growth.

It plays a vital role in economic development and it is known to be the dais on which transfer of technology, knowledge and skills between nations is accomplished effortlessly.

Through trade, nationals are offered an opportunity to make choices on which goods and services they want to consume at competitive prices. This eliminates consumer exploitation, encourages optimal production and promotes competition in an economy.

International trade provides nearly 25 per cent of the monetary Gross National Product of developing countries. For Kenyan exports to thrive at the international markets, we should address the relative cost and price differences of our exports.

Trade costs constitute a significant percentage of the final market prices. Solving the problem of trade restrictions and barriers will improve business environment, create market access and increase competitiveness.

By building up exports, business will flourish and help in bridging trade deficits between Kenya and her trading partners. International trade will provide markets for Kenyan products, enlarge its consumption and production capabilities.

The manufacturing sector will expand and augment rewards to sectors in which Kenya enjoys comparative advantage over its trading partners.

Above all, trade will act as a source of foreign capital inflow critical for generating more employment opportunities, smoothening balance of payments while at the same time helping to tackle shocks such as inflation.

Investors and analysts are waiting in earnest to see how the proposed national investment policy will boost the appetite for investment uptake in Kenya in line with the aspirations of Vision 2030.

Only through root-and-branch trade and investment reforms shall Kenya morph into successful global players like Brazil, Singapore and Taiwan.

The writer is a trade economist and a commentator on international trade. @BenShawAyieko.