How Kenya can achieve sustained export expansion
By Soko Directory Team / Published October 4, 2017 | 5:47 am
As a nation, we need to deliberately create an export push for local goods to increase chances of achieving economic goals in Vision 2030 development blueprint.
A growth in export value will not only increase revenue through foreign exchange earnings but will also have a socio-developmental impact by catalysing the creation of productive jobs, thereby absorbing the large numbers of unemployed youth.
In other words, exports ensure a healthy circular flow of income, stimulating an increase in the production of local goods and expansion of industries, consequently opening up opportunities for employment.
Raising the national income also translates to increased public funds that would enable the government to adequately provide and maintain the equal distribution of public goods and basic amenities for citizens, ultimately increasing their quality of life.
Export growth is not just beneficial for economic growth, it supports social and political development.
The unveiling of the National Trade Policy this year re-sparked enthusiasm in industry, as it sought to enhance export competitiveness through investment in value-add industries thereby expanding regional and global markets.
In fact, the new policy places emphasis on turning Kenya into an export-led economy, in an effort to support inclusive development. While, this vision is indeed laudable the tangibility of it is still out of reach owing to various challenges faced, locally and regionally.
Despite the immense opportunities that lie in the region, Kenya’s total export earnings from the EAC registered a four percent decline to KSh121.7 billion last year.
More and more, the incentives to export for local industrialists are dwindling as new hurdles crop up and long-standing ones persist, bearing huge costs on businesses.
A prime example is the complexities experienced in taxation policies and development of new regulations.
The Import Declaration Fee and Railway Development Levy are some of the taxes imposed on raw materials and inputs, leading to increased commodity pricing and thereby reduced competitiveness of products regionally.
This compromises current share of export markets especially in the face of increasing exports from China and India.
Additionally, continued delays in VAT reimbursement slow down operations and destabilise planning for many exporters. Late VAT refunds shift the tax burden from consumption into production.
Outstanding VAT refunds remains a big pain for manufacturers who look forward to the expeditious payment of refunds. As a last resort, manufacturers are forced to get into debt to keep operations afloat, thereby incurring huge losses.
Taxation should be formulated with the aim of enabling local industry to operate at full capacity, incentivising investors and bringing on board more businesses into the tax bracket.
However, tax policies such as the above deter progress towards sustained export competitiveness and in doing so making economic goals as in Vision 2030 that much harder to realise.
We have been talking about ways in which we can leverage counties for our nation’s economic prosperity and intercounty trade plays a huge role in this.
If we abolish current multiple levies and charges that bar us from trading with each other within our borders, we shall diversify and expand goods for exports and grow export market share within the region and globally.
Taxation that is designed to optimise the growth of the local industry will open up intercounty trade, spurring the proliferation of small and medium industries. Development in counties will ensure equitable distribution of resources and inclusivity.
Kenya needs to develop a National Export Development Strategy, which aligns to existing frameworks such as the KITP and also links to the newly-launched Trade policy.
This strategy will seek to promote value addition, especially in agro-processing, powering more exports and eventually reducing trade balance.
Export strategy should be based on the ‘promotion of self-sustaining industrial development’ meaning we ought to find sustainable ways to grow export value through leveraging various competitive advantages, especially with devolution.
Policies should be first and foremost inward-looking to promote local products and create jobs.
Essentially, we need to reset policy ideas to deliver positive achievable results to increase export value both regionally and globally.
The writer is the Kenya Association of Manufacturers Chief Executive
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