A PAPER ON TRADE POLICY MAKING PROCESS IN

A PAPER ON TRADE POLICY MAKING PROCESS IN KENYA by E. B. MANYARA SENIOR ASSISTANT DIRECTOR OF EXTERNAL TRADE OFFICE OF DEPUTY PRIME MINISTER AND MINISTRY OF TRADE TELPOSTA TOWERS NAIROBI 1

Introduction The need formulation of a National Trade Policy is founded on a notion that promoting trade is key to Kenya’s development in an environment characterized by rapid technology and progress and globalization. The intensification of competitive pressures in liberalized regimes, also make it more important to mount a trade policy. The policy recognizes the need for a coherent trade policy. Current interventions affecting trade development and competitiveness in Kenya can be found in numerous policy documents and the implementation and coordination is scattered to a number of institutions and ministries. This hinders the successful implementation of the trade policies. 2

Evolution of Trade Policy in Kenya l 3 Trade policies in Kenya have evolved through the following distinct policy orientations.

Import Substitution Policies (1960 -80’s) After independence, Kenya’s trade efforts were mainly guided by import substitution strategy. The Sessional Paper No. 10 of 1965 mainly centered on trade development and pursued enhanced protection of the domestic market to help develop industries. The Policy was a key influence on the development of trade regime in Kenya over the first decade from independence. The objectives of the Strategy were; rapid growth of trade, easing balance of payment pressure, increased domestic control of the economy and generation of employment. 4

Trade Liberalization: Structural Adjustment Policies (SAPs-1980 s) l 5 The SAPs were introduce in the early 1980 s to address the Structural rigidities price instability and macro-economic imbalances that had become embedded in the economy and led to poor delivery of services by the public sector. The main thrust of the adjustment programme was to effect a shift from a highly protected domestic market to a more competitive environment that would facilitate increased use of local resources, outward oriented policies that would promote employment creation and export expansion. The implementation of the SAPs involved, among others, promotion of non-traditional exports, liberalization of market systems and reform of international trade regulations.

Export Oriented Policies – 1990 s These policies were embodied in the Sixth Development Plan (1989 -1993) which provided a policy framework for adoption of export promotion strategy centered on creation of an enabling environment for export growth. This was to be achieved through institutional reform, reduction and restructuring of tariffs, abolition of export duties, introduction of export retention schemes, improvement of foreign exchange and insurance regulations and the establishment of the National Export Credit Guarantee Coorporation. This strategy proposed incentives that aimed at encouraging industries to provide for exports. The main objectives of export led industrial reform programmes were to improve efficiency, stimulate private investment and increase the sector’s foreign exchange earnings. 6

Vision 2030 and National Trade Policy (from 2004 to-date) Vision 2030 is geared towards making Kenya a globally competitive and prosperous nation with high quality of life. A National Trade Policy is a key compliment of the Vision and is intended “to transform the economy from a supply constrained outfit responsive to enhanced domestic integration and wider participation in the global economy for national and international trade expansion”. The trade policy is intended to fast-track the realization of Vision 2030 objectives through: - 7

Vision 2030 and National Trade Policy (from 2004 to-date) – – – 8 Promotion of decent, protected and recognized informal trade; Establishment of vibrant business supported by well established and functioning infrastructure and social amenities. Expansion of Kenyan exports and thereby generate jobs and prosperity for the people of Kenya. Transformation of Kenya into a regional service hub; and Enhancement of opportunities and increase the digital opportunity index from access (0. 17) to medium access (0. 5).

Trade Policy Making in Kenya and Main responsibility l 9 The Office of the Deputy Prime Minister and Ministry of Trade takes the lead role in trade policy making process in the country. For instance, the National Export Strategy (NES) and the Private Sector Development Strategy (PSDS 0, the two trade policy documents demanded by “Economic Recovery Strategy for Wealth and Employment Creation (ERS) were accordingly formulated in the Office of the Deputy Prime Minister and Ministry of Trade. The two documents identifies strategic sectors and set out a road map that would help the country build a strong and thriving private sector in Kenya.

Various Stages of Trade Policy making Process Kenya is in the process of finalizing its trade policy document. It adopted a model that European and Asian countries follow in formulating their trade policies which has 11 stages as outlined hereunder: l. Current status l. Problems/challenges identification l. Benchmarking with aspirational countries (newly industrialized countries) l. Area of focus and required interventions l. Overall country vision l. Goal to solve the problem within a time frame l. Specific objectives to achieve the goal within a timeframe 10

Trade Policy Making in Kenya and Main responsibility l l 11 Strategies and targets for each objective Flagship projects for quick wins Institutional implementation framework; and Expected impact

Main Elements of Trade Policy Making Process l l l 12 The trade policy making process focuses on six key elements and the same are presented as follows: Informal trade – to mainstream the sector within the overall economy Retail trade – to ensure that it is well supported by well established and functioning infrastructure and special amenities Distribution and wholesale trade – to address the challenges arising from existence of inefficient supply chains across most sub-sectors and product categories International trade – to negotiate for policy space and better trade terms to enable the country reap the benefits of emerging market access opportunities

Main Elements of Trade Policy Making Process l E-Commerce – to ensure that it is adequately developed and mainstreamed in the whole economy; and l Trade in services – to support and develop the sector and ensure that it maximumly contribute to the growth of the economy All the six elements are intended to contribute towards the realization of the objective of the Economic pillar of vision 2030. . ” to maintain a sustained economic growth of 10% per annum over the next 25 years”. 13

Government Ministries involved in Trade Policy Making Office of the Deputy Prime Minister and Ministry of Trade works very closely with Ministries of Industrialization, Economic Planning and National Development as well as KIPPRA in trade policy making process. 14

Means for Eliciting inputs from Stakeholders The team that is currently formulating the trade policy engage stakeholders both in formal and informal consultations. The consultations have been extended to the provinces targeting provincial administration, agriculture, trade and industrial development officers, local authorities and informal and formal trade organizations. 15

Trade Policy Announcement The Private Sector Development Strategy (PSDS) after obtaining Cabinet approval and launched by former Vice President, Hon. Moody Awori, is the latest trade policy announcement from the Government. This is the first Private Sector Development Policy to be developed by the Government of Kenya. It outlines specific policies and strategies that need to be pursued in order to enhance private sector growth and competitiveness in the country. This is being pursued under five goals as indicated hereunder: - 16

Trade Policy Announcement Goal 1: Improving Kenya’s business environment; Goal 2: Accelerating institutional transformation within the public sector; Goal 3: Facilitating growth through greater expansion of trade; Goal 4: Improving the productivity of enterprises; and Goal 5: Supporting entrepreneurship and indigenous enterprise development. The formulation of the draft trade policy document which is about to be finalized is being supported and funded Goal 3. 17

Conclusion l 18 Since independence Kenya has never had a clear and well structured trade policy document. The trade policies as contained in various government documents makes it cumbersome to interpret them and also difficult to be understood by the outside world. This in turn has had an adverse effect on investment. Every effort has now been made and the first trade policy document is expected to be rolled out by early next year.