[Column] Phyllis Wakiaga: How Kenya can achieve sustained export expansion
In order to achieve our economic goals as envisioned in the 2030 development blue-print, we need to be deliberate in creating an export push for our local goods.
A growth in our export value will not only increase revenue to our country through foreign exchange earnings, but will also have a socio-developmental impact by catalyzing 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 all citizens, ultimately increasing their quality of life.
Export growth is not just beneficial for economic growth, it the supports social and political development of a country.
The unveiling of the National Trade Policy mid this year re-sparked enthusiasm in industry, as it sort to enhance export competitiveness through investment in value-add industries thereby expanding our 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. Whilst this vision is indeed laudable, the tangibility of it is still out of reach owing to various challenges faced currently both locally and regionally.
At the moment, despite the immense opportunities that lie in the region, Kenya’s total export earnings from the EAC registered a 4 per cent decline to Kshs 121.7 Billion in 2016.
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 their businesses.
A prime example being 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 material and inputs, leading to increased commodity pricing and thereby reduced competitiveness of our products regionally. This compromises our 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 destabilize planning for many exporters in the country. Late VAT refunds shift the Tax burden from consumption into production. The issue of outstanding VAT refunds still remains a big pain for manufacturers who look forward to the expeditious payment of the refunds. As a last resort, manufacturers are forced to get into debt to keep operations afloat and thereby incurring huge losses.
Taxation in any country should be formulated with the aim of, enabling local industry to operate at full capacity, incentivizing investors and bringing on board more businesses into the tax bracket.
However, tax policies such as the above deter any progress towards sustained export competitiveness and in doing so making our economic goals as in vision 2030 that much harder to realize.
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 the current multiple levies and charges that bar us from trading with each other within our own borders, we shall be able to diversify and expand our goods for exports and thereby grow our export market share within the region and globally.
Taxation that is designed to optimize the growth of local industry will open up inter-county trade spurring the proliferation of Small and medium industries across the country. Development in counties will ensure equitable distribution of resources and inclusivity.
In conclusion, 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 our country’s trade balance.
Our export strategy should be based on the ‘promotion of self-sustaining industrial development’ meaning that we ought to find sustainable ways to grow our export value through leveraging our various competitive advantages, especially with devolution. Our policies should be first and foremost inward looking to promote our local products and create jobs for our citizens.
Essentially, we need to reset our policy ideas to deliver positive achievable results to increase our export value both regionally and globally.
Phyllis Wakiaga is the CEO of Kenya Association of Manufacturers and the UN Global Compact Network Representative for Kenya.