Kenya’s manufacturers on Friday decried huge volumes of goods entering the country from East African countries, originating from schemes as export processing zones (EPZs), industrial parks and special economic zones among others.
Kenya Association of Manufacturers (KAM) CEO Phyllis Wakiaga called on the government to establish alternative schemes to EPZs in order to make products from Kenya become more competitive.
“We need to have a global perspective by all stakeholders in terms of what is good for the country and move in that direction,” Wakiaga told a forum in Nairobi.
The forum was organized by KAM to disseminate information to industry on Special Economic Zones (SEZ) Bill, the Draft East Africa Community (EAC) Special Economic Zones Regulations as well as to receive wider views from the industrial sector and other stakeholders on Kenya’s position to increase the percentage thresholds of EPZ goods sold in Kenya from the current 20 percent to 49 percent.
Currently, EPZs are allowing up to 20 percent market access in line with EAC protocol. This is subject to application of all taxes and permit to a competent authority.
However, since the enactment of the EAC Common Market Protocol that brought a new definition of the word “domestic” to include other EAC partner states, the volumes of goods sold by Kenyan EPZ firms to EAC countries has drastically declined.
A SEZ is a designated geographical area where liberal economic policies, integrated land use and infrastructure shall be provided. A SEZ has economic and other laws that are free-market-oriented.
The East African nation has set aside 3,400 square kilometers of land to be used for development of SEZs. The land will be in three regions: the lake side city of Kisumu and coastal regions of Lamu and Mombasa.
The SEZ program is a flagship project in the national development blueprint, Vision 2030, to transform Kenya into a middle income economy by 2030.
The objective of SEZs is to contribute towards the transformation of the country’s economic base to realize higher sustained growth, employment creation and poverty reduction.
In April 2014, Kenya submitted her proposal to the EAC Sectoral Committee on Trade to increase the percentage threshold for goods coming from EPZ from the current 20 percent to 49 percent.
This was informed by the fact that other EAC Partner States are operating investment programs similar to EPZs, classified as SEZs or Special programs, which have no significant distinction on incentives offered under EPZs.
However, because such schemes are not classified as EPZ schemes, exports under such schemes from other Partner States access the Kenyan market do not have a 20 percent market access restriction, and such goods are accorded preferential tariff treatment by Kenya Revenue Authority so long as they have EAC certificate of origin.
The impact of this is that Kenya’s products are being replaced slowly in the local market by other Partner States products, and at the same time Kenya is also losing her share in the EAC market due to the restriction. Enditem