Kina Trade Policy

REPUBLIC OF KENYA
MINISTRY OF TRADE
NATIONAL TRADE
POLICY
EFFICIENT GLOBALLY
COMPETITIVE ECONOMY
NOVEMBER 2008
APRIL 2009
TABLE OF CONTENTS ................................................................
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PAGE
LIST OF ACRONYMS................................................................
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................................................................ 4
EXECUTIVE SUMMARY ................................................................
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............................................................................................
............................................................ 6
CHAPTER 1: BACKGROUND ................................................................
................................................................................................
............................................................................
............................................ 10
1.1 INTRODUCTION
NTRODUCTION ................................................................................................................................... 10
1.2 ROLE OF TRADE IN THE ECONOMY ....................................................................................................... 10
1.3 CURRENT TRADE POLICY DISPENSATION ............................................................................................... 12
1.4 NEED FOR A COHERENT TRADE POLICY ................................................................................................ 13
1.5 FORMULATION OF AN INTEGRATED TRADE POLICY .................................................................................. 13
1.6 NATIONAL TRADE POLICY VISION, MISSION AND OBJECTIVES .................................................................. 13
CHAPTER 2: POLICY ON INTERNATIONAL
INTERNATIONAL TRADE ................................................................
...........................................................................
........................................... 15
2.1 INTRODUCTION ................................................................................................................................... 16
2.2 CURRENT INTERNATIONAL TRADE POLICY REGIME .................................................................................. 16
2.3 IMPORT POLICIES, PROCEDURES AND INSTITUTIONS ............................................................................... 18
2.4 EXPORT POLICIES AND MEASURES AFFECTING EXPORTS ......................................................................... 22
CHAPTER 3: STRATEGIES AND PROGRAMMES
PROGRAMMES FOR PROMOTION OF ...........................................
........................................... 25
INTERNATIONAL TRADE ................................................................
................................................................................................
.......................................................................................
....................................................... 25
3.1INTRODUCTION .................................................................................................................................... 25
3.2MARKET ACCESS ................................................................................................................................. 25
3.3TRADE FACILITATION ............................................................................................................................ 29
3.4INSTITUTIONAL CAPACITY AND COORDINATION MECHANISMS .................................................................... 31
3.5SUPPLY CAPACITY ................................................................................................................................ 34
3.6INFORMATION FLOW ............................................................................................................................ 35
CHAPTER 4: COMPLEMENTARY SUPPORT
SUPPORT POLICIES AND MEASURES ..........................................
.......................................... 37
4.1 INTRODUCTION ................................................................................................................................... 37
4.2 TRADE FACILITATION MEASURES .......................................................................................................... 37
4.3 INFRASTRUCTURE NEEDS AND DEVELOPMENT ....................................................................................... 37
4.4 HUMAN CAPITAL DEVELOPMENT ........................................................................................................... 38
4.5 TRADE FINANCE SUPPORT MEASURES .................................................................................................. 38
4.6 SUPPORTING THE COMPETITIVENESS OF BUSINESS SERVICES ................................................................. 39
4.7 TELECOMMUNICATIONS AND WEB ACCESS ............................................................................................ 39
CHAPTER 5: DISTRIBUTION
DISTRIBUTION AND WHOLESALE TRADE
TRADE ................................................................
........................................................................
........................................ 42
5.1 INTRODUCTION ................................................................................................................................... 42
5.2 CURRENT POLICY REGIME .................................................................................................................... 43
5.3 CONSTRAINTS AND CHALLENGES .......................................................................................................... 43
5.4 SECTOR STRATEGY AND GOALS ............................................................................................................ 45
5.5 POLICY PROGRAMME AND PROJECTS .................................................................................................... 47
5.6 OVERALL POLICY FOR THE SUB-SECTOR ................................................................................................. 47
5.7 IMPLEMENTATION, MONITORING AND INSTITUTIONAL RESPONSIBILITIES ................................................... 47
CHAPTER 6: RETAIL
RETAIL TRADE................................................................
................................................................................................
.............................................................................
............................................. 49
6.1 INTRODUCTION ................................................................................................................................... 49
6.2 CURRENT POLICY REGIME ................................................................................................................... 49
2
6.4 SECTOR STRATEGY AND GOALS ............................................................................................................ 51
6.5 POLICY PROGRAMMES AND PROJECTS .................................................................................................. 52
6.6 OVERALL POLICY FOR THE SUB SECTOR ................................................................................................. 53
6.7 IMPLEMENTATION MONITORING AND INSTITUTIONAL RESPONSIBILITIES .................................................... 53
CHAPTER 7: INFORMAL TRADE................................................................
................................................................................................
.......................................................................
....................................... 54
7.1 INTRODUCTION ................................................................................................................................... 54
7.2 CURRENT POLICY REGIME ................................................................................................................... 54
7.4 SUB SECTOR STRATEGY AND GOALS ..................................................................................................... 56
7.5 POLICY PROGRAMME AND PROJECTS .................................................................................................... 57
7.6 OVERALL POLICY FOR THE SUB-SECTOR................................................................................................. 58
CHAPTER 8: TRADE RELATED ISSUES ................................................................
............................................................................................
............................................................ 60
8.1 INTRODUCTION ................................................................................................................................... 60
8.2 CONSUMER PROTECTION ..................................................................................................................... 60
8.3 COMPETITION ..................................................................................................................................... 61
8.4 FAIR TRADE........................................................................................................................................ 62
8.5 INVESTMENT ISSUES ........................................................................................................................... 63
8.6 INTELLECTUAL PROPERTY RIGHTS ......................................................................................................... 63
8.7 TRADE AND ENVIRONMENT .................................................................................................................. 64
8.8 TRADE AND GENDER ........................................................................................................................... 65
8.9 TRADE AND LABOUR STANDARDS ......................................................................................................... 66
8.10 DEMOCRATIZATION AND TRADE PROMOTION........................................................................................ 67
8.11 DISPUTE SETTLEMENT MECHANISMS ................................................................................................. 67
CHAPTER 9: E-COMMERCE ................................................................
................................................................................................
.............................................................................
............................................. 69
9.1 INTRODUCTION .................................................................................................................................. 69
9.2 CURRENT POLICY REGIME................................................................................................................... 69
9.3 CONSTRAINTS AND CHALLENGES ......................................................................................................... 70
9.4 SUB-SECTOR STRATEGIES AND GOALS ................................................................................................. 71
9.5 PROGRAMMES.................................................................................................................................... 72
9.6 OVERALL POLICY FOR THE SUB-SECTOR................................................................................................. 72
CHAPTER 10: INTEGRATION PLANS ................................................................
................................................................................................
.................................................................
................................. 73
10.1 INTEGRATING INTERNATIONAL AND DOMESTIC TRADE POLICIES ............................................................. 73
10.2 LINKAGES BETWEEN INTERNATIONAL AND DOMESTIC TRADE POLICIES ................................................... 73
10.3 RELATIONSHIP TO INDUSTRIAL, AGRICULTURAL, SERVICES AND DEVELOPMENT STRATEGIES ..................... 74
10.4 PRIORITIZATION AND SEQUENCING OF ISSUES...................................................................................... 76
10.5 NATIONAL TRADE POLICY MONITORING AND EVALUATION ..................................................................... 77
10.6 OVERALL INSTITUTIONAL STRUCTURES AND RESPONSIBILITIES .............................................................. 78
10.79 INSTITUTIONAL ARRANGEMENTS ...................................................................................................... 79
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LIST OF ACRONYMS
ACP-EU - African, Caribbean, Pacific, and European Union
AEC - African Economic Commission
AEO - Authorized Economic Operators
AGOA - African Growth and Opportunity Act
ATIA - African Trade Insurance Agency
BOO - Built Operate and Own
BOT - Built Operate and Transfer
BPO - Business Process Outsourcing
CBIK - Centre for Business Information in Kenya
CCK - Communication Commission of Kenya
CET - Common External Tariff
CITES - Convention of International Trade in Endangered Species
COMESA - Common Market for Eastern and Southern Africa
COTU - Central Organization of Trade Unions
DDA - Doha Development Agenda
DFI - Development Finance Institutions
EAC - East African Community
EPC - Export Promotion Council
EPZ - Export Processing Zone
ERS - Economic Recovery Strategy for Wealth and Employment Creation
EU - European Union
FDI - Foreign Direct Investment
FKE - Federation of Kenya Employers
GATT - General Agreement on Tariffs and Trade
GDP - Gross Domestic Product
GJLOS - Governance Justice Law and Order Sector
ICSID - Center for Settlement of Investment Disputes
ICT - Information and Communication Technology
IGAD - Inter-Governmental Authority on Development
IOR-ARC - Indian Ocean Rim-Association for Regional Cooperation
IPR - Intellectual Property Right
ISI - Import Substitution Industrialization
IT - Information Technology
ITES - Information Technology Enabled Services
KAM - Kenya Association of Manufacturers
KEBS - Kenya Bureau of Standards
KEPSA - Kenya Private Sector Alliance
KNCC & I - Kenya National Chamber of Commerce and Industry
KNTC - Kenya National Trade Cooperation
KPA - Kenya Ports Authority
KRA - Kenya Revenue Authority
KUSCO - Kenya Union of Savings and Credit Organizations
MFN - Most favoured Nation
MDGs - Millennium Development Goals
MIGA - Multilateral Investment Guarantee Agency
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MoA - Ministry of Agriculture
MoCMD - Ministry of Cooperative and Marketing Development
MoE - Ministry of Education
MoEAC - Ministry of East Africa Community
MoF - Ministry of Finance
MoFD - Ministry of Fisheries Development
MoH - Ministry of Health
MoIC - Ministry of Information and Communications
MoLFD - Ministry of Livestock
MoLG - Ministry of Local Government
MORPW - Ministry of Roads and Public Works
MoT - Ministry of Transport
MoTW - Ministry of Tourism and Wildlife
MoYA - Ministry of Youth Affairs and Gender
MPND - Ministry of Planning and National Development
MSEA-K - Micro, and Small Enterprise Association of Kenya
MSMEs - Micro, Small and Medium Enterprises
MUB - Manufacture under Bond
NAFTA - North Atlantic Free Trade Area
NCPB - National Cereals and Produce Board
NEMA - National Environmental Management Authority
NESC - National Economic and Social Council
NTB - Non-Tariff Barriers
ODPM & MoT - Office of the Deputy Prime Minister and Ministry of Trade
PBGs - Producer Business Groups
PPPs - Public Private Partnership
R&D - Research and Development
RECs - Regional Economic Corporations
RoO - Rules of Origin
RTA - Regional Trade Arrangements
SACCOs - Savings and Credit Cooperative Organizations
SADC - South African Development Community
SAPs - Structural Adjustment Programmes
SLO - State Law Office
SMEs - Small and Medium Enterprises
TREO - The Trade Remission Exports Office
UNCTAD - United Nations Conference on Trade and Development
USA - United States of America
VAT - Value Added Tax
WCO - World Customs Organization
WIPO - World Intellectual Property Organization
WTO - World Trade Organization
5
EXECUTIVE SUMMARY
Kenya’s trade policy development has evolved through the following distinct policy
orientations: import Substitution Policies (1960s -80s); Trade Liberalization through
Structural Adjustment Policies (SAPs) (1980s); Export Oriented Policies 1990s.
Presently Kenya’s Trade regime is guided by market-driven principles of liberalization under

the World Trade Organization (WTO), which came into effect in 1995 and the increased
efforts in the regional economic integration that has resulted in the establishment of the
East African Community (EAC), Common Market for Eastern and Southern Africa COMESA)
and the Inter-governmental Authority on Development (IGAD).
Progressive liberalization in Kenya has significantly reduced tariff levels, eliminated price
controls and licensing requirements leading to modest growth in export markets. However,
despite the open trade policy pursued, Kenya’s trade structure, remains concentrated in
primary products and traditional markets due to limited capacity for value addition in the
manufacturing sector and the relatively underdeveloped intermediate and capital goods
industries.
The deepening and expansion of regional integration and bilateral trade agreements have
widened the scope of trade opportunities for the Kenyan businesses. Kenya therefore, has
the potential to become a more competitive player in the region and global economy if
factors affecting competitiveness are addressed.
The essence of the Trade policy on international trade, therefore, is to lay strategies to
enhance export growth through value addition in export oriented manufactures and in the
services sector as well as pursuing diversification to fully exploit the export opportunities in
the emerging markets.
Trade plays a significant role in the country’s growth and development through its linkages
with all the sectors of the economy by creating markets through which goods and services
get to the consumer. Trade also plays a critical role in poverty reduction through
employment creation in informal, retail, and wholesale trade and provides MSMEs with
opportunities of accessing more favorable prices in international markets thereby ensuring
equitable income distribution.
The current Trade Policy instruments are contained in various policy documents and
legislations and are administered by various institutions. In the process of implementation,
these trade policy instruments have faced problems of effective coordination and
harmonious decision-making leading to conflicting rules, regulations and practices affecting
trade.
The National Trade Policy takes cognizance of the existing policies and the need to develop
a coherent trade policy, with a view to creating a policy environment that facilitates the
development of private sector. It highlights constraints and challenges in international and
6
domestic trade within the context of existing trade policies, identifies strategies and
programmes to sustain the economy within the tenets of Vision 2030.
The National Trade Policy Vision is for “Kenya to become an efficient domestic market and
export led globally competitive economy” while the Mission is “to facilitate Kenya’s
transformation into a competitive export led economy, enhance regional integration and
widen participation in both domestic and international trade’.
The Trade Policy mission will be achieved through the following broad objectives:
(i) Promotion and expansion of Kenya’s exports of goods and services; and
(ii) Development of an efficient and competitive domestic market.
The policy recognizes international trade as a strategic priority in realizing the objectives of
raising business productivity; encouraging increased international trade and investment;
stimulating and supporting MSMEs to participate more in international trade; enhancing the
competitiveness in both the export and domestic markets; addressing market distortions;
encouraging value additions and diversification; and improving market access. It has equally
identified various programmes for implementation in order to address the constraints and
challenges affecting the country’s development of international trade.
Some of the main constraints and challenges in international trade: include limited capacity
for diversification and low value addition in production, increased use of non-tariff barriers
in export markets; lack of competitiveness due to inefficient trade facilitation infrastructure,
limited availability of affordable trade finance, limited negotiation capacity and
uncoordinated negotiation process; preference erosion, among others.
The domestic trade policy aims at improving business environment and elaborates the
government role and that of the private sector in trade and investment promotion. The policy
further recognizes and encourages public-private partnership in implementing various
programmes and activities. The distinct domestic trade elements covered in the policy
include: Distribution and Wholesale Trade; Retail Trade and Informal Trade. Some of the key
challenges include un-conducive licensing and regulatory framework; high transportation
costs; inadequate logistics and ICT capacities and skills; access to affordable credit;
inadequate business management skills; weak supply chains; and poorly serviced business
premises, among others.
In addition to international and domestic trade policies there are a range of other trade-
related policy issues that arise in the implementation of core programmes. These include
consumer protection; competition; fair trade; investment issues; intellectual property rights;
trade and environment; trade and gender; trade and labour standards; democratization and
trade promotion; and dispute settlement mechanisms.
The policy covers e-commerce which is prioritized in the Kenya’s Vision 2030 which seeks to
mainstream e-Trade within the overall economy. In order for this to be achieved, the
government will focus on infrastructure development; market improvement; skills and
technology upgrading; improved financial transactions; and improved Public Private
Partnerships for the sub-sector.
7
In order to have a coherent and integrated national trade policy, the linkage and synergy of
both domestic and international trade policy are important. In order to achieve its objectives
the National Trade Policy prioritizes and sequences issues to be addressed as follows: policy
and regulatory framework; infrastructure development; institutional strengthening; market
development; and trade finance support..
The policy is presented in three sections comprising ten chapters. Section A gives
background of the policy and comprises chapter one which gives the introduction. Section B
on international trade comprises chapter two, three and four which highlight international
trade policy regime, international trade strategies and objectives, international trade policy
programmes, and complementary support policies and measures respectively. Section C on
Domestic Trade policies comprises chapter five, six, seven, which focus on distribution and
wholesale trade, retail trade, and informal trade respectively. Section C covers trade related
issues, e-commerce and integration plans in chapters eight, nine and ten respectively.
8
SECTION A:
OVERVIEW
9
CHAPTER 1: BACKGROUND
1.1 Introduction
Kenya’s trade policy development can be traced back to the Sessional Paper No. 10 of
1965 on African Socialism and its Application to Planning in Kenya. The Paper centred on
ensuring rapid economic development and social progress for all Kenyan’s. It placed
emphasis on promotion and protection of the domestic industries. The policy was a key
influence on the development of the country’s trade regime over the first decade of
independence.
The second major phase in the evolution of the trade policy in Kenya was through the
Structural Adjustment Programmes (SAPs) introduced in the mid 1980’s by Sessional Paper
No.1 of 1986 on Economic Management for Renewed Growth. It emphasized a change from
reliance on import substitution and protectionism towards a policy that led to industries
being encouraged to manufacture for export with reform programmes aimed at improving
efficiency, stimulating private investment and increasing the sector’s foreign exchange
earnings. It also meant economic liberalization bringing to an end the central role of the
public sector institutions which had hitherto managed and coordinated trade distribution
networks and related trade facilitation and promotion activities.
Presently Kenya’s Trade regime is guided by market-driven principles of liberalization under

the World Trade Organization (WTO), which came into effect in 1995. The liberalization
phase has led to lowering of tariffs and reduction of non-tariff barriers in Kenya’s export
markets thereby improving market access to Kenya’s products. The phase also coincided
with increased efforts in the regional economic integration initiatives that resulted in the
establishment of the East African Community (EAC), Common Market for Eastern and
Southern Africa COMESA) and the Inter-governmental Authority on Development (IGAD).
In addition to the global and regional trade initiatives, the trade sector in Kenya is further
influenced by commodity Acts and regulations contained in other various Acts under the
administration of several ministries and public institutions.
This Trade Policy is also guided by international best practices of trade policy formulation
and the dynamics in global business trends. The policy will seek to maximize on the
emerging trends such as rise in south-south trade, global production networks, growing
trade in services and wider use of e-commerce.
The policy further places emphasis on the need to enhance a conducive investment climate,
mainstream Micro, Small and Medium Enterprises (MSMEs) in the global trade in view of
their critical role in job creation, poverty reduction and furtherance of export diversification
and economic development.
1.2 Role of Trade in the Economy

Trade plays a significant role in the country’s growth and development through its linkages
with all the sectors of the economy. Trade supports agriculture, manufacturing and service
10
industries by creating markets through which goods and services get to the consumer and
therefore provides the channel through which effects of economic growth are transmitted to
various players in the economy. For trade to be effective, therefore, it is imperative that the
factors affecting the inter-relationship in the manufacturing, agriculture and service value
chain are comprehensively addressed. Trade also plays a critical role in poverty reduction
through employment creation in informal, retail, and wholesale trade. In addition, trade
provides MSMEs with opportunities of accessing more favorable prices in international
markets.
Progressive liberalization in Kenya has significantly reduced tariff levels, eliminated price
controls and licensing requirements. As a result, imports grew from an average of 6.1% to
22.5% between the periods 1998-2002 and 2003-2007 respectively. Over the same
periods exports grew from an average of 6.6% to 10%. The high growth in imports relative to
exports resulted in the widening of overall trade imbalance from an average of Kshs.45
billion to Kshs.87 billion between the period 1998-2002 and 2003-2007 respectively.
Despite the open trade policy pursued, Kenya’s trade structure, however, remains
concentrated in primary products and traditional markets. For instance, exports are
composed of a few primary commodities, which include tea, coffee, cut flowers, and
vegetable products, accounting for over 50% of total exports. This has been due to limited
capacity for value addition in the manufacturing sector and the relatively underdeveloped
intermediate and capital goods industries. The trade direction is also limited to a few
countries with COMESA and European Union accounting for over 60% of exports.
The deepening and expansion of regional integration and bilateral trade agreements have
however widened the scope of trade opportunities for the Kenyan businesses. Due to these
initiatives, there is an emerging trend towards exports of services, particularly professional
services. Other non-traditional exports, which are driving the country’s economic growth,
include horticulture targeting the European Union Market. New market opportunities have
emerged particularly the USA market that offers opportunities for exports of apparels and
textiles under the AGOA initiative. The Middle East market has further opened opportunities
for trade in livestock products while the “Asian Tigers” have provided opportunities for
tourism.
Kenya has the potential to become a more competitive player in the region and global
economy. However, the country’s global competitiveness remains a major challenge due to
low levels of productivity, un-conducive business regulatory environment and inadequate
infrastructure development. Intervention measures need to be initiated and aim at further
improving the business climate in terms of a conducive regulatory environment and greater
access to finance and infrastructure development.
The essence of the Trade policy on international trade, therefore, is to lay strategies to
enhance export growth through value addition in export oriented manufactures and in the
services sector as well as pursuing diversification to fully exploit the export opportunities in
the emerging markets.
11
On the domestic front, distribution and wholesale including retail sub-sector has played a
major role in the Kenyan economy. The sub-sector currently accounts for 15.7% of GDP and
10% of formal employment. Indeed Vision 2030 has identified and earmarked wholesale
and retail trade among other sectors for rapid growth and development. Overall, wholesale
and retail trade including hotels and restaurants accounts for 58.7% of employment in the
informal sector.
This informal sector commonly referred to as the “Jua kali” continues to play an important
role in the labour market as it reduces the levels of unemployment by creating jobs for
people in the labour force. In 2007, for instance, the sector provided employment to 7.5
million Kenyans and created 427,000 new jobs compared to 420,000 new jobs in 2006.
This constituted 89.9 per cent of all the new jobs created outside small-scale agricultural
sector and pastoralist activities.
There are however, emerging trends with associated challenges in the distribution,
wholesaling and retailing activities. These include manufacturers distributing their own
products; large scale importers retailing their merchandise and major supermarkets,
shopping and exhibitions malls springing up to retail common user products in major urban
centres.
The service sector which comprises tourism; transport and communications; trade and
related services; and financial and business services, accounts for 60% of GDP. Within the
service sector, there are emerging trends of growth in domestic trade brought about by the
liberalization of the capital markets and the privatization program. This has enabled many
more Kenyans to buy shares and trade through the Nairobi Stock Exchange. In addition,
there are new developments of the domestic oriented Business Processing Outsourcing
(BPO) and Information Technology Enabled Services (ITES) which has created trade
opportunities for MSMEs to provide Business Development Services (BDS). The Trade Policy
will therefore facilitate improvements in the enabling environment for increased trade in
stock and shares and outsourced services.
1.3 Current Trade Policy Dispensation

The current Trade Policy instruments are contained in various policy documents and
legislations; and are administered by various institutions. Some of the policy instruments
include: import/export management, taxation, trade facilitation and promotion, licensing
and registration, production and productivity, skills development and labour laws impacting
on trade, investment and privatization incentives, Government procurement, intellectual
property rights, competition and consumer protection, financial services, ICT, trade in
services, governance (arbitration, bankruptcy etc.). The key Acts that operationalize these
policy instruments include: Local Government Act/By-laws, Companies Act, Customs and
Excise Act, EAC Customs Management Act, Weights and Measures Act, Trade Descriptions
Act, Hotels and Restaurant Licensing Act, Investments Act, Standards Act, Environment Act,
Industrial Property Act, Liquor Licensing Act and various consumer protection acts among
others. (Refer to Annex 1)
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In the process of implementation, these trade policy instruments have faced problems of
effective coordination and harmonious decision-making leading to conflicting rules,
regulations and practices affecting trade.
1.4 Need for a coherent Trade Policy

In view of the existing legal and regulatory framework with trade policies contained in
various documents, legislations and institutions, the National Trade Policy seeks to
consolidate existing policies and develop a coherent trade policy. It seeks to create the
policy environment that is necessary for trade to flourish, drawing upon experiences in
successful economies. It analyses trade constraints and challenges in international and
domestic trade within the context of existing trade policies, prescribes strategies and
programmes to sustain the economy within the tenets of Vision 2030. Further, the policy
establishes the linkages between domestic trade and external trade policies and
competitiveness of the economy.
The Policy takes cognisance of Kenya’s commitments to the multilateral, regional and
bilateral agreements. In particular, the EAC and COMESA regional integration agenda
informs the formulation of this National Trade Policy. Further, the private sector and civil
society concerns for the country to remain competitive and institutionalise accountability
respectively also feed into this Trade Policy.
The formulation of this Trade Policy takes into account international best practices and also
recognises the needs of micro, small and medium-sized enterprises (MSMEs), which have
emerged within the global business environment. It also takes into account new
developments and trends in international and domestic trade such as expansion of world
merchandise trade, a surge in trade between economic blocs, rise in South-South trade,
containerization, intra-firm trade, global production networks, growing trade in professional
services, rapid advances in ICT and wider use of e-commerce.
1.5 Formulation of an Integrated Trade Policy

An integrated Trade Policy contains the elements of both international and domestic trade. It
takes into account the need for effective coordination and shared importance of having
institutions and infrastructure which support the development of trade. It also emphasises
the need for effective participation of all stakeholders in particular the Members of
Parliament through the relevant Parliamentary Committees; the private sector; the Civil
Society. The integrated approach encourages information flows and builds confidence
among stakeholders. The consultative process will ensure ownership of the National Trade
Policy.
1.6 National Trade Policy Vision,

Vision, Mission and Objectives
In view of the linkages between trade and economic growth, the Trade Policy aims at
enhancing development by facilitating private sector led and globally competitive trade. In
particular, trade will contribute towards national economic growth target of 10% by creating
an enabling environment for diversification and expansion of exports and increased
domestic trade. This is in line with the national economic growth target set under Kenya
Vision 2030.
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The National Trade Policy Vision is for “Kenya to become an efficient domestic market and
export led globally competitive economy”. To achieve the aspiration of Vision 2030 the
entire trade sub-sector is expected to play a critical role both in terms of vibrant domestic
and international trade.
The National Trade Policy

Policy Mission is “to facilitate Kenya’s transformation into a competitive
export led economy, enhance regional integration and widen participation in both domestic
and international trade’.
The Trade Policy mission will be achieved through the following broad objectives:
(i) Promotion and expansion of Kenya’s exports of goods and services; and
(ii) Development of an efficient and competitive domestic market.
The National Trade Policy will use a comprehensive, coherent and integrated approach to
achieve these objectives by:
(i) Setting and re-defining Government Policy relating to International and Domestic
trade;
(ii) Designing appropriate complementary measures to improve the business regulatory
and macro-economic environment;
(iii) Increasing investment in infrastructure to support trade development;
(iv) Improving co-ordination of institutions responsible for promoting and regulating
trade; and
(v) Ensuring effective participation of key stakeholders (Members of Parliament,
Government Ministries, private sector, civil society, and development partners,
among others).
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SECTION B:
POLICY ON INTERNATIONAL TRADE
15
CHAPTER 2: POLICY ON INTERNATIONAL TRADE
2.1
2.1 Introduction
The policy on International Trade is anchored on liberalization and globalization and driven
by competitiveness. Industrialization and rapid economic growth in developed and newly
industrializing countries has been mainly attributed to international trade through export-led
strategies. To exploit the existing and expanding opportunities in international trade arising
from liberalization and globalization, countries have formed trade blocs in areas of common
interest to enhance their competitive edge.
Kenya is an active member of World Trade Organization (WTO) where it has made
commitments in both goods and services. It is also a member of COMESA Free Trade Area
and EAC Custom Union. In addition, the country is also involved in bilateral trade
arrangements with a number of countries. The commitments made under these trade
arrangements and the national policy direction have formed the basis under which Kenya’s
international trade policy operates.
The international trade policy regime and institutional arrangements in Kenya include
international trade agreements, the import policies and procedures, the export policies and
procedures and other measures affecting production. The trade policy aims at transforming
the country into a more open, competitive and export-led economy.
2.2 Current International Trade Policy Regime

Kenya’s National Trade policy is anchored on the principles1 and objectives of the WTO.
The country is committed to gradual reduction of Tariff and Non-Tariff barriers and
progressive liberalization of trade in services. The country is also a member of Regional
Trade Economic blocs (COMESA and EAC, among others) and has also signed several
bilateral and preferential trade agreements.
2.2.1 Regional Trade Agreements
Kenya is a member of the East African Community (EAC), Common Market for East and
Southern Africa (COMESA), Intergovernmental Authority on Development (IGAD) and Indian
Ocean Rim-Association of Regional Cooperation (IOR-ARC).
(a) East African Community (EAC)

Kenya, Tanzania, Uganda, Rwanda and Burundi form the East African Community. The EAC
trading block brings the five countries together on issues of economic, social and political
cooperation.
The EAC has created an expanded market for Kenyan goods and services with Uganda being
the leading export market for Kenya and Tanzania and Rwanda also being major export
destinations for Kenyan exports. The leading exports from Kenya to EAC countries include
manufactured goods, fuel and lubricants and machinery and other equipments. The
1
The WTO fundamental principles of the Most Favoured Nation (MFN) , National Treatment , Prohibition of Quantitative Restrictions (QRs)
,Tarriff Bindings/Commitments and Transparency
16
negotiations in the community are aimed at relaxation and harmonization on issues related
to labour movement, work permits, education qualifications, standards, customs, rules of
origin and common tariff nomenclature within the region.
A three-band Common External Tariff (CET) on EAC imports originating in third countries was
agreed upon in the context of the EAC Custom Union (CU) Protocol including the sensitive list
comprising of goods that are charged tariffs higher than the maximum CET of 25%. The EAC
customs protocol also provides for elimination of non-tariff barriers, provision covers on
rules of origin, dumping, subsidies and countervailing duties, settlement of disputes,
securities and other restrictive restrictions to trade, competition, duty draw backs and
remission of taxes, customs co-operations re-exportation of goods and harmonization of
trade documentation and procedures.
The adoption of the CET by the Partner States, ending the practice of Partner States
charging different national tariffs and observing the provisions of EAC customs protocol are
expected to contribute significantly towards enhanced simplicity, rationalization, and
transparency of EAC Partner States’ tariffs. These initiatives inform the direction of this trade
policy.
(b) The Common Market for East and Southern Africa (COMESA)
Kenya is a member of COMESA that brings together 19 countries that form an economic
bloc. Eleven of the COMESA Member States have joined the COMESA Free Trade Area (FTA)
to which Kenya belongs. As such, it exchanges free-trade preferences with 10 COMESA FTA
partner countries, as compared to tariff preferences exchanged with non-FTA COMESA
members. COMESA intends to become a Customs Union by 2009 and become a full
Economic Community by 2025
The COMESA countries have also adopted COMESA CET structure of a four–band category of
raw materials at 0%, capital goods at 0%, and intermediate goods at 10% and final goods at
25%, with a provision for flexibility on policy space.
COMESA is currently the leading destination for Kenyan export products. The main exports to
COMESA include manufactured goods, fuel and lubricants and machinery and other
equipments. The expanded market has enabled Kenya to diversify exports particularly in the
area of manufactured goods and trade in services. Kenya has become a leading financial
and transport hub in the region. In addition, in the air transport sector, the national carrier
has expanded its services to the region.
2.2.2 Preferential Trade Agreements
Agreements
(a) African Growth and Opportunity Act (AGOA) (2000)
Kenya, along with other beneficiary Sub-Saharan African countries, has benefited from
preferential trade arrangement provided by USA through the African Growth and Opportunity
Act. The beneficiary countries have to meet eligibility criteria set out in the Act which
includes establishment of a market based economy and issues of good governance. This
trading arrangement was initially expected to expire in 2007 but has been extended to
2015.This scheme gives Kenya and other beneficiary Sub-Saharan African countries
opportunities to export over 6000 product lines to the United States duty free and quota
17
free. However, Kenya has only been able to export a few products specifically textiles and
handcraft due to demand side and supply side constraints. The policy has identified
strategies to address these constraints.
(b) Economic Partnership Agreements (EPAs)

Kenya together with the other EAC Partner States is negotiating a new trading arrangement
with the EU (EPA) as a successor to the Cotonou Partnership Agreement (successor to the
Lome convention). The new trading arrangement will replace the non-reciprocal trade
preferences arrangement offered to Kenya and other ACP countries under the Cotonou
Partnership Agreement. At the expiry of this agreement in July 2009, this arrangement will
be replaced by a WTO-compatible reciprocal Economic Partnership Agreement. The primary
objectives of the EPAs are to foster sustainable development, integrate the ACP states into
the world economy and fully comply with the prevailing WTO rules.
2.2.3 Bilateral Trade Agreements
Kenya has signed bilateral trade agreements with both developed and developing countries2
that fulfil the following objectives:
(i) Reciprocal participation in exhibitions and trade fairs as well as respective country
week promotional events;
(ii) Exchange of market intelligence, missions/surveys for market information;
(iii) Encouragement of institutional cooperation such as the Standards Institutions;
Chambers of Commerce and Industry, Customs Organizations, Research Institutions
among others;
(iv) Prompt and focused follow up of issues raised during bilateral meetings;
(v) Exchange of general and product specific trade missions; and
(vi) Promotion of Trade and Investment.
2.3 Import Policies, Procedures and Institutions
2.3.1 Goods Trade

a) Applied Tariff Structure
Since coming into force under the EAC Protocol establishing the EAC Custom Union on
January 1, 2005, the EAC Common External Tariff (CET) has been Kenya’s main instrument
of import policy.
The EAC Custom Union Protocol establishes a three band common external tariff with 0% on
raw material imports; 10% on intermediate goods imports and 25% on finished imports CIF
in respect of all goods imported into the Community. Goods imported from EAC partners
states are zero rated while some of Kenya’s exports to Uganda and Tanzania are charged
duties under a transitional arrangement ending in 2009. The Partner States also undertake
to review the maximum rate of the Common External Tariff after a period of 5 years from the
2
Bangladesh, Canada, China, Comoros, Congo, DRC, Djibouti, Egypt, Ethiopia, Hungary, India, Iran, Iraq, Lesotho, Liberia, Mauritius,
Mozambique, Netherlands, Nigeria, Pakistan, Russia, Rwanda, Somali, South Africa, South Korea, Sudan, Swaziland, Tanzania, Thailand,
Turkey, Ukraine, Zambia, Zimbabwe and Libya
18
coming into force of the Custom Union. EAC Partner States charge CET tariffs on sensitive
products3 originating in third countries lower than WTO tariff bindings. Sensitive lists under
COMESA and EPA are still under negotiation.
b) Tariff Bindings
Kenya's tariff bindings cover 14.9% of its total tariff lines. Tariffs are bound at a ceiling rate
of 100% for all agricultural products. For non-agricultural products, Kenya has bound six
tariff lines (at the HS four-digit level), equivalent to 1.6% of non-agricultural tariff lines; at
62% on fresh, chilled, or frozen fish (HS 03.02 and 03.03), excluding fish fillets and other
minced fish meat; 35% on medicaments (HS 30.03); 18% on pharmaceutical goods (HS
30.06); 62% on mineral or chemical fertilizers (HS 31.05) containing two or three of the
fertilizing elements, potassium, phosphorus, and nitrogen; and 31% on polymers of
ethylene in primary form (HS 39.01). The tariff on "other tractors" (HS 87.01.90) is bound at
62%.
c) Duty Exemptions and Waivers

Kenya currently grants tariff exemptions on goods used by charitable bodies, churches, and
approved educational institutions; the military and police; official aid-funded projects; in
emergency situations; and by diplomatic and international organizations. In addition,
samples and exhibits/displays for trade fairs may be imported into Kenya duty free.
However, after use, the items should be re-exported or destroyed. In the event that relevant
customs certification that the goods have been re-exported or destroyed is not produced,
the relevant duties are imposed on the presumed value of the items. However, the
introduction of the CET, with its increased share of zero tariffs, has made redundant a
number of previous tariff concessions.
The Customs Union has also minimized discretionary powers of granting exemptions to
custom duties earlier enjoyed by partner states, and which sometimes had created uneven
playing ground for firms. The Partner States have undertaken harmonization of their
exemption regimes, which shall be administered regionally.
d) Internal Duties
(i) Value Added
Added Tax (VAT)
VAT is levied at a standard rate of 16% on the sale price of locally produced goods
and services, or on the customs value (plus border charges) of imports. A reduced
rate of 14% is applied on certain services, in particular hotels and restaurants. The
government uses the VAT to support policy priorities, both to protect “strategic”
sectors such as transportation and agriculture and to address short-term needs. The
Customs and Excise Act also provides for zero-rated VAT on imports and purchases
by designated persons or organizations.
3
Maize and maize products, dairy products, wheat + meslin flour, rice, sugar, cigars, cigarettes, cement, matches, batteries, khanga fabrics,
bed linen, sacks, bags, used clothes, crown corks, jaggery.
19
(ii) Excise Taxes
Excise taxes apply to both imports and locally produced goods including alcoholic
beverages, tobacco products, petroleum products, motor vehicles, carbonated drinks
and mineral water, cosmetics, jewellery and cell phone airtime. These duties are
charged on the ex-factory price of the domestic goods and the imports value
(inclusive of custom duties) of the imported items. Excise duties on imports are
collected at the time of imports along with import duties and VAT.
e) Quantitative Restrictions and Import Prohibition

The EAC Customs Management Act provides for quantitative restrictions and controls on
some imports on grounds of security, health, morals and environment. These restrictions
and controls are implemented through import quotas, licensing requirement and imposition
of import ban. Import prohibition and licensing regime has goods categorized into three
groups: prohibited goods, restricted goods and those that must meet technical,
phytosanitary, health and environmental standards. Imports of animals and animal products
are undertaken through permits issued by the Department of Veterinary Services.
f) Trade Remedies
Kenya's national legal basis for the imposition of anti-dumping and countervailing measures
is in the Customs and Excise Act. A duty may be imposed on dumped4 or subsidized5 goods
if their importation causes or threatens to cause material injury to an established industry or
is such as to retard materially the establishment of an industry in Kenya.
g) Standards and Technical Regulations

Standards play an important role in ensuring the safety and quality of products in the
market. Kenyan standards are formulated through consensus by the relevant stakeholders.
The government has ensured that competent authorities are in place to undertake
standardization, testing and certification. The Kenya Bureau of Standards (KEBS), Kenya
Plant Health Inspectorate Services (KEPHIS), Weights and Measures Department are among
the institutions that are responsible for developing and enforcing standards and technical
regulations. Compulsory standards apply equally to both imports and locally produced
goods.
4
Dumped goods as those with an export price lower than their fair market price in their country of origin or in the country from which they
were exported to Kenya; or sold in Kenya at a price below the "cost of importing", i.e. the cost of the goods in the country from which they
were exported inclusive of insurance, freight, duties, taxes and any other charges.
5
Subsidies are defined as any support (e.g. grant, loan, tax relief) given, directly or indirectly, on production or export.
20
h) Customs Valuation, Classification
Classification and Implementation Procedures
Kenya has notified its legislation on customs valuation to the WTO. Since January 2000,
customs valuation in Kenya has been based on the Agreement on Implementation of Article
VII of GATT 1994, which provides the rules for the customs value for the imported goods.
The Kenya Revenue Authority (KRA), Kenya Ports Authority (KPA), Kenya Airports Authority
(KAA), KEBS, KEPHIS, Police and clearing and forwarding agents participate extensively in
customs administration including charging fees for their services. A number of reforms have
been undertaken to simplify customs administration which include automated online
operations, harmonised EAC customs duties, reduction of road blocks, simplification and
harmonisation of documentation between EAC and COMESA. Each member of the EAC
Custom Union administers its own customs collection.
i) Rules of Origin (RoO) and Domestic Content Requirement

The Rules of Origin is one of the common trade policy instruments. The many trade
agreements Kenya participates in call for different Rules of Origin and content requirements.
The purpose of the EAC Rules of Origin which is similar to that of COMESA is to implement
the provisions of Article 14 of the Protocol to ensure that there is uniformity among Partner
States in the application of the Rules of Origin and that to the extent possible the process is
transparent, accountable, fair, predictable and consistent with the provisions of the
Protocol.
2.3.1 Trade in Services
Services constitute the most important sector of the Kenyan economy today, with its share
of GDP and employment larger than the combined share of agriculture and industry. The
services sector has been the most important sector in Kenya’s economy in terms of
employment creation, contribution to GDP and foreign earnings. The contribution of the
services sector to real GDP was about 60% in 2007. The most important subsectors include
tourism, transport and communication, financial services and business services. The
services sector, including government services, absorbs about 68% of the labour force.
Kenya has made a number of commitments in its service sectors in WTO. Kenya’s specific
commitments under GATS cover the following areas: financial services (insurance and
insurance related activities, re-insurance and retrocession, services auxiliary to insurance,
banking and other financial services; Communication services; tourism and travel related
services (hotel and restaurants, including catering, travel agencies and tour operators, and
tourist guides); transport services; and other services (meteorological and data/information).
The summary of Kenya’s specific commitments in services is provided in annex 2.
The basic list of service sector considered for progressive liberalization includes business
services, communication services, construction and engineering related services,
distribution services, educational services, environmental services, financial services, health
-related social services, recreational cultural and sporting services, transport services ,
tourism and travel and others
21
2.4 Export Policies and Measures Affecting Exports
2.4.1 Goods Trade
The trade policy instruments available for exports include: export taxes and charges, export
prohibitions, restrictions, and licensing; export subsidies and incentives; export promotion
and marketing assistance, and export finance, insurance, and guarantees.
a) Export Taxes and Charges

The registration formalities for imports of goods for commercial purposes under the
Customs and Excise Act also apply to exports. Specifically, all exports must be carried out
on the basis of a certificate.
The EAC Customs Management Act provides flexibility for member countries to impose
export taxes and charges on a selected range of products for the development of sectors
which are critical in addressing key national issues of industrial development, income
inequalities and unemployment. Kenya maintains an export tax of 25%, on hides and skins
and scrap metal to encourage local processing.
b) Export Prohibitions,
Prohibitions, Restrictions, and Licensing
Kenya prohibits the exportation of certain products such as the firearms and ammunition. A
permit is required for exports of most agricultural products, food, minerals, and mineral
products. Exports of certain agricultural and food products are subject to special licences to
ensure that the country remains self-sufficient in these products.
Products considered as having aesthetic value or security importance to Kenya, and

products covered by international conventions to which Kenya is a signatory e.g. Convention
on International Trade on Endangered Species (CITES) require prior authorization by the
Government before exportation.
Plant exports are subject to a phytosanitary certificate from Kenya Plant Health Inspectorate
Service (KEPHIS), while export of animals and animal products require a health and sanitary
certificate from the Department of Veterinary Services.
c) Export Subsidies and Incentives

Kenya does not grant any export subsidies, nonetheless, three incentives schemes are
available to Kenyan companies to encourage export-oriented activities. These are the Export
Processing Zones (EPZ) Scheme, the Manufacturing Under Bond Scheme (MUB), and the
Duty Remission Scheme.
(i) Export Processing Zones Scheme

The Export Processing Zones Scheme, established in 1990, allows for duty and
VAT exemption on imported machinery (except motor vehicles) and raw materials.
Besides high-quality infrastructure, companies located in EPZs benefit from a ten-
year corporate tax, income, and withholding tax holiday; exemption from stamp
duties; and a 100% investment allowance (applicable over 20 years). The Export
Processing Zones Authority (EPZA) acts as the primary licensing and regulatory
22
agency on behalf of the Government with the objective of rapid project approval
and facilitating licensing.
(ii) Manufacturing under Bond (MUB)

The Manufacturing under Bond (MUB) Scheme was introduced in 1989. Under
the scheme, firms exporting their total output are exempted from payment of
import duties and VAT on inputs, including plant, equipment, and raw materials.
The exemption is subject to the posting of a customs bond.
Eligible firms also enjoy an investment allowance of 100% on immovable fixed

assets. To be eligible, investors must provide documentary evidence showing
financial ability, technical know-how, and market availability as well as significant
employment generation. MUB companies may sell their products on the
domestic market, subject to the approval of the Commissioner of Customs and
Excise, and upon payment of normal duties and taxes plus a 2.5% surcharge on
the dutiable value.
Duty Remission Scheme

(iii)Duty
Duty Remission Scheme has been operational since 1990. Through the scheme
the government grants remission of duties and VAT on goods imported for use in
the production of manufactured goods for export or for the production of raw
materials for use in manufactured products for export, or for the production of
"duty-free items" for sale domestically. The Trade Remission Exports Office
(TREO) administers the scheme. The remission is subject to the posting of a bond
to cover the amount of unpaid duty. In order to recover the bond, exporters must
demonstrate, within six months, which imports have been incorporated into the
production of final goods that have been exported.
d) Export Finance, Insurance, and Guarantees

Kenya does not have any public export finance, insurance or guarantee schemes. However,
African Trade Insurance Agency (ATIA) and the Multilateral Investment Guarantee Agency
(MIGA) provide multilateral import and export credit and political risk insurance guarantee.
Export finance and insurance must be taken with private companies whose prices are
market-determined.
e) Export Promotion and Marketing Assistance

The Export Promotion Council (EPC) is mandated to promote and develop Kenya's export
activities. The EPC's activities revolve around export market development, product
development and adaptation, trade information and delivery services; trade policy
facilitation and development of exporting skills. The EPC also maintains a Centre for
Business Information in Kenya (CBIK), which provides business information and support
services, and houses a WTO reference centre for the business community. In addition, the
National Export Strategy (NES) currently under review has been Kenya's main policy paper
on export promotion.
Other agencies involved in export promotion and marketing include the Export Processing
Zones Authority (EPZA), the Kenya National Chamber of Commerce and Industry (KNCCI),
23
and sectoral producer and exporter associations such as the Kenya Association of
Manufacturers (KAM) and the Fresh Produce Exporters Association of Kenya (FPEAK).
Sectoral Parastatals such as the Horticultural Crops Development Authority are also involved
in export promotion activities.
f) Research, Development and Extension Services

Kenya Agricultural Research Institutes (KARI), the Kenya Industrial Research and
Development Institute (KIRDI) Kenya Institute of Public Policy and Research Analysis
(KIPPRA), Institute of Policy Research Analysis (IPAR), Institute of Economic Affairs (IEA) and
Tegemeo Institute of Egerton University, among others provide important research,
development and extension services to the productive sectors and trade.
g) State Trading Enterprises (STEs)

Kenya maintains state trading enterprise as regulatory authorities to manage liberalised
markets and correct market failures when need arises. Kenya's privatization efforts date
back to 1992, when the Government launched the Public Enterprises Reform and
Privatization (PERP) programme. Under the PERP, most of the commercially oriented
enterprises were privatised except a few which were excluded from privatization due to their
strategic importance such as National Cereals and Produce Board (NCPB), National Oil
Corporation of Kenya (NCK) and Kenya National Trading Corporation (KNTC) among others.
However, their role was drastically reduced as a result of liberalization and privatization.
2.4.2 Trade in Services
The general principles that apply to trade in goods of MFN, National Treatment and
transparency also apply to trade in services. However unlike trade in goods, where the
market access restriction is through tariffs, and market access restriction on trade in
services is through regulations that include foreign equity restrictions, educational
qualifications, economic needs tests and licensing among others.
The General agreement on trade in services however does not compel countries to open up
their services sector. The agreement recognises the special needs of the developing and
least developed countries to liberalise services according to their levels of development.
Kenya’s export of trade in services is quite competitive in the African region but limited in
the developed countries. The services sector in the developed countries is highly competitive
and regulated making Kenya’s potential to export difficult.
Limitations to export to developed countries particularly the EU include; economic needs

test which has often been used as a market access barrier. Other market access barriers in
the service sector include high financial requirements, recognition of educational
qualifications and Visas and work permits.
The structure of Kenya’s services export shows that cross-border trade, (mode 1)
Consumption abroad (mode 2) are the most dominant modes of supply while the country’s
export of services of the other two modes, commercial presence (mode 3) and movement of
natural persons (mode 4) though important for the developing and least developed
countries are not yet fully exploited.
24
CHAPTER 3: STRATEGIES AND PROGRAMMES FOR
PROMOTION OF INTERNATIONAL
INTERNATIONAL TRADE
3.1 Introduction
Globalisation and liberalization coupled with emerging trends in international trade offer
opportunities for Kenyan exporters to penetrate into new markets. These changes however,
have been accompanied by constraints and challenges to the businesses in coping with
them.
Kenya’s international trade strategies, therefore, aim at ensuring that Kenyan business
enterprises especially the Micro, Small and Medium Enterprises (MSMEs) get the necessary
support to be competitive and achieve their full potential. Greater emphasis is placed on
export-driven growth in line with Vision 2030.
The policy recognises international trade as a strategic priority in realising some of the
following main objectives: raising business productivity; encouraging increased international
trade and investment; stimulating and supporting MSMEs to participate more in
international trade; enhancing the competitiveness in both the export and domestic
markets; addressing market distortions; encouraging value additions and diversification;
and improving market access. The policy has identified various programmes for
implementation in order to address the constraints and challenges affecting the
development of international trade in the country.
The constraints and challenges as well as intervention measures on the promotion of

international trade have been categorised into five (5) broad areas namely: market access,
trade facilitation, institutional capacity and coordination mechanisms, supply capacity and
information flow.
3.2 Market Access

The ability of Kenyan business enterprises to penetrate foreign markets has faced a number
of constraints and challenges. The policy has identified strategies and programmes to
address these constraints and challenges with a view to enhancing market access in foreign
markets.
3.2.1 Constraints and Challenges
hallenges
(a) The Increased Use of Non-
Non-Tariff Barriers (NTBs)
Tariffs have substantially come down as a result of multilateral trade agreements and the
regional integration process to an extent that some countries have felt that their industries
face stiff competition. In an effort to promote these industries, countries have turned to
imposing non-tariff barriers, which have continued to increase over time.
The NTBs take the form of business registration and licensing procedures; customs
documentation and administrative procedures; immigration procedures at the border
crossing; cumbersome inspection requirements; road blocks, weighbridges, police checks
and standards requirements; and transit procedures. Applications of NTBs restrict the flow
25
of goods and services among nations. The main challenge confronting the country is to
ensure that negotiations at bilateral, regional and multilateral trading system lead to a
reduction or elimination of all NTBs.
(b) Tariff Peaks and Escalations

While average customs duties have come down after successive rounds of negotiations,
application of high tariffs and tariff escalations by developed countries for value added
products originating from developing countries has continued to restrict exports of
developing countries. In effect, this practice protects domestic industries of the importing
country while discouraging value addition.
(c) Domestic Support and Trade Distorting Subsidies

Developed countries provide support to their producers, which make Kenyan products
uncompetitive in both domestic and export markets. The trade distorting subsidies are
provided in the sectors of strategic importance such as agriculture to the least developed
and developing countries. The challenge therefore is for Kenya to develop effective
negotiation mechanisms that will lead to substantial reduction and ultimate elimination of
trade distorting subsidies.
(d) Treatment of Sensitive Products

The tariffs for the EAC sensitive products are lower than the WTO tariff bindings. Unlike the
sensitive list being negotiated under the EPA with the EU, the EAC list is not comprehensive
enough as it excludes some products, which require protection before exposing them to
competition. The sensitive products are strategic for the purpose of safeguarding national
interest such as employment, livelihoods, rural development revenue losses, and protection
of some strategic industries.
The discrepancies cited above pose a great challenge to the government, thus calling for the
need by the Partner States to harmonise the list of sensitive products and operating rules.
(e) Multi--Fibre Agreement and the US (AG

Expiry of Multi (AGOA)
OA) Market
The expiry of the Multi-Fibre Agreement in December 2005 exposed Kenya’s exporters to
stiff competition as major exporters of textiles from countries like China, India, and the Far
East countries are now key players in the USA market.
The challenge is for the least and developing countries to negotiate for re-classification of
the emerging economies such as China, India and Brazil.
(f) Narrow Baskets of Export

Kenya’s export basket has remained relatively narrow comprising mainly of primary products
such as tea, coffee, horticulture, fish and tourism. Primary products fetch low export
earnings and are also vulnerable to price fluctuations in the world market.
The manufacturing sector is engaged in the production of low value-added and limited range
of products due to limited use of modern cost-effective and efficient production technologies
and limited information on international trade opportunities. This has contributed to limited
scope for product diversification and expansion of export base.
26
The challenge to the government is to create an enabling environment for the manufacturing
sector to undertake value addition of the primary production through agro-processing and
other manufactured goods to generate greater access in international markets.
(g) Preference Erosion and Complexity of Rules of Origin

As a result of the erosion of preferences arising from the continued liberalization under WTO,
the preferential market under AGOA and European Union (EU), Kenya faces the problem of
declining exports caused by competition on the exports to these markets.
The EU insists on prohibitive Rules of Origin, which restrict entry of Kenyan exports to the EU
market. In addition, with the current trend where production of industrial goods are
manufactured and sourced from different countries Rules of Origin become difficult to apply.
The business community therefore will face even a bigger challenge in ensuring that they
overcome the resultant competition once the new trading regime of EPAs comes into effect.
(h) High and Multiple Internal Duties and Taxes

A wide range of taxes, levies, cesses, and fees charged on production, inputs, and services,
distort prices and make products/services uncompetitive in domestic and world markets. In
addition, the multiple taxes are burdensome and cumbersome to the business community.
The challenge for the Government is to review and rationalize all taxation laws and
regulations to enhance competitiveness in production.
(i) Limited Trade in Services

Services
Policies for trade in services are not well developed leading to lack of human resource
development strategies and inadequate investment in infrastructure for transport and ICT
services and promotion of trade in e-enabled services. The country also lacks effective
domestic regulatory framework for many of the service sub-sectors. In particular, the
absence of an enabling legislation for e-commerce and back office operations limits Kenya’s
potential to diversify into high value service sectors. The challenge is for the Government to
develop a regulatory and institutional framework and improve data collection for trade in
services.
3.2.2 Market Access Strategies and Programmes
The Policy has identified the following strategies to address the market access constraints:
(a) Enhancing Participation in International Trade Negotiations

The participation of the country in multilateral, regional and bilateral trading arrangements
in the recent past has experienced a number of challenges that have constrained the
business community to fully exploit the opportunities created by these trading
arrangements. This calls for enhancement of participation in the Multilateral, Regional and
Bilateral Trade Agreements
Programmes
(i) Develop mechanism to enhance Public-Private Sector Partnerships in trade related activities.
27
(ii) Undertaking research and policy analysis to enhance negotiating and implementation
capacities;
(iii) Negotiating for elimination of non-tariff barriers in export markets ;
(iv) Undertake research and analysis on restrictive import regimes based on NTBs;
(v) Harmonize internationally benchmarked standards within the framework of regional and
international agreements including establishing centres of excellence;
(vi) Negotiate for double taxation agreements;
(vii) Development of mechanism for handling unfair trade practices;
(viii) Enforce conformity and compliance with standards and technical regulations; and
(ix) Review the legal and regulatory framework to take on board commitments made in various
trade agreements.
(b) Diversification of Export Base and Value-

Value-Addition
Kenya has not exploited the opportunities in the international market due to limited capacity
to add value to existing products and diversify the export base. To exploit the existing
potential in export markets there is need to identify and develop new export products and
also increase value-added content. The government will facilitate diversification of export
base and value-addition.
Programmes
(i) Establish product development and adaptation centres to facilitate graduation to
higher value-added activities;
(ii) Undertake studies in order to prioritize on export activities and markets;
(iii) Establish an Export Development Fund to promote export diversification and value
addition; and
(iv) Establishing centres of excellence on standards.
(c) Increasing Export Penetration in Priority Markets

Kenya’s export market share has been declining over the years. In order to achieve
desirable export targets envisaged in this National Trade Policy, there is need to explore new
markets and sustain the current markets.
Programmes
(i) Review and implement the National Export Strategy (NES);
(ii) Establish a framework for service sector negotiations to remove market access and national
treatment barriers;
(iii) Improve the service enablers such as telecommunication, transport and financial services
to enhance export opportunities;
(iv) Establishment of free trade zones, tax incentives for trading activities and export
performance awards;
(v) Establish Commercial offices and commercial representation in the identified strategic
markets;;
(vi) Establish exhibition centres and warehouses in priority markets such as COMESA and Asian
Markets to increase visibility of Kenya’s products;
(vii) Undertake market intelligence, market surveys in the target markets and research to identify
new products/services to trade in at regional and global level;;
28
(viii) Establish a network of Kenya’s Diaspora to assist in marketing Kenya’s products; and
(ix) Review the role and operations of the State Trading Enterprises (STEs);
(x) Establish incentive programmes such as export performance award to facilitate penetration
into new markets;
(xi) Establish a framework for provision and administration of export finance and guarantee
schemes to cover risks faced by exporters;
(xii) Establish an export development fund to promote export expansion, diversification and value
addition;
(xiii) Negotiate for the Provision of credit lines in respect of foreign purchases of domestic
services;
(xiv) Establish centres for product development and adaptation to facilitate graduation to higher
value added activities through branding, adoption, packaging and new designs;
(xv) Undertake Research and Development in trade, product design, marketing, distribution, and
use of ICT and E-commerce;
(xvi) Facilitate accreditation of standards certifying bodies to international bodies to address
SPS/TBT issues;
(xvii) Developing programmes geared towards inculcating an export culture among MSMEs; and
(xviii) Establish direct flights to strategic markets.
(d) Safeguarding Sensitive Sectors and Industries

The sensitive products are strategic for the purpose of safeguarding national interest such
as employment, livelihoods, rural development revenue losses, and protection of some
strategic industries. This calls for the government to develop mechanisms for safeguarding
sensitive sectors and industries against unfair competition.
Programmes
Develop mechanisms for safeguarding sensitive sectors and industries against unfair
competition
3.3 Trade Facilitation

Trade facilitation encompasses issues of reducing the complexity and cost of the trade
transactions process, streamlining trade procedures in order to reduce the risk and
transaction cost and enhancing the efficiency, transparency and predictability of
international trade as measured in time and money. The policy identifies strategies and
programmes to address constraints and challenges associated with trade facilitation.
(a) Poor
Poor Infrastructure
The current state of the infrastructure in the country has led to an increase in the cost of
doing business and failed to create and support an enabling business environment that will
facilitate private sector investment in the key productive sectors.
The report on Kenya Investment Climate (2008) for example reports that power disruptions
account for 7% loss of sales compared to less than 2% for China and South Africa. In
addition, out of 150 countries Kenya is ranked 76 with regard to connectivity into the global
supply chain, compared to China (30), India (39) and South Africa (30). In the end costly
29
stocks are held for longer periods compared to international best practices of minimum
stocking. The inefficient transport systems account for losses of 2.6% of the sales values
and the figure is higher when domestic transport logistics are taken into account.
The business community is therefore unable to take up opportunities created by
globalization due to inefficient and unreliable infrastructure. In pursuit of efficient and
reliable infrastructure, the challenge facing the government is to ensure adequate resources
are available for infrastructure development.
(b) Cumbersome Customs Procedures and Documentation

Currently, customs procedures are cumbersome due to documentation requirements,
customs processing delays and non-transparent importation rules, among others. The
challenge facing the government is to reduce the cumbersome customs procedures and
documentation and enhance cooperation among various government agencies to support
efforts of the business community to effectively deal with increased trade flows.
(c) Inadequate Compliance with International Standards and Requirements

The domestic institutions charged with the responsibility of ensuring compliance with
international standards requirements/recommendations lack adequate capacity. The
challenge for the Government is to upgrade the capacities of these institutions and also to
harmonize local standards with regional standards.
3.3.2 Strategies and Programmes
(a) Adoption of international best practices as the basis for import, export and transit
procedures and administration.
administration.
In order for Kenya’s exports to be competitive in potential markets there must be efficient
customs procedures and documentation mechanisms.
This entails harmonizing and streamlining customs procedures by removing duplicative

documentation requirements, customs processing delays, and any non-transparent
importation rules and requirements, among others. It involves identifying and removing
procedural barriers to trade and standardizing information requirements by simplifying
procedures, encouraging use of best practices as well as applying relevant information
technology.
Programmes
(i) Establish a national enquiry point which is responsible for providing or facilitating
access to trade-related information and documents to interested parties;
(ii) Establish a single window/one-time submission system that allows traders to submit
import, export and transit documentation and data (including electronic versions;
(iii) Develop mechanisms to ensure that all authorities and agencies involved in border
and other import and export control points cooperate and coordinate in order to
facilitate trade;
(iv) Undertake reforms for institutionalizing legally backed online customs administration,
procedures and valuations; and
(v) Develop mechanisms to make provision for the lodging and processing of clearance
data and documentation prior to the arrival of the goods.
30
(b) Expansion of transport and communication infrastructure to facilitate regional and
international interconnectivity.
Programmes
Programmes
(i) Establish a regional infrastructure development fund in collaboration with other
partner states;
(ii) Dredge Mombasa port to enable access to the larger post-Panamax vessels to allow
for greater trade utilisation of the port; and
(iii) Expansion and Modernisation of all ports of entry and exit.
(c) Enhance compliance with international standards requirements
Programmes
(i) Develop institutional capacities to improve compliance with standards and Technical
Regulations, customs administration;
(ii) Establish collaboration between standards bodies and institutions of higher learning;
(iii) Upgrade the capacities of institutions dealing with standards and also harmonize
local standards with regional standards; and
(iv) Benchmark trade facilitation institutions and implement best practice programs.
(d) Undertaking reforms in institutions dealing with trade facilitation.
Programmes
(i) Establish mechanisms of publishing promptly all laws, regulations, judicial decisions
and administrative rulings of general application relating to or affecting trade in
goods as to enable governments and traders to become acquainted with them.
(ii) Enhance the capacity of regulatory authorities and eliminate conflict of interest by
separating regulatory functions from service providers.
(iii) Develop an incentive package that is suited to the needs of service providers;
3.4 Institutional Capacity and Coordination Mechanisms

Mechanisms
Provision of adequate human, financial and institutional capacity, as well as effective co-
ordination between support institutions involved in trade negotiations and promotions are
critical for businesses to exploit opportunities in the export markets. These have however,
faced a number of constraints and challenges which are hereby addressed by strategies and
programmes.
Challenges
(a) Capacity to Negotiate
Multilateral trade negotiations involve complex and diverse trade issues, which require
substantial resources, specialised knowledge and analytical skills. Currently there are
inadequate financial resources available for negotiations, limited specialised knowledge and
analytical skills for effective negotiations. The challenge for the government is to provide
adequate resources for negotiations and skills upgrading.
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(b) Uncoordinated Negotiating Process
The processes of multilateral, regional and bilateral trade negotiations have been
undertaken by different groups. However there has been no mechanism to coordinate the
negotiation process in the different trade arrangements which often leads to inconsistent
commitments and obligations. This complicates the trading environment for the business
community. The challenge is for the government to ensure that there is a well structured and
coordinated negotiating process that will ensure that the country’s interests are harmonized.
(c) Inadequate Capacity to Comply and Domesticate International Obligations

Kenya is a signatory to various international trade agreements which she is expected to
domesticate and implement. However, due to lack of human, financial and institutional
capacities, the country has not domesticated or implemented some of these agreements for
instance: the safeguard, subsidy and countervailing and anti-dumping agreements among
others thus denying the business enterprises the benefits arising from these agreements.
The challenge for the government is to provide adequate human, financial and institutional
capacities to domesticate the agreements.
(d) Un-
Un-harmonized regional trade regimes
Kenya is a member of the EAC Custom Union, COMESA Free Trade Area, and IGAD among
others. The CET, Rules of Origin (RoO) and border measures such as axle and transport
insurance requirements in these blocks are not uniform. This poses a challenge to the
business community in complying with different RoO and border measures. The other
adverse effect of the multiple memberships to the business community is the unfair
competition brought by trade deflation and diversion.
(e) Institutionss
Ineffective Coordination among Export Support Institution
Greater co-ordination between export support organizations is critical for exporters to exploit
opportunities in the export markets. The Trade support networks are characterized by
scattered and uncoordinated trade related institutions thus making access to business
information cumbersome. Inadequate funding for export support institutions has also
contributed to the ineffective coordination
The challenge is for the government to develop effective coordination mechanisms of export
support institutions to ensure smooth flow of business information and marketing. There
shall also be need to provide adequate financial resources to the export support institutions
to enhance their coordination mechanisms.
(f) Ineffective Administration of Duty Exemptions/Waivers

Exemptions/Waivers and Multiple Internal Taxes
Goods currently granted tariff exemptions and waivers may find their way into the market
and distort the domestic market. The domestic goods are subjected to unfair competition
from goods receiving duty exemptions and waivers. The existence of numerous internal
taxes is reduces the competitiveness of the Kenya goods.
The challenge for the Government is to strengthen the monitoring mechanisms to ensure
that goods under exemptions and waivers attract the relevant duties if traded in the
domestic market. There is a need to undertake a review of internal tax structure to make
more efficient and competitive.
32
Programmes
(a) Enhance Capacity for negotiation
The Government in collaboration with key stakeholders will provide adequate resources for
negotiations and skills upgrading,
Programmes
(i) Institutionalize stakeholder participation in the negotiations;
(ii) Build synergies from national capacities to strengthen and institutionalize regional
negotiating capacities;
(iii) Develop mechanism to partner with regional research and capacity building
institutions;
(iv) Strengthen capacity of the institutions involved in trade development and negotiations;
(v) Establish a Trade Policy Institute; and
(vi) Institutionalize research and training programmes within research and academic
institutions.
(b) Coordinated Negotiatio

Negotiation Process
To ensure that there is a well structured and coordinated negotiating process the policy
identifies the following programmes.
Programmes
(i) Establishment of a negotiating framework with a legal mandate; (To harmonize
commitments within the multiple memberships in the Regional Economic Co-
operations and strengthen representation in capitals coordinating negotiations at the
different levels( Lusaka, Brussels, Addis Ababa, Arusha, Geneva and Washington); and
(ii) Intensify and expand capacity for institutions involved in trade negotiations and
facilitation.
(c) Strengthen Capacity

Capacity to Comply and Domesticate International Obligations
The Government in collaboration with key stakeholders will provide adequate human,
financial and institutional capacities to domesticate the agreements.
Programmes
The Government in collaboration with key stakeholders will undertake measures to provide
adequate human and financial resources.
(d) Harmonize Regional Trade Regimes
The Government will continue to participate in negotiations to harmonize the regional trade
regimes to address the problems arising from multiple memberships.
Programmes
Provision of adequate human and financial resources to facilitate the negotiations for
harmonization regional trade regimes
(e) Strengthen Coordination among Export Support Institutions

The Government in collaboration with key stakeholders will facilitate the development of
effective coordination mechanisms of export support institutions to ensure smooth flow of
business information and marketing.
33
Programmes
(i) Provide adequate financial resources to the export support institutions;
(ii) Strengthen export support organizations to enhance their efficiency and effectiveness
in their coordination mechanisms; and
(iii) Establish a coordination mechanism for deepening the network of Kenya’s Diaspora.
(f) Improve Administration

Administration of Duty Exemptions and Waivers
The Government will strengthen the monitoring mechanisms to ensure that goods under
exemptions and waivers attract the relevant duties if traded in the domestic market.
Programmes
Review the administration and monitoring of duty exemptions and waivers provision
3.5 Supply Capacity

The multilateral trading system and the regional integration efforts have created
opportunities for expansion of markets for Kenyan goods and services. However the
opportunities have not been fully exploited due to inadequate supply capacities. The
country’s manufacturing and services sectors need to take advantage of these opportunities
by raising the productive capacity and competitiveness.
The Government faces the challenge of addressing the high cost of labour, improving
infrastructure, reducing the high cost of utilities and ensuring the availability of finance.
To address the constraints and challenges that affect the supply capacity the Policy
identifies the following the following strategies and programmes:
Strategies
(a) Strengthening trade related research, development and extension services institutions
Programme
Increase resources on research and development.
(b) Deepen and broaden industrial linkages and enhance cluster

cluster--based development
Programme
(i) Establish industrial parks; and
(ii) Establish free ports.
(c) Rationalize incentive packages to take into account the domes

domestic
tic producers as well as
exporters
Programme
(i) Establishing an export guarantee scheme; and
(ii) Establish an export development fund.
34
(d) Developing enterprise capability to take advantage of international opportunities
Programme
(i) Facilitating the improvement of packaging and development of brands;
(ii) Strengthening e-business capacity for enterprises; and
(iii) Establishing marketing and distribution channels in foreign markets.
(e) Enhance competitiveness and improve enterprise productivity through productivity

centres
Programme
(i) Address supply side constraints; and
(ii) Ensure compliance with international standards and regulations.
3.6 Information Flow

Ease of access to up-to-date information by the business community is critical for enhanced
trade expansion, market diversification and consolidation. However, various constraints and
challenges with regard to information flow continue to face the business community which
are hereby addressed by strategies and programmes.
(a) Inadequate Sensitization of the Business Community
The country has entered into commitments in the various trading arrangements that are
meant to benefit the business community. However, the business community, civil society
and the public sector are inadequately sensitized on these commitments. As a result, the
business community is unable to exploit the arising trade opportunities.
The challenge is for the Government to ensure the availability of adequate resources for
wide stakeholder sensitization.
(b) Inadequate Trade Statistics

Inadequate trade statistics makes it difficult for the business community to access relevant
information necessary to make appropriate business decisions such as available business
opportunities and markets. This is even more critical for statistics on trade in services. The
statistics available at the Kenya National Bureau of Statistics are not sufficient in
addressing the needs of the business community, negotiators and policy makers.
The challenge for the Government is to develop mechanisms for collection of trade data
based on international standards to address the needs of all stakeholders in the trade
sector.
35
Strategies
(a) Enhance the capacity to undertake stakeholder information dissemination on trade
matters.
Programme
Provide adequate financial and human resources for dissemination of trade information.
(b) Strengthen trade data collection methods and management.
Programmes
(i) Development of IT-facilitated information dissemination, human and institutional
capacities development;
(ii) Develop mechanisms for collection of trade data based on international standards; and
(iii) Mainstream e-commerce in tertiary and learning institutions.
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CHAPTER 4: COMPLEMENTARY SUPPORT POLICIES AND
MEASURES
4.1 Introduction
Trade policy reforms play an important role in improving export performance in the face of
constraints that have affected the development of export sector in the past.
To make export ventures more competitive and export activities more visible there’s need
for targeting specific aspects of the development process that are particularly trade
enabling. In addition the trade policy will pursue the following complementary support
policies and measurers: trade facilitation; infrastructure needs and development; capacity
building and human capital development; trade finance support measures; support to the
competitiveness of business services; and telecommunications and web-access.
4.2 Trade Facilitation Measures

Trade facilitation involves measures aimed at easing, speeding and reducing the cost of
movement of goods in the domestic market and across borders.
Kenya’s trade competitiveness, based on export and import facilitation has been affected by
number of export and import documents; time for processing export and import procedures;
multiple approval requirements; and the cost of shipment of goods across borders. These
numerous import and export procedures and high costs of cross border shipment of goods
has placed Kenya's business community at a disadvantage relative to their competitors from
other countries.
The Government has so far undertaken a number of trade facilitation measures. The Kenya
Revenue Authority (KRA) has introduced Taxpayer Charter which stipulates the time and
procedures for export documentations. Similarly Customs Services Department has
introduced reforms and modernisation programmes including introduction of customs
procedures based on risk analysis; introduced a Trade-X system; a community-based system
for electronic exchange of information and documents among relevant authorities; an
internet reference system for accessing statutory information and simulating transaction
costs; and an electronic payment system.
4.3 Infrastructure Needs and Development

Adequate infrastructure including transportation, water, electric power, waste disposal,
security and telephones as well as secure, affordable storage and warehousing facilities at
ports enhance production of goods for exports. Inadequacies in infrastructure development
increase the cost of production since most firms result to having their own back services to
avoid interruptions in production.
The government has embarked on a number of infrastructural programmes including roads,

energy, rail transport and Nairobi Metropolitan development programmes among others. In
37
order to meet the country’s infrastructure needs the government will prioritise resource
allocation towards infrastructure development.
In view of the foregoing, the following measures will be undertaken in infrastructure

development to enhance the country’s domestic and international competiveness.
(i) Provision of cost-effective world-class infrastructure facilities and services is a critical
pre-requisite for Kenya’s competitiveness in domestic and international trade;
(ii) Considerable shift in the deployment of resources to acquire the necessary capacity
and access infrastructure services (transport, telecommunications, energy, water,
sewerage and sanitation and meteorological services) by firms and citizens in their
wealth-creation efforts; and
(iii) Enhance Public Private Partnership in infrastructure development through
concessioning and operationalization of the infrastructure bonds.
4.4 Human Capital Development

Human capital development in the form of skill upgrading for production of exports and
complementary support capacities elaborated hereunder are central to achieving the
objectives of the National Trade Policy.
4.4.1 Skill Requirements for Export Production
Export oriented businesses face the challenge of getting workforce with relevant skills for
export. The education system in Kenya should become more responsive to the skill needs of
the economy. Some specific skills needed to support export oriented enterprises include:
ICT, and international management training.
In designing and implementing an efficient and effective approach to the delivery of the new
training needs of an export-oriented economy, the appropriate balance between individual,
business and government intervention programmes will be maintained. Government will
work in collaboration with the private sector in assessing capacity and training needs with a
view of identifying training gaps for the export oriented enterprises.
4.4.2 Trade Policy and Support Capacity
Increased complexity of bilateral, regional and multilateral trade relations, calls for the
Government to build and strengthen the public sector’s capacity to negotiate and implement
trade agreements; enhance capacity to implement trade remedy mechanisms, identify and
analyse export market and needs; and effectively provide trade promotion programmes in
the marketing of export products and foster international commercial relations. In this
regard, the government will undertake in-post and in-house organization training, and
enhance international trade-oriented education and training in secondary and tertiary
sectors.
4.5 Trade Finance Support Measures

Access to affordable trade finance, is a major challenge to trade development. This situation
is even more critical for MSMEs than large enterprises that have relatively adequate internal
and external sources of financing. In spite of high liquidity in the financial sector, there are
no innovative credit products to support economic growth, such as lending for long term
investment and working capital. Where such lending exists, collateral requirements are
38
forbidding, interest rates and bank charges are high, and repayment terms are unfriendly.
There are also concerns about availability of suitable financial products to cover risks
associated with exchange rate fluctuations. The premium charged by commercial banks
where such products exist is often prohibitive.
Export financing and credit schemes remains one of the problems experienced by the
exporters. Banks do not provide back-to-back letters of credit while the knowledge available
trade finance services are limited particularly among the MSMEs. The government through
the National Export Strategy will formulate and implement export financing strategies that
will ensure adequate and affordable access to export financing.
These measures will complement recently introduced financial reforms in the financial
sector through the Micro-finance Act and Savings and Credit Cooperative Societies. The
programmes will deepen and expand the reach of financial services to the MSMEs and
improve performance and transparency in the cooperative sector.
4.6 Supporting the Competitiveness of Business Services

The National Trade Policy (NTP) is explicitly concerned with the development and
competitiveness of all the trade and services sectors in Kenya, and the interactions and
interdependence between domestic and international competitiveness central to NTP
overall strategy and approach. In this connection, the efficiency of support business
services in the areas of ICT, accountancy, audits, market intelligence and risk and credit
management, among others, is critical to making both large and small firms competitive.
In addition, there are essential linkages between infrastructure and human capital
development discussed above, and the issue of competitiveness of business services. In
particular, infrastructure improvements, skills upgrading and human capital development as
well as active pro-competition policies within a liberalised domestic market make business
services more competitive in Kenya.
Business support services will also benefit from their competiveness in that they will now be
able to export their services to other countries particularly with regard to Business Process
Outsourcing (BPO) espoused in Vision 2030.
4.7 Telecommunications and Web Access

Low cost telecommunications and Information Technology Enabled Services (ITES) are
critical in supporting Kenya’s enterprises to get integrated into the global value chain. For
instance, the fragmentation of production globally has opened new opportunities for
businesses to participate in the production chains located in different countries. However
effective participation in this production chains requires rapid, and low cost access to
information, reliable and low cost means of communicating globally. The government will
undertake projects aimed at increasing broadband to reduce the cost of telecommunication
services and installing undersea fibre optic system to enhance global connectivity.
Effective linkages between telecommunication and web access and information technology
development are essential in the policy programmes for services export development as well
as E-Commerce development which is a key feature of the domestic trade development
39
strategy offering, opportunities for export growth and diversification in both Kenya’s goods
and services.
SECTION C:
DISTRIBUTION
DISTRIBUTION AND WHOLESALE TRADE
40
DOMESTIC TRADE POLICY
Introduction
The domestic trade is substantially liberalized and the market forces continue largely to
govern the sub-sector with the government only taking intervention measures when there
are market imperfections that reduce or threaten consumer welfare or discourage
competition. The role of Government in the domestic trade will continue to be mainly
creation of an enabling environment for trade and investment to thrive. Domestic trade
policies will be geared to integrating domestic trade with international trade given their
interdependence.
The thrust therefore of the domestic trade policy will be to improve business environment
and elaborate the government role and that of the private sector in trade and investment
promotion. The policy recognizes and encourages public-private partnership in implementing
various programmes and activities prescribed in the domestic policy. The distinct domestic
trade elements covered in this section include: Distribution and Wholesale Trade; Retail
Trade and Informal Trade.
41
CHAPTER 5: DISTRIBUTION AND WHOLESALE TRADE
5.1 Introduction
Formal Distributors and Wholesalers primarily engage in selling merchandise to retailers
dealing in industrial, commercial and institutional goods, farm inputs, construction
materials, or acting as agents or brokers in buying merchandise or selling merchandise to
such firms. These establishments are largely small and medium size and mainly located in
the major urban centres thus making them not easily accessible to the rural based retailers.
They act as middlemen between the producers/manufacturers and the retailers although in
a few cases they supply merchandise direct to the final consumers. There is usually no
physical transformation of the merchandise by the Distributors and Wholesalers.
The Distributors and Wholesalers in the country can be broadly categorized as dealers in
Farm and Agricultural Produce; Processed Food, Beverage and Tobacco; Personal and
Household Goods; Petroleum Products; and Motor Vehicle, Spare Parts and accessories.
Other categories of Distributors and Wholesalers include those dealing in Building Material
and Supplies; Forest Products; Apparels; Machinery, Equipment and Supplies;
ICT/Electronics; Wholesale Agents and Brokers and Miscellaneous Distributors/Wholesalers.
Prior to liberalization, the Government had a policy which provided guidance on

how distribution of both locally manufactured and imported goods was to be undertaken.
The policy prohibited manufacturers from engaging in distribution, wholesale or retail trade.
Similarly, an importer of bulky common user goods could not be licensed to engage in retail
trade. The Government had also established State Trading Enterprises (STEs) to deal with
distribution of bulky commodities that were considered essential for the welfare of Kenyans.
Some of these State Trading Enterprises are the Kenya National Trading Cooperation
(KNTC), the National Cereals and Produce Board (NCPB), Kenya Farmers Association (KFA),
Kenya Meat Commission (KMC), Kenya Seed Company (KSC), New Kenya Co-operative
Creameries (NKCC) among others. These enterprises were established to enhance the
efficiency of the distributive trade. However due to poor management, these State Trading
Enterprises became inefficient
With the liberalization of the economy, the role of these State Trading Enterprises has been
minimized as the implementation of the policy was relaxed. This led to some manufacturers
engaging in distribution of their own manufactured products as well as importers of bulky
common user goods engaging in wholesale and retail trade thus being in direct competition
with the retailers and wholesalers. Currently some of the business firms whose core
business is basically retail (supermarkets) are also undertaking distribution and wholesale
thus posing a big challenge to the small distributors and wholesalers.
The distribution and wholesale including retail sub sector plays a major role in the Kenyan
economy. The sub-sector currently accounts for 15.7% of GDP and 10% of formal
employment. The distribution and wholesale particularly in agricultural produce have
remained largely informal and characterized by inefficient and fragmented supply chain. The
42
firms engaging in distribution and wholesale of agricultural produce also have weak
business associations. Overall wholesale and retail trade including hotels and restaurants
account for approximately 58.7% of employment in the informal sector.
5.2 Current policy regime

The current policy regime on distribution and wholesale sub-sector is aimed at improving the
business environment by removing regulations that are not based on health, security and
environment, and the Government desisting from taking intervention measures except when
there are market imperfections in the sub-sector. The sub-sector is, however, still regulated
through several legislations and licensing agencies though effort has been made to repeal
and amend some of the legislations regulating the sub-sector.
The Local Authority licensing of this sub-sector is major impediment. Whereas efforts have
been made to simplify the Local Authority licensing through the single business permit, this
has not reduced the cost of doing business. The single business permit is still associated
with the high fees and inappropriate implementation mechanisms.
In addition, traders in the country are subjected to multiple and cumbersome taxation.
Whereas Kenya has reduced the corporate tax rate in recent years to be more comparable
to its neighbours within East Africa, the financial burden of taxation is still considered to be a
major constraint to the operations and growth of businesses including distribution and
wholesale as profitability is reduced significantly. More specifically, the high tax burden is
mainly due to the high profit tax rate of 32.5% which is the highest in East Africa.
Furthermore, there is double taxation of profits which coupled with multiplicity of taxes such
as Local government levies, Central government, user charges ; internal taxes such VAT and
Excise tax all have a negative impact on business.
The challenge to government is to rationalize licensing regime and reduce the tax burden
without compromising the provision of public amenities that are necessary for the growth
and development of business enterprises in the country.
5.3 Constraints and Challenges

The distribution and wholesale sub-sector has great potential to benefit producers,
manufacturers and consumers and to improve the distribution of the locally produced and
imported goods. The sub-sector, however, faces various constraints which are a challenge to
the Government to address. The main constraints and challenges are as follows:-
5.3.1 Un-
Un-Conducive Licensing and Regulatory Framework
The distribution and wholesale sub-sector is regulated by several licensing agencies. These
agencies require distributors and wholesalers to obtain annual licenses to authorise them to
trade within their respective areas of jurisdiction. Apart from the high annual fees, the
procedure of acquiring these licences is also cumbersome thus increasing the cost of doing
business. Whereas efforts have been made to simplify and reduce the number of licenses
required as well as establishing a Business Regulatory and Reform Unit, the cost of doing
business continues to be high.
43
The challenge to government is to improve the licensing and regulatory framework while
guarding against leaving some of the agencies without legal instrument to address market
imperfections or denying others their main source of revenue especially the local authorities.
5.3.2 High Transportation Costs
Most of the traded goods some of which are bulky are transported by road from the point of
production or entry in case of imports to the distribution/wholesale points and then to the
retailers. In several areas of the country and especially the rural areas the roads are
dilapidated causing frequent breakdown of vehicles and hence high cost of maintenance.
During the rainy seasons some of the roads are impassable thus affecting trade, particularly
in perishable goods. On the other hand, transportation by the railway is limited to areas with
rail lines and rarely used due to its inefficiency. As a result, the cost of transportation to the
distribution and wholesale trade is usually too high leading to inefficiency and
uncompetitiveness in the subsector.
The challenge to government is to provide and maintain adequate and reliable road and
efficient railway network throughout the country without exposing the business enterprises
and her citizens to heavy taxation.
5.3.3 Inadequate Logistics and ICT Capacities and Skills
The slow development of the wholesale and distribution sub- sector in part has been the
limited adoption of Information Communication and Technology (ICT).
The challenge therefore is for the Government to mainstream the adoption of ICT
technologies in the wholesale and distribution sub sector.
5.3.4 Access to Affordable Credit
Easy access to affordable credit is a key factor for growth and development of wholesale
and distribution. Many wholesalers and distributors, especially for start-ups are handicapped
by lack of easy access to affordable credit.
The challenge to the Government is to come up with a conducive environment for financial
institutions to provide easy access to affordable credit.
5.3.5 Inadequate Business Management Skills
Many distributors and wholesalers, especially the indigenous rural based, lack adequate
business management skills such as marketing, record keeping, costing and pricing.
The challenge to the Government is how to mobilize adequate resources to provide business
management skills to the business community country wide.
5.3.6 Weak Supply Chains
Distributors and wholesalers, especially those dealing with agricultural produce; have weak
and fragmented supply chains from producers to distributors and consumer outlets. Lack of
forward and backward linkages lead to wastage, particularly of agricultural perishable
goods, between the farm gate and the consumer.
44
The challenge to the Government is how to facilitate and strengthen the required forward
and backward linkages in order to improve the supply chain in the sub-sector.
5.3.7 Poorly Serviced Business Premises
Many wholesale markets for agricultural produce and other perishable products such as fish
and chicken lack adequate amenities necessary for efficient business operations. As a
result, the wholesalers are unable to sustain high standards of hygiene. The quality of the
products is also affected by the inadequate amenities which often cause wastage leading to
high operational costs.
Provision and maintenance of adequate and efficient amenities in wholesale markets

country-wide is a challenge that the Government in collaboration with private sector
stakeholders will address.
5.3.8 Weak Business Associations
The coordination of the sector is weak due to lack of strong umbrella associations to
facilitate articulation and advocacy of business interest. The situation has been further
compounded by proliferation of breakaway small associations due to leadership wrangles.
The associations are also weakly funded due to narrow membership base a fact which has
affected the management of the associations.
The challenge is for the businesses to form strong associations which can increase their
bargaining power.
5.4 Sector Strategy and Goals

The overall goal in this sub sector is to enhance distribution and wholesale trade
competitiveness through the following strategies:
5.4.1 Policy and Legislative Strategy
Under this strategy, the following policy measures will be undertaken:-
(i) Strengthen the Business Reform Regulatory Unit to undertake simplification and
rationalization of the number of distribution and wholesale related licences among
others;
(ii) The local authorities to explore other sources of revenue other than business
licensing; and
(iii) Reducing Tax burden.
The Government will continue to broaden the tax base by bringing on board other
businesses and individuals not presently taxed as well as improve efficiency in tax
collection. By doing so, the Government will be able to reduce the current high tax burden
on business enterprises.
5.4.2 Institutional Strengthening Strategy
In order to enhance the performance of distributors and wholesalers the following policy
measures will be undertaken:-
(i) Strengthen business sector associations and their networks; and
(ii) Capacity building to trade facilitators from the public sector for example Ministry of
45
Trade, Local Government, Agriculture, Cooperative Development, Health,
environment and Industrialization, among others.
5.4.3 Information and Communication Technology Strategy
Use of Information Communication and Technology (ICT) by the distribution and wholesale
sub sector has been limited and this has contributed to the low development of this sector.
The adoption has been hindered by many factors, including high cost of ICT equipment,
inadequate ICT skills and an under developed ICT infrastructure.
As a step towards achieving the overall goal for e-commerce in the wholesale and
distribution sub sector, the Government, in collaboration with the private sector will
undertake the following policy measures :-
(i) Institutionalise ICT training and skills upgrading as part of on the job training
programs;
(ii) Create awareness for mainstreaming the adoption of ICT technologies in the
wholesale and distribution sub- sector; and
(iii) Developing a legal and regulatory framework for E-commerce.
5.4.4 Strengthening Supply Chain Strategy
In order to strengthen forward and backward linkages of distributors and wholesalers with
the view to improving their capacities in the area of marketing the following policy measures
will be undertaken:-
(i) Establish supply chains based on product categories and provide trade facilitation to
enhance competitiveness. The wholesalers and distributors will be encouraged and
facilitated to form strong linkages between themselves and the manufacturers;
(ii) Undertake a nationwide survey to determine the number of establishments in this
sub sector according to the broad categorization to facilitate planning for promotion
of the sub-sector; and
(iii) Facilitate the zoning of small and medium sized distributors and wholesalers in the
major urban centres for easy access by the rural based retailers. This will be
achieved through provision of tax rebates on the basis of their distribution network,
construction of wholesale and distribution hubs in the districts. The government will
also set aside space to build critical infrastructure connecting Producer Business
Groups (PBGs) to wholesale hubs and wholesale hubs to retail markets.
5.4.5 Capacity Building Strategy
Technical skills are important competitive factors which enable enterprise ability to sustain
its market share both in the domestic and external markets. They also determine the rate of
technological progress at national level. For this to be achieved, the following policy
measures will be undertaken:-
(i) The government will facilitate the sector to design and institutionalize skills
upgrading programs for owner managers and employees;
(ii) The government will encourage the business community to take advantage of the
various training programmes available in the country; and
(iii) Institutionalise entrepreneur training at all levels of education.
46
5.4.6 Trade Finance Strategy
Trade finance is imperative for growth and development of trade, including wholesale and
distribution enterprises. There is therefore need to strengthen development finance
institutions to become effective vehicles for provision of start-up capital, working capital
and export finance to the wholesalers and distributors. Under this strategy, the following
policy measure will be undertaken:-
(i) The government will enhance and facilitate Development Finance institutions to
provide affordable credit to distributors and wholesalers; and
(ii) Create awareness on availability and affordability of credit from Development
Finance Institutions.
5.5 Policy Programme and Projects

To execute the strategies for the distribution and wholesale sub sector, the government has
identified the following flagship projects:-
(i) Strengthen the Business Reform Regulatory Unit to rationalise the various
legislations in the sub-sector;
(ii) Link wholesalers and retailers to the digital villages once they are established;
(iii) Promote programmes on franchising in wholesale business in rural areas;
(iv) Develop skills upgrading programs in wholesaling and distribution;
(v) Zoning for wholesalers and distributors;
(vi) Developing free trade ports; and
(vii) Develop a legal and regulatory framework for E-Commerce.
5.6 Overall Policy for the sub-

sub-sector
The Government will pay special attention to the development of more efficient wholesale
and Distributive trade by:
(i) Streamlining the supply chain and improving the quality of goods coming into the
Kenyan market;
(ii) Providing incentives for entrepreneurs to invest in storage facilities and processing,
especially for perishable farm products, thereby eliminating price fluctuations
resulting from surpluses or shortages of farm goods due to seasonal factors;
(iii) Providing a solution to the problem facing many small-scale farmers, who take their
goods to the market in periods of excess production but are unable to dispose of
them, thereby incurring heavy losses; and
(iv) Facilitate organised wholesale and distributive trade, to make it possible for
producers in one locality to establish market linkages outside their local areas.
5.7 Implementation, Monitoring and Institutional Responsibilities

The Ministry of Trade will coordinate the proposed policy programme and projects for
revitalising the distributive and whole sale trade. In particular, the Ministry of Finance will
lead in the rationalisation of business logistics with regard to licensing and taxation while
the Ministries handling infrastructure will provide leadership in infrastructure and transport
logistics development.
The State Law Office will provide leadership on matters of legislation enactment in
consultation with parent ministries and agencies. Some of the main collaborating ministries
will include Finance, Industrialisation, Planning, Local Government, Youth Affairs,
47
Cooperatives, Communications, Agriculture, Energy and Environment. The public sector state
agencies to participate in the revitalising of the distributive and wholesale sub-sectors
include KEBS, KRA, CBK, NEMA, KPA, and CCK. The private sector associations which
include: KAM, KEPSA, KNCCI, and any other relevant business associations will be involved
in all stages.
48
CHAPTER 6: RETAIL TRADE
6.1 Introduction
Introduction
The retail trade sub sector comprises of enterprises generally engaged in retailing goods
and services without transforming the physical nature of the product except bulk breaking.
These enterprises fall into various categories which include the general retail shop or
specialized retailers such as food, beverages and tobacco; butcheries; Oil and Petrol/gas
dealers; building materials, timber, and domestic hardware. Others deal in textiles, soft
furnishings, clothing and shoes; photography; pharmaceutical goods; restaurants, cafes and
other eating and drinking places; and lodging places.
These enterprises comprise the bulk of the small and medium enterprises in Kenya. Most of
the enterprises firms comprise of small shops and stores. They are heavily concentrated in
urban areas and form the main trading activities in the rural areas. Over the years, the
numbers of enterprises in retail trade have shown a steady growth. There are emerging
retailing trends where supermarkets, shopping and “exhibition” malls are springing up in
major urban centres. This has led to the partitioning of premises into smaller cubicles where
several small retailers sell assorted imported merchandise. Currently supermarkets control
approximately 5% of the retail sub-sector business.
The retail trade sub-sector has great potential for employment creation due to its relative
ease of entry. However, the sub-sector faces a number of constraints and challenges that
require to be addressed for the sector to thrive.
6.2 Current Policy Regime

Regime
The retail sub-sector is currently regulated through registrations and several licensing
agencies. The licensing of the retail outlets depends on the merchandise traded, which may
require licenses on the grounds of health, security and environment considerations. In
addition to the current Single Business Permit, all the local authorities under the Local
Government Act Cap 265 impose additional licenses through their by-laws whose main
objective is to generate revenue.
To streamline and improve the business regulatory environment a detailed review of 1,325
trade licences resulted in the rationalization of 694 licences, elimination of 424 licenses as
well as simplification of another 607 licenses. The regulatory reform has led to the
establishment of a Business Regulatory and Reform Unit (BRRU) in the Ministry of Finance.
The Unit has the mandate to deepen business regulatory reforms in consultation with other
stakeholders to reduce the cost of doing business in the country.

Challenges
The following are the main constraints and challenges that affect the promotion and
development of the retail trade sub-sector:
6.3.1 Inadequate and Poorly Serviced Business Premises

There is inadequate number of business premises particularly in urban areas which have
partly restricted graduation of the informal retailers to the formal sub-sectors. In addition,
49
new entrants have to pay exorbitant rent including ‘goodwill’ for the few business premises
that are available. The inadequacy of business premises is compounded by the fact that
even where the Local Authorities have set aside plots for the construction of business
premises, some of the plots have remained undeveloped for many years. Furthermore, most
of the existing premises lack basic infrastructure such as electricity, sewerage, and water,
which make operation of the business difficult.
The general environment under which some retail premises are located also lack proper
refuse collection and waste management systems and not conducive to the operation of
certain retail businesses. This is mainly attributed to laxity in enforcement of Local
Authorities’ by-laws.
The challenges that government must address is to facilitate the provision of adequate basic
infrastructure for the business community through effective public private partnership
arrangement. In addition, there is need for effective enforcement of local authorities’ by-
laws to stem the mushrooming of temporary business structures such as kiosks and ensure
that retail business activities are conducted in a conducive environment.
6.3.2 Cumbersome Licensing and Regulatory Framework
The retail sub-sector is regulated through several registrations and licensing agencies that
make the cost of doing business high. The licensing of the retail outlets is mainly used as
tool of revenue generation, other than being based on best practices, such as health,
security and environment considerations.
Efforts have been made to streamline and improve the business regulatory environment by
eliminating some licenses and simplifying procedures of acquiring the current licenses
required by retail businesses. However, the reform of the local authority licensing system
through the single business permit has not resulted in the expected reduction of the cost of
doing business as it is still associated with the high fees and inappropriate implementation
mechanisms. It therefore continues to be a major constraint to the promotion and
development of retail trade.
Registration of businesses (incorporation/business name) is still centralized in Nairobi. For

the rural based retail outlets, registering a business is too costly.
The key challenges include balancing the use of business licensing as a tool for revenue
collection and as a regulatory measure. The other key challenge is decentralization of
business registration to the districts or adoption of online business registration.
6.3.3 Access to Affordable Business Finance
The growth and development of retail sub-sector is constrained by lack of access to
affordable business finance due to high interest rates, processing and administrative costs
and lack of collateral. The situation is also compounded by lack of an effective credit system
that allows retail businesses to procure goods on credit.
The major challenge therefore lies in mobilizing of savings to facilitate the improvement of
access to affordable credit to traders. The other major challenge is for the government to
50
influence the lowering of the prevailing high lending rates particularly in a liberalized
monetary system.
6.3.4
6.3.4 Fragmented Supply Chain and Stiff Competition
The supply chain is fragmented with many small producers and retail traders with weak
forward and backward linkages leading to inefficient supply chain. Retail traders continue to
face stiff competition in matters of public procurement which has remained a domain of
large-scale traders. At the same time retail traders have not taken advantage of
opportunities provided in the Procurement and Disposal Act due to the weak mechanisms
for implementing and enforcing the 30 per cent preferential access to public procurement.
With trade liberalization, several manufacturers and wholesalers have opened retail outlets
which give price advantage over the general retailers dealing in the same products. In
addition, the large supermarkets are setting up branches in small towns and as result of
their bulk procurement they receive substantial trade discounts that enable them to offer
lower prices leading to unfair competition to the small-scale retailers.
The challenge for the government is to streamline the fragmented supply chain system
between producers and retailers. This will entail reducing the negative competition effects
of large supermarkets on small-scale retailers, strengthening mechanisms for implementing
and enforcing the 30 percent preferential access of public procurement by the small-scale
traders and creating awareness of procurement procedures to retail traders.
6.3.5 Inadequate Business Management and Entrepreneurship Skills
The majority of the retailers lack business management and entrepreneurial skills. As a
result majority of these retailers are unable to expand, do not maintain basic books of
accounts, cannot sustain local and international business opportunities, business decisions
made without adequate information, and have little understanding of legal requirements
and procurement procedures leading to the collapse of a number of retail outlets.
The challenge is how to facilitate the provision of adequate and affordable business
management trainings, access to business information and to inculcate entrepreneurship
skills to retail traders.
6.4 Sector Strategy and Goals

The overall goal is to move toward a formal retail trade sector that is efficient, multi-tiered,
diversified in product range and innovative. To achieve this goal emphasis will be placed on
improving infrastructure development, regulatory framework, access to trade finance and
credit, streamlining of the supply chain and business management training.
6.4.1 Infrastructure
Infrastructure Development Strategy
The problem of inadequate and undeveloped infrastructure will be addressed through the
following policy measures:-
(i) Strengthening the Public Private Partnerships (PPPs) in the development and
maintenance of infrastructure;
(ii) Building new and rehabilitating the existing formal retail centres; and
51
(iii) Enhancing the enforcement of local authorities’ by-laws to stem the mushrooming of
temporary and poorly constructed structures as business premises and ensuring that
retail business activities are all conducted in a conducive environment.
6.4.2 Policy and Legislative Strategy
Conducive licensing and improved regulatory environment shall be achieved through the
following policy measures:-
(i) Establishing an effective one-stop shop for licensing, registration and taxation;
(ii) Decentralizing business registration to the districts; and
(iii) Exploring other sources of funding for local authorities as a balancing act between
use of licensing as a tool for revenue generation and regulation purposes.
6.4.3 Business Finance Strategy
The following policy measures will be undertaken to improve access to trade finance by
retailers:-
(i) Facilitate the establishment of effective traders’ savings and credit cooperatives
(SACCOs) and enhance the management of the existing ones; and
(ii) Facilitate the establishment of more microfinance institutions and expansion of their
outreach programmes.
6.4.4 Strengthening Supply Chain Strategy
To improve market access, the following policy measures will be undertaken:-
(i) Enhancing public private partnerships to deal with the fragmented supply chain;
(ii) Streamlining the supply chain between retailers and suppliers to reduce wastage and
losses;
(iii) Facilitating the building of the capacity of traders associations;
(iv) Training small scale retailers on Government procurement procedures; and
(v) Exploring measures to address the negative impact of large super markets on the
small-scale retailers.
6.4.5 Capacity Building Strategy
The policy measures to address the inadequacies of business management, market
information and entrepreneurial skills in retail trade sector will include:-
(i) Strengthening and redesigning the business management and entrepreneurship
programmes within the technical institutes and universities;
(ii) Improving capacity building of the traders associations;
(iii) Enhancing the capacity of institutions charged with collection and dissemination of
data and information;
(iv) Collation and dissemination of trade data and information; and
(v) Undertaking capacity building of institutions dealing with provision of Business
Development Services (BDS.)
6.5 Policy Programmes and Projects

In implementing the strategies for the retail trade sub-sector, the following programmes and
projects will be carried out:
(i) Construction and maintenance of retail malls and rehabilitation of retail markets in
the major urban areas through the Public-Private Partnerships;
52
(ii) Simplification of business licensing (One Stop Shop for licensing, registration and
taxation);
(iii) Facilitate the establishment of retail traders SACCOs;
(iv) Develop and mount training programmes on Government procurement procedures;
and
(v) Institutional development and strengthening of training institutions that provides
business development services.
6.6 Overall Policy for the Sub sector

To facilitate the growth of a vibrant retail sub sector supported by well established and
functioning infrastructure and social amenities, the Government will undertake the following
policy measures:
(i) Accelerate the ongoing efforts to remove barriers to retail trade;
(ii) Accelerate the ongoing initiative to reduce multiple licences;
(iii) Enhance measures to curb insecurity;
(iv) Develop mechanisms to address entry barriers to retailing; and
(v) Improve economic infrastructure.
With reliable and efficient infrastructure, it will be possible to attract domestic and foreign
investments into these sectors.
6.7 Implementation Monitoring and Institutional Responsibilities

revitalising the retail trade. In particular, the Ministry of Local Government will lead in the
Construction of new and rehabilitation of retail markets in the major urban centres while the
Business Regulatory Reform Unit (BRRU) in the Ministry of Finance will be key in addressing
unconducive licensing and regulatory framework and facilitating the establishment of more
micro-finance institutions.
Training on business management and entrepreneurship skills and provision of market

information will be undertaken by the Ministry of Trade. The State Law Office will provide
leadership on matters of legislation enactment in consultation with parent ministries and
agencies.
Some of the main collaborating ministries will include Industrialization, Youth Affairs, and
Cooperative development, Communications, Agriculture, Energy and Environment. The
public sector state agencies to participate in the promotion and development of the retail
sub-sector include KNTC, KWAL, EPC, KEBS, KRA, NEMA, The private sector associations will
be involved at all stages include KNCCI, KEPSA, KUSCO and any other relevant business
associations.
53
CHAPTER 7: INFORMAL TRADE
7.1 Introduction
In the face of liberalisation and globalisation, informal trade remains the entry point for the
majority of the business starters. The Informal trade comprises small scale units providing,
distributing and retailing in goods and services. It is generally characterized by ease of entry;
unsuitable work-sites; unregistered outfits; reliance on indigenous resources; family
ownership; small-scale operations; intensive use of labour; extensive use of adaptive
technology; and skills acquired outside the formal sector. Being largely unregulated, the
informal sector operations lead to some undesirable social and environmental impacts
such as environmental degradation, non observance of health standards and infringement
of copyright laws, heavily relying on self-supporting and “informal” institutional
arrangements.
The sector commonly referred to as the “Jua kali” in Kenya continues to play an important
role in the labour market. It reduces the levels of unemployment by creating jobs for people
in the labour force that cannot be absorbed in the modern sector. In 2007, the sector
provided employment to 7.5 million Kenyans. The sector created 427 thousand new jobs in
2007 compared to 420 thousand new jobs in 2006. This constituted 89.9 per cent of all the
new jobs created outside small-scale agriculture sector and pastoralist activities.
The informal trade workforce can be categorized into the owner-managers, wageworkers,
unpaid family workers, apprentices, contract labour, home workers and paid domestic
workers. Of micro enterprises, some of whom are paid workers, paid dependent workers as
well as unpaid workers.

Despite the significant role played by the informal sector, it has continued to experience
many constraints and challenges as already highlighted. The unfavourable policy, legal and
regulatory environments have over the years constrained the development of this sector.
One of the notable intervention measures that the Government put in place was the
publication of Sessional Paper No.2 of 1992 on Small Enterprise and Jua Kali Development
in Kenya. The Paper emphasized the need to create an enabling environment through an
appropriate legal and regulatory framework; and put in place support and facilitative
measures to promote the growth of the sector. However, these measures did not yield the
expected impact, largely due to their inappropriate design and weak implementation.
Another government intervention, which is currently being implemented, is the publication of

Sessional Paper No.2 of 2005 on the Development of Micro and Small Enterprises for
Wealth and Employment Creation for Poverty Reduction. Significant achievements arising
from the implementation of this policy include among others reforms in the legal and
regulatory framework. This is especially so as a number of the existing laws and regulations
remain cumbersome, are out of step with current realities and hostile to the growth of
informal sector. For instance, the current Single Business Permit (SBP) applied by the Local
54
Authorities, remains prohibitive, is not standardized and appears, in most cases, punitive
instead of facilitative.
The centralized registration of business names in Nairobi poses accessibility problem for
informal traders located outside the capital city. The requirement for details of business
physical and postal address also poses a major problem to business operators who may not
have permanent physical locations.

The following are the constraints and challenges that hinder the informal trade sub-sector
from growing and graduating to the formal trade status.
7.3.1 Inadequate and subserviced business premises and working sites
Majority of informal traders live and work in appalling, dangerous and unhealthy temporary
premises and/or worksites, due to lack of basic facilities and amenities. Due to their fluid
environment and operational nature, most of the informal trade activities such as hawking
have not been amenable to mainstreaming in urban planning.
The key challenge is to mainstream informal trade in the urban planning without
compromising their need for appropriate physical locations where they are easily accessed
by their customers.
7.3.2 Unconducive Regulatory framework
The informal sector over the years has been constrained by an unconducive regulatory
framework. The local authorities require them to obtain business permits although they are
often harassed by the same local authorities despite their immense role in employment
creation and distribution networks in goods and services. Notably, the by-laws applied by
many Local Authorities are not standardized and do not appear, in most cases, to be
facilitative. Quite often informal trade activities are constrained by frequent eviction and
destruction of their trading makeshifts by local authorities on the grounds of operating
without licences and unauthorised work sites. In addition, they are vulnerable to the
ambivalent stance of the local authorities and the formal enterprises and by the dictate of
unfavourable circumstances are compelled to operate outside the framework of the law with
little or no legal protection. Even for their social security, they have to rely on family or group
solidarity or unofficial organization.
The challenge is to promote the growth and development of informal trade within a
conducive legal framework while at the same time safeguarding the environment, security
and other social and economic activities
7.3.3 Inadequate Market Access and Low Quality Products
The growth and development of the informal trade depends on the existence of a vibrant
market for their products and services. However, market access for their products and
services is constrained by their inappropriate physical location, low quality and sub-standard
goods. Use of low level of technology and skills in particular forces, most informal traders to
operate at lower levels of productivity and are therefore unable to adequately serve
demanding markets.
55
Informal traders are yet to benefit from the newly enacted Public procurement law in terms
of the 30% preferential treatment due to its inconsistencies with other complementary laws
and regulations. Moreover, linkages between the informal traders and the formal sector are
either weak or non-existent.
The first challenge for which the government commits itself is to identify and set aside
appropriate market locations for informal traders; invest in technology improvement; and
create an effective marketing chain and demand for the informal traders’ goods and
services and skills improvement. The second challenge for the Government is to institute
mechanisms for implementing and enforcing the 30 percent preferential access of public
procurement by the informal traders.
7.3.4 Access to Affordable Credit
Majority of informal traders start their informal businesses with their own personal savings
or with contributions from their family members. They also obtain credit from sources
outside conventional financial institutions and often on much more unfavourable terms.
Operations of most financial institutions are tailored to offer credit services to formally
registered businesses which meet criteria such as proper maintenance of books of
accounts, a viable asset base and availability of collateral. Informal traders cannot meet
these criteria.
In order to assist the informal traders to access credit, the government’s challenge will be on
how to:
(i) Facilitate financial intermediation between informal traders’ associations and micro-
finance institutions;
(ii) Solicit sustainable and effective support and participation of key financial institutions
in the provision of credit to the informal traders;
(iii) Ameliorate the risk associated with financing informal traders;
(iv) Facilitate registration of informal traders businesses; and
(v) Facilitate programmes for business registration.
7.3.5 Inadequate Business Skills
Inadequate basic skills in business management and entrepreneurship are a major
drawback in the growth and development of the informal trade. The traditional approach to
vocational and technical training has not addressed their needs because there are no
linkages between training and the related operation of the informal trade. Consequently,
potential informal traders enter the sector ill prepared to effectively contribute to its
success, while existing ones remain latent in their operations.
The key challenge is the integration of training programmes into the country’s education
system and exposure of potential informal entrepreneurs to modern business management
skills.
7.4 Sub sector Strategy and Goals

In order to mainstream the informal trade within the overall economy, emphasis will be
placed on infrastructure development, market improvement, business skills improvement
and enhancement of trade finance through public private partnership. The overall goal
56
entails provision of land on which to construct markets for the promotion of decent,
protected and recognized informal traders.
7.4.1 Infrastructure Development Strategy
The problem of infrastructure development will be overcome by:-
(i) Establishing fully serviced markets in all the urban centres through public private
partnership programmes; and
(ii) Encouraging the private sector to build markets through the processes of Build
Operate and Transfer (B.O.T) and Build Operate and Own (B.O.O) principles.
7.4.2 Market Development Strategy
The market development strategy will entail undertaking the following measures:-
(i) Increasing markets for selected informal traders’ products through enhanced,
effective public and private sector procurement programmes within the formal sector
in partnership with business associations such as KAM, KNCCI and KEPSA; and
(ii) Training the informal traders association on procurement procedures will go a long
way to enhance market access.
7.4.3 Business Skills Improvement Strategy
Strategy
The inadequate business skills among the informal traders will be overcome through:-
(i) Redesigning and institutionalizing business skills development programmes within
the institutes of technology and selected youth polytechnics for owner/managers and
employees of the informal trade;
(ii) Improving capacity building of informal traders associations; and
(iii) Undertaking Capacity building of institutions dealing with provision of business
development services (BDS)
7.4.4 Trade Finance Strategy
The problem of inadequate trade credit to the informal sector shall be addressed through:-
(i) Enhancing financial intermediation between informal traders associations and micro-
finance institutions; and
(ii) Facilitating informal traders associations to form SACCOs for enhancing savings
mobilization and establishing credit guarantee schemes from the mobilized savings
by micro-finance institutions.
7.5 Policy Programme and Projects

To achieve the overall goal for the promotion of decent, protected and recognized informal
traders, the Government will facilitate the implementation of the following programmes and
projects:
(i) Development of physical markets for informal traders;
(ii) Development of Business and market clusters;
(iii) Mounting informal traders’ procurement training programme;
(iv) Development of business linkages and subcontracting programme
(v) Setting up business skills upgrading programme;
(vi) Establishment and management of SACCOs programme; and
(vii) Capacity building for informal traders association programme.
57
7.6 Overall Policy for the Sub-
ub-sector
The overall policy for this sub sector is to focus on mainstreaming the informal trade into the
overall economy by focussing on its growth and graduation into formal trade status through
the provision of business development services.
7.7 Implementation
Implementation Monitoring and Institutional Responsibilities
mainstreaming the informal trade within the overall economy. In particular, the Ministry of
Local Government will lead in the provision of land for the construction of physical markets
for informal traders countrywide. It will also be responsible for providing licensing and
regulatory framework for informal traders. A collaborative approach will be adopted to
address problems of market access with notable key players in the private sector such as
KAM, KNCC&I, KEPSA among others taking the leading role.
Ministry of Finance will facilitate financial intermediation between informal traders
associations and micro-finance institutions while the Ministry of Cooperative Development
will play a leading role in facilitating informal traders associations to form SACCOs to
enhance savings mobilization. Training on business management and entrepreneurship
skills and provision of market information will be undertaken by the Ministry of Trade while
Ministry of Labour will lead in the provision of technical training.
Some of the other collaborating ministries will include Industrialisation, Youth Affairs,
Planning, Public Works, Agriculture, Energy, Science and Technology, and Environment. The
public sector state agencies to participate in the promotion and development of the informal
sub-sector include EPC, KEBS, KRA, NEMA, The private sector organisations that will be
involved at all stages include Jua Kali Associations, KNCCI, FKE, MFIs, SACCOS, KEPSA,
KUSCO, and any other relevant business associations.
58
SECTION D:
TRADE RELATED ISSUES, E-

E-COMMERCE
AND INTEGRATION PLANS
59
CHAPTER 8: TRADE RELATED ISSUES
8.1 Introduction
Introduction
The previous chapters have concentrated on the core areas of international and domestic
trade policy. There are, however, a range of other trade-related policy issues that arise in the
implementation of the identified core programmes. This chapter addresses these other
trade related issues such as consumer protection, competition and Fair Trade. Others
include countervailing and anti-dumping duties to mitigate against trade subsidies and
dumping respectively. Safeguards and remedies, investment related issues, intellectual
property, environmental and biodiversity, gender and labour standards, and trade disputes
settlement mechanisms have equally been covered.
8.2 Consumer Protection

A well functioning market should enhance and protect consumer welfare by effective
consumer protection policies. Such policies are required to protect consumers irrespective
of the level of competition in the market place. As liberalization of the domestic market
deepens, consumer welfare continues to be threatened by the influx of substandard goods
and counterfeits into the country. This calls for effective and well-coordinated intervention
measures to protect consumers.
The institutions responsible for consumer protection in Kenya include; Weights and
Measures Department (W&M), Kenya Bureau of Standards (KEBS), Kenya Industrial
Property Institute (KIPI), Kenya Plant Health Inspectorate Service (KEPHIS) and Ministry of
Public Health among others.
The Weights and Measures Department is mandated to ensure fair trade practices, use of
accurate weighing and measuring equipment in trade and consumer protection under the
Weights and Measures Act Cap 513 and the Trade Description Act Cap 505.
KEBS is mandated to promote trade through standardization in commerce and industry,

provision of testing and calibration facilities, control of use of standardization marks and
undertakes educational work in standardization under the Kenya Bureau Standards Act, CAP
496.
KIPI is responsible for administering industrial property rights, provide technological

information to the public, promotes inventiveness and innovativeness and provides training
on industrial property under the industrial property Act 2001.
KEPHIS is mandated to coordinate all matters relating to crop pests and disease control
under various acts such as Pest Control Products Act 1985 and Plant Control Act Cap 324
among others.
In addition to the above Government agencies dealing in consumer welfare, there are also
private sector agencies involved in consumer protection such as the Consumer Information
Network of Kenya. These agencies are limited in outreach and also lack the necessary legal
mandate to effectively enforce consumer welfare.
60
Constraints and Challenges
The key constraints facing consumer protection include:
(i) Lack of effective and well-coordinated intervention measures to protect consumers;
(ii) Inadequate legal institutional capacity for enforcement; and
(iii) Inadequate consumer protection awareness.
The above constraints have exposed consumers to the effects of sub-standard goods.
The Government faces the challenge to develop effective and well coordinated consumer
protection measures.
Strategy
The Government will strengthen institutional and legislative measures to ensure effective
consumer protection.
Programmes
(i) Amendment of the current legislation dealing with consumer protection;
(ii) Enactment of a Consumer Protection Act;
(iii) Creation of a national consumer protection body to undertake coordination of consumer
protection activities;
(iv) Ensuring effective consumer protection through consumer education and advocacy; and
(v) Operationalization of the Anti Counterfeit legislation.
8.3 Competition
An effective competition policy encourages competition in an economy through preventing
restrictive trade practices and restricting the concentration of economic power. The
restrictive business practices and excessive market concentration tend to induce
abnormally high prices and profits, and low quality and limitations of supply of goods and
services.
The Monopolies and Prices Commission of Kenya, a Department in the Ministry of Finance is
mandated to encourage competition in the economy by prohibiting restrictive trade
practices, controlling monopolies, concentration of economic power and related activities in
accordance to the current Restrictive Trade Practices, Monopolies and Price Control Act cap
504 (1990).
Constraints and challenges

The major constraints facing competition include:
(i) The Act does not adequately provide control of restrictive trade practices, collusive
tendering, monopolies and concentrations of economic powers and for control of
mergers and takeovers; and
(ii) Some economic activities are regulated by specific acts of parliament but are
exempted from the provisions of the Restrictive Trade Practices, Monopolies and
Price Control Act cap 504 (1990). There is therefore no coordination and control over
regulators of these exempted economic activities by the Monopolies and Prices
Commission of Kenya.
61
The challenge to the government will be to ensure a competitive business environment in
Kenya.
Strategy
The government will encourage and ensure an effective, efficient and coordinated
competition regime in the domestic economy.
Programmes
(i) Review the current Restrictive Trade Practices, Monopolies and Price Control Act (1990); and
(ii) Establish a strong autonomous competition authority in to effectively and efficiently
administer the new competition law.
8.4 Fair Trade

Fair trade is based on dialogue, transparency, respect and seeks greater equity among
trading partners. It contributes to sustainable development by offering better trading
conditions. Trading in subsidized products and dumping on the domestic market are among
the key practices that have been associated with unfair trade. Countervailing measures and
anti- dumping duties are among the safeguard measures and remedies to address these
unfair trade practices.
Kenya’s Customs and Excise Act 2001 defines Dumping and Subsidy, provides for the
constituting of an Advisory Committee on Anti-dumping and imposition of dumping and
countervailing duties.
Constraints
The following are the constraints facing fair trade in the country:
(i) Lack of necessary legislation to ensure compliance with the WTO provisions on
safeguards, anti-dumping and countervailing and therefore can only apply the
existing legislation on Dumping and Subsidy on limited basis;
(ii) Lack of strict enforcement of the relevant laws thus leading to unfair trade practices
such as display of merchandize by hawkers at the doorsteps of licensed permanent
business premises thus blocking potential customers from accessing these
premises.
The challenge for the government is to develop necessary legislation to deal with fair trade
and the strengthening enforcement mechanisms.
Strategy
The Government will enhance fair trade practices by enhancing development of legislations
on anti-dumping, safeguard, subsidy and countervailing measures.
Programmes
(i) Establishment of framework for implementing trade remedy measures that is compatible
with WTO provisions; and
(ii) Develop effective enforcement mechanisms on fair trade practices legislations.
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8.5 Investment Issues
The Kenya Investment Authority (KIA), is mandated to promote and facilitate private
investment for both local and foreign investors. Established through the Investment
Promotion Act 2004, the institutional and legislative framework governing investment in
Kenya aims to promote and facilitate investment by providing assistance and incentives.
The incentive packages covering facilitation, production and competitiveness presently

target foreign investors and those producing for export. To mainstream SMEs and domestic
producers into the supply chain will require that similar incentives are extended to this
sector. The government has prioritized improvement of the business environment by
accelerating institutional transformation, facilitating growth through greater trade expansion,
improving productivity of enterprises, supporting entrepreneurship and MSE development.
Whereas Kenya has provided the above investment incentives there has not been remarked
increase in investment. In the recent years investments have declined with some business
enterprises relocating to other countries especially in the neighbouring countries.

Inadequate incentives for local investors including SMEs. The incentive packages covering
facilitation, production and competitiveness presently target foreign investors and those
producing for export.
High cost of power, labour, infrastructural impediments and the cumbersome legal and
Regulatory framework among other factors which need to be addressed to attract
investment.
The challenge for the government is to ensure a conducive investment environment that will
attract local and foreign investors.
Strategy
The government will promote and facilitate investment by providing an enabling investment
environment for both local and international investors; providing modern infrastructure;
establishing investment rules and laws; improving security.
Programme
Develop and improve incentives packages for local and foreign investors including
development of infrastructure, simplifying licensing procedures, reduction of cost of utilities
and provide tax incentives.
8.6 Intellectual Property Rights

Intellectual Property Right (IPR) safeguards the rights of an owner of the intellectual property
through national legislation and international agreements especially concerning copyrights,
patents and trademarks. The effectiveness of protection of intellectual property rights in a
country has substantial effect on technology transfer and economic development. This
therefore creates a need for effective legal and institutional framework to safeguard the
intellectual property rights.
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Kenya has a legal and institutional framework to ensure intellectual property rights
protection, which includes the Industrial Property Act 2001, the Trade Marks Act, the
Copyright Act 2001, the Seeds and Plant Varieties Act, and the Universal Copyright
Convention. The Copyright Act protects literary, musical, artistic, audio-visual works, sound
recordings and broadcasts, and computer programs. The Kenya Industrial Property Institute
(KIPI) is responsible for patents, trademarks and trade secrets.
While Kenya is a signatory to several international and regional intellectual property

conventions, including the World Intellectual Property Organization (WIPO) and African
Regional Intellectual Property Organization (ARIPO), the intellectual property regime is a
relatively recent development in the country. There is limited awareness on IPR systems
among industries and SMEs, a situation which has contributed to Counterfeiting and piracy.
This has negatively affected foreign direct investment and discouraged the growth of local
entrepreneurs whose talents remains unexploited due to piracy.

Inadequate enforcement of intellectual property legal and institutional framework
(i) Lack adequate capacity to effectively deal with intellectual property rights protection; and
(ii) The challenge is to develop adequate capacity, legal and institutional framework to deal with
IPR issues.
Strategy
The government will mainstream intellectual property rights education and awareness into
the country’s education system and strengthen enforcement mechanisms.
Programmes
(i) Strengthen the current legislation on IPR;
(ii) Support IPR institutions through capacity building;
(iii) Sensitize the business community on IPR system; and
(iv) Strengthen and support protection of genetic resources, traditional knowledge.
8.7 Trade and Environment

Kenya is signatory to a number of international and regional treaties and conventions6 on
environment, a number of which are trade related and covering environmental pollution and
depletion of natural resources through dumping of industrial and toxic wastes, biodiversity
and migratory species of wild life, endangered wild fauna and flora, limitation of materials
depleting the ozone layer and causing climatic change. In Kenya, the National
Environmental Management Authority (NEMA), operating under the Environmental
6 Convention on biological diversity; African convention on the conversation of nature and natural resources; Convention for the protecting,
management and development of the marine and coastal environment of the Eastern African Region; Protocol concerning protected areas and wild
fauna and flora in the Eastern African Region; Protocol concerning cooperation in combating marine polluting in cases of emergency in its Eastern
Region; Vienna convention for the protecting the ozone layer; Ramsar convention on wetlands of international importance especially as water lower
habitant; Convention of wild fauna and flora (cites); Convention on the conservation of migratory species of wild animals; Convention on the
prevention of marine pollution by dumping wastes and other matter; International convention for the prevention of pollution from ships; United
Nations law of sea; Lusaka Agreement on cooperative enforcement operations directed at illegal trade in wild fauna and flora; United Nations
convention to combat desertification in those countries experiencing serious drought and / or desertification particularly in Africa; Convention for the
protection of world cultural and National Heritage; Convention for the establishment of Lake Victoria organization; United Nations Framework
convention on climate change ( UNFCCC)
64
Management and Co-ordination Act, 1999, is mandated to exercise general supervision and
co-ordination over all matters relating to the environment and is the principal instrument of
Government in the implementation of all policies relating to the environment.

(i) Inadequate institutional and legal frameworks for compliance with environmental
requirements; and
(ii) Low appreciation of environmental issues related to trade by the stakeholders.
The challenge for the government is to ensure compliance with domestic and international
trade related environmental laws and regulations in addition to increasing stakeholder
awareness.
Strategy
The Government shall facilitate the conservation and protection of the environment
and promote domestic and international environmental friendly trade and investment
activities.
Programmes
(i) Strengthen institutional and legal frameworks;
(ii) Strengthen capacity to implement, enforce environmental laws, regulations,
standards and policies;
(iii) Encourage the private sector to adopt eco-labelling, information exchange and
networking on products and their requirements in terms of production process;
(iv) Encourage private sector to produce environmental friendly products, adopt
environmental friendly packaging materials and use environmental friendly transport
systems; and
(v) Encourage private sector to develop infrastructure facilities on waste management
and disposal of industrial and toxic wastes.
8.8 Trade and Gender

The formal trade sector in Kenya does not offer equal opportunities to both men and
women. Women are concentrated in the informal sector and account for 70 to 80 percent of
persons engaged in petty and informal trading in Kenya. It is therefore impractical to
implement effective trade and investment programmes for the economic and social
development of the country without the full participation of women in the formal trade
sector.

(i) Inadequate legal framework to address discriminatory practices against women; and
(ii) Inadequate access to capital by women owned enterprises due to lack of collateral
since women rarely own property.
The challenge for the government is to remove obstacles that hinder full participation of
women in the economy.
65
Strategy
The government will promote the empowerment and effective integration and mainstream
the participation of women at all levels of trade and investment.
Programmes
(i) Develop laws, regulations and eliminate those that hinder women’s access to financial
assistance including credit;
(ii) Capacity building on national and regional associations of women in business; and
(iii) Develop education programmes to eliminate prejudices against women and promote
gender equality.
8.9 Trade and Labour Standards

Trade and investment activities in Kenya are carried out under the internationally prescribed
labour standards as the country has ratified a number of the International Labour
Organization (ILO) Conventions on labour standards.7
Kenya's labour laws provide safeguards for worker rights and mechanisms to address
complaints of their violation. The labour laws of Kenya are embodied in its Employment Act
(revised 1984) and the Regulation of Wages and Conditions of Employment Act (revised
1980). The Employment Act covers wages, leave, housing, health and welfare, local and
foreign contracts of service, the employment of women and youth, and other administrative
matters. The government through the Ministry of Labour, umbrella labour organization – the
Central Organization of Trade Union (COTU) and the various employers’ Associations,
Federation of Kenya Employers (FKE) implement these laws.

The cost and productivity of labour in Kenya is considered uncompetitive compared to major
competitor countries.
The challenge for the Government is to ensure harmonious labour relations and cost
effective and a productive labour sector.
Strategy
The Government is committed to the internationally prescribed labour standards. It shall
continually safeguard workers rights and provide mechanisms to address complaints.
Programme
Establish a private sector led capacity building programme to improve labour productivity
and competitiveness of the Kenyan labour force to international standards.
7
ILO Convention 87 (Freedom of Association and Protection of the Right to Organise Convention, 1948) and Convention 98 (Right to Organise and
Collective Bargaining Convention, 1949), ILO Convention 100 (the Equal Remuneration Convention, 1951) and Convention 111 (the Discrimination,
Employment and Occupation Convention, 1958), Convention 138 (Minimum Age Convention, 1973) and Convention 182 (Worst Forms of Child
Labour Convention, 1999), ILO Convention 29 (Forced Labour convention, 1930) and Convention 105 (Abolition of Forced Labour Convention, 1957).
66
8.10 Democratization and Trade Promotion
The key pillars of trade and investment promotion include continual progress toward the
establishment of a market-based economy and the rule of law; the elimination of barriers to
trade and investment; implementation of economic policies to reduce poverty; the protection
of internationally recognized worker rights; and the establishment of a system to combat
corruption among others. Kenya has a multi-party political system whose hallmark is
parliamentary democracy. The political pluralism, rule of law and anti-corruption systems in
place attests to commitment on democratization in the country.

Inadequate and weak legal and institutional framework to enhance democratic participation
to ensure a stable micro-economic environment
The Challenge is for the Government to ensure economic, social and political stability for
business to thrive
Strategy
The Government will continue with a democratic system that is issue-based, people-centred,
result oriented and accountable to the public in all trade related issues for the trade sector
to play its crucial role towards attainment of the national development objectives including
the Millennium Development Goals (MDGs) and Vision 2030.
Programmes
(i) Enact and operationalize the legal and institutional framework to enhance
democratic participation; and
(ii) Develop formal and informal civic education programmes and promote open
engagement between government and civil society, as well as the free flow of
information.
8.11 Dispute Settlement Mechanisms

Effective trade dispute settlement mechanisms must not be cumbersome, should have legal
backing and implemented transparently to ensure those involved have trust in the
mechanisms. The main trade disputes settlement mechanisms include the Kenya judicial
system where the Court of Appeal is at the apex, followed by high court and magistrates’ and
Kadhis’ courts. Others are Commercial Courts which deal with commercial disputes and the
Industrial Court which arbitrates disputes labour disputes.
The Public Procurement and Disposal Act provide an alternative mechanism through which
trade disputes arising in the course of Government procurement and disposal will be
arbitrated. The Act has created a Public Procurement Administrative Review Board whose
mandate is to review and arbitrate on dispute that may be referred to it by the aggrieved
parties in course of participating in public procurement and disposal.
The Landlord and Tenant (Shops, Hotels and Catering establishments) Act, Cap 301 controls
the renting and leasing of business premises for a period not exceeding five years. The
Business Premises Rent Tribunal created under the Act arbitrates disputes between the
property owner and the tenant on matters affecting tenancy. At the regional level, EAC and
67
COMESA have trade dispute settlement mechanisms to deal with disputes that may arise
among the Partner States. Under the EAC Custom Union, trade disputes among the Partner
States are resolved under EAC Custom Union (Dispute Settlement Mechanism).
The EAC Competition Act provides a mechanism through which dispute on competition in the
region is resolved. The Act establishes a Tribunal to resolve disputes dealing with
competition.
Disputes in the COMESA are handled by the COMESA Court of Justice which has jurisdiction
upon all matters referred to it pursuant to its Treaty.
On the other hand, trade disputes arising from breach of bilateral agreement are in built in
the respective bilateral agreements and the signatory states have to follow the prescribed
procedures.
Under the WTO, Dispute Settlement Mechanism (DSM) was designed, inter alia, to secure
the ‘rule of law’ within international trade and provide all members with opportunities to
exercise their rights under Multilateral Trade Agreements.

(i) Outdated legal provisions and institutions dealing with dispute settlement i.e.
Landlord and Tenant (Shops, Hotels and Catering establishments) Act; and
(ii) Inadequate human and physical resources such as magistrates’ offices and court
clerks, inadequate trade lawyers and the existence of only one Commercial court in
Kenya which leads to backlogs in hearing of disputes
The challenge is to review existing laws and institutions on dealing with dispute settlement
as well as addressing the capacity constraints in the institutions.
Strategy
The government will create efficient dispute settlement mechanisms and improve the
capacity to handle disputes.
Programmes
(i) Review the relevant legislations; and
(ii) Review and restructure institutions dealing with trade disputes.
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CHAPTER 9: E-COMMERCE
9.1 Introduction
E-Commerce is the use of electronic communications and digital information processing
technologies in business transactions. E-commerce involves the use of applications that run
on the Internet and these applications influence the commercial relationships between firms
and clients.
E-Commerce mainly occurs in three modes, namely: B2B (Business to Business), B2C
(Business to Consumer) and C2B (Consumer to Business). B2B involve services such as call
centres, back office operations, internet marketing, enterprise resource planning (ERP),
information security service, internet advertisement and offshore development. B2C
includes service for mobile phone and car-tracking service; send movie, music, game, e-
mail, shopping mall and net banking. C2B ?
In 2000, Kenya’s internet usage penetration was 0.7 per cent of the population, which has
increased to 3.2 per cent in 2007. The Government projects to increase the ICT penetration
and usage to 20 per cent by the year 2012. This target is premised on the basis of the
World’s internet penetration and usage of 17.6% and if achieved, would provide Kenya with
an opportunity to compete favourably with other countries trading under E-commerce. This
will in effect contribute to the e-commerce goal of enhancing the Digital opportunity Index
from low access of (0.17) to medium access of (0.5).

Currently, ICT issues are covered under various legislation including the Science and
Technology Act, Cap. 250 of 1977, the Kenya Broadcasting Corporation Act of 1988 and
the Kenya Communications Act of 1998. The National Information & Communications
Technology (ICT) Policy of Kenya which is a product of the Economic Recovery Strategy for
Wealth and Employment Creation (2003-2007) was developed by the Ministry of
Information & Communications in January 2006 to stimulate investment and innovation in
ICT; achieve universal access as provided by the Digital Access Index; and Digital
Opportunity Index among other goals.
The Economic Recovery Strategy (2003-2007) identified key ICT-related goals such as
investing in adequate ICT education and training; and reviewing the legal framework to
remove impediments that have discouraged the adoption and use of e-commerce. The ERS
also identified the implementation of tax reductions and tax incentives on both computer
software and hardware to make them affordable to micro-enterprises and low-income
earners; establishing an inter-ministerial committee to incorporate ICT into government
operations; and developing a master plan for e-government.
The Kenya Communications Act of 1998 repealed the Kenya Posts and Telecommunications
Act and established: Communication Commission of Kenya (CCK) as the
Telecommunications, Radio Communications and Postal Sector Regulator; National
Communications Secretariat (NCS) to serve as a policy advisory body; Communications
Appeals Tribunal; Telkom Kenya Limited; and Postal Corporation of Kenya.
69
The Government is committed with the ongoing liberalization of the various market
segments of the telecommunications sector. Towards this end, the Government will inter
alia, has put in place an appropriate regulatory framework and promote competition.
Licenses in the ICT segment include those of Internet service providers; Internet gateway
and backbone services; and Internet exchange point services.
There is however continued need for a comprehensive policy, legal and regulatory
framework to support ICT development, investment and application; promote competition in
the industry where appropriate; ensure affordability and access to ICT nationally; address
issues of privacy, e-security, ICT legislation, cyber crimes, ethical and moral conduct,
copyrights, intellectual property rights and piracy; and support research and development in
ICT.
The telecommunications policy framework focuses on establishing a market structure that

attracts investment in the sector and allows the creation of telecommunications
infrastructure for leveraging national development. The market structure will be reviewed
from time to time in line with changing market needs and technological trends.

The development of E-commerce in Kenya has been hampered by the following key
constraints:
(i) Low levels of Access as given by the Digital Access Index;
(ii) Low levels of ICT usage as given by Digital Opportunity Index;
(iii) Relatively high Internet access costs including connection service fees,
communication fees, and hosting charges for websites with sufficient bandwidth;
(iv) Limited availability of credit cards and a nationwide credit card system;
(v) Lack of clear policies to support development of e-commerce;
(vi) The underdeveloped ICT infrastructure affecting the efficient operations of E-
commerce;
(vii) Lack of legal and regulatory framework for E-commerce;
(viii) High dependence on off-shore hosted content;
(ix) Network security problems and insufficient security safeguards discourage the use
and growth of e-commerce;
(x) Inadequate skilled human resources and key technologies;
(xi) Content restriction on national security and other public policy grounds greatly affects
business in the field of information services, such as the media and entertainment
sectors;
(xii) Cross-border issues, such as the recognition of transactions under laws of other EAC
/ COMESA and other regional trading blocks member-countries, certification services,
improvement of delivery methods and customs facilitation;
(xiii) The relatively low cost of labour, which implies that a shift to a comparatively capital
intensive solution (including investments on the improvement of the physical and
network infrastructure) is not apparent;
(xiv) Lack of ICT consumer Network to facilitate and stimulate demand for modern quality
e-services;
(xv) Insufficient telecommunication infrastructure and internet connectivity;
(xvi) Absence of adequate legal and regulatory frameworks;
70
(xvii) Limited availability of credit cards and a nationwide credit card system and
(xviii) Lack of clear policies to support development of e-commerce.
Some of the main challenges in the development of E-commerce in the country are as
follows:
(i) The formulation and implementation of national ICT strategy given the complexity
and cross cutting nature of ICT and the need for a holistic approach It is difficult to
create awareness at the political level or to adopt a state-of-the-art regulatory
framework;
(ii) Promotion of use of e-commerce by business community taking into consideration
their low levels of awareness, low level of access and usage of ICT; and relatively high
Internet access costs; and
(iii) Promoting the use of credit cards considering the level of sophistication of the
telecommunication system, security of card transaction and literacy of the
population.
9.4 Sub-
Sub-Sector Strategies and Goals
Kenya’s 2030 vision for e-Trade is to “Mainstream e-trade within the overall economy”. In
order for this to be achieved, the government will focus on infrastructure development;
market improvement; skills and technology upgrading; improved financial transactions; and
improved Public Private Partnerships for the sub-sector.
9.4.1 Infrastructure
Infrastructure Development Strategy
In order to promote infrastructure development the following measures will be undertaken:
(i) Finalize the installation of the fibre optic cable in all urban centres in Kenya to
increase access and connectivity to the international telecommunication network;
(ii) Liberalize network infrastructure, promotion of broadband competition and
liberalization in network services and applications.;
(iii) Assemble computer hardware and software locally to ensure availability of quality
computer goods and services.; and
(iv) Integrate rollout of affordable quality broadband networks in the development of
industrial clusters and special economic zones to promote B2B e-commerce.
9.4.2 Market Improvement Strategy
The market improvement will be undertaken through the following measures:
(i) Establishment of a legal and regulatory framework to support electronic transactions;
and
(ii) Development of an E-commerce policy.
9.4.3 Skills and Technology Upgrading Strategy
In skills and technology upgrading the following will be undertaken:
(i) Establishing frameworks to learn new technology and encourage higher level e-
business skill formation in conjunction with education institutions, businesses and
individuals; and
(ii) Integrating e-commerce in all public and private sector institutions of higher learning
and tertiary colleges.
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9.4.4 Public Private Partnership Improvement Strategy
As part of the Public Sector reforms and to improve the PPP strategy, the government shall
commercialize non-core functions and develop Business Process Outsourcing mechanisms
to provide benefits for use of professional human resource, cutting edge technology and
cost savings.
9.5 Programmes
rogrammes
To achieve the overall goal for the execution of the strategies for e-commerce, the
Government will facilitate the implementation of the following programmes:
(i) Integration of Programmes for promotion of E-Commerce;
(ii) Hardware and software development businesses;
(iii) E-Trade reform programme;
(iv) Digitization of product information;
(v) Standards and quality assurance to support e-trade;
(vi) Capacity Building for e-commerce;
(vii) Business Re-engineering Programme; and
(viii) B2B Programmes and Institutional linkages programme.
9.6 Overall Policy for the Sub-

ub-sector
Integrate e-commerce within the overall economy.
9.7 Implementation Monitoring and Institutional Responsibilities

The Ministry of Trade will coordinate the proposed policy programme and projects by
mainstreaming e-commerce within the overall economy. In particular, the Ministry of
Information and Communication will lead in facilitating the infrastructural development,
Market improvement, Skills and technology upgrading, promoting and facilitating Public
Private Partnership to enable innovations and competition to accelerate the growth of ICT
industries.
Some of the other key players will include Ministry of Planning and National Development,
Ministry of Finance (GITS), Ministry of Immigration & Registration of Persons, Ministry of
Transport, Communication Commission of Kenya (CCK), Cabinet Office (Directorate of E-
Government), Postal Corporation of Kenya (PCK), Telecom Kenya, Department of Remote
Sensing and Remote Surveys and Private sector
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CHAPTER 10
1 0: INTEGRATION PLANS
10.1 Integrating International and Domestic Trade Policies
For trade sector to play its important role in economic growth, industrialization and hence
poverty reduction, several elements need to work together in synergy: better national
development strategies that integrate trade as a key component; increased and effective
national and international financial and technical assistance for developing production and
trade capacities; and a more enabling national and international trade environment.
Improvements in the international and domestic trade will have an impact on economic
growth and poverty reduction only if the government has sound integration plans for both
the international and domestic trade policies. The previous chapters have discussed the
ways in which the international trade policy and domestic trade policy could be supportive in
the economic development. This chapter focuses on the other key elements of a National
Trade policy: linkages between national and international trade policies; prioritisation and
sequencing of issues; monitoring and evaluation; overall institutional structures and
responsibilities and the review mechanisms.
10.2 Linkages between

between International and Domestic Trade Policies
As earlier noted (Formulation of an integrated trade Policy), trading across national
boundaries involves issues that are both similar to and different from those involved when
trading inside a country. There are however, linkages of common features of trading within
and across national boundaries and the distinctive features and issues arising in
international and domestic markets that need to work in synergy.
The International Trade Policy covered effective participation in trade negotiations, analysis
and implementation of multilateral and regional/bilateral trade agreements, international
trade policy mainstreaming or domestication and technical standards; trade facilitation,
including tariff structures and customs regimes; support to regional trade agreements and
human resource development in trade, all of which have a close bearing to the domestic
trade activities. Concerted efforts to undertake research at the national level with the
objective of ensuring that international trade policy decisions, including the WTO negotiation
positions, regional and bilateral trade agreements, are based on sound analysis of the costs
and benefits of different options for the domestic economy.
The Domestic Trade Policy has mainly focused on business development and activities
aimed at improving the entire business climate. Among the key constraints limiting export
growth include lack of supply capacity, inadequate technology to meet standards and the
generally high-cost business environment. Other issues covered include capacity with
respect to business management skill; access to trade finance; and trade promotion in the
productive Sub-sectprs, including at the institutional and enterprise levels. All of these are
not only unique or limited to domestic trade but also equally important for international
trade activities to thrive. In fact, the role of domestic institutions in the implementation of
trade promotion and regulation measures is indeed crucial because international trade
policy raises domestic issues and vice-versa.
There is a shared importance attached to having institutions and infrastructure, which
supports the development of markets; encouraging information flows about market
73
opportunities, building confidence between buyers and sellers, and allowing speedy and low
cost distribution of goods or provision of services. All these efforts on the development of
the infrastructure are deemed to assist both international and domestic trading.
The integration, linkage and synergy of both domestic and international trade policy are
important ingredients in achieving the overall aim of making Kenya a competitive and
efficient market and export-oriented economy. Kenya’s producers will be internationally
competitive if they operate in competitive, efficient and well-organized domestic market
conditions as the competitive challenge in the home market is a stimulus to preparation for
exporting. The SMEs that account for the bulk of businesses in the country shall benefit from
the certainties provided by the international trade rules provided that they are facilitated in
terms of accessing information and capacity to take the export market opportunities arising
from international trade agreements.
The policy programmes and their implementation take cognisant of supportive relationship
between trade and other policies at both national and international levels with a view to
achieving the economic growth objectives. There is therefore need for coherence at the
national level, which calls for the adoption of sound complementary policies by government
to manage for instance economic liberalization policy as well as ensuring that both
international and domestic trade policy is informed by other national policies. The
government, development partners through their development assistance and the private
sector shall work towards building the institutional and trade capacity needs to benefit from
increased trade and better market access.
10.3 Relationship to Industrial,

Industrial, Agricultural, Services and Development Strategies
There is a close complementary relationship between trade strategy and each of the other
four strategies: the Industrial, Agricultural, Services and Development Strategies in
propelling the economy to a 10 per cent growth rate and making Kenya a globally
competitive nation as espoused in Vision 2030. Kenya’s economic policy is to have an
export-led growth through the private sector participation, while the government will play a
facilitative role by creating enabling environment for trade, industrial, agricultural and
services expansion and growth.
a) Industrial sector
The manufacturing sector is still largely inward-oriented, with part of the production exported
to regional markets. Factors that have hampered the development of Kenya's
manufacturing sector include the weakness of infrastructure (shortfalls in power and water
supplies, telecommunication, roads and rail, and port facilities); high interest rates; the
lack of industrial space; inadequate managerial, technical, and entrepreneurial skills; weak
links between research institutions and manufacturers, i.e. between suppliers and users of
research; relatively low value added; underdeveloped legal information culture and the
continued existence of irrelevant, outmoded, and anti-market laws and regulations; and
unpredictable and wide discretionary powers of administrators of laws and regulations.
Notwithstanding the past difficulties experienced by Kenya’s manufacturing sector, it still will
have to play a critical role in the diversification and value addition of trade products and
74
thus propelling the country into a globally competitive nation. These linkages will be realized
through:
(i) Change over to the use of the state-of-the-art technology;
(ii) Attracting foreign direct investment;
(iii) Enhancing backward and forward linkages with the agricultural and services sectors;
(iv) Production of agro-industrial exports with competitive advantage;
(v) Significant investment in infrastructure;
(vi) Development of a highly skilled workforce;
(vii) Investment in large projects with large social economic returns; and
(viii) Taking advantage of the various government reform programmes.
b) Agricultural sector
Agriculture remains a key sector and the backbone of Kenya's economy despite the
continuous reduction of its contribution to GDP over the last few years. . About 80% of the
population lives in the rural areas and derives its livelihood largely from the sector. The
sector has been constrained by inappropriate legal and regulatory framework; inaccessibility
to affordable credit; intermittent floods and droughts; and poor infrastructure, among others.
The backward and forward linkages to agriculture lie in improvement of agricultural

productivity spurred by the increased demand of the manufacturing sector as it transforms
to the production of agro-industrial exports and hence create the desirable value addition,
while relating to the improvements in access to global markets and expansion in export
trade.
In 2004, Kenya unveiled its Strategy for Revitalizing Agriculture (SRA) 2004-14, with the
objective of transforming agriculture into a profitable, commercially oriented, and
internationally competitive activity, capable of attracting private investment, so as to reduce
poverty, create high quality employment, increase value-added and provide food security.
Since the launch of the SRA, there have been remarkable improvements in value addition in
dairy, coffee, tea, beef subsectors with subsequent diversification and increase in exports of
these products. The ongoing reforms in the cotton and pyrethrum subsectors will lead to
value addition and thus greater linkages between trade and agriculture.
c) Services sector
The Services Sector is increasingly becoming the most important sector of the economy
contributing 60% of GDP and 68% of the total employment Kenya has a relatively liberalized
services sector through the commitments made at WTO and through unilateral liberalization
and privatization. The key service sectors include tourism, financial services, communication
and transport on which Kenya has made specific commitments in WTO.
An emerging area of the services subsector is the Business Process Outsourcing/Offshoring

(BPO) with great potential for growth to serve as an information hub for the manufacturing,
agricultural, financial and trade development. For this to take place, the basic infrastructure
of low cost and reliable telecommunications and energy will have to be in place on a stable
basis; generation of a talent pool of young Kenyans through deliberate emphasis on
university programmes in ICT, engineering and commerce as well as specific training at
75
other institutions; and initiatives to support BPO through marketing and promotion, and the
design and incentive framework.
The financial services sector, though still significantly small in comparison with the global
financial centres, plays a crucial role in the provision of financial services for investments in
manufacturing, agriculture, trade as well the services sector investments. One of the critical
issues in the financial services strategy is the need to enhance long-term finance, as
evidence is available that the economy is in greater need of medium and long-term finance
for its productive sectors.
c) Development Sector
The development sector embraces the social economic and political dimensions of the
vision 2030. It cuts across the industrial, Agricultural and services sectors. New
technologies products and markets will appear before 2030 that Kenya can ill afford to
ignore. Besides our traditional markets, the trade policy must take stock of the
unprecedented developments that we wee in Asia. Kenyan economic sectors and our
investors may strike out in directions we cannot fully predict today. Such is the essence of
globally competitive markets. This calls for a pragmatic approach to development by Kenya,
constant monitoring of both internal and external developments and a political will to make
changes rapidly so that our economy does not lose any ground.
10.4 Prioritization and Sequencing of Issues

The following issues have been identified and sequenced as follows;
(a) Policy and legislative strategy to address:

(i) Un-conducive licensing and regulatory framework due to multiple and
cumbersome licensing procedure;
(ii) Strengthening the Business Reform Regulatory Unit;
(iii) Review of outdated trade legislations that impact negatively on trade
development; and
(iv) Unfair trade practices such as dumping, import surges and influx of counterfeit
and sub standard goods.
(b) Infrastructure development strategy to address:

(i) Infrastructure needs and development;;
(ii) Inadequate and poorly serviced business premises; and
(iii) High transportation costs, telecommunications and web access, electricity supply.
(c) Institutional Strengthening Strategy to address:

(i) Capacity Building Strategy for trade promotion experts/facilitators;
(ii) Human capital development;
(iii) Skill requirements for export production and marketing; and
(iv) Inadequate business management skills.
(d) Market Development Strategy to address

(i) Inadequate Supply capacity;
(ii) Strengthening supply chain Strategy;
76
(iii) Access to Markets and Quality of Products;
(iv) Conformity and compliance with technical requirement;
(v) Kenya’s penetration of priority country markets;
(vi) Negotiating improved market access;
(vii) Implementing trade agreements; and
(viii) Improving export policies.
(e) Trade finance support measures to address:

Access to affordable credit by traders.
10.5 National Trade Policy Monitoring and Evaluation

To determine the relevance and fulfilment of objectives, development efficiency,
effectiveness, impact and sustainability of the on-going or completed projects, programme
or policy, design, implementation and the results of the National Trade Policy, the
government shall undertake periodic monitoring and evaluation. Monitoring shall entail a
systematic collection of information to assess progress towards the achievement of National
Trade Policy objectives, outcomes and impacts.
Kenya’s Vision 2030 provides the overall framework for developing the National Monitoring
and Evaluation (M&E) system to provide feedback on the effectiveness of the
implementation of the economic, social and political pillars. The Ministry of State for
Planning and National Development (P&ND) has developed a National M & E system, which
has been rollout to the line ministries including the Ministry of Trade
The National Trade Policy Monitoring and Evaluation (M&E) shall be used to signal potential
weaknesses in programme design, allowing adjustments to be made and will be
instrumental in checking any changes (positive or negative) to the target groups for instance
the SMEs, informal traders, retailers, distributors and wholesalers that may be resulting
from programme activities. The means of verification will include sectoral annual progress
reports, statistical abstracts, economic surveys and other trade review papers. The overall
monitoring and evaluation will remain a key responsibility of the Ministry of Trade as the
coordination Ministry but on specific activities, monitoring and evaluation will be an internal
management activity conducted by the implementing agencies.
The National Trade Policy M&E system shall as much as possible take participatory
approach. This will allow the active engagement of stakeholders in order to ensure that all
information collected and analyzed is used to improve the planning and implementation
process of the Trade Policy. Furthermore, the implementation of the M&E system should
render itself open for transparent scrutiny in many aspects including data collection,
analysis, storage, presentation and utilization. It is important that the establishment of the
National M&E system should take place parallel to the formulation of the Trade Policy
Implementation Plan.
The Ministry of Trade in consultation with the key stakeholders will play a key role in
providing output indicators to quantify the measures of progress towards the intended
inputs, outputs, outcomes and impacts of the National Trade Policy programmes or
strategies. The indicators, which should be independent of possible bias of the observer,
77
and fulfil the SMART criteria by being ‘Specific, Measurable, Achievable, Relevant and Time
bound’, will be quite instrumental in assessing the quantitative and qualitative impact of
National Trade Policy and its development efforts.
10.6 Overall Institutional Structures and Responsibilities

The success of trade policies in most countries, have largely been attributed to an effective,
coordinated and functioning institutional structures characterized by a strong political will
and commitment by the top policy making organs to take firm decisions on trade growth and
development issues. This arises because trade activities are crosscutting in nature and
therefore spread in different ministries and institutions, which have significant bearing on
the trade promotion and development, that is, a number of factors and influencing
measures are not directly within the purview of Ministry of Trade.
This section briefly highlights the inherent weaknesses of the current institutional structures
and responsibilities that have impeded on the implementation of the past and current trade
policies. It equally sets out an implementation framework of the National Trade Policy;
comprising the institutional arrangements and the structures. The implementation
framework has been designed to take into consideration the factors that have hindered the
development of international and domestic trade in Kenya.
(i) Weaknesses of the Current Institutional Structures and Responsibilities

The current policies on trade in Kenya are scattered in various policy
documents, legislations and institutions (Annex 1) hence, the need for a
coherent national trade policy. The current Ministry institutional structure (Fig
a) is inherently inadequate in both institutional capacity and legal backing
which have significantly contributed to the poor co-ordination and
implementation of the past and even the present trade policies.
The scenario has often led to conflicting pronouncements, rules, regulations

and practices affecting trade, which has minimized the impact of trade
policies and their contribution to economic growth and development. The
ineffective coordination of various Ministries and institutions has resulted in
duplications of promotional efforts and inefficiencies in resource utilization.
(ii) Proposed Institutional Structures and Responsibilities

To ensure a systematic and consistent approach to the implementation and
the use of the National Trade Policy instruments and achieve the set broad
objectives, it is imperative to create a vertical, apex institution that will provide
leadership, allocate resources, set targets, oversee and synchronize the
activities of all the different institutions that play a role in the trade promotion.
Without such vertical co-ordination of stakeholder activities, it will be difficult
to apportion failure or success to any particular institution and thus secure
accountability.
The proposed framework is structured to provide three layers of

responsibilities in the promotion of trade development. The apex body will be
the top most organ providing leadership and vision. A technical team to
78
evaluate the technical viability of the policy innovations will back the
structure. The decisions of the apex body will be implemented by relevant
institutions with the Ministry of Trade and Industry carrying out the monitoring
and coordination and reporting to the apex body.
The implementation structure provides a framework for both top-down and bottom-up
approach to issues that would arise during the implementation of the policy. The
implementation framework also provides for an all-inclusive participation by the public
sector, private sector, universities and research institutions and the civil society. This will
enable complete ownership and provide the various stakeholders an opportunity to have an
impact on determining priorities for action.
The Implementation Matrix (Appendix…) will guide the implementation of the National Trade
Policy. The implementation matrix has defined the actions to be undertaken and the
respective agency to do it known as collaborators. In each case the agency or agencies with
most immediate responsibility are specified and a timeframe for implementation given.
Actions required are identified for relevant strategic issues and strategies in this policy.
10.7 Institutional Arrangements

Arrangements
10.7.1 The Role of the Government
The Government's role is to provide an enabling policy environment, namely, providing and
maintaining essential infrastructure, dealing with insecurity perception, investing in human
resource development and basic welfare, guarding against human exploitation and
environmental degradation, diligent pursuit of Kenya’s interests in International Agreements
and Relationships, provision of information on resources, and technology and markets. The
enabling policy environment will also facilitate the creation of a competitive industrial base
that will spur industrialization, investment and trade expansion.
The government will also pursue the following policies to promote industrial development in
the country and speed up the process of realization of the Vision 2030.
(i) Maintain a stable political and economic climate that generates business confidence,
protects property rights and upholds the rule of law and administration of justice;
(ii) Provide institutional support in the development of competitive products;
(iii) Provide administrative and social services, such as education and training, and health
through partnership with the private sector. Where possible, beneficiaries of such
social services will be called upon to contribute towards their provision;
(iv) Provide and maintain the basic infrastructure at reasonable cost to consumers.
Involvement of private sector operators in the provision and management of
infrastructure will be encouraged;
(v) Catalyze increased domestic investments through new industries and continuous flow
of new foreign direct investments into the country. In pursuance of this, specific policy
objectives, strategies and flagship projects have been designed to create inter-industry
linkages, development of small scale industries through linkages, subcontracting, and
entrepreneurship development among others;
(vi) Enhance the participation of civil groups and private sector organizations in the
decision making process by encouraging regular dialogue; and
79
(vii) Review Research and Development Institutions and their current mandates against
the needs of the development of the nation.
In order to create the necessary conditions for the implementation of the policies articulated
here, the current reforms of the civil service, to strengthen implementation capacities and
induce efficiency, will be completed. There will be a continuous review of government structure
and operational procedures with a view to improving service delivery. Clear responsibilities and
lines of authority will be established in order to ensure speedy and efficient implementation of
strategies articulated in this policy document as indicated in figure 1 below.
80
The institutional arrangements will facilitate the various stakeholders to participate
effectively through the following institutional structures:
Figure (a)
CABINET
N. E. S. C.
MINISTRY OF TRADE
COLLABOR
UNIVERSITIE ATING
S, RESEARCH MINISTRIES
PRIVATE
INSTITUTION SECTOR AND
S AGENCIES
TECHNICAL ARM OF
COORDINATING MINISTRY (MOT)
CONSULTATIVE FORUM
10.7.2 The Cabinet

The Cabinet provides the vision, political leadership and direction for National Trade Policy.
It will approve and ratify decisions made at the Trade Commission. As the President chairs
the cabinet, decisions that require to be taken by respective Ministries can then be
instituted through directives from the cabinet.
10.7.3 The National Economic and Social Council (NESC)
(NESC)
The NESC Council is a standing committee comprising of eminent persons with diverse
experience, knowledge, and skills that is chaired by the President or Hon. Minister for
Finance in his absence. The committee, which was formed through the Kenya Gazette
81
Notice No. 7699 of September 24, 2004, provides expert advice on economic and social
matters to the President and the Cabinet.
The NESC forum identifies and discusses policy issues on the basis of the prevailing and
prospective economic circumstances and trends; monitors and assess whether current
government programmes, activities, and policies are delivering targeted performance and
results; and monitors and assess current policy issues where they are identified and
discussed with a view to providing feasible recommendations. By virtue of its nature, the
council will provide advice to the Trade Commission on economic matters related Trade and
Industry growth and development.
10.7.4 Ministry of Trade
The ministry will perform the following functions:-
(i) Coordinate trade development in all sectors in Kenya and negotiations bilaterally,
regionally and in the Multilateral Trading Systems (World Trade Organization, WTO);
(ii) Generate policy innovations that will accelerate trade development in the country;
(iii) Advice the Government on the strategic trade development models to pursue in light
of the dynamics in the international business arena;
(iv) Through the relevant specialized agencies, direct research on thematic issues
directly affecting trade development and propose mitigation or enhancement
measures; and
(v) Receive, synthesize and evaluate policy proposals from the Trade Consultative
Forums and make appropriate recommendations to the Cabinet for approval.
10.7.5 Collaborating Ministries and Agencies
These include implementing Ministries, Agencies and Business Associations that are
concerned with trade growth and development. The Ministry of Trade will continue to work
closely with these Ministries, Agencies and Business Associations to ensure the
implementation of strategies outlined in this policy remain focused to address the issues
related to trade and industry sector. To further ensure participation of all stakeholders in
formulation and implementation of strategies and policies that will ensure successful
implementation of the policy, the Ministry will continue organizing consultative forums from
time to time. This will help refocus implementation of strategies which may have not gone
according to plan.
10.7.6 The role of the Private Sector
The private sector, through its umbrella associations, will be encouraged to sensitise its
members on the importance of the policy towards trade development both locally and
internationally. They will be encouraged to actively participate in the deliberations of the
Sector Working Groups within the consultative forum. This will enable them to purposefully
articulate their priorities for investing in domestic and international trade. They will also be
engaged in policy implementation process under the Public-Private Partnerships as the
policy recognises the private sector as the engine of economic growth. Some of the private
sector organizations include; KEPSA, Kenya Association of Manufacturers (KAM); Kenya
National Chamber of Commerce and Industry (KNCCI); Micro, and Small Enterprises
Association of Kenya (MSEAK); Federation of Kenya Employers (FKE), Central Organization of
Trade Unions (COTU) among others.
82
10.7.7 Universities, Research and Tertiary Institutions
The policy recognizes that the future of trade development will be highly dependent on
innovation, technology transfer; and research and development activities both locally and
internationally. This forum will comprise representatives from the public and private
universities, research and tertiary institutions. The Kenya’s trade development process in
the area of negotiations will be informed by extensive research both locally and
internationally. The forum will advise the Technical Arm.
10.7.8 The Technical Arm
The technical arm will comprise public and private sector experts in fields such as finance,
broad infrastructure, research and technology, SME development, trade and economic
integration initiatives and legal and business regulations. They will offer professional
services in their respective fields to the Ministry, as and when required. The Ministry,
through the technical committee will undertake research; provide technical inputs for
submission to the Ministry for consideration. The Technical Arm will co-opt any member on a
case by case basis to handle specific issues or requests requiring further expertise. They will
also ensure that any technical work is handled before forwarding to the Ministry for
necessary action.
10.7.9 Consultative Forum
This is a forum where the public and private sectors make deliberate effort to share the
concerns and give suggestions on how they can be solved. This will include issues in the
policy, emerging trade and industry issues and act as a focal point for Technical Arm to
collect and synthesize views. The Consultative forum will be designed, where necessary, to
address sector specific issues, or focused group discussions. The Consultative forums would
comprise members from Public Sector, Private Sector, Civil Society and the Development
Partners.
10.7.10 Review Mechanisms
The National Trade Policy will be reviewed at least after every five years or as need arises
through a consultative process.
83
REFERENCES
1. Kenya Vision 2030

2. The First Medium Term Plan(MTP)
3. Economic Surveys
4. World Trade Organization (The Legal Texts)-The Results o the Uruguay Round of
Multilateral Trade Negotiations
5. World Bank Report on Investment Climate in Kenya
6. The East African Community Trade Policy Review
7. Voluntary Peer Review on Competition Policy: Kenya
8. Ministry of Trade Strategic Plan
9. The Draft Industrial Policy
10. Sessional Paper No. 10 of 1965 on African Socialism and its application to Planning
in Kenya
11. Sessional Paper No.1 of 1986 on Economic Management for Renewed Growth
12. Investment promotion Centre (2004,Kenya at a glance, Nairobi)
13. WTO (2000), Trade Policy Review-Kenya, Geneva.
14. Private Sector Development Strategy (PSDS)
15. The Draft National Trade Policy 2007
16. Weights and Measures Act
17. Standards Act
18. Trade Descriptions Act
19. Industrial Property Act
20. Copyright Act, 2001
21. Tanzania Trade Policy
22. Ghana Trade Policy
84
trade--related laws
Annex 1: Institutions Coordinating Trade and Main trade
Area Ministries/Organisations
Ministries/Organisations Law Core Activity Organisations in private
in Public Sector sector and civil society
and International
Organisations
Customs Min. of Finance KRA, EAC Protocol, 2005 Customs KIFWA
EAC Customs Management administration
Act, 2004
Customs and Excise Act
(Cap. 472), revised edition
2000
Finance Act, 1999
Import/Expor KRA, Min of Trade, Min of Import, Exports and Trade KAM, KEPSA, WCO,
t control Finance Essential Supplies Act (Cap. administration KEBS, EPC, EPZA,
502)
AG Trade Disputes Act (Cap. Arbitration
234), 1991
MOA/KEPHIS Plant Protection Act (Cap Research/standard
324), s
MOA/KEPHIS Agricultural Produce (Export) Research/standard
Act (Cap 319) s
Licensing of Min of Local Government Local Government Act Cap Licensing
businesses 265
Min of Immigration Aliens Restriction Act, 1985 Work Permits
AG Companies Act (Cap. 486), Registration
1978
Min of Labour Factories Act (Cap. 514), No. Safety
38 of 1950
AG Bankruptcy Act (Cap. 53),
1930
Min of Local Government Physical Planning Act (1996) Business citing and
building codes
Min of Lands Government Land act Coordinates the
(cap280) development of
land policies
Taxation Min of Finance Income Tax Act (Cap. 470), Revenue collection
1989
Min of Finance Value Added Tax Act (Cap. Revenue collection
476), 1989
Min of Lands Stamp Duty Act, 1982 Revenue collection
Exchange Min of Finance/CBK Exchange Control Act, 1994 Regulation
Rate
Sanitary and MOA/PCPB, Pest Control Products Act, Disease control

phytosanitary 1985
measures DVS Meat Control Act, 1977 Public health
inspection services
to meat exporters
DVS Dairy Industry Act Cap 336, Quality control
DVS Fertilizers and Animal Quality control
Foodstuffs Act (Cap 345),
1977
DVS, Animal Disease Act (Cap Disease control
364), 1972; revised, 1989
KWS Kenya Wildlife Act Conservation

Kenya Vaccine Research
Production Institute Animal Disease Act (Cap
(KEVEVAPI) 364), 1972; revised, 1989
Min of Environmental Management Sanitary standards
Environment/LVEMP and Coordination Act (EMCA)
Min. of Animal Disease Act (Cap Research
85
and International
Organisations
Livestock/International 364), 1972; revised, 1989
Centre for Insect
Physiology and Ecology
(ICIPE)
KEPHIS, HCDA Plant Protection Act (Cap standards KFC
324), 1937; revised, 1979
MOA Seeds and Plant Varieties Quality control
Act (Cap326),
MOH Public Health Act (Cap. 242) Health safety
Fisheries department. Food, Drugs, and Chemical Food safety
Substances Act (Cap. 254)
KARI Research
KEBS Fish Quality Assurance Standards SGS, BIVAC,
Regulations (2000)
Standards Min of Trade/KEBS, Standards Act (Cap. 363), Standards SGS Kenya Limited,
National Standards 1981 Veritas Quality
Council (NSC), Kenya International Kenya
National Accreditation (BVQ) Limited, and CVA
Service (KENAS) International
Fresh Producers
Exporters Association of
Kenya (FPEAK)
NEMA Environmental Management Environmental
and Coordination Act (EMCA) impact assessment
Min of Agriculture(MOA) Suppression of Noxious Agricultural Policy Kenya Agricultural
Weeds Act (Cap 325), The and Services Research Institute
Agriculture Act,
Act Cap 318 National Food (KARI)*.
Policy Kenya Plant Health
Crop Production Inspectorate Service
and Marketing (KEPHIS).
Pests and Diseases Agricultural
Control Development
Agricultural Corporation.
Extension Services Agricultural Finance
Corporation.
Nyayo Tea Zones
Development
Corporation.
Tea Research
Foundation.
Coffee Research
Foundation.
Kenya Sugar Board.
Coffee Board of Kenya.
National Cereals and
Produce Board (NCPB).
Kenya Seed Company.
Horticultural Crops
Development Authority
(HCDA).
Pyrethrum Board of
Kenya.
Kenya Sugar Research
Foundation (KESREEF).
Tea Board of Kenya
Ministry of Labour and Ecolalbeling/Labour Standards
Min of Environment standards/ environmental
standards
86
and International
Organisations
Government Chemist Testing Private laboratories
KDB Dairy Industry Act, Cap. 336 Processing, Private processors
Milk Marketing
Processors/Marketers
Labour Min of labour Wages and Conditions of COTU
Employment Act (1951, with Promotion of self FKE
subsequent amendments) employment in Labour organisations
Employment Act micro and small National Social Security
Labour Relations Act enterprises Fund (NSSF
Labour Institutions Act
Min of Immigration Immigration Act Work Permits

Foreign Min of Finance Constitution of Kenya
investment (Section 75), 1963
Min of Finance Investment Promotion Act, Investment
2004 promotion
Min of Housing Housing Act, 1990 Settlement
Min of Lands Land Acquisition Act, 1983
AG Companies Ordinance Act LSK
(Cap. 486), 1959
AG Investment Disputes LSK
Convention, 1967
AG Partnership Act (Cap. 20 and Registration LSK
30)
AG Arbitration Act, No. 4 of LSK
1995
Privatization Min of Finance Privatization Act, 2005 Divestiture
Export
Export Min of Industrialisation Export Processing Zone's Act Production and Private investors
processing (Cap. 517), 1991 marketing
zones
Government Min of Local Government Local Government Act, 1998 Procurement

procurement Min of Finance Sale of Goods Act, 1981
Min of Finance Government Contracts Act,
1979
Min of Public Works Architects and Quantity
Surveyors Act, 1978
Min of Finance Public Procurement and Procurement
Disposal of Public Assets
Bill, 2005
Intellectual Min of Industrial Property Act, 2001 Patents
property Industrialisation/KIPI
rights MOA Seeds and Plant Varieties Patents
Act (Cap. 326), 1991
AG Trade Marks Act, 2002 Trade marks
AG Statute Law (Repeal and
Miscellaneous Amendment
Act), 1980
Min of Higher Education, Science and Technology Act
Science & Technology (Cap. 250), 1977
Min of Patents and Designs Patents
Industrialisation/KIPI (Convention Countries)
Order, 1971
Min of Copyright Act, 2001 Patents

Industrialisation/KIPI
87
and International
Organisations
Competition Min of Finance Restrictive Trade Practices, Competition
Monopolies and Price
Control Act (Cap. 504), 1990
AG Arbitration Act, 1985 Dispute settlement
Agriculture Tea Board of Kenya Tea Act (Cap. 343), 1950 Marketing - Kenya Tea Growers
and related (TBK) Representing large Association (KTGA).
activities and medium sized
farms
National Tea Representing
Development Nyayo Tea Zones
Corporation (NTDC)
Kenya Tea Development Marketing on Kenya Small Tea
Agency (KTDA Ltd) behalf of Growers Association
smallholder tea (KSTGA)
farmers Kenya Union of Small
Scale Tea Owners
(KUSSTO),
East African Tea Trade Societies Act 1957 Representing tea Tea Packers
Association (EATTA). traders East African Tea Trade
Association (EATTA)
MOA/ Sugar Act, 2001

Kenya Sugar Research Research Kenya Sugar Millers
Foundation (KESREF) Association (KESMA
MOA HCDA Act Processors, Producers,

Marketers
International NGO’s
Min of Cooperative Coffee Act, 2001 production,
Development processing,
Coffee Board of Kenya marketing and
(CBK) regulation
Kenya Coffee
Development Authority
(KCDA)
Nairobi Coffee Exchange Kenya Coffee Producers
(NCE) and Trade Association
(KCPTA)
Kenya Coffee Research Research in
Foundation prevention of
mould formation
Coffee Research Research
Foundation (CRF)
Forests Act, 1992
Agriculture Finance Finance
Corporation (AFC)
Fisheries Department of Fisheries Fisheries Act, 1972 enforces AFIPEK (Kenya Fish
legislation, processors and Exports
facilitates Association)
investments, SGS
collects revenue Community Groups
Min of Fisheries Exclusive Economic Zone
(foreign fishing craft)
regulations 1990
Min of Fisheries Marine Zones Act cap
371(1991).
Kenya Marine and Science and Technology Act Research
88
and International
Organisations
Fisheries Research
Institute (KMFRI)
Kenya Wildlife Services KWS Act Fish protection
(KWS)
Moi University and Training

several polytechnics
Livestock Min of Livestock/Kenya Research Kenya Livestock
Agricultural Research Marketing Council
Institute (KARI)
KETRI, Disease control
KWS Wildlife Conservation and Conservation Private companies
Management Act (Cap. 389). under CSR
Kenya Society for the

Prevention of Cruelty to
Animals (KSPCA)
Financial Min of Finance/CBK Banking Act (Cap. 488),
services 2002
Min of Finance Finance Act, 1999
Min of Finance Insurance Act, 1984
Min of Finance/CBK Central Bank of Kenya Act
(Cap 491), 1966
Min of Finance Unit Trust Act (Cap 521)
Min of Finance Retirement and Benefit Social security
Authority Act, No. 3 of 1997
African Trade Insurance Export Credit COMESA
Agency (ATI) guarantees Insurance companies
Min of Cooperatives/
SACCOS
Energy Kenya Petroleum Petroleum Act, Cap 116 Petroleum supply Private importers
Refineries Limited (KPRL)
Kenya Pipeline Company Petroleum
(KPC) distribution
National Oil Corporation Petroleum retailing Private retailers
(NOCK),
Min of Local Government Local government Act, Cap Licensing
265.
Electricity Kenya Power and Electric Power Act, 1997 Distribution
Lighting Company
Limited (KPLC),
Kenya Electricity Generation
Generating Company The Arbitration Act
(KenGen)
Electricity Regulatory regulation
Board (ERB)
Water Min of Water Water Act, 2002 Provision of water
services
Transport Min of Transport Merchant Shipping Act (Cap. Enhances the
389), 1989 operations and
efficiency of
transport services
Min of Roads Kenya Roads Board Act, Development,
2000 Standardization
and Maintenance
of Roads
Kenya Airport Authority Kenya Airport Authority Act
89
and International
Organisations
(Cap 395), 1992
Kenya Civil Aviation Civil Aviation (Amendment)
Authority, Act, 2002
Min of Transport/KPA Kenya Ports Authority Act
(Cap 391)
Telecommuni Min of Communication Kenya Communications Act,
cations and and Information 1998
postal
services
Tourism Min of Tourism Hotels and Restaurant Act, KATO and KATA
1986
Tourist Industry Licensing
Act, 1990
Wildlife Conservation and National Parks
Management Act, 1989 and Wild Game
Catering Levy and Develop local
Development Trustee tourism operators
Kenya Utalii College Training
Kenya Tourist Board, Promotion
Kenya Tourist Financing
Development
Corporation
Trade Public Sector Transport Licensing Act Transport Logistics Forwarding and Clearing
Facilitation, Infrastructure Utilities Agents
Promotion development and Improving Internal Container
Parastatal utility competitiveness Terminals
providers and productivity KIFWA
County Council
KRC KRC Act,

Kenya Wildlife Services Kenya Wildlife Act Maintain roads in
(KWS) game reserves and
national parks
Kenya Roads Board Kenya Road Board Act 1999 Maintain national
(KRB) road network
Manage Fuel Levy
Fund
Oversee District
Roads Boards
Ministry of Environment Safeguards and
and Natural enhances the
Resources/NEMA quality of the
environment
through
coordination,
research,
facilitation and
enforcement, while
encouraging
responsible
individual,
corporate and
collective
participation
towards
sustainable
90
and International
Organisations
development.
Transport Licensing
Board
Kenya Port Authority Own and operate
port facilities
Oversee shipping
Kenya Airports Authority Management of
airports, including
safety and security
Civil Aviation Authority Regulating aviation
activities
Motor Vehicle Inspection Determine
Unit roadworthiness of
public service
vehicles
Transport Licensing License public
Board service vehicles
and assign them
routes
Kenya Pipeline Transportation
Negotiations Min of Trade/Min of Regional blocs
EAC/Min of
Environment/Min of
Foreign Affairs
Production/ Kenya Meat Commission Kenya Meat Commission Act, Kenya National
Marketing (KMC). Cap 363 Chamber of Commerce
and Industry
MOA Stock and Produce Theft Act,
Cap 355
MOA Cattle Cleansing Act, Cap

358
MOA Hide, Skin and Leather Trade

Act, Cap 359
Min of Livestock Rabies Act, Cap 365
Min of Livestock Veterinary Surgeons Act, Cap
366 (as amended in 1993)
Consumer Min of Trade Trade Description Act (Cap. Consumer Information
Protection 505), 1962 Network, Kenya
Min of Trade/ Weights Weights and Measures Act Consumer Information
and Measures Cap513 Network, Kenya
Department
Min of Industrialization/ Kenya Bureau of Standards Consumer Information
Kenya Bureau of Act Cap 496 Network, Kenya
Standards
Min of Industrialization/
Kenya Industrial Property
Institute (KIPI)
Min of
Agriculture/KEPHIS
Min of Agriculture Pest Control Products Act
1995
Min of Agriculture Plant Control Act Cap 324
Capacity
building
Institutions
Horticulture Training farmer
91
and International
Organisations
Development Centre associations on
(HDC) standards
Min of Farmer training
Agriculture/Farmers
Training Centres
Min of Cooperatives Cooperative societies

Education Act (Cap 211), Training
Industrial Training Act (Cap Training
237 1960, revised in 1983)
Technical and Vocational
Education Training (TVET)
institutions
Productivity Centre of
Kenya (PCK)
Min of
Labour/Directorate of
Industrial Training (DIT)
Trade
Information
Disseminatio
n
Governance Kenya Anti-Corruption
Institutions Commission.
Bankruptcy Act, Insolvency Regime
Deeds of Arrangement Act, , Contract
Enforcement
Legal AG Chapter 2, section 26 of the Advises the
Frameworks Constitution of Kenya Government on all
legal matters for
purposes of
facilitating and
monitoring the rule
of law, protection
of freedoms,
democracy and
efficient delivery of
legal services
Parliament • Examining and
challenging
the work of the
government
(scrutiny)
• Debating and
passing all
laws
(legislation)
• Enabling the
government to
raise taxes.
Kenya Law Reform Reforming laws
Commission (KLRC)
92
Annex 2: Summary of Kenya's specific commitments in services
Mode of supply
Sector or subsector Cross-
Cross-border Consumption Commercial Presence of
supply abroad presence natural persons
Market access/National treatment
2. COMMUNICATION SERVICES
C. Telecommunication services
For public use
(a) Voice telephone service Nlex/NL NLex/NL R/N Uex/Uex
(b) Telex services
(c) Telegraph services
(d) Facsimile services
(e) Private leased circuit services
For public
public use
(b) Packet-switched data transmission services NL/NL NL/NL R/NL Uex/Uex
(c) Circuit-switched data transmission services
For non-
non-public use
Services supplied to closed users group Nlex/NL NLex/NL NLex/NL Uex/Uex
(a) Voice telephone services
(b) Packet-switched data transmission services
(c) Circuit-switched data transmission services
(d) Telex services
(e) Telegraph services
(f) Facsimile services
Value added services NL/NL NL/NL NLex/NL Uex/Uex
(h) Electronic mail
(i) Voice mail
(j) On-line information and database retrieval
(k) Electronic data interchange
(l) Enhanced/value-added facsimile services, including
store and forward, store and retrieve
(m) Code and protocol conversion
(n) On-line information and /or data processing
(including transaction processing)
Other
Internet and internet access services NL/NL NL/NL NLex/NL Uex/Uex
Satellite based Nlex/NL NLex/NL NLex/NL Uex/Uex
Mobile services
Cellular/mobile telephone
Mobile data services
Personal communications services
Paging
Terrestrial based OP/NL OP/NL OP/NL Uex/Uex
Mobile services
Cellular/mobile telephone
Mobile data services
Personal communications services
Paging
Fixed satellite services (for public use) OP/NL OP/NL NLex/NL Uex/Uex
D. Audiovisual services
(a) Motion picture and video tape production services NL/NL NL/NL U/U Uex/U
(excluding distribution services)
(b) Motion picture projection services Utf/Utf NL/NL NL/NL Uex/U
7. FINANCIAL SERVICES
A. Insurance and insurance
insurance related services
(a) Life insurance U/U U/U OP/NL Uex/Uex
(b) Non-life UexSP/U U/NL OP/U Uex/Uex
(c) Broking U/U OP/N OP/NL Uex/Uex
(d) Agency services UexSP/NL U/U R/U Uex/Uex
(e) Auxiliary services, assessors, intermediaries and loss NL/NL NL/NL NL/NL Uex/Uex
adjustors
(f) Reinsurance and retrocession (all classes) R/NL R/NL R/NL Uex/ Uex
B. Banking and other financial services
(a) Acceptance of deposits and other repayable funds NL/U NL/NL OP/U Uex/Uex
from the public
(b) Lending of all types, including consumer credit, NL/NL NL/NL NL/U Uex/Uex
mortgage credit, factoring and financing of
commercial transactions
93
Mode of supply
Sector or subsector Cross-
Cross-border Consumption Commercial Presence of
supply abroad presence natural persons
Market access/National treatment
(c) All payments and money transmission NL/NL NL/NL NL/U Uex/Uex
(d) Guarantees and commitments NL/U NL/NL NL/U Uex/Uex
(e) Participation in issues of all kinds of securities and R/U NL/NL R/U Uex/Uex
provision of services related to such issues except
underwriting
(f) Asset management except pension fund management NL/U NL/NL R/U Uex/Uex
(g) Advisory and other auxiliary financial services NL/NL NL/NL NL/U Uex/Uex
9. TOURISM AND TRAVEL RELATED SERVICES
A. Hotels and restaurants (including catering) Utf/Utf NL/NL NL/NL Uex/OP
B. Travel agencies and tour operators services NL/NL NL/NL NL/NL Uex/OP
C. Tourist guides services NL/NL NL/NL NL/NL Uex/OP
11. TRANSPORT SERVICES
C. Air transport services
(a) Aircraft repair and maintenance services Utf/Utf NL/NL NL/NL Uex/U
(b) Selling and marketing of air transport services NL/NL NL/NL OP/OP Uex/U
(c) Computer reservation systems (CRS) services NL/NL NL/NL U/U Uex/U
F. Road transport services
(a) Passenger transportation NL/NL U/NL U/U Uex/OP
(b) Freight transportation NL/NL NL/NL U/U Uex/U
(c) Rental of commercial vehicles with operator NL/NL NL/NL U/U Uex/U
(d) Maintenance and repair of road transport equipment Utf/Utf NL/NL U/U Uex/U
(e) Supporting services for road transport services NL/NL NL/NL U/U Uex/U
12. OTHER SERVICES NOT INCLUDED ELSEWHERE
Meteorological data information NL/NL NL/NL U/U Uex/OP
NL: No limitations, i.e. Kenya agreed to place no constraints on the item in question.
NLex: No limitations with exceptions.
U: Unbound, i.e Kenya made no engagements with respect to the item in question.
Uex: Unbound, except as provided by Kenya's horizontal commitments.
UexSP: Unbound, except as provided by Kenya's horizontal commitments, and/or special provisions apply.
Utf: Unbound due to lack of technical feasibility.
R: Restriction
OP: Other provisions apply.
Source: WTO documents GATS/SC/47, 15 April 1994; /Suppl.1, 26 February 1998; and /Suppl.2, 18 November 1999.
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Kina Trade Policy

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REPUBLIC OF KENYA

Presently Kenya’s Trade regime is guided by market-driven principles of liberalization under

Presently Kenya’s Trade regime is guided by market-driven principles of liberalization under

1.2 Role of Trade in the Economy

1.3 Current Trade Policy Dispensation

1.4 Need for a coherent Trade Policy

1.5 Formulation of an Integrated Trade Policy

1.6 National Trade Policy Vision,

The National Trade Policy

POLICY ON INTERNATIONAL TRADE

2.2 Current International Trade Policy Regime

(a) East African Community (EAC)

(b) Economic Partnership Agreements (EPAs)

2.3 Import Policies, Procedures and Institutions

2.3.1 Goods Trade

c) Duty Exemptions and Waivers

e) Quantitative Restrictions and Import Prohibition

g) Standards and Technical Regulations

i) Rules of Origin (RoO) and Domestic Content Requirement

a) Export Taxes and Charges

Products considered as having aesthetic value or security importance to Kenya, and

c) Export Subsidies and Incentives

(i) Export Processing Zones Scheme

(ii) Manufacturing under Bond (MUB)

Eligible firms also enjoy an investment allowance of 100% on immovable fixed

Duty Remission Scheme

d) Export Finance, Insurance, and Guarantees

e) Export Promotion and Marketing Assistance

f) Research, Development and Extension Services

g) State Trading Enterprises (STEs)

Limitations to export to developed countries particularly the EU include; economic needs

The constraints and challenges as well as intervention measures on the promotion of

3.2 Market Access

(b) Tariff Peaks and Escalations

(c) Domestic Support and Trade Distorting Subsidies

(d) Treatment of Sensitive Products

(e) Multi--Fibre Agreement and the US (AG

(f) Narrow Baskets of Export

(g) Preference Erosion and Complexity of Rules of Origin

(h) High and Multiple Internal Duties and Taxes

(i) Limited Trade in Services

(a) Enhancing Participation in International Trade Negotiations

(b) Diversification of Export Base and Value-

(c) Increasing Export Penetration in Priority Markets

(d) Safeguarding Sensitive Sectors and Industries

3.3 Trade Facilitation

(b) Cumbersome Customs Procedures and Documentation

(c) Inadequate Compliance with International Standards and Requirements

This entails harmonizing and streamlining customs procedures by removing duplicative

(c) Enhance compliance with international standards requirements

(d) Undertaking reforms in institutions dealing with trade facilitation.

3.4 Institutional Capacity and Coordination Mechanisms

(c) Inadequate Capacity to Comply and Domesticate International Obligations

(f) Ineffective Administration of Duty Exemptions/Waivers

(b) Coordinated Negotiatio

(c) Strengthen Capacity

(e) Strengthen Coordination among Export Support Institutions

(f) Improve Administration

3.5 Supply Capacity