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China Has the Upper Hand in Trade with Kenya – World Bank

March 31, 2016 at 06:29 am | Money Moves, News

Fredrick Ngugi

Fredrick Ngugi | Contributor

March 31, 2016 at 06:29 am | Money Moves, News

Chinese Prime Minister Li Keqiang walking with President Uhuru Kenyatta at a Nairobi airport. (Source: english.sina.com)

China is getting the lion’s share in its bilateral trade with Kenya, a new report by the World Bank Group has revealed. The report highlights an unfair exchange between the two countries, claiming that the huge presence of Chinese companies in Kenya, particularly in the construction sector, doesn’t have a direct effect on the economy since these companies hardly invest in Kenya. It further claims that Kenya’s exports to China have remained low while its imports from the Asian economy have continued to increase.

The World Bank attributes this disparity to Kenya’s underperforming manufacturing and agricultural sectors. According to the report, this stagnation is largely due to underdeveloped infrastructure and high cost of doing business.

The bank argues that the manufacturing sector in Kenya receives little investment since most investors prefer to put their funds in less costly sectors such as real estate and construction, which are highly non-tradable.

Poor government policies, inefficiency and mismanaged marketing boards are the other main impediments discouraging Kenyan coffee farmers from exporting to countries like China, the report has revealed.

To improve the export climate, the report recommends a number of short-term measures which include enforcing competition laws in the transport sector, developing an automated risk management system to accelerate risk-free cargo through customs and creating a trade information portal on general tariff rates, preferential rates and quality standards.

Although the importation of cheap products from China has reduced the cost of manufactured goods in the Kenyan market, the World Bank Group claims that this has consequently hurt local manufacturers: 

“Local producers are suffering from cheap Chinese goods. Some even argue that imports are hurting Kenya’s prospects of industrialization,” the bank reports.

In the past decade, Kenya together with other African countries has deepened its bilateral relations with China, awarding mega infrastructure projects to the Asian nation, which include Thika Super Highway and Standard Gauge Railway among others. While some people view this as an ideal alternative to the prevailing Washington consensus and a possible engine of growth for African countries, critics have cried foul over the manner in which Chinese companies bring their own workforce from China to an already jobless Kenyan society.

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