Kenya’s International Trade and Economic Development

Introduction

Economic development is the visible, measurable and quantifiable aspects of progress and growth of any given state or nation. The visible aspects of economic development involve: Infrastructure like roads, housing/buildings, reacreational facilities, medical facilities, educational facilities, scientific innovations and technologies. On the other hand, the measurable and quantifiable aspects of progress and growth of any nation include scales of trade, standards of livelihood, educational standards of citizens and increased world demand on any product of the given nation or state.

We will write a custom Kenya’s International Trade and Economic Development specifically for you
for only $14.00 $11,90/page
308 certified writers online
Learn More

Alternatively, economic development is as well considered as the creation of wealth of states for the principle purpose of improving lives of citizens. It is the mean by which economic progress of nations is analyzed (Schumpeter: Theory of economic development (1911).

Analysis

Economic development if analyzed by parameters as output growth is exemplified by capital creation as a vital impetus to development.Nurkse(1952). Economic development therefore is the international scale of comparison of fiscal growth of different countries and states in the world. This comparison of scale of economies leads to the classification of the states and countries as: Developed Nations, Newly Industrialized Nations and or the Least Developed Nations. Kenya trades in natural agricultural produce from large scale and small scale farms around the country. The agricultural sector is the country’s economic backbone and produces most of the country’s subsistence crops (IFOAM 2003).

The two major types of agricultural produce include subsistence produce and large scale farm produce like coffee, tea, pyrethrum, sunflower, homegrown flowers which are traded at the international markets. Kenya has also increased its local production of fresh fruits and vegetables for international market consumption. (FAO, 14.07.2006).The country also produces plenty of cereals including: Maize, sorghum and rice. Of late the horticulture sector has seen constant impressive growth with exports of flowers and fruits and vegetables to Europe, America and the Middle East.

Coffee and Tea from Kenya are the most sought after, while the latter accounts for 17% of the world’s export market. Tourism in Kenya also flourishes due to the wildlife, vast national parks, conservancies and beautiful coastal beaches and comfortable hotels with loving people. The government of Kenya has also put a lot of effort into the tourism industry. This has been necessitated by the fact that tourism has been identified as one of the countries major foreign exchange earners. The government has gone further into forming the ministry of tourism and culture. The ministry is involved in marketing the country internationally as a preferred tourist destination. Apart from the marketing the government also has incentives for both local and international investors who would be interested in investing in the tourism sector.

A countries balance of payments can be described as the records of accounts of financial dealings of a country covering a specific period of time which compares the foreign currency coming in to the country to the amounts of local currency which has been taken out. (Investor words.com 2008). It is a broad statement giving the economic transactions of a particular country with other countries considering a specific period of time.(Government of Canada, Economic concepts). Kenya constantly runs into trade deficits and imbalanced trading activities with its major trade partners due to the nature of its economy which is characterized by industrial and mechanized goods import as compared to its agricultural exports to the world market. (Magazine Financial, East African Standard journal). The trade imbalance is exemplified by massive debt from the World Bank and its trade partners. However; the Export Processing Zones have tried to cushion Kenya from excess exploitation.(WTO, Trade Policy Review).The trade imbalance and fiscal deficit experienced by the East African country is caused by the unsteady agricultural produce to the World markets and untempered market prices.

Britain and Germany have remained Kenya’s chief markets for tea; coffee, horticultural products.However,Kenya imports petroleum products whose price have been inflated from US$437 million in 1992 to US$672 million in 1997.(Foreign trade statistics,1999). This increase is critically skewed, however, in comparison to the increase of exports to the world economies. Kenya Organic Agriculture Network (KOAN).

Get your
100% original paper on any topic done
in as little as 3 hours
Learn More

Kenya’s economy runs at approximately US$ 800 million for its annual budget and is Marjorly funded by taxes and other government revenues besides loans and grants both from the International Monetary Fund, IMF, Western economies like Britain and America. However, the government has seriously reduced its quest for International funding from the Occidental Countries and running into trade partnerships and agreements with the emerging Oriental economies in the Middle East which seems keener on creating an uncontestable surge for African economies and the world at large. Another factor which has helped Kenya to reduce the dependence on foreign aid and donations is the increased strict measures which have been put in place. The ministry of finance with the Kenya Revenue Authority introduce the electronic tax registers to help in controlling tax evasion. The government has also been constantly trying to use persuasive means to encourage the citizens to pay their taxes. It has also roped in many sectors which were not taxed initially and this led to increased economic development in the past five years.

The government of Kenya also borrows massively from its domestic banks and local investors. For local borrowing the government uses a number of instruments in the local financial markets. Some of these instruments which the government uses are treasury bills and treasury bonds which are traded at the Nairobi Stock Exchange. Mainly it is the local Banks which participate in the buying and selling of these instruments. Part of the investment and budget deficit funding is done through privatization of major public assets like the Telecom Kenya, sold to the Orange Company of France.

Kenya finds its ready market within the regional markets including East African Community (EAC), Common Market for Eastern and Southern Countries (COMESA) Kenya’s export trade policies are tailored towards creating an environment conducive to international market penetration and more particularly the developed countries of Europe, America and Japan besides improving its trade links and practices with the other African states. Trade policies are ensure that the Kenyan market becomes accessible to the both the African and developed Nations.

And the Common Wealth however, its international partners’ trade policies and practices severe farmers’ incentives and employment opportunities since AID and grants are normally accompanied by strict measures and regulations, even though Kenya’s agricultural sector is characterized by little mechanization and more on family communal farm work. The Associated Press November 8 2008. The country has a sizeable advantage in comparison to other African countries and more specifically the East African countries. This is because it has experienced a long period of political maturity and peace since its independence. Secondly the country has vast natural resource capacity with diverse cultural background, good climate and natural phenomena.

The country’s population estimated at 38 million provides comparatively cheap labour to the industries. The trade policies advocated for by the Western economies and most specifically market liberalization have hurt Kenya’s economy. The country depends on export of agricultural produce for maximum market capital/fiscal value returns which work to its disadvantage. Trade protection measures should be implemented to ensure that Kenya’s economy competes effectively with the rest of the market. The vice versa would severe the country’s economy and prolong the unequal trading patterns that sustain the country’s critical differences in trade deficit. If these issues are not implemented, then pro-trade idea of countries’ producing and exportation for comparative advantage would be undermined remorselessly.

The East African Community offers benefits and provides a more equalized trade for a for its members than the internal markets. UNEP/UNCTAD (2006). Kenya’s debt has however continued to increase tremendously and has even experienced threats of economic sanctions from the IMF.This arises to the fact that the Kenyan government does not have a recurrent budget for its debts both at home and abroad. The international trade policies have worked against Kenya. The country finds itself disadvantaged because of the competitive edge of the Western and Eastern economies which are comparatively resilient and flexible to change of market situations. The World Trade Organization (WTO) Trade Policy Review Body, January 2008, has reported serious drive by the Kenyan Government to push for structural reforms in a bid to reduce the red tape procedures experienced by investors. The Trade policies in the country are implemented by the Ministries of Commerce, Trade and commerce.

This has also lead to unprecedented levels of domestic borrowing thereby increasing bank interest rates to the Kenyan public. Some of the international trade policies have led to the shrinkage of Markets for Africa’s produce, Kenya included. Even though Kenya complains of unequal market opportunities and partisan trade policies, even Kenyans experience insurmountable problems in investing in their country. WTO, World Trade Policy Review 2009.The Kenya’s trade policies have been stepped up towards the Financial year 2007/2008 due to the unprecedented World fiscal turmoil. Kenya therefore has improved access to its local market and regional markets due to the inclusion of Rwanda and Burundi in the East African Community. The country invests a lot of money on international trade fair and annual Agricultural shows country wide. The improved trade policies have ensured that the local manufacturing has grown to about 13% of the country’s GDP.Services sector constitutes the greatest percentage of the GDP of the country at 54%.It is equally dominated by Financial, communication services and tourism. The improved macro and micro economic structural reforms have ensured its place as the most competitive in East Africa. This has led to a more growth conducive economic environment.

We will write a custom
Kenya’s International Trade and Economic Development
specifically for you!
Get your first paper with 15% OFF
Learn More

Agri- processing sector is considered the major branch of manufacturing consisting of about 13% of the country’s GDP.Due to the developed trading policies in East Africa, the East African Community is Kenya’s second largest market for its exports after the European Union. The improved international trade policies and domestic competitiveness for nits markets, Kenya has seen improved infrastructural development like roads, schools and hospitals. The country has also recorded increased tourist activities and revenue collection from the sector. The country has improved its marketing abroad and relationships with the diasporas. Increased agricultural productivity has also been recorded with a growth rate of up to 7% per annum.

National security has also improved and previous threats on terrorism and other related cases. The potential loses on the other hand has been loss of revenue and potential displacements on its goods for import. It has as well created a weaker dependent economy which is subject to manipulation by any emerging and promising economies like the Chinese Markets.

References

Agayo Ogambi. Impact of Economic Partnership Agreements on the Kenyan economy. 2008. Web.

Economic Development. (2000). Web.

Government of Kenya. Economic concepts. Balance of Payments. 2008. Web.

International Monetary Fund. International Financial Statistics Yearbook 1999.

Trade Policy:Press Release/TPRB/124,19TH2000. Web.

Not sure if you can write
Kenya’s International Trade and Economic Development by yourself?
We can help you
for only $14.00 $11,90/page
Learn More

Jane Kiringai. Trade Policy and Transport Costs in Kenya. 2001. Web.

KNAW Research Information. Project: Agriculture trade policies and development. 2008. Web.

WTO.Trade Policy Review 2000. Web.

Kenya Economic Development. 2008. Web.

Check the price of your paper