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• Trade Facilitation: reducing trade transactions costs in Kenya

Trade Facilitation: reducing trade transactions costs in Kenya

Date: 5 Jun 2007

Kenya has made great progress in facilitating trade and improving clearance times through its port and airports. The time to clear goods through the port of Mombassa has dropped from 17 days to under 11 days and progress has also been made at the Jomo Kenyatta International Airport (JKIA).

 The costs exporters and importers incur in terms of clearing and forwarding charges, port handling and especially storage/demurrage charges when goods are help up at port have been reduced significantly and there is greater predictability in the system. These efficiency gains have been realised through the individual and collective efforts of the country’s key trade facilitation agencies and institutions. Despite these improvements, there is a widespread understanding that more needs to be done to the make the country an internationally competitive entrepot. As trade is a vital component of the economy that can contribute to Kenya’s general development, improved trade facilitation can have a positive ripple effect that will spur growth and reduce poverty.

To achieve continued improvement in trade facilitation, it is necessary to have a clear strategy in place that maps out a plan of action. The Kenya Trade Strategy funded and implemented with CFTC technical assistance has four key elements:

1. At the heart of the Strategy is a Community Based System (CBS) that utilises electronic data interchange (EDI) to reduce the burden of clearing goods for traders and public agencies alike, simplifying the current system and helping to increase transparency whilst improving control. The CBS is capable of reducing the average time to clear goods at Mombassa from 10 days, 8 hours to 2 days, 8 hours, a saving of 77% of the current time and, at JKIA, from 5 days 11 hours to 1 day, 9 hours, representing a saving of 75%. The World Bank has provided US$3.5 million for the implementation of the CBS.
   
   Estimates are that the CBS, in itself, should be able to reduce direct trade transaction costs at current levels of trade by a conservative Ksh 300 million annually
   
2. Whilst the CBS is being developed, improve the wider environment for trade facilitation by: i) simplifying and streamlining the regulatory framework to facilitate the registration and operation of businesses in Kenya; ii) improve ICT infrastructure, training and application in the public and private sectors (especially KIFWA[1]); iii) build capacity of officers in key trade facilitation institutions; iv) reinforce governance improvements brought about by the CBS; and v) improve infrastructure used by key trade facilitation institutions.
   
3. Invest in the country’s telecommunications infrastructure and specifically, the Kenya Electronic Payment and Settlement System (KEPSS). Introduce the enabling legislation for use of ICT in Kenya.
   
4. Invest in transport infrastructure and operations focusing on the Kenya Railways Corporation and the main arterial roads linking ports and airport and the land border crossing points.

The strategy builds upon what Kenya has already achieved and has been informed by the intensive stakeholder consultations and guidance that have characterised this project. The strategy will help the country to harness the benefits of the efforts it has made to date by bringing about a step change in trade facilitation, providing a framework to guide the actions of the many players involved from both the public and private sectors.