The Asian state, which has one of the world’s best ICT skills pool, is also eyeing major contracts in Kenya’s agribusiness, business process outsourcing (BPO), e-learning and e-government sectors. These ambitions have deepened India’s rivalry with China which has gained significant economic clout in Kenya in the past three years. China, the biggest beneficiary of Kenya’s massive infrastructure projects, has also been expanding its reach to broadcasting, telecoms, textile and mainstream consumer goods markets.

Author: 
Victor Juma
Date published on SAFPI: 
Thursday, 26 July, 2012
Date published on source: 
Wednesday, 25 July, 2012
Source organisation: 
Business Daily

India replaces Emirates as top source of Kenya imports

Nairobi: Sustained commercial diplomacy, backed by aggressive export promotion, has pushed India past the United Arab Emirates to become the top source market for Kenya’s imports, according to newly released data. The value of India’s exports to Kenya rose to Sh74.5 billion or 13.3 per cent of Kenya’s total imports in the first five months of the year compared to UAE’s Sh66.7 billion or 11.9 per cent of imports, according to the Kenya National Bureau of Statistics (KNBS).

The UAE has been Kenya’s largest source of imports in the past decade, losing the top position only once to China in 2010 after Beijing deepened its presence in East Africa with mega infrastructure development projects.

India’s top ranking is the culmination of an aggressive export promotion drive that gathered pace last year when it sold goods worth Sh148 billion to Kenya compared to China’s Sh144 billion.

The UAE beat the two Asian rivals to the top position, having exported Sh199.3 billion worth of goods to Kenya.

India widened its share of Kenya’s import cash in the five months to May with a two percentage point lead over China, which sold goods worth Sh63.7 billion to Kenya.

Kenya sources more than 90 per cent of its petroleum products from the UAE, assuring the Arab nation of the top position in the list of leading source markets for imported goods. The value of fuel and lubricants imported in the five months to May rose by Sh10 billion to Sh148.2 billion despite the sharp increase in Murban prices over the same period last year, according to the KNBS.

The marginal rise in the cost of petroleum imports is attributed to the drop in consumption in the wake of the double- digit increase in the price of petrol, diesel and kerosene from December. UAE’s trade with Kenya is expected to weaken further in coming months if the ongoing decline in crude prices continues.

But the real threat to the Emirate’s trade with Kenya lies in the recent discovery of oil deposits in Turkana, which if commercially viable, could reduce trade between the two countries to a bare minimum, leaving India and China to fight for the lion’s share of Kenya’s import dollars. London-based Tullow Oil announced in March that it had discovered large deposits of petroleum in Northern Kenya but whose commercial viability is yet to be established.

Besides oil, Kenya also imports clothes, household goods, and cosmetics from the UAE. Kenya mainly imports textiles, pharmaceuticals, industrial machinery, vehicles, electronic and semi-processed goods from India while the list of China’s exports to Kenya include heavy machinery, electronics, vehicles, textiles and a range of household goods.

The two Asian powerhouses have deepened their presence in Kenya with intense economic diplomacy since President Kibaki came to power in 2003. The rivalry has not only benefitted Kenya in terms of variety and right-priced imported goods but also in foreign direct investments, technical and financial assistance.

“Besides diversifying import markets and increasing foreign direct investment inflows, Kenya has benefited from competitive pricing of foreign goods,” said Gerishon Ikiara, an economics lecturer at the University of Nairobi.

Though the rivalry between India and China continues to play out as an Asian affair, Mr Ikiara said the biggest losers have been the traditional Western trading partners such as Britain whose share of the market has been on a steady decline.

President Kibaki has actively encouraged this shift to the East and has backed it up with exchange of high-level diplomatic visits that have yielded multi-billion shilling trade and investment deals.

India sent its largest business delegation to Nairobi in 2010 when major deals were closed and doors opened for the entry of Indian firms into new segments of Kenya’s consumer market.

A communiqué released after a meeting between Prime Minister Raila Odinga and India’s minister of Commerce and Industry, Anand Sharma, said the two countries had agreed to increase the value of bilateral trade to Sh240 billion ($2.5 billion) in the next two years. Mr Odinga said Kenya would rely on India for quality generic drugs to be used in public hospitals.

The PM firmed up the Nairobi deals with a visit to Mumbai where the Export-Import Bank of India (Exim Bank) offered Kenya a $61.6 million (Sh6 billion) loan to finance construction of new power transmission lines.

Under the deal, Indian companies supply equipment and manpower for the project and make 100 per cent expense claims with Exim Bank – the force behind India’s global ambitions. The bank has, for instance, helped Indian companies export cement and sugar to Kenya with the provision of guarantees or letters of credit through PTA Bank.

India has also offered Kenya technical and financial support to revive the ailing textile industry.

The Asian state, which has one of the world’s best ICT skills pool, is also eyeing major contracts in Kenya’s agribusiness, business process outsourcing (BPO), e-learning and e-government sectors.

These ambitions have deepened India’s rivalry with China which has gained significant economic clout in Kenya in the past three years. China, the biggest beneficiary of Kenya’s massive infrastructure projects, has also been expanding its reach to broadcasting, telecoms, textile and mainstream consumer goods markets.

China has emerged as a major supplier of shoes, textiles, batteries, and motor vehicle parts to Kenya, gaining significant marketshare with its low price mass market strategy that has caused disquiet among local traders dealing in similar merchandise.

Since Mr Kibaki came to power, Chinese firms have won contracts to build some of the largest infrastructure projects in Kenya, including the upgrade of Thika Road at a cost of Sh27 billion and a national fibre-optic network.

The President has made several trips to China during his nine-year rule, sealing multiple deals with Beijing and opening doors for Chinese firms to tender for local contracts.

Chinese firms have been among the top contenders for a multi-billion shilling contract to build a new port in Lamu and a railway line linking the port with Southern Sudan and Ethiopia.

The firms have also fought with rivals for multi-million shilling tenders to build a standard gauge railway line from Mombasa to Malaba and a mass transit light rail network for Nairobi metropolis.

In 2010, China topped the list of Kenya’s FDI sources, having invested Sh40.2 billion in the country.

Though the two Asian powers have posted steady growth of their exports to Kenya, Nairobi has only marginally expanded the value of its exports to the two countries, resulting in a huge trade imbalance.

This is because Kenya’s commercial engagement with the Asian nations is mainly pegged on low-value primary commodities like tea, coffee and hides. Besides, Kenya lacks the high-value primary exports that are the main drivers of India and Chinese interest in the continent.

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