KENYA is considered as the regional hub for trade and finance in East Africa. The political instability and its impact on key sectors like agriculture and tourism, had dampened the expectations of continuous growth in the country. But a diversified economy has helped East Africa’s largest economy, to experience a considerable growth in the past few years. The growth is driven by several key factors like reasonably well-educated labour force, a vital port that serves as an entry point for goods destined for countries in the East African and Central Africa interior, abundant wildlife and kilometres of attractive coastline and above all, a government that is committed to implementing business reforms. Kenya’s agricultural development remains the most important contributor to GDP.Kenya’s position as the economic, commercial and logistical hub in Eastern Central Africa, places the country as one of the best investment destinations globally.

Foreign Direct Investments (FDI) has been on the rise and is strongest in the East Africa region. Kenya is the dominant economy in the East Africa Community, contributing more than 40% of the region’s GDP. This is also uniquely distinguished from many countries by the fact that Kenya’s economy is one of the most diversified with no oil, nor gas exports. Kenya’s growth is projected to rise to 5.9% in 2016 and 6.1 % in 2017. India and Kenya are working on strengthening the ties shared by the two countries. To help bilateral cooperation attain new heights, the Prime Minister of India, Mr Narendra Modi, paid a State Visit to Kenya from 10 to 11 July 2016. The visit culminated in the signing of the following agreements to boost bilateral cooperation:

• MoU on Defence Cooperation
• MoU on Cooperation in the field of National Housing Policy Development and Management
• Agreement for the Avoidance of Double Taxation and the Prevention of

DOING BUSINESS IN KENYA 2016

Fiscal Evasion with Respect to Taxes on Income
• MoU between Bureau of Indian Standards and Kenya Bureau of Standards
• Agreement on Exemption of Visa for holders of Diplomatic Passports
• Line of Credit Agreement for US$ 15 million to IDB Capital Limited, for
development of small and medium enterprises [SMEs]
• Line of Credit Agreement for US$ 29.95 million to the Government of
Kenya for upgrade of Rift Valley Textiles Factory [RIVATEX)

Commercial guide to Kenya

Private sector-led economic growth has since the early 2000s, been Kenya’s Priority. Kenya has a market-based economy and is generally considered the  economic, commercial, and logistics hub of East Africa. With the strongest industrial base in East Africa, Kenya has been successful in attracting private equity capital. The Government’s business-friendly stance has helped set development benchmarks for a number of priority sectors. This has been complemented by the integration of the East African Community (EAC) and the establishment in 2005 of a customs union and a common market. Kenya is a member of COMESA (Common Market for Eastern and Southern Africa) with 19 countries, and 14 of which are in a Free Trade Area (FTA). Three regional economic blocks i.e EAC, COMESA and SADC (South African Development Community) with a combined population of over 600 million people are currently developing a joint framework and roadmap towards a Free Trade Area by 2015. With all these developments happening, the real GDP growth which was 5.3% in 2014, is estimated to be 6.4 % in 2017. Kenyan economy is on the path of expansion and offers opportunities for more cooperation in engineering, electronics, pharmaceuticals, textiles and information technology sectors.

Market challenges

The market in Kenya is evolving and also shares good relations with its neighboring countries in the African continent. But a few challenges faced by the business community while doing business in Kenya are : physical infrastructure- though Kenya has a superior infrastructure as compared to its neighboring countries but still it remains underdeveloped and a key obstacle to economic development; low level of price competition in Kenya compared with many other fast-developing countries which is a challenge
for traders as it affects market efficiency; insecure environment for business especially in urban settings and corrupt dealings are also prevalent in Kenya; Legal recourse in Kenya is slow and expensive. But the Kenyan government is trying its best to overcome these hindrances and build a strong market base.

Market Opportunities

Despite the many challenges that Kenya presents, there are a good number of opportunities locally and regionally. Kenya offers potential investment opportunities in sectors like infrastructure, environment & natural resources, Building and construction, manufacturing, agribusiness engineering services like : power generation equipment and power transmission infrastructure,
household appliances.

Market entry strategy

A common strategy followed in Kenya is to first appoint an agent or distributor, and then to enter and register. Kenya is one of the key logistical conduits into the East Africa Community (EAC) regional market consisting of South Sudan, Kenya, Tanzania, Uganda, Rwanda, and Burundi. Many foreign companies operating here do business under their own name to manage penetration into the larger, regional market. Companies that create jobs and implement strong Corporate Social Responsibility (CSR), education and training programs are appreciated. Capacity building to create employment is needed to support Kenya’s economic development goals. India-Kenya bilateral trade India and Kenyan government have cordial relations and good cooperation dating back to several centuries. The Indian Diaspora in Kenya has contributed to Kenya’s progress. The migration of Indians to Kenya took place in the late 19th century and the early 20th century to help build Mombasa-Kampala railway line. Also many of the Indian have set up businesses in Kenya. Both the countries share common views on regional; and global interests and cooperated closely in regional and multi lateral fora. The bilateral engagements between the two countries have been strengthening with regular high level visits, growing trade and commerce as well as extensive people to people
contacts and business opportunities.

Kenya is an important trade and investment partner for India. Bilateral trade was US$ 4.235 billion during 2014-15. There has been a growing trade (US$ 3.15 billion in 2015-16) and investment partnership. Indian firms

have invested in telecommunications, petrochemicals and chemicals, etc. and have executed engineering contracts in the power and other sectors. Kenya is a founder-member in the Indian Ocean Rim Association. India’s exports were worth nearly US$ 4.12 billion. Principal Indian exports to Kenya include pharmaceuticals, steel products, machinery, yarn, vehicles and power transmission equipment. Main Kenyan exports to India include soda ash, vegetables, tea, leather and metal scrap.

India-Kenya trade in engineering goods

India and Kenya have maintained strong trade ties over the years. India is the third largest exporter to the country for engineering goods.

The above table contains the trade figures for India-Kenya bilateral trade
in engineering sector. The total trade and exports from India in engineering
sector between the two countries has been increasing until a downfall
experienced in 2014-15. After the downfall the trade between the countries
has been on a rising path. But a different trend has been seen in the imports
of engineering products by India from Kenya. In the year 2014-15, where
total trade and exports experienced a fall, India’s imports fro0m Kenya in
engineering products jumped by more than 100% and falling by the same
magnitude in the immediate year.

Top engineering exports to Kenya by India

As per the DGCIS classification of the HS Codes at 2-digit level, we have segregated the top 10 panels of engineering products which have been exported
to Kenya from India. Out of these 10 panels 3 panels have experienced
negative growth. Panels like 76 and 79 have established growth more than
40% for rest of the panels the growth has not been that significant.

• Kenya is the largest economy in the region- According to the IMF, the current and forecased GDP and GDP per capita are higher than Ethiopia, Uganda, Rwanda, Burundi and Tanzania
• International companies that have their continental headquarters that are in Kenya are Google, IBM, Toyota, CocaCola, Standard Chartered, Microsoft etc.
• Due to the wide democratic space and despite close elections, Kenya is considered one of the most politically stable countries in Sub-Saharan Africa

• Kenya is part of the East African Community (EAC), an intergovernmental organization along with Burundi, Burundi, Rwanda, Tanzania, and Uganda. The EAC is a free trade area that now includes member states from COMESA and SADC
• Kenya has the best trade links in the whole of Eastern and Central Africa. Nairobi airport is the busiest airport in the region and Mombassa port is the busiest trade port.
• There is an extremely strong private sector that has developed in Kenya because of market friendly policies.

• Kenya is the highest trading country in the region making up 37% of trades
• Silicoln Savanah (officially called Konza) is the technology city outside Nairobi and makes Kenya the tech hub of Africa
• The Foreign Investors Act of 1964 protects foreign investors and allows repatriation of earnings