Discussion Paper No. 54 of 2005 on Heavy Commercial Vehicles Industry in Kenya: Regulation or Deregulation?

Abstract

This paper assesses the current regulatory framework in the heavy commercial vehicles industry sub-sector. The transport sector constitutes a major component of the services sector in Kenya and has a big potential as one of the engines of economic growth for the economy. Quality transport systems are central in attracting investment, spurring economic growth, creating wealth and reducing poverty. Despite its importance, the roads transport sector faces a number of challenges, among them multiplicity of taxes and licenses, inadequate funding, and poor maintenance. Using both field survey and secondary sources of information, the study focused on taxation and licensing of heavy commercial vehicles. It reveals that though the previous regulatory measures were designed and implemented to ensure that operations in the sub-sector are orderly and create facilitative business environment, the measures have acted as constraints on business. Most existing laws and regulations have caused not only a high cost of compliance to the entrepreneur but also diverted skilled resources away from productive activities, as much time is spent in obtaining and renewing licenses. This has been worsened by the fact that most of the registration functions are centralized at the Registrar's office in Nairobi and therefore acquiring the multiplicity of licenses is an added cost to the business.