Discussion Paper No. 345 of 2024 on Enhancing Competitiveness of Kenya’s Exports in the Regional and International Markets

Abstract

The purpose of this study is to analyze the competitiveness of Kenya's export products, both regionally and internationally. Kenya recognizes the significance of exports in achieving its objectives, as evident in the Kenya Vision 2030 and the National Trade Policy 2017, which aims to make the country a competitive export-led economy. Data from the International Trade Centre, covering a 21-year period (2001-2022) under the Harmonized System of Classification (HS2 digit code and HS6 digit code), was used. Using the Revealed Comparative Advantage index, the study found that Kenya increased the number of products with comparative advantage in the regional and international markets between 2001 and 2022 across the several trade regimes. However, the rise of competitive products was primarily in the agricultural sector, underscoring the importance of agriculture as a source of export products. Additionally, Kenya lost export competitiveness mostly for non-agricultural products in these markets, highlighting the need to develop the non-agricultural sectors in Kenya. Generally, Kenya’s export products remained competitive across different markets. Within the EAC, manufactured articles and fertilizers saw an upswing in competitiveness, reflecting a positive trend across regimes with a few products such as raw hides and skins (other than furskins) and leather slightly decreasing in their competitiveness. The introduction of the Simplified Trade Regime (STR) in 2010 by COMESA has notably facilitated cross-border trade, leading to increased competitiveness in the categories of animal and vegetable fats and oils. In contrast, certain agricultural products that are exports priority in the Bottom-up Economic Transformation Agenda (BETA), such as coffee and tea, witnessed a decline. As a member of the African Continental Free Trade Area (AfCFTA), Kenya’s comparative advantage in exports of coffee, tea, maté, and spices has shown resilience in the Rest of Africa......