US Identifies Corruption, Bribery Amongst Key Trade Obstacles In Kenya

The United States has raised concerns over key foreign trade barriers that are impacting the ease of doing business in Kenya. It singles out several areas of concern, including customs barriers and trade facilitation issues, intellectual property protection, limitations on foreign equity participation, real estate restrictions, and State-owned Enterprises (SOEs), digital trade and corruption.

The concerns are raised in the 2024 National Trade Estimate report on Foreign Trade barriers, an assessment by the US Trade Representative, Katherine Tai.

It serves as a key document for policymakers and business leaders alike, providing a detailed examination of the hurdles that impede the flow of commerce between the two nations.

The report underscores the need for concerted efforts to address these barriers, which are crucial for enhancing the ease of doing business and fostering a more equitable trade relationship between the United States and Kenya.

Significant obstacles

According to the report, customs barriers and trade facilitation issues stand out as significant obstacles, with the intricate procedures required by Kenya Customs to release shipments creating a bottleneck that slows down trade and inflates costs.

“This complexity represents a substantial financial burden that could deter US.companies from engaging with the Kenyan market,” it says.

Intellectual Property Protection is another critical area of concern highlighting the prevalence of counterfeit and pirated goods in Kenya that erodes the profits of US companies and stifles innovation.

The intricate customs recordation system exacerbates this issue, fostering an environment that is hostile to businesses dependent on intellectual property rights, the report states. The report also sheds light on the limitations imposed on foreign equity participation, where restrictions on foreign ownership in various sectors present a formidable barrier for US companies seeking to establish a substantial presence in the country.

These limitations curb the potential for US investment and hinder the transfer of technology and expertise, which are vital for the growth and competitiveness of businesses. Real estate restrictions are yet another hurdle, with the prohibition on foreigners holding freehold land titles in Kenya posing a significant barrier to U.S. companies aiming to set up a physical presence.

Such restrictions, the report states, can dissuade long-term investment and commitment from U.S. entities, which is essential for the development of a robust business relationship. The issue of State-Owned Enterprises (SOEs) is also a notable area of concern. The Kenyan Government’s ownership and control over certain enterprises create a skewed competitive landscape, favoring SOEs and limiting the opportunities for U.S. companies. This preferential treatment can discourage foreign entities from entering the Kenyan market, thus affecting the diversity and dynamism of the economic environment.

Economic hurdles

Digital trade is increasingly complex, with various legal and economic hurdles presenting challenges for international business operations. The Data Protection Act of 2019, with its ambiguous regulations on cross-border data transfer, has introduced a layer of uncertainty that affects U.S. companies dependent on the fluidity of digital trade. This uncertainty is compounded by the imposition of a 1.5 per cent digital services tax on non-resident entities, which further burdens U.S. firms operating in the digital domain.

Corruption also remains a formidable obstacle, with U.S. businesses often finding themselves at a disadvantage when competing against companies that may not adhere to legal standards or may engage in corrupt practices. Such conditions disrupt the level playing field and cast a shadow on Kenya’s reputation as a trade partner, the report states.