Joyce Mulama
29 January 2005
analysis
Nairobi — Kenyan manufacturing officials have accused the government of Mwai Kibaki of doing little to revive the country's textile industry, and compete internationally.
They say the East African nation is unprepared for the challenges of the new regulation which permits an unrestricted textile export. The new regulation, introduced by the World Trade Organisation (WTO), came into force, following the expiry of the WTO quota system, Jan. 1.
To seize the new opportunity offered by the WTO, the officials urged the government to double its efforts.
"The government is not moving at the speed we would like in terms of safeguarding the industry," Jaswinder Bedi, a board member of the Kenya Association of Manufacturers (KAM), told IPS this week.
"There is going to be reduced business because of the removal of the quota, and the only winner is going to be Asia, particularly China," he noted.
The quota system, known as the Multi Fibre Arrangement (MFA), ended Dec. 31, 2004. The arrangement, introduced 40 years ago, controlled volume of textile exports from developing countries, spurring expansion of their apparel industries.
With the removal of the quotas, China is expected to flood the markets with its cheap products. China has comparative advantage of cheap labour and a fair production chain, making it hard for the rest of the developing countries to compete fairly with it.
Encouraging investment in Kenya's textile industry is being seen as the key to bringing the sector back to its feet. The state-run textile consultative committee has suggested the formation of an institution, called Textile Upgrading Concessionary Fund, that would allow low interest rate in borrowing and a longer repayment period.
"A 20-year period would be ideal for Kenya's textile industry, which requires funds for rehabilitation and upgrading of the existing old equipment," said the committee in its meeting recently. The body seeks to chart out ways of revamping Kenya's textile industry.
According to the committee, the proposed fund is similar to what India provided its textile mills in preparation for a quota free world to enhance quality standards and ensure global competitiveness.
Providing a 10-year tax holiday, as accorded to the Export Promotion Zone (EPZ), is also being considered as an effective intervention for rehabilitating the country's 10 textile factories. The factories have collapsed due to, among other reasons, influx of cheap second-hand clothing imports.
Efforts to rehabilitate the textile sector saw the government last week slap a punitive tax on second-hand clothing. Enraged by the tax, dealers, supported by a section of parliament, accused the government of being insensitive to poverty eradication and development of small enterprises. About 56 percent of Kenya's population lives below the poverty line of less than a dollar a day, according to the World Bank.
At a news conference in Kenya's capital of Nairobi Jan. 26, trade and industry minister Mukhisa Kituyi said the slapping of the tax would encourage trade in new, cheap and quality clothing to boost the local industry, including EPZs.
The EPZ is a World Bank concept aimed at substituting Africa's exportation of raw materials with exportation of manufactured goods. The 34 textile manufacturing factories within the EPZ process export their products to the United States through the African Growth and Opportunity Act (AGOA).
Employment under AGOA has recorded an upward trend, from 10,000 in 2000 to 32,000 in 2004, according to Bedi, who owns a chain of factories.
He said sales to the U.S. market had also increased, from 30 million dollars in 2000 to 200 million dollars in 2004.
The bad news is that four factories have been closed, resulting in about 4,000 job losses. More other factories are said to be on the verge of folding because of high cost of production, sparked by high electricity tariffs, and poor road network.
"With these kinds of problems, all these workers face an uncertain future. If the cost of doing business is not urgently addressed, how do you expect more investors in the textile industry? How do you expect new people to venture into the industry when the veterans are pulling out?" Laban Onditi Rao, the first vice chairman of the Kenya National Chamber of Commerce and Industry told IPS. His organisation, which is an independent body, lobbies government on trade issues.
"We have tried to dialogue with the ministry of trade on the importance of these issues, in vain. I see very little commitment on the part of the government," Rao added.
Set up in 2000, the AGOA initiative provides for clothing exports from Kenya, together with 35 other countries from sub-Saharan Africa, to enter duty-free into the American market.
Kituyi is optimistic that Kenya will see more investors come to take advantage of AGOA whose mandate was recently extended by the U.S. Senate to 2015.
"We have realised the need to address competitiveness. We are already looking at reduction in cost of transport and rehabilitation of transport system. This will help in regaining Kenya's competitiveness," he told IPS Jan. 26.
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