Efficient logistics is key for Kenya’s Far East partnership to impact the economy
Posted Saturday, June 21 2014 at 13:32
- An efficient logistics chain is one of the key tools to create competitive advantage in a growing economy.
An efficient logistics chain is one of the key tools to create competitive advantage in a growing economy. Every thriving economy relies on an efficient supply chain that nurtures global trade and embraces global competitiveness.
Singapore boasts of being the most efficient country in logistics. In the 2011 World Bank Ease of Doing Business Index, Singapore was ranked as the best country in the world to do business in.
Kenya, seeking diversity among its trade partners, has set its sights on the East. Asia is the fastest growing economic region and the largest continental economy by GDP in the world.
China is the largest economy in Asia and the second largest economy in the world. In addition, Asia has the highest population, with China alone having more than one billion inhabitants. The potential trade and impact on the Kenyan economy as a result of this new trade partnership would be immense.
But does Kenya have the capacity to reap the benefits of doing business with this trade giant?
On the Kenyan logistics front, key concerns include non-tariff barriers, the state of infrastructure, insecurity and the rising cost of fuel. Thus, the high cost of goods is largely attributed to logistics.
These are critical concerns that have directly impacted the cost of doing business in Kenya and threatened its position as the regional business hub in East Africa.
Neighbours Tanzania, Uganda and Rwanda have identified this gap as well, and they are drawing investors into their markets by embarking on infrastructural developments like the construction of the $11 billion Bagamoyo Port, $164 million new airport terminal and the Tanga-Musoma railway in Tanzania; Rwanda is investing in the air cargo industry and an airport free trade zone. These initiatives could shift trade away from Kenya.
To remain competitive, the Kenyan government is expanding its infrastructure as well as regional partnerships that would ease trade among the East African Community partners.
The recently launched single window system, standard gauge railway, infrastructure development and expansion — specifically at the port of Mombasa and Jomo Kenyatta International Airport — have moved in the right direction.
To effectively tackle the current and emerging demands from international markets, Kenya needs to provide a safe and convenient environment for doing business. Some interventions include building a dual carriageway on the Northern Corridor from Mombasa to the Malaba border.
Uganda and Rwanda could extend the dual carriage way into their countries.
There is also a need to fast-track the construction of the free port to enable Kenya to meet the demands of the growing markets.
An airport free trade zone would also greatly boost our air cargo logistics. East African countries should jointly partner and negotiate with global markets.
Tackling current trade hindrances while planning for long term business growth will attract more investments in Kenya and East Africa. In the longer term, innovative ideas should be considered for Kenya’s traditional markets from the West and the Asian markets.