By ANTHONY KITIMO

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Construction of the first phase of Kenya’s free-trade zone (FTZ) — Dongo Kundu Special Economic Zone — at the port of Mombasa is to start in July, after the government signed an agreement with the Japan International Cooperation Agency (JICA)  to undertake the project.

On June 2, Kenya Ports Authority (KPA) acting managing director John Mwangemi and JICA officials led by Naota Mukai signed the agreement to mark the beginning of the project.

“The construction of new road infrastructure and special economic zone under the Mombasa Port Development Project (MPDPR) and the Standard Gauge Railway will be linked to the expanded Port of Mombasa, landlocked countries within the East and Central Africa will efficiently serve the Port,” said Mwangemi.

According to the Mombasa Special Economic Zone (SEZ) Development project, the final report will be done under JICA loan scheme structured as a $60 million grant and a $500 million concessional loan payable within 30 years.

The project which is set to be completed by 2026 will include creation of a free trade zone, a free port, a logistics hub, and a mega industrial zone where major players and regional countries using Mombasa port will be allocated parcels of land to set up their key depots.

Mombasa port serves a number of landlocked countries in East Africa including Uganda, South Sudan, Rwanda, Burundi and the Democratic Republic of Congo.

The project is part of Kenya’s industrialisation plan, spanning 10 years and is boosted by the revised draft SEZ regulations (2019) that offer incentives to companies operating in the zone.

Among the incentives in the new regulations include exemption from VAT, reduced corporate tax from 30 percent to 10 percent for the first 10 years and 15 percent for the next 10 years, exemption from taxes and duties payable under the Customs and Excise Act (2014), the Income Tax Act (1974), the EAC Customs Management Act (2004), and stamp duty, and exemption from county-level advertisement and license fees.

The main focus of the FTZ is strengthening key sectors such as agro-processing, textiles, leather, construction, ICT, hydrocarbons and mining and the location strategic with its main objective of decongesting Mombasa port and ensure quicker turnaround for freight logistics companies.