Dongo Kundu free trade zone construction starts early 2016

The construction of the free trade zone (FTZ) at Dongo Kundu Mombasa will start next year, targeting regional trade.

“Ground breaking for the Dongo Kundu free economic zone is set for early next year” the Industrialisation ministry said in an update yesterday.

The FTZ project will be established on a site of between 300-500 acres of land that is available to investors.

It will host wholesale and retail trading, breaking bulk, re-packaging logistics, warehousing and handling and storage of goods among others.

Unlike the current practice at Mombasa port where all goods are subjected to slow customs procedure, an FTZ creates a haven where goods on transit face less strict customs regulations.

The area will be reserved for re-exports to the 400 million-people Common Market for Eastern and Southern African (Comesa), allowing for transshipment of cargo without inspection or paying customs duty.

The Comesa bloc is already the single-largest export destination for Kenya’s goods accounting for 35 per cent of Sh517.9 billion worth of goods exported in 2012.

“The FTZ is a proven development model which attracts foreign and domestic investors, stimulates local, regional and international trade, improves a country’s business climate and reduces cost of doing business,” Industrialisation principal secretary Wilson Songa told the Business Daily in a previous interview.

Globally, FTZs are organised around major seaports, international airports and generally underdeveloped areas.

Marginalised areas are often targeted for the FTZs because they attract investments which help address poverty. As a sweetener, corporations setting up in the zone may be given tax breaks.

The zones are normally popular with multinational corporations that set up factories to produce goods such as textiles.

In building an FTZ, Kenya will join others such as Dubai whose economy rides on goods distributed to other parts of the world.

The planned FTZ is expected to gain immensely from the ongoing expansion and modernisation of the port of Mombasa.

Kenya is also building a second container terminal valued at Sh28 billion in Mombasa to handle increased trade within the region driven by a boom in the construction industry, vast infrastructure development and an emerging middle class.

By 2016, the new terminal is projected to have a capacity of 450,000 TEUs and this is expected to rise to 1.2 million by 2019.

The Mombasa port handled a record one million twenty-foot equivalent units (TEUs) of cargo last year, signifying rising trade volumes in the region.

The extra capacity is expected to boost operations at the port that has been witnessing increased traffic, driven by improved economic activity in neighbouring countries that depend on it for exports and imports.

Besides the expansion of the port of Mombasa, the planned construction of the standard gauge railway could also boost the coming FTZ by providing efficient flow of cargo to and from the port of Mombasa where the government has also effected major regulatory reforms.