Huge trade gap in Japan’s favour to feature at talks

As Kenyan officials host their Japanese guests in Nairobi for the sixth Tokyo Investment Conference on African Development (TICAD), the growing trade imbalance in favour of Japan and how to reduce it is expected to feature prominently in the discussions.

This is because the value of imports from Japan has continued to rise sharply in recent years, touching Sh88.2 billion last year from Sh56.6 billion in 2011, according to the Economic Survey 2016.

Kenya’s exports to Japan have however remained low at about Sh4 billion last year from Sh2.3 billion in 2011, piling pressure on Nairobi to up its game.

“Kenya is basically importing 22 times more than it is exporting to Japan and this is something that needs to be tackled despite the massive differences in the sizes of the two economies,” Trade Principal Secretary Chris Kiptoo said.

The profile of Kenya’s main exports to Japan is mainly to blame for the trade imbalance between the two countries, analysts said.

Kenya mainly exports unprocessed agricultural products including cut flowers, tea, coffee, edible nuts, fish fillets, tobacco and sisal fibre as well as handicraft, semi-processed precious stones and  soda ash whose overall returns may not be much without value-addition.

Japan, on the other hand, ships to Kenya large numbers of both used and new motor vehicles and spare parts, iron and steel products, electronics, rubber tyres and machinery.

“The current profile of our exports clearly shows why the trade gap is huge. We mainly export lower value primary agricultural products to Japan while they bring in high value machinery and industrial products. We don’t expect to compete effectively under such circumstances,” Dr Kiptoo said.

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Kenya’s options of bridging the imbalance include value-addition on agricultural products and broadening the export base.

“Striking a balance with Japan is difficult given the advanced nature of its economy but we can make some improvement through value-addition to products so that we can fetch more money from our exports. Exporting agricultural products in primary form cannot yield much in terms of earnings,” the PS said.

He added: “The range of products we export to Japan is also quite thin at the moment and we need to make forays there and discover new markets for other products that may be supplied from Kenya”

Dr Kiptoo said Kenya is also keen on tapping investments from Japan to drive Kenya’s industrial capacity with an aim of servicing markets in the region.

“We are keen on growing Japanese investment in Kenya because it can help boost our trade numbers. Having investments in our local industries with an eye on markets in the region is a plus for us. Besides, having Japanese investment here in Kenya comes with numerous advantages including riding on their technical expertise as well as work culture” he said.

Kenya’s trade is already benefiting from Japanese investments in key sectors including geothermal power production, roads as well as the expansion of the port of Mombasa which have helped lower the cost of production of various products.

“The support in these key sectors of power and infrastructure are a direct catalyst for trade because markets are won mainly on cost efficiency and we are keen on having more investment in these areas. If the cost of production and transport is lower you definitely have an edge over rivals,” the PS further said.

During a recent visit to Tokyo, President Uhuru Kenyatta said Kenya would push for direct from Japan to help boost trade and tourism between the two countries.

“This is another area where we were talking about how we can get direct flights coming into Japan. This will help us improve the number of tourists coming from Japan to Kenya,’’ he said.