Workers at an EPZ factory in Athi River. Since 2013 Kenya’s economic zones have employed 35,000 people and exported goods worth Sh51 billion. PHOTO | FILE
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The bank said bad timing and weaknesses in design hobbles the performance of the EPZ despite rapid expansion boosted by the US government Africa Growth and Opportunity Act (Agoa)-linked apparel exports.
By 2013 the EPZ hosted more than 80 enterprises which employed 35,000 people with combined exports of more than $500 million (Sh51 billion).
The bank said Kenya’s unsatisfactory experience with EPZs mirrors that of most Africa’s economic zone programmes set up “at the wrong time”.
Kenya’s Export Processing Zones (EPZs) have failed to meet expectations on wealth and job creation, the World Bank (WB) says in a new report as the government prepares to reform the model.
The bank said bad timing and weaknesses in design hobbles the performance of the EPZ despite rapid expansion boosted by the US government Africa Growth and Opportunity Act (Agoa)-linked apparel exports.
By 2013 the EPZ hosted more than 80 enterprises which employed 35,000 people with combined exports of more than $500 million (Sh51 billion).
“Nevertheless, on a global scale, Kenya’s EPZ results are not impressive,” the World Bank said adding that countries such as China, Costa Rica and Vietnam ramped up investment and exports from the model quicker.
The bank said Kenya’s unsatisfactory experience with EPZs mirrors that of most Africa’s economic zone programmes set up “at the wrong time”.
“Part of the story is simply one of bad timing. The rapid growth of economic zones worldwide and their success in stimulating export-led growth owes in part to an unprecedented era of globalisation of trade investment that took place during the 1980s and 1990s,” the bank said adding that most African countries launched their programmes in the 1990s and 2000s amid extreme competition by established rivals.
Apart from competition from other international rivals, the lender said Kenya’s overemphasis on single-factory units stretched resources, making it difficult to offer satisfactory services and infrastructure for the entire economic zone. “The quality of infrastructure was superior to other African EPZs, yet it still lagged behind what Asian and Latin American countries offered.
One of the reasons for this was that although the EPZ infrastructure and regulatory environment was effective, little was done beyond the EPZ gates, including issues of electricity outages, electricity costs, customs, transport logistics and low productivity of the labour force,” the bank said.
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It further blamed the flop on a rigid model that restricted potential for diversification and local integration.
“The EPZ model adopted in Kenya was relevant only for export-oriented, assembly-related activities relying on imported inputs. Companies in the EPZs were disadvantaged when it came to serving the larger East Africa Community market, and services companies were excluded altogether,” the WB said.
As part of a strategy to address the EPZ failures the government plans to roll out Special Economic Zones (SEZs) which will enjoy lower taxes to boost the country’s investment profile.
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Note: The results are not exact but very close to the actual.
