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KQ banks on traders on new Vietnam route to boost revenue

The new destination is a recognition of Vietnam’s growing prominence as a source of imports for Kenyan and West African traders. PHOTO | FILE
The new destination is a recognition of Vietnam’s growing prominence as a source of imports for Kenyan and West African traders. PHOTO | FILE 

Kenya Airways is counting on traders of electronic and textile goods importing from Vietnam to sustain direct flights to Hanoi, the Asian country’s capital city.

Kenya Airways last week announced that it will launch three direct flights to Vietnam — one of the world’s fastest growing economies — in March.

The new route is a recognition of Vietnam’s growing prominence as a source of imports for Kenyan and West African traders and is expected to boost KQ’s revenue on Asian routes.

“The potential of Vietnam as a country with strong economic growth and a growing middle class is significant. Vietnam has shown a considerable and stable economic growth over the recent years, including an increase in trade with Africa,” said Mbuvi Ngunze, Kenya Airways’ CEO in a statement.

Kenya’s trade with Vietnam as captured by the Kenya National Bureau of Statistics is negligible, but this is expected to change as more global companies shift their manufacturing from China, whose labour costs are on the rise, to the country.

Kenya Airways is also keen to capitalise on the first mover’s advantage to make Jomo Kenyatta International Airport the connecting hub for African traders with business interests in Hanoi.

“As the first airline to directly connect Vietnam to Africa, we are sure to leverage on this growth. Together with our SkyTeam partner Vietnam Airlines, we are very confident the addition of Hanoi to our network will be a success.”

Vietnam’s fast growing economy, cheap labour, stable politics and the government’s open door policy make the country an attractive market for multinationals to venture.

Last year, Samsung announced that it will move all its production units to Vietnam.

Its plant, which will be fully functional within the course of the year, will manufacture 80 per cent of mobile phones sold by the company.

Microsoft also announced that it was closing Nokia’s production units in Hungary and moving most of production to a plant in Bac Ninh in Vietnam. Intel and LG electronics have production lines in Vietnam, too.

Vietnam’s relatively cheaper labour market, compared to other countries in Asia such as China, is seen as the main reason why electronic companies are setting production bases in the country.

A recent survey by Japan External Trade Organisation (Jetro) indicates that the average work wage in Beijing is Sh41,940 ($466) per month while in Hanoi it is Sh13,050 ($145).

A 2013 World Bank report on trade facilitation, value creation, and competitiveness indicated that Vietnam’s textile industry growth rate from 2011 to 2015 was forecasted at 12 per cent per annum.

Its export revenue is forecast to increase from Sh1 trillion ($11.2 billion) in 2010 to Sh1.6 trillion ($18 billion) in 2015.

From 2016 to 2020, a sector growth rate of nine percent per year is predicted, while the total export value is targeted to reach Sh2.3 trillion ($25 billion) by 2020.

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