Corruption, taxes cut Kenya’s competitive edge in global ranking

Corruption and burdensome taxes have cut Kenya’s competitiveness in the latest ranking by the World Economic Forum (WEF).

The country is ranked 99th out of 140 economies in the 2015-16 Global Competitiveness Index (GCI) released Wednesday, down from 90 last year and trails regional rival Rwanda-which has risen to position 58.

Corruption was cited as the most problematic factor in doing business with weak institutions in government also pulling Kenya’s score down.

High corporate taxes has also dimmed Kenya’s competitiveness. The government takes 38.1 per cent of the profits posted by firms in form of taxes compared 28.8 per cent in South Africa and 33.5 per cent in Rwanda.

Kenya had an average score of 3.9 points from a maximum seven across 114 indicators that range from labour, macroeconomic stability, education, institutions and infrastructure among others.

In all the indicators that are corruption-related, the country scored poorly reflecting the weakness in combating the vice that has remained rooted in Kenya’s government and private sector. For example, the index gives a poor score of 2.9 (out of 7) for diversion of public resources.

Diversion of resources for key programmes like infrastructure has been blamed for slowing down the improvements necessary to attract and retain investors in the country.

The report also paints a poor picture of the country in terms of irregular payments and bribes as well as favoritism in decisions made by government officials.

READ MORE: Kenya scores poorly in ease of doing business ranking

Besides Rwanda, Kenya’s other neighbours were ranked below it with Ethiopia jumping nine places to 109. Uganda was at 115 while Tanzania is ranked 120.

The index provides a glimpse into the key factors that determine economic growth and a country’s level of present and future prosperity.

“By doing so, it aims to build a common understanding of the main strengths and weaknesses of an economy so stakeholders can work together to shape economic agendas that address challenges and enhance opportunities,” the report adds.

Kenya performed relatively well on the quality of the education system where it scored 4.3 points  out of seven to see it ranked at position 36.

Other areas of good performance are financing through local equity market (4.4 points), the country’s capacity to attract talent (3.7 points) and capacity for innovation (4.3 points).

But terrorism which has severely affected tourism at the coast is shown to be a major drawback. Kenya has been ranked last in the business costs of terrorism showing the huge amount being lost due to the terror attacks as well as the insurance covers and security costs.

The country also ranks low at position 134 on the cost associated with insecurity and organised crime. Police services are put to be unreliable in the country.