Kenya has marked the e-commerce segment as a key growth area and a priority in the negotiations for a proposed free trade agreement (FTA) with the United States.
In the negotiation objectives unveiled last week, the government eyes support from the superpower to help strengthen e-commerce and digital platforms for trade to enhance growth. Kenya plans to gradually relax its regulations of the digital market to ease entry of US firms and products.
“We seek to secure commitment to allow gradual regulations at facilitation of digital trade in goods and services and cross-border data flow in line with the country’s development agenda, in particular contribution of this trade to economic development,” Ministry of Trade said it its objectives.
“The US-Kenya FTA will aim at progressively eliminating tariff and non-tariff barriers on substantially all trade in goods in order to establish a free trade area among the parties.”
US wants Kenya to “ensure that procedures facilitate e-commerce shipments and a simplified process for the return of domestic origin of goods to meet the challenges disproportionately impacting small business e-commerce.”
The commitments are expected to enhance growth of e-commerce and help enterprises keep up with competition and raise consumer demand from both local and international markets.
E-commerce penetration in Kenya remains low despite a growth in the number of developers in the country, with Economic Survey 2020 showing that only 25.4 percent of industries in 2019 engaged in e-commerce for transactions, sales promotion and lowering their operational costs.
In anticipation of a pick-up, the government introduced a 1.5 percent digital service tax on the value of transactions in the Finance Bill 2020 that takes effect on July 1.
However, the US is calling for the scrapping of tariffs on digital products including software, music, video, e-books and facilitation of cross-border data flows.