Doing Business In Kenya

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Mar 7, 2005 - Interested U.S. firms may contact Commercial Service Nairobi for a list of ..... Authorities licensed Kencall, Kenya's first call center, In. November 2004 ...... P.O. Box 52692, 00100, Transcom House, Ngong Road, Nairobi, Kenya.

Doing Business In Kenya: A Country Commercial Guide for U.S. Companies INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2005. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

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Chapter 1: Doing Business In … Chapter 2: Political and Economic Environment Chapter 3: Selling U.S. Products and Services Chapter 4: Leading Sectors for U.S. Export and Investment Chapter 5: Trade Regulations and Standards Chapter 6: Investment Climate Chapter 7: Trade and Project Financing Chapter 8: Business Travel Chapter 9: Contacts, Market Research and Trade Events Chapter 10: Guide to Our Services

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Chapter 1: Doing Business In Kenya • • • •

Market Overview Market Challenges Market Opportunities Market Entry Strategy

Market Overview

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Kenya’s Gross Domestic Product (GDP) in 2004 stood at about US $14.6 billion, making it the most developed economy in Eastern Africa with an estimated population of 32.2 million people and per capita income of US $239.

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2004 sectoral estimates indicate that services contributed 61.7% to Kenya’s GDP, with the agricultural and industrial sectors contributing 19.7% and 18.6%, respectively. Some 75% of Kenya’s 15 -16 million workforce works in agriculture. Gross fixed investment in 2004 is estimated at 14.3% of GDP.

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Kenya’s imports in 2003 (the last full year for which statistics are available) stood at US $3.758 billion. Exports that year were US $2.442 billion. Kenya’s main imports in 2003 were from the United Arab Emirates (11.3%), Saudi Arabia (8.6%), South Africa (8.2%), United Kingdom (6.9%), Japan (6.6%), India (5.3%) and the U.S. (5.1%). Kenya’s favorable trade balance with the U.S. in 2003 was US $52.8 million.

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U.S. business investment in Kenya is estimated to be about US $285 million, primarily in sales, light manufacturing, and tourism.

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Kenya is the economic and political heart of two regions. “East Africa” is commonly used to indicate the three countries of Kenya, Uganda, and Tanzania. Greater East Africa, or “Eastern Africa” generally refers to the countries serviced by the U.S. Commercial Service Eastern Africa, based in Nairobi. These 14 countries are: Kenya, Uganda, Tanzania, Burundi, Rwanda, the Democratic Republic of Congo, Congo-Brazzaville, the Central African Republic, Ethiopia, Eritrea, Djibouti, Sudan, Somalia, and the Seychelles. These countries have a combined GDP of about US $80 billion, a population of 286 million (larger than the U.S.), and a land area of 9.9 million square kilometers (larger than China).

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Kenya has been politically stable since independence in 1963, and relations with the U.S. have been friendly. In 1992, the country adopted a multiparty system, and it held its first transitional elections in 2002, which ushered Kenya’s first opposition party into control of government.

Market Challenges •

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Non-tariff barriers include the requirement to use a Government of Kenya (GOK) appointed inspection firm for imports. Some U.S. firms find packaging and labeling requirements onerous. The lack of certain intellectual property rights (IPR)

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protection on videos, music, and software causes some U.S. firms to be reluctant to export their goods and services to Kenya. •

Despite occasional signs of reform and progress, corruption continues to be an issue, particularly in cases involving land purchases or transactions and large government contracts.



Shipment times from the U.S. average eight weeks, and customs irregularities are not unusual. If market size warrants, U.S. firms should consider warehousing in Kenya for prompt supply and customer service. Catalogs and product brochures are useful marketing tools, and Kenyan businesses encourage the use of cell phones for doing business and telemarketing. Fixed lines are hard to obtain, relatively inexpensive, and of poor overall quality. The electrical current in Kenya is 240 volts, 50 hertz (or cycles per second).

Market Opportunities

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As evaluated by U.S. Commercial Service Eastern Africa (based in Nairobi, Kenya), the top-ten leading sectors for U.S. exports and investment in rank order are: Telecommunications Equipment, Agricultural Machinery & Equipment, Computers and Peripherals, Construction Equipment, Aircraft and Aircraft Parts, Agricultural Chemicals, Management Consulting Services, Medical Equipment, Cosmetics/Toiletries, and Electric Power Systems.



Major projects anticipated in 2005 include the upgrading of the Jomo Kenyatta International Airport, and the launch of a major e-government project by the Government of Kenya.



Various business and investment opportunities exist in Kenya, especially in the tourism, agriculture, and manufacturing sectors. Specific areas of interest to U.S. business include eco-tourism, power generation equipment, telecommunications equipment, agricultural inputs, and food processing and packaging equipment.



U.S. firms are encouraged to consider using Kenya as a base to access and penetrate the larger combined Eastern Africa and Central African market.

Market Entry Strategy

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The usually recommended market entry strategy entails the establishment of a local representative, agent, or distributor. Alternatively, selling through established dealers or establishing a full dealership is common, particularly for big-ticket items.



U.S. firms are encouraged to maintain close communication with distributors and customers to exchange information and ideas on market trends, opportunities, and strategies. The principles of customary business courtesy, especially replying promptly to requests for price quotations and orders, are a prerequisite for exporting success. The use of first names at an early stage of a business relationship is acceptable. Friendship and mutual trust are highly valued. Kenyan buyers appreciate quality and service, and, if justified, are willing to pay a premium if they

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are convinced of a product’s overall superiority. U.S. exporters should allow for additional shipping time to Kenya and ensure that Kenyan buyers are continuously updated on changes in shipping schedules and routing. It is much better to quote a later delivery date that can be guaranteed than an earlier one that is not completely certain.

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Chapter 2: Political and Economic Environment For background information on the political and economic environment of the country, please click on the link below to the U.S. Department of State Background Notes. http://www.state.gov/r/pa/ei/bgn/2962.htm

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Chapter 3: Selling U.S. Products and Services • • • • • • • • • • • • • • • •

Using an Agent or Distributor Establishing an Office Franchising Direct Marketing Joint Ventures/Licensing Selling to the Government Distribution and Sales Channels Selling Factors/Techniques Electronic Commerce Trade Promotion and Advertising Pricing Sales Service/Customer Support Protecting Your Intellectual Property Due Diligence Local Professional Services Web Resources

Using an Agent or Distributor

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Kenyan laws have no requirement for the retention of a local agent or distributor by a U.S. or other foreign company exporting to Kenya. However, it is advisable for a U.S. company trying to penetrate this market to consider retaining an agent resident in Kenya. If the product to be exported requires servicing, qualified service personnel and a reasonable supply of spare parts must be considered. Failure to address the issue of after-sales support and service is a major impediment to success in this market. To locate a local agent, distributor, or partner, U.S. business representatives contact the nearest U.S. Department of Commerce Export Assistance Center (USEAC) and request an International Partner Search (IPS) or a Gold Key Service (GKS). Nominal fees are charged for these services. The Commercial Service at the U.S. Embassy in Nairobi also provides counseling services for visiting U.S. business representatives. Establishing an Office

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To establish a legal presence in Kenya, U.S. firms register with the Kenyan Registrar of Companies as a foreign company rather than register a business name or incorporate in Kenya. Incorporation of a company in Kenya as a subsidiary of a U.S. corporation, as opposed to the registration of a U.S. firm, is more complicated and usually more expensive. Registration entails delivering the following within 30 days of establishing a place of business in Kenya to the Registrar of Companies, Companies Registry, Attorney General Chambers, in Nairobi: (1)

A copy of the charter, statutes, Memorandum of understanding, Articles of Association, or other instrument constituting or defining the company and certified as accurate by a Notary Public;

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(2)

A list of the company directors and a secretary containing their full names, physical and/or postal address, nationalities, business occupation, and directorships (if any) of Kenyan companies;

(3)

A statement of all mortgages or charges (if any) created by the company over any property situated wholly or partly in Kenya;

(4)

The names and postal addresses of one or more people resident in Kenya authorized to accept service of legal proceedings or notices on behalf of the company;

(5)

The full physical and postal address of the company’s head office or registered office; and

(6)

The physical and postal address of the company’s place of business in Kenya.

The Registrar of Companies issues a "Certificate of Compliance" that certifies that the requirements of the Kenyan Companies Act have been fulfilled. This allows the company to obtain trading licenses from local authorities and the Ministry of Trade and Industry. The U.S. Commercial Service recommends that U.S. firms obtain the services of a local attorney to undertake registration. Well-established Kenyan legal firms provide such services for an average fee of US $500 plus a Government of Kenya Stamp Duty of 1% of share capital value. Interested U.S. firms may contact Commercial Service Nairobi for a list of attorneys in Kenya. Kenya has, in the main cities of Nairobi and Mombasa, well-established realtors specializing in all areas of real estate management. The U.S. Commercial Service in Nairobi can assist in identifying realtors to recommend suitable office space. Franchising

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Although franchising is one of the fastest-growing commercial practices today, historically it has not been a main commercial feature in Kenya. It is therefore one of the least understood and practiced channels of distribution. With the exception of a dozen or so world-renowned firms (such as Coca-Cola), franchising in general has not been successful in Kenya, although five years ago South African franchises began to enter the fast-food market. The key impediments include frequent infringement of the franchise agreement, lack of commitment by the franchisees, perceived lack of a “critical mass” customer base, and weak management in general. The distance between the U.S. and Kenya has made franchise supervision and training difficult. Despite these shortcomings, frequent local inquiries for U.S. fast-food and auto rental franchises clearly indicate growing interest in franchising.

Direct Marketing

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Direct marketing of U.S. products in Kenya today is limited to major-purchase items. This includes major tender (bid) items and/or single sale items. For these items Commercial Service Nairobi prepares market reports on both public government tenders and private trade leads, which are then distributed through the U.S. Department of Commerce www.export.gov website.

Joint Ventures/Licensing

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Kenyan regulations allow for the establishment of public and private corporations, as well as joint ventures and branches. Unlike franchising, joint ventures and licensing are common features of the Kenyan business scene. Commercial Service Nairobi frequently recommends joint ventures or licensing as a practical arrangement for entering the Kenyan market, as it combines local marketing expertise and U.S. manufacturing competence. However, such arrangements should only be finalized through a local attorney. (In the case of disputes, there is a board of arbitration through which commercial disputes can be referred.) Joint ventures and licensing arrangements are generally recognized and protected by Kenyan commercial law. With the exception of the insurance and telecommunications sectors, and certain infrastructure and media companies, Kenya does not require that its nationals own a percentage of a company. For insurance companies, citizens of Kenya, whether in terms of paid-up share capital or voting rights, must hold at least one-third of the controlling interest. In the telecommunications sector, Kenyan nationals must own at least 40% equity. In other sectors, joint ventures are encouraged but are not mandatory. The percentage of foreign equity need not be reduced over time.

Distribution and Sales Channels

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All imports with an F.O.B. value of more than US $5,000 must undergo a pre-shipment inspection for quality, quantity, and price until the end of June 2005, when the contracts of the two existing Pre-Shipment Inspection (PSI) companies, Cotecna Inspections, Inc. and Bureau Veritas, expire. These PSI companies have been issuing importers with Clean Report of Findings (CRFs) documentation for customs duty valuation purposes, depending upon the zones from which the goods originate. After June 30, 2005, the Kenya Revenue Authority (KRA) will carry out destination inspections at the various border entry points. Imports to Kenya generally either enter through the port of Mombasa as sea freight or through Kenya’s main international airport, Jomo Kenyatta in Nairobi, as air freight. Upon arrival at the point of entry, the exporter’s shipping agent will usually hand the imported cargo documentation to a locally contracted clearing and forwarding agent, who prepares the necessary documentation for customs clearance. It is advisable that U.S. exporters confirm their shipping agents’ familiarity with Kenya’s import customs clearance procedures in advance, and preferably contract with a clearing and forwarding agent in Kenya before the arrival of the cargo at its final destination. Once goods have been cleared by Kenyan customs, the clearing and forwarding agent will undertake the transportation of the imported goods, either by road or rail, usually to

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the buyer’s warehouse for storage. The buyer’s sales channels ensure that the imported goods reach the retail shelves and ultimately consumers. The distribution system, especially at the retail level, consists of outlets that are small by American standards. Wholesalers often also act as retailers. They purchase goods from manufacturers and then distribute them either directly and/or through retail outlets to end-users. Common methods of selling are through retail outlets, agents or distributors, established wholesalers or dealers, or to end-users -- which include government agencies and other private local organizations. Most buyers of imported perishable consumer goods sell products directly to the large retail stores, such as the Uchumi and Nakumatt supermarket chains. Although the Kenyan market presents no unique or particular marketing problems for U.S. suppliers, its long distance from U.S. manufacturers requires that the local dealer or distributor be positioned to stock higher than normal levels to compensate for longer freight time. Price and compatible technical specifications usually are the major considerations when deciding to purchase goods. Other than setting up a manufacturing plant, U.S. manufacturers and exporters are best served by establishing a local representative as the most realistic market penetration strategy for Kenya and the region. Kenya, unlike the U.S. and Europe, lacks a tradition of truly effective back-up service and after-sales support, making these major considerations when Kenyans purchase from international sources. Kenyan dealers and retailers generally do a smaller volume of business than do their American counterparts, So U.S. exporters should be prepared to sell in smaller quantities.

Selling Factors/Techniques

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Catalogs and product brochures serve as convenient starting points for both resellers and end-users. The Kenyan market prefers visual representation for most products, particularly technically detailed goods. Technical details are important in product brochures as they may also serve as references for maintenance. Written materials should supply both end-users and importers with up-to-date product information, including prices and the latest technological developments. U.S. firms should, where practical, use Kiswahili as a second language on flyers, with English as the primary (and official business) language. Today, Kenyan businesses virtually require the use of cell phones for doing business and telemarketing. Fixed lines are not reliable and are often of far worse quality. Kenya’s mobile phone providers, Safaricom and Celtel, are doing excellent business as mobile phones are affordable to most businesspersons and pre-paid calling cards are also readily available for general users. The electrical current in Kenya is 240 volts, 50 hertz (or cycles per second). At times, the voltage can vary from 200 to 265 volts. Voltage regulators/stabilizers are available in Kenya, but most are imported from Japan and are expensive (people often only use them for computers). Electrical outages, power surges, and brownouts are common in all parts of the country, including Nairobi, at any time.

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Kenyan businesses strongly support the use of business cards when conducting business transactions. They are essentially required in the early stages of introduction, such as during a Gold Key Service.

Electronic Commerce

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While the Kenyan government recognizes the important role that e-commerce can play in trade development and poverty alleviation, the use of e-commerce currently remains limited for the most part to the airline, hospitality, banking, and courier services sectors. Of four major network applications most frequently used in B2B e-commerce – e-mail, internet, extranets, and electronic data interchange (EDI) – e-mail and internet are the most commonly used. Kenya is estimated to have 1.5 million internet users, placing it among the top ten countries in Africa. Although high-speed digital connections are available in Kenya, most companies continue to use modem-based analogue network connections owing to the relatively high cost of equipment that support high-speed networks. Besides cost, two other factors that have impeded the use of e-commerce include the low utilization of credit cards, estimated at less than 1% of the population in Kenya, and the highly inefficient government controlled fixed-line telecommunications infrastructure run by Telkom Kenya (Jambonet is Kenya’s only public internet connectivity network). However, recent developments in the telecommunications sector, including the licensing of ten new internet service providers (ISPs) in September 2004, offers significant new opportunities for the use of e-commerce. In December 2004, the Communications Commission of Kenya approved the use of Voice over Internet Protocol (VoIP) traffic by ISPs that will allow making less expensive telephone calls to any part of the world over the internet without going through Telkom Kenya's fixed line, or private mobile telephone, networks. The GOK established in 1999 a National Task Force on E-commerce with the mandate of enhancing the use of e-commerce. It was later re-constituted and registered as the Nationwide Task Force on E-Commerce (NTFECOM) and is to assess and make recommendations on policies for facilitating e-commerce, telecommunication infrastructure, the legal and regulatory framework, financial environment, human and institutional capacity building, and e-commerce support network. The GOK master plan for e-commerce is expected in June 2005. E-sokoni is currently the main business-to-business trading hub in Eastern Africa and hosts over 200 suppliers. E-sokoni provides a facility for businesses to order nonproduction supplies such as stationery, fuel, and vehicle spares through an electronic system securely accessible over the internet. Several leading firms including British American Tobacco, Unilever, Magadi Soda, and Homegrown are using E-sokoni for many of their procurement needs.

Trade Promotion and Advertising

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The most widely used advertising media in Kenya are print, radio, and television. The development and use of other media are limited and not particularly cost-effective. Kenya has four main daily newspapers: The Daily Nation, East African Standard, The

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People, and Kenya Times; five weekly newspapers: The People Weekly, Sunday Times, Sunday Nation, Sunday Standard, and The East African. There are a number of monthly magazines such as The Executive, Market Intelligence, Parents, Presence, Law Review, Health Digest, Construction Review, Real Estate, Eve Magazine, Drum East Africa, and The Farmers and Computers in Africa. The government-owned Kenya Broadcasting Corporation (KBC) operates both radio and television on a commercial basis and airs from 5:00 a.m. to midnight. KBC, in a joint venture with South Africa’s Multichoice, also operates a 24-hour commercial satellite and cable television station targeting Nairobi’s up-market viewers. KBC also operates Metro FM Radio, a music station, and Metro Television, a dedicated sports and entertainment channel. There are seven privately-owned broadcasting stations: Kenya Television Network (KTN) - run by the Standard Ltd., Nation Television & Radio – run by the Nation Media Group, Family TV & Radio – an American station featuring mainly Christian programming, Citizen Television & Radio, Kiss FM, Capital FM, and most recently East Africa Television & Radio – with coverage also in Uganda and Tanzania. These are all 24-hour stations with considerable foreign television programming including CNN, BBC, Sky News, and VOA. There are three vernacular radio stations: Kameme FM, and Coro FM, and Pwani FM (all owned by KBC) and Ramogi FM, both targeted at rural listeners. There are four religious/secular stations including East FM, Sound Asia, and Metro East FM (catering to the Asian community); Iqra FM (catering to the Muslim community); Baraka Radio, Waumini, and Sauti Ya Rehema (that caters to the Christian community). Cable Television Network (CTN), a pay-per-view television network, runs a cable station aimed mainly at up-market, Nairobi-based, Asian clientele. The current government has almost fully liberalized the licensing of radio and television stations. Many leading international advertising agencies including Ogilvy & Mather, McCann Erickson, and Young & Rubicam have local offices or affiliates. Although there are no restrictions on importing ready-to-use advertising materials, U.S. firms should consult closely with locally-based advertising firms to obtain leads on accepted advertising norms and help adapt material to fit local situations, including translation as necessary. U.S. Commercial Service Nairobi assists individual firms in conducting solo exhibitions or technical seminars on a reimbursable basis. The service that is recommended for this is the Single Company Promotion. The Nairobi International Trade Fair, an annual six-day event, is a horizontal exhibition organized by the Agricultural Society of Kenya. It can be a useful venue for the exhibition and promotion of such products as agricultural machinery, equipment and inputs; construction equipment; food processing and packaging equipment; and road construction equipment. There also are a few specialized trade exhibitions organized annually in Nairobi covering computers (http://www.aitecafrica.com/, horticulture, medical, and telecommunications equipment. U.S. firms marketing regionally should examine the possibility of participating in regional trade fairs and in U.S. pavilions organized in other countries in Eastern and Central Africa.

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Pricing

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Although many U.S. firms prefer to quote prices F.O.B. U.S. port, price quotations for Kenyan-destined goods should be on a C.I.F. Mombasa or Nairobi basis (i.e., costs, insurance, and freight to the point of disembarkation; Mombasa for sea freight and Nairobi for air freight). C.I.F. quote in U.S. dollars is generally acceptable and preferred by Kenyan importers as they are familiar with customs charges, including taxes that are levied at the local ports/airports and brokerage and handling charges. There are no price controls in Kenya (following a serious drop in economic growth, the Government of Kenya undertook economic reforms in the mid-1990’s). Pricing formulas will vary from one product to another based on demand and landed costs, although in most cases the maximum profit margin varies between 15 – 30%. Landed product costs are arrived at by applying cost formula and the sum total of: FOB costs, as per bill of lading Net sea/airfreight charges Insurance Shipping agents fee Port charges Clearing and forwarding charges (generally up to 0.5% of FOB cost), and Land transport costs

Sales Service/Customer Support

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U.S.-based manufacturers are disadvantaged in terms of freight time compared with European competitors. U.S. firms exporting major purchase items and durable items to Kenya should fully train local staff and establish a strong liaison with end-users for continuous equipment performance assessment. Manufacturers, in conjunction with the local representative, should provide detailed product information, including operating instructions. Therefore, good local availability of spare parts and strong integrated backup service is vital. Kenyan buyers are increasingly demanding after-sale service and customer support, including warranties, especially for electronics. Buyers increasingly demand guarantees from retailers to ensure that products remain functional.

Protecting Your Intellectual Property

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Kenya is a member of the Paris Union International Convention for the Protection of Industrial Property (Patents and Trademarks). The country also enacted legislation in 1990 for protection of patents and trademarks. The 1990 legislation created the Kenya Industrial Property Institute (KIPI) for receipt of international applications, issuance of industrial property rights, screening of technology transfer agreements and licenses, and dissemination of patent information. KIPI also has the legal authority to prosecute infringements of IPR and handles the registration and renewal of trademarks and service marks. Trademarks are protected for a period of seven years from the date of application.

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Kenyan protection of copyrights was enacted as law under the Copyright Act No. 12 of 2001; however, enforcement continues to be weak. In an annual study conducted by the Business Software Alliance, Kenya was among the “Top 25 worst piracy offenders” with a 77% rate of counterfeit software. In essence, this means that approximately 8 out of every 10 software products in Kenya are pirated. Intellectual property rights violations extend widely to the music and video industries as well. On paper, the Copyright Act of 2001 has provisions for protection from both audio and video copyright infringements, but in actuality protection is extremely weak. Kenya has law firms with IPR-specialized attorneys who can advise U.S. firms on Kenyan IPR legislation.

Due Diligence

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Commercial Service Nairobi can assist U.S. companies with researching the bonafides, credit worthiness, and business history of companies based in Eastern Africa. From a simple email verification request on the existence or reputation of locally based companies to the more comprehensive and detailed International Company Profile (ICP) service, CS Nairobi can provide U.S. firms with vital information they need to decide whether a proposed agent, distributor, buyer, or joint venture partner is a good business candidate. CS Nairobi’s ICP due diligence process involves an assessment of a local company’s registration, analysis of corporate history, corporate structure, company background, executive information, financial profiles, banking and auditing information, operating situation, staff size, range of products, facilities, profiles of subsidiaries and affiliates, current challenges, market capabilities, and more. For more information on this service, contact [email protected]

Local Professional Services

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The Kenyan legal system is based on British law. Although not substantially different from the U.S. legal system, Kenyan legal practices and procedures are different enough to require services of either a Kenya-based attorney or an attorney licensed to practice within the British Commonwealth. U.S. firms should seek the services of such attorneys whenever legal services are required. Contravention of Kenyan legal practices and procedures, including using the services of a non-Commonwealth attorney, could result in serious repercussions such as company de-registration and/or nullification of any and all legal agreements, contracts, charges, etc. U.S. firms are also advised to seek clarification of all legal terminology, as legal terms in Kenyan English may mean something different in American English. A listing of attorneys is available on CS Nairobi’s www.buyusa.gov/kenya website. Similar listings of other professional organizations will soon be available on the same website, all under “Business Service Providers.”

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Web Resources International Partner Search – http://buyusa.gov/kenya Gold Key Service - http://buyusa.gov/kenya CS Nairobi - http://buyusa.gov/kenya U.S. Department of Commerce – http://www.export.gov Daily Nation – http://www.nationaudio.com East African Standard – http://www.eastandard.net Kenya Times – http://www.kentimes.com Kenya Broadcasting Corporation – http://www.kbc.co.ke Multichoice – http://www.multichoice.co.za Cable News Network – http://www.cnn.com Sky News – http://www.sky.com Voice of America – http://www.voa.com Gold Key Service – http://www.buyusa.gov/kenya Single Company Profile – http://buyusa.gov/kenya Aitec Africa – http://aitecafrica.com International Company Profile – http://www.buyusa.gov/kenya Return to table of contents

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Chapter 4: Leading Sectors for U.S. Export and Investment Commercial Sectors • • • • • • • • • • •

Telecommunications Equipment (TEL) Agricultural Machinery & Equipment (AGM) Computers & Peripherals (CPT) Construction Equipment (CON) Aircraft & Aircraft Parts (AIR) Agricultural Chemicals (AGC) Management Consulting Services (MCS) Medical Equipment (MED) Cosmetics & Toiletries (COS) Electrical Power Systems (ELP) Agricultural Sector

Telecommunications Equipment (TEL)

Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 128.2 N/A N/A 128.2 10.6

2003 134.6 N/A N/A 134.6 5.7

2004 (estimated) 150 N/A N/A 150 6.5

All figures in millions of US $ Exchange rate: 2002 – 1 US $ ~ Kenya shillings 78 2003 - 1 US $ ~ Kenya shillings 75 2004 – 1 US $~ Kenya shillings 79.3

Overview

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The Kenyan telecommunications market in 2004 is estimated at about US $150 million. In July 1999, the telecommunications sector was largely liberalized when the Kenya Posts & Telecommunications Corporation was split into three autonomous entities – Telkom Kenya; the Postal Corporation of Kenya; and the Communications Commission of Kenya (CCK). Total Kenyan telecommunications market growth for the period 20032007 is expected to range from 5 to 10% annually in real terms. Although there is some assembly of telephone sets and PABXs, there is no significant local production of telecommunications equipment. While U.S. technology is highly respected for quality and performance, U.S. firms have a continuing problem in matching the financing terms (concessionary and mixed credits) offered by their competitors. The Kenyan government is keenly focused on further reforming the telecommunications

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sector, as it is one of the keys to sustained economic development in Kenya. The government plans to increase urban and rural teledensities from the current unsatisfactory level of 4 lines per 100 persons and 0.16 lines per 100 persons, respectively, to 4 lines per 100 persons in the rural areas and 20 lines per 100 persons in urban centers by 2007. In pursuance of these objectives, Telkom Kenya’s monopoly came to an end in June 2004, although the GOK has still to license a second national operator to provide competition in the fixed-line telephony market segment. The GOK has also stated that Telkom Kenya will be restructured to improve its performance in preparation for eventual privatization planned for completion by 2006. (In 2001, the privatization of Telkom Kenya began in earnest under the Moi administration with Solomon Brothers as the transaction advisors. However, towards the end of 2004, the process was abruptly halted under controversial circumstances). The GOK issued a third GSM license in September 2003 to a consortium including local entities Rapsel Ltd. and the Kenya National Federation of Cooperatives (KNFC), Econet and Wireless International, a firm jointly owned by South Africa's Altech group and Zimbambwe's Econet Wireless Group. However, the GOK in November 2004 under controversial circumstances cancelled this license after the local entity, KNFC, failed to raise the equity needed to meet the shareholding requirement. Econet Wireless contested the government’s decision in Kenya’s High Court, which reinstated the license in December 2004 by ruling that the GOK had no legal authority to cancel Econet’s 15year license granted by the CCK. Other recent significant developments within the sector include the licensing of six additional companies in November 2004 as internet gateway providers, bringing the total to 16, the licensing of 3 public data network operators (PDNO) and 2 local loop operators (LLOs), and the liberalization of the use of VSAT services following the licensing of 3 VSAT providers. Authorities licensed Kencall, Kenya’s first call center, In November 2004. Best Products/Services

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The demand for telephone receivers and cellular telephones is expected to grow at a high rate owing to the removal of tariffs for these categories of products. In February 2004, Safaricom, Kenya’s first cellular service provider, awarded its fourth successive contract of US $1.3 million to U.S. company Interwave Communications, a compact wireless communications systems firm, for the expansion of Safaricom’s GSM network. Although growth in Kenya’s mobile telephony sector since 1998 has been phenomenal, from just over 10,000 subscribers to about 2.8 million in 2004, statistics from the CCK show that current demand stands at between 4.7 million and 9.4 million. Other best sales prospects include computers, data terminals, modems, payphone terminals, routers, broadband equipment, and VSAT equipment. Opportunities

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Opportunities should continue to develop in strategic alliances or joint ventures, especially in cellular telephony and value add-ons to the traditional telephone system. Cellular telephony remains the fastest growing telecommunication subsector. Vodafone PLC of the UK and Vivendi Telecom of France made a successful debut in the market

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through joint partnership with local firms, Safaricom and Kencell, respectively. However, in 2003, Vivendi Telecom pulled out of the cellular telephony market in Kenya and the Sameer Group, the majority shareholders in Kencell, held negotiations with several firms that eventually saw Celtel International acquire Vivendi’s shares in 2004. In four years, Safaricom and Celtel have built a subscriber base estimated at 2.8 million subscribers and with a projected growth of up to 3.2 million in 2005. With the continued liberalization of the telecommunications sector, Kenya is expected to play more of a regional role. Resources

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Communications Commission of Kenya – www.cck.go.ke Telkom Kenya – www.telkom.co.ke Safaricom Limited – www.safaricom.co.ke Celtel Communications – www.ke.celtel.com/en/index.html Telecommunications Service Providers Association of Kenya – www.tespok.co.ke Ministry of Information and Communications – www.information.go.ke

Agricultural Machinery & Equipment (AGM)

Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 31 NIL NIL 30.3 5.1

2003 31.7 NIL NIL 31.7 5.32

2004 (estimated) 34.2 NIL NIL 34.2 5.7

All figures in millions of US $ Exchange rate: 2002 – 1 US $ ~ Kenya shillings 78 2003 - 1 US $ ~ Kenya shillings 75 2004 – 1 US $~ Kenya shillings 79.3

Overview

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Agriculture and agricultural activities contribute 75% of Kenya’s GDP and therefore are the mainstay of the economy. Fabrication of replacement parts is the main local production activity in Kenya’s agricultural machinery and equipment sector; imports dominate the market. The country does not have an established manufacturing base as it lacks know-how and requisite materials. The Kenyan market for imported agricultural equipment has been growing, but slowly.

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Best Prospects/Services

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The growth of this market is largely influenced by external macroeconomic factors such as the international price of coffee and tea, the country’s primary foreign exchange earners. Following closely is Kenya’s lucrative, flourishing, and rapidly growing floriculture sector, which generated $120 million in 2004. Kenya is the leading exporter of fresh cut flowers to the European Union with further growth expected in exports to Japan and the U.S. The following products offer best opportunities for U.S. exporters: Tractors and parts, farm implements – disc ploughs, harrows, planters, tractor trailers, combined harvesters, irrigation equipment, dairy processing equipment, and greenhouses. Opportunities

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With ever-greater emphasis on food security in Eastern Africa, there will be increased need to use modern technology for agricultural production, transportation, storage, and food processing. With the envisaged opening up of the Southern Sudan for investment and agricultural development, greater long-term demand for agricultural implements is expected to further support development in the region. Resources

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Ministry of Agriculture - www.agriculture.go.ke Kenya Agricultural Research Institute - www.kari.org Kenya Plant Health Inspectorate Services - www.kephis.org Fresh Produce Exporters Association of Kenya - www.fpeak.org Horticultural Crops Development Authority – www.hcda.org

Computers & Peripherals (CPT)

Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 76.7 N/A N/A 76.7 4.22

2003 88.2 N/A N/A 88.2 4.42

All figures in millions of US $ Exchange rate: 2002 – 1 US $ ~ Kenya shillings 78 2003 - 1 US $ ~ Kenya shillings 75

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2004 (estimated) 106 N/A N/A 106 4.87

2004 – 1 US $ ~ Kenya shillings 79.3

Overview

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The computer and peripherals industry is one of the fastest growing business sectors in Kenya. The figures above reflect the estimated documented (legal) market. Although U.S.- built computers are available, a substantial number of personal computers are imported by affiliates of European-based U.S. firms. These imports are not reflected in the above statistics as U.S. exports to Kenya, thus distorting the actual U.S. share of the total market. The U.S. is therefore regarded as the leading source of computers and peripherals used in Kenya, accounting for as much as 60% of the market. U.S. fully built and branded computer and peripherals exports to Kenya were US $4.22 million in 2002 and US $4.42 million in 2003. The total import market for the entire fully built computer and peripherals industry in Kenya stood at an estimated US $76.7 million in 2002 and US $88.2 million in 2003. Kenya imports 100% of its computers and peripherals, with a very small amount of total knock down (TKD) assembly done locally within Export Processing Zones (EPZ), mainly for the export markets in Eastern Africa. It is estimated that the market grew in 2004 by 15% and is expected to grow in 2005 at 20%, owing in part to anticipated government procurements in relation to the implementation of the e-government project. The main competition for U.S. exports in this industry is primarily Asian clones, which originate mainly from the Middle East via Dubai. It is important to note that clones come as knocked down kits, which are assembled by the importers. Import prices of clones range from US $125 - 325 depending on the specifications. Retail pricing will accordingly range from US $275 625. The market for clones is estimated at 20%, with the major end-users being primary and secondary schools, colleges, internet cafes, and households. However, clones have been reported to have major failure rates, with industry observers estimating failure rates of 20 – 30%.

Best Prospects/Services

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The Kenyan market preference for desktop computer systems is largely skewed towards P3 and P4 systems. For both cases, the basic specifications are as follows: RAM - 128 MB Hard Disk Drive - 10 GB (P3) and 40 GB (P4) 15-inch monitor Keyboard PS/2.0 Onboard processor - 700 Mhz and above (P3) and 2.0 Ghz (P4) Onboard modem Full multimedia (FMM) Import and excise duties for digital processing machines (comprising at least a central processing unit, an input and output unit [8 digit HTS code: 8471.41.00]) and peripherals were effectively zero-rated (removed) in June 2003. As a result, the only duty to consider for fully built up computer systems and peripherals is the 16% value-added tax. Kenya’s computer assembling business was dealt a major blow in 2004 when a 2.5 per

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cent surcharge was introduced on units manufactured under the EPZ program and sold in the domestic market. Opportunities

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In April 2004, the GOK launched a comprehensive e-government strategy to introduce the use of information and communication technology in government. At an estimated cost of US $37.8 million (KSh 3 billion) and a completion date of 2010, the GOK has already created a Directorate of E-government under the Office of the President. Plans for the creation of an e-security department within the directorate are also complete, with a program and a manual for operations. Local area networks (LANs) have been installed at a cost of US $1.85 million (KSh 147 million). Some of the services to be integrated into the e-government strategy include the registration of persons, an integrated property and assets registration system, an electronic payment system of utility bills such as water and electricity bills, and some administration of police operations. By 2007, the government plans to install a system that will enable workers to file income tax returns online. Resources

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Computer Society of Kenya – http://www.csk-online.org AITEC Kenya - http://www.aitecafrica.com/Kenya/index.php Cyber Café Operators Association of Kenya (CCOAK) – http://www.ccoak.net The Kenya ICT Federation (KIF) – http://www.kif.or.ke

Construction Equipment (CON)

Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 83 NIL NIL 83 41.5

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2003 84.5 NIL NIL 84.5 42.3

2004 (estimated) 86.5 NIL NIL 86.5 43.2

All figures in millions of USD Exchange rate: 2002 – 1 USD ~ Kenya shillings 78 2003 - 1 USD ~ Kenya shillings 75 2004 – 1 USD ~ Kenya shillings 79.3

Overview

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The construction industry in Kenya consists primarily of two key sub-sectors, roads and housing. The Ministry of Roads and Public Works oversees the construction, maintenance, and rehabilitation of the entire road network. The Kenya Roads Board (KRB) was set up in 1999 to oversee road maintenance. It also manages the road maintenance levy fund, and sets policy and regulations on safety. The KRB collects an average of US $115 million for maintenance of Kenya’s road network, which is estimated to be about 63,000 kilometers. However, the government through the Ministry of Roads and Public Works estimates that the total amount required for adequate maintenance and rehabilitation of Kenya’s roads is as much as US $1.4 billion annually. On January 24, 2005 the Ministry of Roads and Public Works issued a press release giving details of planned investments in the construction industry, stating that in 2004, US $230 million in road construction programs were begun. In the housing sub-sector, the GOK estimates that 150,000 units at a minimum are required per year to meet existing and rising demand in housing over the next five years. The private sector is expected to play a major role in the provision of the housing units required. Several U.S. exporters have already made preliminary investigations into providing various technological solutions for low cost, high-quality public and private housing. Best Prospects/Services

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Best prospects for U.S. exporters include the supply of new and used construction equipment (light and heavy earth moving equipment, loaders, crawlers, tippers and quarry mining equipment), low-cost road maintenance options, and low cost housing construction technology and know-how. Opportunities

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A variety of public and private sector investments are on offer at present – or are planned -- to private investors. Many are BOT (Build, Operate, and Transfer) or BOOT (Build, Own, Operate, and Transfer) road concessions with conventional road tolling, such as the currently approved Northern Corridor Project. Resources

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Ministry of Public Works and Housing – http:// www.publicworks.go.ke Kenya Roads Board - http://www.kroadsboard.go.ke Kenya Institute of Public Policy and Research Analysis – http://www.kippra.org

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Aircraft and Aircraft Parts (AIR)

Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 368 NIL NIL 368 258

Return to top 2003 531 NIL NIL 531 326

2004 B/C NIL NIL B/C B/C

All figures in millions of USD B/C = being compiled Exchange rate: 2002 – 1 USD ~ Kenya shillings 78 2003 - 1 USD ~ Kenya shillings 75 2004 – 1 USD ~ Kenya shillings 79.3

Overview

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Kenya has no domestic production of aircraft or aircraft parts. Although the Kenyan tourist industry has declined overall in recent years, there was strong evidence of resurgence in 2004 and small aircraft operators have indicated their intention to increase their fleets to meet growing demand, especially to cater for regional tourism. U.S. firms are encouraged to maintain their marketing presence, as big-ticket items take many years before a purchase contract is signed. Nairobi’s Wilson Airport is the busiest general aviation airport in Africa and serves as the regional small aircraft maintenance center. Best Prospects/Services

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Direct investments and joint ventures in aircraft parts, maintenance, and equipment for domestic and regional markets include: medium and heavy aircraft maintenance, assembly and fabrication of components, parts and sub assemblies for aircraft communications, navigation and surveillance equipment, and duty free importation of aircraft, aircraft spare parts and jet fuel. Opportunities

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The privatized national carrier Kenya Airways received three Boeing 737-300 aircraft in 1997-98, and three 767-300 aircraft in 2000-2001. To meet its expansion plans, in June 2002 Kenya Airways took delivery of its first of two 737-700s, and also acquired a Boeing 777 in May 2004, to be followed by two more 777s in 2005. Accordingly, Kenya Airways – arguably one of the most successful and profitable airlines in Africa, intends to grow and will require support and maintenance across the board, as will airports Kenya Airways services. There is also expected to be strong demand in Kenya over the next several years for smaller civil aircraft, general and recreational aviation, service and parts -- especially in the face of strong marketing by South African firms. Resources Kenya Ports Authority - www.kenyaairports.co.ke

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Kenya Civil Aviation Authority - www.kenyacivilaviation.or.ke Kenya Airways - www.kenya-airways.com Ministry of Transport and Communication - www.transport.go.ke

Agricultural Chemicals (AGC)

Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 123.8 NIL NIL 123.8 13.3

Return to top 2003 120.0 NIL NIL 120.0 14.9

2004 (estimated) 122.0 NIL NIL 122.0 16.0

All figures in millions of US $ Exchange rate: 2002 – 1 US $ ~ Kenya shillings 78 2003 - 1 US $ ~ Kenya shillings 75 2004 – 1 US $ ~ Kenya shillings 79.3

Overview

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Kenya imports virtually all of its agricultural chemicals, as there is no significant local production. The market is currently dominated by European suppliers—Belgian, German, and Swiss--and, to a lesser extent, Asian exporters. 2005 sectoral growth is estimated in the 7-10% range. New investment in manufacturing is encouraged by the Government of Kenya. U.S. industrial chemical manufacturers/suppliers should actively consider utilizing Kenya as a base for penetrating the entire Eastern African market. Best Products/Services

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Best sales prospects for U.S exporters include fertilizers and pesticides. 50% of all imported pesticides to Kenya are fungicides, 20% crop insecticides, and 20% herbicides, acaricides, rodenticides, and nematicides, and 10% other. It is estimated that Kenya’s consumption of fertilizers in 2004 was more than 300,000 tons valued at over US $38 million. The most widely used fertilizer is diammonium phosphate (DAP). Other fertilizers used in Kenya include nitrate potassium phosphate (NPP), single super phosphate (SSP), and calcium ammonium nitrate (CAN).

Opportunities

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Kenya’s real agricultural sector GDP registered 1.5% growth in 2003, the highest in the last five years, with expectations of even better performance in 2004. The value of fertilizers sold in 2003 increased 7.2% over the figure registered in 2002 (US $37.5

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million). A leading buyer of fertilizers in the country is the government’s National Cereals and Produce Board (NCPB). Kenya’s horticulture industry is a major export success in Africa. The industry is entirely dominated by the private sector and provides an opportunity for increased importation of fertilizers and pesticides. Similar opportunities lie in Kenya’s floriculture industry, which is the leading importer of fresh cut flowers to the flower auction in Holland. Resources

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Ministry of Agriculture – http://www.agriculture.go.ke Fresh Produce Exporters of Kenya (FPEAK)- http://www.fpeak.org Kenya Flower Council (KFC) – http://www.kenyaflowers.co.ke Agrochemicals Association of Kenya (AAK) – http://www.agrochem.co.ke

Management Consulting Services (MCS)

Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 48.2 2.6 NIL 45.6 37.2

Return to top 2003 50.7 2.0 NIL 48.7 40.8

2004 51.7 2.5 0.5 48.7 42.4

All figures in millions of USD Exchange rate: 2002 – 1 USD ~ Kenya shillings 78 2003 - 1 USD ~ Kenya shillings 75 2004 – 1 USD ~ Kenya shillings 79.3

Overview

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Management consulting in Kenya has experienced only modest growth in comparison with some other professional services such as accounting, architecture, and engineering. Foreign firms such as PriceWaterhouseCoopers, Deloitte and Touche, and Hawkins and Associates account for a large proportion of management consulting services in the country. As with the case of accounting and auditing services, multinational firms heavily dominate management consulting services, with indigenous firms accounting for a small share. Kenyan professionals largely control the local branches of these multinational firms.

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Best Products/Services

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Accounting is one of the largest professional service sectors in Kenya today. The Institute of Certified Public Accountants of Kenya (ICPAK) estimates that there are about 3000 fully qualified professionals in the country. Accountancy in Kenya is heavily dominated by the world’s “Big Five” accountancy firms, which control about 80% of large and public business. Opportunities

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Joint venture opportunities exist for foreign firms to work with Kenyan professionals. Consultancy services opportunities also exist in the privatization process of several state owned corporations. Kenya is also recommended as a hub for the servicing of all Eastern Africa. Kenya is a net exporter of services to the rest of the Eastern African market. However, ICPAK has identified bottlenecks that hinder such export, including an implicit prejudice against professionals from developing countries on the basis of undefined “quality” reasons, non-tariff barriers to entry into developed countries’ markets, legal jurisdictional issues that hinder the enforcement of discipline across borders, and the absence of globally recognized professional standards. To promote trade in accountancy services, ICPAK is seeking reciprocal market access conditions. In the future, Kenya is expected to play more of a regional leadership role in serving as a hub for all business services. Resources

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Kenya Institute for Policy Research and Analysis - www.kippra.org Institute of Certified Public Accountants of Kenya - www.icpak.com

Medical Equipment (MED)

Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

Return to top 2002 25.6 NIL NIL 25.6 1.8

2003 21.0 NIL NIL 21.0 1.6

All figures in millions of US $ Exchange rate: 2002 – 1 US $ ~ Kenya shillings 78 2003 - 1 US $ ~ Kenya shillings 75 2004 – 1 US $ ~ Kenya shillings 79.3

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2004 (estimated) 25.0 NIL NIL 25.0 1.8

Overview

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The medical equipment market in Kenya is totally reliant on imports. The estimated market demand in Kenya for electro-medical equipment in 2004 was US $25 million, with imports from the U.S. accounting for US $1.8 million. Other major suppliers include Germany, the Netherlands, the U.K, India, Italy, and China. The electro-medical equipment sub-sector is expected to grow by 10% on an annual average over the next three years. Best Products/Services

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Best prospects include CT scanners, ultrasound units, X-ray equipment, angiography, endoscopy, biochemistry, hematology, and immunology systems. Opportunities

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The U.S. is in a good position to increase its share of the market due to its superiority on the technological front. The Kenyan market appreciates the quality and reliability of U.S. medical equipment. A major opportunity in the short to mid-term involves the implementation of the controversial National Social Health Insurance Scheme (NSHIS) by the Ministry of Health, which is expected to kick-off in early 2005. (In December 2004, President Kibaki refused to approve the bill providing for the creation of the NSHIS, referring it back to Parliament for amendment). The implementation of the NSHIS will require the government to embark on a re-equipping strategy for most of its public hospitals, which at present lack most basic medical equipment. Resources

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Ministry of Health – http://www.health.go.ke

Cosmetics & Toiletries (COS)

Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 N/A N/A N/A 40.9 0.686

Return to top 2003 N/A N/A N/A 45.2 3.697

All figures in millions of US $ Exchange rate: 2002 – 1 US $ ~ Kenya shillings 78 2003 - 1 US $ ~ Kenya shillings 75 2004 – 1 US $ ~ Kenya shillings 79.3

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2004 (estimated) N/A N/A N/A 50.0 4.45

Overview

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Eastern Africa presents one of the fastest developing markets in the world for cosmetics. When it comes to looking their best at all times, Africans consider themselves second to none. There is pent-up demand for up-market products from Europe and North America, as well as for the entire range of beauty and personal care products from major manufacturers around the world. Foreign cosmetics manufacturers and suppliers deal through local subsidiaries, affiliates or local companies. These distributors or representatives sell beauty products directly to local supermarkets, pharmacies, and other wholesale and retail outlets, located countrywide with a larger proportion located within urban centers. Traditionally, pharmacies have been the primary outlets for cosmetics and toiletries, but there has been a distinct trend for supermarkets to expand into personal/beauty care products; increasingly, more middle-range product lines are appearing on supermarket shelves. Many well-known U.S. brands are available at supermarkets; including hair care products and body care products. The Kenyan market is characterized by distinct product differentiation between proprietary and generic formulations. The large variety of generic cosmetic products is further differentiated by package shape, or color or brand name, making identical products seem unique due to the packaging. Local consumers prefer imported goods and particular brands, an attitude that impedes market presentation of equally effective and cheaper locally manufactured products. Best Products/Services

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Great demand exists for products such as beauty soaps, face washes, shampoos, conditioners, body and skin lotions, toners, astringents, cold creams, moisturizing formulations, perfumes, hair colors, dyes, powders, and eye and face packs, to mention just a few. While there is now a considerable level of manufacturing activity taking place within Africa, there is an assertive and growing segment of consumers who are demanding the best products available from overseas. Enterprising traders are keen to source goods from reputable manufacturers, but are often hamstrung by the relatively small volumes of purchases requested. Most manufacturers are not interested in supplying quantities that do not run into several container loads at a minimum, and often it is not viable for buyers to go for such large volumes yet. There is also the issue of sourcing products from different countries and even continents. For instance, an African importer may be interested in facial products from Europe, toiletries from the Far East, and herbal cosmetics from the U.S. However, this involves significant logistical difficulties and should involve traveling around the world and opening of letters of credit with a host of banks. Often, these obstacles prove insurmountable, and many small importers are put off by the sheer magnitude and complications of the exercise.

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Opportunities

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There are several easy ways for cosmetic dealers and manufacturers to make their presence felt in the markets of Eastern Africa. For traders of beauty products, perfumes, toiletries, and salon equipment, Eastern Africa can be a very lucrative market. To promote products and/or services, the most effective method is to establish direct contacts with business counterparts by participating in business trade fairs. In the past few years, many international companies, especially from the Middle East, have used trade fairs to improve their presence. Information on participation and stall availability can be obtained from trade fair organizers such as Events and Conference Organizers and Sols Inclinations and Exhibitions and Events Organizers. The growing use and influence of the Internet can also be harnessed to promote business. By posting business proposals on the African Classified Advertisements section, exporters can expect direct responses from importers. Employing the growing influence of Internet technology to promote business in international markets is one of the most simple and effective promotional tools for entrepreneurs. Other investment opportunities exist in hairdressing and international beauty schools, which are also major end users of cosmetic products. There are several salons and hair and beauty care schools in Kenya, the well-known ones being Pivot Point International, Vera Beauty College, Cindy’s Beauty Palour, Chricas Beauty Palour, Afrodite Health and Beauty School, Ashleys, Bodywise, Unity, Queens, LaBelle, and Personal Care Consultants. Consumers have become more beauty conscious and more willing to explore new looks, moving away from traditional hand braiding styles that have been so much a part of the Kenyan society until now. The lack of employment also contributes to the growth in this market as the younger generation can gain experience from these schools, which will enable them to get jobs in the beauty industry. Currently, there are one hundred and thirty hair dressing salons and beauty schools: a huge potential market for the professional hairdressers and beauticians who would like to see some of the professional U.S. firms set up training facilities and educate people in this industry on the use of U.S. products. Resources

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Sols Inclinations – www.solsinclinations.com Exhibitions and Events Organizers – www.exhibitionsevents.com African Classified Advertisements section – www.africa-business.com

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Electrical Power Systems (ELP)

Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 68.8 NIL NIL 68.8 12.2

2003 72.24 NIL NIL 72.24 12.8

2004 (Estimated) 77 NIL NIL 77 13.02

All figures in millions of USD Exchange rate: 2002 – 1 USD ~ Kenya shillings 78 2003 - 1 USD ~ Kenya shillings 75 2004 – 1 USD ~ Kenya shillings 79.3

Overview

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The major sources of electricity in Kenya are hydroelectric, geothermal, thermal and imports from Uganda. The total installed capacity is 1235 MW made up of hydropower 677 MW, oil-based thermal 407 MW, geothermal 121 MW and imports from Uganda of 30 MW. The effective capacity is 1140 MW with peak demand for electricity of 870 MW in 2004. Kenya therefore has a surplus of power of 270 MW under normal weather conditions. The gap between installed and effective capacity points to significant system losses in transmission and distribution. The demand for electricity is expected to grow by 6% annually to about 1150 MW in 2010. The industry is split into three main government agencies. Power generation is carried out by the national firm KENGEN and private sector investors licensed as Independent power producers (IPPs). KENGEN is a 100% state-owned corporation that accounts for 82% of the installed capacity. IPPs currently have a combined capacity of 186 MW including 13MW generated from geothermal energy. IPPs were first allowed into the industry in 1997 and have since grown to four active or formerly active IPPs: Kipevu II, a consortium of five international firms; Iberafrica of Spain; and Westmont Tsavopower and Orpower -- both of U.S.-capital origin. Kenya Power and Lighting Company (KPLC) holds exclusive rights to distribute, market, and sell electricity as the only licensed electricity supplier. KPLC has power purchase contracts with KENGEN and the IPPs. The Electricity Regulatory Board (ERB) set up in 1998 regulates the electricity and power sector including approval of electricity tariffs. Kenya’s only two government-owned power companies have recently embarked on major power generation and distribution projects. These projects are intended to revamp the country’s available electrical power. Currently, supply exceeds demand due to a depressed economy, which in turn reduces demand from the manufacturing industry. The GOK intends to boost supply by diversifying power supply sources through enhanced imports from Uganda and accessing the South African power pool. In the June 2004 budget the Minister for Finance zero-rated the duty levied on imported electricity from Uganda. In March 2002, then President Daniel Moi inaugurated Kipevu II, a thermo-diesel power plant in Mombasa that added 74 MW to Kenya’s power grid. The World Bank and its affiliates have disbursed $699 million to support distribution and transmission systems with U.S. equipment since 2002. Another project still in progress is the 60 MW Sondu

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Miriu hydropower plant whose financing by the Japanese government resumed in 2004. The 64 MW Olkaria II plant was completed and commissioned in 2004. New transmission lines have been planned for construction and commissioning through 2008 and include the 100 km 220 KV Olkaria – Nairobi double circuit, 140 km Kiambere – Nairobi single circuit and the 140 km 220 KV Kamburu – Meru single circuit line. All of the above are projects in progress. Total Kenyan ELP market growth is expected to range from 5-7% annually in real terms in the next few years, although demand for items such as transmission lines and switchgear may grow at a faster rate. Demand for replacement equipment for existing facilities will also be a considerable factor. Best Products/Services

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The following products and equipment provide the best prospects for U.S. exporters: drilling rigs and associated equipment; electric and electrical cables; transformers, electric meters, and electric poles. Opportunities

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Areas of particular interest to foreign suppliers include the continuing Rural Electrification Program and the geothermal and thermal power generation projects. The GOK plans to create a statutory body to implement the Rural Electrification Program with the aim of enhancing connectivity to at least 40%. Although the World Bank previously withdrew funding for the geothermal project, funding resumed in 2004 following the passage of legislation to stamp out corruption. The GOK is committed to accelerating the Geothermal Resource Assessment (GRA) to facilitate designation of geothermal energy as a least cost source of electricity supply. There is no local production of any of the equipment covered in this category. Other opportunities include future investment in KPLC, concessioning and privatizing isolated power stations to improve the efficiency and lower power costs, the financing of power expansion projects with private funding instruments, the manufacturing and fabrication of electrical equipment like transformers, cables and switchgear; and developing under a joint venture with strategic investors a purpose-built facility up to 600 MW for Tiomin Resources Inc. (a Canadian firm with 30% U.S. ownership engaged in mining activities in the Coast Province). Resources Ministry of Energy – www.energy.go.ke Kenya Power & Lighting Company Ltd – www.kplc.co.ke Kenya Electricity Generating Company – www.kengen.co.ke Electricity Regulatory Board – www.erb.go.ke

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Agricultural Sectors 1.

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Wheat

In recent years, Kenya’s annual wheat requirements have averaged about 720,000 tons. Over 70% of this requirement is met through commercial imports. Average annual wheat production ranges from 180,000 - 270,000 tons, depending on the production system, weather conditions, and many other factors involved in a normal cropping year (timely rainfall, good crop husbandry, etc.). Land area under wheat cultivation has stagnated at about 140,000 hectares, with over 75% planted by large-scale wheat farmers. Wheat consumption has increased faster than production due to high population growth and increased urbanization. Production technology has not kept up with even a fraction of the increased demand over the last decade, and Kenya can expect to continue to import 450,000 - 550,000 metric tons annually. Highest demand is for hard or high protein wheat used to blend bread flour, and Kenya produces little of this type of wheat. High U.S. prices discourage would-be importers; however, quality standards favor U.S. wheat. Also, nearly all wheat imported from the U.S. is food aid.

Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 720 252 NIL 519 87

2003 720 360 NIL 550 87

2004 (estimated) 720 270 NIL 540 17.2

All figures in thousands of metric tons Figures do not include beginning and ending stocks and therefore totals may not agree

2.

Maize (Corn)

Maize is Kenya’s main staple food, although production has fallen short of demand due to frequent droughts and low productivity. The area under cultivation has stabilized at around 1.5 million hectares with limited potential for further expansion given competition for land use. Average production in this hectarage is about 2,520,000 metric tons in a normal cropping year. Annual corn consumption is estimated at 2,880,000 metric tons, with the shortfall being met by commercial imports. The Ministry of Agriculture estimates imports at 210,000 tons for 2004/05. However, this figure is likely to be revised upwards after March 2005 after spring harvesting yields are known. Maize production for 2004/05 is estimated at 2.03 million metric tons: 1.71 million metric tons from the long rain harvests, and about 320,000 metric tons from the short rains. The June-September 2004 drought severely adversely affected maize production and resulted in increased maize prices.

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Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 3600 2340 180 170 NIL

2003 3600 2200 NIL 190 NIL

2004 (estimated) 3200 2025 NIL 210 17

All figures in thousands of metric tons Figures do not include beginning and ending stocks and therefore totals may not agree

3.

Seeds (Cereals, Pasture and Horticulture)

Horticulture is the fastest growing and most dynamic sub-sector in agriculture. The industry is fully controlled by the private sector. Companies are always looking for the best material to plant and sell. Although exact figures are not available, some farmers have tried to obtain inputs from the U.S., especially those eyeing the North American market for export. There are also good prospects for support services like packaging, irrigation systems, and equipment. For other crops (cereals, pastorals, legumes, etc.) there are potential markets for quality seed as local production has often disappointed farmers with poor quality seed.

Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 1400 700 400 1100 20

2003 920 400 80 600 30

2004 (estimated) 860 500 140 500 40

All figures in metric tons The above figures reflect industry estimates only, and actual figures are believed to be higher

4. Animal Genetics Kenya has a relatively well-developed livestock sub-sector that comprises some 10% of GDP. The total cattle population is estimated to be over 12 million, nine million Zebu and three million dairy cattle. The dairy industry supports over 600,000 small-scale farmers. Since the government’s liberalization policy in 1992, the sector no longer receives subsidies in the provision of artificial insemination, dipping, and other clinical services. With the liberalization of the dairy industry and the emergence of more private processors, dairy farmers are eager to improve their herds. U.S. dairy genetics have been selling in the Kenya and the Eastern African region for the last five years, but face competition from Europe, Canada, New Zealand and more recently, South Africa. Three U.S. companies are active in Kenya.

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Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 155 120 NIL 35 26

2003 160 120 NIL 40 36

2004 (estimated) 200 120 NIL 80 50

All values represent Thousand of Units/Straws One Unit/Straw = One dose of semen

5. Centrifugal Sugar Sugar is Kenya’s second most important food crop, after corn. In the 1970s and early 80s, the country produced enough for domestic consumption and export. In the late 80s, however, production began to decline. This, coupled with a growing population, necessitated the importation of the commodity. There is now generally a deficit of about 200,000 tons every year, which is covered by imports. Increased cane delivery to sugar millers resulted in about a 17% increase in processed sugar production in 2004 compared to 2003. 2003 processed sugar production was 377,000 metric tons. The country is far from being self-sufficient, and most imports are refined sugar for industrial use. The industrial sector consumes about 100,000 – 200,000 metric tons of sugar per year. The major challenge facing the sugar sector remains competitiveness against cheaper imports from low-cost producers within the COMESA region. There have been complaints lately within the industry of dumping of cheap sugar from neighboring countries. Some of the less expensive sugar is reportedly finding way into the country illegally, and by-passing the payment of import tariffs.

Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 600 494 15 150 NIL

2003 600 377 11 200 NIL

2004 (estimated) 600 401 10 200 NIL

All figures in thousands of metric tons Figures do not include beginning and ending stocks and therefore totals may not agree

6.

Oil Seeds & Products

Edible oil production in Kenya continues to face problems, mainly caused by importation of relatively cheap palm oil, low yielding seed varieties, lack of farm credit and a poor technical support system. As a result, edible oil production has leveled off at 80,000 tons for the past couple of years. Kenya’s industrial sector has the capacity to handle 50,000 tons of seeds per year. However, only 5% (2500 tons) of this capacity is utilized by processing locally produced oil crops. Sunflower oil dominates the country’s oilseed production, accounting for 90% of the total output. In recent years, about 8,000 to 10,000 tons of edible oil has been produced from

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corn. Demand for cottonseed is high, but production is low. Considerable amounts of cottonseed are infrequently obtained from neighboring countries. The government and some non-governmental organizations are trying to promote the cultivation of soybeans. However, current production cannot meet demand. The bulk of soybean requirements are imported from countries such as Malaysia, Indonesia, and India. Most U.S. imports of edible oils and products are food aid.

Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 430 80 NIL 350 0.02

2003 N/A 80 N/A N/A N/A

2004 (estimated) N/A 80 N/A N/A N/A

All figures in thousands of metric tons Reliable statistics or industry estimates are generally no longer available for this sector

7.

Rice, Milled

About 90% of the farmed rice produced in Kenya is managed through the National Irrigation Board (NIB), which contracts with farmers in four main irrigation schemes. The remaining 10% is produced in small-holder fields producing rain-fed rice. In total, the country has an annual average production ranging between 45,000 – 50,000 tons. The Ministry of Agriculture estimates production in the 2004/05 cropping year at 47,000 tons, with 41,000 tons coming from NIB. Production falls short of demand and the deficit has to be serviced through imports. Local rice is popular, although relatively expensive. Most of the imported rice originating from Asian countries is much cheaper, with an import tariff of 35% for non-COMESA countries and 3.5% for COMESA countries. Because of the cheaper imports, NIB is unable to rapidly move its rice stocks. With the implementation of the East African Community Customs Union protocol, there will be changes as the duty for rice was revised upwards to 75% in January 2005. Rice is popular particularly in the urban areas of the country and along the coastal region. Lately well-known U.S. brands have appeared in supermarkets frequently by relatively affluent customers. Currently, the import market seems promising, mainly among the large expatriate community and wealthier Kenyans.

Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 N/A 50 N/A N/A NIL

All figures in thousands of metric tons

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2003 N/A 50 N/A N/A NIL

2004 (estimated) 120 47 NIL 73 0.3

8.

Consumer Products (Processed Food and Beverages)

Kenya has a fast-growing food retail sector with three large supermarket chains featuring multiple outlets in the six largest cities. Suppliers able to provide smaller quantities through consolidators should find the greatest chance for success. Most consumeroriented food products from the U.S. are imported via consolidators in Dubai (United Arab Emirates) or suppliers in South Africa and Europe. The growing middle class (5 10% of the total population) and a large expatriate community account for the high demand for high-value, consumer-oriented food items. Other sources of consumeroriented products are Europe, South Africa, the Middle East and Far Eastern countries. The consumer-oriented food items include canned fruits and vegetables, snack foods, confectionery, bakery products, baby foods, pet foods, dry groceries and some food ingredients (protein concentrates, vitamins, minerals, flavors, stabilizers etc.).

Total Market Size Total Local Production Total Exports Total Imports Imports from the U.S.

2002 N/A N/A 187,126 140,632 1,585

2003 N/A N/A 198,760 163,746 5,307

2004 N/A N/A N/A N/A N/A

All figures in thousands of USD Exchange rate: 2002 – 1 USD ~ Kenya shillings 78 2003 - 1 USD ~ Kenya shillings 75 2004 – 1 USD ~ Kenya shillings 79.3 A detailed breakdown of consolidated figures for a variety of processed products are not available

Resources

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USDA/FAS Washington - http://www.fas.usda.gov Kenya Bureau of Standards (KEBS) - http://www.kebs.org Customs and Excise Department - http://www.revenue.go.ke Kenya Plant Health Inspectorate Service (KEPHIS) - www.kephis.org Return to table of contents

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Chapter 5: Trade Regulations and Standards • • • • • • • • • • •

Import Tariffs Trade Barriers Import Requirements and Documentation U.S. Export Controls Temporary Entry Labeling and Marking Requirements Prohibited and Restricted Imports Customs Regulations and Contact Information Standards Trade Agreements Web Resources

Import Tariffs

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Kenya applies tariffs based on the international harmonized system (HS) of product classification. Though the 2004 budget did not provide major amendments to tax charges, there were significant changes in tax administration. The major highlights of budget 2004 were as follows: a) b) c) d)

e)

f)

g)

h)

i) j)

The standard Value Added Tax (VAT) rate remains at 16%. Capital goods and raw materials will continue to enjoy a total duty waiver granted in the 2003 budget. Investment allowance remains at 100%. New investors and manufacturers will continue to benefit from tax remission on plants and other capital goods though this will be carried out on a consignment basis. However, this benefit will be phased out on December 31, 2006 and the scheme will be subject to a Kenya Revenue Authority (KRA) audit. Manufacturers found to be abusing the fiscal privileges provided under the Export Promotion schemes, especially those involving VAT and duty remissions will be de-registered. Abuses include diversion of export goods into the domestic market. A surcharge duty of 2.5% is to be enforced on export goods sold into the domestic market by enterprises operating in the Export Processing Zones (EPZs). Furthermore, the authority to offload EPZ goods into the local market will require prior approval by the Ministry of Trade and Industry. Fiscal incentives and tax remission programs on imports will be harmonized in line with the East African Community Customs Management Act, which comes in force on January 1, 2005. Equipment and plants for generation of electricity, borehole drilling machinery and water treatment chemicals will continue to enjoy a duty waiver granted in 2003. While excise duty on non-carbonated soft drinks remains at 10%, excise duty on carbonated drinks and drinking water has been reduced from 15 to 10%. Import duty on sanitary towels has been reduced from 35 to 25% -- and VAT on these items removed.

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k) l)

m) n)

o)

p) q)

While import duty on motor vehicles was reduced from 35 to 25%, excise duty was increased by 10%. Specific rates of export duty on raw hides and skin and scrap metal have been introduced to replace the ad valorem rates of duty. Raw hides and skin will attract an export rate of duty of $0.125 (KShs. 10) per kilogram while scrap metal will attract the same duty at the rate of $0.04 (KShs. 3) per kilogram. VAT on liquefied petroleum gas (LPG) has been made tax exempt. Goods entering into the country for warehousing should reach the designated warehouse within seven days after release from the port of entry, though an extension of the period can be granted on special grounds. Imported goods shall only be cleared at the first port of entry or the port declared in the cargo manifest. Requests to amend the port of clearance in the cargo manifest will no longer be allowed. License fees for bonded warehouses and duty free shops have been increased to $2500 (KSh 200,000). Customs agents’ fee has been increased to $500 (KShs 40,000).

It is important to note that those industries that have been negatively affected by the proposed tax changes are aggressively lobbying the Ministry of Finance to reconsider its positions. The government maintains lower duties and value-added tax for selected items in certain priority sectors. Those items include: palm oil and tallow, bicycles, steel billets, wire rods, graphite lead, windmills, power transformers, cables, and active ingredients used for preparation of human and veterinary pharmaceuticals, fungicides and pesticides.

Trade Barriers

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Non-tariff barriers include the requirement to use a GOK appointed inspection firm for imports. Some U.S. firms may find packaging and labeling requirements difficult to meet. For example, the lack of certain intellectual property rights (IPR) protection on videos, music, and computer software makes U.S. firms reluctant to export their goods and services to Kenya. Kenya's eight tax treaties normally follow the Organization for Economic Cooperation and Development model for the prevention of double taxation of income. At the moment there is no tax treaty between Kenya and the United States but this has not been a hindrance. There are U.S. companies operating in Kenya and are subject to Kenyan tax law. For a list of U.S. companies operating in Kenya, please contact, U.S. Commercial Service Eastern Africa, P.O. Box 606, Village Market 00621, Nairobi, Tel: 254-20-3636-605, Fax: 254-20-3636-6065, Email: [email protected]

Import Requirements and Documentation

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Import licensing controls were dismantled in 1993. However, for a small number of health, environment and security imports, import licenses are required. Imports are, nevertheless, still subject to some paperwork and approvals. Imports of machinery and equipment classified as equity capital or loan purchases must receive prior exchange

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approval; banks are not to issue shipping guarantees for clearance of imports in the absence of the approval. All imports procured by Kenyan-based importers must be insured with companies licensed to conduct business in Kenya. Importation of animals, plants, and seeds are subject to quarantine regulations. Certain pets require an import license. Cats and dogs are issued with an import license only after a veterinary surgeon has certified the animal to be vaccinated against rabies and free from any contagious disease. The Kenyan Embassy in Washington, DC (address: 2249 R Street, N.W. Washington, DC 20008; Tel: 202-387-6101) and other Kenyan embassies may issue the import license. Importation is allowed only at designated entry points. All Kenyan imports are required to have the following documents: import declaration forms (IDF), a clean report of findings from the pre-shipment inspection firm, and valid pro forma invoices from the exporting firm. Firms exporting from Kenya need to obtain Form C 29 from Customs Department and the following documents, which serve as certificates of origin, from Kenya’s Ministry of Trade and Industry: G.S.P. Form A for U.S. destined goods, EURO 1 for exports to the European Union, PTA Certificate of Origin for exports to the PTA (COMESA) area, and Ordinary Certificate of Origin for exports to all other parts of the world.

U.S. Export Controls

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U.S. companies exporting to Kenya must adhere to the requirements of the U.S. Department of Commerce’s Bureau of Industry and Security and Department of Treasury’s Office of Foreign Asset Control. The Bureau of Industry and Security (BIS) is responsible for implementing and enforcing the Export Administration Regulations (EAR), which regulate the export and re-export of most commercial items. Items that BIS regulates are often referred to as "dual-use" items that have both commercial and military or proliferation applications - but purely commercial items without an obvious military use are also subject to the EAR. The EAR do not control all goods, services, and technologies. BIS's activities include regulating the export of sensitive goods and technologies in an effective and efficient manner; enforcing export control, anti-boycott, and public safety laws; cooperating with and assisting other countries on export control and strategic trade issues; assisting U.S. industry to comply with international arms control agreements; A primary mission of BIS is the accurate, consistent and timely evaluation and processing of licenses for proposed exports and re-exports of goods and technology from the United States. Other U.S. government agencies regulate more specialized exports. For example, the U.S. Department of State has authority over defense articles and defense services. Other agencies involved in export controls include the Department of Treasury’s Office of Foreign Asset Control, which administers controls against certain countries that are the object of sanctions affecting not only exports and re-exports, but also imports and financial dealings. A list of other agencies involved in export controls can be found on

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this Web site or in Supplement No. 3 to Part 730 of the EAR which is available on the Government Printing Office Web site.

Temporary Entry

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Kenya allows duty-free entry into the country of goods destined for neighboring countries or for transshipment; however, bonds must be executed. Such goods must be held in bonded warehouses designated by the Kenyan Customs Department. Release of the bonded goods into the Kenyan market is prohibited, unless statutory customs payments are made. Samples and exhibits/displays for trade fairs may be imported into the country duty free. It is a Customs Department requirement, however, that the items are re-exported or are certified destroyed by a customs certification officer after use. An importing firm that fails to meet these requirements will be surcharged import duty and value added tax on the presumed value of the items.

Labeling and Marking Requirements

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See “Labeling and Marking” Section following “Publication of Technical Regulations”

Prohibited and Restricted Imports

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It is illegal to import the following items unless exemption has been granted by the relevant Kenyan Ministry: 1. False money or counterfeit currency notes or coins, and any money not being of the established standard and weight of fineness. 2. Indecent or obscene prints, paintings, books, cards, lithographs or other engravings, and any indecent or obscene articles. 3. Matches in the manufacture of which white phosphorus has been employed. 4. Any article marked, without proper authority, with the Armorial Ensigns or Coat of Arms of Kenya, or having ensigns or arms so closely resembling them as to be calculated or deceive. 5. (1) Any advertisement or statement intended to promote sale of any medicine, appliance or article for the alleviation or cure of tuberculosis, or of cancer, or of any venereal disease affecting the generative organs or functions, or of sexual impotence, or of any complaint or infirmity arising from or relating to sexual intercourse, in or of humans; Provided nothing herein shall apply to a book, document or paper published for the advancement of medical science and intended for use of a government department or registered medical practitioner. (2) Any medicine, appliance or article to which is affixed an advertisement or statement referred to in paragraph one (1) or to which such an advertisement or statement relates. 6. Distilled beverages containing essential oils or chemical products which are injurious to health, including thujone, star anise, benzoic aldehyne, salicylic esters, hyssop and absinthe; Provided that nothing herein contained shall apply to "Anise" and "Anisette" liqueurs containing not more than 0.1per centum of oil

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of "Anise" and distilled from either Pimpinella anisum or the star of Anise allium verum. 7. Manufactured articles bearing the name, address, or trade mark of any manufacturer or dealer, or the name of any place in Kenya, calculated to impart to those articles a special character of Kenya manufacture and which are not of that manufacturer. 8. Fire arms and ammunition of all types and other articles having the appearance of lethal weapons imported by post. Restricted Imports 1. Tear gas and any other similar lachrymatory substance (whether in liquid or gaseous form) whatsoever, and any device or instrument especially designed to expel tear gas or any such similar lachrymatory substance (whether in liquid or gaseous form), except under and in accordance with the term of a written permit granted by the Minister responsible for Home affairs. 2. Portable spirits unless in respect of each consignment of spirits there is produced a certificate of age issued in the country of production or shipment by such official authority as may be acceptable to commissioner showing that the spirits have been stored in wood for a period of not less than four years. As the list of prohibited imports is continuously changing, importing firms should always check with the Kenyan Customs Department.

Customs Contact Information

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Customs and Excise Department Ministry of Finance P.O. Box 40160, 00100 Nairobi, Kenya Tel: 254-20-310900 Fax: 254-20-341217 Contact: Mr. Francis Thuranira, Commissioner of Customs Email: [email protected] The Customs and Excise Department under the Kenya Revenue Authority has the primary function of collecting and accounting for customs and excise taxes. Some of the taxes collected include import duty, excise duty (both on imports and local), and VAT on imports. Other taxes collected by the department on an agency basis include: petroleum development fund; road maintenance levy; import declaration form/pre-shipment inspection fees; road transit toll; Directorate of Civil Aviation fees; and fees on motor vehicle permits. Apart from its strictly fiscal responsibilities, the Customs and Excise Department has responsibility for collection of trade statistics, facilitation of trade and protection of society from illegal entry and exit of prohibited goods (e.g. drugs of abuse, hazardous chemicals, pornography/paedophilia, precursors and weapons/explosives).

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Customs and Excise Department implements bilateral, regional and international trade arrangements, and supports global enforcement efforts against smuggling, the illegal importation and exportation of arms, drugs of abuse, etc as mandated through various international legal instruments. For example, Kenya is a member of both the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA). Membership in these two regional blocs entails extending preferential tariffs to goods imported from EAC and COMESA Member States subject to agreed conditions (the Rules of Origin). Goods originating in Kenya also enter into the countries in question at preferential rates. The Customs and Excise Department, as the agency of government entrusted with the responsibility to monitor and control imports and exports, is responsible for the implementation of the ‘trade and customs’ clauses of the regional trade agreements. This also applies to trade preferences that may not be mutually applying – such as the preferences extended to Kenya under the African Growth and Opportunity Act of the USA and the Africa, Caribbean and Pacific/European Union Cotonou Partnership Agreement (signed in June 2000). At the international level, the Kenya Revenue Authority Customs and Excise Department is a member of the World Customs Organization (WCO). Standards • • • • • • •

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Overview Standards Organizations Conformity Assessment Product Certification Accreditation Publication of Technical Regulations Labeling and Marking

Overview

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A Kenya Standard is a precise and authoritative statement of the criteria necessary to ensure that a material, product or procedure is fit for the purpose for which it is intended. Kenya Standards fall into six categories: glossaries or definitions of terminology, dimensional standards, performance standards, standard methods of test, codes of practice and measurement standards. These standards are developed by technical committees whose members include representative of various interest groups such as producers, consumers, technologists, research organizations and testing organizations, in both the private and public sectors. The secretariat of these technical committees is the Kenya Bureau of Standards (KEBS). Standards Organizations

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Organizations that develop standards in Kenya include: 1. The Kenya Bureau of Standards (KEBS) 2. The National Environment Management Authority (NEMA)

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3. The Division of Environmental Health The Kenya Bureau of Standards (KEBS) is the government regulatory body under Kenya’s Ministry of Trade mandated to develop as well as ensure compliance with International Standards Organization (ISO) product standards. The National Environment Management Authority, under the Ministry of Environment and Natural Resources and the Department of Public Health, Ministry of Health, are government organizations that develop environmental and public health standards, respectively, in partnership with KEBS. KEBS conducts product testing for individual product categories and undertakes certification. KEBS has a semi-annual standards development plan, and is currently in the process of reviewing all standards with particular attention to those that are ten or more years old. A large number of the standards have been reviewed and harmonized within the Eastern Africa region. Conformity Assessment

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In addition to KEBS, other national testing bodies include: a) The Government Chemist (carries out forensic testing for law enforcement agencies) b) The National Quality Control Laboratories (medical and pharmaceutical related testing) c) The National Public Health Laboratories (testing on microbiological reagents) d) The Kenya Plant Health Inspectorate Service (KEPHIS) (certification of all imported plant materials as well as implementing sanitary &.phytosanitary requirements). e) Materials Testing Department, Ministry of Roads & Public Works (testing of materials used in the building and construction industries). Private conformity assessment bodies in Kenya include SGS Kenya, Bureau Veritas, Cotecna Inspection, and InterTek Services, which all provide private consumer producttesting services. With the exception of Cotecna and InterTek Services, they also undertake systems and services certification. All imports with an F.O.B. value of more than US $5000 continue to undergo a pre-shipment inspection for quality, quantity, and price until June 2005, when the contracts of the current two Pre-Shipment Inspection (PSI) companies, Cotecna Inspections Inc. and Bureau Veritas, expire. These PSI companies have been issuing importers with Clean Report of Findings documentation for customs duty valuation purposes, depending upon the zones from which the goods originate. After June 30, 2005, the Kenya Revenue Authority (KRA) will carry out destination inspection at the various border entry points.

Product Certification

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Product certification is currently voluntary, but is generally considered essential for marketing purposes. There are no mandatory requirements for product certification, but companies are encouraged to have their export products certified. National organizations such as the Radiation Protection Board, NEMA, the Dairy Board of Kenya, and the Communications Commission of Kenya (CCK) have specific product and system requirements that must be met prior to issuance of licenses or permits. The importation of any form of plant material (seeds, cuttings, bud wood plantlets, fresh

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fruit, flowers, and timber) into Kenya is subject to strict specified conditions as outlined in the import permit issued by the Kenya Plant Health Inspectorate Service (KEPHIS). Seed certification is mandatory before it can be sold locally; the process can take up to three years. Kenya has been a member of the International Union for the Protection of New Varieties of Plants (UPOV) since 1999. The Pest Control Products Board (PCPB) registers all agricultural chemicals imported or distributed in Kenya following local testing by an appointed research agency. It also inspects and licenses all premises involved in the production, distribution, and sale of the chemicals. The board has the right to test chemicals sold locally to assure their compliance with originally certified specifications. No agricultural chemicals can be imported into Kenya without prior PCPB authorization, and chemicals can only be sold for the specific use permitted by the board. For the most part, major horticulture producers and exporters also apply strict European Union and U.S. standards in the application and use of agricultural chemicals. All organizations involved in the manufacture, distribution, and sale of agricultural chemicals in Kenya are members of the Agro Chemical Association of Kenya (ACAK). Members must sign a "Code of Conduct" based on the U.N.’s Food and Agriculture Organization Code. This document requires rigid controls in manufacture, packaging, labeling, and distribution. It also mandates an ethics code. Kenya’s Pharmacy and Poisons Board (PPB), Ministry of Health, is responsible for the certification and registration of all pharmaceutical drugs manufactured or imported into the country. To indicate conformity with mandatory product requirements, manufacturers can voluntarily place a KEBS mark of quality on the certified product. Kenya Bureau of Standards has legal authority to stop the sale of substandard products and to prosecute offending parties. KEBS inspects all products to ensure they conform to KEBS or any other KEBS-approved standards; products that do not meet the standards are withdrawn from the market and the importer/manufacturer prosecuted. Accreditation

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Accreditation bodies in Kenya include KEBS, SGS, and Bureau Veritas. Currently, no mandatory accreditation for laboratories is required for any sector. However, the Government of Kenya plans to launch in 2005 the Kenya Accreditation Services (KAS), a quasi-government body with both public and private sector membership, to spearhead the development of a national accreditation system. Cabinet approval for the creation of KAS was given in June 2004. Publication of Technical Regulations

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Proposed technical regulations under the Standards Act are not usually published in the Kenya Gazette, the government’s official gazette. However, final regulations are published in the Kenya Gazette as legal notices to give them legal backing. By taking up corporate membership with KEBS, U.S. companies can, upon a written request to the Managing Director of KEBS, receive proposed technical regulations affecting their

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industry as well as submit their comments on the proposed regulations for consideration by the relevant technical committee. To obtain the list of proposed KBS standards, U.S. exporters can contact the Managing Director, Kenya Bureau of Standards (Off Mombasa Road, Nairobi South C, P.O. Box 54974, Nairobi, Kenya; tel: +254 (20) 502211; fax: +254 (20) 503293; contact: Eng. John Masila, Managing Director, email: [email protected], Website: www.kebs.org.). Labeling and Marking

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Special labeling is required for certain goods, including condensed milk, paints, varnishes, vegetables, and butter. In addition, imports of pre-packaged paints and related or similar products must be sold by metric weight or metric fluid measure. Weights and measure indicators must be in metric form or both metric and imperial forms. Manufacturers are required to indicate on the labels of all consumables both the date of manufacture and expiry. Labeling for pharmaceutical products should include therapeutically active substances, inactive ingredients, name and percentage of any bactericidal or bacteriostatic agent, expiry date, batch number, warnings or precautions, name and business address of manufacturer, and registration number of the product.

Trade Agreements

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Kenya first signed a bilateral trade and investment agreement with Germany in 1996. Since then, it has concluded a number of other trade agreements geared towards gaining export opportunities. Kenya is a member of the East African Community (EAC), the Intergovernmental Authority on Development (IGAD), the Common Market for Eastern and Southern Africa (COMESA), the World Trade Organization (WTO). According to the Investment Promotion Center, agreements are pending with the United Kingdom, Italy, and Russia. Kenya has no bilateral trade investment agreement with the U.S.; however, Kenya is eligible for preferential access to the U.S. market under the African Growth and Opportunity Act (AGOA). Kenya has implemented the WTO Customs Valuation Agreement and the Financial Services Agreement and has passed legislation designed to implement the Trade-related Aspects of Intellectual Property Rights (TRIPS) agreement. Web Resources

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Kenya Customs Department – http://www.kra.go.ke The Bureau of Industry and Security – http://www.bis.doc.gov Export Administration Regulations – http://www.bxa.doc.gov Government Printing Office – http://www.access.gpo.gov/bis/ear_data.html Ministry of Finance – http://www.treasury.go.ke

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Kenya Bureau of Standards – http://www.kebs.org National Environmental Management Authority – http://www.nema.go.ke The Division of Environmental Health – http://www.dehs.his.gov Communication Commission of Kenya – http://www.cck.gov East African Community – http://www.eac.int Intergovernmental Authority on Development (IGAD) – http://www.igad.dj Common Market for Eastern and Southern Africa (COMESA) – http://www.comesa.int African Growth and Opportunity Act (AGOA) – http://www.agoa.gov Trade-related Aspects of Intellectual Property Rights (TRIPS) – http://www.pc.gov.au/research/straffres.trips Return to table of contents

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Chapter 6: Investment Climate • • • • • • • • • • • • • • • • •

Openness to Foreign Investment Conversion and Transfer Policies Expropriation and Compensation Dispute Settlement Performance Requirements and Incentives Right to Private Ownership and Establishment Protection of Property Rights Transparency of Regulatory System Efficient Capital Markets and Portfolio Investment Political Violence Corruption Bilateral Investment Agreements OPIC and Other Investment Insurance Programs Labor Foreign-Trade Zones/Free Ports Foreign Direct Investment Statistics Web Resources

Openness to Foreign Investment

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The Government of Kenya (GOK) encourages foreign direct investment (FDI), but has followed a mixed economic development strategy since independence in 1963. While the respective roles of the public and private sectors have evolved over time, the country has experienced continuity in its underlying economic development strategy. However, there has been a shift in emphasis from public investment to private sector-led investment. Market-based reforms have been introduced and more incentives for both local and foreign private investment have been provided. Foreign investors seeking to establish a presence in Kenya receive the same treatment as local investors. Multinational companies make up a large percentage of Kenya’s industrial sector. In the past, government support for foreign investment was often implicitly conditioned on some form of joint venture whereby a related parastatal or a politically well-connected individual became the local partner. This practice is less common following economic liberalization and privatization of most public sector enterprises. However, privatization has not proceeded with the speed anticipated, especially in the power and telecommunications sectors. New investment has declined since the 1980s. The decline is partially attributable to problems with corruption, administrative and procedural barriers, and political unrest and uncertainty especially during election years (1992, 1997 and 2002). The GOK has sought-out foreign investment through investment conferences and foreign trips occasionally lead by the Head of State. The GOK hosted two international investment forums in 2003 and 2004 to hoping to attract new foreign investment. Foreign investment is not routinely screened. Nevertheless, investors may choose to take advantage of the “one-stop office” of the Investment Promotion Center (IPC. The

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IPC confirms minimum environmental, health and security requirements for its projects. After a decade drafting investment code, the government enacted the amended Investment Promotion Act 2004, which is expected to streamline the administrative and legal procedures to achieve a more effective investment climate. The legislation establishes a Kenya Investment Authority (KIA) to facilitate investment in the country. It is not yet known how the KIA will intersect with the IPC. Efforts have been made to harmonize investment regimes and investment incentives among the East African Community (EAC) countries (Tanzania, Kenya and Uganda). Tariff barriers between the three East African countries were removed in 1999. Kenya, Tanzania and Uganda signed a Customs Union Protocol, putting in place a three tier taxation systems in March 2004, paving the way for further steps towards a common market. Implementation of the Customs Union started in January 1, 2005 amid confusion as to what tariffs should be levied in the three East African countries. The Customs Union is meant to turn East Africa into a free trade area without paying imports and exports duties. In line with the protocol, the EAC member states are to allow free entry of raw materials from members, levy a 10% on semi-processed goods and a 25% levy on finished goods. It is the Government of Kenya’s policy to encourage investments that earn foreign exchange, provide employment, promote backward and forward linkages and transfer technology. The only significant sectors in which investment (both foreign and domestic) are constrained are those where state corporations still enjoy a statutory monopoly. These are restricted almost entirely to infrastructure (e.g., power, posts, telecommunications and ports) and the media, although there has been partial liberalization of these sectors. For example, reforms in the power sub-sector since 1997 have permitted the entry of five Independent Power Producers (IPPs). In the 2003/04budget statement, duty was waived on capital goods, plant and equipment for investments, especially to encourage generation and distribution of electricity. Apart from the Mumias Sugar Company power production, which is locally owned, the others (Iberaafrica, Westmont, Tsavo Power Company, and OrPower 4) are majority foreign owned. However, Westmont closed down in 2003. The Kenya Posts and Telecommunications Corporation (KPTC) was restructured in July 1999. Postal services, telecommunication and regulatory functions were separated, creating the Postal Corporation of Kenya, Telkom Kenya Limited and the Communication Commission of Kenya (CCK), respectively. The CCK is primarily charged with regulating a competitive telecommunications sector. Foreign investors are allowed to have a 70% share holding in telecom investments. Two companies have been licensed to operate cellular networks. Safaricom, a Telkom Kenya subsidiary,and Celtel. Vodafone Airtouch became a player in Kenya’s growing mobile communications sector when it paid about $22 million for a 40% stake in Safaricom. The government licensed a third mobile company operator although it has yet to start operating. The two current mobile phone operators have over 2.8 million subscribers, with Safaricom having about 60% of the market share. The government is supposed to have licensed a second fixed line operator to compete with the state owned Telkom Kenya after its monopoly ended on June 30 2004. However, there continue to be delays in the awarding of this license. Kenya has more than 30 monthly, bi-monthly, and quarterly magazines and journals, published locally. There are four national English language daily newspapers, as well as a large selection of foreign newspapers and magazines. Radio and television networks are linked to international networks such as the Cable News Network (CNN),

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British Broadcasting Corporation (BBC), and Reuters. Kenya hosts an International Press Center serving over 150 international journalists. The government controls the tax-funded Kenya Broadcasting Corporation (KBC), which covers almost the entire country. In June 2002, the Kenyan President gave assent to the Miscellaneous Statutes (Amendment) Bill 2002, making it more difficult for press to operate in the country. The law requires the publisher of every book printed in Kenya to sign a bond of KSh 1 million (about US $12,820) up from KSh 10,000 (about US $128). Early in June 2002, the Kenya media launched non-statutory Media Council. The 17-member council representing the local media was developed as a self-regulating mechanism. All resident companies are subject to tax on their incomes at the rate of 30%. Branches of non-resident companies pay tax at the rate of 37.5%. Taxable income is generally defined to be income sourced in or from Kenya. Value Added Tax (VAT) is levied on goods imported into or manufactured in Kenya, and taxable services provided. The standard VAT rate is 16%. There is no discrimination against foreign investors in access to government-financed research. Work permits are required for all foreign nationals wishing to work in the country. It is becoming increasingly difficult for expatriates to obtain work permits because the government says qualified middle level managers and technical staffs are available locally but this may be driven more by the high unemployment level in the country. The government’s export promotion programs do not distinguish between local and foreign-owned goods. Over the past three years, there is some indication that foreign direct investment in Kenya has been slowly increasing, particularly for European investment in the horticulture sector. The United Nations Conference on Trade and Development (UNCTAD), in conjunction with the International Chamber of Commerce (ICC), is scheduled to publish an Investment Guide for Kenya in 2005. Conversion and Transfer Policies

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There are no restrictions on converting or transferring funds associated with investment. Under Kenyan law, amounts above KSh 500,000 (about US $6,400) must be declared. The threat of international terrorism, some of which is Kenya-based, severely disrupted Kenya’s tourism sector, particularly during the May – July 2003 suspension of British Airways flights to Kenya. Under the Foreign Investment Protection Act (FIPA) (Cap 518), foreign investors are free to convert and repatriate profits including retained profits, which have not been capitalized -- proceeds of the investment after payment of the relevant taxes and the principal and interest associated with any loan. Foreign exchange is readily available from commercial banks and foreign exchange bureaus. Local and foreign investors are allowed to freely buy and sell foreign exchange. Kenya has had a floating exchange rate since late 1993 and it has remained relatively stable. Expropriation and Compensation

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The Kenya Constitution (Article 75) prohibits nationalization of private property without prompt and full compensation. The Foreign Investment Protection Act (FIPA) protects foreign investment against expropriation. Expropriation may only occur for either security reasons or public interest, whereupon fair compensation is guaranteed.

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However, during the 1980’s, the government used its authority on some occasions to compel foreigners to sell a portion of profitable companies to political insiders. In 2001, the Insurance Act was amended to raise from the minimum paid up capital for companies offering life and general business insurance from KSh100 million to KSh150 million (about US $1.3 - 2 million). For companies offering general business insurance alone, it was raised from KSh50 million (about US $0.67 million) to KSh 100 million (about US $1.33 million). Foreign investors can acquire shares freely in the stock market subject to a reserved ratio of 25% for domestic investors in each listed company. To encourage the transfer of technology and skills, foreign investors are allowed to acquire up to 49% of local stockbrokerage firms and up to 70% of local fund management companies. Fraudulent claims and unrestructured compensations bog down the insurance industry. The question of title to land acquired irregularly under the previous government is the subject of continued controversy. The issue is particularly important because 80% of bank loans are secured with land. Dispute Settlement

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Kenya is a member of the World Bank-affiliated Multilateral Investment Guarantee Agency (MIGA), which issues guarantees against non-commercial risk to enterprises that invest in member countries. It is also a signatory to the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States. The Convention established the International Center for Settlement of Investment Disputes (ICSID) under the auspices of the World Bank and is also a member of the Africa Trade Insurance Agency (ATIA). Kenya’s judicial system is modeled after the British, with magistrates’ courts, high courts in major towns and a court of appeal. In addition, there is a separate industrial court that hears disputes over wages and labor terms. Its decisions cannot be appealed. Kenya established commercial courts to deal with commercial cases in 2000. Property and contractual rights are enforceable, but long delays in resolving commercial cases are common. In the past, the system was subject to political influence that eroded the confidence of the judicial system. However, since January 2003, there have been changes in the judiciary to address the problems. In August 2003 the Chief Justice suspended 18 High Court judges, 5 Supreme Court judges and 82 magistrates on corruption allegations. Only five of the suspended opted to face the tribunals established by the President to investigate corruption allegations, while the others decided to retire. In the first case heard, the tribunal found the judge “not guilty” and ordered his reinstatement to the bench. Kenya does not have a bankruptcy law. Creditors’ rights are comparable to those in other common law countries. Monetary judgments are usually made in Kenyan shillings. The government does accept binding international arbitration of investment disputes with foreign investors. Apart from being a member of the ICSID, Kenya is a party to the New York Convention on the Enforcement of Foreign Arbitral Awards (1958).

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Performance Requirements and Incentives

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Investors in manufacturing and hotels sectors are permitted to deduct from their taxes a large portion of the cost of buildings and capital machinery. All locally financed materials and equipment (excluding motor vehicles and goods for regular repair and maintenance) for use in construction or refurbishment of tourist hotels is zero-rated for purposes of Value Added Tax (VAT). The Permanent Secretary to the Ministry of Finance must approve such purchases. In The Government permits some VAT remission on capital goods, including plants, machinery and equipment for new investment, expansion of investment and replacement. The investment allowance under the Income Tax Act is set at 100%. Materials imported for use in manufacturing for export or for production of duty-free items for domestic sale qualify. Approved suppliers, who manufacture goods to be supplied to the exporter, are also entitled to the same import duty relief. The Import Declaration Fees (IDF) on goods imported under the Tax Remission for Export Office (TREO) is KSh 5,000 (about US $67). The government sponsors a Manufacturing Under Bond (MUB) program that is open to both local and foreign investors. Enterprises operating under the program are exempted from duty and VAT on imported plants, machinery, equipment, raw materials and other imported inputs. Other incentives include 100% investment allowance on plant, machinery, equipment and buildings. The Kenya Revenue Authority (KRA) administers the program. Enterprises operating in Export Processing Zones (EPZs) enjoy the following benefits; a 10 year tax holiday and thereafter a flat 25% tax rate for 10 years; exemption from all withholding taxes on dividends and other payments to non-residents during the first 10 years; exemption from import duties on machinery, and raw materials; no restriction on management or technical arrangements; no restriction on intermediate inputs; exemption from stamp duty and VAT; exemption from certain industrial regulations and single licensing. Foreign investors are attracted to the EPZs by tax incentives and support services provided such as power and water. Enterprises operating in EPZs have increased from 54 in the year 2002 to 69 in the year 2003. The increase is largely due to preferential access and duty free status accorded to Kenyan textile exports into the U.S. under the African Growth and Opportunity Act (AGOA). However, shrinking domestic markets, cost increases of capital and production, and bureaucratic red tape minimize the effectiveness of these incentives in attracting industrial investment. With the exception of the insurance and telecommunications sectors and other infrastructure and media companies discussed earlier, Kenya does not require that its nationals own a percentage of a company. For insurance companies, citizens of Kenya, whether in terms of paid-up share capital or voting rights, must hold at least one-third of the controlling interest. In the telecommunications sector, Kenyan nationals must own at least 40 percent equity. In other sectors, joint ventures are encouraged but not mandatory. The percentage of foreign equity need not be reduced over time. Technology licenses are, however, subject to scrutiny by the Kenya Industrial Property Office (KIPO) to assure that they are in line with the Industrial Property Act. Licenses are valid for five years and are renewable. Foreign investors are free to obtain financing locally or offshore. The government no longer steers investment to specific geographic locations. Local content rules are applied but only for purposes of determining whether goods qualify for 3/7/2005

preferential duty rates within the Common Market for East and Southern Africa (COMESA), a 21 nation-trading block with combined population of about 380 million. Kenya qualifies for duty free access to the U.S. markets under the AGOA legislature enacted in 2000. Kenya’s major exports under AGOA include textiles, apparel and handicrafts. Under the Generalized System of Preferences, a wide range of Kenya’s manufactured products are entitled to preferential duty treatment in Canada and the European Union. Kenya continues to pursue an export-led growth strategy as demonstrated by economic reform measures, which have been taking place since the 1990s. The Export Promotion Council (EPC), established in 1992, encourages export development activities with several programs to help Kenyan exporters, such as research in prospective markets and attendance at trade fairs and exhibitions. Kenya is a member of the East African Community (EAC), along with Uganda and Tanzania, as well as a member to COMESA. Exports and imports within member countries enjoy preferential tariff rates. The government’s economic survey for 2004 indicates that the base of Kenya’s products is still narrow with about 55% of the total value of exports in 2003 being attributable to three items; tea (24.1%), horticultural products (26.7%) and coffee (4.6%). According to the EPC, the main Kenyan trading partners are the COMESA (44%) and EU (31%) countries. In COMESA, Kenya exports mostly manufactured products, while to the EU, Kenya sells coffee, tea and flowers. Kenya’s exports to US that are mainly attributed to AGOA recorded about US $353 million in 2004 compared to US $196.5 million in 2003. The exports include textile and apparel, plastics, detergents, petroleum products, cement and soft drinks. Imports from the U.S. were US $288.2 million and US $249.3 million for 2004 and 2003 respectively. Over the years, Kenya has enjoyed a favorable balance of trade with its immediate neighbors. However, with the rest of the world, there is an overall trade deficit due to decline of exports in all categories except for horticulture and oil products. To encourage employment of Kenyan nationals, the immigration Department requires that a minimum of KSh 3 million (about US $39,000) be invested before it authorizes work permits for foreigners. The Investment Promotion Center (IPC) is more flexible. Its minimum is KSh 2 million (about US $25,000). However, implementation of the requirement remains uncoordinated. Foreign employees are expected to be key senior managers or have special skills not available locally. Foreign investors seeking to establish a presence in Kenya are given the same treatment as local investors. Right to Private Ownership and Establishment

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Foreign and domestic private entities have a right to establish and own business enterprises in nearly all forms of remunerative activity. The principal exceptions concern public utilities (infrastructure) and the media, although a number of private owned media stations have been authorized to operate, mainly in major towns. Recent energy sector reforms have provided limited opportunities for private power generation. By statute, manufacturing companies are not permitted to distribute their own products. In addition, local officials have used their licensing authority to ensure the retail trade is mainly in the hands of Kenyans. Private enterprises can freely establish, acquire and dispose of interest in business enterprises.

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In general, “competitive equality” is the standard applied to private enterprises in competition with public enterprises. However, certain parastatals have enjoyed preferential access to markets. Examples include Kenya Reinsurance with a guaranteed market share, Kenya Seed Company with fewer marketing barriers than its foreign competitors, and the Kenya National Oil Corporation with retail market outlets developed with government funds. Some state corporations have benefited from easier access to cheap government credit. Protection of Property Rights

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Secured interests in property are recognized and enforced. In theory, the legal system protects and facilitates acquisition and disposition of all property rights – land, buildings and mortgages. In practice, obtaining title to land is a cumbersome and often corrupt process, which is a serious impediment to new investment. It is frequently complicated by improper allocation of access and easements to third parties. There is also a general unwillingness of the courts to permit mortgage holders to sell land to collect debts. Since January 2003, the government has been nullifying some land allocations that were illegally acquired. Foreigners may require Presidential approval to acquire large tracts of agricultural land or any seashore property. Kenya is a member of the Paris Union (International Convention for the Protection of Industrial Property) along with the U.S. and 80 other countries. Businesses and individuals from signatory states are entitled to protection under this convention, including national treatment and property right recognition of patents. A future prospect for patent, trademark, and copyright protection is embodied in the African Intellectual Property Organization, although its enforcement and cooperation procedures are yet untested. Kenya also is a member of the African Regional Intellectual Property Organization (ARIPO). Protection for intellectual property -- copyrights, patents and trademarks -- is inadequate. Sale of pirated audio and videocassettes is rampant although there is little domestic production. An estimated US $3.5 million is lost every year as a result of illegal software being used, according to the Business Software Association – a computer industry association established to protect software copyright and prevent software piracy. The most prevalent form of software piracy in Kenya involves business use of unauthorized copies. Kenya is in the process of conforming its legislation to the WTO TRIPS Agreement. In August 2001, the Kenyan Parliament passed an amended version of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement within the Kenya Industrial Property Act (KIPA) in order to comply with WTO obligations. The KIPA bill became law after the President’s assent in 2002. The Bill still remains unpublished in the final form and pending implementation. However, the Ministry of Trade and Industry is working on a new Bill that would establish Industrial Property Institute to lead in training of various actors in the country. In June 2003, the Kenya Bureau of Standards indicated that over KSh 37 billion (about US $493.3 million) is lost annually in customs and value added taxes due to sale of counterfeit goods. Patents, trademarks and trade secrets are the responsibility of the Kenya Industrial Property Office (KIPO) under the Ministry of Trade and Industry. Copyright protection is the responsibility of the Attorney General’s office. Kenya is a member of most of the major international and regional intellectual property conventions. The Copyright Act protects literary, musical, artistic, audio-visual works, sound recordings and broadcasts, and computer programs. Though penalties for infringement were increased in the year 2001, they are still low, and 3/7/2005

enforcement and the understanding of the importance of intellectual property, are poor. Criminal penalties associated with piracy in Kenya include a fine of up to KSh 800,000 (about US $10,700), a jail term of up to 10 years and confiscation of pirated material. There is widespread sale of pirated music and videotapes produced in neighboring countries on the Kenyan market. Kenyan authorities have recently increased their IPR enforcement efforts on behalf of textile producers to limit the transshipment of foreignmade garments through the Port of Mombasa (mostly from Asia) that are fraudulently being exported to the U.S. under AGOA preferences. Kenya has also begun a campaign to crackdown on the entry into the local market of counterfeit or “substandard” goods. Transparency of the Regulatory System

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Kenyan regulations allow for the establishment of public and private corporations, as well as joint ventures and branches. Under the law, manufacturers may not distribute their own products, and they are required to supply information to the government about their distributors. The government has legislation to control monopolies and restrictive trade practices although the body charged with oversight -- the Monopolies and Price Control Commission -- lacks the capacity to implement the legislation. There are no formal requirements on minimum local participation in either equity or management under FIPA. Foreign investors are required to sign an agreement with the government stating training arrangements for phasing out expatriates. Expatriate work permits are increasingly difficult to renew or acquire due to Kenya’s high unemployment rate. Government approval for ventures in agriculture, distributive trade, and small-scale enterprises has become more difficult to secure as the government seeks to indigenize these sectors. All investors receive the same treatment in the initial screening process. The government screens each private sector project to determine its viability and implications for the development aspirations of the country. For example, a rural agro-based enterprise, with many forward and backward linkages, is likely to receive licensing fairly quickly. However, new foreign investment in Kenya has historically been constrained by a time-consuming and highly discretionary approval and licensing system that have been vulnerable to corrupt practices. The amended investment law is to address the concerns through its “one-stop-office”, to process applications for foreign investors within one month. The law sets guidelines for processing investment applications and incorporate the means to ensure transparency and accountability. It provides information on various incentives to investors, including the procedures for obtaining such information, and how the incentives are implemented. Incoming foreign investment through acquisitions, mergers or takeovers is governed by antitrust legislation that prohibits restrictive and predatory practices that prevent the establishment of competitive markets. The legislation is also aimed at reducing the concentration of economic power by controlling monopolies, mergers and takeovers of enterprises. Mergers and takeovers are subject to the Companies Act, the Insurance Act (in case of insurance firms) or the Banking Act (in case of financial institutions).

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Efficient Capital Markets and Portfolio Investment

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Kenya has a small capital market consisting of the government controlled Capital Market Authority (CMA), Nairobi Stock Exchange (NSE), 19 securities and equities brokerage firms, 18 investment advisory firms, 6 investment banks, 13 stock brokers, 8 fund managers, 1 credit rating agency, 1 capital venture fund, 2 collective investment schemes, 3 authorized securities dealers, and 4 authorized depositories. The CMA regulates and supervises all these institutions and oversees the development of Kenya’s capital market. The NSE trades stocks from publicly quoted companies and had a market capitalization of KSh 282.5 billion (about US $3.7 billion) at the end of June 2004, up from KSh 163.3 billion (about US $2.2 billion) in April 2003. Kenya’s banking sector by November 2004 comprised of 51 financial institutions with 43 commercial banks, 2 non-financial institutions (NFBIs), 2 mortgage finance companies, 4 building societies. There are 96 foreign exchange bureaus up from 48 in 2003. Three foreign exchange bureaus have been licensed and are expected to begin operations in 2005. At the end of October 2004, the total banking assets were KSh 576 billion (about US $7.3 billion). Loans and advances accounted for 57.5% of the total assets equivalent to KSh 331.1 billion (about US $4.2 billion). Seven banks dominate the banking sector accounting for two thirds of the total deposits in the banking institutions according to the 2004 Market Intelligence report. Asset quality of Kenyan banks though improving remains poor with about 21.9% equivalent to KSh 72.9 billion (about US $0.92 billion) of assets classified as non-performing. Realization of the collateral is difficult because of a slump in the property market as well as a cumbersome court system. Significant policy, regulatory and institutional reforms have been introduced in the capital markets by the Capital Markets Authority (CMA) in line with ongoing government economic policy reforms to strengthen capital markets since the 1990s. The NSE iswas reorganized into three segments: the Main Investment Market (MIM), the Alternative Investment Market (AIM) and the Fixed Income Securities Market (FISM). The MIM targets mature companies with strong dividend streams. The AIM is more favorable to small and medium sized companies, and allows firms to access cheaper, longer-term sources of capital through the capital markets. And, the FISM allows businesses, financial institutions, government and supranational authorities to raise capital through the issuance of debt securities. The CMA continues to initiate reforms in the market through reorganization and legal framework. As of October 2004, the listings were categorized into 39 companies in the Main Investments Market (MIM) segment, 8 companies in the Alternative Investments Market segment (AIM). The CMA is involved in the preparation of a proposed integrated East African Capital Market. Kenya signed a Memorandum of Understanding (MOU) in March 1997 to establish the East African Securities Regulatory Authority to coordinate regional developments of capital markets. The NSE has started to automate its trading, clearing, and settlement systems in order to increase efficiency and improve the overall attractiveness of the capital markets. Once complete, the effort will eliminate the handling of physical certificates, thus increasing transparency and security, and minimizing settlement time. Activity at the NSE has been diversified through trading in commercial paper and corporate bonds issued by private companies. Trading in these debt instruments is regulated through a set of guidelines (developed in collaboration with private sector). They allow private companies to raise funds from the public without being quoted in the 3/7/2005

NSE. A Central Depository System (CDS) for government exists which encourages the development of a secondary market for the government’s one-year floating rate bond. The CDS opened a shop window for small investors offering products in multiples of KSh 50,000 (about US $667) up to KSh 1 million (about US $13,333) . Independent rating of companies operating in the money and capital markets is encouraged. Expenses related to credit rating services by listed companies and other issuers of corporate debt securities are tax deductible. Credit is allocated on market terms and foreign investors are able to obtain credit on the local market. However, the number of credit instruments is relatively small. Legal, regulatory, and accounting systems are generally transparent and consistent with international norms. The Central Bank of Kenya Act has been amended to provide security of tenure to its Governor, to increase the Bank’s operational autonomy, to strengthen its bank supervision functions, and place statutory restrictions on government borrowing from the Bank. The Parliament amended the Banking Act 2004 that gave powers to register and deregister commercial banks and financial institutions to Central Bank from the finance minister. In June 2003, finance minister reduced the cash ratio requirement to a range of 6% – 8%, from 10%. Corporate tax for newly listed companies is 25% for a period of 5 years from the date of listing. Withholding tax on dividends is 7.5% for foreign investors and 5% for local investors. Through legal notice number 109 that became effective in June 15, 2002, foreign investors can acquire shares in the stock market subject to a minimum reserved ratio of 25% of the share capital of the listed company for domestic investors. The 75% portion is considered as a free float available to local, foreign and regional investors without restrictions on the level of holding. Dividends distributed to residents and nonresidents are subject to a final withholding tax at the rate of 5%. Dividends received by financial institutions as trading income are not subject to tax. In 2002, the Central Bank of Kenya set requirements for all banking institutions and building societies to disclose their un-audited financial results on a quarterly basis by publishing them in the print media. The objective of the disclosures is to enable bank customers to make informed decisions about the general soundness of banks particularly when placing large deposits. Kenyan Parliament passed in December 2004 an amended Central Bank of Kenya Act 2004 that established an independent Monetary Policy Advisory Committee whose mandate is to advise the Bank with respect to monetary policy. The amended Act provides for the Central Bank to publish the lowest interest rate it charges on loans to banks referred to as the “central bank rate”. Amendments in the Banking Act 2004 were made transferring powers to revoke and issue licenses to financial institutions to the Central Bank of Kenya (CBK) from Ministry of Finance and introduced an “in Duplum Rule” which limits fees and fines on nonperforming loans to the amount of the outstanding principal. Though the banking sector problems in Kenya associated with poor bank management, inadequate government supervision, political pressure to make loans that are rarely paid, and current economic conditions are easing out, the banks are awash with cash in their vaults unable to attract private borrowers. The statutory minimum capital base for a commercial bank, as set by CBK, is KSh 250 million (about US $3.3 million) and KSh 200 million (about US $2.7 million) for Non Bank Financial Institutions. The introduction in 1996 of the Magnetic Ink Character Recognition (MICR) system in the banks’

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clearinghouse has facilitated faster clearing of checks from 14 days to 3. Both residents and non-residents are allowed to operate foreign currency accounts. “Cross-shareholding” and “stable shareholder” arrangements are not used to restrict foreign investment through mergers and acquisitions. Hostile takeover defenses are uncommon. Private firms are free to adopt articles of incorporation, which limit or prohibit foreign investment, participation or control. No other practices by private firms exist to restrict foreign investment. Political Violence

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There have been clashes in the past between police and demonstrators over political reform and other issues. An on-going political conflict over the implementation of a new draft constitution and the composition of President Kibaki’s cabinet has inhibited the government’s effectiveness. In July 2004 violent demonstrations were held in the cities of Nairobi and Kisumu. Although some shops in major cities have been damaged or looted during such disturbances, the damage had been limited and not directed at foreign companies. There are ethnic clashes on the borders between Masai and Kisii communities in Western Kenya and reported skirmishes in the Rift Valley Province, which was also a hot spot for political violence during the presidential election campaigns of 1992 and 1997. The reported violence is not directly targeting foreign companies but operations are disrupted in such times. Kenya has a good relationship with all its immediate neighbors. Corruption

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On-going corruption has been a major reason for widespread disinvestment in Kenya. To address the this problem the Prevention of Corruption Act was amended in late 1997 to create the Kenya Anti-Corruption Authority (KACA). The Act makes it a felony, punishable by up to 10 years in prison, to give or receive a bribe. KACA had a poor start when its first Director was sacked in 1998 and the Authority declared unconstitutional in 2000. The Corruption Control Bill 2002 established an Anti-Corruption Police Unit (ACPU) under the police Department. A new director was appointed and the Chief Justice appointed two magistrates to deal with corruption in the country. The government enacted the Anti-Corruption and Economic Crimes Act and the Public Officers Ethics Act in May 2003. The Anti-Corruption and Economics Crimes Act sets rules for transparency and accountability, including actions that would amount to graft and abuse of office. The Public Officers Ethics Act requires certain public officials to declare their wealth and that of their spouses within 90 days from August 2, 2003. The government is to operationalize the Anti-Corruption Commission and move forward with the implementation of the Anti-Corruption and Economic Crimes Act and launch full implementation of the code of Ethics Act for Public Servants, according to the June 2003 budget speech. However, by early July 2004, the name for the director of KACC had not been tabled in Parliament for approval as required by law. Additionally, the government introduced a Public Service Integrity Program, designed to improve management practices in public offices. The government created a Ministry of Justice and Constitutional Affairs and appointed a Permanent Secretary in charge of governance and ethics. The Permanent Secretary is to spearhead the fight against corruption.

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Since January 2003, there have been concerted efforts to fight corruption in all sectors of the economy. Key personalities taken to court include a High Court judge and many former government senior officers. The government established a Goldenberg Commission of Inquiry to investigate corruption involving export compensation scandals that occurred in early 1990s. The inquiry is ongoing and it is revealing allegations of corruption from previous and some of the current government officials. The Government is yet to take action on the annual reports of the Controller and Auditor-General and the Auditor-General for Corporations on specific areas of corruption as pointed out in the financial accounts of ministries and parastatals. Also, action is yet to be taken on the reviews of the findings by the two parliamentary watchdog committees. Kenya has a local Transparency International chapter that compiles an annual bribery index in the country. The Kenya Bribery Index 2004 reported that the likelihood of a bribe went down from 65% to 40% between 2002 and 2004. However, the Transparency International Global Corruption Barometer 2004 released in December 2004 ranks Kenya among the five most corrupt countries from 64 countries across the world. Parliament and political parties are identified as the most corrupt institutions although other institutions such as police, tax/revenue services, registry/permit services and the legal system/judiciary are among the top six corrupt institutions in the country. U.S. firms have identified corruption as a major obstacle to foreign direct investment. Corruption has been pervasive in most sectors, particularly in government procurement and dispute settlement. In May 2003, the Minister for Finance sacked all procurement officers in public offices. In June 2004, two Permanent Secretaries (Finance and Home Affairs ministry) and other senior officers were sacked for corruption involving a KSh 2.7 billion (over US $35 million) scandal involving the procurement of passports with foreign owners, Anglo Leasing and Finance Company limited, a company yet to be established. In July 2004, the same company was exposed for shady involvement in the construction of a police forensic laboratory that never existed worth KSh 4 billion (over US $52 million). Although both projects have been cancelled, the culprits have not yet been taken to court, despite the recommendations of the Public Accounts Committee, a Parliamentary watchdog body. A Public Procurement and Disposal Bill June 2003 has been prepared to deal with procurement issues and is to be tabled in Parliament. The bill seeks to establish a procurement commission to take over all procurement matters. Many government tenders are subjected to all manner of bureaucracies, including delay and re-evaluation with the ultimate aim of awarding the tenders to already agreed beforehand companies. The government established a police unit at the Kenya Revenue Authority (KRA) to tackle tax evaders, including scandals involving duty evasion at the Port of Mombasa, however the problem remains widespread. Bilateral Investment Agreements

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Kenya signed a bilateral trade and investment agreement with Germany in 1996. According to the IPC, agreements are pending with the United Kingdom, Italy and Russia. There is no bilateral trade investment agreement with the United States. However, Kenya qualifies for duty free access to the United States market under the African Growth and Opportunity Act (AGOA).

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OPIC and Other Investment Insurance Programs

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In 2004, the U.S. Overseas Private Investment Corporation (OPIC) supported four projects in Kenya. These included a company specializing in land information services, a well-drilling company, a company providing humanitarian activities and services, and a housing company. The housing project, in which a U.S. small business will use an OPIC loan to build 400 affordable housing units in Kenya, represents significant progress towards fulfilling the Memorandum of Understanding between OPIC and the Kenya government designed to leverage OPIC programs to increase U.S. private sector investment in Kenya. In FY2004, the U.S. Overseas Private Investment Corporation (OPIC) supported four projects in Kenya totaling US $8.75 million. Historically, OPIC has committed US $55.8 million to 37 projects in Kenya. Labor

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Kenya has a population of 32.2 million with a work force of just over 15 million, 75% of whom work in agriculture. Several million Kenyans work in the informal sector, known as “jua kali.” High population growth of 2.1% per annum means there is an on-going demand for new jobs. Kenya has an abundant supply of well-educated and skilled labor in most sectors at internationally competitive rates. High HIV/AIDS prevalence (estimated at 6.7%) poses a serious threat to human resource development. Kenya’s laws generally provide safeguards for worker rights and mechanisms to address complaints of their violation. However, amendments to the Finance Act of 1994 allowed employers in ailing industries to retrench workers irrespective of the provisions of their collective bargaining agreements. All labor laws, with the exception of the Factories Act (permitting occupational safety and health inspections), apply in the Export Processing Zones (EPZs, which employed about 36,000 workers at the end of 2003). Following a number of strikes in the EPZs in January – March 2003, EPZ workers are now being allowed to unionize. New sets of labor laws (applying all laws to the EPZs) was presented to the Attorney General in April 2004, but are yet to be tabled in Parliament for debate. The law provides that as few as seven employees may form a union. There are 41 trade unions registered under the Trade Union Act. All but five, including the 240,000-member Kenya National Union of Teachers and the newly reregistered (after a 20-year ban) Kenya Union of Civil Servants, are affiliated with the Central Organization of Trade Unions (COTU), which has about 300,000 members. The unions are organized by industry rather than craft and union membership is voluntary. The law permits strikes, but unions must notify the government 21-28 days before a strike is called. During this 21-day period, the Minister of Labor may mediate the dispute, nominate an arbitrator or refer the matter to the Industrial Court. Once a dispute is referred to mediation, fact-finding or arbitration, any subsequent strike is illegal. Kenya’s Industrial Court is highly regarded and there are no long delays in the hearing of labor disputes. The court has penalized employers for discriminating against employees because of their union activities; usually requiring the payment of lost wages. Reinstatement is not a common remedy.

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Kenya has relatively harmonious labor relations. However, over the last few years, the labor market in Kenya has experienced industrial disputes partly attributed to the consequences of liberalization and globalization that has required reorganization and restructuring of both public and private enterprises. In 2003, trade disputes reported to the Ministry of Labor and Human Resources Development increased to 2,323 from 892 in 2002. Only 142 disputes were referred to the Industrial Court. There were 161 strikes involving 62,312 in 2003, many of them taking advantage of the momentum for change brought about by the new government and gaining workers in the EPZs permission to join unions. In the first half of 2004, sporadic strikes were reported in the EPZs, although fewer in number than in 2003. There is an active tripartite (government, labor and employers) structure. In April 2004 the work of a U.S. government and ILO-funded tripartite Labor Law Reform Task Force was completed and a new set of laws was presented to the Attorney General. The proposed new laws incorporate the ILO core labor standards and are Africa Growth and Opportunity Act (AGOA) - consistent. The normal workweek is 45 hours, after which overtime must be paid. The Regulation of Wages and Conditions of Employment Act provides that the total hours worked in any 2week period not exceed 120 hours (144 hours for night workers). Wages and conditions of employment are established in negotiations between unions and management. There are twelve separate minimum wage scales, varying by location, age and skill level. The lowest minimum wage is currently US $50 (KSh 3,908) per month in urban areas and US $42 (KSh 3,252) in rural areas. Workers covered by a collective bargaining agreement generally receive a better wage and benefit package than those not covered (on average US $97 (KSh 7,303) per month), plus a housing and transport allowance, which may account for 25 to 50 percent of a Kenyan worker’s compensation package. Kenyan law establishes detailed environmental, health and safety standards that are not strictly followed in practice. Although fines specified in the Factories Act (regarding occupational safety and health) are the highest in the labor laws, they have not been increased since 1990 and are generally too low to serve as a deterrent to unsafe practices. These are due to rise with the new draft laws. Work permits are required for all foreign nationals who wish to work in Kenya. Although there is no official time limit, a visitor’s pass or a visa is usually valid for three months and immigration usually grants an extension upon proper application. Work permits may be applied for in any major city in Kenya; however, all applications go to Nairobi for processing. Foreign investors are required to sign an agreement with the government describing training arrangements for phasing out expatriates. High unemployment levels have made it increasingly difficult for expatriates to renew or obtain work permits. The Immigration Department has occasionally cancelled work permits before the expiry date without giving reasons. According to the law, the immigration officer issuing entry permits may require a bond of not less than KSh 100,000 (US $1,261) for each permit to be deposited with immigration. Foreign-Trade Zones/Free Ports

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Kenya had 37 Export Processing Zones (EPZs) in 2003 up from 31 in 2002. The government owns some of them and others are owned by private industry. The zones offer considerable advantages as discussed in the previous sections. Of the 69 enterprises operating in EPZs, 11% are Kenyan owned, 74% are foreign investments while 15% are joint ventures. The products from EPZs are mainly for US markets that 3/7/2005

takes 79% with European Union accounting for 8% and EAC/COMESA 7%. The largest privately owned EPZ is the Sameer Industrial Park located in Nairobi’s Industrial area. It has been operational since 1990. Three others have been set up and are operated by Kenyan firms for their specific needs, while four privately owned zones are being constructed. Out of 712 acres allocated for export processing at Athi River, a Nairobi suburb, the government has developed a 230-acre zone. Another large export processing zone under development by the government is in Mombasa, Kenya’s main seaport. The EPZs are available to both those intending to put up structures for lease and operators. A government agency, Kenya Export Processing Zone Authority (EPZA) regulates the zones. The total investment in the zones is KSh 15.7 billion (about US $203 million) with a total turnover of KSh 15.8 billion (about US $204 million) in 2003, reflecting an increase of 52.8% from 2002. The increase is largely due to preferential access and duty free status accorded to Kenya textile exports into the U.S. under AGOA where Kenya was among the first sub-Saharan states to be fully accredited under the provisions of the Act. An increasing number of firms in the EPZ are agro-processing, especially in cotton weaving, horticulture and tea processing. Foreign Direct Investment Statistics

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The Central Bank of Kenya (CBK) collects, but does not publish, data on FDI transactions. The government does not publish data on the value of foreign direct investment (position/stock and annual investment capital flows) by country of origin or by industry sector destination. Neither is data available on Kenya’s investment abroad. On its website, UNCTAD does provide some data on FDI in Kenya. Although there are more than 200 foreign registered companies in Kenya with the majority from the United Kingdom, Germany, and the United States, the past three years have experienced major disinvestments. The UNCTAD website indicate a total FDI in 2002 of US $50.4 million compared to US $75.9 million outward investment. Web Resources Telkom Kenya – http://www.telkom.co.ke Communications Commission of Kenya – http://www.cck.co.ke Safaricom – http://www.safaricom.co.ke Cable News Network – http://www.cnn.com British Broadcasting Corporation – http://www.bbc.com Reuters – http://www.reuters.com Kenya Broadcasting Corporation – http://www.kbc.co.ke

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International Chamber of Commerce – http://www.iccwbo.org African Trade Insurance Agency – http://www.ati-aca.com Export Processing Zones Authority – http://www.epzahq.com African Growth Opportunity Act – http://www.agoa.gov Captial Markets Authority – http://www.cma.or.ke Nairobi Stock Exchange – http://www.nse.co.ke Central Organization of Trade Union – http://www.cotu-kenya.org Sameer Industrial Park – http://www.sameer-group.com Central Bank of Kenya – http://www.cbk.go.ke Return to table of contents

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Chapter 7: Trade and Project Financing • • • • • •

How Do I Get Paid (Methods of Payment) How Does the Banking System Operate Foreign-Exchange Controls U.S. Banks and Local Correspondent Banks Project Financing Web Resources

How Do I Get Paid (Methods of Payment)

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Differences in business practices include export financing. U.S. firms are strongly advised to discuss best practices and transaction details with an experienced international bank familiar with Kenya. U.S. firms are also strongly advised to determine the range of financing offered by competitors. There are several basic methods of receiving payment for products sold in Kenya, the selection of which is usually determined by the degree of trust in the buyer’s ability to pay. Payment alternatives that U.S. exporters might consider, in order of the most to the least-secure include: 1) Cash in advance (confirmed wire transfer or check after depositing and clearing); 2) Confirmed irrevocable letter of credit (if concerned about the importer and international standing of his bank); 3) Irrevocable letter of credit (if concerned only about the reliability of the importer); 4) Documentary drafts for collection (checks drawn on the importer’s bank); 5) Open account; and 6) Consignment sales. Being paid in full in a timely manner is always a major concern of any exporter, as is relative commercial risk. U.S. exporters are encouraged to discuss these and all other concerns with a CS Nairobi specialist before doing business with a new partner. As a general rule, U.S. exporters selling to Kenya for the first time are advised to transact business only on the basis of cash-in-advance or an irrevocable letter of credit confirmed by a recognized international bank. Any other form of payment carries a high level of risk. The establishment of the African Trade Insurance Agency (ATI) in 2001 has strengthened and increased foreign trade by providing cover against non-commercial risks such as war, trade embargoes, expropriation, and seizure of goods. ATI has support from the International Development Association – an arm of World Bank – and offers insurance at lower costs than most private, commercial insurers. CS Nairobi can provide background and credit-risk information (for a nominal fee) on virtually any Kenyan individual or firm. CS Nairobi can also recommend local companies that provide U.S. exporters with credit information and the bona fides of potential Kenyan importers on a commercial basis (generally, for a higher fee than charged by CS

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Nairobi). Interested U.S. firms should visit CS Nairobi’s website for further details: www.buyusa.gov/kenya Note: Kenyan exporters themselves have liberal access to various types of attractive and useful export finance and insurance programs. These include overdraft facilities, revolving lines of credit, pre-shipment rediscounting facilities, and post-shipment financing.

How Does the Banking System Operate

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Kenya, already a regional leader, is expected to develop one of the largest commercial banking industries in Africa. It inherited at independence a financial system typical of British colonies in Africa: a currency board; a commercial banking system wholly dominated by major British banks; a Post Office Saving Bank, and a small number of non-bank financial institutions (NBFIs) providing mortgage finance, insurance, and other financial services. The sector has become substantial, sophisticated, and complex. Recent years have witnessed a restructuring of the sector through liquidations and mergers brought about by a declining client base and non-performing loans -- as well as overall poor management of small, indigenous banks. The sector includes: The Central Bank of Kenya (CBK); 43 domestic and foreign commercial banks with branches, agencies, and other outlets throughout the country; NBFIs with excellent branch networks in Kenya's major cities; 4 building societies; 40 insurance companies; 2 mortgage finance companies; the Post Office Savings Bank with a large network of branches around the country; forex bureaus, and over 1500 (generally less well-organized) savings and credit unions. Despite the number of established banks, the banking sector is essentially dominated by four major commercial banks. However, NBFIs are often able to compete successfully with commercial banks because of the less restrictive regulatory framework within which they operate. NBFIs were originally designed to operate as merchant or investment banks, but in June 1994 the Central Bank instructed NBFIs to operate more like commercial banks, taking deposits and making short-term loans. To date, 27 NBFIs have become full banks, and 20 have merged with parent commercial banks. Despite the existence of a relatively developed and sophisticated financial system, Kenya's capital market is still in its infancy. Treasury bills and bonds dominate the market for short-term securities. There is only light trading in commercial paper, although Kenya has a secondary market in government and commercial paper. The Nairobi Stock Exchange (NSE) is the only licensed trading exchange in the country. NSE originally started as a private association but is now a fully-fledged stock market. Currently, there are 47 companies listed. The 20-share NSE index closed at 2945.58 in December 2004 -- up from 2738 in 2003. The increase in share volume and the NSE index indicate a recovery trend from the sluggish activity recorded in 2002-2003. Market capitalization as of December 2004 stood at US $314.15 billion, up from US $4.18 billion in December 2003. However, despite the change of government in 2003, the level of foreign investment in the NSE has not changed significantly, due primarily to lingering and persistent concerns about Kenya’s overall governance and political paralysis.

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The industry regulator is the Capital Markets Authority. The mission of the Capital Markets Authority is “to promote the development of dynamic capital markets in Kenya within a framework that facilitates innovation through regulation for the maintenance of investor confidence and safeguards the interest of all market participants.” The exchange is fully computerized and is currently in the process of installing an electronic central depository system (CDS). The strengthening of the Capital Markets Authority through revised legislation in the mid-1990’s helped in its growth. With the right macroeconomic framework, it has the potential of joining the ranks of other strong emerging markets.

Foreign-Exchange Controls

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In conjunction with the removal of import licensing requirements in 1993, Kenya repealed all exchange control laws and has moved to a fully market-determined exchange rate system. There are no controls on foreign exchange, and this policy has attracted short-term capital inflows. The Central Bank of Kenya licenses foreign exchange bureaus, which were introduced in 1995 to enhance efficiency in the forex market. These bureaus are open longer hours than banks and have increased competition in the foreign exchange market. Currently, only the following capital transactions have foreign exchange restrictions: 1)

Investment by foreigners in shares (set in May 2002 at not more than 75% for both companies and individuals on shares traded on the NSE); and

2)

Investments by Kenya residents outside Kenya exceeding US $500,000 must be approved by the Central Bank through the facilitating bank.

Residents and non-residents are now permitted to buy or sell foreign exchange to and from authorized dealers up to the equivalent of US $5,000. Amounts exceeding this require the necessary documentation to show the purpose for the transaction. This is, however, primarily only for administrative recording by the Central Bank of Kenya. There is currently no anti-money laundering legislation, although given Kenya’s unfortunately position as a base or transit point for global terrorists, anti-money laundering controls are clearly needed and laws are expected within the next few years. Exporters may retain all their export proceeds in foreign currency accounts with local banks, or sell such proceeds to obtain local currency. Residents may borrow abroad with no limit on the amount. However, the government will not guarantee any borrowing by the private sector. Although payments under technical, management, royalty, and patent fees are freely remittable, the relevant agreements and renewals will be subject to approval. Persons leaving or entering Kenya are permitted to take or bring into the country, without declaration, Kenyan currency up to a maximum of KSh 500,000 and foreign currency equivalent to a maximum of US $6,400. Amounts beyond these limits may be taken out or brought into the country, provided they are declared at the point of departure or entry.

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U.S. Banks and Local Correspondent Banks

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Almost all major commercial banks in Kenya have either direct or indirect correspondent offices in London and the U.S. They include the following: Bank Indosuez Bank of Baroda Bank of India Barclays Bank of Kenya Citibank Commercial Bank of Africa Habib Bank A.G. Zurich Habib Bank Ltd Kenya Commercial Bank Mashreq Bank PSC National Bank of Kenya Stanbic Bank Ltd. Standard Chartered Bank

Project Financing

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Each year Kenya receives significant project financing assistance from donors. There are three sources of external assistance: multilateral, bilateral, and Private Voluntary Organizations (PVOs). The first category can further be divided into United Nations Organizations and non-United Nations multilateral institutions. Bilateral donors lead in provision of project financing, followed by multilaterals and PVOs. In the budgetary period 2003/2004, Kenya received $311 million from multilateral donors and $466 million from bilateral donors. The largest overall multilateral donor is the World Bank. As of December 2004, the Bank had approved 176 loans, credits, and grants for Kenya for a total amount of approximately US $5 billion. The Bank’s portfolio as of December 31, 2004, comprised 14 projects with a total commitment of US $761 million. In June 2004, the World Bank upgraded Kenya’s lending status from “low case” to “base case;” a major vote of confidence in the current government. With this new lending status, Kenya can now borrow up to US $900 million from the World Bank to fund its development programs. Active World Bank-funded projects include: Project

Funding

Northern Corridor Transport Improvement Kenya Agricultural Productivity Improvement Nairobi Water & Sewerage Institutional Restructuring Development Center Learning Arid Lands Resource Management Free Primary Education Support Public Sector Management Technical Assistance Regional Trade Facilitation

World Bank World Bank World Bank World Bank World Bank World Bank World Bank World Bank

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Value (million) $207.0 $ 40.0 $ 15.0 $ 2.7 $ 22.0 $ 50.0 $ 15.0 $ 25.0

Decentralized Reproductive Health & HIV/AIDS HIV/AIDS Disaster Response Urban Transport Infrastructure Export Development Financial Sector Adjustment Financial Sector Adjustment Industrial Sector Adjustment

World Bank World Bank World Bank World Bank World Bank World Bank World Bank

$ 50.0 $ 50.0 $115.0 $ 49.2 $ 67.3 $ 44.0 $ 53.7

The private lending arm of the World Bank Group, International Finance Corporation (IFC), provides substantial amounts of finance to the private sector, particularly investments with a potential of generating foreign exchange. The African Development Bank/Fund has a concessionary lending facility that is not, at present, adequately replenished. Thus, the only AFDB funded projects active are those already funded. The AFDB is expected to recommence concessionary lending operations in the near future. U.S. firms also should examine the possibility of using the private sector window established at the AFDB. For more information on opportunities for projects funded by multilateral development banks, U.S. firms should visit the African Development Bank’s website on www.afdb.org In the U.S. fiscal year that ended on September 30, 2004, the U.S. allocated about $175 million in direct and project assistance to Kenya (about KSh 13.6 billion). About $70 million of this was spent on combating HIV/AIDS through President Bush’s Emergency Plan for AIDS relief, or PEPFAR. In 2005, the U.S. expects to spend more than $110 million in PEPFAR money in Kenya, the most the U.S. will spend in any country in the world. Other significant U.S. investments in Kenya in 2004 included: almost US $30 million in assistance to Kenya’s armed forces and police and prosecutors; US $42 million in food aid, of which more than US $25 million was mobilized in response to President Kibaki’s appeal in July 2004; US $25 million for economic development, education, environmental protection and democracy and governance programs; US five million over the past three years to improve aviation and airport security; and a grant of $400,000 to fund a study on improvement of hospital management and patient care at Kenyatta National Hospital. Another U.S.-initiative is the “Ambassador’s Self-Help Fund:” US $100,000 divided up annually among about 20 small-scale projects all over the country (a typical grant is US $5000, invested at the ground level, to help local communities improve lives in their villages).

Web Resources

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Export-Import Bank of the United States: http://www.exim.gov Country Limitation Schedule: http://www.exim.gov/tools/country/country_limits.html OPIC: http://www.opic.gov Trade and Development Agency: http://www.tda.gov/ SBA's Office of International Trade: http://www.sba.gov/oit/

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USDA Commodity Credit Corporation: http://www.fsa.usda.gov/ccc/default.htm U.S. Agency for International Development: http://www.usaid.gov United Nations Organization – http://www.unon.org Nairobi Stock Exchange – http://www.nse.co.ke Capital Markets Authority – http://www.cma.or.ke Multilateral Development Banks Africa Development Bank: http://www.afdb.org World Bank: http://www.worldbank.org International Finance Corporation: http://www.ifc.org Return to table of contents

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Chapter 8: Business Travel • • • • • • • • • •

Business Customs Travel Advisory Visa Requirements Telecommunications Transportation Language Health Local Time, Business Hours and Holidays Temporary Entry of Materials and Personal Belongings Web Resources

Business Customs

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While there is solid potential for U.S. goods and services in Kenya, Kenya is a developing country with a complex market. The U.S. exporter should keep certain factors in mind to achieve maximum success. Given the good business and political relations between Kenya and the U.S., there are significant commercial opportunities for U.S. firms. The principles of customary business courtesy, especially replying promptly to requests for price quotations and orders, are a prerequisite for exporting success. In general, Kenyan business executives are relatively informal and open. The use of first names at an early stage of a business relationship is acceptable. Friendship and mutual trust are highly valued, and once an American has earned this trust, a productive working relationship can usually be expected. Given the competitive market, increasing international experience and growing prevalence of overseas Kenyans doing business with and often returning to Kenya to live and work, Kenyan firms are developing significant expertise in international business. Kenyan buyers appreciate quality and service, and, if justified, are willing to pay a premium if they are convinced of a product’s overall superiority. The market, however, is very price sensitive. Care must be taken to ensure that delivery dates are closely maintained and that after-sales service is promptly honored. As there are numerous factors that may interfere with prompt shipment, the U.S. exporter should allow for additional shipping time to Kenya and ensure the Kenyan buyer is continuously updated on changes in shipping schedules and routing. Since Kenyan wholesalers and retailers generally do a lower volume of business than their American counterparts, U.S. firms should be prepared to sell smaller quantities than is normal in the U.S. U.S. firms should maintain close contact with distributors and customers to exchange information and ideas. Local distributors/representatives can serve as an excellent source of local market requirement information and as appraisers of product market acceptance. In most instances, mail, fax, or telephone communications are sufficient, but the understanding developed through periodic personal visits is the best way to keep distributors apprised of new developments and to resolve problems quickly. Prompt

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acknowledgment of correspondence by fax or e-mail is mandatory. If the market size warrants, U.S. marketers should seriously consider warehousing in Kenya for speedy supply and service of customers. Local assembly of complete knock down kits, especially for electrical and electronic goods, is recommended; this has proven viable in the Kenyan market and has an import duty advantage. As would be the case in most markets, vigorous and sustained promotion is often needed to launch products. Products must be adapted to both technical requirements and to consumer preferences, as well as meet Kenyan Government regulations. The GOK is keen to ensure that all imports conform to the stipulated technical specifications; any flaws detected could result in the withdrawal of the product from the market, prosecution of the manufacturer and the retailer/importer, or both. It is not sufficient to merely label a product in conformity with national requirements to achieve successful market penetration. Consumers must be attracted to the product by the label and packaging as well as ease of use. Travel Advisory

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Kenya is a developing Eastern African country known for its wildlife and beautiful national parks. The capital city is Nairobi. The second largest city is Mombasa, located on the southeast coast on the Indian Ocean. Tourist facilities are widely available in Nairobi, the game parks, the reserves, and on the coast. On November 21, 2004, a U.S. government travel advisory was re-issued to alert Americans to ongoing safety and security concerns in Kenya. The U.S. State Department urges Americans to consider carefully the risks of travel to Kenya at this time. The U.S. Government continues to receive indications of terrorist threats in the region aimed at American and Western interests. Terrorism poses a continuing threat in Kenya and throughout East Africa. The State Department recommends that private American citizens in Kenya evaluate their personal security situation in light of the current terrorist threat. U.S. citizens in or traveling to Kenya should consult the Department of State’s Consular Information Sheet for Kenya, the East Africa Public Announcement, and the Worldwide Caution Public Announcement, which are available via the Internet at http://travel.state.gov. American citizens may obtain up-to-date information on security conditions by calling 1-888-407-4747 toll-free in the United States, and 1-317-472-2328 from overseas. On August 7, 1998, terrorists bombed and destroyed the U.S. Embassy in Nairobi, killing 213 people and injuring many more in and around the Embassy. The U.S. Embassy relocated to its new chancery at Gigiri in March 2003. On November 28, 2003, terrorists bombed the Paradise Hotel in Kikambala, 30km from Mombasa, killing 16 people and injuring several others. U.S. citizens visiting or resident in Kenya are encouraged to register with the U.S. Embassy. American citizens may complete a registration form on-line or may request one by email at: [email protected] American citizens living or traveling in Kenya may contact the U.S. Embassy in Nairobi at +254 (20) 363-6000 during normal business hours. The sparsely populated northern half of Kenya has recurrent, localized incidents of violent cattle rustling, counter-raids, ethnic conflict, tribal or clan rivalry, and armed 3/7/2005

banditry. Over the last several years, incidents have occurred in the Kerio Valley, Northern Rift Valley sections of Laikipia and Nakuru districts, and other areas north of Mount Kenya. A number of incidents have also occurred near the game parks or lodges north of Mwingi, Meru, and Isiolo, which are frequented by tourists. The precise areas tend to shift with time. For these reasons, U.S. citizens who plan to visit Kenya are urged to take basic security precautions to maximize their safety. Travel to Northern Kenya should be undertaken with at least two vehicles to ensure a backup in the case of a breakdown or other emergency. The area near Kenya’s border with Somalia has been the site of a number of incidents of violent criminal activity, including kidnappings. In a late 1998 attack by armed bandits at a resort in the Lamu district near the border with Somalia, U.S. citizens were identified as specific targets, although none were present. There are some indications of ties between Muslim extremist groups and roving groups of Somali gunmen. Recent information about possible targeting of Americans for kidnapping or assassination in this same area has heightened the Embassy’s concern. There is a high rate of crime in all cities, particularly Nairobi, Mombasa, Kisumu, and at coastal beach resorts. Reports of attacks against tourists by groups of two or more armed assailants have increased significantly throughout the country. There have been increasing incidents of violent crime resulting in death and the serious injury of American citizens. Travelers are advised not bring valuable items to Kenya. Leaving valuable items in hotel or room safes is not a guarantee of security. There have been reports of room safes being removed from the room and robberies where staff were forced to open hotel safes. Pickpockets and thieves carry out "snatch and run" crimes on city streets and near crowds. Walking alone or at night, especially in downtown areas, public parks, along footpaths, on beaches, and in poorly lit areas, is dangerous. Thieves routinely snatch jewelry and other objects from open vehicle windows while motorists are stopped at traffic lights or in heavy traffic. Armed vehicle hijackings are common in Nairobi, but they can occur anywhere in the country. Armed robbers in the capital steal approximately ten vehicles daily. Although the attacks are often violent, victims are generally injured only if they resist. There is also a high incidence of residential break-ins. Thieves and con artists have been known to impersonate hotel employees, police officers, or government officials. Thieves on buses and trains may steal valuables from inattentive passengers. Passengers on inter-city buses should not accept food or drink from a new acquaintance, even a child, because such food or drink may contain narcotics used to incapacitate a victim and facilitate a robbery. Highway banditry is common in much of the Northeastern Province, significant portions of the Eastern Province, the northern part of Coast Province, and the northern part of the Rift Valley Province, which are remote and sparsely populated. Incidents also occur occasionally on Kenya's main highways, particularly after dark. Due to increased bandit activity, air travel is the recommended means of transportation when visiting any of the coastal resorts north of Malindi. Travelers to Garrisa and Lake Turkana should travel with police escorts or convoys organized by the Government of Kenya. There have been recent attacks on ships in the vicinity of Kenyan waters, in particular near the Kenya-Somalia border. Mariners should be vigilant.

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The Kenyan mail system can be unreliable and monetary instruments (credit cards, checks, etc.) are frequently stolen. International couriers provide the safest means of shipping envelopes and packages, but anything of value should be insured. The loss or theft abroad of a U.S. passport should be reported immediately to local police and to the nearest U.S. embassy or consulate. The pamphlets A Safe Trip Abroad and Tips for Travelers to Sub-Saharan Africa provide useful information on protecting personal security while traveling abroad and on travel in the region. Both are available from the Bureau of Consular Affairs home page at http://travel.state.gov, or from the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402, Internet address http://www.access.gpo.gov/su_docs.

Visa Requirements

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A passport is required and all visitors require visas. The Kenyan visa fee is US $50. Business and other visas should be obtained in advance, although airport visas are available. Travelers who opt to obtain an airport visa should expect delays upon arrival. There is a fee for the business visa, whether obtained in advance or at the airport. Evidence of yellow fever immunization may be requested. Travelers may obtain the latest information on visas as well as any additional details regarding entry requirements from the Embassy of Kenya, 2249 R Street, N.W., Washington, DC 20008, telephone (202) 387-6101, or the Kenyan Consulates General in Los Angeles and New York City. Persons outside the United States should contact the nearest Kenyan embassy or consulate. Upon arrival in Kenya, visitors should register with the U.S. Embassy’s consular section and receive the latest updates on safety and security. U.S. Companies that require travel of foreign businesspersons to the United States should allow sufficient time for visa issuance if required. Visa applicants should go to the following links State Department Visa Website: http://travel.state.gov/visa/index.html United States Visas.gov: http://www.unitedstatesvisas.gov/ U.S. Embassy-Nairobi’s Consular Section: http://www.usembassy.state.gov/nairobi/wwwhcop.html

Telecommunications

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The telecommunications system in Kenya, which includes direct dialing telephone service, cellular telephone service and fax to the U.S., is available throughout the country. There is a vibrant mobile telecommunications sector and there are mobilerenting facilities available, especially in the major towns. Interruptions in service do occur and simple local calls often are hard to complete. Microwave telecommunications links in

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Kenya are available and meet the quality requirements for transmission of high-speed business data and communications. Most of the larger hotels have business centers with internet facilities, although they can be antiquated, slow, or temporarily inoperative. Transportation

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Taxis and rental automobiles are available in large towns and cities. Traffic moves on the left-hand side of the road. For safety reasons, visiting American business executives should not use the bus system or trains. If possible, taxis should be hired via concierge services at hotels or through reputable travel agents. Kenya has two major international airports: Jomo Kenyatta in Nairobi and Moi in Mombasa. Inland passenger and freight are conveyed by the road and rail network. Passenger travel by train is not recommended, however. Language

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The official languages of Kenya are English and Kiswahili. However, many different languages and dialects are spoken throughout the country. The commercial language is English. Language barriers pose few problems, but in legal documents it is important to have lawyers who can interpret between American English and Kenyan English. Health

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Adequate medical services are available in Nairobi. Malaria is not prevalent at high elevations, but precautions must be taken in lower areas, especially in the coastal and lake basin regions. Americans undertaking travel to Kenya are advised to carry with them malaria prophylaxis. Residents should follow a strict sanitary regime in washing and preparing food. Other precautions should be taken to avoid contracting endemic tropical diseases. The U.S. Embassy’s Consular Section can provide visitors with a list of qualified local doctors. If a pharmacy recommends a substitute prescription other than the one prescribed by your doctor, please consult with one of the doctors on the Consular Section’s list. U.S. medical insurance is not always valid outside the United States. U.S. Medicare and Medicaid programs do not provide payment for medical services outside the United States. Doctors and hospitals often expect immediate cash payment for health services. Uninsured travelers who require medical care overseas may face serious difficulties. Please check with your own insurance company to confirm whether your policy applies overseas, including provision for medical evacuation, and for adequacy of coverage. Serious medical problems requiring hospitalization and/or medical evacuation to the United States can cost tens of thousands of dollars. Please ascertain whether payment will be made to the overseas hospital or doctor or whether you will be reimbursed later for expenses that you incur. Some insurance policies also include coverage for psychiatric treatment and for disposition of remains in the event of death.

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Useful information on medical emergencies abroad, including overseas insurance programs, is provided in the Department of State’s Bureau of Consular Affairs brochure, Medical Information for Americans Traveling Abroad, available via the Bureau of Consular Affairs home page http://travel.state.gov/medical.html or auto fax: (202) 6473000. Information on vaccinations and other health precautions may be obtained from the Centers for Disease Control and Prevention's international travelers hotline at telephone: 1-877-FYI-TRIP (1-877-394-8747); fax: 1-888-CDC-FAXX (1-888-232-3299), or by visiting the CDC Internet home page at http://www.cdc.gov.

Local Time, Business Hours, and Holidays

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Most of the year, Kenya is UTC/GMT +3, or three hours ahead of London and eight hours ahead of Eastern Standard Time. Accordingly, 8:00 a.m. on the West Coast and 11:00 a.m. on the East Coast is 7:00 p.m. in Kenya. A 40-hour workweek is the norm for offices and factories. Typical office working hours are 8:00 a.m. to 5:00 p.m. with lunch from 1:00 p.m. to 2:00 p.m. Banking hours are from 9:00 a.m. to 3:00 p.m. Most retail stores are open from 9:00 a.m. to 6:00 p.m. The following are the official statutory holidays when most commercial offices are closed: New Year's Day Id-Ul-Fitr Good Friday Easter Monday Labor Day Madaraka Day Moi Day Kenyatta Day Jamhuri Day Christmas Day Boxing Day

January 1 Variable Variable (March/April) Variable (March/April) May 1 June 1 October 10 October 20 December 12 December 25 December 26

Temporary Entry of Materials and Personal Belongings

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The law has been amended to limit the period of temporary importation to be consistent with the purposes for which goods have been imported. For instance, the temporary importation period for goods imported for exhibition purposes shall be limited to the period of the exhibition. However, the Minister for Finance may extend the period of temporary importation beyond twelve months upon application depending on the merit of each case.

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Web Resources

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Consular Information Sheet for Kenya – travel.state.gov East Africa Public Announcement – http://travel.state.gov/travel/eafrica_announce.html Worldwide Caution Public Announcement: http://travel.state.gov/travel/wwc1.html American Citizens Registration Form: http://usembassy.state.gov/nairobi.wwwhcon3.html Bureau of Consular Affairs home page – http://travel.state.gov Superintendent of Documents, U.S. Government Printing Office – http://www.access.gpo.gov/su_docs State Department Visa Website: http://travel.state.gov/visa/index.html United States Visas.gov: http://www.unitedstatesvisas.gov/ Centers for Disease Control – http://www.cdc.gov Return to table of contents

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Chapter 9: Contacts, Market Research, and Trade Events • • •

Contacts Market Research Trade Events

Contacts

1.

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U.S. EMBASSY AND U.S. GOVERNMENT TRADE-RELATED CONTACTS U.S. & Foreign Commercial Service Commercial Service Nairobi Commercial Service Eastern Africa U.S. Embassy Nairobi, United Nations Avenue P.O. Box 606, Village Market 00621, Nairobi, Kenya Tel: +254 (20) 363-6000 (x6424); fax: +254 (20) 363-6065 Contact: Edward Yagi, Regional Senior Commercial Officer and Counselor for Commercial Affairs Website: www.buyusa.gov/kenya Economic Section U.S. Embassy Nairobi, United Nations Avenue Tel: +254 (20) 363-6000 (x6051); fax: +254 (20) 363-3611 Contact: John Hoover, Counselor for Economic Affairs Website: www.usembassy.state.gov Export-Import Bank (EXIM) 811 Vermont Avenue, N.W, Washington, D.C. 20571 Tel: (202)-565-3946 or 1-800-565-EXIM; fax: (202)-565-3380 Website: www.exim.gov Foreign Agricultural Service U.S. Embassy, Nairobi, United Nations Avenue Tel: +254 (20) 363-6000 (x6413); fax: +254 (20) 363-6349 Contact: Kevin Smith, Agricultural Attaché Website: www.fas.usda.gov Market Access and Compliance – Office of Africa U.S. Department of Commerce 14th & Constitution Avenues, N.W; Washington, D.C. 20230 Tel: (202)-482-4227; fax: (202)-482-5198 Contact: Mr. Robert Telchin Website: www.mac.doc.gov

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Overseas Private Investment Corporation (OPIC) 1100 New York Avenue, N.W, Washington, D.C. 20527 Tel: (202)-336-8400; fax: (202)-336-8700 Website: www.opic.gov Trade Promotion Coordinating Committee (TPCC) Trade Information Center, USA Trade Center, Ronald Reagan Building Washington, D.C. 20230 Tel: 1-800-USA-TRADE Website: N/A U.S. Department of Agriculture Foreign Agricultural Service Trade Assistance and Promotion Office Tel: (202)-720-7420; fax: (202)-720-7772 Website: www.usda.gov U.S. Department of State Office of Coordinator for Business Affairs; Washington, D.C. 20230 Tel: (202)-746-1625; fax: (202)-647-3953 Website: www.state.gov

2.

BUSINESS-RELATED ASSOCIATIONS American Business Association P.O. Box 64736, 00620 Esso Plaza, Nairobi, Kenya Tel: +254 (20) 286-8000; fax: +254 (20) 272-2999 Contact: Louis Otieno, Chairperson E-mail: [email protected] Website: N/A Kenya National Chamber of Commerce & Industry P.O. Box 47024, Nairobi, Kenya Tel: +254 (20) 316-713; fax: +254 (20) 318-367 Contact: Mr. David Githere, Chairman Website: N/A Organization of Women in International Trade (OWIT) Kenya Chapter President: Christine A. Agimba P.O. Box 482225, Nairobi, Kenya Tel: 254-733-284-261; fax: +254 (20) 214-371 Contact: Ms. Lydia Waithaka Email: [email protected] or [email protected] Website: www.owit.org

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3.

COUNTRY TRADE OR INDUSTRY ASSOCIATIONS IN KEY SECTORS Kenya Association of Manufacturers P.O. Box 30225, 00100, Peponi Road, Nairobi, Kenya Tel: +254 (20) 374-6005/6; fax: +254 (20) 374-6030 Contact: Miss. Betty Maina, Chief Executive Email: [email protected] Website: www.kenyamanufacturers.org Kenya Bureau of Standards P.O. Box 54974, Off Mombasa Road, Nairobi South C, Nairobi, Kenya Tel: +254 (20) 605-490; fax: +254 (20) 604-031/609-660 Contact: Eng. John Masila, Managing Director Email: [email protected] Website: www.kebs.com Central Organization of Trade Unions (COTU) P.O. Box 13000, Solidarity House, Digo Road, Nairobi, Kenya Tel: +254 (20) 267-61375/7; fax: +254 (20) 267-62695 Contact: Mr. Francis Atwoli, Secretary General Email: [email protected] Website: N/A East African Association Jubilee Insurance House, Wabera Street P.O. Box 41272, Nairobi, Kenya Tel: +254 (20)-218-317; fax: +254 (20)-218-317 Contact: Mr. John Sawers, Resident Representative Website: N/A Federation of Kenya Employers (FKE) P.O. Box 48311, Waajiri House, Hurlingham, Nairobi, Kenya Tel: +254 (20)-272-1929; fax: +254 (20)-272-1990 Contact: Gerrison Nkonditi, Executive Director Website: www.fke-kenya.org Kenya National Farmers Union (KNFU) P.O. Box 43148, 00100, Family Health Plaza – Langata Road, 2nd Floor Nairobi, Kenya Tel: +254 (20) 608-324/500-036/600-355; fax: +254 (20) 608-325 Contact: Mr. John K. Mutunga, Chief Executive Email: [email protected] Website: N/A Marketing Society of Kenya P.O. Box 69826, Witu Road, Nairobi, Kenya Tel: +254 (20) 551-600/10 or 559920; fax: +254 (20)-535-390 Contact: Mr. Paul Kukubo, Chairperson

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Email: [email protected] Website: N/A

4.

COUNTRY GOVERNMENT OFFICES Ministry of Agriculture P.O. Box 30028, 00100; Kilimo House, Cathedral Road, Nairobi, Kenya Tel: +254 (20) 271-8870 or 2710-817; fax: +254 (20) 271-1149 Contact: Mr. James E.O. Ongwae, Permanent Secretary Email: [email protected] Website: www.agriculture.go.ke Customs and Excise Department Ministry of Finance P.O. Box 40160, 00100, Nairobi, Kenya Tel: +254 (20) 310-900; fax: +254 (20) 341-217 Contact: Mr. Francis Thuranira, Commissioner of Customs, Email: [email protected] Website: www.revenue.go.ke Export Processing Zones Authority P.O. Box 50563, 00200, British-American Center Building, Nairobi, Kenya Tel: 254-045-26421-6; fax: 254-045-26427 Contact: Mr. Albert Gumo, Chief Executive Email: [email protected] Website: www.epza.go.ke Kenya Electricity Generating Company P.O. Box 47936, 00100, Stima Plaza, Kolobot Road, Nairobi, Kenya Tel: +254 (20) 366-6000, 248833; fax: +254 (20) 248-848 Contact: Mr. Edward Njoroge, Managing Director Email: [email protected] Website: www.kengen.co.ke Ministry of Energy P.O. Box 30582, 00100, Nyayo House, Kenyatta Avenue, Nairobi, Kenya Tel: +254 (20) 310-112; fax: +254 (20) 240-910 or 228-314 Contact: Mr. Patrick Nyoike, Permanent Secretary Email: [email protected] Website: www.energy.go.ke Ministry of Finance P.O. Box 30007, Treasury Building, Harambee Avenue, Nairobi, Kenya Tel: +254 (20) 252-299; fax: +254 (20) 219-365 Contact: Mr. Joseph Kinyua, Permanent Secretary Email: [email protected] Website: www.treasury.go.ke

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Industrial & Commercial Development Corporation P.O. Box 45519, 00100, Uchumi House, Aga Khan Walk, Nairobi, Kenya Tel: +254 (20) 229-213 or 222-031; fax: +254 (20) 317-456 Contact: Eng. Joseph Munene, Executive Director Email: [email protected] Website: www.icdc.co.ke Investment Promotion Center P.O. Box 55704, 00200, National Bank Building, Nairobi, Kenya Tel: +254 (20) 221-4014; fax: +254 (20) 243-862 Contact: Mr. Luke E. Obanda, Ag. Managing Director Email: [email protected] or [email protected] Website: www.ipckenya.org Ministry of Labour and Human Resource Development P.O. Box 40326, 00100, Social Security House, Bishop Road, Nairobi, Kenya Tel: +254 (20) 272-9800 or 2717-799; fax: +254 (20) 272-6497 Contact: Amb. Nancy Kirui, Permanent Secretary Email: [email protected] Website: www.labour.go.ke Kenya Ports Authority P.O. Box 96009, Mombasa, Kenya Tel: 254-041-312-211/220-255; fax: 254-041-311-867/230-906 Contact: Mr. Brown Ondego, Managing Director Email: [email protected] Website: www.kenya-port.com Kenya Power & Lighting Company P.O. Box 30099, 00100, Stima Plaza, Kolobot Road, Nairobi, Kenya Tel: +254 (20) 320-13201; fax: +254 (20) 310-336 Contact: Mr. Jasper Oduor, Managing Director Email: [email protected] Website: www.kplc.co.ke Kenya Revenue Authority P.O. Box 48240, NSSF Bldg., Block A, 18th Floor, Nairobi, Kenya Tel: 254-2-310-900/315553; fax: 254-2-316-872 Contact: Mr. Michael Waweru, Commissioner General Email: [email protected] Website: www.kra.go.ke Telkom Kenya P.O. Box 30301, 00100, Telposta Towers, Kenyatta Avenue, Nairobi, Kenya Tel: +254 (20) 323-2000; fax: +254 (20) 251-071 Contact: Eng. John Njuguna Waweru, Managing Director Website: www.telkom.co.ke

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Ministry of Trade and Industry P.O. Box 30430, 00100, Telposta Towers, Kenyatta Avenue, Nairobi, Kenya Tel: +254 (20) 315-001-5; fax: +254 (20) 310-983 Contact: Dr. Nehemiah Ngeno, Permanent Secretary Email: [email protected] Website: www.tradeandindustry.go.ke Ministry of Transport & Communications P.O. Box 52692, 00100, Transcom House, Ngong Road, Nairobi, Kenya Tel: +254 (20) 272-9200 or 313-060; fax: +254 (20) 272-6362 Contact: Mr. Gerrishon K. Ikiara, Permanent Secretary Email: [email protected] Website: www.transport.go.ke Ministry of Tourism and Information P.O. Box 30027, 00100; Utalii House, Off Uhuru Highway, Nairobi, Kenya Tel: +254 (20) 313-010 or 318-044; fax: +254 (20) 318-045 Contact: Mrs. Rebecca M. Nabutola, Permanent Secretary Website: www.tourism.go.ke 5.

MULTILATERAL DEVELOPMENT BANK OFFICES African Development Bank BP 323, 1002 Tunis Belvedère, Tunisia Tel: (216) 713-33511/7110-3450; fax: (216) 713-51933 Email: [email protected] Website: www.afdb.org International Finance Corporation P.O. Box 30577, 00100, Nairobi, Kenya Tel: +254 (20) 272-0467; fax: +254 (20) 322-6383 Contact: Jeanphilippe Prosper, Manager, Eastern Africa Email: [email protected] Website: www.ifc.org World Bank P.O. Box 30577, 00100, Hill Park, Upper Hill Road, Nairobi, Kenya Tel: +254 (20) 322-6000; Telex: 22022; fax: +254 (20) 322-6380 Contact: Mr. Makhtar Diop, Country Director Website: www.worldbank.org

6.

TRADE DIRECTORIES The Kenya Association of Manufacturers Directory P.O. Box 30225, 00100, Nairobi, Kenya Tel: +254 (20) 374-6005/7/21/22; fax: +254 (20) 374-6028/30

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Contact: Ms. Betty Maina, Chief Executive Email: [email protected] Website: www.kenyamanufacturers.org Nation Business Directory Nation Marketing & Publishing Ltd. P.O. Box 49010, 00100, Nation Center, Kimathi Street, Nairobi, Kenya Tel: +254 (20) 520-88589/91/64/75; fax: +254 (20) 249-976 Contact: Jennifer Wambua, Ag. Manager Email: [email protected] Website: N/A 7.

TRADE EVENTS African IT Exhibitions and Conferences Kenya (AITEC) P.O. Box 13891, Nairobi, Kenya Tel: +254 (20) 374-9771; fax: +254 (20) 375-1438 Contact: Andrew Karanja, General Manager Website: www.aitecafrica.com Nairobi International Trade Fair P.O. Box 21340, 00505, Nairobi, Kenya Tel: +254 (20) 573-804/13; fax: +254 (20) 573-838 Contact: Mr. Sam Gitonga, Chairman Email: [email protected] Website: N/A

Market Research

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To view market research reports produced by the U.S. Commercial Service please go to the following website: http://www.export.gov/marketresearch.html and click on Country and Industry Market Reports. Please note that these reports are only available to U.S. citizens and U.S. companies. Registration to the site is required, but free of charge.

Trade Events

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Please click on the link below for information on upcoming trade events. http://www.export.gov/tradeevents.html

Return to table of contents

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Chapter 10: Guide to Our Services The U.S. Commercial Service offers customized solutions to help your business enter and succeed in markets worldwide. Our global network of trade specialists will work one-on-one with you through every step of the exporting process, helping you to: • • • •

Target the best markets with our world-class research Promote your products and services to qualified buyers Meet the best distributors and agents for your products and services Overcome potential challenges or trade barriers

For more information on the services the U.S. Commercial Service offers U.S. businesses, please click on the link below. www.buyusa.gov/kenya Return to table of contents

U.S. exporters seeking general export information/assistance or country-specific commercial information should consult with their nearest Export Assistance Center or the U.S. Department of Commerce’s Trade Information Center at (800) USA-TRADE, or go to the following website: http://www.export.gov To the best of our knowledge, the information contained in this report is accurate as of the date published. However, The Department of Commerce does not take responsibility for actions readers may take based on the information contained herein. Readers should always conduct their own due diligence before entering into business ventures or other commercial arrangements. The Department of Commerce can assist companies in these endeavors.

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