::: INTERNATIONAL TRADE Kenya has followed a mixed economy development strategy since independence. While the respective roles of the public and private sectors have evolved over time, the country has experienced remarkable continuity in its underlying economic development strategy. However, there is a shift recently in emphasis from public to private investment. In this context, market-based reforms have been introduced and incentives for both local and foreign private investments provided. GUARANTEES TO INVESTORS Kenya provides the following guarantees to local and foreign investors: Repatriation of Capital and Profits: Capital repatriation and remittance of dividends and interests are guaranteed to foreign investors under the Foreign Investment Protection Act (FIPA) (Cap.518). To be eligible for FIPA guarantees, investors should obtain a Certificate of Approved Enterprise from the Ministry of Finance. Guarantee Against Expropriation: The Kenyan Constitution provides for a guarantee against expropriation of private property. Expropriation may only occur either for security reasons or public interest, upon which fair and prompt compensation is guaranteed. Other Guarantees:- Kenya is a member of the World Bank affiliated Multilateral Investment Guarantee Agency (MIGA), which issues guarantees against non commercial risks to enterprises that invest in signatory countries. Kenya is also a member of the International Centre for Settlement of Investment Disputes (UCID). MAJOR INVESTMENT INCENTIVES The Government policy is to create an enabling environment for private sector investment. The following is a summary of investment incentives: INVESTMENT ALLOWANCE Investors in manufacturing and hotel sectors outside Nairobi and Mombasa are eligible for an investment allowance of 85 percent on plant, machinery, buildings, and equipment. Investments located in Nairobi and Mombasa are eligible for the investment allowance at 35 percent. For manufacturers under bond, the applicable rate is 100 per cent for all locations. DEPRECIATION Liberal rates are allowed for depreciation of assets based on book value as follows: Hotels................................................... .4% per year, Industrial buildings...............................25% per year, Plant and machinery...........................125% per year, Vehicles, trucks, and tractors...........25-37% per year. LOSS CARRIED FORWARD Business enterprises that suffer tax losses can carry forward such losses indefinitely to be offset against future taxable profits. REMISSION FROM CUSTOMS DUTIES Duties on machinery and equipment may be reduced to 10% where the investment is expected to have net foreign exchange earnings or savings for Kenya. Imported plant and equipment intended for industries located outside major towns are also charged custom duties at 10%. A 50 per cent remission of duties and tax is granted to industries established within designated boundaries of Nairobi, Mombasa and other urban centres. DUTY REMISSION FACILITY Materials imported for use in manufacture for export or for the production of duty free items for sale domestically are eligible for duty remission, irrespective of the source of financing. This programme is open to all types of investment whether they are for expansion, replacement or rehabilitation or new manufacturing plants. MANUFACTURING UNDER BOND To encourage manufacturing in Kenya for world markets, the Government has established an in-bond programme open to both local and foreign investors. Enterprises operating under the programme are offered the following incentives: Exemption from duty and VAT on imported plant, machinery and equipment, raw materials and other imported inputs. 100 per cent investment allowance on plant, machinery, equipment and buildings. Bonded manufacturing enterprises can be licensed to operate in Nairobi, Mombasa, Kisumu, Eldoret, Nakuru, Nyeri and Thika or within the immediate environs of these towns. MARKET ACCESS Exports from Kenya enjoy preferential access to world markets under a number of special access and duty reduction programmes. Regional Markets:- Kenya is a member of Common Market for Eastern and Southern Africa (COMESA) with a population of approximately 400 million. Exports and imports within member countries are entitled to tariff rates. ACP/Lome Convention:- Exports from Kenya entering the European Union are entitled to duty reductions or exemptions and freedom from all quota restrictions under the terms of the LOME Convention. Trade preferences include duty free entry of all industrial products and a wide range of agricultural products including beef, fish, dairy products, cereals, fresh and processed fruits and vegetables. Generalized System of Preferences (GSP): Under the Generalized System of Preferences, a wide range of Kenya’s manufactured products are entitled to preferential duty treatment in the United States of America, Japan, Canada, Switzerland, Norway, Sweden, Finland, Australia, Austria, New Zealand, and most East European countries. In addition, no quantitative restrictions are applicable to Kenyan exports of any of the 3,000 plus items currently eligible for GSP treatment. Kenya was the first country to qualify for preferential access into the United States Market, under the African Growth Opportunity Act (AGOA) of 2001.