TRALAC - Trade Law Centre

Kenya: UN attributes export lag to high wages

Thursday, 18 September 2008

Source: Daily Nation (Kenya)

High production cost, particularly in the form of wages, is cited in a new UN report as a key reason for Kenya’s failure to claim a larger share of the world garment market.

A study released on Monday by the UN Conference on Trade and Development (Unctad) found that “technical efficiency does not seem to be the main determinant of the difference in competitiveness between Africa and other developing countries, particularly those in Asia.”

The Unctad report on trade liberalisation in Africa noted that wage costs in the clothing export sector are 138 per cent higher in Kenya than in Bangladesh, which has become one of the world’s top clothing exporters.

Kenya, on the other hand, has made only a small advance in that realm, despite gaining duty-free access to the US market under the terms of the Africa Growth and Opportunity Act (Agoa).

Unctad said the two countries can be fairly compared because they have nearly identical levels of per capita income - $456 for Kenya and $454 for Bangladesh in 2006.

Bangladeshi and Kenyan clothing manufacturers use similar technologies, Unctad observed. The rate of inefficiency in that regard is only 17 per cent higher in Kenya than in Bangladesh, the report said.

The costs of transport and credit for businesses in Kenya are also much higher than for companies in China, Unctad added. Export financing costs borne by clothing manufacturers in Kenya are 136 per cent of the costs that Chinese clothing exporters must pay, the study said.

The costs of materials for Kenyan companies producing garments for export were also said to be double those for Chinese firms.

The study found that African countries in general have failed to gain from trade liberalisation measures instituted by their governments during the past decade.

Africa’s share of the global export market has actually fallen by half – from 6 per cent in 1980 to about 3 per cent last year.

Unctad said massive investments are needed in order for African countries to make gains in the export of manufactured goods.



“ Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Kenya’s bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.


Other regularly updated trade statistics on AGOA.info include: (click each link to view)

  • AGOA-Beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.