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Recovering US economy presents hope for Kenya

Published date:
Monday, 02 November 2009

A rebounding US economy presents an opportunity for Kenya’s policy makers to craft new investment policies to reverse the decline that has come to characterise the country’s textile and apparel industry and boost the country’s Agoa exports, industry players say.

Kenya, which adopted a niche market approach to the US market when the Agoa policy was enacted a decade ago, has mainly concentrated on promoting the production and sale of textile and apparel to the American market.

Kenya’s textile industry is the most advanced in the region and is considered the best among the 27 African countries that qualify to export apparel to the US under the Agoa facility.

Early last year, the Export Processing Zones Authority become the first state agency to openly admit that Wall Street troubles, which started in 2007, had a direct impact on the country’s economy as low orders for apparel products pushed most firms to cut jobs and migrate to Asia.

“A prolonged recession in the US will be a very dangerous development to all textile EPZ firms,” the Zones’ former CEO John Akara told Business Daily in an interview.

The admission came shortly after SpendingPulse, an arm of MasterCard Worldwide that provides data on consumer spending, also indicated that demand for apparel and footwear in the US had slid as buyers scaled back on discretionary purchases in a depressed economic environment.

But when the US announced last week that its economy was out of the woods, having grown by 3.5 per cent in the third quarter, the local textile industry said that it was yet to experience better times

Guarded optimism is still rife in the industry whose players maintain that Kenya can only reap the benefits of a rebounding global economy if the government moves quickly to benchmark its investment incentives with subsidies which Asian states — their main competitors for the US market — give their industries.

Positive growth

“We are surprised that the US economy has experienced any positive growth because textile firms continue to report low sales and closures,” Mr Jas Bedi, the Textile and Apparel Manufacturers Association chairman said yesterday.

Last month, SpendingPulse gave the world a ray of hope after predicting a rebound of the US economy based on its September retail sales figures that showed several merchandising categories, including luxury goods and electronics, had posted significant gains.

The data also vindicates local industry players’ claim, showing that the US clothing sales are still down having fallen 2.9 per cent in September.

However, the Jewelry sales rose 1.2 per cent compared to the September 2008 when they fell 5.8 per cent.

On the other hand, the sale of electronics, which fell 5.9 per cent in September rose by five per cent last September.

“It’s stable, but it’s stable at 2005 levels. We’re in recovery mode, but it’s going to take a while, Mr Michael McNamara, the SpendingPulse VP, is quoted at the organisation’s website as saying.

For the local textile industry, experts say global economic recovery cannot be relied on to change the sector’s fortunes.

They say the recession had only compounded the problem of an industry where the high cost of energy, dropping cotton reserves and a tepid official intervention policy were pushing to extinction of the sector.

The value of Kenya’s exports to the US have been declining from $277 million in 2004, to $270 million in 2005, $262 in 2006, $ 249 million in 2007 and $246 last year.

“Even with increased demand for textile and apparel products in the US market, our goods will still be locked out on the basis of prices if our energy costs remain between 250 – 300 per cent above the highly subsidised Asian products,” said Mr Bedi.

“ Latest AGOA Trade Data currently available on

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 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.

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