WT/TPR/S/64 Trade Policy Review
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II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
(1) TRADE POLICY
(i) Trade policy objectives
1. Starting in the mid 1980s, the Kenyan Government shifted away from an import substitution
strategy towards a more outward-oriented growth policy.  The general trade policy objectives of
Kenya include moving towards a more open trade regime, strengthening and increasing overseasmarket access for Kenyan products, and further integrating Kenya into the world economy.  These
policy objectives have been pursued through multilateral, regional and bilateral trade negotiations, in
particular within the African region.  The focus is on the adoption of common regional positions and
building economic and trade relations with emerging groupings in the region and further away such as
in South East Asia.  The different integration orga nizations within Africa are expected to operate as
building blocks towards the achievement of a single large market on the African continent.  As stated
in its National Development Plan, within the existing arrangements, Kenya will urge the continued
reduction and eventual elimination of tariff and non-tariff barriers to trade among participating
countries, while recognizing the need to implement changes at the institutional level to promote these
regional initiatives.
1  The Plan also states the need for a shift in the Government's role away from
control and regulation to facilitation of private sector development, and for closing the gap between
policy objectives and their implementation.
2. Sectoral policies are aimed at enhancing production and productivity, through a continuous
process of economic reform and trade liberalization, as a way to promote a more efficient allocation
of resources, while improving the environment for private domestic and foreign investment.  Specific
emphasis is placed on strengthening the agriculture sector, and promoting value-added activities
through the processing of agricultural goods.
(ii) Institutional and legal framework
3. Since Kenya's previous Trade Policy Review (in 1993), the structure of the legislative and
executive bodies has remained generally unchanged.  Executive power is vested in the President and
the Cabinet.  The President is Head of State, Head of the Cabinet, and Commander-in-Chief of the
Armed Forces.  Election of the President, for a five-year term, is by direct popular vote;  the winningcandidate at a presidential election must receive no less than 25% of the votes in at least five of
Kenya's eight provinces.
2  Under the Constitution, the President may be re-elected only once.3  The
President appoints the Vice-President and the Ministers (currently 15) from amongst the members of
Parliament who belong to his party.  The Parliament remains as the only supreme law-making body in
Kenya and, as such, exercises control of public finances.4
4. Legislative power is vested in the Parliament,  which consists of the President and the
National Assembly.5  The central legislative authority is the unicameral National Assembly, formed
by 210 directly elected representatives, 12 nominated members, and two ex-officio members
                                                     
1 Government of Kenya (1996a).
2 Local administration is divided among 63 rural districts.  The districts are joined to form seven rural
provinces.  The Nairobi area has special status and is not included in any district or province.  The Government
supervises the administration of districts and provinces ( Background Notes:  Kenya. Available at:
http://www.state.gov  [7 June 1999]).
3 The Constitution of Kenya, Chapter II, Part I, §9.
4 Kenya – Government .  Available at:  http://www.rcbowen.com/kenya/government  [28 May 1999].
5 The Constitution of Kenya, Chapter III, Part 2, §30.Kenya WT/TPR/S/64
Page 15
comprising the Speaker, elected by the National Assembly, and the Attorney-General, nominated by
the President.  The maximum term of the National As sembly is five years from its first meeting.  It
can be dissolved by the President at any time, and the National Assembly may force its own
dissolution by a vote of no confidence, whereupon Presidential and Assembly elections must be held
within 90 days.
5. Kenya's legal system is based on its 1963 Constitution and on English Common Law. In
September 1997 the National Assembly approved legislation that amended the Constitution with a
view to ensuring multi-party elections.  The Constitution can be amended by an affirmative vote, on
the Second and Third Readings, of 65% of the membership of the National Assembly (excluding the
Speaker and Attorney-General).6
6. The body of laws consists of Acts passed by the National Assembly and signed into law by
the President, as well as a number of laws enacted during the colonial period by the British Parliament
of the Legislative Council of the former colony.  English Common Law and doctrines of equity apply
in Kenya subject to amendments to reflect local circumstances.  In addition, Kenyan law recognizes
African customary law, which consists of legal rights and duties of indigenous Kenyans according to
inherited customs and traditions.  Customary law applies only where it does not conflict with writtenlaw and is not immoral or unjust.
7
7. The Cabinet initiates and formulates most legislative proposals;  bills are drafted in
consultation with the private sector and other stakeholders.  After being read and passed by the
National Assembly, bills are presented to the President, who has 21 days to signify to the Speaker his
assent or refusal.  In case of refusal, he must, within 14 days, submit a memorandum to the Speaker
indicating the specific provisions to be recons idered by the National Assembly, including his
recommendation for amendments.  The National Assembly subsequently reconsiders the bill takinginto account the President's comments, and either: (i) approves the President's recommendations with
or without amendment and resubmits the bill to the President for assent;  or (ii) refuses the
recommendations and approves the bill in its original form by a resolution supported by a vote of not
less than 65% of all members of the National Assembly (excluding ex-officio members), in which
case the President must assent to the bill within 14 days.
8
8. The judiciary is headed by High Courts, consisting of the Chief Justice and at least 30 high
court judges, all appointed by the President under the advice of a judicial service commission.9
(iii) Trade policy formulation and implementation
9. The agencies in charge of trade policy formulation have not changed since the previous
review.  The main responsibility for trade policy form ulation is with the Ministries of Tourism, Trade
and Industry; Finance and Planning;  and Agriculture and Rural Development (which constitute the
Cabinet's Economic Sub-committee);  and the Central Bank.
10. In general, trade policy is formulated by the Cabinet's Economic Sub-committee.
Recommendations may also be made by the two main inter-ministerial and consultative committees:
(i) the Joint Industrial Commercial and Consultative Committee, which  consists of the KenyaChamber of Commerce and Industry (KNCC&I), the Kenya Association of Manufacturers (KAM),
and a group of research institutes and private enterprises;  and (ii) the Export Promotion Council
                                                     
6 The Constitution of Kenya,  Chapter III, Part 2, §47.
7 Kenya in Brief.  Available at:  http://www.leisu.edu [28 May 1999].
8 Flanz (1996).
9 Background Notes: Kenya .  Available at:  http://www.state.gov [7 June 1999].WT/TPR/S/64 Trade Policy Review
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(EPC).10  The EPC, established in 1992 as a public entity under the Ministry of Tourism, Trade and
Industry, is responsible for organizing export promotion activities abroad, sponsoring contact
promotion programmes and sales missions, and carry ing out market opportunity surveys.  In addition,
the EPC, in consultation with KAM, KNCC&I, and leading manufacturers and exporters, formulates
the Common Plan of Action for the development of exports in Africa.11
11. There are no independent bodies with a formal mandate to carry out public reviews and
assessments of the Government's trade policy.
12. Trade policy implementation is mainly by the Ministry of Tourism, Trade and Industry, which
is responsible for regulating imports, promoting exports, protecting consumer interests and ensuring
fair trade.  This Ministry is also in charge of implementing the industrial protection policy, which
includes the administration of imports of industrial raw materials and capital goods, and regionalinitiatives, such as COMESA.  The responsibilities of the Ministry of Finance and Planning include,
inter alia , the collection of taxes and import duties through the Kenya Revenue Authority (the
Government's collection agency), the administration of the Export Promotion Programmes Office
(EPPO), which provides tax rebates for exported goods, and the coordination of ACP/EU relations
and fiscal and monetary policies.
(iv) Trade laws and regulations
13. The main legislation relating to international trade is the 1984 Customs and Excise Act,
revised in 1996 (Table II.1).  The Act regulates import and export procedures;  computation of duties;
exemption and remission of duties;  refund, rebate and duty drawback;  and customs valuations
procedures.  It also contains ten schedules, which provide details on, inter alia, import duties,
suspended duties, goods exempted from duties, va lue of imported goods, and prohibited and restricted
goods.  The schedules related to import and suspended duties and the value of goods were modifiedrecently by the Finance Act of 1999.  The Imports, Exports and Essential Supplies Act, which
stipulates import and export licensing procedures, is still in place;  however, according to the
authorities, in practice these procedures are no longer followed.
12  The Foreign Investment Protection
Act (1981), the Investment Promotion Center Act (1992), and the Trade Licensing Act of 1967,
amended in 1990, contain provisions for foreign investment and licensing of business activities.
Table II.1
Main trade-related laws in Kenya
Law Area
The Customs and Excise Act,1996 Import and export procedures and other regulations; import and
export duties; and excise duties
The Finance Act, 1999 Customs valuation; and amendments to the tariff
Imports, Exports and Essential Supplies Act Licensing of imports and exports
The Foreign Investment Protection Act, 1981;  and Investment
Promotion Centre Act, 1992Foreign investment
The Trade Licensing Act, 1990 Licensing of businesses
The Industrial Property Act, 1991;  The Copyright Act, 1991;  The
Trade Marks Act,1982;  The Seeds and Plant Varieties Act, 1991Intellectual property rights
The Restrictive Trade Practices, Monopolies and Price Control
Act, 1990Competition
Table II.1 (cont'd)
                                                     
10 GATT (1994).
11 Government of Kenya (1996a).
12 Information provided by the Kenyan authorities.Kenya WT/TPR/S/64
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Law Area
Export Processing Zone Act, 1991 Export promotion
The Local Government Act, 1998;  The Sale of Goods Act, 1981;
The Government Contracts Act, 1979;  The Architects and
Quantity Surveyors Act, 1978Government procurement
The Standards Act, 1981 Standards
The Pest Control Products Act, 1985;  The Meat Control Act,
1977;  The Fertilizers and Animal Foodstuffs Act, 1977;  TheAnimal Disease Act ;  The Plant Protection ActSanitary and phytosanitary measures
Source : WTO Secretariat, based on information provided by the Kenyan Authorities.
14. The Kenyan authorities are updating certain trade-related laws that have become outdated, but
the legislative framework has not yet been completely revised.  Laws governing foreign trade are
sometimes inconsistent with current trade policies and practices.  Intellectual property laws have
undergone some amendments to conform with the TRIPS Agreement;  a new Industrial Property Billis being discussed in Parliament.  An Investment C ode is also envisaged (see below).  The authorities
are also revising the government procurement laws and intend to draft legislation and regulations on
contingency measures.  The rationalization of trade legislation will enhance the predictability of
Kenya's trade regime and provide greater certainty for business.
15. The legal environment within which businesses operate in Kenya appears to lack efficiency.
This is a consequence, in particular, of the incomplete collection and publication of legal materials,
and the inadequacy and slow dissemination of laws .  Another problem is the wide discretionary power
that remains in the administration of laws and regulations, such as those on tax and customs duties.
The slow and cumbersome adjudication process of the Kenyan courts and the absence of adequate
specialized commercial courts to adjudicate business disputes expeditiously also add to the difficultiesof the private sector.
13  The authorities are taking steps to ensu re full compliance with the rule of law.
In addition, since August 1997 Kenya has taken measures to address governance issues and eliminate
distortions resulting from relatively weak institutions.  Measures undertaken include establishing
accountability and transparency regarding financial infractions;  safeguarding the independence of the
Kenya Revenue Authority;  establishing an inde pendent Kenya Anti-Corruption Authority;  and
addressing outstanding issues in government procurement.
(2) TRADE AGREEMENTS AND ARRANGEMENTS
(i) World Trade Organization
16. Kenya signed the Final Act of the Uruguay Round and the Marrakesh Agreement establishing
the World Trade Organization on 15 April 1994.  Accession to the WTO was ratified on
23 December 1994 and Kenya became a member of the WTO on 1 January 1995.  Under the Single
Undertaking, all WTO Multilateral Agreements became binding on Kenya.  However, none of theWTO Agreements have been incorporated into Kenyan law.
14  Private individuals cannot invoke
provisions of the WTO Agreements before national courts, but the Agreements are binding for Kenya
vis-à-vis other WTO Members.  Kenya is not a signatory of any of the plurilateral agreements.
                                                     
13 Government of Kenya (1997a).
14 In Kenya, international treaties and agreements have to be adopted thro ugh a domestic law;  in case
of conflict, the national law prevails over the international agreement.WT/TPR/S/64 Trade Policy Review
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17. As a developing country, Kenya benefits from a transition period to implement a number of
commitments under various WTO Agreements;  Kenya notified the delayed application of the
Agreements on Customs Valuation and Import Licensing Procedures.15
18. Table II.2 shows Kenya's status in relation to notification requirements under the WTO
Agreements as at October 1999.
Table II.2
Status of selected notification requirements to the WTO, 1999
WTO Agreement Description of requirement PeriodicityDocument No. of most recent
notification or number of
notification
Agriculture (Art. 18.2) Domestic support Annual G/AG/N/KEN/4, G/AG/N/KEN/5,
26 November 1997
Agriculture (Art. 10 and
18.2)Export subsidies (outlays and
quantities)Annual G/AG/N/KEN/1, G/AG/N/KEN/2,
G/AG/N/ KEN/3
26 November 1997
Agriculture (Art. 18.3) Domestic support (modification
of legislation)Before new measure is adopted or
30 days after adoptionNone
Textiles and Clothing
(Art. 3.1)Outstanding measures as of
1 January 1995Once G/TMB/N/109, 20 June 1995
Textiles and Clothing
(Art. 2.17)Administrative arrangements Ad hoc
Textiles and Clothing
(Art. 6.9)Bilateral agreements Ad hoc
Textiles and Clothing
(Art. 6.1)Transitional safeguards Once G/TMB/N/110, 20 June 1995
Subsidies (Art. 32) Laws and regulations Once by March 1995, then
changesG/SCM/N/1/KEN/1, 22 May 1996
Subsidies (Art. 25) Specific subsidies granted Annual None
Subsidies (Art. 25.11) Countervailing duty actions taken Every six months when measure
is takenNone
Anti-dumping (Art. 18) Laws and regulations Once by March 1995, then
changesG/ADP/N/1/KEN/1, 22 May 1996
Anti-dumping (Art. 16.4) Anti-dumping actions taken Every six months preliminary or
final anti-dumping actionsNone
Safeguards (Art. 12) Laws and regulations Once by March 1995, then
changesG/SG/N/1/KEN/1, 10 May 1996
Safeguards (Art. 12) Investigations and actions taken Ad hoc
Technical Barriers to Trade
(Art. 2.9)Technical regulations Ad hoc
Technical Barriers to Trade Acceptance of the WTO TBT
Code of Good PracticeOnce G/TBT/CS/N/24, 29 January 1996
Technical Barriers to Trade
(Art. 15.2)Laws and regulations Once, promptly after the WTO
Agreement enters into force and
changes thereafterNone
Table II.2 (cont'd)
                                                     
15 WTO document WT/LET/1/303, 2 March 1995.Kenya WT/TPR/S/64
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WTO Agreement Description of requirement PeriodicityDocument No. of most recent
notification or number ofnotification
Sanitary and Phytosanitary
MeasuresMeasures taken Ad hoc G/SPS/NKEN/1, 8 January 1999
and G/SPS/NKEN/1/Corr.1, 20
April 1999
Preshipment Inspection
(Art. 5)Laws and regulations which put
the Agreement into forceOnce, then changes only None
Import Licensing
Procedures (Art. 7.3)Questionnaire;  rules and
information concerning procedures
for the submission of applicationsAnnual for questionnaire;  rules
and information once, then
changesG/LIC/N/3/KEN/1,
4 December 1997
Import LicensingProcedures (Art.1.4(a) and
8.2 (b))Laws and regulations relevant to
import licensing
Rules of Origin Preferential and non-preferential
rules of originNon-preferential in April 1995;
preferential as soon as entry into
forceG/RO/N/9, 19 April 1996
Customs Valuation Delay in application of  the WTO
Agreement on Customs ValuationOnce WT/LET/1/REV.1, 2 March 1995
Trade-related Investment
MeasuresNotifications under Article 6.2 of
the TRIMs Agreement ofpublications in which TRIMs may
be foundAd hoc None
GATT Council for Trade in
Goods, G/L/59Complete notifications on non-
tariff measuresEvery two years, beginning
January 1996None
GATT (Art. XXVIII) Members reserved their right under
the provisions of Art XXVIII:5 of
the GATT to modify theirSchedules during the three-year
period commencing on
1 January 1997Triennial None
State trading enterprises Complete notification of  state
trading enterprisesDue on 30 June 1995 None
GATS (Art. 3.3) Significant alterations in the rules
governing scheduled sectors
including new rulesAd hoc None
GATS (Art. 3.4 and/or 4.2) Enquiry point Once S/ENQ/43, 23 June 1997
TRIPS (Art. 63.2) Laws and regulations Once, then changes IP/N/1/KEN/1, 5 June 1996
Source : WTO documents.
19. Kenya grants MFN treatment to all its trading partners.
20. The Kenyan authorities have expressed dissatisfaction regarding the result of the Uruguay
Round, specifically in the areas of agriculture and textiles, and have also indicated technical barriers
to trade as one of the fields requiring particular attention within the multilateral trading system.  The
need for enhanced technical assistance has also been raised, mainly in the area of intellectual property.
21. In preparation for the 1999 Ministerial Conference, Kenya has raised concerns about the
inclusion on the agenda of the WTO of issues that are considered not to be trade-related, such as
labour standards, environment, and investment.  The Kenyan authorities consider that these issues
would need further study before they are negotiat ed within the WTO.  In contrast, Kenya would
recommend, inter alia , the complete abolition of export subsidies affecting agricultural goods;  furtherWT/TPR/S/64 Trade Policy Review
Page 20
reduction in tariffs on products of export interest to developing countries;  and the enhancement of
technical assistance.16  In addition, on behalf of the African Group, Kenya presented proposals
regarding the interaction between trade and competition policy;  technical assistance; the customs
valuation agreement; and the TRIPS agreement.17
22. Kenya has never been involved in dispute cases under the WTO dispute settlement
mechanism.  Neither has Kenya been involved in dispute settlement outside the WTO.
(ii) Regional agreements
23. At the regional level, Kenya's economic cooperation arrangements currently revolve around
the African region:  the Common Market for Eastern and Southern Africa (COMESA),  the East
African Co-operation (EAC), the Organization of African Unity (OAU), and the Inter Governmental
Authority on Development (IGAD).18
Common Market for Eastern and Southern Africa (COMESA)
24. Kenya is a signatory of the COMESA Treaty.  The current members are Angola, Burundi,
Comoros Islands, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya,
Madagascar, Malawi, Mauritius, Mozambique, Namibia, Rwanda, Seychelles, Somalia, Sudan,
Swaziland, Uganda, Zambia and Zimbabwe.19   The COMESA Treaty superseded the Preferential
Trade Area for Eastern and Southern African States (PTA).20  The COMESA agenda is to deepen and
broaden the integration process among member States through:  the adoption of more comprehensive
trade liberalization measures, such as the complete elimination of tariff and non-tariff barriers to trade
and the adoption of a Common External Tariff (CET);  the free movement of capital, labour, goods
and right of establishment within COMESA;  the ad option of a common set of standards and technical
regulations, quality control procedures, certification schemes, and sanitary and phytosanitary
regulations;  the standardization of taxation rates (including value-added tax and excise duties), andconditions regarding industrial cooperation, particularly on company laws, intellectual property rights
and investment laws;  and the establishment of a Monetary Union.
21
25. COMESA members agreed to create a fr ee-trade area (FTA) by 31 October 2000.22   A l l
members were supposed to have reduced tariffs by 80% as at October 1996.  However, the status of
implementation of the tariff reduction programme was different among members.23  C O M E S A  h a s
                                                     
16 WTO document WT/GC/W/233, 5 July 1999.
17 WTO documents WT/GC/W/300,  6 August 1999;  WT/GC/W/299,   6 August 1999;  WT/GC/W/301,
6 August 1999;  and WT/GC/W/302,  6 August 1999.
18 Government of Kenya (1996a).
19 On 27 July 1999, Tanzania announced its intention to withdraw from COMESA.
20 WTO Document WT/COMTD/N/3,  29 June 1995.
21 Objective of COMESA.  Available at:  http://www.comesa.int/backgrnd.  [25 May 1999].
22 Kyodo News International, Inc., 31 May 1999;  and Financial Times, 27 May 1999.
23 As at June 1999, three countries (Kenya, Madagascar and Egypt) had reduced tariffs by 90%.
Comoros, Eritrea, Mauritius, Sudan, Tanzania, Uganda, and Zimbabwe had reduced tariffs by 80%;  Malawi by
70%;  and Burundi, Rwanda and Zambia by 60%.  Namibia and Swaziland were given an extension until
October 1999 to fully implement COMESA's tariff.  The Democratic Republic of Congo reduced its tariffs by60% in 1998, and had to further reduce them in 1999 (to reach an 80% reduction) with a view to fullliberalization by the year 2000.  The Seychelles was allowed to complete its customs reform programme in 1999and thereafter reduce tariffs by 90%.  Angola, Djibouti and Ethiopia did not reduce any tariffs.Kenya WT/TPR/S/64
Page 21
also agreed to implement a Common External Tariff by the year 2004;  the CET will be 0%, 5%, 15%
and 30% on capital goods, raw materials, intermediate goods, and final goods, respectively.24
26. In order to facilitate trade within the regi on, COMESA members have agreed to implement
the Automated System for Customs Data and Management (ASYCUDA) and EUROTRACE.25 The
objective of ASYCUDA/EUROTRACE is to assist the business community to clear goods faster from
customs areas, make available up-to-date and accurate international trade statistics, modernizecustoms administrations and, through improved effi ciencies, increase revenues.  Thirteen COMESA
countries have already implemented the system, and eight members are in the process of doing so.
Kenya, however, has not implemented this system.
26
27. COMESA rules of origin stipulate that goods mu st be wholly produced;  or contain imported
content of not more than 60% of the c.i.f. value of the total cost of materials used in production;  orcontain not less than 45% ex-factory value added;  or contain not less than 25% value added if the
final product is considered to be of particular importance to the economic development of member
States.  All goods eligible for preferential tariff treatment must be accompanied by a COMESA
Certificate of Origin, duly completed, stamped and au thenticated by the authorized signatories in the
country of origin.
27
28. The Monetary Harmonisation Programme is to be implemented in four phases, from 1992 to
2025.  The final phase should culminate in full monetary union, which implies the use of irrevocable
fixed exchange rates, a single currency, or parallel currencies;  full harmonization of economic, fiscal,
and monetary policies of member States;  full integration of the financial structure of member States;
pooling  of foreign resources;  and the establishment of a common monetary authority.28  D u r i n g
COMESA's Heads of State Summit, held in Nair obi in May 1999, it was decided to re-launch the
monetary harmonization programme with the introdu ction of limited currency convertibility between
and among member States with substantial cross-border trade.  A coordinating body to be made up of
experts from Central Banks and Ministries of Finance is to be formed to oversee implementation of
policy measures to take the process of monetary harmonization to the level of monetary union.
29. The COMESA Heads of State have established several institutions to assist members in
attaining their development objectives.  These institutions are the Eastern and Southern African Tradeand Development Bank (PTA Bank);  the COMESA  Clearing-House, the PTA Reinsurance Company
and the COMESA Bankers' Associat ion.  Each of these institutions performs a specialized function to
be carried out by the COMESA Secretariat in Lusaka (Zambia).
29   The PTA Bank provides trade and
project financing to public and private investors domiciled in member States.  At present, the Bank
has 15 members including Kenya.  The COMESA Clearing-House was brought into existence whenthe countries of the region had strict exchange controls regimes in place and foreign exchange was
                                                     
24 The Free-trade area and Common Tariff Structure.  Available at:  http://www.comesa.int/finance
[25 May 1999].
25 The ASYCUDA system is a computerized customs management system, which also covers foreign
trade procedures.  It handles manifests and customs declarations, accounting procedures, warehousing, and
import and export licences. It also generates trade data.  The EUROTRACE system is able to take the datagenerated by ASYCUDA and integrate it into a database for the production of external trade statistics(COMESA ASYCUDA- EUROTRACE Project.  Available at:  http://www.comesa.int/trade [26 May 1999]).
26 The Free-trade area and Common Tariff Structure.   Available at:  http://www.comesa.int/finance
[25 May 1999].
27 COMESA Rules of Origin.  Available at:  http://www.comesa.int/trade [25 May 1999].
28 Monetary and Fiscal Co-operation in COMESA.  Available at:  http://www.comesa.int/finance
[26 May 1999].
29 The Association of Commercial Banks of the Common Market for Eastern and Southern Africa.
Available at:  http://www.comesa.int/finance  [25 May1999].WT/TPR/S/64 Trade Policy Review
Page 22
scarce.  The importance of the Clearing-House has diminished as most COMESA countries have
liberalized their foreign exchange regimes.30  The PTA Re-Insurance Company (ZEP-RE), established
in 1990, has 17 signatories and aims at fostering/assisting the development of the insurance and
reinsurance industry in the COMESA sub-region, a nd promoting the growth of national, sub-regional
and regional underwriting and retention capacity.31
30. In addition, the COMESA Treaty provides for a Court of Justice.  The Court's primary
function is to uphold the rule of law in the operation of the Treaty by ensuring adherence to law in the
interpretation and application of the Treaty.  Its general jurisdiction is to adjudicate upon all matters
that may be referred to it under the Treaty.  The Court became operational in 1998.32  Kenya has never
been involved in trade disputes under this framework.
Commission for East African Co-operation31. The Agreement establishing the Permanent Tripartite Commission for East African Co-
operation was signed by Kenya, Tanzania and Uganda, on 30 November 1993.  The EAC Secretariat
was established in March 1996 and has its headquarters in Arusha, Tanzania. The treaty establishing
the EAC was expected to be signed by the end of 1999.  The East African Co-operation objectives
include harmonizing tariffs and customs regimes, free movement of people, and improving regionalinfrastructure by the year 2000.
33   A preferential tariff is intended to prevail within the EAC and a
common external tariff (CET) is envisaged for 2004.
32. Since the cooperation agreement was signed, Kenya, Uganda and Tanzania have tried to
harmonize their fiscal and monetary policies;  they have signed a double taxation arrangement, which
also provides for joint measures to prevent tax evasion.  Other achievements include pre- and post-
budget consultations between the finance ministers, synchronization of the budget day in the three
countries, regular consultations between the central banks, the full convertibility of the threecurrencies, cooperation in capital and securities regulation, and the creation of common internal
passports.  In an attempt to promote trade and investment, the East African Business Council has been
established, drawing members from national private-sector organizations in the region.  Lawyers have
also formed their own forum, the East African Law Society.
34
33. The three countries are undertaking joint projects in infrastructure, including a digital
transmission system financed by the telecommunications authorities of the three countries, together
with the European Investment Bank (EIB) and the East African Development Bank.  A regional road
network has also been planned.35
34. In April 1998, a new draft treaty set out the steps to political federation, based on the report
from a meeting held in November 1997.  It will confer on the EAC recognition as a legal entity actingin the common interest of member States.  Discussions on broadening the membership base, perhaps
to include Rwanda, Burundi and, although less likely,  the Democratic Republic of Congo, will also
                                                     
30 The COMESA Clearing-house.  Available at:  http://www.comesa.int/finance [26 May 1999].
31 The PTA Re-Insurance Company (ZEP-RE).  Available at:  http://www.comesa.int/finance
[25 May 1999].
32 COMESA Court of Justice.  Available at:  http://www.comesa.int/finance [26 May 1999].
33 Dun & Bradstreet Information Services (1998).
34 EIU (1998).
35 EIU (1998).Kenya WT/TPR/S/64
Page 23
continue, as will discussions among leaders about the relationship of the EAC with the existing
COMESA and the Southern Africa n Development Community (SADC).36
Cross-Border Initiative (CBI)
35. Kenya has been participating in the CBI, which has been developed in close collaboration
with the relevant regional integration organizations in the Eastern and Southern African sub-region
under the sponsorship  of the African Development Bank (ADB), the EU, the IMF, and the WorldBank.
37  The main objective of the CBI is to assist these countries to speed implementation of the
various economic cooperation and integration programmes and projects already agreed upon under
various integration organizations, through the pr ovision of financial and technical assistance.38
The Organization of African Unity (OAU)
36. The OAU was founded in 1963 by 30 African nations to promote solidarity and higher living
standards, and to defend the sovereignty of member States.  Another 21 signatories have since joined,
the last of which was South Africa, in 1994.  Morocco left in 1985.39  As an OAU member, Kenya
signed in 1991, at Abuja (Nigeria), the African Ec onomic Community Treaty (AEC) provided for by
the 1980 Lagos Plan of Action.  This Treaty, outlined six stages, including the removal of tariff and
non-tariff barriers to trade and the establishment of a continent-wide customs union by 2004.  Acommitment was also made to the establishment of an African Common Market (ACM), with a
central bank and single currency over a period of 34 years.
40
Inter-governmental Authority on Development (IGAD)
37. Formerly known as Inter-governmental Au thority on Drought and Development (IGADD)41,
the IGAD was established in January 1986 by seven East African countries:  Djibouti, Ethiopia,
Eritrea, Kenya, Somalia, Sudan and Uganda.  Its initial aim was to combat drought and
desertification.  In March 1996, at a summit in Nairobi, IGAD adopted a new charter to revitalize andexpand its mandate to include new priority areas of economic cooperation, conflict prevention,
resolution and management and humanitarian affairs.  IGAD gained official recognition from the
Organization of African Unity as a regional economic organization in June 1997, and began to focus
more on economic integration.
42
(iii) Bilateral agreements
38. Kenya has signed bilateral trade agreements with Argentina, Bangladesh, Bulgaria, China,
Djibouti, Egypt, Ethiopia, Hungary, India, Ir an, Lesotho, Nigeria, Pakistan, Poland, Romania,
Rwanda, the Republic of Korea, Sudan, Swaziland, Tanzania, Thailand, Zambia and Zimbabwe.
However some of these agreements are non-operational since they have never been ratified.43  I n
                                                     
36 EIU (1998).
37 This initiative is now actively supported by 13 countries in the region, including Kenya.
38 Government of Kenya (1996a); and Cross-Border Initiative.  Available at:
http://www.comesa.int/trade [26 May 1999].
39 EIU (1998).
40 EIU (1998).
41 In March 1996, at a summit in Nairobi, IGADD renamed itself the Inter-governmental Authority on
Development (IGAD).
42 Kenya.  Available at:  http://www.fco.gov.uk  [27 May 1999].
43 Those with Bangladesh, Hungary, Romania, Swaziland, Tanzania, and Zimbabwe.WT/TPR/S/64 Trade Policy Review
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addition, agreements with the former Czech and Slovak Republic, the former Yugoslavia, and the
former USSR have expired.
(iv) Other
39. Kenya is a signatory to the Lomé Convention,  which affords a group of 70 African, Caribbean
and Pacific (ACP) countries preferential trade and aid links with the EU. The fourth and current
convention (Lomé IV), signed in 1989, which superseded agreements signed in Lomé in 1975, 1979and 1984, is to expire in 2000.
44  Negotiations between the EU and the ACP countries on renewing the
convention started on September 1998 and are still under way.
40. One of the instruments of ACP-EU cooperatio n concerns non-reciprocal trade preferences
granted by the EU to imports of industrial and pr ocessed agricultural products originating in the ACP
countries, and market access under "commodity protocols" (bananas, rum, beef and veal, and sugar).45  
The convention offers two other schemes: (a) the STABEX set up to cover losses of earnings caused
by a fall in prices or a decline in production of the main ACP agricultural exports (a total of 49
products are on the STABEX List);  and (b) SYSMIN, a special financing facility for countries reliant
on the export of minerals.
41. Kenya has benefited directly under the National and Regional Indicative Programme in terms
of financial assistance, as well as from preferential access to the EU market for some of its exports.
Since the bulk of Kenya's exports receipts come from commodities such as tea and coffee, it has been
a major beneficiary of the Stabilization of Export Earning Scheme (STABEX) Fund.46
42. Kenya also benefits from preferential tariff treatment under the Generalized System of
Preferences (GSP).  Kenyan products receiving preferential treatment under GSP include tea, coffee,
pyrethrum, and horticultural products, mainly exported to the United States, Japan, Canada,
Switzerland, Norway, and the European Union.
(3) FOREIGN INVESTMENT REGIME
(i) Regulatory framework
43. Private foreign investment in Kenya is governed by the Foreign Investment Protection Act
(FIPA) of 1981, the Investment Promotion Centre Act of 1986, amended in 1992, and the Trade
Licensing Act of 1967, which was revised in 1990.  The three acts are being consolidated into onelegal document, an Investment Code, to clearly regulate the legal rights and obligations for both
foreign and local investors and to provide legal guarantees for all investors.  Through the Investment
Code the Government envisages streamlining investment approval procedures and harmonizing the
incentive package.
47
44. Under the FIPA, foreign investors may receive an  investment approval certificate from the
Ministry of Finance and Planning provided  their proposed investment promotes economic
development, or is "likely to benefit" the Kenyan economy.48  All foreign investors  are entitled to
                                                     
44 The European Union's waiver to apply non-recipr ocal trade preferences to imports from the ACP
countries granted by the WTO expires on 29 February 2000  (WTO document WT/L/186).
45 Titles I and II of Part III of the Fourth ACP-EEC Convention, OJ L229, Vol. 34 of 17 August 1991,
as amended at Mauritius on 4 November 1995 (EU TPR forthcoming in 2000).
46 Kenya-EU cooperation.  Available at:  http://www.oneworld.org/euforic/courier  [7 June 1999].
47 Government of Kenya (1996a);  and Government of Kenya (1997a).
48 The Foreign Investment Protection Act, Art 3(1), Revised Edition 1981.Kenya WT/TPR/S/64
Page 25
repatriate both capital and profits, and are protected under the Act from compulsory acquisition of
their enterprises.49  Moreover, following the repeal of the Foreign Exchange Act, this certificate is no
longer necessary for repatriation of profit. The Kenyan Constitution also provides a guarantee against
expropriation of private property.  Expropriation may only occur either for security reason or public
interest, whereupon fair and prompt compensation is guaranteed.50
45. The agency in charge of investment in Kenya is the Investment Promotion Centre (IPC),
established in 1986 to promote domestic and foreign investment, provide advice and assistance to
foreign investors, and advise the Government on policies and procedures to encourage both domestic
and foreign investment.  The Centre is run jointly by the business community and the Government
and is publicly funded;  services offered by IPC carry no cost.  The IPC has become a one-stop
window for investment procedures through which it facilitates the acquisition of necessary approvalsand licences;  applications by foreign investors are processed within one month.
51
46. The IPC also identifies the types of licences required for the investment and facilitates their
acquisition.   A multiplicity of licences are required for new investments depending on the sector, but
IPC approval (which is granted with the consent of the relevant Ministries/Departments) confers on
the investor the right to undertake the new business and acquire the relevant licences within a periodof up to one year.  The Government recognizes the need to harmonize licensing requirements, which
had proven a constraint to investment.
52
47. Kenya grants national treatment to foreign investors.  In general, most business activities are
open to foreign investors, except those related to matters of security or health.  In this case, approval
of such projects requires careful examination by the relevant ministries.  Kenyan co-ownership is
required in the telecommunication and insurance services industries (Chapter IV(5)).53   F o r e i g n
ownership of agricultural land and small-scale retail operations continues to be prohibited.54  I n
addition, according to the Trade Licensing Act, foreigners are not allowed to conduct  business:  in
any places outside a "general business area";  or in any specific goods unless the licences specifically
authorize them to do so.55   Licensing fees vary from KSh 110 to 6,600, depending on the type of
business and on its location (rural areas, urban areas, or general business areas, with fees increasing
accordingly).
48. A company incorporated outside Kenya may carry out business in Kenya through a branch. In
order to establish a branch, the following documents and details must be submitted to the Registrar of
Companies:  (a) a certified copy of the company's own Memorandum and Articles of Association or
equivalent constitution documents;  (b) a list containing the names, addresses, nationalities and
occupations of its directors and company secretary;  (c) a statement of existing mortgages and chargescreated by the company in Kenya and, if any, the names and addresses of one or more Kenyan
                                                     
49 Investors can repatriate:  after tax profits, including retained profits that have not been capitalized;
the proceeds of the investment after payment of the releva nt taxes;  and principal and interest associated with
any loan (IPC, 1997).
50 IPC (1997).
51 Dun & Bradstreet (1998).
52 Government of Kenya (1997a).
53 WTO documents GATS/SC/47/Suppl.1, 26 February 1998 and S/C/W/107, 12 May 1999.
54 GATT (1994).
55 The list of specified goods comprises 72 items including staple foods, cloth, charcoal, basic tools,
shoes, firewood, hides and skins, handicrafts, and spare parts for motor vehicles and bicycles (The TradeLicensing Act, Revised Edition 1990).WT/TPR/S/64 Trade Policy Review
Page 26
residents who are authorized to accept legal notices on the company's behalf;  and (d) the address of
the company's registered or principal office.56
49. As stated in a Sessional Paper prepared by the Government, bureaucracy and corruption are
still considered a major constraint to investment in  Kenya.  Long and slow bureaucratic procedures,
duplication of licensing requirements, and "lukewarm" attitudes of public servants to processing
applications for approvals and licences required by business can be costly and hamper investment.  Inorder to cut delays, businessmen occasionally offer inducements to speed up the process;  this has the
effect of increasing the cost of setting up business in Kenya.  The establishment of an Investment
Promotion Centre (IPC) has not yet succeeded in reducing the amount of time required in pre-
operational activities.
57  As noted previously, in July 1997 the Government created the Kenya Anti-
Corruption Authority (KACA) with a view to prev enting abuse involving the use of public funds.
(ii) Investment incentives and promotion
50. In order to attract FDI, Kenya offers tax incentives  to locals and foreigners in the form of tax
holidays, accelerated depreciation, investment allowance, lower duties on intermediate capital goods,
and gradual reduction of corporate rates.58  In addition, large-scale private investment projects with
expenditure on capital goods in excess of US$5 million within a two-year period, and with a potentialto generate net economic benefits for the country, can recover the duties paid on imported capital
goods for the project against income liability.
59  However, according to the Government, dwindling
domestic markets, increased costs of capital and production, and the existence of widespread controls
and bureaucratic red-tape minimizes the effectiveness of these incentives.60  Various programmes are
in place for enterprises producing specifically for export:  the Export Processing Zones (EPZ) and
Manufacturing Under Bond (MUB) (Chapter III).61 The IPC also processes applications for export-
oriented projects under the MUB programme.  Under the new Investment Code the incentives givenunder the EPZ and the MUB are to be harmonized.
62  Kenya has not notified any trade-related
investment measures to the WTO.
51. Kenya has a double taxation agreement with Zambia;  discussions on proposed similar
agreements with other countries are yet to be concluded.  In addition, as part of the establishment of
the East African Co-operation (EAC), Kenya, Uganda and Tanzania have signed a tripartite taxationagreement.
63
52. Kenya has signed bilateral investment treaties for the promotion and protection of foreign
direct investment with Germany, the Netherlands, the United Kingdom, and the United States
(Overseas Private Investment Corporation and Export-Import Bank programmes only).64   Kenya is a
member of the Multilateral Investment Guarantee Agency (MIGA) and the International Centre forthe Settlement of Investment Disputes (ICSID).
65
                                                     
56 Investment Profile Kenya.  Available at:  http:www.mbendi.co.za/ernsty/kenya/inv_menu.htm
[26 May 1999].
57 Government of Kenya (1997a).
58 No attempt has been made to estimate the revenue forgone due to these investment schemes.
59 IPC (1997).
60 Government of Kenya (1996a).
61 Guide to Investing in Kenya.  Available at:  http://www.kenyaweb.com/business/ipc [25 May 1999].
62 Government of Kenya (1996a).
63 Dun & Bradstreet (1998).
64 UNCTAD (1997);  and Dun & Bradstreet (1998).
65 Guide to Investing in Kenya.   Available at:  http://www.kenyaweb.com/business/ipc [25 May 1999].