Unfair Bilateral Trade: Kenya Vs China
The Kenya Revenue Authority (KRA) is either too ambitious in setting its targets or it is not doing its work as expected.
In the financial year between July 2016 and March 2017, KRA had a target of Ksh. 1.05 trillion. By July, 2017 KRA had just raised Ksh. 984 billion. This was an under performance by Ksh. 65.9 billion.
The following reasons were given for the failure to reaching the set target:
- Shortfalls in collection of income tax
- Lower than expected collection of Imports Declaration Fee and Investment Income
The matters are compounded by the fact that public debt has been increasing at a fast rate. By March, 2017 it had reached the Ksh. 4 trillion mark.
This is a general observation for most non-resource intensive countries such as Kenya, Malawi, Ethiopia, Benin, Mozambique, Senegal, Togo and Cape Verde.
A few days ago, Kenyan government wrote a formal request to the Chinese Exim Bank for a loan to be used in extending Standard Gauge railway line from Naivasha to Kisumu.
Kenya will receive Ksh. 370 billion for this purpose. This will push the total cost to Ksh. 847 billion. Already phase I has gobbled up Ksh. 477 billion.
Bilateral Trade Skewed in favor of China
Kenya is in a trading relationship which has triggered hot debates on whether it is mutually beneficial.
A dig into data shows that China exported good and services to Kenya valued at Ksh. 320 billion while Kenya exported to China good valued at Ksh. 8.4 billion. This is what makes Aly-Khan Satchu to say that we need to rethink our bilateral trade with China.
China is actually over-benefiting from this kind of arrangement. We expect more from China considering that the country has 1.3 billion people hence a ready market for Kenya’s consumer goods.
We cannot continue tolerating raw deals from our bilateral partners.
Titanium takes up 95 percent of the total exports from Kenya. This is a shame who who ever is representing us in arguing these trade deals.
Data from the Kenya National Bureau of Statistics points out that China purchased titanium from Kenya worth Ksh. 5.3 billion during the first 10 months of 2016.
The other exports during the same period were as listed below:
- Tea – Ksh. 139 million
- Coffee – Ksh. 73 million
- Vegetable – Ksh. 2.3 million
The above information shows that if we stop exporting titanium to China, then the other exports are negligent. They buy our titanium to use it as an alloy in manufacturing jet engines among other great products.
If we are continue being bilateral trading partners, then China must do something. Maybe formulating something similar to the Africa Growth and Opportunity Act (Agoa). The gap is enormous and needs to be bridged ASAP!
An alternative is to encourage our Kenyan government to embrace manufacturing. We must stop importing what we can produce locally.
I agree with Dr. XN Iraki from University of Nairobi that in order to address the existing trade imbalance, some protectionism will be in order.
Protectionism is defined as
“an economic policy where government regulations are used to protect local industries.”
We now demand to be liberated from:
- second-hand clothing (mitumba)
- dumping of low quality electronic goods
- Chinese smoked, dried and salted fish (we’ve enough here at home)
- cheap tires – in the first half of 2015, we imported tires worth Ksh. 2.5 billion which led to the closing up of Sameer Africa.
- protect us from cement whose import has increased 10 times despite us producing the same here in Kenya.
The low prices of Chinese goods is associated with the government incentives and lower energy costs in Beijing.
Those are not the only imports which as killing our local industries. Chinese cuisine and language are filtrating our culture fast