The impact of African growth opportunity act AGOA on the Kenyan economy : a case of export processing zones EPZs in Nairobi
Nyaga, Henry Wamugo
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This study is an analysis of the impact of the AGOA Act on the economic growth in Kenya with the aim of determining the role played by the export processing zones in Kenya. In 2000, the US Congress passed the African Growth and Opportunity Act (AGOA). AGOA gave preferential treatment to exports from the eligible countries in Sub-Saharan Africa to encourage the growth of export -led economies on the continent. Over the past few years, the idea of establishing Export Processing Zones (EPZs) has found support among several governments of Sub-Saharan Africa. Attempts to become internationally competitive, to move towards export-led growth, and structural adjustment programmes (SAPs) are now characterizing most Sub-Saharan African countries and most governments regard EPZs as a suitable strategy to find a niche in the global economy. A study of all the firms operating in Export Processing Zones in Nairobi was undertaken. The sample frame constituted the senior managers of the EPZs, the EPZA, the KIA, and the EPC. The researcher targeted three senior managers from these institutions. Primary data was collected using a questionnaire consisting of both open and close ended questions. Data was analyzed using descriptive statistics with the help of the SPSS computer package. These were deemed appropriate due to the qualitative nature of the study. The data was then presented in the form of graphs, tables and pie charts. The findings of the survey show that only exports in the apparels sector grew as a result of the enactment of AGOA. Furthermore, the findings show that AGOA had led to Foreign Direct Investments in to the country. As a result of the investments, a phenomenal growth of jobs/employment was experienced. The study also established that the firms operating in the EPZ's do face some challenges, which affect their competitiveness on the international scene. The challenges include high energy costs, poor transport infrastructure, delay in clearing goods at the ports and high Labour costs. The government is also faced with the challenge of retaining the investors in the EPZ after the third country fiber usage ends in 2007. In the light of the findings, it is recommended that Kenya should aim at diversifying its exports to the American markets under AGOA and give support to the firms operating in the EPZs so as to fully maximize on the AGOA opportunity.