Delays in resolving contract disputes and protracted cross-border trade procedures have eroded Kenya’s attractiveness as an investment destination, causing it to drop 12 places in the World Bank’s global list of economic competitiveness.
The latest edition of the World Bank’s Ease of Doing Business report ranks East Africa’s largest economy as the world’s 121st most competitive country this year down from position 109 in 2012.
It also has Kenya comparing unfavourably with neighbouring Rwanda and Uganda, ranked in positions 52 and 120 respectively.
Kenya’s ranking last year was also three places lower than the 2011 position, reflecting a steady decline in the country’s competitiveness in the past three years and weakening its position in the race for foreign direct investments.
The report shows that although Kenya’s performance improved in critical areas such as payment of taxes and starting a business, poor contract enforcement, slow property registration processes and lengthy cross-border trade procedures significantly eroded its overall ranking.
“The decline in ranking means that we are either deteriorating or other countries are reforming at a faster rate,” Moses Ikiara, the managing director of Kenya Investment Authority, said.
Dr Ikiara, however, expects the projected strong economic growth and high returns in a number of sectors to be Kenya’s main attractions in the medium term.
The World Bank ranks 185 economies globally based on their performance in 11 areas of business operations, including employment rules, access to electricity and taxation.
Tanzania, one of Kenya’s major competitors for investment in East Africa, dropped to position 134 from last year’s 127.
Kenya’s poor performance was partly contributed by prolonged delays and high cost of processing documents that lowered its cross-border trade score.
(Read: Congestion at Mombasa port slows down trade in EAC bloc)
It now takes an average of 26 days to import a [goods] container compared to 24 days a year earlier — a development that pushed Kenya’s cross-border trade ranking down to 148 from 141 a year earlier.
The cost of importing a [goods] container also rose by 7.3 per cent to $2,350 (Sh199,750) from $2,190 (Sh186,150) in the same period a year earlier.
Kenyan exporters were not spared the deterioration of the business environment as the cost of shipping out a container rose by 9.7 per cent to $2,255 (Sh191,675) from $2,055 (Sh174,675) the previous year.
Industry insiders say the delays and rise in costs of international trade are linked to bureaucratic red tape and inadequate capacity at the port of Mombasa to handle fast-growing cargo volumes.
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