Policy Reforms, Competitiveness and Prospects of Kenya's Manufacturing Industries: 1984-1997

Eckhard Siggel, Gerrishon Ikiara and Benjamin Nganda
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Eckhard Siggel: Department of Economics, Concordia University
Gerrishon Ikiara: Institute of Diplomacy and International Studies, University of Nairobi
Benjamin Nganda: Department of Economics, University of Nairobi

Journal of African Development, 2002, vol. 5, issue 1, 72-104

Abstract: This paper attempts to answer the question whether trade liberalization and other measures of structural adjustment undertaken in Kenya since the mid-1980s have led to increased competitiveness of the manufacturing sector. It uses a method of analysis that consists of the computation of three unit cost indicators, of domestic and international competitiveness, and of comparative advantage, and their break-down according to the main sources. It distinguishes real sources from nominal ones based on price distortions, including those of factor and product prices, exchange rate misalignment, various trade restrictions, interest rate distortions and subsidies. Using data from two manufacturing sector surveys in Kenya, of 1984 and 1997, the study shows that comparative advantage has increased on average, but industry competitiveness has declined during the 13-year period of structural adjustment and policy reforms, due to higher distortion levels, mainly in the financial cost of credit and exchange rate misalignment, but also through deteriorating infrastructure and public services.

Date: 2002
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