New industrial spaces in Kenya: a case study of Export processing zones in Nairobi and Athi river

Abstract

This study aims at determining whether the Export Processing Zones (EPZs) are "new industrial spaces" in Kenya by analyzing their evolutionary, structural and operational characteristics. The concern here being to determine whether there are similarities and or differences amongst the EPZ firms in terms of their structural characteristics, linkage capabilities and marketing strategies. The regulation approach and the product cycle model were employed in understanding the evolutionary and operational characteristics of the EPZs in Kenya. The findings of this study are based on information gathered from a sample of 25 EPZ firms and 250 employees. The technique employed in acquiring the samples for employees was stratified random sampling. Primary data was gathered by use of standardized questionnaires, while secondary data was obtained from government publications and Export Processing Zones Authority (EPZA) reports. In the analysis and presentation of the field data both qualitative and quantitative techniques were employed. In assessing the linkages between EPZ firms and the host economy, Corden's (1974) enclave approach was employed. It was used descriptively in assessing the linkage capabilities between the EPZs and the host economy. Finally, common factor analysis was utilized in determining the significant survival strategies utilized by EPZ firms in the competitive world market economy. The findings indicate that like the new industrial spaces in North America and Western Europe, EPZ firms in Kenya exhibit similar structural and operational characteristics. For instance most EPZ firms are foreign owned, depend on labor-intensive technology, rely on imported inputs, are export oriented, manufacture mature products and most of them are either small or medium size firms. The EPZ firms in Kenya utilize the same survival strategies in a competitive world market economy. The most significant strategies utilized are production of quality goods, use of cheap non-unionized labor, standardization of production processes, locational mobility and reliance on EPZ incentives. The findings also indicate that the contribution of EPZs on the host economy has not been very significant. For instance, employment creation in the EPZs has been very low as evidenced in v the small numbers of people employed in the firms. Backward and forward linkages have not been achieved due to over-dependence of the EPZ firms on foreign inputs and external markets. Technological transfer by EPZ firms has not been very significant because of the substantial protection by patents, the low technological level of labor-intensive production and lack of skilled labor. Therefore, the enclave nature of EPZs has denied the host economy the anticipated benefits expected from EPZ firms. This study recommends that in order for Kenya to achieve integrated national development through strategies such as EPZs and to transform them into viable industrial development tools, there is need to: select industries with strong backward and forward linkages; invest in promotion programs to encourage both marketing and production skills between EPZs and the host economy; encourage local manufacturers to produce quality goods to be able to supply the EPZ firms; and engage in continuous assessments to determine and evaluate the success of the EPZ program.