Analysis of the factors which affect the operations of firms in export processing zones in Kenya

Abstract

This study is an analysis of the factors that affect the operations of firms in EPZs with the aim of determining why despite the heavy investment that firms undertake and the attractive incentives offered by the Government, there have been cases of withdrawal from the export processing zones in Kenya. A study of all the firms operating in Export Processing Zones in Nairobi and Athi River was undertaken. Primary data was collected using a questionnaire consisting of both open and close ended questions. The questionnaire consisted of five sections each addressing the different factors that impact on the operations of the firms. The five sections were directly related to the reasons for which EPZs were established in Kenya, namely; Employment generation, skills development, technology transfer, foreign exchange earning and creation of forward and backward linkages. The questionnaire was addressed to the General Manager or Managing Director of the firm. Data was analysed using statistics, proportions, percentages and tables. These were deemed appropriate due to the qualitative nature of the study. The data is then presented in the form of bar graphs and pie charts. Majority of the firms in the EPZs are foreign owned. Most of their investment took place between 1990 and 1995. The major sources of information on EPZs in Kenya are business contacts. 70% of the EPZ firms in Kenya are labour intensive with 54% of the workforce being female. The USA and Europe are the major exporters of the EPZ products, 70% of which are finished products. After extensive analysis of the factors affecting operations of firms in the EPZs the study identifies huge expenses incurred due to an ineffective infrastructure as the main reason for the withdrawal from the scheme. The power failures of 12.28 - 2000, an ineffective telecommunication system and a poor national road network are the main reasons for the withdrawal from the scheme. The results of the study raise a number of issues that could be addressed in future research. Of key interest would be to determine the extent of marketing the EPZA undertakes to generate investment into the scheme. One may also want to determine what specific measures have been undertaken to reduce incidences of withdrawal from the scheme and the actual contribution of the EPZs in the overall economic development of the country.