A comparative study of Kenya and united Arab emirates export processing zones competitiveness using porter's theory of competitive advantage of nations

Abstract

Export processing zones have increasingly been used by governments in developing countries as a policy tool for development. Both developed and developing and have turned to export processing zones in a bid to attract foreign direct investment and trade through export oriented growth. Experience has shown that export processing zones can be successful in earning foreign exchange, creating employment and in developing export competitiveness. While countries like China, Dominican Republic, United Arab Emirates and Singapore have succeeded in their zones, zones established in some developing countries have failed to attract substantial investment. In sub Saharan Africa, with the exception of Mauritius, countries like Botswana, Cameroon, Ghana, Kenya, Madagascar and Malawi are among those that have failed to attract substantial foreign direct investment through export processing zones. The objective of this research was to determine whether Porter's theory of Competitive Advantage of Nations can explain the difference in competitiveness between Kenya and United Arab Emirates export processmg zones. Porter's theory states that nations can only create a sustainable competitive advantage if they acquire four broad attributes, which he called the determinants of competitive advantage, that create the environment in which local firms compete and in so doing create a competitive advantage. The four determinants are factor conditions, firm strategy, structure and rivalry, demand conditions, related and supporting industries and form the diamond of competitive advantage. Porter's theory predicts that a country with a more robust diamond will be more competitive. The research, a comparative case study research design, examined the difference in competitiveness by analyzing each determinant separately. Each determinant was broken down into different categories. Each category within the determinant was further broken down into its constituent elements. As an example, one of the factor conditions categories was infrastructure. Infrastructure was further broken down into its constituent elements of road infrastructure, railroad infrastructure, port infrastructure and so on. Secondary data on the global ranking and score of competitiveness of each element was obtained from World Economic Forum Global competitiveness survey report for both Kenya and United Arab Emirates. These were then tabulated for each category of determinant and competitiveness for the countries compared to determine which was more competitive. A summary table was then constructed for each determinant and by examining the number of categories a country was more competitive, an overall leader in each determinant was determined. Where there was an apparent tie, the actual element scores within categories were tallied to determine the country that was more competitive. The research findings showed that United Arab Emirates was more competitive in all four determinants and had therefore a more robust diamond than Kenya, confirming the prediction of Porter's Theory of Competitive Advantage of the Nations. The research showed that Kenya had competitive weaknesses mainly in its institutions, infrastructure, health, knowledge resources in terms of secondary and tertiary enrollment and macroeconomic stability. Institutions had many categories such as property and intellectual rights, judicial independence and efficiency of legal framework, bureaucracy, business ethics, crime and corruption. The role of Kenya's government is to strengthen Kenya's diamond by addressing the subject areas. By so doing it will increase its global competitiveness, instill investor confidence and attract more foreign direct investment in Kenya export processing zones. UAE has a more robust diamond than Kenya but it can enhance its competitiveness by addressing areas its areas of weakness which are health, knowledge resources in enrollment of primary, secondary and tertiary education, innovation and also address time required to start. Because of UAE financial strength, it does procure latest technology from advanced nations. UAE government must however work to develop its education system and areas of research if wants to improve its global competitiveness.