Adjusting to Chinese Ascendancy in the post- MFA Global Clothing Industry: The Case of Kenya

Abstract

The textiles and clothing industry has been essential to the industrialization strategies of many African countries. In Kenya, this industry is crucial for development because it has very low entry barriers, has the potential to improve livelihoods because it is labour-intensive and thus provides many jobs for low-skilled workers, and also because it generates foreign exchange much needed to support imports. The performance of this industry has been propelled by the creation of Export Processing Zones (EPZ) in 1990, and the enactment of the African Growth Opportunity Act by the US Government in 2000, which gives Kenya tariff and duty free access to the US market. In the last two decades, China has become a major economic force globally, more importantly in the clothing industry. This has created opportunities and threats for developing countries such as Kenya. The rise of China has competitive and complementary effects to clothing industrial development in Africa. Moreover, the effect of Chinese ascendancy in clothing industry is differentiated even among the African countries. It is therefore not prudent to generalize these impacts. There is need for country and sector specific studies to examine how different African countries are impacted on by Chinese ascendancy in the clothing sector. This study contributes to this debate by analyzing the implication of Chinese ascendancy on Kenya’s clothing industry in the post Multi-fibre Arrangement (MFA) period. The broad objective of this study is to assess ways in which Chinese ascendancy in the global clothing industry interacts with Kenya’s clothing sector capabilities to determine the extent of post-MFA stabilization. This study uses both primary and secondary data, with primary data forming the bulk of the analysis. The primary data was collected from 16 exporting firms representing 52% of all apparel exporters in Kenya. Interviews were conducted with management team in each of the firm using face-face interviews. Secondary data was collected from UN COMTRADE data base and other published materials. Data analysis shows that Kenya’s exporters rely on raw materials imported from Asian countries, including China. However, given that the US market is the main market for Kenya’s exports, competition from China has intensified. Most firms produce and export basic products that compete directly with those from China. Market diversification has generally been low, with all firms targeting the US market. There is need to explore other markets such as Europe and Asia. The Government of Kenya needs to support the clothing industry more than is happening today. For example, the AGOA, which is the main entry point to the US market, requires government intervention for its extension beyond 2015. There is also need for clothing firms to diversify markets for their products beyond the US. Developing a private-public partnership in textile manufacturing is critical in enhancing backward linkages in the value chain. Finally, there is need to involve all stakeholders in developing critical policies for this industry.