Export Incentives, Efficiency, and Garment Exporters in Kenya: Applying the Policy Analysis Matrix Approach

Abstract

Many countries, including Kenya, have established a wide range of incentives for exporters in hopes of reaping economic gains through employment creation, foreign exchange earning and technology transfer, and at the same time rectifying the antiexport bias of their policy structures. This study is concerned with competitiveness and efficiency of garment exporters within the liberalized regimes (MUB and EPZ ) in Kenya. The study was motivated by lack of systematic analysis of the impact of policy incentives on profitability and resource ahl-oeat'ion. To assess these impacts a new approach of analysis policy (The Policy Analysis Matrix, PAM) was applied. Based from available evidence and the PAM results, it was found that while production of garment for exports has been the handiwork of incentive policies pursued by the government which lowered firms’ costs, the nominal incentive to clothing exports was still low due to poor implementation of the green channel scheme meant to hasten import and export documentation. Further, it was found that an overvalued exchange rate did not allow exporters to reap higher profits. More important than the competitiveness of garment production was that, when the domestic economy is distorted, the incentive policies confer social gains and can be seen to be "engines of development" as hoped so by Kenya.