Introduction
Kenya recognises the role of trade and investment in socio-economic development. Thus, the government has, through several sessional papers and national development plans outline the various policy guidelines aimed at promoting trade. Some of the most notable documents include the sessional paper no. 1 of 1994 and the Economic Recovery Strategy Paper of 2003, both of which underscore the need to liberalise markets, reduce the government’s role in trade while encourage private as well as foreign investment.

Investment offers opportunities for more people to get jobs, leads to physical development of infrastructure, including social amenities like hospitals and schools, and also inspires other informal or small-scale businesses, especially that help the low-income people.
Some of the steps so far taken to promote investment include abolishing export and import licensing, rationalising and reducing import tariffs, liberalisation of foreign exchange and price controls and liberalisation of the capital markets.

The government has been working on policy and legal reforms to make the country attractive to investors. Various incentives have been provided such as the duty and VAT remission; manufacturing under bond scheme; export processing zones; and the pursuance of a flexible and realistic exchange rate that promotes exports. The export compensation scheme has since been abolished.

The most fundamental change made in improving the trading environment was the enactment and signing into law of the Investment Act in December of 2004. This has set clear guidelines for issuance of trading licences, inspection of business premises and other ground rules that are critical for trade. In particular, the new laws provide that one who applies to start investment can wait for only 21 days to get going, which is a major improvement on what used to happen in the past where it took up to six months to set shop in Kenya. Similarly, the new law provides for a one-off trading licence, instead of 18 one had to get in the past.

Since 2003, the government has been working on infrastructure rehabilitation and expansion with the under-standing that investment best thrives in the presence of efficient and good infrastructure. Also the government has been intensifying campaigns to end insecurity, which is a major threat to investments.

A number of challenges, however, remain, key among them being the relatively slow process of rehabilitating infrastructure particularly roads, which are in bad shape and make doing business quite expensive. Insecurity too has not been fully addressed while the process of legal and policy reforms have not moved as faster as anticipated.
Liberalisation, while opening up markets and allowing easy flow of goods and services, has also had the negative effect on local investment. The removal of price controls a few years ago, for instance, has led to sharp fuel prices as oil companies, which operate in a cartel-like manner, have taken to increasing prices at will without any control.

In terms of administration, trade policy implementation is carried out mainly by the Ministry of Trade and Industry and the Ministry of Finance through the Customs and Excise Department, which is under the Kenya Revenue Authority, as well as Central Bank of Kenya.

Highlights of investment in 2005
Continuing with the policies and strategies started in the past five years, in 2005 the government moved to spell out additional schemes to promote investment. The first one was to reduce the number of licences one needed to start any business. Towards this end, the Minister of Finance announced during the Budget the cancellation of some 17 trading licences erstwhile needed before any business was established. These included trade licence, stock traders licence, hides, skins and leather licence, imports and exports licence and Horticultural Crops Development Authority Order licences.

Second duty on various items like computer software, pharmaceuticals and sanitary towels were removed to reduce the cost of producing them, hence encourage investors in those sub-sectors.

Three, the Investment Promotion Centre (IPC), which was established in 1992 as a one-stop shop geared to promote investment in the country, continued playing a major role in encouraging trade. The centre processes all applications for new investments and forwards recommendations to the Ministry of Finance for approval. A General Authority license is issued within one month with prior approval from the relevant authority in charge of issuing the license.

Four, to encourage manufacturing in Kenya for world markets, the government has established an in-bond programme open to both local and foreign investors, known as Manufacturing Under Bond (MUB), which is administered by IPC and Ministry of Finance. This allows for exemption from duty and VAT on imported plant, machinery and equipment, raw material and other imported inputs; and 100 per cent investment allowance on plant machinery equipment and buildings.

Five, the Export Processing Zones (EPZ), which is co-ordinated by the Export Processing Zones Authority (EPZA), offers conducive trading opportunities for investors, including offering a 10 years tax holiday and a flat 25 per cent tax for the subsequent 10 years. Other benefits at the zone are exemption from all withholding taxes on dividends and other payments to non-residents during the first 10 years; exemption from import duties on machinery raw materials and intermediate inputs; waiver on restriction on management or technical arrangement; exemption from stamp duty; and VAT.

Six, currency exchange has been liberalised and one can now change money at various outlets in the country with ease. This has made it easier for foreign investors to do their business. In line with that import licensing has been abolished and similarly, price controls have been eliminated.

Seven, the government continued with the policy of opening up the stock market to foreign investors. The scope for foreign investment at the Nairobi Stock Exchange has been expanded by introducing incentives for capital markets growth, including setting up of tax-free Venture Capital Funds and removal of Capital Gains Tax on insurance companies’ investments. The government has also allowed beneficial ownership by foreigners in local stockbrokers and fund managers.

Eight, the government has established commercial courts to hear and determine cases related to trade and industrial disputes. The aim is to expedite arbitration of industrial disputes and ensure professionalism in handling the cases. In setting up the commercial courts, the government seeks to provide maximum legal protection to investors and inspire their confidence in the country’s judicial system. In the past, trade and industrial disputes were handled in the same courts like other cases and this was characterised by delays in determining the suits, hence frustrating businesses.

Nine, enacting the Intellectual Property Act which has provided a framework for administering and managing Intellectual Property Rights (IPR). Subsequent to that, the government has also embarked on a national sensitisation campaign to enlighten the public on industrial property rights.

Ten the enactment of the Investment Act in December 2004, which among others reduces the number of days and licences one requires to set up business in the country, has helped a great deal to spur investment.