A Study On The Performance Of Export Processing Zones In Kenya

Export Processing Zones(EPZs)are potential valuable economic tools that help countries overcome some existing impediments to attracting investment and increasing exports.Many developing countries including Kenya have established zones in an attempt to address the challenge of industrialization and foster an export-oriented manufacturing sector.The initiative to promote exports was on the principle that increased exports would,in turn,enhance overall economic growth.However,the EPZ program in Kenya has not had much success in achieving the objectives for which it was intended.It is on this concern that this study set out to empirically investigate what explains this underperformance by analyzing the factors that affect the performance of EPZs in terms of export growth in Kenya.Performance in this study was measured by EPZs export share in total national exports.This study adopted a descriptive and explanatory research design.A regression model was applied for the analysis of time series data from 1993 to 2017 for EPZs in Kenya.This paper is organized into six chapters.Chapter one is the introduction.Chapter two gives a brief overview of EPZs Kenya,zones in operation,their sectorial distribution,market destinations,and policy on incentives.Chapter three is an analysis of EPZs performance in Kenya in terms of exports,investments,employment,and output.Chapter Four is the empirical analysis of the factors that affect EPZs performance,model specification,data analysis and discussion of empirical findings.Chapter five covers EPZs/SEZs experiences from successful countries and lessons to be learned.Lastly,the conclusion and recommended ways to improve the performance of EPZs in Kenya in chapter six.The empirical results showed that infrastructure,productivity,and institutional stability are the major factors affecting EPZs performance in Kenya.Their effects are positive and statistically significant.However,Value addition,exchange rate,and governance factors have affected the performance negatively.The study recommends more emphasis be directed toward improving internal capacity within the zones and overall investment climate in the country to attract investors and increase exports.Policies that are in place relating to the industry need to be re-examined in order to bring them in line with the nation's current economic realities.