Embassy of Kenya, Washington, DC

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Nairobi

City March 26, 2008:

Kenya

has improved its ranking as an investment destination, signalling that recent efforts to simplify regulation for registration and protection of investor property is beginning to bear fruit.

The World Bank’s 2008 index for Ease of Doing Business indicates that the country has moved 10 positions from last year’s listing to number 72 out of the 178 countries surveyed for the report.

This ranking reflects investors’ perception of Kenya’s ability to provide an environment conducive to the survival of foreign capital. The report was however prepared before the post-election conflict early this year.

With the warring parties having signed a peace deal with the help of former UN secretary general Kofi Annan this ranking should reflect the true picture on the ground as the conflict does not appear to have affected the country’s legal and regulatory environment.

The Ease of Doing Business Index prepared by the World Bank and the International Finance Corporation indicates that Singapore is the best country to do business in while DR Congo is the worst.

Higher rankings indicate better, usually simpler, regulations for businesses and stronger protections of property rights.

Empirical research funded by the World Bank has shown that improvement of the regulatory environment has a positive impact on economic growth.

The index is based on the study of laws and regulations, with the input and verification by government officials, lawyers, business consultants, accountants and other professionals who routinely advise on or administer legal and regulatory requirements.

The World Bank which also reviews various processes for paying taxes and moving trade across the borders says that Kenyan businesses are performing poorly on payment of taxes while trading across borders.

On this front Kenya ranked number 154 out of 178 countries compared to number 156 in the 2007 index.

The Kenya Association of Manufacturers has urged the Kenya Revenue Authority, the agency responsible of collecting taxes, to expedite its reforms including training of personnel to make the process more efficient in critical trade points.

The report however says starting a business in Kenya remains difficult, citing bureaucratic red tape and the duration it takes to have a business fully registered. The World Bank says

Kenya

has made significant gains in eliminating the multiple licensing regimes such as those administered by the various town or city council and the central government.

With the support of a World Bank backed business regulatory reform unit the Government has identified 1,325 business licenses applicable to businesses.
The study recommends that 424 licences be eliminated, while 607 should be simplified. If fully implemented about 200 licenses will be retained.

The World Bank says businesses in Kenya spent a total of more than Sh5 billion in securing the mandatory licences.

So far, the central government and the local authorities have eliminated 110 licences and simplified eight others under a reform programme that is being executed with the assistance of the World Bank and the Japanese government.

The Licensing Laws (Repeals and Amendments) Bill aimed at amending the country’s licensing laws to allow for the scraping of some licenses which have been identified as a hindrance to doing business in Kenya lapsed with the 9th Parliament.

Once the licensing Laws are amended by Parliament, it will pave the way for the elimination of licences that hampered the growth of sub sectors like film, scrap metal, industrial alcohol licenses among others.

In a bid to make Kenya a 24-hour business centre, the Licensing Laws Bill proposed to do away with permits that had put a limit on the number of hours business people could conduct business.

The index established that Kenyan authorities are slow in registering property, meaning that multinationals and international investors would find it difficult to buy and register property in their names.

The index is meant to measure regulations directly affecting businesses and does not directly measure more general conditions such as a nation’s proximity to large markets, quality of infrastructure, inflation or crime.

To rank a nation, the World Bank considered several sub-indices including: Starting a business, dealing with licences, hiring and firing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business.