RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q3/KEN/6
12 March 2002
(02-1255)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement
on Subsidies and Countervailing Measures
Replies to Questions Posed by Australia1, Switzerland2, the European Communities3,
Japan4 and the United States5
The following communication, dated 8 March 2002, has been received from the Permanent
Mission of Kenya.
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In accordance with paragraph 10.6 of the implementation-related issues and concerns
contained in document WT/MIN/(01)17, and with re ference to document G/SCM/39 adopted by the
Fourth Ministerial Conference, the Government of the Republic of Kenya reserved its rights to use the
procedures contained in document G/SCM/39 regard ing the transition period under Article 27.4 of the
Agreement on Subsidies and Countervailing Measures.
Kenya has three programmes that are relevant to the procedures contained in document
G/SCM/39. The programmes are as listed below:
- Export Processing Zones;
- Export Promotion Programme under Customs & Excise Regulations;
- Manufacture under Bond.
KENYA'S JUSTIFICATION
The performance of the Kenyan economy has been disappointingly poor and growth targets
have not been met.  Overall growth in real term s slowed to -0.3 per cent in 2000 compared to 1.4 per
cent in 1999, 1.8 per cent in 1998 and 2.3 per cent in 1997.
This is significantly below the original growth target of 2.3 per cent.Manufacturing is the second most important sector in its contribution to national income.  The
manufacturing sector contributes about 13.2 per cent of GDP.  It recorded 1 per cent growth in 1999,
                                                     
1 G/SCM/Q3/KEN/1
2 G/SCM/Q3/KEN/2
3 G/SCM/Q3/KEN/3
4 G/SCM/Q3/KEN/4
5 G/SCM/Q3/KEN/5G/SCM/Q3/KEN/6
Page 2
but declined to -1.5 per cent in 2000.  It has continued to perform poorly as a result of intense foreign
competition among other factors.
The income per capita of Kenya has decreased from US $350 in 1980 to US $280 in 1999 in
nominal terms, a decline of nearly 20 per cent over a period of 20 years. The economy has notgenerated adequate jobs to match the number of Kenyans seeking employment, which has resulted in
rising levels of poverty. Nearly 56 per cent of the population or 15 million people now live below the
poverty line, compared to 45 per cent in the mid 1990s and 30 per cent in the early 1970s.
In terms of volume of trade, Kenya’s share of world merchandise export trade has not been
very impressive. According to appendix 3 of the WTO’s calculations contained in document
G/SCM/38 Kenya’s share in world export trade between 1998-2000 was 0.03 per cent. This figure iswithin the eligibility criteria for extension of subsidies programmes.
Export Processing Zones (EPZ), Manufacture Under Bond (MUB) and Export Promotion
Programme attract labour intensive firms in Kenya to produce for the export market, thereby creating
employment in addition to earning foreign exchange for the country.  If incentives to support them
decline or are withdrawn, such firms may be relo cated to other countries, resulting in further
unemployment, thereby exacerbating poverty.
SUMMARY
The challenge ahead is to raise the level of Gross Private Investment to at least 25 per cent of
GDP.  Deliberate effort must therefore be made to stimulate domestic savings as a means of
encouraging investments.  This has necessitate d the Government to spurt targeted foreign
investments, which has the potential of facilitating  technological transfer, which will stimulate local
investments and hence economic growth.  To this end Kenya would endeavour to maintain the exportprogrammes that it currently operates.
RESPONSES TO QUESTIONS POSED BY THE EU
With reference to the six questions posed by the European Communities concerning the
request made by Kenya pursuant to Article 27.4 of the Agreement on Subsidies and CountervailingMeasures, Kenya wishes to respond as follows:
Q1. Please indicate when the pr ogrammes came into operation.
Reply
Manufacturing Under Bond (MUBs) came into operation in 16 July 1988 with sole objective
of employment creation through development of expo rt oriented industries.  The Export Processing
Zones programme was established under Chapter 517 of the Laws of Kenya on
23 November 1990.and the Export Promotion Programme was started in 1990.
Q2. Please indicate whether the programmes pr ovided for other forms of subsidies other
than the exemptions of import duties.
Reply
The programmes exempts duties and internal taxes on imported inputs used for the production
of exports only.G/SCM/Q3/KEN/6
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Q3. Does the Programme provide for a condition for use of local domestic goods?
Reply
No.  No specific condition on use of domestic goods on all the three projects.  Use of local
supplies is encouraged but not mandatory.
Q4. Please indicate the rate of import duty or internal tax exemption as of
1 September 2001.
Reply
The programme waives all import duties.  It is therefore zero-rated.
Q5. Please describe any changes to the programme since 1 September 2001, if any.  In
particular, indicate any changes to the rate of exemption or the coverage of the programmes e.g.
in terms of products, location etc.
Reply
Two additional locations one in Mombasa (Mombasa/block/I/394) and one in Nairobi
(LR.209/7698) have been designated as Export Processing Zones since 1 September 2001.
Q6. Please indicate for each programme how many companies have benefited from the
respective programme as of 1 September 2001.
Reply
Nearly 600 firms have benefited from the respective programmes as of 1 September 2001.
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