The Pursuit of Industrialization in the EAC region: The Role of Trade Facilitating Infrastructure in Promoting exports of Manufactured goods (original) (raw)
Related papers
2017
The paper estimates the impact of economic infrastructure on the exports of manufacturing products for the East African Countries, specifically, Uganda, Tanzania and Kenya. It departs from the literature that looks at infrastructure and development in general to facilitation of exports of manufactured products. An augmented gravity model is used to estimate the elasticities through which the proportion of economic infrastructure development required to generate a given proportion of exports of manufactured exports is calculated. Data used covers the period from 2001-2014 and is drawn from various sources including: COMTRADE, WEF, WDI and CEPII. Results provide evidence that that improvement in economic infrastructure generates huge gains in terms of export of manufactured exports; and there are more gains from hard infrastructure compared to soft infrastructure. Therefore the electricity, rail, road, airports infrastructure is paramount in boosting exports of manufactured products i...
Effect of Infrastructural Development on Kenya’s Manufacturing Exports to EAC Region
International journal of economics, business and management research, 2022
Manufacturing industries have played a significant role in boosting economic wellbeing in the world through accelerating and maintaining greater productivity growth, boosting employment options for semiskilled workers, and increasing country competitiveness through exports. Kenya, like many other developing nations, is working to build a strong manufacturing industry. Agriculture and services have been the primary drivers of growth in the country. Historically, the manufacturing sector's contribution to Kenya's economy has remained constant at 10% of GDP, and in 2021 it was around 8.4 percent. As a result, the country has seen an early deindustrialization, as evidenced by the manufacturing sector's contribution to GDP, which was just 8.4% in 2021 and 9.2% in 2016. Boosting manufacturing sector results remains a key priority for Kenya, as evidenced by the slew of planned interventions for the industry that have been created over the years. The government has established Vision 2030, the Kenya Industrial Transformation Programme (KITP), and, most recently, the Big 4 Agenda to modernize the industrial sector. The major goal of this research was to see how infrastructure development (ID) affected Kenya's manufactured exports to the East African Community (EAC). The specific goals were to determine the impact of infrastructure development on Kenya's manufacturing exports to the EAC region. Gravity model was used as the theoretical framework for the study, which is based on the theory of international trade and employs a correlation research design that is ideal for dynamic panel data models. Each country's data for the study variables was obtained from the United Nations Conference on Trade and Development (UNCTAD), Kenya Nation Bureau of Statistics, World Bank development and African Development Bank for six EAC members for the period 2007-2021. Unit root test, Im-Pesaran and Shin, Levin-Li-Chu tests were used in the study. The Im-Pesaran unit root test results at Levels indicated that all the variables except inflation had unit root at levels as indicated by the p-values>0.05, except inflation which had a p-value of 0.0006<0.05. However, all the variables achieved at first difference with (p-value<0.05). Hausman Test Results of fixed effect model indicated that manufacturing exports were positively and significantly determined by infrastructure development with a (P-value of 0.0000<0.05) and (β3=4.392823). The government of Kenya and other stakeholders should invest more in infrastructure and improve capital through education, training, health, and housing, according to this report, in order to increase labor productivity and boost manufacturing exports. Government supply-side policies, such as government subsidies and tax rebates, are recommended to lower production costs and attract and channel foreign direct investment (FDI) to more productive and comparative advantaged manufactured exports, thereby improving domestic producers' productive and export supply capacity, lowering inflation rates, and increasing efficiency.
Infrastructure development, institutions, and intra-regional trade: The case of East Africa
The European Journal of Applied Economics
This study empirically examines the relationship between infrastructure stock and bilateral trade flows using a panel of 11 countries in East Africa for the period 2000 to 2018. Infrastructure augmented gravity model was estimated using total bilateral exports for the countries in East Africa. Infrastructure was disaggregated into transport and information and communications technology (ICT) infrastructures. Two institutional variables, control of corruption index and regulatory quality, were incorporated in the model. By employing Poisson Pseudo Maximum Likelihood (PPML) estimator, the results confirm that both ICT and transport infrastructures and quality institutions positively impact on the volumes of total bilateral exports in East Africa. However, ICT infrastructure has a greater impact on trade flows compared to transport infrastructure. Therefore, more resources should be channelled towards increasing the stock of ICT infrastructure to propel trade and regional integration i...
East African community (EAC) regional economic Integration and its impact on trade flows
Africa is making a significant economic progress. Six out of ten fastest growing economies in the world are found in Africa. This growth phenomena allows African countries to subdue poverty and food shortages whilst lifting the standards of living and welfare of their societies. Trade liberalization and regional economic integration have had much to contribute to these efforts. This paper examines trade liberalization and regional integration in the East African Community (EAC) comprising Kenya, Uganda, Burundi, Tanzania and Rwanda between 2000 and 2012, since the inception of the earliest major free trade agreement (FTA) in the region. Using a panel data set of member countries with their top 20 trading partners, the study examined trade creation and diversion phenomena. It looked into institutional and infrastructural deficiencies by employing concepts of ‘behind the border constrains’ and explicit ‘beyond the border constrains’ using stochastic frontier model on panel data. The empirical findings indicate per capita GDP growth in EAC region enhanced export activities through economies of scale effects. The export activities from the region were not dependent on importers GDP growth, however. The result also highlighted trade creations within the region whilst trade diversions for exports to the region – consistent with Linder hypothesis. The gamma and eta coefficient from the frontier model also revealed both existence of severe deficiencies in infrastructure and institutions and slight improvements through time.
Trade Infrastructure and Export Competitiveness in the East African Community
Journal of Economics, Finance and Accounting Studies
The purpose of this paper is to examine the influence of trade infrastructure components: port infrastructure, telephone usage and electricity on the export competitiveness of firms in the East African Community (EAC). The study adopted the structural gravity model and the Poisson Pseudo Maximum Likelihood (PPML), a nonlinear estimation method that was applied in STATA on balanced panel data for the period of 2007 to 2018. Data was obtained from World Bank International Trade Centre (ITC) and World Bank development indicators. Results show that telephone usage, electricity and port infrastructure are positive and significant predictors of export competitiveness in East African Community partner states. The results of this study show that electricity usage, telephone usage and port infrastructure are important contributors to improving export competitiveness in the EAC. There is a need to examine the intricate nature of the EAC economy in order to further this study’s findings. The...
The impacts of institutional quality and infrastructure on overall and intra-Africa trade
Economics: The Open-Access, Open-Assessment E-Journal
The authors examine the impacts of quality of institutions, border and transport efficiency, physical and communication infrastructure on overall and intra-Africa trade covering 44 African countries and their 173 trade partners for the periods 2000-2014. Aggregate indicators are derived for the quality of economic institutions, border and transport efficiency, physical and communication infrastructure using principal component analysis. The findings disclose that intra-Africa and overall Africa's trade robustly determined by the quality of institutions, border and transport efficiency, physical and communication infrastructure. The estimates also indicate that the marginal effect of the quality of institutions, physical and communication infrastructure on trade flow appears to be increasing in GDP per capita. In contrast, the marginal effect of border and transport efficiency on trade decreases in GDP per capita. The authors compute the simulation of improving each indicator to the best performer in the sample. Their findings are robust to estimation method conducted to account for potential endogeneity.
Impact of the East Africa Community (Eac) Customs Union on Kenya’s Exports Volume
2016
It has been argued that trading arrangements in Africa induce potentially adverse effects on trade patterns among member states. Such regional integration schemes include the East African Community. This paper sought to assess the impact of the EAC customs union on Kenya's exports volume for the period 1999 to 2014. Econometric modeling used the augmented gravity model and the fixed effects model was used for estimation purposes. Utilizing panel data for analysis, specific conclusions and recommendations are made The study results suggests that the customs union was a key determinant of trade causing an increase in export trade implying that the continued use of the tariff liberalization scheme is likely to be beneficial for exporters. Appreciation of exchange rates and favarouble growth in Gross Domestic Product were found to positively affect exports while Population had a negative effect.
Analysis of Macroeconomic Factors Affecting the Performance of Manufactured Exports in Kenya
The International Journal of Business & Management, 2019
Background of the Study Kenya's vision 2030 aspires to achieve middle income status by 2030 of which GDP growth rate should be at 12 percent. Export sector is the engine of the GDP in any economy of the world especially manufacturing exports because it has an impact on the economic growth of a country, creation of employment and opening up of other subsectors which will assist in uplifting the economic growth of a country. Kenyan manufactured exports enjoy a strong position with regard to exports to EAC market over the last 25 years (Megha, 2013). Regional integration is the coming together of two or more states through reciprocal preferential agreements(Fondad,2005).The benefits of regional integration include the ability to foster competition, subsidiarity, access to wider markets, larger and diversified investment and production and socioeconomic and political stability for countries involved. Firms still encounters challenges which are not only perceived to be real gains or losses for firms of member countries but also increases competition among supplies of goods and services providers within the regional integration area. This is due to customer's tastes and preferences for products and services within the economic bloc. The strong commitment by member countries in the implementation of the agreed arrangements ,arbitration mechanism and equitable distribution of the gains and costs of regional integration will determine the success of integration(EAC,2010).The coming together of EAC regional integration has necessitated the need for manufacturing firms in Kenya to embrace Trade Openness, Terms of Trade, Foreign Direct Investment inflows, Real Effective Exchange Rate and Gross Domestic Product as important tools influencing manufactured exports performance. The challenges of regionalism are lower production and marketing costs, competing firms, larger markets and pressure on firms to integrate. The growing volume of trade causes increase to a country's incomes (Greenway et al, 2002). The collapse of many African countries economies since independence has been the collapse of their exports. The development of Asian tigers' economy was based on the growth of their manufacturing exports. Many African countries have not emphasized on manufactured exports as the gateway to economic prosperity.