Academic journal article Journal of Emerging Trends in Economics and Management Sciences

The Kenyan Textile Industry in a Liberalized Economy: An Analysis of Performance and Challenges

Academic journal article Journal of Emerging Trends in Economics and Management Sciences

The Kenyan Textile Industry in a Liberalized Economy: An Analysis of Performance and Challenges

Article excerpt

Abstract

With the Kenyan textile industry being one of the most important contributors to industrial development, liberalization of the country's economy in the early 90's resulted in great competition from imported clothing leading to closure of some textile industries. Firms that had been exporting under the African Growth and Opportunity Act (AGOA) were threatened by increased volume in exports from Asia. Though rated 3rd after Madagascar and Lesotho, with 20.7% of total African apparel exports to the US; Kenya's textile industry's development was hampered by manpower underdevelopment, high cost of production, competition both in the local and international markets, consumer preference for imported textiles and corruption. The purpose of this study was to address these crucial issues that hinder the Kenyan industry from flourishing globally. Using both primary and secondary data, this study analyses the performance of the local textile industry in a liberalized economy; focusing on an overview of the industry before and after liberalization, the industry under AGOA and challenges resulting from liberalization. Significantly, government support through reduction of operation costs and review of training courses in relevant institutions to meet industry needs and increase human development and training are important in increasing the industry's performance

Keywords: Kenyan textile industry, liberalized economy, performance, challenges, prospects

INTRODUCTION

The Kenyan textile and clothing industry began during the colonial period (Kinyanjui, Lugulu, McCormic, 2004). By 1945, there were seventy four (74) such establishments. At independence, the government inherited well-established clothing and textile industrial sector which expanded under the Import Substitution Scheme (ISS) whereby imported clothing and fabrics were taxed heavily to enable the local industry flourish (Goughlin and Ikiara, 1991). Most of the textile mills were owned by private investors, majority being Kenyans of Asian origin because the technical expertise came from India. The industry grew rapidly after independence between 1976-83 and fibers such as cotton, wool and sisal were locally available but synthetic fibers (nylon, polyester, acrylics) jute and linen were imported as well as dyes, chemicals, and resins (African Development & Economic Consultants Limited [ADEC], 1998). The government invested heavily in firms such as Kisumu Cotton Mills (KICOMI), Rift Valley Textiles (RIVATEX), Kenya Textile Mills (in Thika) and Mountex (in Nanyuki). Private firms such as Raymonds, Yuken, United Textile Mills, Sunflag, Thika clothing Millers, Spinners also evolved and thrived under the ISS era. Production stagnated from mid 80's and fell sharply after liberalization in the early 90's (Kinyanjui et al., 2004). In 1984, there was change of policy from ISS to Export led industrialization as contained in national development plan of 1984-88. Export promotion was encouraged and schemes such as Manufacturing Under Bond (MUB), Export Processing Zones (EPZ's) and Export Compensation Schemes were formed and markets were liberalized by abolition of quantities restrictions and lowering of tariffs to facilitate exportation of their products.

Liberalization of the Kenyan Economy in 1993 meant great competition from imported clothing (CBS, 1995). There was increased importation of textiles especially secondhand, "mitumbaNyang'or (1994) points out that these clothes were preferred to locally manufactured ones because of their high quality and low prices. Low sales and financial difficulties experienced by the local producers led to closure of textile firms such as KICOMI, Allied Industries Limited and Heritage Woolen Mills.

While MUB was started in 1987 to allow duty-free imports of machinery and raw materials, the condition remained that all products were to be exported. If a MUB firm wanted to sell the products locally, it could do so after paying duties and Value Added tax (VAT). …

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