Title:
Effect of Human Capital Development on Kenya’s Manufacturing Exports to EAC Region

Authors:
Catherine Murunga, Dr.Ruto Reuben, Dr Umulkher Ali, Dr Edwin Simiyu, Kenya

Abstract:

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 semi-skilled 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 human capital development (HCD) affected Kenya's manufactured exports to the East African Community (EAC). The specific goals was to examine the impact of human capital development on Kenya's manufacturing exports to the EAC region. The 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 Devel opment and African Development Bank for six EAC members for the period 2007–2021. Unit root test, Im-Pesaran and Shin, Levin-Li-Chu and Hadri LM 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. Hausman Test Results of fixed effect model indicated that Human development index (HDI) had a positive and significant effect on export with a (p-value 0.0300<0.05) and (β1=0.299147). 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.

DOI: https://doi.org/10.51505/IJEBMR.2023.7621