Title:
EFFECTS OF INFRASTRUCTURE DEVELOPMENT ON KENYA'S MANUFACTURING EXPORTS TO COMESA REGION

Authors:
Dr. Rutto Reuben, Kenya

Abstract:

Kenya's manufacturing value added as a percentage of GDP (Gross domestic product) continues to decline over years for example from 12% in 2008 to 9.2% in 2016, this could be attributed to heavy reliance on agricultural exports. Manufacturing sector could be improved by enhancing manufacturing exports to regional trade blocs; such as COMESA (Common Markets for Eastern and Southern Africa). Kenya is an active participant in regional trade and the main exporter to COMESA. Many studies have been conducted to establish the determinants of general exports in relation to population, GDP and exchange rates. However, the studies fell short of considering the importance infrastructure development (ID). The purpose of this study was to explain the effects of infrastructure development (ID) on Kenya's manufactured exports to COMESA region. Gravity model anchored on the theory of international trade was used and adopted a correlational research design. Panel data was sourced from World bank and African Development Bank for eighteen COMESA members for the period 2005–2016. Unit root tests were estimated using Im-Pesaran and Shin, and Levin-Li-Chu tests. Hausman Test was used to choose between fixed and random effect models. Results of fixed effect model indicated that manufactured exports were positively and significantly (β3 = 0.4989) determined by infrastructure development with (p–value 0.0010 < 0.05). This study recommends that Government of Kenya and other stakeholders should invest more in infrastructure and create good investment climate by providing subsidies to exporters in order to foster Kenya's manufacturing exports.