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Viewing cable 06NAIROBI1048, NAIROBI INPUT FOR 2006 PRESIDENT'S REPORT ON AGOA

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Reference ID Created Released Classification Origin
06NAIROBI1048 2006-03-08 08:23 2011-08-25 00:00 UNCLASSIFIED Embassy Nairobi
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 NAIROBI 001048 
 
SIPDIS 
 
DEPT FOR AF/E, AF/EPS, AF/PD 
USAID FOR AFR/EA 
 
E.O. 12958:  N/A 
TAGS: ETRD ECON EAID PREL KE
SUBJECT:  NAIROBI INPUT FOR 2006 PRESIDENT'S REPORT ON AGOA 
 
REF:  STATE 26707 
 
1.  In response to reftel, please find at para 2 Post's 
input for the President's report to Congress on Kenya's 
political and economic climate as it relates to AGOA 
eligibility.  This text has also been sent by e-mail to 
AF/EPS and AF/E.  In addition, please note that this 
mission, through USAID-Kenya, and USAID's Regional Economic 
Development Services Office (REDSO) fund programs designed 
to facilitate the expansion and diversity of AGOA exports 
from Kenya.  Information on these programs was also 
included in the e-mail to AF. 
 
2.  Begin Text of Post's Draft: 
Status: AGOA eligible, including for textile and apparel 
benefits. 
 
AGOA Trade and Investment: [Trade figures to be updated by 
USTR.]  Kenya's 2003 exports under AGOA and its GSP 
provisions, mostly apparel, were valued at $184 million, 
representing 74 percent of total Kenyan exports to the 
United States. The government reports that AGOA-related 
employment was over 37,000 by 2003 but this had declined to 
32,000 in 2004.  There are credible reports of textile 
factories shutting down and additional lay-offs as a result 
of the January 1, 2005 end of global quotas for most 
textile trade. 
 
Market Economy/Economic Reform/Elimination of Barriers to 
U.S. Trade:  The government has made limited progress on 
economic and market reform.  Despite a bloated public 
sector, Kenya has a fairly diversified economy for domestic 
production and services.  Kenya's major foreign currency 
earners are tea, horticulture, and tourism. A new 
Privatization Act entered into force in November 2005 to 
accelerate the long-delayed privatization of state-owned 
enterprises.  The Kenyan government is expected to publish 
a comprehensive list of firms to be privatized in the 
coming years.  The state owned railways will be 
concessioned in 2006, and two significant parastals - 
Telekom Kenya, the monopoly fixed-line telephone company, 
and the Kenya Power and Light Company, the monopoly power 
distribution firm, will likely take steps towards partial 
privatization, as well.   The East African Community's 
Customs Union began enforcing common external tariffs on 
January 1, 2005, and has begun efforts to harmonize some 
business and industry regulations, including those covering 
civil aviation.  Kenya does not participate in the HIPC 
program, and despite official appeals for relief, the 
country's external debt is manageable.  U.S. investment in 
Kenya is modest, but includes the manufacture of consumer 
goods, automobile assembly, and processed agriculture 
items, as well as participation in the tourism sector.  The 
enforcement of intellectual property rights (IPR) remains 
weak, but the government is working to amend existing laws 
and to empower police and other law enforcement agencies to 
better protect IPR.  In 2005, the Kenya Bureau of Standards 
contracted with two private companies to institute a new 
Pre-shipment Inspection regime.  Following the introduction 
of the program some importers have complained that the GOK 
continues to charge Import Documentation Form fees in 
addition to fees paid directly to the two contract 
companies, viewing this as a form of "double taxation." 
 
Political Pluralism/Rule of Law/Anti-Corruption:  In 
December 2002, Kenya held presidential and parliamentary 
elections that the international community judged free and 
fair.  A new coalition government, headed by now-President 
Mwai Kibaki was formed.  National elections, in which some 
70 political parties are expected to present candidates for 
local and national offices, are next scheduled for December 
2007.  The official opposition is active and can influence 
policy debates.  In November 2005, Kenyans rejected a 
proposed new constitution, which was supported by President 
Kibaki.  Kenya is making some progress toward improving the 
rule of law.  The Judiciary is mostly free from executive 
branch influence.  Corruption remains a significant problem 
in Kenya.  In January 2006, a former Permanent Secretary in 
charge of Governance and Ethics released documents 
detailing corruption and cover up at the highest echelons 
of the Kibaki administration.  As a result, three 
implicated ministers resigned in February.  A 2005 
Transparency International Kenya survey found that, while 
incidents of petty bribery were on the decline, large-scale 
graft was on the increase.  The Kenya Anti-Corruption 
Commission has begun to take investigatory action against 
senior government officials who fail to accurately account 
for their assets.  In November 2005 the Public Procurement 
and Disposal Act became law.  It is designed to close 
loopholes for graft in the government procurement of goods 
and services, one of the most widely exploited avenues for 
large scale corruption throughout Kenya's history.  Much 
needed and long-delayed anti-money laundering legislation 
could be presented to Parliament in 2006. 
 
Poverty Alleviation:  Kenya remains a very poor country, 
with 56% of the population living on a dollar a day or 
less.  The government has a mixed record of implementing 
its pro-poor Economic Recovery Strategy, which was designed 
jointly with the World Bank and IMF in 2003. The 
introduction of universal, free public primary education in 
January 2003 remains one of the government's most notable 
achievements, but primary education remains seriously under 
funded and secondary education is beyond the means of many 
Kenyan families.  Kenyans in a number of regions will face 
the continuation of a serious, three-year drought, which 
will reduce real incomes and erase meager assets for 
millions of Kenya's poor.  In 2005 Kenya's civil service 
received pay raises, but the income disparity between low 
income and middle to upper income earners is wide and 
increasing. 
 
Labor/ Child Labor/ Human Rights:  Kenya's overall human 
rights record remains mixed.  Freedom of expression and 
political participation continues to expand, and 
politically-motivated violence has diminished in recent 
years.  However, trafficking in persons, child labor, and 
sex tourism remain problematic.  Though prison conditions 
have improved over the last two years, they remain harsh 
and life-threatening.  Police continued arbitrarily to 
arrest and detain persons; however, unlike in previous 
years, there were no reports that security forces arrested 
political activists.  The government has arrested and 
prosecuted a number of police officers for abuses; however, 
most police who committed abuses were neither investigated 
nor punished.  Lengthy pretrial detention is a problem.  In 
2005, violence marred some political campaigns and on a few 
occasions, the government restricted freedom of speech, 
press, assembly, and association.  Police disrupted public 
meetings and forcibly dispersed demonstrators and 
protesters.  Violence and discrimination against women and 
abuse of children remain serious problems.  The government 
has not moved forward revisions to the labor law, as 
expected since 2003.  However, some steps have been made in 
the past year to improve the sometimes-poor working 
conditions in the Export Processing Zones (EPZs).  Kenya 
has ratified ILO conventions 29 on forced labor, 105 on 
prohibitions on forced or compulsory labor, and 182 on the 
worst forms of child labor.  Kenya has not ratified the ILO 
convention No. 87 on freedom of association and protection 
of the rights to organize nor convention No. 98 on the 
right to organize and collective bargaining.  Cases of 
forced labor have also been documented. Child labor is a 
problem in the informal sector, including child 
prostitution. International Labor 
Organization/International Program on the Elimination of 
Child Labor (ILO/IPEC)  programs have been launched to 
address the child labor problem in several specific 
economic sectors.  Child employment is prohibited by Kenyan 
law, but enforcement is not vigorous, and children continue 
to be employed in informal sector and as domestic workers. 
All children are required to attend primary school (grades 
1-8). 
 
End Text. 
 
BELLAMY