Delay in AGOA-rule extension effects Kenyan garment sector

29 May '13

2 min read

The delay in the extension of third country fabric provision under the African Growth and Opportunity Act (AGOA), which was due to expire in September last year, has led to contraction of direct employment in Kenyan garment sector, says ‘Economic Survey 2013’ released by the Ministry of Devolution and Planning.

The survey notes that capital investment in Kenya’s textile and apparel sector too decreased for the second consecutive year, last year.

As doubts regarding extension of the third country fabric rule kept the risk-wary investors away from accepting long-term financial commitments in the Kenyan clothing sector, it deprived the sector of Sh 647 million of capital investments during last year.

AGOA’s third country fabric rule, which authorise countries like Kenya to export items prepared from imported raw material to the US either duty-free, quota-free or on preferential basis, was due for expiry on September 30, 2012.

Following reservations, capital investments in the Kenyan clothing sector contracted by 9.4 percent to Sh 6.2 billion, as compared to Sh 6.9 billion in 2011, the survey said.

The strength of workers at garment and apparel units of the Export Processing Zones (EPZ) also reduced by 5.4 percent from 25,169 workers in 2011 to 23,811 in 2012, Business Daily reported quoting the survey.

For countries like Kenya, which do not produce raw materials in adequate quantities, required for boosting exports of final products, the loss of AGOA third-country provision would have resulted in downfall of the garment sector, which generated export revenues worth Sh 23.3 billion last year.

The US Congress gave its nod for extension of the provision till September 2015 on August 2, 2012, bringing a sigh of relief to the Kenyan garment sector.

Fibre2fashion News Desk - India

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