NAIROBI, Kenya, Jan 4 – The World Bank has urged Kenya to remove restrictive market regulations that have dampened growth in the country.
In a new report dubbed Unlocking Growth Potential in Kenya: Dismantling Regulatory Obstacles to Competition, the World Bank says regulations that restrict competition are more prevalent in Kenya than in other middle-income countries.
It says that the regulations that restrict healthy competition and distort markets and business decisions have been having a negative effect on the country’s competitiveness and growth.
“Kenya’s business environment has as a result been weakening and limited the private sector’s ability to grow, create jobs and contribute to economic development,” World Bank notes.
Some of the sectors the report highlights are in the sugar and tea sectors that have unreasonably high trade barriers, such as excessive import duties and non-tariff barriers (NTBs), and restrictive domestic regulations.
“Fines are currently capped at Sh10 million for restrictive trade practices, particularly horizontal agreements, regardless of the size of the firm involved or the nature of the offence. A common international practice is to the set the maximum fine at 10 per cent of the turnover of the firm involved,” the report notes.
The report also recommends moves such as opening markets and removing anti-competitive regulations and effectively enforcing competition law.
“Opening up the markets to private investment and rationalising regulation will improve market performance and attract investments in industrial crops. For example, in the case of pyrethrum, a dramatic decline in production has been linked to regulatory issues that eliminated entry into the industry,” the report notes.
The report calls for the strengthening of the competition Authority to foster competitive markets in Kenya and contribute to achieving Vision 2030.
“Regulatory obstacles to competition include inappropriate rules and regulations that alter entry conditions in a market, create discriminatory conditions among players, limit businesses’ strategy options, and impede consumer choice. Ideally, the principle guiding the regulatory setup would be selecting the instrument that would cause the least distortive effect on competition in the market and one that would create incentives for firms to deliver the best deals for consumers,” says the report.
The World Bank however acknowledges that Kenya has indeed made significant progress in strengthening its competition enforcement framework to enable the CAK to promote competition and to protect consumers from anticompetitive market conduct and potentially harmful mergers.
Despite these advancements, the bank says that there remain areas which should be addressed in order to improve competition enforcement.