365 Binära Options

OPEN TRADING ACCOUNT OPEN DEMO ACCOUNT Binär Alternativ Förklarad Handel för varje person Med binär optionshandel kan både nybörjare och erfarna investerare göra betydande avkastningar från börsen. Denna form av investering växer i popularitet idag, eftersom människor från hela världen njuter av de fördelar binär optionshandel har att erbjuda. Trading Binär Options, det låter som en komplicerad produkt, men det är en av de enklaste finansiella produkterna för tillfället. Speciellt för nybörjare är det en bra produkt att lära känna handel med finansiella instrument. Grundtanken bakom Binär Options trading är tyst enkel, en förutsägelse görs om priset på en underliggande tillgång (t. ex. lager, råvara, index, valuta) kommer att sluta över eller under 8220Strike Price8221 (Det pris som en underliggande tillgång innehar den tid man börjar handel), när handeln löper ut. Som namnet Binary antyder finns det bara två möjliga resultat, en förutsägelse är korrekt eller felaktig. Vid handel väljer du att placera antingen en 8220Call Option8221 eller 8220Put Alternativ 8211 Ett samtalalternativ förutsäger att en underliggande tillgång kommer att löpa över aktiekursen och ett Put-alternativ förutsäger att det löper ut nedan. Med binära alternativ är avkastningsräntan på en investering fastställd. Om en handel löper ut en dollar eller tvåhundra dollar över eller under Strike Price (beroende på den valda riktningen) kommer utbetalningen att vara densamma, den är inte proportionell mot det pris som alternativet löper ut. Typ av alternativ Traded Ett alternativ kan baseras på vilken typ av tillgång som handlas på marknaden, inklusive index (som Dow Jones), valutapar (ex: Euro vs Dollar), terminer (som FTSE100-futures) och råvaror (såsom silver och olja). Är binär handel spelande I världen av finans och handel är det alltid en risk som kommer med varje investering. En dålig investering är inte belönad, men bra investeringar är. Betyder det nödvändigtvis att binär handel faktiskt är en form av spel nr, det viktigaste som gör binär handel att sticka ut från vanliga spel är den mängd skicklighet som är inblandad. Mycket få spelaktiviteter kan vara så beroende av skicklighet som binär handel. För att lyckas med binär handel och tjäna pengar du drömmer om, måste du lägga in arbetet, och det är också en av anledningarna till varför binär handel inte kan passera som en form av spelande. Så, för att dra slutsatsen, binär alternativ handel är definitivt inte en form av spel. Visst är risken att förlora pengar involverat precis som i kasinospel, men den kompetensnivå som handlarna kan använda till deras fördel gör det enkelt till ett instrument som belönar bra handlare. 365TRADING VILLKOR VILLKOR FÖRBÄTTRINGAR HÖG RISIKO INVESTERING VARNING: 365trading drivs av Fidelisco Capital Markets Ltd, ett finansiellt företag som är auktoriserat och reglerat av Cyperns värdepappersbörs (CySEC) under licensnummer. 18112 och ligger vid Stassinos Building, 2: a våningen, Ayias Elenis 2, 1060, Nicosia, Cypern. Handel Binära optioner kan medföra en hög risknivå och kan resultera i förlust av allt investerat kapital. Därför kan det inte vara lämpligt för alla investerare. Du bör inte riskera mer än du är beredd att förlora. Innan du bestämmer dig för handel, var god och se till att du förstår riskerna och ta hänsyn till din erfarenhetsnivå. Sök efter oberoende råd, om det behövs. Observera 365trading marknadsför inte aktivt sina produkter i följande länder. Argentina, Amerika, Brasilien, Kanada, Belgien. Läs vår fullständiga Risk Disclosure Statement. OPEN TRADING ACCOUNT OPEN DEMO ACCOUNT START TRADING BINARY OPTIONS MED 365TRADING 365Trading är inriktat på ett primärt mål: att erbjuda traderna möjlighet att tryggt och tillförlitligt tjäna genom att investera i olika tillgångar. Binär optionshandel på 365Trading passar både den erfarna investeraren och nybörjaren. MINIMUMSUTSÄTTNING ENDAST 100 eller 100 eller 100 OPEN TRADING ACCOUNT PRIVACY OCH SÄKERHET 365Trading ser sin kunds säkerhet som den största vitaliteten i våra webbplatser integritet och lovar våra handlare. Vi har en rad säkerhetsåtgärder för att säkerställa att användningen av vår plattform är optimalt säker och uppdaterar webbplatsen kontinuerligt för att skydda alla våra handlares ekonomiska och personliga säkerhet. LÄS VÅR HANDELARE ANVÄNDARVÄNNER VÄNLIGT I motsats till andra plattformar erbjuder 365Trading möjlighet att handla binära alternativ online men det är också utvecklaren av plattformen. Jämfört med andra webbplatser som köper standardiserade plattformar är vi stolta över våra utvecklingsinitiativ och fortsätter investera för större förbättringar. LÄR EXAKTIVT HUR ENKEL ÖPPEN HANDELSKONTO LÄS OSS HANDELSRESKRIFTER LÄR NÅGON HUR MYCKET Se våra videoklipp Se våra e-böcker 365TRADVILLKOR VILLKOR PROMOTIONS365 Binary Option Review Oproserv Limited, 2 Old Brompton Road, South Kensington, London SW7 3DQ, Storbritannien, Tel. Storbritannien: 44 20 3670 1522, Australien: 61 2 8880 7640, Irland: 353 1 437 3238, Kanada: 1 438 808 0155, Sydafrika: 27 21 300 8740, Singapore: 65 3159 0662 Email: support365BinaryOption Live chat, webbformulär 365 Binär Options Platform 365 Binär Options Platform för handel är mycket enkel att använda, rik på en mängd olika funktioner och funktioner. Med denna plattform kan du hantera alla dina affärer, samt kommunicera med en personlig finansiell rådgivare som hjälper dig att lösa alla problem. Plattformen är helt säker, alla dina data är skyddade. Handelsalternativ på det är som standard ndash High and Low, som alternativ som One Touch, Gräns ​​och Long and Short Term, High Yield. Förfallodagar varierar från minuter till en dag eller mer. 365 Binär Alternativhandel presenterar olika tillgångar: aktier som Google, Dell, Amazon-varor som olja, guld, kaffe samt valutapar och index, vilken fullständig lista du hittar på Broker39s tillgångsindex. Mäklaren kompletterar ständigt det39: s lista över tillgångar som är tillgängliga för handel. Även den ekonomiska kalendern är integrerad i 365 binär options-plattform. Detta hjälper inte bara till att hålla sig uppdaterad med kommande ekonomiska händelser men eliminerar också behovet av att öppna ytterligare applikationer och webbläsarfönster som påverkar terminalens kapacitet negativt. 365binaryoption Review - Instrument Fortsätter denna 365 binära alternativrecension. Vi skulle vilja lista alla handelsinstrument som du kan handla på brokers39s plattform. Hög och låg. Denna typ representerar ett klassiskt digitalt alternativ. Dess utmärkande funktion gör att du kan göra affärer inom 5 minuter upp till flera dagar. Detta skapar det optimala förhållandet mellan riskerna för lönsamheten i branschen. Procentandelen av utbetalningarna når 85. One Touch. I detta alternativ är gränsen ett översta pris, eller under det. I det här fallet, för att göra en vinst, behöver du priset för att röra linjen fram till tiden för utgången. Det har ganska svåra förhållanden, och ledande mäklare erbjuder lönsamheten för sådana affärer större än att handla klassiskt alternativ. Boundary. Särskilden hos ett sådant alternativ är att mäklaren ställer in övre och nedre gränsen, men näringsidkaren måste göra en förutsägelse om priset kommer att ligga inom gränserna eller utsidan. Denna typ av alternativ ger utbetalningar högre än vanligt. Kortsiktigt. Sådana alternativ används oftast av handlare eftersom de får tjäna upp till 70 på några sekunder (minuter). Men i stort sett är det här alternativet i stort sett detsamma som HighLow. 365 Binär Option-handel stöder sådana kortfristiga affärer som 60 sekunder, 2 och 5 minuter. När du väljer gränser eller snabbvalstyper av alternativ finns det också höga avkastningsalternativ, vilket betyder att den höga vinsttypen av valt alternativ är. 365binaryoption Review - Bonuser För närvarande är alla nya kunder tillgängliga för att få en bonus på deras insättning. Men villkoret att få det är att göra en initial insättning på minst 300. Vi vill också nämna i den här 365 Binär Options-översynen att du bör komma ihåg om mäklarens bonuspolicy, enligt vilken du måste göra 40 gånger handelsvolymen av detta bonus för att få möjlighet att dra tillbaka det. Bonusvolymen beror på storleken på din insättning. 365 Binär Option Trading Registreringsformuläret är snabbt och enkelt. När itrsquos är klar kan du snabbt sätta in pengar med dina CreditDebit-kort, banköverföring eller elektronisk betalning. 365 Binär Alternativ handel första insättning är 200. Men du bör komma ihåg att banköverföring kräver 500 insättning. Minsta handelsbeloppet för ett vanligt alternativ är 10. Det är värt att nämna i vår 365 Binär Alternativ recension att återkallandet är tillräckligt snabbt (mäklaren kommer att behandla ditt uttag inom 3-5 dagar), utan några avgifter eller avgifter per månad. Ytterligare uttag debiteras 25. Det finns också olika typer av konton: Mini, Silver, Guld och Platinum. Varje kontotyp kräver en viss mängd insättning och ger ytterligare funktioner och fördelar. Let39s listar dem i den här 365binaryoption recensionen. Mini-konto. Du kommer att få en tjugo minuters session med en äldre mäklare en gång i veckan, en förmåga att handla alla verktyg och tillgångar och introduktionslektioner om binär handel. Silver konto. Förutom fördelarna med det tidigare kontot kan du få mer avancerade lektioner och en extra avkastning på var och en av dina handelar i procentandel 2 och 2 gånger per vecka. Guld - och Platinum-konton ger ännu mer högnivålektioner, samt ytterligare avkastning på 3 respektive 4. Platinumägare har också möjlighet att en riskfri handel (upp till 1 000) en gång i månaden. 365 Binär Alternativ Scam Finishing vår 365 Binär Option recension. vi kan tillägga att det är ett betrodat namn inom den digitala handeln. Det verkar som om det inte finns något 365 binärt alternativ scam. men bara ett väletablerat varumärke som ger kunderna en professionell handelskunskap. Plattformen är väldigt användarvänlig och ger en mängd olika avancerade verktyg. Denna mäklare rekommenderas även för erfarna handlare och nybörjare. Och en viktig anteckning är också att det inte finns några 365 binära alternativ svindelklagomål på webben. Om du är nybörjare eller erfaren trader och du vill komma in på en plattform som ger dig lika handelsrättigheter, höga utbetalningar, snabba uttag och transparent prissättning, levererar 365 Binary Option krav från de flesta handlare. En negativ punkt är att det inte regleras, och som ni vet tenderar folk att inte lita på oreglerade leverantörer. Men det betyder inte att det är 365 binärt alternativ scam. BÄSTA HÄNDRA BINÄRA OPTIONS

Forex Investeringar Företag I Kenya

Östafrikanska Forex Signal Skolan av Forex Foreign Exchange (Forex) nykomlingar är ofta nedsänkt i en stor mängd information och utländsk terminologi som kan lämna dem överväldigade, trött, desperat och avskräckt. Men vi vänliga själar på EastAfricanForex är här för att se till att detta inte händer. Vi ger dig en sammanfattning av de grundläggande begreppen, teknisk analys och sentimentell analys av FOREX-industrin och lägger grunden till att allt du behöver göra är att läsa och förbereda din Forex Time att börja. FOREX Basics Att komma in i Forex World för första gången kan vara förvirrande. Nya koncept, nya teorier, nya ord det kan lämna en något förvirrad. Var här för att berätta en historia en historia som visar att branschens grundprinciper faktiskt inte är så komplicerade att förstå. Detta är historien om en handlareupplevelse Att välja den bästa FOREX-mäklaren Det första och viktigaste steget som en näringsidkare behöver ta är att hitta en valutahandel som de kan lita på. I denna bransch är mäklare en integrerad del av handelsekvationen och de är en handelspartners främsta affärspartner, så ett handelsmål bör vara att hitta den bästa valutamarknaden som finns tillgänglig. Att välja en lämplig och pålitlig mäklare är avgörande, liksom att välja en som uppfyller dina individuella behov som näringsidkare. För att kunna fatta ett välgrundat beslut finns det några viktiga faktorer som varje näringsidkare bör ta hänsyn till. Vad är Forex Trading Historien om Forex Trading Innan vi börjar förklara vad forex trading är, vill vi ge dig några korta historiska sammanhang. Valutamarknaden kom i huvudsak till liv 1875, med födelsen av Gold Standard Monetary System. Detta var ett system genom vilket varje land fastställde ett belopp på deras Signal School of Forex är ett dotterbolag till moderbolaget Signal Trading Systems Ltd, ett välrenommerat östafrikanskt företag som är vederbörligen registrerat i Nairobi Kenya. Vårt primära kontor ligger vid Victoria House, 203, vid sidan av Tom Mboya St. (uppför Nairobi Brandstation). FBS MARKETS INC tillhandahåller inte finansiella tjänster till invånare i Belize, USA och Japan 2009-2017 FBS Markets Inc. FBS: Suite 5, Garden City Plaza, Mountain View Boulevard, BELMOPAN, Belize, CA Licens IFSC60292TS15 Riskvarning. Innan du börjar handla bör du helt förstå riskerna med valutamarknaden och handla på margin och du bör vara medveten om din erfarenhetsnivå. All kopiering, reproduktion, republicering, samt på internetresurser av material från fbs är endast möjlig vid skriftligt tillstånd. Kontakta oss. Din förfrågan är accepterad. En chef ringer dig snart. Nästa återuppringningsförfrågan för detta telefonnummer kommer att finnas tillgänglig 00:30:00 Internt fel. Vänligen försök igen senare. Department of State Öppenhet för utländska investeringar Kenya har haft en lång historia av ekonomiskt ledarskap i Östafrika som den största och mest avancerade ekonomin i regionen. Men etniskt laddad våld efter våldet i januari-februari 2008, som lämnade 1.200 död och 500.000 förskjutna, satte ett brått stopp för en stark tillväxt och ökade säkerhetshinder om Kenyalsquos investeringsklimat. Turismindustrin drabbades särskilt hårt av våldet, som sjönk 33 procent i ankomsterna och 19 procent i vinst, medan jordbruket drabbades av 300 miljoner förluster i tillgångar på grund av oönskade förstörelse av gårdar och mejerier. Både turism och jordbruk har återhämtat sig, med turismen växande på högsta nivå någonsin och förväntningar på mer än 1,8 miljoner ankomster 2010. Den fredliga och historiska folkomröstningen i augusti 2010, som godkände en ny konstitution med två tredjedelar majoritet, andas hopp i Kenya39s framtida prospekt. Efter att ha upplevt en tillväxt på 7,1 procent 2007 sjönk ekonomin till 1,6 procent tillväxt 2008. Ekonomin 2009 ökade med 2,6 procent, medan 2010 steg tillväxten för tredje kvartalet över sex procent och tillväxten 2010 skulle överstiga 5 procent. Utsikterna för 2011 och 2012 är att BNP-tillväxten når upp till 5 ndash 6 procent. Den genomsnittliga årliga inflationen var 16,2 procent 2008, vilket sjönk till 9,2 procent 2009 och ytterligare 4,5 procent i december 2010 för årets inflation. (Kenya ändrade sin beräkningsmetod för inflationstakten till ett geometriskt system under 2009, vilket har resulterat i mycket lägre inflationstakt.) Så sent som i december 2010 krävde 1,2 miljoner kenyaner nödhjälp, en dramatisk förbättring från det värsta av torkan i hösten 2009. De rikliga långa och korta regniga årstiderna 20092010 ledde till den starka återhämtningen inom jordbruket, även om nordöstra Kenya lider i början av 2011 från under normala regnar. Tyvärr skulle en eventuell återkommande torka utgöra en annan livsmedelsförsörjningskris i Kenya, eftersom bevattningssystemen nästan inte existerar. Följaktligen, medan Kenya var ett utmärkt val för utländska investerare som försökte etablera sig i Östafrika 1960- och 1970-talet, har en kombination av politiskt styrd ekonomisk politik, olyckshändelser, orimlig korruption, substandard offentliga tjänster och dålig infrastruktur motverkat utländska direktörer investeringar (FDI) sedan 1980-talet. Kenya har under de senaste 25 åren varit en underpresterare för att locka till sig FDI. Sedan 2003 har Kenya39s prestanda att locka FDI varit marginellt bättre vid nästan US 6 per US 1,000 av BNP (totalt 82 miljoner US-dollar). Detta ligger dock i jämförelse med FDI-nivåerna i grannländerna med mindre ekonomier. UNCTAD39s världsinvesteringsrapport för 2008 beskriver Kenya som East Africa regionsquos minst effektiva företrädare för att locka till sig FDI. FDI-beståndet i Kenya uppgick till 183 miljoner under 2008. Efter att ha haft ett banerår 2007 som lockade 729 miljoner i FDI, fick Kenya endast 96 miljoner 2008 och 141 miljoner 2009. Den senaste pressartikelen visar att inhemska investeringar nu överstiger FDI och har en betydande inverkan på utvecklingen i Kenya. Kenya39s suveräna betyg, som nedgraderades efter våldet efter valet i början av 2008, uppgraderades i slutet av 2010 av SampP till positiv B från stabila B. På samma sätt uppgraderade Fitch Rating utsikterna från negativa till stabila samtidigt som de tidigare B-värdena behölls för långfristig utlandsskuld och BB - för långfristig inhemsk skuld i januari 2009 är dessa värderingar desamma som i januari 2011. En undersökning från april 2008, som genomfördes av Kenya Manufacturers Association (KAM ndash Kenya39s främsta näringslivsförbund) att Kenya39s affärsklimat är fientligt. På grund av det kostsamma investeringsklimatet lärde KAM att allt fler företag har valt att byta från tillverkning till handel. Andra har övergett landet. Efter att ha granskat förklaringar till varför företagen stängdes eller flyttades under det senaste decenniet, ansåg KAM att den legitima handeln i Kenya hämmas av: a) oskälig utländsk konkurrens som dumpar förfalskade och piratkopierade produkter (kosmetika, toalettartiklar, batterier, däck, bil delar, läkemedel, böcker, elektroniska medier och programvara) och andrahandskläder och skor på marknaden släpper ut nya skor och andra kläder som exklusive och underfakturerade export. b) Höga tillverkningskostnader på grund av orimliga eltariffer, dålig infrastruktur (särskilt vägar och skenor) och kraftiga transportkostnader. c) Otillgänglighet av råvaror som råolja. d) Arbetslagar som tvingar privata företag, i stället för regeringen, att ge sina anställda ett socialt skyddsnät av förmåner, inklusive faderskap och mammaledighet och hälso - och sjukvård ndash alla skattefria undantag (e) låg produktivitet, brist på arbetark disciplin och starka fackföreningar fokuserade på högre löner och fördelar (f) l ocal government licenser och trakasserier över småaktiga krav (som kan tolkas som krav på mutor) och (g) Kenyas intäktsmyndighet (KRA) misslyckades att snabbt behandla företagsskatt och momsbidrag. En analys av Kenya39s skattesystem som utförs av Världsbanken, International Finance Corporation och revisionsfirman PriceWaterhouseCoopers och släpptes i början av december 2008 bedömde Kenyalsquos skatteordning som den minst vänliga i Östafrika. Rapporten Betalningsskatt 2009 kritiserar Kenya för att inte ha en enda myndighet som ansvarar för alla skattekollektioner. Snarare är Kenyalsquos skattestruktur markerad av flera myndigheter, var och en med myndighet att samla skatter vid olika tidpunkter på året. Enligt studien har Kenya fem olika skattebetalningsdatum varje månad för mervärdesskatt, företagsvinster, återhållsamhet, social trygghet och hälsa. Bortsett från komplexiteten i deras skattesystem, många Kenyaner klagar skatter är för höga. Följaktligen ökar skatteflykten. Kenya bevittnar nu ett ökat antal oregistrerade eller informella företag som är kända i lokala versioner som ldquojua kali. rdquo (Obs: Enligt den offentliga sektorns ekonomiska undersökning i 2010 undersöker den informella sektorn cirka 80 procent av arbetskraften.) På grund av countrylsquos flera skattebetalningsarkitektur och uppfattat höga skatter, lade rapporten i Kenya 158 av de 181 undersökta länderna. Rapporten lovordade Kenya Revenue Authority (KRA) för sin effektiva skatteinsamling och välkomnade Governmentlsquos framtida lansering av ett integrerat skattehanteringssystem. Kenyanska företag bär den tyngsta skattebelastningen i Östafrika. Trots att de afrikanska afrikanska gemenskapsstaterna tar upp en enhetlig 30 procent företagsbeskattning i hela regionen, måste kenyanska företag strida mot andra avgifter, vars slutgiltiga effekt ökar den totala skattebelastningen. Skatteexperter på PriceWaterhouseCoopers säger att den totala skattetrycket i Kenya står för närvarande på 49,7 procent jämfört med Tanzania39s 45 procent, Uganda39s 32 procent och Rwanda39s 31 procent. Denna extra börda har ökat kostnaden för att göra affärer i regionens största ekonomi och minskat företagens konkurrenskraft. Kenyanska företag måste strida mot 41 olika skattebetalningar som skar över 16 skattesystem, vilket tar 417 manstimmar till fil jämfört med världens genomsnitt av 31 skattebetalningar och 286 timmar, vilket gör att Kenya är ett av länderna med de mest komplicerade skattesystem i denna del av världen. Filialer av utländska företag betalar skatt till 37,5 procent. Regeringen definierar generellt skattepliktig inkomst för att vara inkasserad i eller från Kenya. Mervärdesskatt (moms) tas ut på varor som importeras till eller tillverkas i Kenya, och skattepliktiga tjänster tillhandahålls. Mervärdesskattesatsen är 16 procent. Regeringens diskussion om mervärdesskatt i början av 2011 fokuserade på att minska eller eliminera undantag för att skapa en bredare intäktsbas jämfört med höjningsräntorna. Brott är ett annat avskräckande. I en separat KAM-undersökning 2007 rapporterade 33 procent av de kenyanska företagen brottslighet som ett allvarligt problem och redovisade förluster på nästan 4 procent på årlig försäljning. KAM upptäckte att i genomsnitt fördelar företagen 3 procent av sina driftsbudgetar till privata säkerhetstjänster och säkerhetsuppgraderingar. Högre tjänstemän är väl medvetna om dessa problem. Vidare erkände vice premiärminister och handelsminister Uhuru Kenyatta i början av december 2008 att en omedelbar åtgärd som involverar en samordnad insats bland medlemmarna i East African Community (EAC) måste vidtas för att förbjuda förfalskade varor att komma in i Kenya och regionen. Han erkände att förfalskningar undergräver den inhemska tillverkningssektorn. Andra hinder för investeringar som kräver snabb uppmärksamhet, nämnde han, osäkerhet, en ovänlig affärslagstiftning och de höga energikostnaderna. Den 5 augusti 2008 började premiärministern Raila Odinga hålla kvartalsvisa möten som en del av en offentlig-privat dialog kallad quotationell Business Agendaquot med ordförandena för KAM, Kenya Private Sector Alliance (KEPSA), East Africa Business Council (EABC) , och andra företagsledare att diskutera vad som måste göras för att förbättra landets affärsklimat. Som ett resultat av det första mötet beställde Odinga och president Mwai Kibaki att hamnen i Mombasa skulle vara öppen 247, antalet vägar och vägar på Mombasa-Nairobi-Busia norra korridormotorvägen minskas dramatiskt, och att Kenya Ports Authority (KPA), Kenya Bureau of Standards (KEBS) och KRA harmonisera sina föreskrifter och anta ett gemensamt ackrediterings - och datoriserat clearingssystem för att påskynda lastkontroll och clearance. Regeringen handlade om hamn - och vägarbetsproblem, medan harmoniseringsproblemen fortsätter att hanteras. Därefter beställde president Mwai Kibaki och därefter finansminister John Michuki att moms minskas eller elimineras på energiinsatser. Treasury meddelade i slutet av november 2008 att det skulle upphäva en 120 procent punktskatt på tillverkning av plast. För att underlätta inflationstrycket på matkorgn reducerade regeringen i mitten av juni 2008 tullen på importerat vete från 35 procent till 10 procent och nollvärde 297 000 ton importerad majs. Den avstod också 60 procents tull på 52 149 ton importerat vetemjöl. Jordbruksministern nollställde också momsen på bröd, vetemjöl, mjölk, ris och majsmjöl. I enlighet med sin privatiseringsstrategi tillkännagav regeringen i mitten av december 2008 att det skulle sälja sina aktier i 16 parastataler, däribland Kenyas nationalbank, Kenya Electricity Generation Company (KenGen), Kenya Pipeline Company, Kenyas hamnmyndighet , och olika socker-, cement-, mejeri-, vin - och köttbearbetningsföretag. Regeringen sätter också Kenya Tourism Development Authority till försäljning under 2009. Hittills har regeringen inte slutfört någon av försäljningarna. I december 2008 godkände regeringen dessutom den föreslagna rättsliga och institutionella ramen för offentlig-privata partnerskap, vilket medgav att privata företag många nu undertecknar förvaltningsavtal, leasingavtal, koncessioner och - avtal med BOOT-avtal med regeringen på olika infrastrukturprojekt som vatten, energi, hamnar och vägar. I en annan positiv utveckling är kredit nu lättare tillgänglig från kenyanska utlåningsinstitut, enligt en analys som släpptes i början av december 2008, ldquoFirst Things Faster: Kenya Competitiveness Benchmark Report 2008.rdquo Rapporten citerade också Kenya39s engagemang för innovation som främjar affärsutveckling . Ökad utlåning, vilket ledde till att antalet bilförsäljningar registrerades under 2010, återspeglar starkt konsumentförtroende för växande ekonomin. Bolagsförordningen, partnerskapslagen, lagen om utländsk investeringsskydd och lagen om investeringskampanj 2004 utgör den rättsliga ramen för direktinvesteringar. För att locka till sig investeringar antog Kenyas regering flera reformer, bland annat avskaffande av export - och importlicenser, förutom några punkter som anges i lagen om import, export och väsentliga förnödenheter, rationalisering och minskning av importtullar, återkallande av alla exporttullar och nuvarande konto restriktioner, frigöra Kenya Shilling39s växelkurs, så att invånare och utländska medborgare kan öppna utländska valutakonton hos inhemska banker och ta bort begränsningar för upplåning av utländska såväl som inhemska företag. Under 2007 granskade den koreanska sin investeringspolitik och lanserade en utvecklingsstrategi för den privata sektorn. En politisk översyn av FN: s konferens om handel och utveckling (UNCTAD) är en del av denna insats. Licensloven från 2007 har hittills eliminerat eller förenklat 694 licenser. Under 2008 minskade regeringen också antalet licenser för att starta ett företag från 300 till 16, och kommer att granska ytterligare 337 licenser. Affärslagslagen från 2007 inrättade en affärsreglerande reformenhet inom finansdepartementet för att fortsätta avregleringsprocessen. Under 2009 lanserade Kenya ett nationellt e-register för att underlätta hanteringen av företagslicenser och förbättra transparensen. Under 2008 antog parlamentet lagen om förfalskning, som president Kibaki undertecknade i lagen, inrätta en byrå och en stark rättslig ram för polisiära förfalskade varor. I juni 2010 opererade industriministeriet (dess moderbolag) förfalskningsverket. Den växande myndigheten bygger fortfarande kapacitet och kämpar med brist på resurser, samtidigt som man skär ut sin roll. För att bekämpa importen av förfalskningar beslutade industriministeriet och Kenya Bureau of Standards (KEBS) 2009 att alla lokalt tillverkade varor måste ha ett standardiseringsmärke som utfärdats av KEBS, medan flera kategorier av importerade varor (särskilt livsmedelsprodukter, elektronik, och läkemedel) måste ha ett standardiseringsmärke för import (ISM), kostar 300 per produkt. De offentliga och privata sektorns respektive roller har utvecklats sedan självständigheten 1963, med en övergång från offentliga investeringar till investeringar i den privata sektorn. GOK har infört marknadsbaserade reformer och gav fler incitament för både lokala och utländska privata investeringar. Utländska investerare som vill etablera sig i Kenya får i allmänhet samma behandling som lokala investerare. Multinationella företag utgör en stor andel av Kenya39s industrisektor. Kenya39s investeringskod, som formuleras i lagen om investeringsreklam från 2004, effektiviserade de administrativa och juridiska förfarandena för att skapa ett mer attraktivt investeringsklimat. Den trädde i kraft när den publicerades 2005. Investeringsfrämjande aktins mål är att locka till och underlätta investeringar genom att hjälpa investerare att erhålla de licenser som krävs för att investera och genom att tillhandahålla annat stöd och incitament. Lagen ersatte Governments Investment Promotion Center med Kenya Investment Authority (KIA), men lagen skapade också några nya hinder. Den fastställde lägsta utländska investeringströskel på 500 000 och konditionerade vissa fördelar med att erhålla ett investeringscertifikat från KIA. Regeringen reviderade senare det minsta utländska investeringsgränset till 100 000 som ett ändringsförslag till lagen. Minsta investeringskravet kommer sannolikt att avskräcka utländska investeringar, särskilt inom tjänstesektorn, som normalt inte är så kapitalintensiv som jordbruks - och tillverkningssektorn. En annan ändring gjorde kravet på utländsk investering certifikat frivilligt. Arbetstillstånd krävs för alla utländska medborgare som vill arbeta i landet. Den kenyanska regeringen förväntar sig att utländska medarbetare är nyckelansvariga eller har särskilda kunskaper som inte är tillgängliga lokalt. Utländska investerare är skyldiga att teckna avtal med regeringen som definierar utbildningsarrangemang avsedda att avveckla utlänningar. Alla företag, oavsett om de är lokala eller utländska, kan rekrytera utlänningar för någon kategori av skicklig arbetskraft, om Kenyans inte är tillgängliga. Arbetardepartementet utvecklar en kompetensinventering. Detta bör ersätta arbetsmarknadsprovningsproceduren, åtminstone för högkvalificerade positioner, med en förutbestämd lista över kunskaper med brister i Kenya. Investerare som söker utländska anställda med dessa färdigheter skulle inte vara skyldiga att visa genom en uttömmande lokal rekryteringskampanj att lämpligt kvalificerade medborgare inte var tillgängliga. Godkända arbetsgivare skulle ha rätt att anställa sådana utländska arbetstagare, endast för kontroll av de personer som föreslås för anställning av invandringsavdelningen. Det blir allt svårare för utlandsföretagen att få arbetstillstånd, eftersom den koreanska regeringen säger att kvalificerade mellanledare och tekniska personal finns tillgängliga lokalt. Kenya39s höga arbetslöshetsnivå driver sannolikt den nya trenden. Den officiella arbetslöshetsnivån 2010 är 10 procent, men den reala arbetslösheten i landet är över 40 procent. GOK fokuserar sin investeringsfrämjande på möjligheter som tjänar utländsk valuta, tillhandahåller anställning, främjar bakåt och framåtkopplingar och överför teknologi. De enda betydande sektorer där investeringar (både utländska och inhemska) är begränsade är de där statliga företag fortfarande har ett lagstadgat monopol. Dessa begränsas nästan helt till infrastruktur (t. ex. kraft, tjänster, telekommunikation och hamnar), även om det har varit partiell liberalisering av dessa sektorer. Till exempel har fem oberoende kraftproducenter (IPP) under de senaste åren börjat verksamma i Kenya. Från och med januari 2011 finns fyra mobiltelektronikleverantörer i Kenya: den delvis statligt ägda Safaricom, franska ägda Orange (den mobila delen av Telkom Kenya), den indianska ägda Bharti Airtel (tidigare Zain) och indianska ägda Yu (tidigare Essar Telecom). Utländska telekomföretag kan också etablera sig i Kenya, men måste ha minst 20 procent lokalt ägande. Regeringen gav emellertid en treårsperiod för telekommunikationsföretag att hitta lokala investerare för att möta de lokala äganderätten och den koreanska regeringen kan helt och hållet skrapa den lokala ägarpolitiken. Ett juridiskt meddelande som publicerades i juni 2007 minskade tröskeln för utländsk äganderätt till börsnoterade företag på Nairobi-börsen (NSE) från 75 procent till 60 procent vilket är ett avskräckande för utländska ägda företag intresserade av en NSE-notering. Trots att förordningen inte är tillämplig med retroaktiv verkan, tvingar det bolag med en utländsk närvaro på mer än 60 procent att nedgradera utländska aktieinnehav innan de ansöker om NSE. Åtgärden bära sålunda dessa företag från att sälja överflödiga aktier till icke-kenyanska. Det finns ingen diskriminering mot utländska investerare när det gäller tillgång till statsfinansierad forskning. Regeringens exportfrämjande program skiljer inte mellan lokala och utländska ägda varor. UNCTAD, i samarbete med Internationella handelskammaren (ICC), publicerade en investeringsguider till Kenya i maj 2005. Guiden ger omfattande analyser av investeringstrender, möjligheter och regelverket i landet. Enligt UNCTAD-rapporten (och de flesta observatörer) är betydande incitament för investeringar i Kenya bl. a. överreglering och ineffektivitet, dyra och oregelbundna el - och vattenförsörjningar, en underutvecklad telekommunikationssektor, en dålig transportinfrastruktur och höga kostnader i samband med brott och allmän osäkerhet . Trots att det inte finns någon specifik lagstiftning som förhindrar utlänningar från att äga mark, är det enligt deras markkontrolllag att deras förmåga att äga eller hyra mark som är klassificerat som jordbruk är begränsat. Landskontrolllagen tjänar därför som ett hinder för alla agroförädlingsinvesteringar som kan kräva mark. Det enda undantaget från denna lag är att förvärva presidentval, som inte har några tydliga riktlinjer och har lett till klagomål om överdriven byråkrati och patronage. Den nya konstitutionen säger att icke-medborgare inte får äga mark, men får hyra mark för högst 99 år. EAC, grundat 1999, består av Kenya, Tanzania, Uganda, Rwanda och Burundi. Rwanda och Burundi blir medlemmar i gemenskapen 2007. EAC syftar till att bredda och fördjupa samarbetet mellan partnerstaterna i politiska, ekonomiska, sociala och andra områden för ömsesidig nytta. Enligt protokollet ska EAC-medlemsländerna tillåta nollkodad råvaruproduktion, en avgift på 10 procent på halvfabrikat och en avgift på 25 procent på färdiga varor. Förverkligandet av en stor ekonomisk block med en sammanlagd befolkning på mer än 125 miljoner och en kombinerad bruttonationalprodukt på 61 miljarder bär stor strategisk och geopolitisk betydelse och erbjuder utsikterna till en förnyad och nyinvesterad EAC. EAC-tullunionen trädde i kraft den 1 januari 2010, medan den gemensamma marknaden för EAC trädde i kraft den 1 juli 2010. Medan medlemsstaterna har enats om tullunionen och den gemensamma marknaden kommer det faktiska genomförandet att ta en betydande tid . EAC-länderna, inklusive Kenya, har inte gått igenom många av de lagar som är förknippade med den gemensamma marknaden, och tullunionens genomförande vid gränsövergångar är långt ifrån sammanhängande eller enhetlig. Bland de problem som ska lösas är centraliserad intäktsintäkt vid den första punkten för inträde i EAC och förvaltning av transitlast i en gränslös region. Löpande planering för EAC omfattar en monetär union senast 2013 och eventuell politisk federation. Icke-tariffära hinder (NTB) är emellertid fortfarande ett problem i EAC. En rapport från mars 2005 om NTB och utvecklingen av ett Business Climate Index i Eastern African Regionquot av East African Business Council identifierade administration av tullar och andra skatter som den viktigaste NTB, följt noggrant av korruption. Rapporten visar att Kenyalsquos investeringsnivå och affärsoptimism dämpas av låga förväntningar avseende förbättringar av infrastruktur, tillgång till mark och lönsamhet i verksamheten. Sedan självständigheten har Kenya följt två breda strategier för industrialisering, nämligen importsubstitution och exportorienterad industrialisering. Det är för närvarande genomförande av en industrialiseringsstrategi som skisseras i sessionspapper nr 2 av 1996, som syftar till att omvandla Kenya till ett helt industriellt tillstånd senast 2020. Strategin betonar stöd till specifika exportindustrier, drivna av en önskan att öka sin sysselsättningspotential. Vision 2030, som presenterades 2007 som GOKrsquos långsiktiga plan för att uppnå medelinkomststatus som en nation, bekämpar Sessional Paper genom att även erkänna industriell marknadsföring som en aveny för tillväxt och utveckling. Kenya upplever svårigheter att ta tillvara möjligheter som genereras av handelsliberalisering på utvecklade marknader för att exportera tillverkade varor. Huvuddelen av sin export till Europeiska unionen är trädgårdsodling baserad på minimaltillskott: te, kaffe, snittblommor, grönsaker, frukt och nötter. I motsats härtill utgör tillverkningsvaror (mestadels kläder) huvuddelen av exporten till Förenta staterna enligt den afrikanska tillväxt - och möjlighetslagen (AGOA). Textil - och plaggindustrin beror till stor del på importerade tyger och råvaror som bomull, viskos, polyester, denim, polyester, nylon och akryl, eftersom en konkurrenskraftig integrerad bomullsindustri inte existerar. Heritage Heritage Index of Economic Freedom placerar Kenya 101 av 179 länder, en minskning med 11 platser från 2009 och rankades 13 av 46 länder i Afrika söder om Sahara. Omvandlings - och överföringspolitik Den utländska investeringsskyddslagen (FIPA) (Cap 518) garanterar kapitaltransporter, återbetalning av utdelningar och intresse för utländska investerare. Utländska investerare är fritt att konvertera och repatriera vinster inklusive ej kapitaliserad kvarhållen vinst, dvs. intäkter från investeringen efter betalning av relevanta skatter och huvudstol och ränta förknippade med något lån. Utländsk valuta är lättillgänglig från affärsbanker och utländska byråer och kan köpas fritt och säljs av lokala och utländska investerare. Den kenyanska shilling har en flytande växelkurs bundet till en korg av utländska valutor. Shilling var relativt stabil de senaste åren fram till slutet av 2007, då den ökade signifikant i värde gentemot dollarn, till och med handel kort under KSh60 till dollarn. I efterdyningarna av den 27 december 2008 efter valvalet led både ekonomin och shilling en allvarlig nedgång. Från och med januari 2011 handlades shillingen till nästan KSh80 till dollarn. Kenya har inga restriktioner för att konvertera eller överföra medel som är förknippade med investeringar. Kenyansk lag kräver att de belopp som överstiger 500 000 Ksh (cirka 6 500) anges som en formell kontroll mot penningtvätt. Parlamentet godkände Kenyas intäkter från brottsbekämpning och penningtvätt, och president Kibaki undertecknade det i lag i slutet av 2009. Trots att lagstiftningen trädde i kraft i juni 2010 har genomförandebestämmelser ännu inte utarbetats, vilket skulle få Kenya i linje med mer avancerade finansiella ekonomier och bidra till att minska allvarliga problem med penningtvätt. Kenya ingår i den östliga och södra Afrika anti-money laundering gruppen och samarbetar med den mellanstatliga Financial Action Task Force (FATF). Expropriation and Compensation Kenyas investeringslagstiftning är modellerad enligt engelsk investeringslag. Aktiebolagslagen, lagen om investeringsfrämjande åtgärder och lagen om utländsk investering är de viktigaste rättsakterna för investeringar i Kenya. Kenyansk lag ger skydd mot expropriering av privat egendom, förutom när rätt behandling följs och adekvat och snabb kompensation tillhandahålls. Olika bilaterala avtal garanterar också ytterligare skydd mot andra länder. Expropriation kan endast ske av säkerhetsskäl eller allmänintresse. Den koreanska regeringen kan återkalla en utländsk investeringslicens om (1) ett felaktigt uttalande görs vid ansökan om licensen om bestämmelserna i lagen om investeringsfrämjande åtgärder eller av någon annan lag enligt vilken licensen beviljas bryts eller, om (2) det finns ett brott mot villkoren för den allmänna myndigheten. Investeringsfrämjande akten från 2004 föreskriver återkallelse av licensen i fall av bedräglig representation till Kenya Investment Authority (KIA) genom att skriftligen meddela investeraren att visa orsak inom 30 dagar från dagen för uppsägning varför licensen inte borde vara återkallas. I praktiken återkallar KIA endast sällan licenser. Som ett exempel på expropriation och kompensation i september 2007 invaderade plundrar en privat bostad på 15 000 hektar i kustprovinsen, knappt en månad efter att president Kibaki meddelade att tomgångsland skulle återbesitta och ges till de landlösa. Regeringen betalade slutligen privatägaren mer än 10 miljoner för landet. Kenya är medlem i Världsbankens anslutna multilaterala investeringsgarantibyrå (MIGA), som ger garantier mot icke-kommersiell risk för företag som investerar i medlemsländer. Det är också undertecknare av konventionen om lösning av investeringstvister mellan stater och medborgare i andra stater. Konventionen inrättades Internationella centret för lösning av investeringstvister (ICSID) under Världsbankens regi. Kenya är också medlem i Afrika Trade Insurance Agency (ATIA). Kenya är medlem i många andra globala och regionala organisationer och fördrag inklusive den gemensamma marknaden för östra och södra Afrika (COMESA) Cotonouavtalet mellan Europeiska unionen och staterna i Afrika, Västindien och Stillahavsområdet (AVS) Pariskonventionen om immateriell äganderätt, Universal Copyright Convention och Bern Copyright Convention World Intellectual Property Organization (WIPO) och Världshandelsorganisationen (WTO). Kenya har också tecknat dubbelbeskattningsavtal med ett antal länder, bland annat Kanada, Kina, Tyskland, Frankrike, Japan, Nederländerna och Indien. Den 27 november 2007 gick Kenya med sina EAC-systater i undertecknandet av det första ekonomiska partnerskapsavtalet (EPA) med Europeiska gemenskapen (EG). I mitten av juli 2008 undertecknade Kenya och dess andra EAC-medlemmar ett avtal om handel och investeringar (TIFA) med Förenta staterna vid ingåendet av forumet för afrikansk tillväxt och möjligheter i Afrika i Washington, DC. Den kenyanska konstitutionen garanterar skydd av liv och egendom, som också skyddas av strafflagen i Kenya. Deras överträdelse kan genomföras enligt straffrätten. Despite these protections, insecurity in the forms of international terrorism, unsafe borders, and common crime has been a major concern to many investors in Kenya. Kenyalsquos judicial system is modeled after the British, with magistrateslsquo courts, high courts in major towns and a Court of Appeal at the apex of the judicial system. Immediately below the high courts are subordinate courts consisting of the Kadhis Courts, the Resident Magistratelsquos Courts, the District Magistratelsquos Courts, and the Court Martial (for members of the Armed Forces). In addition, a separate industrial court hears disputes over wages and labor terms. Petitioners cannot appeal its decisions, except on procedural grounds. Kenya also has commercial courts to deal with commercial disputes. The Companies Act of 1948 provides the foundation for company and investment law. Property and contractual rights are enforceable, but long delays in resolving commercial cases are common. The legal system in Kenya is adversarial, and most disputes are resolved through litigation in court, although arbitration and alternative dispute resolution are becoming increasingly popular. The Arbitration Act governs arbitration. The new constitution, when fully enacted, will change the court system dramatically. Kenya will have a Supreme Court, a Court of Appeal, a Constitutional Court, and a High Court. In addition, the subordinate courts, Magistrates, Khadis, and Courts Martial, will remain. Parliament will decide if the industrial and commercial courts will remain. The Foreign Judgments (Reciprocal Enforcement) Act provides for the enforcement in Kenya of judgments given in other countries that accord reciprocal treatment to judgments given in Kenya. The countries with which Kenya has entered into reciprocal enforcement agreements are Australia, the United Kingdom, Malawi, Tanzania, Uganda, Zambia, and Seychelles. Without such an agreement, a foreign judgment is not enforceable in the Kenyan courts except by filing suit on the judgment. Kenyan courts generally recognize a governing-law clause in an agreement that provides for foreign law. A Kenyan court would not give effect to a foreign law if the parties intended to apply it in order to evade the mandatory provisions of a Kenyan law with which the agreement has its most substantial connection, and which the court would normally have applied. Foreign advocates are not entitled to practice in Kenya unless a Kenyan advocate instructs and accompanies them, although a foreign advocate may practice as an advocate for the purposes of a specified suit or matter if appointed to do so by the Attorney General. All advocates in private practice are members of the Law Society of Kenya (LSK), while those in public service need not be. Kenya does not have a bankruptcy law. Creditors39 rights are comparable to those in other common law countries. Monetary judgments typically are made in Kenyan shillings. The government does accept binding international arbitration of investment disputes with foreign investors. Apart from being a member of the ICSID, Kenya is a party to the New York Convention on the Enforcement of Foreign Arbitral Awards (1958). Performance Requirements and Incentives The law permits investors in the manufacturing and hotel sectors to deduct from their taxes a large portion of the cost of buildings and capital machinery. The government allows all locally financed materials and equipment (excluding motor vehicles and goods for regular repair and maintenance) for use in construction or refurbishment of tourist hotels to be zero-rated for purposes of Value Added Tax (VAT). The Ministry of Finance permanent secretary must approve such purchases. The government permits some VAT remission on capital goods, including plants, machinery, and equipment for new investment, expansion of investment, and replacement. The investment allowance under the Income Tax Act is set at 100 percent. Materials imported for use in manufacturing for export or for production of duty-free items for domestic sale qualify for the investment allowance. Approved suppliers, who manufacture goods for the exporter, are also entitled to the same import duty relief. The program is also open to Kenyan companies producing goods that can be imported duty-free or goods for supply to the armed forces or to an approved aid-funded project. Fiscal incentives offered by the Kenyan government to Export Processing Zone (EPZ) investments and registered and approved venture-capital-fund investments include a 10 year tax holiday and a flat 25 percent tax for the next 10 years exemption from withholding taxes during the first 10 years exemption from import duties on machinery, raw materials, and inputs no restrictions on management or technical arrangements and exemption from stamp duty and from the VAT on raw materials, machinery and other inputs. The Export Promotion Programs Office, set up in 1992 under the Ministry of Finance, administers the duty remission facility. The government established a Manufacturing Under Bond (MUB) program in 1986 that is open to both local and foreign investors. The law exempts enterprises operating under the program from duty and VAT on imported plants, machinery, equipment, raw materials, and other imported inputs. The Kenya Revenue Authority (KRA) administers the program. Foreign investors are attracted to the EPZs by their single licensing regime, tax incentives, and support services provided such as power and water. The number of enterprises operating in Kenya39s EPZs increased from 66 in 2003 to 74 in 2004. They declined to 68 in 2005 following the end of the Multi-fiber Textile Agreement in January 2005 before increasing to 71 in 2006. In 2007, 72 firms were in operation, which increased to 74 in 2008. In 2009, 83 firms were operating in the EPZs, although the number of Kenyans employed actually declined slightly. The majority of Kenya39s manufactured products are entitled to preferential duty treatment in Canada and the European Union. Kenya39s statute does not permit manufacturing companies, whether domestic or foreign-owned, to distribute their own products. The preferential access and duty free status accorded to Kenyan apparel exports under the African Growth and Opportunity Act (AGOA) fueled the initial increase in the number of apparel factories. Kenya39s major exports under AGOA include apparel and handicrafts. Over 50 percent of EPZ manufactured products enter the U. S. market under AGOA provisions. In 2005, 25 apparel firms in the EPZ39s were manufacturing apparel for export under AGOA. That number declined to 22 in 2007 and to 18 in 2008 following the January-February 2008 post-election violence. 2009 saw an increase to 19 firms operating under AGOA, although the number of Kenyans employed by these firms continued to drop. With the exception of the insurance and telecommunications sectors and other infrastructure companies discussed earlier, Kenya does not require that its nationals own a percentage of a company. The government does not require that the percentage of foreign ownership be reduced over time. There are no restrictions on the percentage of equity that foreign nationals may hold in a locally incorporated company, although foreign firms are encouraged to form joint ventures with Kenyan companies or entrepreneurs. However, there are some restrictions on investment in companies listed on the NSE and certain businesses. Foreign brokerage companies and fund management firms must be locally registered companies, with Kenyan ownership of at least 30 percent and 51 percent, respectively. Foreign ownership of equity in insurance and telecommunications companies is restricted to 66.7 percent and 80 percent, respectively. However, the government allows telecommunications companies a three-year grace period to find local investors to achieve the local ownership requirements and the local ownership policy may be scrapped entirely. A legal notice published in June 2007 decreed that companies seeking a listing on the NSE could not have foreign ownership above the 60 percent threshold. Previously the NSE threshold for foreign ownership for some companies was 75 percent. Foreign equity in companies engaged in fishing activities is restricted to 49 percent of the voting shares under the Fisheries Act. Foreign investors are free to obtain financing locally or offshore. The manufacture of and dealing in firearms (including ammunition) and explosives require special licenses from Chief Firearms Licensing Officer and the Commissioner of Mines and Geology, under the Firearms Act and the Explosives Act respectively. The manufacture of and dealing in narcotic drugs and psychotropic substances is prohibited under the Narcotics Drugs and Psychotropic Substances Act. Technology licenses are, however, subject to scrutiny by the Kenya Industrial Property Office (KIPO) to ensure that they are in line with the Industrial Property Act. Licenses are valid for five years and are renewable. The government does not steer investment to specific geographic locations but encourages investments in sectors that create employment, generate foreign exchange, and create forward and backward linkages with the rural areas. The law applies local content rules but only for purposes of determining whether goods qualify for preferential duty rates within the Common Market for Eastern and Southern Africa (COMESA) and the EAC. Right to Private Ownership and Establishment The Kenyan legal system is quite flexible on exit options, which normally are determined by the agreement that the investor has with other investors. The Companies Act specifies how a foreign investor may exit from an incorporated company. In practice, a company faces no obstacles when divesting its assets in Kenya, if the legal requirements and licenses have been satisfied. The Companies Act gives the procedures for both voluntary and compulsory winding-up processes. In late 2006, the U. S. multinational personal grooming and hygiene company, Colgate Palmolive, closed its factory in Kenya. MobilExxon divested and sold its assets to the Libyan oil company, Tamoil, in 2007. In 2008, Chevron divested and sold its assets to Total. Reckitt Benckiser East Africa Limited, a multinational firm that makes household cleaning health and personal care products, also closed its Kenyan facility. Many U. S. companies remain in the market and, in 2010, some recorded record profits. The typical reason given for a firm closing its factories in Kenya is restructuring to cut costs and improve efficiency in its African markets. The high cost of production as a result of poor infrastructure, inadequate protection of intellectual property rights, and unreliable and expensive electrical power continues to frustrate Kenyarsquos manufacturing sector, even as economic growth forges ahead. Private enterprises can freely establish, acquire, and dispose of interest in business enterprises. In general, competitive equality is the standard applied to private enterprises in competition with public enterprises. However, certain parastatals have enjoyed preferential access to markets. Examples include Kenya Reinsurance (Kenya-Re) with a guaranteed market share, Kenya Seed Company, with fewer marketing barriers than its foreign competitors, and the Kenya National Oil Corporation (KNOC), with retail market outlets developed with government funds. Some state corporations have also benefited from easier access to government credit at favorable interest rates. Protection of Property Rights Secured interests in property are recognized and enforced. In theory, the legal system protects and facilitates acquisition and disposition of all property rights ndash land, buildings, and mortgages. In practice, obtaining a title to land is a cumbersome and often non-transparent process, which is a serious impediment to new investment, frequently complicated by improper allocation of access and easements to third parties. There is also a general unwillingness of the courts to permit mortgage lenders to sell land to collect debts. Only Kenyan citizens or incorporated companies, whose majority shareholders are Kenyan citizens, may own land. Since January 2003, the government has been nullifying some illegally acquired land allocations. The question of title to land acquired irregularly under the Moi government is the subject of continued controversy. The issue is particularly important because land secures 80 percent of bank loans. Kenya has a comprehensive legal framework to ensure intellectual property rights (IPR) protection, which includes the Anti-Counterfeiting Act of 2009, the Industrial Property Act of 2001, the Trade Marks Act, the Copyright Act of 2001, the Seeds and Plant Varieties Act, and the Universal Copyright Convention. The new Anti-Counterfeiting Act creates a new agency, the Anti-Counterfeiting Agency (ACA), to enforce IPR laws in Kenya. The ACA will be the lead agency for IPR enforcement and will coordinate its activities with the other enforcement bodies, including the Kenya Copyright Board (responsible for copyrights), the Kenya Industrial Property Institutes (responsible for patents, trademarks, and trade secrets), the Pharmacy and Poisons Board (responsible for medicines), and several other agencies. Penalties under the Anti-Counterfeiting Act are substantially more punitive than under previous IPR laws. The Ministry of Finance badly underfunded the new organization in its first year, resulting in a reduced workforce and slower buildup of capacity. The Copyright Act protects literary, musical, artistic, audio-visual works, sound recordings and broadcasts, and computer programs. Criminal penalties associated with piracy in Kenya include a fine of up to KSh800,000 (about 10,000), a jail term of up to 10 years, and confiscation of pirated material but enforcement and the understanding of the importance of intellectual property are poor. Copyright protection is the responsibility of the parastatal, the Kenya Copyright Board (KCB), which resides under the Attorney General39s Office. In collaboration with Microsoft and Hewlett-Packard, the KCB has in the past several years carried out a number of major busts. In November 2007, cyber cafeacute operators within Nairobi grappled between legalizing their Microsoft software operating system, shifting to Open Source Code, or closing shop all together following a joint KCB-police crackdown on illegal software. Most cyber cafes in Kenya use Microsoft software, although without valid licenses. The KCB raided the Jet Cyber and Dagit Cyber Cafe companies in Nairobi on the suspicion of copyright infringement. The raids on the cyber cafes came after the expiry of an October 30, 2007 deadline set by the KCB. During the raid, 50 computers containing unlicensed versions of Microsoft Windows Office 2003 edition were confiscated. Also impounded were Windows 2000 and Microsoft 2003 counterfeit installer CDs. The computers were valued at KSh1.5 million (about 18,750), while the cost of Windows and Office were estimated at KSh1.4 million (about 17,500). On September 18, 2008, Nairobi police and agents with Kenya39s Bureau of Weights and Measures raided two warehouses suspected of holding counterfeit Hewlett-Packard products and arrested the warehouse owner. Local authorities working with Hewlett Packard (HP) have seized more the 9000 counterfeits in Kenya since November 2008. Kenya is a member of the World Intellectual Property Organization (WIPO) and of the Paris Union (International Convention for the Protection of Industrial Property) along with the United States and 80 other countries. The African Intellectual Property Organization (AIPO) embodies a future prospect for patent, trademark, and copyright protection, although its enforcement and cooperation procedures are yet untested. Kenya also is a member of the African Regional Intellectual Property Organization (ARIPO). Kenya is a signatory to the Madrid Agreement Concerning the International Registration of Marks however, the other original EAC members (Uganda and Tanzania) are not. The Kenya Industrial Property Institute (KIPI), under the Ministry of Trade and Industry, is responsible for patents, trademarks, and trade secrets. Investors are entitled to national treatment and priority right recognition for their patent and trademark filing dates. The Trade Marks Act provides protection for registered trade and service marks that is valid for 10 years and is renewable. The Act established an independent national patent law and KIPI, which considers applications for and grants industrial property rights. However, actual protection for intellectual property -- copyrights, patents, and trademarks -- remains inadequate. The sale of pirated audio and videocassettes is rampant, although there is little domestic production. According to the Business Software Association (BSA), an estimated USD 3.5 million is lost every year because of the use of illegal software, mainly by businesses. Kenya enacted the Industrial Property Act (KIPA) of 2002 to comply with WTO obligations, but its implementation of the law remains weak. In July 2006, the Ministry of Trade and Industry conceded that over KSh 36 billion (about 450 million) is lost annually due to the sale of counterfeit goods and a further KSh 6 billion (about 75 million) is lost in tax revenues to the government. A subsequent KAM study, released in late October 2008, concluded that piracy and counterfeiting of business software, music, pharmaceuticals, and consumer goods costs Kenyan firms about 715 million annually in lost sales. KAM estimates the government now loses over 270 million in potential taxes every year. Since then, former KEBS Director Dr. Kioko Man39geli charged that counterfeits are eating 10 percent of this countrylsquos GDP annually. To combat the manufacture and sale of counterfeits, he announced that, as part of a five-year strategic plan, KEBS would require that manufacturers obtain a new standardization mark. KEBS would also open a National Quality Institute to train both business leaders and consumers and would offer IPR courses to magistrates. On behalf of local textile and apparel producers, Kenyan Customs and Port Authority officers have prevented the transshipment of foreign-made (mostly Asian) garments through the Port of Mombasa that are fraudulently being exported to the United States under AGOA preferences. Kenya is also working to crack down on the entry into the local market of counterfeit or substandard goods. In 2006, it confiscated and destroyed over 3 million fake Bic pens. Since then, the Kenyan government has intercepted additional counterfeit Bic pens, Eveready batteries, Kiwi shoe polish, and other pirated consumer goods. Unfortunately, inadequate enforcement of intellectual property rights continues to affect global companies operating in Kenya and within the region. Inadequate funding for Kenya39s anti-counterfeiting agencies limits the number of seizures and destruction of counterfeits in an environmentally friendly way ndash often leaving seized goods to pile up in warehouses where they may be stolen and returned to the market. Inadequate training for judges means that the new law is often not enforced or manipulated so that counterfeiters may retrieve their goods after paying a small fine. Transparency of Regulatory System Investors in Kenya are required to comply with environmental standards. The National Environment Management Authority (NEMA) oversees these matters and is the principal environmental regulatory agency. Developers of particular projects are required to carry out Environmental Impact Assessments (EIA) prior to project implementation. Companies are required to submit their up-to-date assessment reports to NEMA for verification by the agencylsquos environmental auditors before they can receive an EIA license. In theory, all investors receive equal treatment in the initial screening process. The government screens each private sector project to determine its viability and implications for the development aspirations of the country. For example, a rural agro-based enterprise, with many forward and backward linkages, is likely to receive licensing quickly. However, new foreign investment in Kenya historically has been constrained by a time-consuming and highly discretionary approval and licensing system, that is subject to corrupt practices. In response to appeals from the business community in 2007, the government earnestly began improving Kenya39s business climate. Following the reduction of required business licenses, simplification of others, and establishment of an electronic company registry, Kenya is a much better country in which to do business. In 2009, the GOK launched an e-Registry, which sped up the registration of new companies, cut regulation costs, and enhance transparency in accessing information on registered companies. The Licensing Act of 2007 has eliminated or simplified 694 licenses to date. In 2008, the government reduced the number of licenses to set up a business from 300 to 16 and is reviewing another 337 licenses. The World Bank-International Finance Corporationlsquos quotDoing Business 2010 Report, quot which ranked 183 national economies on their ease of doing business, ranks Kenya as the 98th in ease of doing business, a drop from 94th in 2009. Issues hurting Kenya39s ranking include difficulties in starting a business, registering property, paying taxes, trading across borders, and enforcing contracts. The World Bank and IFC contend that the government must significantly reduce the cost of doing business, deal with delays at the Port of Mombasa, and eliminate the requirement of even more licenses to maintain Kenya39s current level of economic growth. The Restrictive Trade Practices, Monopolies, and Price Control Act of 1989 (with subsequent amendments) govern Kenya39s competition framework. The Act is relatively modern and works well in avoiding anti-competitive practices since the abolition of price controls in 1994. The Monopolies and Prices Commission, however, is under the Ministry of Finance, instead of an independent regulatory body. Although the Commission is independent in its investigation of competition-related issues, it must rely on ministerial powers to enforce orders on companies found to have breached competition rules. The Commission lacks the capacity to implement the legislation fully. Practices that seek to block entry into production and that discriminate against buyers (for production, resale, or final consumption) are illegal. Mergers and acquisitions must receive the green light from the Commission and the Minister of Finance in all cases, regardless of the sector, size, or market share of the companies involved. This puts an unnecessary burden on investors and the Commission. However, the Commission has no jurisdiction over the electricity, telecommunication, or insurance sectors. Under the law, manufacturers may not distribute their own products, and they are required to supply information to the government about their distributors. Antitrust legislation governs incoming foreign investment through acquisitions, mergers, or takeovers by antitrust legislation that prohibits restrictive and predatory practices, which prevent the establishment of competitive markets. Antitrust legislation also seeks to reduce the concentration of economic power by controlling monopolies, mergers, and takeovers of enterprises. Mergers and takeovers are subject to the Companies Act, the Insurance Act (in case of insurance firms), or the Banking Act (in case of financial institutions). Kenya has been ranked among the most accessible and connected markets in Africa. The country stands among the continentlsquos top five behind South Africa, Tunisia, Guinea, Sudan, and Mauritania with regard to reliability of the supply chain according to a 2007 World Bank survey on trade logistics. Kenya ranked 76 out of the 150 countries tested for efficiency in key supply chain areas such as customs procedures, cost of logistics, and infrastructure quality. Through the Port of Mombasa, Kenya is a major hub for international and regional trade for neighboring land - locked countries such as Uganda and the Great Lakes region. The survey, however, found that the cost of importing or exporting containers in Kenya and other large economies in Africa remains higher compared to the global average. Efficient Capital Markets and Portfolio Investment Kenya has a small capital market overseen by the government-controlled Capital Market Authority (CMA). The market consists of the Nairobi Stock Exchange (NSE), 21 investment advisory firms, 20 investment banks, 6 stockbrokers, 18 fund managers, 15 authorized depositories, 13 collective investment schemes, 7 employee share ownership plans, one credit rating agency, one venture capital fund, and one central depository. The CMA regulates and supervises all these institutions and oversees the development of Kenyalsquos capital market. The CMA is working with other East African Community (EAC) member states through the Capital Market Development Committee (CMDC) and East African Securities Regulatory Authorities (EASRA) on a two-year roadmap to integration of their respective capital markets. Beginning in 2005, the NSE started settling all equity trades through an electronic Central Depository System (CDS). The combined use of both CDS and Automated Trading System (ATM) has moved the Kenyan capital market to globally acceptable standards. Kenya has recently joined the International Organization of Securities Commissions (whose members represent 90 percent of the world39s capital markets) as a full (ordinary) member, which solidifies their status as the primary capital market place in East Africa. The NSE enjoyed a bull market from January 4, 2005 when its blue chip share index was 2980.48 to January 10, 2007, when it reached an all-time high of 6085.50. Blue chips remained well above 5000 throughout 2007 and eventually the NSE attained a market capitalization of 16.3 billion. However, trading and prices nosedived in the wake of the January-February 2008 post-election crisis, and continued to do so as the world economy entered a recession in late summer 2008. By the end of 2008, the NSE had a market capitalization of approximately 11.4 billion (roughly on par with the end of 2007) but its blue chips had dived to 3521 (a 35 percent drop from 2007). At the end of 2009, NSE market capitalization stood at 11.1 billion and the NSE blue chips had dropped almost 8 percent from 2008 to stand at 3247. Wrapping up 2010, NSE market capitalization boomed to sit at 14.6 billion and the NSE blue chips had increased to 4433. The NSE categorizes itself into three segments: the Main Investments Market (MIMS) (with 47 offerings), the Alternative Investments Market (AIMS) (with eight offerings), and the Fixed Income Securities Market (FISMS) (with 12 offerings). The MIMS targets mature companies with strong dividend streams. The AIMS is more favorable to small and medium-sized companies, and allows firms to access lower interest rate, longer-term sources of capital through the capital markets. The FISMS allows businesses, financial institutions, and governmental and supranational authorities to raise capital through the issuance of debt securities. Fees charged by the CMA on NSE participants are a significant entry barrier for new companies. The NSE needs to do additional work to develop small business entry into the stock market. While the equity market has participated in active trading for some time, the corporate bonds market has been active only since 1997. The equity market is far larger and more mature than the bond market, which is growing. Currently, 16 corporate bonds are trading on the NSE. In general, the treasury bonds issued by the government are more active than corporate bonds although, that is beginning to change due to large corporate bond issues in 2009. Trading in commercial paper and corporate bonds issued by private companies has diversified activity at the NSE. The government regulates such trading through a set of guidelines developed in collaboration with private sector. They allow private companies to raise funds from the public without NSE quotation. Establishing the CDS encouraged the development of a secondary market for the governmentlsquos one-year floating rate bond. The CDS opened a shop window for small investors offering products in multiples of KSh 50,000 (about 769) up to KSh 1 million (about 15,400). Expenses related to credit rating services by listed companies and other issuers of corporate debt securities are tax deductible. Foreign investments through mergers and acquisitions are not restricted via cross-shareholding and stable shareholder arrangements. Hostile takeover attempts are uncommon. Private firms are free to adopt articles of incorporation, which limit or prohibit foreign investment, participation, or control. Foreign investors can acquire shares freely in the stock market, subject to a reserve ratio of 40 percent for domestic investors in each listed company. To encourage the transfer of technology and skills, the government allows foreign investors to acquire up to 49 percent of local stockbrokerage firms and up to 70 percent of local fund management companies. Foreign ownership of equity in insurance and telecommunications companies is restricted to 66.7 percent and 80 percent, respectively. Foreign equity in companies engaged in fishing activities is restricted to 49 percent of the voting shares under the Fisheries Act. Foreign investors are able to obtain credit on the local market however, the number of credit instruments is relatively small. Legal, regulatory, and accounting systems are generally transparent and consistent with international norms. The corporate tax for newly listed companies is 25 percent for a period of five years from the date of listing. The withholding tax on dividends is 7.5 percent for foreign investors and 5 percent for local investors. Foreign investors can acquire shares in a listed company subject to a minimum reserved ratio of 40 percent of the share capital of the listed company for domestic investors, with the remaining 60 percent considered as a free float available to local, foreign, and regional investors without restrictions on the level of holding. Dividends distributed to residents and non-residents are subject to a final withholding tax at the rate of 5 percent. Dividends received by financial institutions as trading income are not subject to tax. In 2007, the GOK granted the following fiscal incentives to encourage growth of capital markets: (1) exemption from income tax on interest income accruing from cash flows of securitized assets and (2) exemption from income tax on interest income accruing from all listed bonds with at least a maturity period of three years. The fiscal incentive targets providers of infrastructure services such as roads, water, power, telecommunication, schools, and hospitals. Company capital expenditures on legal costs and other incidental expenses associated with listing by introduction at the NSE are tax deductible. As of the end of 2010, Kenyalsquos banking sector consisted of 43 commercial banks, one mortgage finance company, two microfinance institution, one credit reference bureau, and 126 forex bureaus (primarily located in Nairobi and Mombasa). At the end of October 2010, total banking assets increased to almost 21 billion. Loans and advances accounted for 51 percent of total assets with 26 percent in government securities and 7 percent in placements with the Central Bank of Kenya (CBK). The ratios of total and core capital to total risk-weighted assets improved from 19.9 percent and 17.5 percent to 20.7 percent and 18.5 percent, respectively, mainly due to a more than proportionate increase in core and total capital. The asset quality of Kenyan banks improved from 3 percent in June 2010 to 2.4 percent in October 2010 of assets classified as non-performing. A cumbersome court system complicates the realization of collateral, which makes it difficult for creditors to accept collateral. Only 19 percent of Kenyans have formal access to financial services through commercial banks and the Post Bank. With the advent of mobile money and its recent association with the formal banking system, the number of Kenyans with access to electronic financial services continues to grow. Since most Kenyan adults own a cell phone, they can utilize mobile money services to receive their salary, do their shopping, pay their school fees, and, now, access savings, insurance, and other financial services. Kenya has four mobile money services: MPesa, the dominant service through Safaricom Zap, run by Bharti Airtel Orange Money, run by Orange and Yu Cash, run by Essar Telecom. The financial sector, in particular the commercial banks, remains relatively robust, aided by a stable macroeconomic environment and stringent supervisory oversight. Despite the global economic downturn, the banking sector expanded by 11 percent in 2009-2010, at least partially due to a continued housing boom in Nairobi. Islamic banking, which started modestly, has continued to take off as the primary Islamic-based banks expand their reach across Kenya into areas with relatively smaller Muslim minorities. Islamic banking solutions, first introduced in December 2005, took the form of deposit products tailored in line with Shariah principles, which have grown to include insurance products. The Parliament amended the Banking Act of 2004 to delegate the power to register and deregister commercial banks and financial institutions from the Finance Minister to the Central Bank of Kenya (CBK). Under the Central Bank of Kenya Act, the security of tenure for the Governor is enhanced, the Bank39s operational autonomy is increased, the CBK39s bank supervision functions are strengthened, and statutory restrictions on government borrowing from the Bank are codified. The CBK sets requirements for all banking institutions and building societies to disclose their un-audited financial results on a quarterly basis by publishing them in the print media. Parliament also amended the Central Bank of Kenya Act in December 2004 to establish an independent Monetary Policy Advisory Committee (MPAC) whose mandate is to advise the Bank with respect to monetary policy. The amended Act provides for the CBK to publish the lowest interest rate it charges on loans to banks referred to as the central bank rate. Other amendments transferred powers to revoke and issue licenses to financial institutions from the Ministry of Finance to the CBK and introduced an quotIn Duplum Rule, quot which limits fees and fines on non-performing loans to the amount of the outstanding principal. However, the rule is yet to be implemented. A proposal by the Finance Minister in June 2007 to increase minimum capital requirement for a commercial bank from KSh 250 million (about 3.85 million) to KSh 1 billion (about 15.4 million) over a period of three years was rejected by Parliament. The last five years have seen improvements in the financial sectorlsquos legal and regulatory framework, triggered by the enactment of the Cooperative Societies Amendment Act of 2004. To regulate Kenyalsquos burgeoning insurance industry, Parliament passed the Insurance Amendment Act 2006, which resulted in the establishment of the Insurance Regulatory Authority. To strengthen the Sacco industry, Parliament passed the 2007 Sacco Act. As a result, access to financial services has improved especially for those previously unable to bank. For instance, the introduction of M-Pesa by Safaricom has made it easy to send money via cellular phone at very low cost. All of the telecom operators followed suit with their own products in the market. Mobile money has grown in size and popularity and now provides savings and insurance services to the large majority of Kenyans who do not have access to a bank. Parliament passed and the President signed the Anti-Money Laundering Bill of 2008. This long-awaited bill provides for the creation of an FIU (financial intelligence unit) with investigatory powers and sets specific reporting requirements for financial institutions. The law came into force in June 2010, although implementing mechanisms are yet to be put into place. The Microfinance Act of 2006 became operational in 2008. The Act provides for the licensing, regulation, and supervision of the microfinance sector, necessitated by a series of mismanagement and embezzling scandals at micro-finance institutions. The law provides for the regulation of deposit taking microfinance institutions in Kenya and gives the CBK powers to oversee microfinance institutions. Microfinance institutions (MFIs) provide financial services to majority of Kenyans who remain unbanked. Kenya39s financial sector has a wide range of products, institutions, and markets, but there are gaps in development finance. Commercial banks, which traditionally refrained from offering long-term capital, are beginning to provide long-term capital, at least to large companies. Kenya39s corporate bond market is still in an early stage of development. While having attracted a handful of firms, it is faced with the problem of low liquidity thus, to boost long-term investment growth, deliberate efforts must be made to adequately develop vehicles for mobilizing long-term capital in Kenya. Development Finance Institutions (DFIs) are viable options given the prevailing market condition. However, in Kenya, DFIs have faced several constraints that have made them unable to fill in the development-financing gap. Competition from State Owned Enterprises Kenya has a long history of government ownership in industry dating back to independence. Public ownership of enterprise expanded from independence in 1963 through the 198039s. However, several commissions, one in 1979 and one in 1982, established the need for Kenya to begin divesting itself of its publicly owned enterprises. The commissions identified 240 publicly owned firms and listed 207 as non-strategic and the remaining 33 as strategic. During the first round of privatization, from 1992 to 2002, Kenya fully or partially privatized most of the non-strategic publicly owned firms. From 2003 to 2007, the government of Kenya engaged in a second round, which fully or partially privatized a number of large strategic firms, including KenGen (the primary electricity generator), Kenya Railways, Mumias Sugar, Kenya Reinsurance, Telkom Kenya, and Safaricom. These transactions netted over a 1 billion towards supporting additional development and infrastructure. The third round of privatization is scheduled to last through 2013 and includes the Development, Consolidated and National Banks of Kenya, five sugar companies, the Kenya Wine Agencies, nine hotels, portions of the Kenya Ports Authority, the Agrochemical Food Company, the remainder of KenGen, East African Portland Cement, the Kenyan Meat Commission, the New Kenya Cooperative Creameries, the Numerical Machining Complex, and several power stations. The Kenyan government seems determined to remove itself from competing with private enterprise, other than a few strategic areas. The government divested the telecom sector from 2002 to 2007, which now enjoys full competition. The sugar industry has been partially privatized and will be fully privatized with the next round of divestitures. The energy industry remains the most publicly owned sector in Kenya. The Kenyan government owns the National Oil Corporation, the Kenya Pipeline Corporation, and the oil refinery in Mombasa. Therefore, competition is either restricted or limited. KenGen, Kenya Power and Lighting, and the newly formed Geothermal Development Corporation dominate the electricity generation portion of the energy sector, which is another restricted portion of the Kenyan economy. The primary port in Mombasa is mostly government owned but privatization efforts are underway. Beyond these sectors, competition is expected and encouraged among private enterprise in Kenya. Corporate Social Responsibility Kenya has only recently applied the concept of corporate social responsibility (CSR). The United Nations has instigated discussions under the auspices of the UN Global Compact in Kenya for the introduction of the UN Global CompactUNDP quotGrowing Sustainable Business for Poverty Reduction Initiative. quot In Kenya, surveys suggest that the highest proportion of corporate donations goes for health and medical provision. In addition, corporations direct funds towards education and training, HIVAIDS, agriculture and food security, and underprivileged children. The rationale for these philanthropic activities is closely tied to a sense that companies should give something back to the nation and to the communities in which they operate. In Kenya, many companies in the export-processing sector are seeking to mainstream HIVAIDS programs into their activities as well as other workplace issues. Local campaigns have focused attention on labor rights and abuses in Kenyan export sectors such as textiles, cut flowers, and horticulture. Some companies are taking a positive lead on labor standards, i. e. Cirio Delmonte is now accredited to the SA8000 standard. The bulk of the business community is challenged to create quality jobs by paying living wages and observing fundamental labor rights. Given that employment creation is one of the most pressing concerns in Kenya, workplace issues ndash particularly trade-offs between the creation of jobs and reasonable pay and working conditions ndash are likely to remain at the heart of the CSR agenda. In Kenya, there are relatively few incentives for businesses to adopt responsible or pro-development practices. Few consumers in either country are sufficiently informed or able to pay a premium for responsibly produced goods. While some companies producing for export markets are subject to labor or environmental requirements imposed by overseas buyers, those producers selling into the domestic market are unlikely to be subject to such pressures. Even pressures within export markets are patchy, depending on the sector, product, and buyer. A similar gap is observed between large companies operating in the formal sector, and smaller companies or micro-enterprises, which operate below the radar. Given the economic context in which financial margins are generally very thin, companies are unlikely to adopt higher standards voluntarily unless there is a clear business case. The disputed December 27, 2007 presidential election unleashed Kenyalsquos worst episode of ethnically-charged political violence. Before the antagonists reached a power-sharing agreement in late February 2008, the violence took the lives of 1,200 Kenyans and displaced 500,000, including thousands of farmers. Property damage was in the millions of dollars. Agriculture alone suffered 300 million in damages. Tourism took a major hit. Arrivals and earnings fell 90 percent in the first quarter 2008, and were off 30 percent throughout the year. At least 20,000 Kenyans employed in the tourism sector lost their jobs. The violence dissuaded both tourists and potential investors from coming to Kenya. Buyers stopped considering Kenya, resulting in several factories closing. An official government investigation, the Waki Commission, reportedly names several prominent Kenyan politicians as having instigated much of the violence. As of mid-December 2010, the commission39s report has yet to be released to the public, although on December 15, 2010 the International Criminal Court (ICC) released the names of six individuals, five government officials, and one journalist, identified as suspects in the incidents of political violence. Indictments may follow in early 2011, although a movement is afoot to withdraw from the ICC and establish a local tribunal, which is unlikely to result in any indictments unless there is a massive public outcry. Despite the global recession, the Kenyan economy began to bounce back in 2009 and 2010, especially with respect to tourism. The very slow implementation of the reform agenda, agreed upon by both parties involved in the power sharing agreement, concerns many in Kenya, who fear that without the reforms, violence will return in the 2012 election. The reform agenda includes police, land tenure, judicial, and constitutional reform as well as prosecution of those who instigated the 2007 violence. Of the various required reforms, Kenya has only partially implemented a new constitution voted for by 23 of the Kenyan people. Terrorism also remains a serious problem. Kenya suffered major terrorist attacks in 1998 and 2002. On August 7, 1998, bombs exploded at the U. S. Embassies in Nairobi and Dar es Salaam, Tanzania, killing over 250 and wounding more than 5,000 people. A suicide bomber killed 15 people in an Israeli-owned Mombasa hotel in November 2002. The U. S. maintains a travel warning for Kenya due to the threat of terrorism and violent crime. The shaky situation in neighboring Somalia has heightened security concerns at a time when Kenya has yet to enact appropriate anti-terrorism legislation. In 2010, several incidents occurred, including a suicide bombing of a bus in Nairobi in late December that killed two and injured more than twenty. Crime is a major source of insecurity in the country. According to a World Bank study, in 2004 almost 70 percent of investors reported major or very severe concerns about crime, theft, and disorder in Kenya, as opposed to 25 percent in Tanzania and 27 percent in Uganda. Kenya has good relationships with all its immediate neighbors. However, unstable, porous, and conflicted borders remain a source of insecurity in the region. The 2002 terrorist attacks in Mombasa are thought to have been planned in Somalia and much of the small arms used to commit crimes in Kenya are widely believed to originate from Somalia. In 2004, 11 East African countries decided to create an Eastern African Standby Brigade (EASBRIG). The EASBRIG is one of the five formations of the African Standby Force, established by the African Union in 2002, to carry out peacekeeping operations. The headquarters of the EASBRIG is in Addis Ababa and its secretariat in Nairobi. EASBRIG is operational and should be ready for deployment by 2015. The current coalition government inherited a problem of grand-scale economic and political corruption. In 2003, the Kibaki government enacted the Anti-Corruption and Economic Crimes Act and the Public Officers Ethics Act, setting rules for transparency and accountability, and defining graft and abuse of office. The Public Officers Ethics Act requires certain public officials to declare their wealth and that of their spouses within 90 days from August 2, 2003. Subsequently, the government fired 23 judges for corruption. Nevertheless, opposition leaders castigated the Kibaki government for its lackluster pursuit of individuals suspected of corruption. In 2004, the government established the Kenya Anti-Corruption Commission (KACC), moved forward with the implementation of the Anti-Corruption and Economic Crimes Act, and launched full implementation of the Code of Ethics Act for Public Servants in 2004. A Public Procurement and Disposal Bill became law in 2005. It establishes a procurement commission to oversee all procurement matters but has proven ineffective in limiting abuse by public officials. Large public procurement programs and military procurement have been at the center of a number of corruption scandals in recent years. Enacted in 2007, the Supplies Practitioners Management Act is to regulate the training, certification, and conduct of procurement officers. The law complements the Public Procurement and Disposal Act, which came into force in January 2007. The new law, which is an effort to curb loss of public funds, stipulates strict operational measures and penalties for breach in an attempt to eradicate corruption that remains embedded in the GOKlsquos tendering processes. The KACC launched several investigations in 2006-2007 against senior government officials, including two government ministers however, none of the cases has been prosecuted successfully, in large part due to bottlenecks in the Attorney General39s Office and loopholes in the judiciary. Former Finance Minister Amos Kimunya stepped aside in early July 2008 in connection with the non-tendered sale of a government-owned property, the Grand Regency Hotel, to a Libyan group. An investigatory commission, the Cockar Commission, reportedly exonerated Kimunya of any wrongdoing. He was appointed as Minister of Trade in January 2009, providing an example of the culture of impunity in Kenya. At the end of 2010, he became Minister of Transportation. In 2009, President Kibaki irregularly reappointed the director of KACC, the primary corruption investigatory unit. With the former director of KACC and the Attorney General, no minister-level official has ever been prosecuted in Kenya despite huge corruption scandals including Goldenberg, Anglo Leasing, Triton, and the maize scandal. After a storm of protest from Parliament, the director of KACC lost his re-appointment vote. This historic vote was the first time that Parliament had overruled the President. In 2010, the KACC Board selected PLO Lumumba as director of KACC. Lumumba has taken a strong stance against corruption, and is re-opening some of the older cases, including Anglo-Leasing. In December 2010, Lumumba, in his first major corruption case, and the KACC arrested and charged Minister of Trade Henry Kosgey with abuse of office over the illegal importation of automobiles. The 2010 Ibrahim Index of African Governance ranked Kenya 26 out of 53 countries on the quality of governance, a drop of four places from 2009. The 2010 Transparency International Corruption Perceptions Index ranks Kenya 154 of 178 countries, a drop of 8 places from 146 in 2009, and its composite score of 2.1 was the second worst in the EAC, better only than Burundi. Bilateral Investment Agreements Kenya does not have a bilateral investment trade agreement with the United States, although there are hopes for talks leading to such an eventual agreement. Kenya has bilateral trade and investment agreements with Germany, the Netherlands, Brazil, and the United Kingdom. Agreements are pending with Italy and Russia. Kenya and her EAC partners signed a Trade and Investment Framework Agreement with the United States in July 2008 as a bloc. OPIC and Other Investment Insurance Programs Kenya is eligible for Overseas Private Investment Corporation (OPIC) programs. In 2008, the U. S. Overseas Private Investment Corporation (OPIC) supported two projects in Kenya totaling 11.78 million. The beneficiaries include two microfinance companies. In 2009, OPIC supported three projects totaling 7.4 million, including two large microfinance projects women. Historically, OPIC has committed 75 million to 42 projects in Kenya. Kenya39s population reached an estimated 40 million in July 2010. Of the approximately 20 million working Kenyans ages 15-64, the Kenya National Bureau of Statistics reports that 7 million are engaged in pastoral and small-scale subsistence livestock rearing and farming. Another 8.3 million are engaged in commercial agriculture, ranching, and the informal sector. Only 2 million Kenyans are in the formal sector. Approximately 54 percent of the population lives on less than 1 per day (the 8 percent increase over the 2007 figure of 46 percent is attributable to the January-February 2008 post-election violence). Per capita income, per the Atlas method, is 770. High population growth rate of 2.64 percent per annum means there is an on-going demand for new jobs . Kenya has an abundant supply of well-educated and skilled labor in most sectors at internationally competitive rates. Though there is an apparent modest decline in new infections, high HIVAIDS prevalence continues to pose a serious threat to human resource development and an economic drain on families and the health care sector. The Kenya AIDS Indicator Survey 2007 (released in July 2008) indicates that 7.4 percent of Kenyans ages 15-64 are infected with HIV, with considerable disparities in prevalence among provinces. Kenya39s laws generally provide safeguards for worker rights and mechanisms to address complaints of their violation, but the Ministry of Labor and Human Resource Development lacks the resources to enforce them effectively. In October 2007, Parliament passed and President Kibaki signed five labor reform laws that were drafted with the ILOlsquos assistance under the U. S. Department of Laborlsquos Strengthening Labor Relations in East Africa (SLAREA) project to make Kenyalsquos labor laws more consistent with ILO core labor standards, AGOA compliant, and harmonious with Ugandalsquos and Tanzanialsquos. The new laws are: the Employment Act, which defines the fundamental rights of employees and regulates employment of children the Labor Relations Act on worker rights, the establishment of unions, and employers associations the Labor Institutions Act concerning labor courts and the Ministry of Labor and Human Resource Development the Occupational Safety and Health Act and the Work Injury Benefits Act on compensation for work-related injuries and diseases. The GOK gazetted the amended texts of the new laws in 2008. Also in 2008, the Government of Kenya gazetted the National Labor Board to steer stakeholders to meet and propose necessary amendments to Parliament for smooth implementation of the Acts. The Board will set structures and rules as required by the Act. Under the new Labor Relations Act, a minimum of seven workers may apply to register a union, but the nascent union must have a minimum of 50 members to be registered. A union must show a signed membership request from 50 percent of the workers in a workplace to force an employer to recognize the union. There are 42 registered unions representing over 500,000 workers, approximately one quarter of the country39s formal sector work force. All but six, including the 240,000 member Kenya National Union of Teachers (KNUT), the University39s Academic Staff Union (UASU), and the Union of Kenyan Civil Servants (UKCS), are affiliated with the Central Organization of Trade Unions (COTU), which has about 260,000 members. Union membership is voluntary and organized by craft rather than industry. The law permits strikes, but unions must notify the government 21-28 days before calling a strike. During this period, the Minister of Labor and Human Resource Development may mediate the dispute, nominate an arbitrator, or refer the matter to the Industrial Court. If the Minister of Labor and Human Resource Development refer to mediation, fact-finding, or arbitration, any subsequent strike is illegal. Kenya39s Industrial Court is backlogged and has difficulty enforcing its rulings because employers tend to appeal to the High Court. The Labor Institutions Act of 2007 expands the Industrial Court and gives it the same powers as a High Court to enforce its rulings with fines or prison sentence. The court has penalized employers for discriminating against employees because of their union activities, usually by requiring the payment of lost wages. Court-ordered reinstatement is not a common remedy because of the difficulty in implementation. Kenya has relatively harmonious labor relations. The number of strikes dropped significantly from 24 in 2007 to 8 in 2008, reflecting a 66 percent decrease. In 2008, 4718 workers were involved in the strikes representing 135,185 person-hours compared to 36,095 workers involved with strikes in 2007. The Industrial Court adjudicated 226 cases out of which it gave 192 rulings compared to 295 cases and 147 rulings in 2007. The agricultural sector had the highest reduction of strikes with two in 2008 compared to 14 in 2007. Labor law mandates the total hours worked in any two-week period should not exceed 120 hours (144 hours for night workers). Negotiations between unions and management establish wages and conditions of employment. There are twelve separate minimum wage scales, varying by location, age, and skill level. The lowest minimum wage is currently about 41 (KSh 3270) per month in urban areas and about 38 (KSh 3043) in rural areas. On May 1, 2009, the GOK the increased the statutory minimum wage by 20 percent under the General Wage Order and 18 percent for workers in the agricultural sector. To give more weight on productivity improvement in determining wage increases, the government announced, in its June 2005 budget speech, that minimum wages should be considered for adjustment after at least two years as opposed to every year, and that wages be adjusted in line with productivity changes however, the decision remains unimplemented. Workers covered by a collective bargaining agreement generally receive a better wage and benefit package than those not covered (on average 182, or KSh 14621, per month), plus a housing and transport allowance, which may account for 20 to 40 percent of a Kenyan workerlsquos compensation package. Kenyan law establishes detailed environmental, health and safety standards, but these tend not to be strictly enforced. The Directorate of Occupational Health and Safety Services (DOHSS), a department under the Ministry of Labor and Human Resource Development, has the mandate to enforce the Occupational Safety and Health Act and its subsidiary rules. DOHSS has the authority to inspect factories and work sites, except in the EPZs, but had only 45 inspectors, instead of the 168 expected to cover the entire country. DOHSS developed a program to help factories establish Health and Safety Committees and train them to conduct safety audits and submit compliance reports to DOHSS. The Directorate maintains a register of approved and certified safety and health advisers whom employers may enlist to conduct safety audits in the factories and other places of work. The Directorate should carry out these audits at least once a year and forward a copy of the audit report to the DOHSS within 30 days. However, according to the government, fewer than half of the largest factories had instituted Health and Safety Committees. Work permits are required for all foreign nationals who wish to work in Kenya. An applicant for an entry permit describes the work one intends to engage in and only can engage in that specific activity. Although there is no official time limit, a visitor39s pass or a visa is usually valid for three months and the Immigration Department must grant applicable extensions upon proper application. Applicants may apply for work permits for in any major city in Kenya, but all applications go to Nairobi for processing. Foreign investors are required to sign an agreement with the government describing training arrangements for phasing out expatriates. High unemployment levels have led the government to make it increasingly difficult for expatriates to renew or obtain work permits, and Immigration increased the price of a work permit to up to Ksh200, 000 (about 2,500). The Immigration Department occasionally has cancelled work permits before the expiry date without giving reasons. According to the law, the immigration officer issuing entry permits may require a bond of not less than KSh 100,000 (about 1,250) for each permit to be deposited with the Immigration Department. Foreign-Trade ZonesFree Ports As of December 2010, 41 Export Processing Zones (EPZ) are operating around the country. The GOK gazetted three new zones in 2009. 83 companies are operating in the zones. A government parastatal, the Kenya Export Processing Zone Authority (EPZA), regulates the zones. Of the 41 zones, the public sector develops and manages two. The private sector, in the form of licensed EPZ developersoperators, owns and manages the rest. Of the 83 enterprises operating in EPZs, foreign investors own 57 percent and Kenyans own 19 percent with the remainder being joint ventures. The largest privately-owned EPZ is the Sameer Industrial Park located in Nairobilsquos Industrial area. It has been operational since 1990. The Athi River EPZ, near Nairobi, is the largest publicly owned EPZ at 339 hectares. The second publicly owned EPZ is being developed in Mombasa, Kenya39s main seaport. The United States remained the principal market in 2007 for Kenyan EPZ exports. Over 55 percent of EPZ manufactured products enter the United States under AGOA provisions. The value of non-agriculture AGOA exports was 207.9 million in 2009 a drop of almost 19 percent from 2008. AGOA exports of garment products worth 244.8 million constituted 94 percent of AGOA-related exports. While the U. S. is the leading market for Kenyan EPZ exports, diversification is occurring including Europe, Canada, the United Arab Emirates, Hong Kong, Panama, and Zimbabwe. Foreign Direct Investment Statistics Through the 8039s and 9039s, the deterioration in economic performance, together with rising problems of poor infrastructure, corruption, high cost of borrowing, crime and insecurity, and lack of investor confidence in reforms generated a long period of low foreign direct investment (FDI) inflow. Per the United Nations Conference on Trade and Development (UNCTAD), FDI inflows in the period 1990-2000 averaged 29 million a year. This report reflects 2009 FDI inflows of 141 million, an increase of 47 percent over a dismal 2008. The report indicates 2009 total FDI stock in Kenya of 2.13 billion. These figures compare poorly to Tanzania, which shows FDI inflows of 645 million and total FDI stock of 5.34 billion in 2009. The market value of U. S. investment stands at approximately 183 million (2008 estimate), primarily concentrated in commerce, light manufacturing, and tourism industry. Most foreign investment in manufacturing since 2001 has been in the EPZs 64 percent tied to AGOA-related apparel investment. Poor data collection in Kenya leads to underestimating actual inflows of FDI. There is no clear mandate by any agency to collect data on FDI. The Central Bank of Kenya (CBK), the Kenya Investment Authority (KIA), and the Kenya National Bureau of Statistics (KNBS) all collect only partial information on either balance of payments inflows or investment projects. The government does not publish data on the value of foreign direct investment (positionstock and annual investment capital flows) by country of origin or by industry sector destination. Neither is data available on Kenyalsquos investment abroad. However, recent media reports indicate a drop in FDI, now superseded by domestic investment ndash a clear indication that Kenya must implement constitutional and political reforms to attract FDI, attain double-digit economic growth, and achieve its goals of becoming a middle-income country by 2030.U. S. Department of State Openness to, and Restrictions Upon, Foreign Investment Kenya has enjoyed a long history of economic leadership in East Africa as the largest and most advanced economy in the region. However, ethnically-charged post-election violence in January-February 2008, which left approximately 1,200 dead and 600,000 displaced, caused many to reassess Kenyarsquos investment climate. Since then, the economy has rebounded, but GDP growth has not returned to 2007 levels. Serious concerns regarding corruption and governance have slowed Kenyarsquos economic growth, while some neighboring countries have maintained higher growth rates and more political stability. The average annual growth rate of gross domestic product (GDP) in the 2000s was 3.6 percent, an increase from the 1990s average of 2.2 percent. By 2010, the growth rate improved to 5.8 percent before falling to 4.4 percent in 2011. Economic growth in 2012 is projected by the World Bank to have been 4.3 percent, lower than earlier projections of 5 to 6 percent growth. The Treasury of Kenya projected 6.4 percent growth projection for the third quarter, based on expectations of favorable rains, and 6.8 percent growth for the fourth quarter. Despite the Treasuryrsquos optimistic growth projections, and even with favorable weather conditions in the third quarter of 2012, nominal GDP grew by 4.7 percent (2.2 percent, seasonally adjusted). Overall GDP growth has been negatively affected by: high interest rates, heightened insecurity due to al-Shabaab terrorist attacks and the emergence of youth gangs, election uncertainty, and depressed global demand due to the Euro-zone debt crisis. Tourism and horticulture have been most affected by the slowdown in Europe. The increase in consumption expenditure in the run-up to the March 2013 elections as well as the pick-up in the construction and trade sectors as a result of improved access to credit, brought by falling interest rates, would accelerate overall growth. The World Bank projects a growth rate of 5.0 percent in 2013 and 5.1 percent in 2014. The Treasury of Kenya projects the growth rate will increase to 6.5 percent in three years based on expectations of stable weather conditions, completion of infrastructure projects, and growth of regional markets for exports. These projections require Kenya to grow at a rate rarely seen in the past 30 years and still below the governmentrsquos Vision 2030 target growth rate of 10 percent. Kenyarsquos inflation dropped from 16.2 percent in 2008 to 9.2 percent in 2009, partly due to a new methodology for calculating the rate, and fell further to 4.1 percent in 2010. High inflation reemerged in 2011, however, hitting a year-on-year high of 19.72 percent in November 2011. The average annual inflation for 2012 was 9.6 percent, compared with 13.95 percent in 2011. Inflation consistently declined from a peak of 18.3 percent in January to 3.2 percent in December, registering 13 consecutive monthly drops in inflation. In October, Kenyarsquos year-on-year inflation fell below the Central Bankrsquos 5 percent target. However, the decline in year-on-year inflation is driven in part by rapid inflation in late 2011 and mask persistent monthly price increases. The average USDKsh exchange rate for 2011 was 88.87, and was 84.52 for 2012. At the end of 2012, the shilling was trading at approximately 86 to the dollar. Kenyarsquos economic performance and level of global competitiveness remains low relative to global benchmarks. According to the World Economic Forumrsquos Global Competitiveness Report 2012-2013 . Kenya is ranked 106 out of 144 countries evaluated countries, showing a relatively steady performance when compared to last yearrsquos ranking of 106 out of 139 countries ranked. The countryrsquos strengths continue to be found in the more complex areas measured by the Global Competitiveness Index (GCI). Kenyarsquos innovative capacity is ranked an impressive 50th, with high company spending on RampD and good scientific research institutions that collaborate well with the business sector in research activities. Supporting this innovative potential is an educational system thatmdash although educating a relatively small proportion of the population compared with most other countriesmdashis recognized for quality (37th) as well as for on-the-job training (62nd). The economy is also supported by financial markets that are well developed by international standards (24th) and a relatively efficient labor market (39th). According to GCI categories, Kenyarsquos overall competitiveness is held back by a number of social factors. Health is an area of serious concern (115th), with a high prevalence of communicable diseases contributing to the low life expectancy of 57 years and reducing the productivity of the workforce. Kenya is ranked 125th in terms of overall security. In 2011, Kenya ranks 143 of 187 countries according to the UN Human Development Index (HDI). Since independence in 1963, Kenya has pursued at various times import substitution and export-oriented industrialization strategies. It is currently implementing an industrialization strategy outlined in Sessional Paper No. 2, adopted by Parliament in 1996, which aims to transform Kenya into a fully industrial state by 2020. The strategy emphasizes support for export industries, driven by a desire to increase their employment potential. Vision 2030, unveiled in 2007 as the Kenyan governmentrsquos long-term plan for attaining middle-income status as a nation by 2030, buttresses the Sessional Paper by also recognizing industrial promotion as an avenue for growth and development. In 2012, the Ministry of Industrialization prepared the National Industrialization Policy (NIP) in line with Vision 2030 to guide development of the manufacturing industry. The NIP has been approved by the cabinet. The Ministry of Industrialization is developing a legal framework to implement it. Kenya has experienced difficulty seizing opportunities generated by trade liberalization in developed markets to export manufactured commodities. The bulk of its exports to the European Union are agricultural with minimal value addition: tea, coffee, cut flowers, vegetables, fruits, and nuts. Value addition to these primary products leads to tariff escalation in the European Union market. In addition, processed products in Kenya attract value-added tax (VAT) which must be paid first and claimed after exporting, through a reimbursement process in which it can take up to four years to receive the VAT refund. In contrast, manufactured goods (mostly apparel) comprise the majority of exports to the United States under the African Growth and Opportunity Act (AGOA). The textile and garments industry largely depends on imported fabrics and raw materials like cotton, viscose, polyester, denim, nylon, and acrylics, since a competitive integrated domestic cotton industry does not exist. The overwhelming majority of Export Processing Zones (EPZ) products are exported to the United States under AGOA, with AGOA-based exports to the United States reaching US292 million in 2011. By the end of 2011, Kenya has 44 designated EPZs in which 79 companies operated, employed 40,000 workers, and produced roughly 11 percent of exports. Kenya has also ventured into services, pioneering mobile money transfers through M-Pesa and other innovative ICT products. The countryrsquos regional leadership position, however, is threatened by persistently high energy costs and interest rates, which drive up the overall cost of doing business in Kenya. The manufacturing sector has shrunk in recent years as a percentage of GDP, exposing a gap in the countryrsquos ability to achieve a fully industrialized economy by 2020. To attain this and other development goals contained in the Vision 2030 roadmap, Kenyarsquos manufacturers believe the economy must grow by double digits for the next 18 years. The country also needs to address inefficiencies in transport logistics, especially at the Port of Mombasa. The Kenya Association of Manufacturers (KAM) called for the need to protect local manufacturers by banning the sale of second-hand clothes ( mitumba ). Local textile manufacturers argue that the continued sale of mitumba in the local market could potentially cripple their industry.1 Building upon its high ranking in innovative capacity in the GCI, Kenya is poised to become East Africarsquos information and communication technology (ICT) hub due to the continued growth in Internet and mobile technology use. The World Bankrsquos 2011 Kenya Economic Update states that over the last decade, ICT has outperformed all others sectors in Kenya, growing at an annual average of 20 percent. The report concludes that ldquoThe benefits of ICT are starting to be felt in other sectors, and have contributed to the conditions for the country to reach an economic tipping point. rdquo Kenya has four undersea fiber cables with approximately 8.56 terabytes of bandwidth. Plans to land a fifth undersea fiber optic cable in Kenya are underway, as part of an effort to increase the countryrsquos current bandwidth capacity to 15 terabytes. Kenya has over 17 million internet users (36 percent of the population) out of which only 6 million people access the Internet through subscription, while the rest use mobile devices to access the Internet. ICT, especially mobile technology, is an important area of growth and innovation in the Kenyan economy. As of December 2012, there are four mobile telecommunications providers in Kenya: the partially government-owned Safaricom, French-owned Orange (the mobile portion of Telkom Kenya), Indian-owned Bharti Airtel, (formerly Zain), and Indian-owned Yu (formerly Essar Telecom). Foreign telecom companies can establish themselves in Kenya, but must have at least 20 percent local ownership. In June 2010, Kenyarsquos telecommunications regulator slashed the license fee for third-generation (3G) mobile Internet services by 60 percent to US10 million in order to raise market penetration, and announced that it would not charge for an upgrade to 4G. The wider applications of ICT are starting to reshape the structure of the economy, especially in the financial sector. The ICT sector is eyeing a boom in business once the government devolves services to the county level after the March 2013 elections, especially if the government makes more public services available online. Kenyarsquos new 47 county governments will require better and faster data services to connect with one another and the national government. Moreover, citizens likely will demand more services to be provided online, which will increase public sector demand for ICT hardware and software. Experts have cited power shortages, costly devices, and data usage rates as some of the main issues impeding Internet use. With over 20,000 kilometers of fiber laid across the country, connectivity of this traffic to retail customers still remains a challenge. Tourism surpassed the pre-election levels with 1.26 million arrivals recorded in 2011, but growth in 2012 is expected to be flat. Consolidated tourist arrivals through airports from January through to September were 906,960 representing a 2.7 percent dip with 932,193 arrivals recorded in 2011 at the same period. Among the key source markets, only India, the United States, and China registered positive growth in 2012, according available statistic for the first three quarters of 2012. Tourist arrivals declined marginally by 0.5 percent for the first quarter of 2012, following the murder and kidnapping of foreign tourists in the northern coastal area of Lamu in late 2011. Several foreign governments issued travel advisories, leading to lower resort and hotel bookings by foreign tourists. Mombasa, located on the southern coastal area, also recorded a decline in the number of tourists in the first eight months of 2012. Contributing factors included incidents of terrorism and activities of the secessionist Mombasa Republican Council (MRC) lower arrivals from Europe due to the economic impact of the Euro-zone crisis and withdrawal of charter flights to Mombasa as well as other international airlines operating flights to Kenya.2 The Kenyan government focuses its investment promotion on opportunities that earn foreign exchange, provide employment, promote backward and forward linkages, and transfer technology. The only significant sectors in which investment (both foreign and domestic) are constrained are those where state corporations still enjoy a statutory monopoly. These monopolies are restricted almost entirely to infrastructure (e. g. power, telecommunications, and ports), although there has been partial liberalization of these sectors. For example, in recent years, five Independent Power Producers (IPPs) have begun operations in Kenya. In late 2010, the ratings agency Standard amp Poorrsquos (SampP) upgraded Kenyarsquos sovereign debt rating to BB (long-termshort-term) with a stable outlook. The rating is based on SampPrsquos ldquoexpectation of continued political stability, fairly resilient economic growth, improving inflation performance, and continued moderately high deficits, but with more spending on growth-enhancing infrastructure investment. rdquo SampP could lower the rating if ldquopolitical tensions were to flare up, significant currency pressures were to re-emerge, or fiscal or monetary performances were to deteriorate significantly. rdquo In November 2012, Moodyrsquos initiated coverage of Kenya, Nigeria, and Zambia. The rating agency assigned Kenya a long-term foreign and local currency rating of lsquoB1rsquo with a stable outlook. It cited economic resilience in the face of various shocks in recent years and a commitment to governance reforms as underpinning the rating. Moodyrsquos also said that even though the debt burden was high, the government had followed prudent fiscal policies in recent years. The report also highlighted risks from the 2013 election, increased activity of militants, a widening current account deficit, and volatile short-term flows. For future Moodyrsquos upgrades, the country needs to diversify the economy and make lsquosignificant improvementsrsquo in strengthening financial institutions. The country risks a downgrade if there is prolonged political instability following the 2013 election or deterioration in overall security. Moodyrsquos rating is similar to the lsquoBrsquo rating of SampP and Fitch, so this rating affirms the views expressed by other agencies. The respective roles of the public and private sectors have evolved since independence, with a shift in emphasis from public investment to private sector-led investment. The Kenyan government has introduced market-based reforms and provided more incentives for both local and foreign private investment. Foreign investors seeking to establish a presence in Kenya generally receive the same treatment as local investors, and multinational companies make up a large percentage of Kenya39s industrial sector. Furthermore, there is no discrimination against foreign investors in access to government-financed research, and the government39s export promotion programs do not distinguish between local and foreign-owned goods. The ability of foreigners to lease land classified as agricultural is restricted by the Land Control Act. Consequently, the Land Control Act serves as a barrier to any agro-processing investment that may require land. Exemption from this act can be acquired via a presidential waiver, but the opaque process has led to complaints about excessive bureaucracy and patronage. The Companies Ordinance, the Partnership Act, the Foreign Investment Protection Act, and the Investment Promotion Act of 2004 provide the legal framework for foreign direct investment (FDI). To attract investment, the Kenyan government enacted several reforms, including: abolishing export and import licensing, except for a few items listed in the Imports, Exports and Essential Supplies Act rationalizing and reducing import tariffs revoking all export duties and current account restrictions introducing a free-floating exchange rate allowing residents and non-residents to open foreign currency accounts with domestic banks and removing restrictions on borrowing by foreign as well as domestic companies. In 2005, the Kenyan government reviewed its investment policy and launched a private sector development strategy. One component of this effort was a comprehensive policy review by UNCTAD that was the basis for the 2005 UNCTAD Investment Guide to Kenya . published in conjunction with the International Chamber of Commerce (ICC). Kenya39s investment code, articulated in the Investment Promotion Act of 2004, which came into force in 2005, streamlined the administrative and legal procedures to create a more attractive investment climate. The Actrsquos objective is to attract and facilitate investment by assisting investors in obtaining the licenses necessary to invest and by providing other assistance and incentives. The Act replaced the government39s Investment Promotion Center with the Kenya Investment Authority (KenInvest) however, the law also created some new barriers. It set the minimum foreign investment threshold at US500,000 and conditioned some benefits on obtaining an investment certificate from KenInvest. The government later revised the minimum foreign investment threshold to US100,000 as an amendment to the act. The minimum investment requirement is likely to deter foreign investment, especially in the services sector, which is normally not as capital-intensive as the agriculture and manufacturing sectors. Another amendment made the foreign investment certificate requirement optional. Further regulatory reforms include the Licensing Act of 2007, which eliminated or simplified 694 licenses, and a 2008 reduction in the number of licenses required to set up a business from 300 to 16. The Business Regulation Act of 2007 established a Business Regulatory Reform Unit within the Ministry of Finance to continue the deregulation process. In 2009, Kenya launched a national e-Registry to ease business license processing and help improve transparency. A law passed in June 2007 reduced the maximum share of foreign ownership for companies listed on the Nairobi Stock Exchange (NSE) from 75 percent to 60 percent, creating a disincentive for foreign-owned firms interested in an NSE listing. Although the regulation is not applicable retroactively, it does compel companies with a foreign presence of more than 60 percent to downgrade foreign shareholding before they can apply to the NSE, effectively barring these firms from selling excess shares to non-Kenyans. Work permits are required for all foreign nationals wishing to work in the country. The Kenyan government issues permits for key senior managers and personnel with special skills not available locally. Firms seeking to hire expatriates must demonstrate that the requisite skills are not available locally through an exhaustive search, although the Ministry of Labor plans to replace this requirement with an official inventory of skills that are not available in Kenya, as discussed below. Firms must also sign an agreement with the government describing training arrangements for phasing out expatriates. A number of infrastructural, regulatory, and security-related constraints prevent the Kenyan economy from realizing its potential. The 2012 UNCTAD Investment Guide to Kenya provides comprehensive analyses of investment trends, opportunities, and the regulatory framework in the country According to this guide, Kenya faces several key structural challenges, most notably the absence of a reliable and affordable power supply. Many companies invest in costly backup generators to ensure a steady supply of electricity. Tax administration is another significant concern. Investors often face delays in obtaining VAT and other withholding refunds, and the customs clearance process can be drawn out as goods are subject to a multiplicity of inspections. Insecurity driven by domestic and foreign factors is another major concern, though the Kenyan government has taken important steps recently to improve its ability to monitor and respond to security incidents. An April 2008 survey conducted by the Kenya Association of Manufacturers (KAM), identified constraints similar to those in the UNCTAD report and concluded that Kenya39s business climate generally is hostile. According to KAM, energy costs in Kenya constitute as much as 40 percent of total manufacturing costs. Manufacturers in Kenya pay an average of US0.134kW of electricity, but their counterparts in Egypt pay US0.05kW. KAM reported that because of the costly investment climate, a number of companies have opted to shift from manufacturing to trading, while others have abandoned the Kenyan market altogether. After examining firmsrsquo decisions to close or relocate over the past decade, KAM deemed that legitimate commerce in Kenya is inhibited by: (a) unfair foreign competition, which dumps counterfeit and pirated products (cosmetics, toiletries, batteries, tires, car parts, medicines, books, electronic media, and software) and secondhand clothes and shoes into the market passes off new footwear and other apparel items as secondhand to avoid tariffs and under-invoices imports (b) the high cost of manufacturing due to exorbitant electricity tariffs, poor infrastructure (notably roads and rails), and hefty transport costs (c) periodic unavailability of raw materials such as crude oil (d) labor laws that compel private companies, rather than government, to provide their employees with a social safety net, including paternity and maternity leave and health care, all of which is taxable (e) low productivity, lack of worker discipline, and strong labor unions focused on obtaining higher wages an d benefits (f) onerous licensing requirements and harassment over petty demands (which could be interpreted as demands for bribes) and (g) the failure of the Kenya Revenue Authority (KRA) to process corporate tax and value added tax (VAT) refunds expeditiously. KAM noted that Kenyarsquos export markets have also been diversified away from an over-reliance on Europe to regional markets in Africa. According to the Kenya Economic Survey 2012 . Africa is the dominant export destination for Kenyan goods, while Asia is the leading source of Kenyarsquos imports. Currently Kenya exports three times more than it did 10 years agomdashmostly manufactured goods and servicesmdashto new markets rather than unprocessed products they sold traditionally. A recent survey of 145 CEOs by the Kenya Private Sector Alliance (KEPSA) found that high energy costs, the high cost of credit, and insecurity are major constraints for Kenyan businesses. Energy topped the list, with 63 percent of surveyed CEOs citing the cost of electricity as a key concern 61 percent mentioned the high cost of credit, and 59 percent mentioned insecurity. Other major concerns were high taxes (54 percent), political instability (50 percent), and poor infrastructure (48 percent). Kenyan CEOs were somewhat less optimistic than their Ugandan and Tanzanian counterparts, with 53.8 percent indicating they are confident about future economic prospects, compared to 65.8 in Uganda and 65.4 in Tanzania. This reflects a significant decrease from the last KEPSA survey, conducted in February 2010, in which 68.6 percent of Kenyan executives expressed confidence. The chairman of KEPSA attributed the decrease to uncertainty regarding the March 2013 elections. The Kenyan government has taken a number of steps to make the country more appealing for foreign and domestic private investment. In August 2008, Prime Minister Raila Odinga began holding quarterly meetings as part of a public-private dialogue called the quotNational Business Agendaquot with the chairpersons of KAM, KEPSA, the East Africa Business Council (EABC), and other business leaders to discuss how to improve the country39s business climate. As a result of the first meeting, Prime Minister Odinga and President Mwai Kibaki ordered that the Port of Mombasa operate on a 24-hour basis, the number of roadblocks and weigh stations on the Mombasa-Nairobi-Busia Northern Corridor Highway be dramatically reduced, and that the Kenya Ports Authority (KPA), the Kenya Bureau of Standards (KEBS), and the KRA harmonize their regulations and adopt a common accreditation and computerized clearance system to expedite cargo inspection and clearance. The government dealt with the port and roadblock issues, and continues to address harmonization issues. Subsequently, President Kibaki and then-Acting Finance Minister John Michuki ordered that VAT be reduced or eliminated on energy inputs. The Treasury announced in late November 2008 that it would suspend a 120 percent excise duty on the manufacture of plastics. In keeping with its privatization strategy, the government announced in mid-December 2008 that it would sell its shares in 16 parastatals, including the National Bank of Kenya, the Kenya Electricity Generating Company (KenGen), the Kenya Pipeline Company, the KPA, and various sugar, cement, dairy, wine, and meat processing firms. The government also put hotels owned by the Kenya Tourism Development Authority up for sale in 2009. In December 2008, the Cabinet approved the proposed legal and institutional framework for public-private partnerships, thereby authorizing private firms to sign management contracts, leases, concessions, andor build-own-operate-transfer (BOOT) agreements with the government on various infrastructure projects such as water, energy, ports, and roads. The process of privatizing government parastatals to finance a budget deficit stalled in 2010 after Parliament declined to ratify names submitted for the Privatization Commission by then-Finance minister Uhuru Kenyatta on the basis that the appointments violated standing procedures. In November 2011, Finance Minister Njeru Githae appointed members of the commission, clearing the way for the sale of government assets. The newly installed Privatisation Commissionrsquos plan to sell 23 state-owned assets has received Cabinetrsquos approval. Three state-owned hotels, five sugar companies and government-owned Kenya Wine Agencies are top on the list of assets to be privatized. High taxes are a further hindrance to competitiveness for firms operating in Kenya. Consequently, tax evasion is a major concern for the KRA. Kenya has a large number of unregistered or informal businesses known as ldquo jua kali, rdquo which according to the governmentrsquos 2012 Economic Survey engages approximately 80.6 percent of the workforce. In 2013, the KRA is expected to fully roll out an online system to register, file returns, and make payments which is expected to ease tax compliance for businesses in Kenya. According to the Paying Taxes 2013 report by World Bank, International Finance Corporation (IFC), and PricewaterhouseCoopers (PwC), Kenya is ranked 164 th of 185 countries overall for the ease of paying taxes.3 Kenyarsquos total tax rate of 44.4 percent is comprised of 28.1 percent tax on profits, 6.8 percent on labor, and 9.5 percent on other taxes. Regionally, Kenyan firms carry a heavy tax burden, ahead of Tanzania (45.3 percent) and Burundi (53.0 percent), but trailing Uganda (37.1 percent) and Rwanda (31.3 percent). According to the study, Kenya has five different tax payment dates each month for VAT, corporate profits, withholdings, social security, and health. In total, Kenyan firms have to contend with 41 different tax payments cutting across 16 tax regimes, which take 340 person-hours to file, compared to the global average of 27 tax payments and 267 hours. Branches of non-resident companies pay tax at the rate of 37.5 percent the government generally defines taxable income to be income sourced in or from Kenya. VAT is levied on goods imported into or manufactured in Kenya, and on taxable services provided. The standard VAT rate is 16 percent, although the rate charged on a given transaction varies depending on a range of factors. Discussion by the government on VAT in early 2011 focused on reducing or eliminating exemptions to create a broader revenue base rather than raising rates. In March 2011, the Kenya Revenue Authority (KRA) received the ISO 9001:2008 system certification standard for the scope lsquoassessment and collection of revenue for the administration and enforcement of the laws relating to revenue and for connected purposes. rsquo The ISO 9001:2008 standard is the latest publicly available and internationally recognized set of benchmark standards for customer focused quality management principles. Kenya was formally admitted as a full member of the Inter American Centre of Tax Administration (CIAT) during the 45 th General Assembly held in Quito, Ecuador in April 2011. The KRA has been actively involved in CIAT and other major international organizations responsible for setting international standards and best practices in revenue administration. After Kenya joined the Global Forum on Transparency and Exchange of Information for Tax Purposes in July 2010, the KRA also became a member of the Forumrsquos Advisory Panel. This Panel advises the Forumrsquos Steering Committee on strategies to help developing countries combat international tax avoidance. KRA and the Directorate of Customs amp Excise (DGDA) of the Democratic Republic of Congo signed a Memorandum of Understanding (MOU) in Nairobi, Kenya in March 2011. The MOU will enable KRA and DGDA to work more closely towards achieving productive working relations, enhancing enforcement activities and mobilizing revenue collection for both Kenya and the DRC. The cooperation and administrative assistance within the framework of the MOU will be implemented within the national laws and customs regulations in combating offences detrimental to Kenya and the DRC. The MOU will also enhance prevention of transnational organized crimes that range from smuggling to proliferation of weapons of mass destruction and terrorism. In 2011, KRA introduced an online PIN and tax compliance certificate (TCC) verification system. Over the years, the PIN has become a vital document for any individual or company wishing to conduct various transactions, including opening a bank account, registering a title deed, and obtaining various government approvals. Other PIN-required services include importation of goods, payment of deposits for power connections, and government contracts for goods and services. Similarly, a TCC is mandatory for businesses that conduct transactions with government agencies and public bodies. The new verification system, known as the PIN amp TCC Checker, enables the public to verify PIN and TCC for authenticity and validity. The KRA introduced the facility following numerous complaints of fake PINs and TCCs in circulation. The TCC is issued to business companies with a clean tax record and is normally valid for a period of six months. In 2008, President Kibaki signed into law the Anti-Counterfeit Act, which established a dedicated Anti-Counterfeit Agency and created a strong legal framework to combat the widespread trade in counterfeit goods, most often imported to Kenya from Asia. In June 2010, the Ministry of Industrialization launched the Anti-Counterfeit Agency (ACA), which has since struggled to build capacity as a result of insufficient funding. The ACArsquos effectiveness is hindered by a lack of clarity regarding its role and relationship to other Kenyan agencies with a stake in intellectual property protection, such as KRA, the Kenya Bureau of Standards (KEBS), the Kenya Copyright Board, and the Pharmacy and Poisons Board. Interagency cooperation has proved difficult. Furthermore, the government has yet to adopt regulations to guide implementation of the Act. In a separate attempt to combat the importation of counterfeits, the Ministry of Industrialization and the KEBS decreed in 2009 that all locally manufactured goods must have a standardization mark issued by KEBS, and several categories of imported goods, specifically food products, electronics, and medicines, must have an import standardization mark (ISM). Under this new program, U. S. consumer-ready products may enter the Kenyan market without altering the U. S. label under which the product would normally be marketed in the United States but must also carry an ISM. Once the product qualifies for a Confirmation of Conformity, however, KEBS will issue the ISM free of charge. The legislative body of the East African Community (EAC) is currently considering a regional anti-counterfeiting bill, which would harmonize these laws across the five member-states as well as increase the authority of port countries like Kenya to inspect and seize suspicious transit good shipments destined for neighboring land-locked countries. The East Africa Community (EAC), which includes Kenya, Tanzania, Uganda, Rwanda, and Burundi, aims to widen and deepen cooperation among the member-states in political, economic, social, and other fields for mutual benefit. Together, these countries represent a significant economic bloc with a combined population of more than 133 million and a combined gross domestic product of US79 billion. While integration has progressed slowly, the regional group has the potential to become a significant economic and geopolitical player. The EAC Customs Union and Common Market officially came into effect in January and July 2010, respectively, but actual implementation will take a substantial amount of time. Discussions regarding a Monetary Union, and ultimately a Political Federation, have stalled, and are viewed by many observers as unrealistic in the near-term. EAC member states, including Kenya, have not passed many of the laws required to fully implement the Common Market protocol, and enforcement of the Customs Union at border crossings is inconsistent. Among the issues to be resolved are centralized collection of revenue at the first point of entry into the EAC and management of transit cargo in a borderless region. Non-tariff barriers (NTBs) also remain an obstacle to greater EAC integration. A November 2012 report from Trademark East Africa and Transparency International-Kenya focuses on bribery as a major NTB in the EAC where bribery is an expected expense for transportation businesses.4 The EAC has made slow progress towards implementing a Monetary Union and subsequently missed the deadline originally set for 2012. EAC member states have had difficulty agreeing on coordinated approaches to budgets, inflation, foreign exchange reserves, government debts, and exchange rates, harmonization of which will be critical to formation of a Monetary Union with a common currency. Some of the institutions still to be established include a Customs Union Authority, Common Market Authority, Monetary Union Authority, Central Bank for the Monetary Union, and a Unified Federal Treasury. Kenya rose to a rank of 139 out of 176 countries from 154 out of 183countries on Transparency Internationalrsquos (TI) 2012 Corruption Perceptions Index, due to a marginal increase in its score from 2.1 to 2.2. The 2012 Heritage Foundation Index of Economic Freedom places Kenya 103 rd out of 179 countries, an increase of three places compared to the 2011 ratings, despite its score remaining virtually unchanged at 57.5 compared to 57.4 in 2011. The 2013 World Bank Doing Business Survey placed Kenya at 121, a drop of 4 places compared to 2012 and a drop of 37 places since 2009. Kenyarsquos Millennium Challenge Corporation (MCC) scorecard for fiscal year 2013 shows modest gains in government effectiveness, rule of law, control of corruption, land rights and access, and regulatory quality compared to 2012.5 Conversion and Transfer Policies Kenya is an open economy with a liberalized capital account and a floating exchange rate. Kenyarsquos Foreign Investment Protection Act (FIPA) guarantees capital repatriation and remittance of dividends and interest to foreign investors, who are free to convert and repatriate profits including un-capitalized retained profits (proceeds of an investment after payment of the relevant taxes and the principal and interest associated with any loan). Kenya has no restrictions on converting or transferring funds associated with investment. Kenyan law requires the declaration of amounts above Ksh 500,000 (US5,920) as a formal check against money laundering. Foreign exchange is readily available from commercial banks and foreign exchange bureaus and can be freely bought and sold by local and foreign investors. The Kenyan shilling has a floating exchange rate tied to a basket of foreign currencies. A floating exchange rate policy was adopted in Kenya in 1993, allowing the central bank to conduct an independent monetary policy to fight inflation. Interaction between economic agents and firms determine the relative prices between the domestic and foreign currencies (the exchange rate) with the domestic price level left indeterminate. The existing framework requires that the Treasury specifies a price target to be pursued by the Central Bank of Kenya (CBK). The CBK coordinates monetary policy and expectations towards the achievement of the target. This has enhanced the evolution of monetary policy and increased transparency. Since 2008, Kenyarsquos foreign exchange market has experienced, either directly or through contagion effects, six major shocks of differing magnitudes attributable to a number of factors, including: the post-election violence of 2007-2008, the Safaricom initial public offering (IPO) of 2008, the U. S. subprime mortgage crisis in late 2008, the Greek debt and Irish banking crises of 2010, and the oil price surge arising from the political instabilities in the Middle East and North Africa region. In 2011, turbulence in the U. S. and European debt markets sparked a flight to safety, as international investors converted their liquid asset holdings to currencies considered lsquosaferrsquo. The shilling was relatively stable in recent years until late 2007, when it increased significantly in value against the dollar, trading briefly below 60 to the dollar. In the aftermath of the 2008 post-election violence, both the economy and the shilling suffered a serious decline. The shilling stabilized in 2009 and 2010, trading between Ksh 75 and Ksh 82 to the dollar, but high inflation and other factors contributed to severe exchange rate volatility in late 2011. The shilling depreciated to Ksh 107 to the dollar in October 2011 and then appreciated to nearly Ksh 80 to the dollar in late December 2011 as a result of aggressive central bank intervention and lower global prices on imported commodities. To anchor inflationary expectations and stabilize the exchange rate, the CBKrsquos Monetary Policy Committee (MPC) shifted to a tight monetary policy stance in March 2011. The MPC raised the Central Bank Rate (CBR) to 18.00 percent in December 2011 and lifted the banksrsquo cash reserve ratio (CRR) from 4.75 percent to 5.25. In July 2012, the MPC began to lower the CBR which ended 2012 at 11 percent. The decline of year-on-year inflation, which dropped to 3.2 percent in December 2012 from a high of 19.72 percent in November 2011, has given the MPC room to relax monetary policy, which should stimulate credit demand and economic growth. Commercial banks have also lowered their lending rates, though spreads remain on average at approximately 17 percent, as of November 2012. Expropriation and Compensation Kenyan investment law is modeled on British investment law. The Companies Act, the Investment Promotion Act, and the Foreign Investment Act are the main pieces of legislation governing investment in Kenya. Kenyan law provides protection against the expropriation of private property, except where due process is followed and adequate and prompt compensation is provided. Various bilateral agreements with other countries also guarantee further protection. Expropriation may only occur for either security reasons or public interest. The Kenyan government may revoke a foreign investment license if (1) an untrue statement is made while applying for the license the provisions of the Investment Promotion Act or of any other law under which the license is granted are breached or, if (2) there is a breach of the terms and conditions of the general authority. The Investment Promotion Act of 2004 provides for revocation of the license in instances of fraudulent representation to KenInvest by giving a written notice to the investor granting 30 days from the date of notice to justify maintaining the license. In practice, KevInvest rarely revokes licenses. Kenyarsquos judicial system is modeled after the British, with magistratesrsquo courts, high courts in major towns, and a Court of Appeal at the apex of the judicial system. Immediately below the high courts are subordinate courts consisting of the Khadis Courts, the Resident Magistratersquos Courts, the District Magistratersquos Courts, and the Court Martial (for members of the Armed Forces). In addition, a separate Industrial Court hears disputes over wages and labor affairs. Petitioners cannot appeal its decisions, except on procedural grounds. Kenya also has Commercial Courts to deal with commercial disputes. The Companies Act of 1948 provides the foundation for company and investment law. Property and contractual rights are enforceable, but long delays in resolving commercial cases are common. The new constitution, when fully implemented, will change the court system dramatically. Kenya now has a Supreme Court, a Court of Appeal, a Constitutional Court, and a High Court. In addition, the subordinate courts, Magistrates, Khadis, and Courts Martial, will remain, as will the Commercial Court. The former Industrial Court has been replaced with an Employment Relations Court that has expanded authority to hear individual employment-related complaints. The Foreign Judgments (Reciprocal Enforcement) Act provides for the enforcement in Kenya of judgments given in other countries that accord reciprocal treatment to judgments given in Kenya. Kenya has entered into reciprocal enforcement agreements with Australia, the United Kingdom, Malawi, Tanzania, Uganda, Zambia, and Seychelles. Without such an agreement, a foreign judgment is not enforceable in the Kenyan courts except by filing suit on the judgment. Kenyan courts generally recognize a governing-law clause in an agreement that provides for foreign law. A Kenyan court would not give effect to a foreign law if the parties intended to apply it in order to evade the mandatory provisions of a Kenyan law with which the agreement has its most substantial connection, and which the court would normally have applied. Foreign advocates are not entitled to practice in Kenya unless a Kenyan advocate instructs and accompanies them, although a foreign advocate may practice as an advocate for the purposes of a specified suit or matter if appointed to do so by the Attorney General. All advocates in private practice are members of the Law Society of Kenya (LSK). Advocates in public service are not required to join LSK. The legal system in Kenya is adversarial, and most disputes are resolved through litigation in court although arbitration and alternative dispute resolution, which are governed by the Arbitration Act, are becoming increasingly popular. Parties opting to refer their present or future differences to arbitration must include an arbitration clause in their agreement. The authority of an arbitrator appointed by virtue of such an agreement is irrevocable, except by leave of the High Court or unless a contrary intention appears in the agreement. Facilities for alternative dispute resolution are provided by Kenyarsquos Dispute Resolution Centre. In addition, The Chartered Institute of Arbitrators has a Kenya chapter. Kenya is also a member of the International Centre for the Settlement of Investment Disputes (ICSID), a World Bank agreement for the settlement of disputes between States and Nationals of other States. Under this agreement, Kenya is required to recognize ICSID arbitral awards. The Foreign Judgments (Reciprocal Enforcement) Act (Chapter 43, Laws of Kenya) provides for the enforcement in Kenya of judgments given in other countries that accord reciprocal treatment to judgments given in Kenya. The countries with which Kenya has entered into reciprocal enforcement agreements are Australia, Malawi, Rwanda, Seychelles, United Republic of Tanzania, Uganda, the United Kingdom and Zambia. Without such an agreement, a foreign judgment is not enforceable in the Kenyan courts except by filing suit on the judgment. Kenyan courts would, as a general rule, recognize a governing-law clause in an agreement that provides for foreign law. However, the selection of such a law must be real, genuine, bona fide, legal and reasonable. A Kenyan court would not give effect to a foreign law if the parties intended to apply it in order to evade the mandatory provisions of a Kenyan law with which the agreement has its most substantial connection and which, for this reason, the court would normally have applied. Bankruptcies are governed by the Bankruptcy Act (2009) creditors39 rights are comparable to those in other common law countries. Monetary judgments typically are made in Kenyan shillings. The government does accept binding international arbitration of investment disputes with foreign investors. In addition to being a member of the ICSID, Kenya is a party to the New York Convention on the Enforcement of Foreign Arbitral Awards (1958). Kenya is a member of the World Bank-affiliated Multilateral Investment Guarantee Agency (MIGA), which issues guarantees against non-commercial risk to enterprises that invest in member countries. It is also a signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which established ICSID. Kenya is also a member of the Africa Trade Insurance Agency (ATIA), as well as many other global and regional organizations and treaties, including the Common Market for Eastern and Southern Africa (COMESA) the Cotonou Agreement between the European Union and the African, Caribbean and Pacific States (ACP) the East African Community (EAC) the Paris Convention on Intellectual Property, the Universal Copyright Convention, and the Berne Copyright Convention the World Intellectual Property Organization (WIPO) and the World Trade Organization (WTO). Kenya has also signed double taxation treaties with a number of countries, including Canada, China, Germany, France, Japan, Netherlands, and India. On November 27, 2007, Kenya joined with its EAC sister states in signing the first-ever interim economic partnership agreement (EPA) with the European Community (EC). EPA negotiations between Kenya and the European Union are ongoing. The EAC signed a Trade and Investment Framework Agreement (TIFA) with the United States in 2008. In October 2012, the EAC and the United States launched talks on a new trade and investment partnership that includes a regional investment treaty, a commercial dialogue, and a trade facilitation agreement. Kenya is an active beneficiary of trade preferences under the African Growth and Opportunity Act (AGOA) particularly in textiles and apparel. Performance Requirements and Incentives Investors in the manufacturing and hotel sectors are able to deduct from their taxes a large portion of the cost of buildings and capital machinery. The government allows all locally financed materials and equipment (excluding motor vehicles and goods for regular repair and maintenance) for use in construction or refurbishment of tourist hotels to be zero-rated for purposes of VAT calculation. The Ministry of Finance permanent secretary must approve such purchases. The government permits some VAT remission on capital goods, including plants, machinery, and equipment for new investment, expansion of investment, and replacement. The investment allowance under the Income Tax Act is set at 100 percent. Materials imported for use in manufacturing for export or for production of duty-free items for domestic sale qualify for the investment allowance. Approved suppliers, who manufacture goods for an exporter, are also entitled to the same import duty relief. The program is also open to Kenyan companies producing goods that can be imported duty-free or goods for supply to the armed forces or to an approved aid-funded project. Firms operating in Export Processing Zones (EPZ) are provided a 10-year corporate tax holiday and 25 percent tax rate thereafter (the statutory corporate tax rate is 30 percent, but the overall tax rate is 44.4 percent) a 10-year withholding tax holiday on dividend remittance duty and VAT exemption on all inputs except motor vehicles 100 percent investment deduction on capital expenditures for 20 years stamp duty exemption exemption from various other laws exemption from pre-shipment inspection availability of on-site customs inspection and work permits for senior expatriate staff. Kenyarsquos EPZ law allows manufacturers and service providers to sell up to 20 percent of their output in the domestic market. Manufacturers are liable for all taxes on products sold domestically, however, plus a 2.5 percent surcharge. By the end of 2011, Kenya had 44 designated EPZs in which 79 companies were operating. Most EPZ firms operate in factory space managed by the EPZ Authority (EPZA). According to figures provided by the EPZA for 2011, EPZ firms employed 32,043 Kenyans and 421 expatriates, who typically serve in mid to senior-level management roles. EPZ firms exported goods worth US438.2 million in 2011, or roughly 8 percent of total Kenyan exports. The preferential access and duty free status accorded to Kenyan apparel exports under AGOA fueled an increase in the number of textile factories in Kenya, which along with handicrafts, constitute the bulk of Kenyarsquos exports under AGOA. EPZ firms servicing AGOA-related contracts employ nearly 80 percent of all EPZ workers and account for roughly 50 percent of total EPZ exports. Kenyan EPZ firms exporting under AGOA employed 25,169 workers directly in 2011, and exported goods worth nearly US236 million, according to the EPZA. In order to better take advantage of AGOA, in 2011 Kenyarsquos Ministry of Trade launched an AGOA Unit charged with developing and implementing a national AGOA strategy conducting research and market analysis to inform AGOA policies and activities identifying products for potential export under AGOA advising the Minister of Trade on all AGOA-related matters performing regional and county-level outreach to educate the Kenyan public about AGOA and liaising with AGOA stakeholders across the Kenyan government and within the private sector and civil society. The governmentrsquos Manufacturing Under Bond (MUB) program is meant to encourage manufacturing for export by exempting participating enterprises from import duties and VAT on imported plant, machinery, equipment, raw materials, and other imported inputs. The program also provides a 100 percent investment allowance on plant, machinery, equipment, and buildings. Participating companies must export goods produced under the MUB system. If not exported, the goods are subject to a surcharge of 2.5 percent, and imported inputs used in their production are subject to all other tariffs and other import charges. The program is open to both local and foreign investors, and is administered by the KRA. Under the Firearms Act and the Explosives Act, manufacturing and dealing in firearms (including ammunition) and explosives requires special licenses from Chief Firearms Licensing Officer and the Commissioner of Mines and Geology, respectively. Technology licenses are subject to scrutiny by the Kenya Industrial Property Institute (KIPI) to ensure that they are in line with the Industrial Property Act. Licenses are valid for five years and are renewable. Manufacturing and dealing in narcotic drugs and psychotropic substances is prohibited under the Narcotics Drugs and Psychotropic Substances Act. The government does not steer investment to specific geographic locations but encourages investments in sectors that create employment, generate foreign exchange, and create forward and backward linkages with rural areas. The law applies local content rules but only for purposes of determining whether goods qualify for preferential duty rates within COMESA and the EAC. Although Kenya does not generally set minimums for Kenyan ownership of private firms or require companies to reduce the percentage of foreign ownership over time, a number of sectors do face restrictions. According to the World Bankrsquos 2010 Investing Across Borders Report . Kenya restricts foreign ownership in more sectors than most other economies in sub-Saharan Africa. Foreign ownership of insurance and telecommunications companies is restricted to 66.7 percent and 80 percent, respectively, although the government allows telecommunications companies a three-year grace period to find local investors to achieve the local ownership requirements. There is discussion of scrapping the local ownership policy in telecommunications entirely. Foreign equity in companies engaged in fishing activities is restricted to 49 percent of the voting shares under the Fisheries Act. In June 2007, the level of foreign ownership allowed for companies seeking a listing on the NSE was decreased from 75 to 60 percent. This change was not applied retroactively. Foreign investors are free to obtain financing locally or internationally. As noted above, there is no discrimination against foreign investors in access to government-financed research, and the government39s export promotion programs do not distinguish between local and foreign-owned goods. Right to Private Ownership and Establishment Private enterprises can freely establish, acquire, and dispose of interest in business enterprises. The Kenyan legal system is quite flexible on exit options, which normally are determined by the agreement that the investor has with other investors. The Companies Act specifies how a foreign investor may exit from an incorporated company. In practice, a company faces no obstacles when divesting its assets in Kenya, if the legal requirements and licenses have been satisfied. The Companies Act gives the procedures for both voluntary and compulsory winding-up processes. Many U. S. companies remain in the market and continue to do well. The typical reason given for a firm closing its factories in Kenya is restructuring to cut costs and improve efficiency in its African markets. The high cost of production as a result of poor infrastructure, inadequate protection of intellectual property rights, and unreliable and expensive electrical power continues to frustrate Kenyarsquos manufacturing sector, even as economic growth forges ahead. As noted above, the Land Control Act restricts the ability of foreigners to own or lease land classified as agricultural, and requires a presidential waiver. Furthermore, under the new constitution only Kenyan citizens, whether male or female, or incorporated companies whose majority shareholders are Kenyan citizens may own land foreigners are restricted to 99 year leases. Since January 2003, the government sought to nullify all illegally acquired land. The question of title to land acquired irregularly under the Moi government is the subject of continued controversy. This issue is of particular importance to overall economic performance and access to credit as land secures approximately 80 percent of bank loans in Kenya. Kenya has a long history of land-related conflict and corruption. Despite the agreement that ended the 2007-2008 post-election violence, there has been considerable delay in implementing land reforms. Agenda 4 of the National Accord that formed the Grand Coalition Government in 2008 sought to address historical injustices in terms of land ownership and distribution. Many land transactions continue to suffer delay since the moratorium placed on public and trustcommunity land by the Cabinet in 2012 will only cease when members of the newly appointed National Land Commission (NLC) take office. The NLC was created to manage public land, advise the government on land policy, and investigate and recommend solutions to current and historical land-related conflicts or injustices. Protection of Property Rights Secured interests in property are recognized and enforced. In theory, the legal system protects and facilitates acquisition and disposition of all property rights, including land, buildings, and mortgages. In practice, obtaining a title to land is a cumbersome and often non-transparent process, which is a serious impediment to new investment, frequently complicated by improper allocation of access and easements to third parties. There is also a general unwillingness of the courts to permit mortgage lenders to sell land to collect debts. Kenya has a comprehensive legal framework to ensure intellectual property rights (IPR) protection, which includes the Anti-Counterfeit Act, the Industrial Property Act, the Trade Marks Act, the Copyright Act, the Seeds and Plant Varieties Act, and the Universal Copyright Convention. However, enforcement of IPR continues to lag far behind legislation, and the widespread sale of counterfeit goods continues to do significant damage to foreign businesses operating in Kenya. Furthermore, Kenyan authorities are limited in their ability to inspect and seize transit shipments of counterfeit products, which the authorities believe often find their way back into Kenya. As noted above, the 2008 Anti-Counterfeit Act created the Anti-Counterfeit Agency (ACA), which officially opened its doors in 2010, as the lead agency for IPR enforcement6. Insufficient funding and the conspicuous absence of implementing regulations to accompany the act continue to constrain the Agencyrsquos effectiveness. Independent investigations have proven nearly impossible for the ACA given its current budget and the prohibitively high cost of environmentally sound destruction of seized products, meaning counterfeit goods remain in warehouses where they can be stolen and returned to the market. The Agency is ostensibly responsible for coordinating the efforts of Kenyarsquos other IPR enforcement bodies, including the Kenya Bureau of Standards (KEBS), the Kenya Copyright Board (KCB, responsible for copyrights), the Kenya Industrial Property Institute (KIPI, responsible for patents, trademarks, and trade secrets), the Pharmacy and Poisons Board (PPB, responsible for medicines). Interagency cooperation has proved difficult to achieve. Despite the challenges, the Agency has made a number of high-profile seizures of counterfeit goods shipments including Bic pens, HP toner cartridges, Eveready batteries, Nokia cellular phones, Adidas shoes, and a range of other products. Furthermore, penalties under the Anti-Counterfeiting Act are much more punitive than under previous IPR laws. However, Kenyarsquos law enforcement agencies have failed to implement the improved laws and regulations and convictions are rare. Kenyarsquos High Court ruled on April 20, 2012 that parts of the 2008 Anti-Counterfeit Act are unconstitutional, in particular the Actrsquos definition of counterfeit medicines and certain related sections. The Court argued that enforcement of the violating sections could limit access to generic medicines and, as a result, infringe on the fundamental rights to life, human dignity, and health enshrined in the countryrsquos new constitution. ACA has said it plans to appeal and is confident the ruling will be overturned. The Agency also plans to offer up revisions to the Act that would prevent future challenges on similar grounds. In another effort to combat the manufacture and sale of counterfeits, the Ministry of Industrialization and KEBS implemented a system of standardization marks required for locally manufactured products as well as certain imported goods, discussed below. KEBS also opened the National Quality Institute in 2008 to train business leaders and consumers. Initially KEBS planned that the Institute would offer IPR courses to magistrates who, along with prosecutors, are often unfamiliar with intellectual property law, but the program has not yet been established. Kenyarsquos Copyright Act protects literary, musical, artistic, and audio-visual works sound recordings and broadcasts and computer programs. The act is enforced by KCB, a parastatal housed under the Attorney Generalrsquos Office. Criminal penalties associated with piracy in Kenya include a fine of up to Ksh 800,000 (US9,470), a jail term of up to ten years, and confiscation of pirated material. Nonetheless, enforcement is spotty and the understanding of the importance of intellectual property remains low. The sale of pirated audio and video is rampant, although there is little domestic production. According to the Business Software Association (BSA), an estimated US3.5 million is lost every year because of the use of illegal software, mainly by businesses. Kenya is a member of the World Intellectual Property Organization (WIPO) and of the Paris Union (International Convention for the Protection of Industrial Property), along with the United States and 80 other countries. The African Intellectual Property Organization (AIPO) embodies a future prospect for patent, trademark, and copyright protection, although its enforcement and cooperation procedures are still untested. Kenya is also a member of the African Regional Intellectual Property Organization (ARIPO). Kenya is a signatory to the Madrid Agreement Concerning the International Registration of Marks however, the other original EAC members (Uganda and Tanzania) are not. The Kenya Industrial Property Institute (KIPI), housed within the Ministry of Trade and Industry, is responsible for registering and enforcing patents, trademarks, and trade secrets. Investors are entitled to national treatment and priority right recognition for their patent and trademark filing dates. In addition to creating KIPI, the Industrial Property Act of 2002 brought Kenya into compliance with WTO obligations, although implementation of the act remains weak. The Trade Marks Act provides protection for registered trade and service marks protection under the act is valid for 10 years and is renewable. In July 2006, the Ministry of Trade and Industry conceded that over Ksh 36 billion (US405 million) is lost annually due to the sale of counterfeit goods and a further Ksh 6 billion (US67 million) is lost in tax revenues to the government. A subsequent KAM study, released in late October 2008, concluded that piracy and counterfeiting of business software, music, pharmaceuticals, and consumer goods costs Kenyan firms about US715 million annually in lost sales. Consequently, KAM estimated that the Kenyan government was losing over US270 million in potential tax revenues every year. The most current estimates as of late 2011, summarized in a report by the International Peace Institute called ldquo Termites at Work: Transnational Organized Crime and State Erosion in Kenya, rdquo put Kenyarsquos counterfeit goods trade at US913.8 million, resulting in lost tax revenue between US84 million and US490 million. The technology firm HP estimates losses of US7.1 million per year due to counterfeits and 60 percent of HP-branded printer cartridge refills sold in East Africa are thought to be fakes imported from China. Battery manufacturer Eveready significantly reduced its Kenyan production due to pressure from counterfeiters. Transparency of Regulatory System The government screens each private sector project to determine its viability and implications for the development aspirations of the country for example, a rural agro-based enterprise, with many forward and backward linkages, is likely to receive licensing quickly. In theory, all investors receive equal treatment in license screening processes. However, new foreign investment in Kenya historically has been constrained by a time-consuming, highly discretionary, and sometimes corrupt approval and licensing system. In response to appeals from the business community in 2007, the government launched a substantial effort to streamline the registration process by reducing the number of required business licenses and simplifying others. The Licensing Act of 2007 initially eliminated or simplified 694 licenses and in 2008, the government reduced the number of licenses to set up a business from 300 to 16. The review of licensing requirements is ongoing, but no further licenses have been eliminated to date. In 2009, the Kenyan government launched an e-Registry, which sped up the registration of new companies, cut regulation costs, and enhanced transparency by allowing easy access to information on registered companies. Nonetheless, the 2013 World Bankrsquos Doing Business Report placed Kenya at just 121 of 185. Kenya has fallen behind Uganda, but remains ahead of Tanzania for ease of doing business. The World Bank and IFC contend that the government must significantly reduce the cost of doing business, deal with delays at the Port of Mombasa, and eliminate the requirement of even more licenses to maintain Kenya39s current level of economic growth. In August 2011, the Finance Minister put the Competition Act of 2010 into effect, thereby replacing the outdated Monopolies and Price Control Act and the Monopolies and Prices Commission. Specifically, the Act created the Competition Authority, which is an autonomous public institution that has primary jurisdiction over competition and consumer welfare matters in the economy and is the Governmentrsquos advisor on competition matters. All mergers and acquisitions require the Authorityrsquos authorization before they are finalized. In September 2011, in response to rapidly rising food and fuel prices, President Kibaki signed into law a new Price Control (Essential Goods) Act, which granted the Finance Minister the authority to set price ceilings for any goods designated as essential. The Finance Minister has not exercised this authority, however, and many observers believe the act was simply an attempt to appear responsive to public concerns, rather than a meaningful shift in policy. Kenya lags behind much of Africa with regard to reliability of supply chains, according to a 2012 World Bank survey on trade logistics. Kenya ranked 122 nd out of the 155 countries studied for efficiency in key supply chain areas such as customs procedures, cost of logistics, infrastructure quality, and timeliness. Through the Port of Mombasa, Kenya is a major hub for international and regional trade for neighboring land-locked countries such as Uganda, Burundi, and Rwanda. The survey, however, found that the cost of importing or exporting containers in Kenya and other large economies in Africa remains high compared to the global average. According to the World Bankrsquos Doing Business 2013 report, it takes an average of 26 days and costs US2,350 to complete import procedures for a standardized container of cargo. It takes 26 days and costs US2,255 to complete export procedures for a similar container. In addition to insufficient capacity, corruption is thought to be a major contributor to delays at the Port of Mombasa: in order to free up space inside the port, goods are moved to privately-owned container freight stations (CFS) for customs clearing and onward haulage. These CFSs are suspected of serving as a primary conduit for corruption and facilitating illicit trade. Moreover, they have little incentive to clear cargo efficiently, given that storage fees represent a large share of their revenue. Investors in Kenya are required to comply with environmental standards. The National Environment Management Authority (NEMA) oversees these matters and is the principal environmental regulatory agency. Developers of certain types of projects are required to carry out Environmental Impact Assessments (EIA) prior to project implementation. Companies are required to submit up-to-date assessment reports to NEMA for verification by the agencyrsquos environmental auditors before they can receive an EIA license. Efficient Capital Markets and Portfolio Investment The CBK is the primary regulator of financial institutions. As of June 2012, Kenya had 44 banking institutions (43 commercial banks and 1 mortgage finance company), five representative offices of foreign banks, six deposit-taking microfinance institutions (DTMs), 115 forex bureaus and two credit reference bureaus (CRBs). Out of the 44 banking institutions, there are 31 locally owned banks: three with public shareholding and 28 privately owned while 13 are foreign owned. The six DTMs, two CRBs and 115 forex bureaus are privately owned. The foreign owned financial institutions comprise of nine locally incorporated foreign banks and four branches of foreign incorporated banks. Total aggregate financial sector assets grew by 16 percent to Ksh 2.2 trillion (US26 billion) in the year to June 2012. During the same period, financial sector pre-tax profits grew by 30 percent to more than Ksh 53 billion (US627 million).7 By the end of 2011, 10 Kenyan banksmdashincluding Kenya Commercial Bank, Commercial Bank of Africa, and Bank of Africamdashhad subsidiaries operating in the EAC and South Sudan. These subsidiaries registered profit before tax of Ksh 2.3 billion (US27 million), with South Sudan, Tanzania, and Uganda accounting for the majority of profits.8 In July 2012, Central Bank of Kenya (CBK) granted authority to Bank of China Limited (BOC) to open a representative office in Kenya. BOC is the fifth foreign bank to receive such authorization. In November 2012, Kenyan banks were authorized to open Yuan-denominated accounts to ease China-Kenya trade. China exported goods worth US1.7 billion to Kenya in 2011, making it Kenyarsquos third largest source of imports behind the United Arab Emirates and India. Bank branches increased by 98 to 1,161 branches in 2011 and each of the countryrsquos 47 counties had a branch. Increased usage of the agency banking model, introduced in May 2010, allows commercial banks to offer banking services through third parties. Increasing access to finance has been abridged with the use of innovation such as agent banking, which allows commercial banks and DTMs to engage the services of third party outlets to deliver specified financial services on their behalf. Following the roll out of the agency banking model in May 2010, commercial banks have been able to contract varied retail entities. These entities, such as security companies, courier services, pharmacies, supermarkets and post offices act as third party agents to provide cash-in - cash-out transactions and other services in compliance with the laid down guidelines. As of June 2012, ten commercial banks had contracted 12,067 active agents facilitating over 20.4 million transactions valued at Ksh 104.4 billion (US1.24 million). As at 31st December, 2011, 23 banks were offering various internet products to their customers. Internet services provided include opening accounts, transferring funds to different accounts, online viewing of the accounts, online inquiries and requests, online salaries payments, clearing checks status query and instant alerts or messages of account status. The banking industry in Kenya in collaboration with the Kenya Bankers Association (KBA) rolled out the Check Truncation System in August 2011. Check truncation refers to a process in which physical checks presented for payment in a bank by individuals or corporate bodies are converted into electronic form and the image transmitted electronically to the clearing house for processing and eventual payment by the paying bank. The introduction of this system is expected to speed up clearing of such checks in addition to reducing incidences of frauds and the costs of transporting these checks from one bank to another. Though small by Western standards, Kenyarsquos capital markets are the deepest and most sophisticated in East Africa. Investors trade stocks and bonds on the Nairobi Securities Exchange. The Capital Markets Authority (CMA), in conjunction with the Central Bank of Kenya, regulates and supervises relevant financial institutions and intermediaries, and oversees the development of Kenyarsquos capital markets. In late 2012, the CMA launched the development of a new, five-year capital markets master plan, which is being designed by market experts and participants, including private sector and government representatives The CMA is working with regulators in EAC member states through the Capital Market Development Committee (CMDC) and East African Securities Regulatory Authorities (EASRA) on a regional integration initiative, and has successfully introduced cross-listing of equity shares. Beginning in 2005, the NSE started settling all equity trades through an electronic Central Depository System (CDS). The combined use of both CDS and an automated trading system has moved the Kenyan securities market to globally accepted standards. Kenya is a full (ordinary) member of the International Organization of Securities Commissions, (whose members represent 90 percent of the world39s capital markets), which solidifies its status as a primary capital marketplace in East Africa. In 2011, the NSErsquos All Share Index (NSEASI) dropped by 30 percent due to a weak and volatile shilling, high commodity prices, and the ongoing global credit crisis. The NSEASI went up by 35 percent in 2012, however, surging on the back of a stable shilling and declining inflation, despite lingering economic problems in the West. The NSE consists of three segments: the Main Investments Market (MIMS), the Alternative Investments Market (AIMS), and the Fixed Income Securities Market (FISMS). The MIMS targets mature companies with strong dividend streams. The AIMS is more favorable to small and medium-sized companies, and allows firms to access lower-interest rate, longer-term sources of capital. The FISMS allows businesses, financial institutions, and governmental and supranational authorities to raise capital through the issuance of debt securities. Fees charged by the CMA on NSE participants are a significant entry barrier for new companies. Small business entry into the stock market continues to lag, though the CMA plans to launch a new securities exchange for SMEs, which will have less onerous regulatory requirements. Though still a nascent industry, foreign and domestic private equity funds are increasingly active in Kenya, providing growth capital to entrepreneurs and helping turn around struggling businesses. Stockbrokers at the Nairobi Stock Exchange are seeking to reduce the ownership stake of the Ministry of Financersquos Capital Markets Authority from 20 percent to 5 percent. The NSE is in the process of becoming a demutualized corporate entity, which itself will become a publicly-traded company. To facilitate the listing of Small and Medium Sized Enterprises (SMEs), NSEmdashin collaboration with the CMA and the Central Depository and Settlement Corporation (CDSC)mdashorganized the Growth Enterprise Market Segment (GEMS). In June 2012, the establishment of GEMS received a major boost when the government officially published new listing regulations for SMEs. The NSE is working with the CMA to publish the rules for Nominated Advisors (NOMADS), who will assist SMEs to become publicly traded companies and comply with corporate governance standards. By amending the Central Depositories Act, the Ministry of Finance seeks to create a single central depository for both equity and debt securities. At present, equity and debt are settled through separate depositories, creating inefficiencies and higher settlement costs. A streamlined securities settlement infrastructure would support Treasury Mobile Direct, which is a joint CBK and World Bank project that will enable Kenyans to trade government debt securities using their mobile phones. Mobile and Internet solutions are already available for trading equities. Although equities trading is fairly robust, the bond market is still underdeveloped and dominated by trading in government debt securities. Long-dated corporate bond issuances are uncommon, leading to a lack of long-term investment capital. Listed companies, including banks, are therefore heavily reliant on short-term debt, which is relatively expensive and exposes borrowers to undue short-terms risks. Trading in commercial paper and corporate bonds issued by private companies has diversified activity at the NSE. The government regulates such trading through a set of guidelines developed in collaboration with private sector. They allow private companies to raise funds from the public without NSE quotation. Establishing the CDS encouraged the development of a secondary market for the governmentrsquos one-year Treasury security. The CDS provided opportunities to small investors by offering products in multiples of Ksh 50,000 (US590) up to Ksh 1 million (US11,830). Expenses related to credit rating services by listed companies and other issuers of corporate debt securities are tax deductible. Foreign investments through mergers and acquisitions are not restricted via cross-shareholding and stable shareholder arrangements. Hostile takeover attempts are uncommon. Private firms are free to adopt articles of incorporation, which limit or prohibit foreign investment, participation, or control. Foreign investors are able to obtain credit on the local market however, the number of credit instruments is relatively small. Legal, regulatory, and accounting systems are generally transparent and consistent with international norms. The corporate tax for newly listed companies is 25 percent for a period of five years from the date of listing. The withholding tax on dividends is 7.5 percent for foreign investors and 5 percent for local investors. Foreign investors can acquire shares in a listed company subject to a minimum reserve ratio of 40 percent of the share capital of the listed company for domestic investors, with the remaining 60 percent considered as a free float available to local, foreign, and regional investors without restrictions on the level of holding. Dividends distributed to residents and non-residents are subject to a final withholding tax rate of 5 percent. Dividends received by financial institutions as trading income are not subject to tax. In 2007, the Kenyan government granted two fiscal incentives to encourage growth of capital markets: exemption from income tax on interest income accruing from cash flows of securitized assets and exemption from income tax on interest income accruing from all listed bonds with a maturity of at least three years. The fiscal incentives targeted providers of infrastructure services such as roads, water, power, telecommunication, schools, and hospitals. Company capital expenditures on legal costs and other incidental expenses associated with listing by introduction at the NSE are tax deductible. In 2009, as a way of widening the investor base and promoting savings among Kenyans, the CBK reduced the minimum entry into treasury bills from Ksh 1 million to Ksh 100,000 (US11,800 to US1,190). Infrastructure bonds were issued in 2009. The primary corporate bond market is, however, still dominated by a few leading institutions, with a thinly traded secondary market. The bond market is currently led by government securities, and the corporate bond market accounts for only 9 percent of issuances. In 2009, the government issued a 20-year treasury bond as part of its efforts to deepen the pool of long-term capital available locally. To restore market confidence, CBK and the market players introduced Sell-Buybacks, similar to repurchase agreements, in October 2011 to provide liquidity for bondholders who required immediate cash but faced difficulties in selling their bonds. Sell-buybacks refers to transactions where two parties, a seller and a buyer agree to exchange a security for cash at a bilaterally agreed price with a promise to reverse the same security and cash at a future date for a specific price. The introduction of sell-buybacks safeguarded bond values, provided liquidity to investors, and reduced panic-induced bond sales. The result is a more stable bond market. The next expected market development is the introduction of over the counter (OTC) bond trading, which will further enhance market liquidity and stability. Several initiatives have been undertaken over the last five years aimed at achieving the three envisaged goals of stability, efficiency and financial inclusion. These initiatives include the introduction of the agent banking mechanism in May 2010 where banks were allowed to engage third parties to provide certain banking services the introduction of credit reference bureaus to collect, collate, analyze and disseminate credit information among credit providers licensing of deposit taking microfinance institutions (DTMs) to target the lower end of the market, through the Microfinance Act, 2006 (now there are eight of them) the rollout of mobile phone financial services enabling banks to leverage on mobile phone technology to present convenience and lower costs for their customers without compromising quality of service and lowering the cost of doing business through the establishment of more currency centers. Since the enactment of the Cooperative Societies (Amendment) Act of 2004, which governs the formation and management of cooperatives in Kenya there have been improvements in the financial sectorrsquos legal and regulatory framework. To regulate Kenyarsquos burgeoning insurance industry, Parliament passed the Insurance Amendment Act 2006, which resulted in the establishment of the Insurance Regulatory Authority. Parliament passed the Sacco Act in 2007 to strengthen the savings and credit cooperative (Sacco) industry. As a result, access to financial services has improved, especially for those previously unable to take advantage of financial services from traditional banks. Mobile money has grown in size and popularity and now provides transfer, deposit, lending, and insurance services to the large majority of Kenyans who do not have access to traditional banking services. Only 19 percent of Kenyans have formal access to financial services through commercial banks and the government-owned Post Bank. With the advent of mobile money and its recent linkages to the formal banking system, however, the number of Kenyans with access to electronic financial services has grown rapidly. Kenya has now become a leader in financial inclusion and its example is being replicated in countries around the world. With 29 million cell phone subscriptions, the vast majority of Kenyan adults now have cell phone access, which they use for everything from voice and SMS communication to banking, insurance, internet access, and other services. According to the World Bank, M-Pesa processes more transactions within Kenya each year than Western Union does globally. As of June 2012, 19.8 million Kenyans were using mobile phone platforms to make transfer money, according to CBK figures. There were over 61,000 agents facilitating transactions in excess of Ksh 1.3 trillion (US15.4 billion) in the year to June 2012. The CBK said the increase in mobile money transfers was fuelled by a high number of consumers moving money in their bank accounts using mobile phones. Safaricomrsquos M-Pesa, which has a 76 percent market share, has mobile banking arrangements with 25 banks, which has contributed to greater accessibility of the service. Customers have also increased the use of bank platforms through a wide array of services. Mobile money platforms have been used to offer medical insurance, microloans, transfer money to a pre-paid credit card, and even to pay parking, electricity, and water bills. Beyond money transfers, Kenyans are using mobile phones to disseminate commodity price information, track diseases, monitor social unrest and human-rights violations, mobilize voters, and disseminate election results. Microfinance institutions (MFIs) also provide financial services to many Kenyans who remain underserved by the traditional financial markets. The Microfinance Act of 2006 became operational in 2008 and provides for the licensing, regulation, and supervision of the microfinance sector. These regulations were prompted by a series of mismanagement and embezzling scandals at micro-finance institutions. The Act also grants regulatory oversight authority of MFIs to the CBK. In 2003, the inter-ministerial National Taskforce on Anti-Money Laundering and Combating the Financing of Terrorism was formed to develop a comprehensive AMLCTF legal framework. In 2012, Kenya passed the Prevention of Terrorism Act, which criminalizes acts of terrorism and conspiracy to commit such acts. This law provides for the restraint, seizure, and forfeiture of terrorist assets. In 2010, Kenya passed the Prevention of Organised Crime Act, which allows for the prosecution of criminal groups that commit serious offenses and allows for asset forfeiture. Kenya has designated Al Shabaab as an organized criminal group. The Proceeds of Crime and Anti-Money Laundering Act (POCAMLA), passed in 2009, criminalized money laundering, and provided for the creation of a Financial Reporting Center (Kenyarsquos version of a financial intelligence unit), and an Assets Recovery Agency. With this legal structure in place, Kenya must now work towards implementing these laws and creating functional institutions. Despite these advances, the Financial Action Task Force (FATF) raised concerns over Kenyarsquos inability to address deficiencies in its AMLCFT regime as outlined in the jointly developed FATF Action Plan in 2010. A key element of the plan was establishing a financial reporting center. Kenya created the FRC in April, 2012, obtained office space and is hiring staff. It currently has four investigators, an attorney, and administrative staff. To become operational, the FRC needs an automated system to analyze suspicious transaction reports (STRs). The FRC issued guidance notes to commercial banks, non-bank financial institutions, and mortgage finance companies about their responsibilities regarding working with the FRC and began receiving STRS on October 10, 2012. The June 2012 FATF Public Statement advised Kenya that countermeasures by FATF members against Kenya could be applied if Kenya did not show significant progress by the October 2012 FATF meeting and specifically cited the lack of terrorist financing legislation. Kenya passed the Prevention of Terrorism Bill in 2012, which criminalized material support to commit a terrorist act, and addressed a key element in the implementation of the FATF Action Plan. At its October 2012 meeting, the FATF did not impose countermeasures against Kenya. Competition from State-Owned Enterprises Public ownership of enterprise expanded from independence in 1963 through the 1980s. However, two commissions, one in 1979 and one in 1982, established the need for Kenya to begin divesting itself of its publicly owned enterprises. The commissions identified 240 state-owned firms, designating 207 as non-strategic and the remaining 33 as strategic. During the first round of privatization, from 1992 to 2002, Kenya fully or partially privatized most of the non-strategic publicly owned firms. From 2003 to 2007, the government of Kenya engaged in a second round, which fully or partially privatized a number of large strategic firms, including KenGen (the primary electricity generator), Kenya Railways, Mumias Sugar, Kenya Reinsurance, Telkom Kenya, and Safaricom. These transactions netted over US1 billion for development and infrastructure spending. The third round of privatization is scheduled to last through 2013 and includes the Development, Consolidated and National Banks of Kenya, five sugar companies, the Kenya Wine Agencies, nine hotels, facilities owned by the Kenya Ports Authority, the Agrochemical Food Company, the remainder of KenGen, East African Portland Cement, the Kenyan Meat Commission, the New Kenya Cooperative Creameries, the Numerical Machining Complex, and several power stations. In general, competitive equality is the standard applied to private enterprises in competition with public enterprises. However, certain parastatals have enjoyed preferential access to markets. Examples include Kenya Reinsurance (Kenya-Re), with a guaranteed market share Kenya Seed Company, with fewer marketing barriers than its foreign competitors and the Kenya National Oil Corporation (KNOC), which benefits from retail market outlets developed with government funds. Some state corporations have also benefited from easier access to government credit at favorable interest rates. The Kenyan government seems determined to remove itself from competition with private enterprise, except in certain strategic areas. The government substantially divested the telecom sector from 2002 to 2007, which now benefits from competition. The sugar industry has been partially privatized and will be fully privatized with the next round of divestitures. The energy industry remains the most publicly owned sector in Kenya. The Kenyan government wholly owns the National Oil Corporation, the Kenya Pipeline Corporation, and the oil refinery in Mombasa therefore, competition is either restricted or limited. KenGen, Kenya Power and Lighting, and the newly formed Geothermal Development Corporation dominate the electricity generation portion of the energy sector, which is another restricted portion of the Kenyan economy. The primary port in Mombasa is mostly government owned but privatization efforts are underway. Beyond these sectors, competition is expected and encouraged among private enterprise in Kenya. Corporate Social Responsibility Kenya has only recently begun to apply the concept of corporate social responsibility (CSR). The United Nations initiated discussions under the auspices of the UN Global Compact in Kenya for the introduction of the UN Global CompactUNDP quotGrowing Sustainable Business for Poverty Reduction Initiative. quot In Kenya, surveys suggest that the highest proportion of corporate donations go to health and medical services. In addition, corporations direct funds towards education and training, HIVAIDS, agriculture and food security, and underprivileged children. The rationale for these philanthropic activities is closely tied to a sense that companies should give something back to the nation and to the communities in which they operate. In Kenya, many companies in the export-processing sector are seeking to mainstream HIVAIDS programs into their activities as well as other workplace issues. Local campaigns have focused attention on labor rights and abuses in Kenyan export sectors such as textiles, cut flowers, and horticulture. Some companies are taking a positive lead on labor standards, for example Cirio Del Monte is now accredited to the SA8000 standard. The bulk of the business community is challenged to create quality jobs by paying living wages and observing fundamental labor rights. Given that employment creation is one of the most pressing concerns in Kenya, workplace issues, particularly the trade-off between the creation of jobs and internationally accepted working conditions, are likely to remain at the heart of the CSR agenda. In Kenya, there are relatively few incentives for businesses to adopt responsible or pro-development practices. Few consumers are sufficiently informed or able to pay a premium for responsibly produced goods. While some companies producing for export markets are subject to labor or environmental requirements imposed by overseas buyers, producers selling into the domestic market are unlikely to be subject to such pressures. Even pressures within export markets are patchy, depending on the sector, product, and buyer. A similar gap is apparent between large companies operating in the formal sector, and smaller companies or micro-enterprises, which operate below the radar. Given an economic context in which financial margins are generally very thin, companies are unlikely to adopt higher standards voluntarily unless there is a clear business incentive to do so. The disputed 2007 presidential election sparked a devastating episode of ethnically-charged political violence, resulting in approximately 1,200 deaths and the displacement of more than 300,000 people. Property damage was in the millions of dollars and agriculture alone suffered US300 million in damages. The 2007-2008 post-election violence was investigated by the governmentrsquos Waki Commission, which identified a number of prominent Kenyan politicians as chief instigators of much of the violence. In December 2010, the International Criminal Court (ICC) released the names of five high-ranking Kenyan government officials and one journalist, whom the Court named as suspects in the incidents of political violence four of the six were subsequently charged formally with crimes against humanity. Deputy Prime Minister Uhuru Kenyatta and Member of Parliament William Ruto, who are expected to run for president and deputy president in the March 2013 elections, are among the four indicted suspects. Trials are scheduled to begin in April 2013. It is widely hoped that ongoing implementation of Kenyarsquos new constitution, approved by a two-thirds majority in a violence-free referendum in 2010, will prevent a re-emergence of violence during elections scheduled for March 2013. However, the constitution calls for a restructuring of many key national institutions, transitioning many powers and functions to newly established county governments. This process is expected to take many years to implement fully. Among other issues, implementation of police, land tenure, and judicial reforms agreed to in the power sharing agreement that ended the 2007-2008 post-election violence have been slow. The United States maintains a travel warning for Kenya due to the threat of terrorism and violent crime. Kenyarsquos military incursion into Somalia, which was in response to a series of high-profile kidnappings near the Kenya-Somalia border, has heightened security concerns and led to increased security measures at businesses and public institutions around the country. In addition to the kidnappings, Kenya suffered a series of bombings and grenade attacks targeting Kenyans in northern Kenya and in Nairobi. To date, these attacks have not appeared to target commercial projects or installations. As noted above, security expenditures represent a substantial operating expense for businesses in Kenya. Kenya maintains friendly relationships with all of its immediate neighbors, although there are strong rivalries against it as the dominant economy in the region from other EAC partners. It remains an active participant in the EAC, which includes both commercial and political initiatives, as well as the Intergovernmental Authority on Development (IGAD), an eight-country multilateral organization that coordinates efforts to mitigate the effects of regional challenges such as drought, famine, and economic hardship. Kenya is also an active participant in the Common Market for Eastern and Southern Africa (COMESA). The Kenyan government has strong ties with governments of neighboring countries, including Somalia, despite the ongoing security issues caused by unstable, porous, and conflicted borders and the presence of violent extremist groups like al-Shabaab. Kenya and its neighbors are working together to mitigate the threats of terrorism and insecurity through African-led initiatives such as the African Union Mission in Somalia (AMISOM) and the nascent Eastern African Standby Brigade (EASBRIG). In November 2012, the Judicial Service Commission approved the establishment of a special division within the High Court to deal with those responsible for the post-election violence. The International Crimes Division (ICD) will deal with the ldquomiddle and lower levelrdquo perpetrators of international crimes committed in Kenya during the post-election violence period. The National Council for Administration of Justice (NCAJ) through its technical committee has endorsed the proposal to cover the 2007-2008 period and recommended that the events surrounding the 1992 and 1997 elections also be considered. The court will be composed of seven judges, will have jurisdiction over crimes such as money laundering, cyber laundering, human trafficking, piracy and transnational organized crime. Appeals will be directed to the Court of Appeal with a final appeal to the Supreme Court. Corruption in Kenya is pervasive and entrenched. Kenya is ranked amongst world39s most corrupt countries. The 2012 Ibrahim Index of African Governance ranked Kenya 25 out of 52 countries on quality of governance, a decline of two places from 2011. Transparency International Kenyarsquos Global Corruption Perception Index 2012 has Kenya ranked 139 out of 176 countries, a marginal increase from 154 of 183. Kenya still ranks second from the bottom among the five EAC countries, better only than Burundi. The Corruption Perceptions Index measures the perceived levels of public sector corruption in countries worldwide. Lack of political will, little progress in prosecuting past corruption cases, and the slow pace of reform in key sectors were cited reasons why Kenya is still ranked amongst the 35 lowest-scoring countries. In December 2003, the Kenyan government signed and ratified the UN Convention against Corruption. In 2003, the Kibaki government enacted the Anti-Corruption and Economic Crimes Act and the Public Officers Ethics Act, setting rules for transparency and accountability, and defining graft and abuse of office. The Public Officers Ethics Act requires certain public officials to declare their wealth and that of their spouses within 90 days from August 2, 2003. Subsequently, the government fired 23 judges for corruption. Nevertheless, opposition leaders castigated the Kibaki government for its lackluster pursuit of individuals suspected of corruption. In 2004, the government established the Kenya Anti-Corruption Commission (KACC), moved forward with the implementation of the Anti-Corruption and Economic Crimes Act, and launched full implementation of the Code of Ethics Act for Public Servants in 2004. The Public Procurement and Disposal Act, which established a commission to oversee all procurement matters, became law in 2005 but has been ineffective in limiting abuse by public officials. Despite the law, large public procurement programs and military procurement have been at the center of a number of corruption scandals in recent years. Enacted in 2007, the Supplies Practitioners Management Act is meant to complement the Public Procurement and Disposal Act by regulating the training, certification, and conduct of procurement officers and imposing penalties for violations. The KACC launched several investigations in 2006-2007 against senior government officials, including two government ministers however, none of the cases have been prosecuted successfully, in large part due to bottlenecks in the Attorney General39s Office and loopholes in the judicial system. Former Finance Minister Amos Kimunya stepped aside in early July 2008 in connection with the non-publicly tendered sale of a government-owned property, the Grand Regency Hotel, to a Libyan group. An investigatory commission, the Cockar Commission, reportedly exonerated Kimunya of any wrongdoing. He was appointed as Minister of Trade in January 2009, providing an example of the culture of impunity in Kenya. At the end of 2010, he became Minister of Transport. In 2009, President Kibaki irregularly reappointed the director of KACC, during whose tenure no minister-level official had ever been prosecuted, despite a number of high profile corruption scandals including Goldenberg, Anglo Leasing, Triton, and the maize scandal. After a storm of protest from Parliament, the director of KACC lost his re-appointment vote. This historic vote was the first time that the Parliament overruled the President. In 2010, the KACC Board selected PLO Lumumba as director of KACC. Lumumba took a strong stance against corruption and re-opened some of the older cases, including Anglo-Leasing. In December 2010, in Lumumbarsquos first major corruption case, the KACC arrested and charged Minister of Trade Henry Kosgey with abuse of office over the illegal importation of automobiles. The case was dismissed on a technicality and the government has said it plans to appeal. As called for in the constitution, the KACC was replaced in 2011 by the Ethics and Anti-Corruption Commission (EACC), which is very similar to the KACC. Hopes that the new body would be a more effective check on corrupt behavior than its predecessor have not been realized as yet like the KACC, the EACC has investigative power but lacks prosecutorial authority. Furthermore, it is widely believed that Parliament was uncomfortable with the pressure brought to bear by Lumumba and sought to dismiss him by disbanding the KACC. Since it was established in 2011, the EACC has been without a fully constituted board of directors and senior management team, which has hindered its ability to operate effectively. Bilateral Investment Agreements Kenya does not have a bilateral investment trade agreement with the United States. Kenya has signed bilateral investment agreements with Burundi, China, Finland, France, Germany, Iran, Italy, Libya, Netherlands, Slovakia, Switzerland, and the United Kingdom, although only those with Germany, Italy, Netherlands, and Switzerland have entered into force as of June 2012. As noted above, Kenya and its EAC partners signed a Trade and Investment Framework Agreement with the United States in July 2008 as a bloc. In 2012, the United States launched talks with EAC on a new trade and investment partnership, which includes a regional investment treaty. OPIC and Other Investment Insurance Programs Kenya is eligible for Overseas Private Investment Corporation (OPIC) programs and is a member of the Multilateral Investment Guarantee Agency (MIGA). In September 2011, OPIC approved up to US310 million in financing for the expansion of Nevada-based Ormatrsquos geothermal energy facility in Kenya, which also receives support from MIGA. This represents a substantial increase in scale compared to previous OPIC activities in Kenya: in 2008 and 2009 OPIC supported five projects in Kenya totaling US19.18 million, including two large microfinance projects targeting women. OPIC is seeking to expand its existing Kenya portfolio of US320 million to supporting mobile banking, housing, telecommunication and power. In July, 2012, OPIC announced that their Board of Directors ldquoapproved US72 million in financing to help bring affordable high-speed internet service, television programming and telephone service to growing, yet underserved middle class markets in East Africa. The OPIC direct loan will enable Wananchi Group Holdings (WGH), a Kenyan company, to extend fiber optic cable services for high-speed internet, television and voice-over internet telephonic services in Kenya. WGH will also provide pay TV programming via satellite across a broad footprint of cities and rural areas directly to Kenya, Tanzania, and Uganda, and indirectly through agents to a number of other East African countries, including Burundi, Malawi, Rwanda, Somalia, South Sudan, and Zambia. rdquo9 Note: OPIC is appointing an Africa representative to the U. S. consulate in Johannesburg to facilitate transactions throughout Sub-Saharan Africa later this year. Kenya39s population is estimated to be roughly 41 million. Of the approximately 21 million working Kenyans aged 15-64, the Kenya National Bureau of Statistics reports that 10 million are engaged in pastoral and small-scale rural agriculture. Another 8.8 million are engaged in the informal sector, leaving only 2.2 million Kenyans in the formal sector. A 2006 household survey found that 46 percent of the Kenyan population was living on less than US1day newer data is not available, but the Kenyan government believes that the number has decreased considerably due to rising per capita income and a growing middle class, which at 10 percent of the population is now among the largest in Africa. Per capita income, per the Atlas method, is US820 in 2011. The countryrsquos population growth rate of 2.7 percent per annum coupled with high unemployment and informal employment produces on-going demand for new jobs . Kenya has an abundant supply of well-educated and skilled labor in most sectors. According to the Global Competitiveness Index Kenya ranks 100 of 144 in higher education and training and 39 of 144 in labor market efficiency. Kenya39s laws generally provide safeguards for worker rights and mechanisms to address complaints of their violation, but the Ministry of Labor and Human Resource Development lacks the resources to enforce them effectively. In October 2007, President Kibaki signed five labor reform laws that were drafted with ILO assistance under the U. S. Department of Laborrsquos Strengthening Labor Relations in East Africa (SLAREA) project to make Kenyarsquos labor laws more consistent with ILO core labor standards, AGOA compliant, and harmonious with Ugandarsquos and Tanzaniarsquos labor laws. The new laws are: the Employment Act, which defines the fundamental rights of employees and regulates employment of children the Labor Relations Act on worker rights, the establishment of unions, and employers associations the Labor Institutions Act concerning labor courts and the Ministry of Labor and Human Resource Development the Occupational Safety and Health Act and the Work Injury Benefits Act on compensation for work-related injuries and diseases. The Kenyan government formally published the amended texts of the new laws in 2008. Also in 2008, the Kenyan government created the National Labor Board to steer stakeholders to meet and propose necessary amendments to Parliament for smooth implementation of the Acts. The Board will set structures and rules as required by the Act. Kenya has signed and ratified 7 of 8 Fundamental Conventions of the ILO and 3 of 4 Priority Governance Conventions. Not ratified are the ldquoFreedom of association and Protection of the Right to Organize (C087)rdquo and ldquoEmployment Policy (C122)rdquo conventions. Under the Labor Relations Act, a minimum of seven workers may initially apply to register a union, but the nascent union must have a minimum of 50 members to be registered. A union must also show a signed membership request from 50 percent of the workers in a workplace to force an employer to recognize the union. There are 42 registered unions representing over 500,000 workers, approximately one quarter of the country39s formal sector work force. All but six, including the 240,000 member Kenya National Union of Teachers (KNUT), the University39s Academic Staff Union (UASU), and the Union of Kenyan Civil Servants (UKCS), are affiliated with the Central Organization of Trade Unions (COTU), which has about 260,000 members. Union membership is voluntary and organized by craft rather than industry. Kenyarsquos constitution protects the right to fair remuneration, reasonable working conditions, trade union activities, and the right to strike in the Bill of Rights as fundamental freedoms. Consequently, workers, especially in the public sector, now enjoy greater latitude to express their grievances. While the law permits strikes, unions must notify the government 21-28 days before calling a strike. During this period, the Minister of Labor and Human Resource Development may mediate the dispute, nominate an arbitrator, or refer the matter to the new Employment Relations Court, which replaced the Industrial Court. A strike is illegal while mediation, fact-finding, arbitration, or other legal proceedings are in progress. The Labor Institutions Act of 2007 expanded the former Industrial Court and gave it the same powers as a High Court to enforce its rulings with fines or prison sentences the new Employment Relations Court is largely the same as the Industrial Court but may also hear individual employment complaints, which previously were handled by the Ministry of Labor. The court has penalized employers for discriminating against employees because of their union activities, usually by requiring the payment of lost wages. Court-ordered reinstatement is not a common remedy because of the difficulty in implementation. On August 2011, Kenya re-constituted the Industrial Court elevating it to the status of the High Court to hear and determine disputes relating to employment and labor relations from the perceived subordinated Court status in line with provisions of the new Constitution of 2010 and as part of the on-going judicial reforms in Kenya. This is an attempt to create industrial peace and speedy resolution of increased employment disputes arising from the increased labor freedoms brought by the new Constitution as witnessed by the recent wave of strikes. The Industrial Court has now been integrated with the traditional judiciary. It remains a specialized Court, but removed from the Ministry of Labor to the Judiciary. The new Industrial Court Act 2011 entrenches the Industrial Court into the relatively well funded and independent Judicial Service Commission system from the chronically underfunded Ministry of Labor. To address congestion in the Industrial courts, new branches are being rolled up in the two other Kenyan cities namely Mombasa and Kisumu. The new Industrial Court has both the same status as High Court and appellate jurisdiction to hear and determine appeals from: decisions of the Registrar of Trade Unions and Magistrate courts, local tribunal or commission. Recognition of Alternative Dispute Resolution system to supplement the court is a key feature of the new Act. The Court has appellate jurisdiction to hear and determine appeals from: decisions of the Registrar of Trade Unions and Magistrate courts, local tribunal or commission. The Chief justice has also designated all courts in the 47 Counties presided over by Magistrates as special courts to hear and determine Employment and Labor relations cases. This initiative is expected to ease the backlog in the Industrial court. Kenya has relatively harmonious labor relations. The Industrial Court adjudicated 226 cases in 2008, out of which it gave 192 rulings, compared to 295 cases and 147 rulings in 2007. However, the number of cases subsequently rose to 851 in 2009 and 1,484 in 2010. 361 Collective Bargaining Agreements were negotiated and registered by the Industrial Court in 2011. Late 2011 saw a notable uptick in labor unrest and at least ten unions issued strike notices in the last six months of the year alone. A number of different unions, from postal workers to physicians, exercised their right to strike. There were several large-scale strikes in 2012 involving public sector workers, primarily teachers, health sector workers, and public transportation drivers. Violence was minimal and all strikes were resolved through negotiations. Labor law mandates the total hours worked in any two-week period should not exceed 120 hours (144 hours for night workers). Negotiations between unions and management establish wages and conditions of employment. There are twelve separate minimum wage scales, varying by location, age, and skill level. Regulation of wages is part of the Labor Institutions Act, and the government establishes basic minimum wages by occupation and location, setting a minimum for monthly, daily, and hourly work in each category. In 2011, the Kenyan government revised the minimum wage upwards by 12.5 percent. In many industries, workers are paid the legal minimum wage and thus benefited from this increase however, the wage increase was outpaced by increases in the cost of living. As of January 2012, the lowest legal urban minimum wage was Ksh 7,586 (US90) per month, and the lowest agricultural minimum wage for unskilled employees was Ksh 3,765 (US45) per month, excluding housing allowance. The Productivity Center of Kenya, a tripartite institution including the Ministry of Labor, the Federation of Kenyan Employers, and COTU, is tasked to set wage guidelines for various sectors based on productivity, inflation, and cost of living indices, but the center lacks strong industry support and employers often do not follow its recommendations. Most minimum wage workers must rely on second jobs, subsistence farming, other informal work, or the extended family for additional support. Furthermore, a large portion of employees in Kenya rely primarily on the informal sector for work and thus are not protected by minimum wage laws. Workers covered by a collective bargaining agreement generally receive a better wage and benefit package than those not covered: Ksh 14,621 per month on average (US173), plus a housing and transport allowance, which may account for 20 to 40 percent of a Kenyan workerrsquos compensation package. Kenyan law establishes detailed environmental, health and safety standards, but these tend not to be strictly enforced. The Directorate of Occupational Health and Safety Services (DOHSS), a department under the Ministry of Labor and Human Resource Development, has the mandate to enforce the Occupational Safety and Health Act and its subsidiary rules. DOHSS has the authority to inspect factories and work sites, except in the EPZs, but operates with less than half of the 168 inspectors needed to adequately cover the entire country. DOHSS developed a program to help factories establish Health and Safety Committees and train them to conduct safety audits and submit compliance reports to DOHSS. The Directorate also maintains a register of approved and certified safety and health advisers whom employers may enlist to conduct safety audits in the factories and other places of work. The Directorate should carry out these audits at least once a year and forward a copy of the audit report to the DOHSS within 30 days. However, according to the government, fewer than half of the largest factories had instituted Health and Safety Committees. Visas and Work Permits Work permits are required for all foreign nationals who wish to work in Kenya. An applicant for an entry permit must describe the type work they will perform and will be limited to that specific activity. Although there is no official time limit, a visitor39s pass or a visa is usually valid for three months and the Immigration Department must grant applicable extensions upon proper application. Applicants may apply for work permits in any major city in Kenya, but all applications go to Nairobi for processing. Before hiring expatriate workers, businesses are required to demonstrate by an exhaustive local recruitment campaign that suitably qualified Kenyan citizens are unavailable. Foreign firms must also sign an agreement with the government defining training arrangements intended to phase out expatriates. The government is currently working to develop a skills inventory, which should lower the burden on firms hiring expatriates by replacing the labor-market testing procedure, at least for high-skill positions, with a pre-determined list of skills with shortages in the Kenya. As of January 2012, however, the Ministry had conducted a pilot study but had not commissioned a full employment survey. Once implemented, this inventory will allow approved employers to freely hire foreign workers with the listed skills, subject only to verification of the credentials and character of the individuals proposed for employment by the Immigration Department. Despite this measure, high unemployment levels have led the government to make it increasingly difficult for expatriates to renew or obtain work permits, and Immigration has increased the price of a work permit to up to Ksh200, 000 (US2,370). The Immigration Department has occasionally cancelled work permits before the expiration date without giving reasons. According to the law, the immigration officer issuing entry permits may also require a bond of not less than Ksh 100,000 (US1,180) for each permit, to be deposited with the Immigration Department. Foreign Direct Investment Statistics Through the 198039s and 199039s, the deterioration in economic performance, together with rising problems of poor infrastructure, corruption, high cost of borrowing, crime and insecurity, and lack of investor confidence in reforms generated a long period of low FDI inflows. The GoK has made the attraction of FDI a clear policy priority and established KenInvest as a semi-autonomous agency in 2004. Net inflows increased more than fourteen-fold between 2006 and 2007, from US51 million (0.2 of GDP) in 2006 to a record US729 million (2.7) in 2007, according to the World Bankrsquos World Development Indicators due to large privatizations in telecommunications and investment in the railways. FDI inflows dropped off sharply in 2008, coming in at only US96 million (0.3), and then increased to US116 million (0.4) in 2009, US178 million (0.6) in 2010, and US335 million (1.0) in 2011. These figures compare poorly to neighboring Tanzania and Uganda, which have both posted higher net FDI inflows in dollar terms than Kenya each year since 1993, with the exception of 2007, despite their smaller economies. In 2011, Tanzania reported US1.095 billion in net FDI inflows and Uganda reported US792 million. UNCTAD estimates Kenyarsquos 2011 FDI stock at approximately US2.6 billion. As of 2008, the market value of U. S. investment in Kenya stood at approximately US183 million, primarily concentrated in commerce, light manufacturing, and tourism. Kenya, which has traditionally been seen as a laggard in attracting FDI, is now ranked among top FDI destinations in Africa, thanks to ongoing investments in infrastructure and judicial reforms. FDI Intelligencersquos FDI Report 2012 ranked Kenya 10 th in infrastructure systems in Africa and 8 th in human resource capacity attributes in Africa. The report shows that Kenya attracted 55 projects in 2011 compared with South Africarsquos 154 and Moroccorsquos 70. The highest number of projects were in coal, natural gas, and oil, real estate, hotels and tourism, software, IT services and communications sub-sectors. The number of projects coming to Kenya rose 77 percent from 2010, pushing it ahead of Nigeria, and Egypt. However, the other East African countries did not feature in the ranking. Inflows into the country were boosted by increased fundraising by oil since and mineral prospecting companies seeking a share of Kenyarsquos rising mineral resource profile. In 2012, Kenya struck oil but its commercial viability is yet to be determined. FDI from traditional sources such as Europe has been complemented by that from emerging markets. Investors from China (roads, manufacturing, and agriculture), India (ICTs such as Airtel and Yu), and the Middle East (hotel and property development such as Fairmont) are starting to make their presence felt. Large government infrastructure projects are likely to increase FDI in the coming years. The government is presented a PPP bill to Parliament with the intention of attracting US40 billion in infrastructure finance. With an industrial base that is relatively advanced compared to the region, Kenya is also becoming an important outward investor in manufacturing, finance and service activities to EAC countries and the wider region. Kenyan companies with a significant regional presence include Tourism Promotion Services Eastern Africa (operating as Serena Hotels), Kenya Commercial Bank, Diamond Trust Bank and Equity Bank, East African Breweries, the Uchumi and Nakumatt supermarket chains, and Nation Media (radio broadcasting and television). Outward FDI reached US46.0 million in 2009 before decreasing to US17.7 million in 2010. Meanwhile total outward stock stands at US306 million. In 2012, foreign interest in the energy sector grew. Kenyarsquos energy sector has received significant attention with major breakthroughs in oil and geothermal offsetting slower-than-hoped-for progress in wind and solar energy. Energy sector expansionmdashincluding oil, gas, coal, geothermal, wind, solar, biomass, and even nuclearmdashfigures prominently in the countryrsquos Vision 2030 development strategy. Tullowrsquos discovery of oil in early 2012 prompted significant excitement among government officials and the private sector, as well as among development partners and organizations interested in supporting the governmentrsquos energy sector policy reform process. Tullow has not yet determined whether its discovery is commercially viable, although most indications thus far have been positive. More recently, U. S.-based Apache discovered non-commercial quantities of natural gas in its offshore exploration block near Malindi, Kenya. Six U. S. companies now hold stakes in a total of nine Kenyan oil exploration blocks. Poor data collection in Kenya leads to underestimating actual inflows of FDI. There is no clear mandate by any agency to collect data on FDI. The CBK, the Kenya Investment Authority, and the Kenya National Bureau of Statistics all collect only partial information on either balance of payments inflows or investment projects. The government does not publish data on the value of foreign direct investment (positionstock or annual investment capital flows) by country of origin or by industry sector destination. Neither is data available on Kenyarsquos investment abroad. If implementation of the new constitution and other reforms moves forward smoothly, this growing domestic investment might be bolstered by a significant increase in FDI inflows. 2 Source: Kenya Tourism Board