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Country Commercial Guides for FY 2000: Kenya Report prepared by U.S. Embassy Nairobi, released July 1999

CHAPTER V:   LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT

A.   BEST PROSPECTS FOR NON-AGRICULTURAL GOODS AND SERVICES

RANKING PRODUCT

 
	      		        Est. Total         Est. Imports
      	 	       		  Market 	     from U.S.
  		     	       (In $ Million)     (In $ Million)

1.  Telecommunications Equipment   103.8              15.9
2.  Electrical Power Systems  	    55.3	       8.5
3.  Industrial Chemicals	    84.7	      43.5
4.  Food Processing & Packaging Eq. 28.7	       2.7
5.  Automobile Parts & Service
    Equipment	    		   115.7	       1.8
6.  Plastic Materials & Resins	    98.5	       3.0
7.  Agricultural Machinery & 
    Equipment		  	    26.5	       3.1
8.  Laboratory Scientific 
    Instruments		  	    29.5	       2.8
9.  Computers & Peripherals	    25.2	       6.1
10. Aircraft and Parts		    60.6	      35.1

1.   Telecommunications Equipment (TEL)

The Kenyan telecommunications market is estimated at about $103.8 million. In July 1999, the telecommunications sector was liberalized when the Kenya Posts & Telecommunications Corporation was split into three autonomous entities. Total Kenyan telecommunications market growth for the period 2000-2002 is expected to range from four to seven percent annually in real terms. However, demand for certain items such as telephone receivers and cellular telephones will grow at a faster rate. Although there exists some assembly of telephone sets and PABXs, there is no significant local production of telecommunications equipment. While U.S. technology is respected in this market, American firms have a continuing problem in matching the financing terms (concessionary and mixed credits) offered by its competitors. The telecommunications sector is one of the keys to sustained economic development in Kenya. Opportunities should continue to develop in strategic alliances or joint ventures, especially in the areas of cellular telephone and value add-ons to the traditional telephone system. With the continued liberalization of the telecommunications sector, Kenya could possibly play more of a regional role, as well.

					1997		1998		1999
						    ($ Millions)				
Total Market Size 			95.5		103.8	 	113.1
Total Local Production			NIL		NIL		NIL
Total Exports				N/A		N/A		N/A
Total Imports				95.5		103.8		113.1
Imports From the  U.S.			15.0		 15.8		 16.7 
Exchange Rate: U.S. $1 = KSH.		58.8	  	 60.4   	 70.3	
       
MOST PROMISING SUB-SECTORS:		Market Size Est. 1998 
($ Millions)

Line Telephone & Telegraph Apparatus    	41.7
Navigational Equipment & Parts           	 2.6

2.   Electrical Power Systems (ELP)

Kenya's only two power companies have recently embarked on major power generation and distribution projects. These projects are intended to revamp the country's available electrical power, of which current demand exceeds supply by up to 30 percent. GOK has liberalized the electrical power sector by splitting the Kenya Power & Lighting Company, while at the same time allowing independent power producers to invest in electrical power generation and supplement Kenya Electricity Generating Company, the new power generating entity. The World Bank and its affiliates have pledged to support Kenya's electrical power generation to the tune of $699 million. The country's annual expenditure for transmission lines and sub-station investment will, therefore, trend upwards over time. Total Kenyan ELP market growth for the period 2000-2002 is expected to range from five to seven percent annually in real terms, though demand for such items as transmission lines and switchgear may grow at a faster rate. Demand for replacement equipment for existing facilities also will be a considerable factor. Areas of particular interest to foreign suppliers include the continuing Rural Electrification Program and the World Bank-sponsored geothermal and thermal power generation projects. There is no local production of any of the items covered in this category.

					1997		1998		1999
 		     				    ($ Millions)

Total Market Size			52.6		55.0		60.2
Total Local Production		 	NIL		 NIL		 NIL
Total Exports			 	NIL		 NIL		 NIL
Total Imports				52.6		55.0		60.2
Imports from U.S.			 8.1		 8.5		 9.9
Exchange Rate: U.S. $1 = KSH.		58.8		60.4		70.3  

MOST PROMISING SUB-SECTORS:   Market Size Est. 1998
 ($Million)

Generation equipment			15.0
Switchgear Motors/Engines		 9.7
Transmission/Distribution
 Equipment				 7.7

3.   Industrial Chemicals (ICH)

Kenya imports all its industrial chemicals, as there is no local production. The market is currently dominated by European suppliers and, to a lesser extent, Asian exporters. An improved Kenyan economy coupled with an expanding regional market dictate an upward trend for industrial chemicals. The 2000-2002 sectoral growth is estimated in the 7-10 percent range. New investment in manufacturing is encouraged by the Government of Kenya. Thus, this sector has growth potential, as new industrial materials are required. U.S. industrial chemical manufacturers/suppliers should actively consider utilizing Kenya as a base for penetrating the entire Eastern and Central African market.

					1997		1998		1999
					           ($ Million)

Total Market Size		 	88.9		100.5		111.5
Total Local Production	  		NIL		 NIL		 NIL
Total Exports		  		NIL		 NIL		 NIL
Total Imports		 		88.9		100.5		111.5
Imports From U.S.		 	41.9		 43.5		 46.7
Exchange Rate: U.S. $1 = KSH.		58.8	  	 60.4	  	 70.3   

MOST PROMISING SUB-SECTORS:     Market Size Est. 1997
  ($ Million)
	
Hydrocarbons 				13.7
Carboxylic Acids & derivatives		 9.1
Synthetic Organic dyes			 9.5

4.   Food Processing & Packaging Equipment (FPP)

Demand for food processing and packaging equipment in Kenya is expanding in reaction to government-initiated economic reforms. However, domestic production of food processing machinery is still at primarily limited to small commercial ovens used in the baking industry and prefabrication of containers. Due to lack of requisite know-how and material, no significant expansion is expected in local production in the near future. For all practical purposes, all machinery in this sector is imported. The Kenyan sugar industry has initiated expansion plans to the existing sugar factories that require significant amount of imports. Long term, the industry will have a major new investment in the Busia Sugar Factory. Regionally, greater emphasis is being placed on food security in the Greater Horn of Africa, thus placing an increasing demand for food processing, storage and distribution. The GOK, responding to the attendant need of food security, is increasingly reducing tariffs on FPP. This sector is therefore projected to experience solid growth in the future. The sectoral market growth is estimated in the 10 percent range for the period 2000 to 2002.

					1997		1998		1999
			       			   ($ Millions)

Total Market Size			28.5		31.6		32.7
Total Local Production			N/A		N/A		N/A
Total Exports				N/A		N/A		N/A
Total Imports				28.5		31.6		32.7
Imports from U.S.			 2.6		 2.8		 3.2
Exchange Rate: U.S. $1 = KSH.		58.8   		60.4   		70.3   

MOST PROMISING SUB-SECTORS: 	Market Size Est. 1998
     ($ Million)

Vegetable Oil Milling Machinery		15.3
Sugar Processing Equipment     	         2.2

5.   Automotive Parts & Service Equipment (APS)

Although it has an active motor vehicle assembly sector, Kenya has no manufacturing base for automotive parts and service equipment, which are imported mainly from Europe and East Asia. Japan and Europe dominate the auto and truck market in the country. Recently, however, we have witnessed entry of some of U.S. vehicles, led by Chrysler's Jeep Cherokee. Kenyan statistics mix completely knocked-down (CKD) kits with auto parts and service equipment. Thus, the breakdown of the total market and import figures are estimates. By local standards this is a large market with great potential for expansion considering that neighboring countries of Uganda, Tanzania, southern Sudan, Ethiopia, Rwanda and Burundi are also supplied through this market. With the deplorable state of roads, an unhindered influx of used cars in recent years, plus lack of local manufacturing, a growing demand for spare parts and vehicle maintenance in the range of eight to ten percent annually continues. Opportunities exist in this sector, but success will require aggressive marketing.

 
					1997		1998		1999
						    ($ Million)

Total Market Size			123.8		137.4		141.4
Total Local Production			N/A		N/A		N/A 
Total Exports				N/A		N/A		N/A 
Total Imports				123.8		137.4		141.4
Imports from U.S.			  1.3		  2.0		  2.9
Exchange Rate: U.S. $1 = KSH.		 58.8  	 	 60.4  	 	 70.3 

MOST PROMISING SUB-SECTOR: 	Market Size Est. 1997
     ($ Million)

Auto Engine Parts (Aftermarket)		20.6
Auto Body Parts 			 3.2

6.   Plastic Materials & Resins (PMR)

Kenyan consumer demand for plastic products continues to grow at a faster rate than economic and production growth. This has been spurred by economic reforms that have led to sustained economic development and subsequent improvement of available disposable income. The country has no resources to cater for local production of the requisite plastic materials and resins, so imports dominate the market. Thus, a continued increase in future exports is expected in this sector. Competition is from third country suppliers. The market growth for the period 2000-2002 is projected to be in the range of 10-12 percent annually.

					1997		1998		1999
				        	   ($ Millions)

Total Market Size			107.2		121.2		126.7
Total Local Production			N/A		N/A		N/A
Total Exports				N/A		N/A		N/A
Total Imports			        107.2	        121.2		126.7 
Imports from U.S.			2.7		  3.4		  5.2
Exchange Rate: U.S. $1 = KSH.		58.8   		 60.4  		 70.3   

MOST PROMISING SUB-SECTORS:      Market Size Est. 1997
    ($ Million)

Resins   		    		14.7
Unsupported Film Sheets      		 7.7

7.   Agricultural Machinery & Equipment (AGM)

Fabrication of replacement parts is the main local production in Kenya's agricultural machinery & equipment sector; imports dominate the market. The country does not have an established manufacturing base as it lacks know-how and requisite material. The Kenyan market for imported agricultural equipment has been growing, but slowly. The growth of the market is largely influenced by external macroeconomic factors such as the international price of coffee and tea, the country's main foreign exchange earners. Major developments in the sugar industry are another determining factor. This includes rehabilitation of existing cane farms, and new large projects, including the Siaya and Busia sugar projects. These will increase sugar cultivation, which will positively affect demand for AGM. Additionally, with a greater emphasis on food security in the Greater Horn of Africa, there will be increased need to use modern inputs to agricultural production, transportation, storage and food processing.

					1997		1998		1999
						   ($ Millions)

Total Market size			24.9		27.7		28.5
Total Local Production			NIL		NIL		NIL
Total Exports				NIL		NIL		NIL
Total Imports				24.9		27.7		28.5
Imports from U.S.		 	 3.9		 4.5		 4.8
Exchange Rate: U.S. $1 =  KSH.	 	58.8   	 	60.4   	 	70.3  

MOST PROMISING SUB-SECTORS:     Market Size Est. 1998
   ($ Million)

Tractors				10.6
Dairy Farm Machinery & Parts		 6.4
Horticultural, Poultry & 							
Bee Keeping Machinery	 		 3.8	

8.   Laboratory Scientific Instruments (LAB)

Kenya imports all laboratory scientific instruments; there is no local production. The big consumers are institutions of higher learning, government installations (mainly hospitals) and parastatals. As the economy improves, GOK has initiated a "re-equipping" program for all schools with laboratory scientific instruments. Government agencies offering essential services especially hospitals and clinics are expected to follow suit in the re-equipping program. With many Kenyans educated in the U.S., there is a familiarity and affinity with U.S. manufactured scientific equipment.

					1997		1998		1999
  						   ($ Millions)

Total Market Size			26.8		29.5		32.5
Total Local Production			NIL		NIL		NIL
Total Exports				NIL		NIL		NIL
Total Imports				26.8 		29.5		32.5
Imports from U.S.			 2.5		 3.0		 3.5
Exchange Rate: U.S. $1 = KSH.		58.8   	 	60.4   	 	70.3

MOST PROMISING SUB-SECTORS: 	Market Size Est. 1998
        ( $Million)

Measuring and Analyzing Instruments	11.4

9.   Computers and Peripherals (CPT)

Kenya has a limited computer assembly sector. Manufacturing of computers and peripherals is yet to be established. The Kenyan computer market has historically been awash with undocumented computer imports in response to high tariffs. However, since the GOK substantially reduced the tariffs to around ten percent, the market has expanded and undocumented imports have virtually disappeared. The figures below reflect the estimated documented (legal) market. Although U.S. computers are available in the market, a substantial number of personal computers are imported by affiliates of European-based U.S. firms. These imports are not reflected in the statistics as U.S. imports to Kenya, thus distorting the actual U.S. share of the total market. Mainframes and minicomputers dominate the market in terms of installed value.

					1997		1998		1999
						    ($ Millions)

Total Market Size			23.9		26.8		30.0
Total Local Production			N/A		N/A		N/A
Total Exports				N/A		N/A		N/A
Total Imports				23.9		26.8		30.0
Imports from U.S.	 		 7.1		 7.4		 8.3		
Exchange Rate: U.S.  $1 = KSH.		58.8   		60.4  	 	70.3   

MOST PROMISING SUB-SECTIONS:    Market Size Est. 1998
  ($ Millions)

Personal Computers				4.8
Local Area Network Equipment  		        2.5
Mainframe Computers			        2.1

10.   Aircraft and Parts (AIR)

The privatized national carrier, Kenya Airways, has entered the market for replacement aircraft. The airline received three Boeing 737-300 in 1997-98. Kenya has no domestic production of aircraft. With the national carrier contemplating further expansion, additional aircraft orders may be made (subject to availability of finances). Although the Kenyan tourist industry has declined in recent years, there is evidence of resurgence and small aircraft operators have indicated intentions to increase their fleet to meet growing demand, especially to cater to regional tourism. U.S. firms are encouraged to maintain their marketing presence, as big ticket items take many years before a purchase contract is signed. Nairobi's Wilson Airport is the busiest general aviation airport in Africa and serves as the regional small aircraft maintenance center. U.S. exporters should maintain their presence and expand marketing activities for smaller civil aircraft, especially in the face of strong marketing by South African firms.

					1997		1998		1999
						    ($ Millions)

Total Market Size			144.7 	    	60.2		64.6
Total Local Production			NIL		NIL		NIL
Total Exports				NIL		NIL		NIL
Total Imports			    	144.7       	60.2		64.6
Imports from U.S.			 89.0		18.1		19.9
Exchange Rate: U.S. $1 = KSH.		 58.8   	60.4   		70.3   

MOST PROMISING SUB-SECTORS:     Market Size Est. 1997
  ($ Million)

Aircraft Parts				4.1
Aircraft Engines			3.5
Aircraft General Aviation		2.6

B.   BEST PROSPECTS FOR AGRICULTURAL PRODUCTS

SUMMARY

RANKING PRODUCT				Est. Total		Est. Imports
					Market Size		From U.S.
					(Metric Tons)		(Metric Tons)

1. Wheat				  650,000		  25,000	
2. Corn			          	3,200,000		  70,000
3. Seeds (Cereals & Horticulture)	   20,000		   1,000	
4. Animal Genetics			1 million		 300,000
5. Sugar & Sugar Products		  483,000		  20,000
6. Oilseed & Products			  190,000		  10,000
7. Rice, milled				   80,000		  25,000

A.   Rank:   1

B.   Name of Sector:   Agriculture

C.   ITA or PS&D Code:   Wheat (0410000)

					1996		1997		1998
             					(000 Metric Tons)

D. Total Market				620		640		650
E. Total Local Production		288		350		260
F. Total Exports			  0		  0		  0
G. Total Imports			487		465		500
H. Total Imports from U.S.		150		 20		 25
I.  Exchange Rate			 57.10 		 58.80 		 60.40 

Kenya produces only 35-40% of its domestic wheat requirements, estimated at 650,000 tons. Production for the 1997/98 season decreased drastically due to adverse weather conditions. To meet domestic demand, about 465,000 tons will be imported. The government reduced variable duty in February, 1998 to 10% from 50% on top of the normal duty of 25% to ease importation. The highest demand is for hard or high protein wheat used to blend bread flour. Kenya does not produce this type of wheat. High U.S. prices also discourage would-be importers. However, quality standards favor U.S. wheat.

A.   Rank:   2

B.   Name of Sector:   Agriculture

C.   ITA or PS&D Code:   Corn (0440000)

				1996		1997		1998
					(000 Metric Tons)

D. Total Market			3100		3200		3200
E. Total Local Production	2900		2200		2300
F. Total Exports		   5	           0		   0
G. Total Imports	  	  10		 780		 690
H. Total Imports from U.S.	   2	 	  80		  70
I.  Exchange Rate		  57.10	  	  58.80 	  60.40

In mid 1995 to early 1996, Kenya exported about 375,000 tons of corn. After this, the country experienced irregular rains. The drought, coupled with disgruntled farmers unhappy with poor government policies, led to a drastic grain production decline to only 2.2 million tons compared to the previous year's production of 2.9 million tons. The country could not meet its domestic corn requirements of about 3.2 million tons. In 1997, production was hampered by drought in the early months of the planting season followed by exceptionally heavy rains leading to heavy crop losses. The severe crop production deficit prompted the importation of massive amounts of maize. Over 1.1 million tons of maize was imported out of which 850,000 was done by the commercial sector and the rest by donor agencies and the government for relief operations. There was a significant deficit of maize in 1998. To ease importation of the grain, import duty of 25% was waived for three months starting April 1, 1998 to make up for the shortfall in production.

A.   Rank:   3

B.   Name of Sector:   Agriculture

C.   ITA or PS&D Code:   Seeds (Cereals, Pasture and Horticulture) (0410000)

				1996		1997		1998
             				(000 Metric Tons)

D. Total Market			20		25		30
E. Total Local Production	N/A	        N/A		N/A
F. Total Exports		N/A		N/A		N/A
G. Total Import 		N/A		N/A	 	20
H. Total Imports from U.S.	N/A		N/A		 1
I.  Exchange Rate		57.10 		62.70 		62.71 

Though still relatively young, horticulture is the fastest growing and most dynamic sub-sector in the country. The industry is fully controlled by the private sector. As companies strive to compete with other countries, they are always looking out for the best material to plant and sell. Although the exact figures are not available, some farmers have tried to obtain material from the U.S., especially those eyeing the North American market. There are also good prospects for support services like packaging and irrigation systems and equipment.

For other crops there is a potential market for quality seed. The local seed-producing company, which until recently was government controlled, has often disappointed farmers with poor quality seed. There are some government regulations - especially the quantity ceiling requirement - that sometimes stifle importation, but these are gradually being eased.

A. Rank:   4

B. Name of Sector:   Agriculture

C. ITA or PS&D Code:   Animal Genetics

				1996		1997		1998
            				(000 Metric Tons)

D. Total Market			N/A		N/A		N/A
E. Total Local Production	N/A		N/A		N/A
F. Total Exports		N/A		N/A		N/A
G. Total Imports		350		500		650
H. Total Imports from U.S.	130		256  		300
I.  Exchange Rate		 57.10 		 58.80		 60.40

Two U.S. companies and one local company are actively involved in the importation of dairy cattle genetic material from the U.S. The U.S. companies have reported increasing demand for the U.S. genetics from a value of $23,015 in 1993 to $256,161 in 1997. Though no disaggregated volume data is available to support the claim, the market potential is encouraging with a growth rate of 5%. This is bound to rise as farmers begin to appreciate the quality of U.S. genetic material.

A. Rank:   5

B. Name of Sector:   Agriculture

C. ITA or PS&D Code:   Centrifugal Sugar (0612000)

				1996		1997		1998
             				(000 Metric Tons)

D. Total Market			454		453		483
E. Total Local Production	389		401		410
F. Total Exports		 24		 25		 27 
G. Total Imports		 65		 52		 73 
H. Total Imports from U.S.	 20		 20		 20	
I.  Exchange Rate		 57.10 		 58.8 		 60.40 

Sugar is Kenya's second most important food crop after corn. In the 1970s and early 80s the country used to produce enough for domestic consumption and some surplus for export. In the late 80s, production started to decline. This, coupled with a high population, necessitated the importation of the commodity. There is generally a deficit of about 100,000 tons every year, which is covered by imports. There have been complaints of late within the industry of dumping of cheap sugar from various worldwide destinations. It is claimed that this has depressed local prices and it has been difficult to move local sugar that is more expensive. Some of the cheap sugar found its way into the country irregularly through non-payment of import tariffs. The government is instituting measures to counter this so as to protect the local industry, and substantially higher duties are the likely result.

Post's consumption estimate was 484,000 tons in 1998 up from 435,000 tons in 1996. Kenya Sugar Authority forecast is much higher at 580,000 tons in 1998 from 520,000 in 1997.

Although production has improved, the country is far from being self-sufficient. Most imports are likely to be refined sugar for industrial use. The industrial sector consumes 60-70,000 tons of sugar per year.

The national output is placed at about 410,000 tons.

A.   Rank:   6

B.   Name of Sector:   Agriculture

C.   ITA or PS&D Code:   Oil Seeds & Products (06001)

				1996		1997		1998
             				(000 Metric Tons)

D. Total Market			 185		 190		  200
E. Total Local Production	  80		  80		   80
F. Total Exports		   0		   0		    0
G. Total Imports		 130		 140		  150
H. Total Imports from U.S. 	  19		  80		  100	
I.  Exchange Rate		  57.10 	  58.80 	   60.40 

Edible oil production in Kenya continues to face problems. This is mainly caused by importation of relatively cheap palm oil, low yielding seed varieties, lack of farm credit and a poor technical support system. As a result, edible oil production has leveled off at 80,000 tons for the past couple of years.

Sunflower oil dominates the country's oilseed production, accounting for 90% of the total output. In recent years, about 8,000 to 10,000 tons of edible oil are produced from corn. Demand for cotton seed is high, but production is low. Considerable amounts are irregularly obtained from neighboring countries.

The government and some non governmental organizations are trying to promote the growing of soybeans. However, current production cannot meet the demand. The bulk of soybean requirements are imported. Over the past couple of years a considerable amount has been obtained from the U.S. and the trend is likely to continue.

A.   Rank:   7

B.   Name of Sector:   Agriculture

C.   ITA or PS&D Code:   Rice Milled (0422110)

				1996		1997		1998
             				('000 Metric Tons)

D. Total Market		    	 96		  98		 100
E. Total Local Production	 34		  40		  40
F. Total Exports		  0		   0		   0
G. Total Imports		 65		  65		  70
H. Total Imports from U.S.	108		  18		  25	
I.  Exchange Rate		 57.10 	   	  58.80 	  60.40 

About 90% of paddy produced in Kenya is through the National Irrigation Board (NIB) which contracts farmers in four main irrigation schemes. Production has however stagnated at an average of 33,000 tons a year for the past several years. This makes up only 45% of the domestic requirements necessitating importation of more than 55% of milled rice. Local rice is popular, though expensive. Most of the imported rice originating from Asian countries is much cheaper, although import tariffs for rice are more than 40%. Because of the cheaper imports, NIB is unable to move its rice stocks fast, leading to a situation where the government is threatening to raise the import tariffs even further.

Rice is popular in the urban areas of the country and along the coastal region. Of late there are noticeable American brands in more affluent supermarkets. At this level currently the market seems promising, mainly among the expatriate community and wealthier Kenyans.

C.   SIGNIFICANT INVESTMENT OPPORTUNITIES

1.   OVERVIEW

Kenya has a number of growth areas that have not been fully developed. The Government of Kenya through its Investment Promotion Center has identified those sectors the government has prioritized for investment. The U.S. Commercial Service in Nairobi has identified those sectors below in which U.S. firms may be interested in seeking more information.

2.   MAJOR INVESTMENT OPPORTUNITIES

1. HORTICULTURE:   The horticultural sector is one of the fastest-growing sectors in the economy and is the largest foreign exchange earner after tourism and tea. Opportunities exist in the production and export of products such as cut flowers, French beans, pineapples, mushrooms, asparagus, mangoes, macadamia nuts, avocados, passion fruit, melons and carrots.

2. AGRICULTURE SUPPORT:   Investment opportunities exist in seed production, manufacture of sprayers and pesticides, veterinary services, and installation of irrigation systems and services to enhance production of industrial crops such as oil seeds, barley, tobacco, sugar cane and peanuts. Opportunities also exist in support and product distribution, such as cold storage and transport of horticultural produce.

3. AGRO-PROCESSING:   Numerous investment opportunities exist in this area. Kenya produces excellent beer utilizing locally-grown barley. There is potential for additional investment due to rapidly increasing domestic and regional demand. Coffee roasting and grinding are carried out in Kenya, and further potential such as production of decaffeinated coffee for export exists. Other areas of potential investment include: tea processing and packaging, fruit canning, and sugar by-products processing.

   Sugar production is below the domestic requirement. Molasses, a by-product from sugar production, is processed into power alcohol, potable alcohol, and baker's yeast. There is also considerable potential for the expansion of chocolate and confectionery products. Investment for development of palm oil processing is sought.

   Parastatals in the production and processing of sugar, tea, meat and dairy products are earmarked for privatization under the ongoing "Privatization Programme." This provides major investment opportunities in the sector.

4. POULTRY PRODUCTS:   Kenyan poultry meat has a large under-exploited market in the East & Central African region and the Middle East. Hatcheries for the production of chicken, turkeys, and geese for domestic, regional, and export market represent a major investment opportunity.

5. FISHERIES:   Kenya's water resources in the Indian Ocean and Lake Victoria provide vast fishing potential. At present, deep sea fishing, prawn and trout farming are in their infancy, but growing rapidly. Large scale fish processing (filleting and fishmeal production), as well as fisheries-support infrastructure, provide major investment opportunities.

6. LEATHER AND LEATHER GOODS:   Approximately 1.5 million hides and 5 million skins are available in Kenya each year. Most hides and skins are processed into the wet blue stage for export. Investors have recently begun producing finished leather, offering potential for the manufacture of shoes and other leather products. Kenya and the region have no facilities for production of high quality leather products despite the abundance of hides and skins, most of which are exported to Europe. U.S. investors should consider this sector of considerable potential.

7. LIVESTOCK:   Investment opportunities exist in the rearing of livestock for meat and dairy products. Non-conventional livestock farming, for example ostrich and crocodile farming, represent an exciting new area of investment. Approximately 70 percent of Kenya is suitable for ranching. American-owned Solio and Segera ranches are good examples.

   Ostrich farming presents the best investment opportunity. Kenya has the resources (both birds and land) to sustain major investment in ostrich farming; some trial small scale farming has come out with very positive results indicative of the potential of this type of farming.

8. PAPER PRODUCTS:   Kenya has one major plant producing paper and paperboard from renewable forest products in an integrated pulp and paper mill. However, there is no production of coated white lined chipboards and other boards for packaging. Investment opportunities exist also in the production of paper from other raw materials such as bagasse, sisal waste, straw and waste paper.

9. TEXTILE AND APPARELS:   The textile industry in Kenya has traditionally concentrated on cotton textile manufacture, predominantly using local cotton fiber. The basic raw material inputs such as dyes and chemicals are imported, as is all textile equipment and most spares. Investment opportunities exist in manufacturing under bond and the Export Processing Zones for the production of items such as yarn and garments for export.

10. METAL AND ENGINEERING:   The country possesses a broad-based metal products sector with various independent engineering foundries and metal-workshops. Opportunities exist in the development of a nucleus foundry making precision castings.

11. VEHICLE PARTS AND ASSEMBLY:   The motor vehicle component industry is rapidly developing. Its main area of concentration is to supply replacement parts to the rapidly growing automotive industry, which is dominated by imported, reconditioned Japanese cars. It also supports local motor vehicle assemblers. Opportunities exist for manufacturing of components.

12. ELECTRICAL EQUIPMENT:   Kenya is totally dependent on imports in this sector. Only a few manufacturing activities exist in Kenya, and even here, they are rudimentary and are not considered to be major inputs in the industry. Investment potential exists in the full range of this sector.

13. ELECTRONICS:   Kenya's electronics industry is still in its infancy and therefore offers major opportunities for direct investment, joint ventures and subcontracting. The country has a relatively large selection of competent personnel in this sector who do not require major investment in training and remuneration. Major areas of interest include: consumer electronics, telecommunication equipment, and support industry items. U.S. investors should consider operating from the Export Processing Zones, which offer key incentives.

14. PLASTICS, CHEMICALS and PHARMACEUTICALS:   Many attractive investment opportunities in this sector remain unexploited. Areas of most interest include production of PVC granules, mixing and granulating fertilizer, and textile dyestuff.

15. MINING AND MINERAL PRODUCTS:   Investment potential exists in prospecting and mining of minerals such as gold, precious stones and petroleum.

16. CONSTRUCTION:   With the increasing population, opportunities exist in the construction of residential housing, including prefabricated and low-cost housing.

17. TOURISM:   Kenya is a major destination for tourists from the U.S., Europe, and the Far East. The country serves as the regional tourist hub and point of departure. If the current slump can be overcome, enormous opportunities will exist for investment in accommodation, recreation and entertainment facilities in the following areas: health spas; new tourist class hotels, villas, holiday centers; a floating ship hotel on Lake Victoria; and water sports facilities. There also are opportunities in ecotourism, which is underdeveloped but is gaining considerable support from environmentalists, the government and the industry in general.

For more information on the above sectors, interested U.S. firms should contact the Commercial Service, U.S. Embassy, Nairobi.

The Government of the United States acknowledges the contribution that outward foreign direct investment makes to the U.S. economy. U.S. foreign direct investment is increasingly viewed as a complement or even a necessary component of trade. For example, roughly 60 percent of U.S. exports are sold by American firms that have operations abroad. Recognizing the benefits that U.S. outward investment brings to the U.S. economy, the Government of the United States undertakes initiatives, such as Overseas Private Investment Corporation (OPIC) programs, investment treaty negotiations and business facilitation programs, that support U.S. investors.