Determinants of Service Exports in Kenya

Abstract

Kenya produces variety of services which contribute significantly to the economy. However, it has not been able to increase its share of global trade in services. The country service exports still face a lot of challenges and is restricted to English speaking countries. Furthermore, Kenyan service firms do not have any objective prior to entering the foreign market. This study was therefore, conducted in order to identify the factors that affect service exports in Kenya and thereafter recommend policies that will help all the stakeholders in service exports. Time series secondary data from 1970 to 2015 was used and an OLS estimation technique was employed after diagnostic tests. The results showed that merchandized goods, real exchange rate were positively related to export of services and were very significant. All the other variables were insignificant. Value of service GDP, trade liberalization and trade openness were negatively related to the export of services. That is contrary to the expectation from the findings in the empirical literature. It means that while Kenya expands its service sector production, there are no specific policies with regards to trade in services. The government could still be excercising trade restrictions and controls. It is therefore, important for the government to adopt better policies with regards to exchange rate and value of merchandized goods exports. The government should come up with coherent policies through the Export Promotion Council in oder to promote export of services. Finally it should liberalize its services trade and remove trade barriers that are associated with export services