A GLOBAL COUNTRY STUDY AND REPORT ON KENYAN TOURISM SECTOR SUBMITTED TO: GEETANJALI INSTITUTE OF MANAGEMENT STUDIES

Transcription

1 A GLOBAL COUNTRY STUDY AND REPORT ON KENYAN TOURISM SECTOR SUBMITTED TO: GEETANJALI INSTITUTE OF MANAGEMENT STUDIES IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION IN GUJARAT TECHNOLOGICAL UNIVERSITY UNDER THE GUIDANCE OF: ASSIT. PROF. NIRAJ RAJYGURU SUBMITTED BY: ANSARI JOHRA ( ) DAVE JAYDEEP ( ) PUJARA CHETAN ( ) JANANI JIGNESH ( ) MANDALIYA GAURAV ( ) JOSHI SIDDHARTH ( ) [BATCH: , MBA SEM. III/IV] GEETANJALI INSTITUTE OF MANAGEMENT STUDIES MBA PROGRAMME AFFILIATED TO GUJARAT TECHNOLOGICAL UNIVERSITY AHMEDABAD 1

2 STUDENT S DECLARATION We Ansari Johra, Dave Jaydeep and Pujara Chetan,Janani Jignesh, Mandaliya Gaurav and Joshi Siddharh hereby declare that report for global/country study report entitled KENYA in is result of our own work and our indebtedness to other work publications, references if any, have been duly acknowledged. Place: Rajkot Date: Student Name Sign ANSARI JOHRA. DAVE JAYDEEP. PUJARA CHETAN. JANANI JIGNESH. MANDALIYA GAURAV JOSHI SIDDHARTH. 2

3 INSTITUTE CERTIFICATE 3

4 PREFACE Now a day in modern and globalize business era there is requirement of high skill. And skill is referred to the practical as well as theoretical knowledge and to improve skill both are important at high rate in the business. And in MBA we get the chance to improve our skill on the way of study and preparing a good report named as a global country report. The amount of knowledge in the world is increasing day by day and with the end of every day and it is now expected to double every time. So if we plan to be in this knowledge explosion means that we should be facing with unpredictable challenges and opportunities. How well we address that it would depend upon, in large part of our ability to adapt to the continuing changes. Project work like this gives an exposure to the practical and real life experiences of the modern market as well as the global market also. The theoretical knowledge & conceptual ideas are the background for the career development but project work has also equal contribution for occur. The sentence experience is the best teacher is very true in every field & so project work during the MBA programme is arranged to develop the skills & attitude. It is rightly said that practice makes a man perfect. In order to achieve excellence and success, theoretical knowledge must be supplemented with practical knowledge and practical work i.e. is project work. Among the numerous interesting things concerned with changing the understanding of management students, this project work playing significant role for growth and development of us. 4

5 ACKNOWLEDEGEMENT No task can be achieved alone, particularly while attempting to finish a project of such magnitude. It took many special people to facilitate it and support it. Hence, I would like to acknowledge all of their valuable support and convey my humble gratitude to them. I would like to thank Director of my institute Dr. R. K. BALIAN and my Guide ASST. PROF. NIRAJ RAJYGURU. All other faculty member of GIMS. For their guidance throughout the preparation of the project and for their valued suggestion. We would also like to thank our parents for their silent extensive support provided during preparation of this project. We are aware of the fact that one flower makes no garland so; project work is not a result of any individual but of many who contribute directly or indirectly towards it. Probably, I could never complete this task so well without the guidance of many people. So, I express my deepest sense of gratitude to all the people who had helped me during the Project Report. At Last, last but not least I am thanking all the friends who helping me directly or indirectly and make my project at the same time. 5

6 IINDEX SR.NO. DETAILS PART-I ECONOMICS OVERVIEW OF THE KENYA PAGE NO. 1 DEMOGRAPHIC PROFILE OF THE KENYA 9 2 ECONOMIC OVERVIEW OF THE KENYA 12 3 OVERVIEW OF THE INDUSTRIES TRADE AND COMMERCE 20 4 OVERVIEW DIFFERENT ECONOMIC SECTOR OF KENYA OVERVIEW OF BUSINESS AND TRADE AT INTERNATIONAL LEVEL PRESENT TRADE RELATION AND BUSINESS VOLUME OF DIFFERENT PRODUCT WITH INDIA/GUJARAT PESTEL ANALYSIS (WTO AND OTHER TRADE UNIONS AND ITS IMPACT ON COMMERCE AND INDUSTRY OF KENYA)

7 TABLE OF CONTENT SR.NO TABLE NAME. TABLE NO. PAGE NO. 1. DEMOGRAPHICAL PROFILE OF KENYA GUJRAT /INDIA TRADE MAIN ECONOMY DRIVER

8 PART-I ECONOMICS OVERVIEW OF THE KENYA 8

9 Demographic Profile of Kenya (TABLE-1) Population 43,013,341 (July 2012 EST.) note: estimates for this country explicitly take into account the effects of excess mortality due to AIDS; this can result in lower life expectancy, higher infant mortality, higher death rates, lower population growth rates, and changes in the distribution of population by age and sex than would otherwise be expected Age structure 0-14 years: 42.2% (male 8,730,845/female 8,603,270) years: % (male 11,373,997/female 11,260,402) 65 years and over: 2.7% (male 497,389/female 605,031) (2011 EST.) Median age Total: 18.9 years Male: 18.8 years Female: 19 years (2011 EST.) Population growth rate 2.444% (2011 EST.) Birth rate Death rate Net migration rate births/1,000 population (2011 EST.) 7.26 deaths/1,000 population (July 2011 EST.) migrant(s)/1,000 populations (2011 EST.) Urbanization Urban population: 22% of total population (2010) Rate of urbanization: 4.2% annual rate of change ( EST.) 9

10 Major cities population NAIROBI (capital) million; Mombasa 966,000 (2009) Sex ratio At birth: 1.02 male(s)/female Under 15 years: 1.01 male(s)/female years: 1 male(s)/female 65 years and over: 0.79 male(s)/female Total population: 1 male(s)/female (2011 EST.) Infant mortality rate Total: deaths/1,000 live births Male: deaths/1,000 live births Female: deaths/1,000 live births (2011 EST.) Life expectancy at birth Total population: years Male: years Female: years (2011 EST.) Total fertility rate HIV/AIDS - adult prevalence rate HIV/AIDS - people living with HIV/AIDS 3.98 children born/woman (2011 EST.) 6.3% (2009 EST.) 1.5 million (2009 EST.) HIV/AIDS deaths Nationality 80,000 (2009 EST.) noun: Kenyan(s) Adjective: Kenyan Ethnic groups Kikuyu 22%, Luhya 14%, Luo 13%, Kalenjin 12%, Kamba 11%, Kisii 6%, Meru 6%, other African 15%, non-african (Asian, European, and Arab) 1% 10

11 Religions Protestant 45%, Roman Catholic 33%, Muslim 10%, indigenous beliefs 10%, other 2% Note: a large majority of Kenyans are Christian, but estimates for the percentage of the population that adheres to Islam or indigenous beliefs vary widely Languages Literacy English (official), Kiswahili (official), numerous indigenous languages Definition: age 15 and over can read and write Total population: 85.1% Male: 90.6% Female: 79.7% (2003 EST.) School life expectancy (primary to tertiary education) Total: 11 years Male: 11 years Female: 11 years (2009) Education expenditures 7% of GDP (2006) Maternal mortality rate 530 deaths/100,000 live births (2008) Health expenditures 12.2% of GDP (2009) 11

12 Economic Overview of Kenya Kenya's economy is market-based, with a few state-owned infrastructure enterprises, and maintains a liberalized external trade system. The country is generally perceived as Eastern and central Africa's hub for Financial, Communication and Transportation services. As at May 2010, economic prospects are positive with 4-5% GDP growth expected, largely because of expansions in tourism, telecommunications, transport, construction and a recovery in agriculture. These improvements are supported by a large pool of English speaking professional workers. There is a high level of computer literacy, especially among the youth. The government, generally perceived as investment friendly, has enacted several regulatory reforms to simplify both foreign and local investment. An increasingly significant portion of Kenya's foreign inflows is from remittances by non-resident Kenyans who work in the US, Middle East, Europe, Asia and Antarctica. Compared to its neighbors, Kenya has a well-developed social and physical infrastructure. It is considered the main alternative location to South Africa, for major corporations seeking entry into the African continent. 12

13 Economic History After independence, Kenya promoted rapid economic growth through public investment, encouragement of smallholder agricultural production, and incentives for private (often foreign) industrial investment. Gross domestic product (GDP) grew at an annual average of 6.6% from 1963 to Agricultural production grew by 4.7% annually during the same period, stimulated by redistributing estates, diffusing new crop strains, and opening new areas to cultivation. Between 1974 and 1990, however, Kenya's economic performance declined. Kenya's inward-looking policy of import substitution and rising oil prices made Kenya's manufacturing sector uncompetitive. The government began a massive intrusion in the private sector. Lack of export incentives, tight import controls, and foreign exchange controls made the domestic environment for investment even less attractive. From 1991 to 1993, Kenya had its worst economic performance since independence. Growth in GDP stagnated, and agricultural production shrank at an annual rate of 3.9%. Inflation reached a record 100% in August 1993, and the government's budget deficit was over 10% of GDP. As a result of these combined problems, bilateral and multilateral donors suspended program aid to Kenya in Throughout these first three decades of independence, Kenya's parastatals, partly from a lack of expertise and endemic corruption, largely inhibited economic development. In 1979, a presidential commission went as far as saying that they constituted "a serious threat to the economy"; a decade later, they had still not furthered industrialization or fostered the development of a Black-Kenyan business class. The backbone of the country's private-sector success was provided by Asian Kenyans; during the colonial period, it was they who had created their country's internal market, and then dominated internal trade. British colonizers instituted segregation based on skin color: Whites were first-class citizens, Indians (who had been brought to Kenya to work on the East African Railway as slaves, were secondclass citizens, and native Kenyans were third-class citizens. As a result various laws were set in place to limit African Kenyans in their own land, for example, they had to walk around with 'Passes' at all times, and free movement, schooling and 13 entrepreneurial endeavors for Africans in Kenya was strictly enforced by colonial

14 police between the late 1800's and [Kenya's Independence}} in Postindependence, and particularly after being pushed out of its retail stronghold after its "Africanisation", those who stayed in Kenya transferred their dominance to the more advanced sectors of its commerce and industry, easily out-competing Western multinationals in notable instances. Prominent Asian-Kenyan businesspeople include Manu Chandaria and Madatally Manji. In 1993, the Government of Kenya began a major program of economic reform and liberalization. A new minister of finance and a new governor of the central bank undertook a series of economic measures with the assistance of the World Bank and the International Monetary Fund (IMF). As part of this program, the government eliminated price controls and import licensing, removed foreign exchange controls, privatized a range of publicly owned companies, reduced the number of civil servants, and introduced conservative fiscal and monetary policies. From 1994 to 1996, Kenya's real GDP growth rate averaged just over 4% a year. In 1997, however, the economy entered a period of slowing or stagnant growth, due in part to adverse weather conditions and reduced economic activity prior to general elections in December In July 1997, the Government of Kenya refused to meet commitments made earlier to the IMF on governance reforms.[citation needed]as a result, the IMF suspended lending for three years, and the World Bank also put a $90 million structural adjustment credit on hold. The Government of Kenya took positive steps on reform, including the 1999 establishment of the Kenyan Anti-Corruption Authority, and measures to improve the transparency of government procurements and reduce the government payroll. In July 2000, the IMF signed a $150 million Poverty Reduction and Growth Facility, and the World Bank followed suit shortly after with a $157 million Economic and Public Sector Reform credit. This is a chart of trend of gross domestic product of Kenya at market prices estimated by the International Monetary Fund with figures in millions of Kenyan Shillings. 14

15 Small scale businesses are providing a more and more jobs in Kenya. With increased but simplified regulations, they are able to blossom into large, legitimate businesses that can eventually create more jobs and government revenue. Gross Domestic Product (GDP) Kenya's economic performance since independence In 2006 Kenya s GDP was about US$17.39 billion. Per capita GDP averages somewhat more than US$450 annually. Adjusted in purchasing power parity (PPP) terms, per capita GDP in 2006 was about US$1,200. The country s real GDP growth picked up to 2.3 percent in early 2004 and to nearly 6 percent in 2005 and 2006, compared with a sluggish 1.4 percent in 2003 and throughout President Daniel arap Moi s last term ( ). Real GDP is expected to continue to improve, largely because of expansions in tourism, telecommunications, transport, and construction and a recovery in agriculture. The Kenya Central Bank forecast for 2007 is between 5 and 6 percent GDP growth. GDP composition by sector, according to 2004 estimates, was as follows: agriculture, 25.7 percent; manufacturing, 14.0 percent; trade, restaurants, and hotels, 13.8 percent; transport and communications, 6.9 percent; government services, 15.6 percent; and other, 24.0 percent. Kenya's 2010 Economic Performance and Outlook for 2011: In 2010, Kenya has seen the return of higher growth projected at 4.9 percent, and may now be at a tipping point for robust growth. Five factors are creating a positive momentum: the new constitution, EAC integration, ICT innovations, strong macroeconomic management, and recent investments in infrastructure. Services, the driver of previous years' growth, have moderated while agriculture and industry are rebounding after two weak years. ICT has been the main driver of Kenya's economic growth over the last decade, growing on average by 20 percent annually, and propelling the combined transport and communications sector into the economy's 15

16 second largest (after agriculture). Since 2000, Kenya's economy grew at an average of 3.7 percent. Without ICT, growth in 2010 would have been a lackluster 2.8 percent similar to the population growth rate and income per capita would have stagnated. Over the last three decades Kenya has experienced only two short episodes when economic growth exceeded five percent and was sustained for at least three consecutive years: and Economic growth in could range between 5.3 and 6.0 percent if no shocks occur. Public sector investments in infrastructure will help to stimulate this growth. However, the timely implementation of the constitutional reforms would also be necessary to help boost business confidence. (Ref; Kenya Economic Update, December 2010, 16

17 Kenya's Climate Kenya is generally a dry country; over75% of its area is classed as arid of semi-arid with only around 20% being viable for agriculture. Inland, rainfall and temperatures are closely related to altitude changes, with variations induced by local topography. Generally the climate is warm and humid at the coast, cool and humid in the central highlands, and hot and dry in the north and east. Across most of the country, rainfall is strongly seasonal, although its pattern, timing and extent vary greatly from place to place and from year to year. The relatively wet coastal belt along the Indian Ocean receives 1,000 mm or more rain per year. Most rain falls from April to July as a result of the southeasterly monsoon. Another moist belt occurs in the Lake Victoria basin and its surrounding scarps and uplands, mainly due to moist westerly winds originating over the Atlantic Ocean and Congo Basin. Except immediately adjacent to the Lake, rainfall occurs reliably from March to November. The upland plateaus adjacent to this area are less influenced by the lake, and rain falls mainly in March-May and July-September. In much of the central highlands, there is also a bimodal rainfall pattern, with rainy seasons in March-May and October-December. The remaining 70% or so of the land area falls into the arid lowlands zone (NRI 1996), with rainfall averaging less than 500 mm and varying greatly from year to year. 17

18 Rainfall peaks in most areas are in November and April. Some 30% of this zone can be classed as semi-desert, with rainfall averaging less than 300 mm per year and evaporation often greater that 3,000 mm. Except for the coast and Lake Victoria region, altitude is the main determinant of precipitation. The high-attitude areas (over c. 1,500 m) in the central Kenya highlands usually have substantial rainfall, reaching over 2,000 mm per year in parts of the Mau Escarpment. However, topography also has a major influence, with strong rain-shadow effects east of Mt. Kenya and the Aberdare mountains. Here, even areas higher than 1,800 m may be relatively dry. In the arid lowlands the peaks of isolated mountains attract cloud and mist, and may support very different vegetation to that of the surrounding plains. Differences in temperature vary predictably with altitude. Frost occurs regularly at 3,000 m and occasionally down to at least 2,400 m, and there is permanent snow and ice on top of Mt. Kenya at 5,200 m. The hottest areas are in the arid northeast, and west of Lake Turkana, where Mena maximum temperatures average over 34 C. 18

19 Kenya's Water resources all Kenya s major river drain from the central highlands, divided by the rift into those flowing westwards into Lake Victoria and those flowing eastwards towards the Indian Ocean. There are five major drainage basins: Lake Victoria, the Rift Valley, the Athi- Galana-Sabaki River (and Coastal areas to its south), the Tana River and the northern Ewaso Ng iro. Kenya only has a small part of Lake Victoria s water surface, but the Kenya catchment contributes a disproportionate 33% of its surface inflow, some 470 million cubic meters a year. The rift valley contains several basins of internal drainage, forming a chain of endorheic lakes from Lake Natron on the Tanzanian border, through Lakes Magadi, Naivasha, Turkana, Elementaita, Nakuru, Bogoria and Baringo. These lakes vary in alkalinity; from fresh water Lake Naivasha to the intensely alkaline Lake Magadi. Lake Turkana is notable as a major volume of (more or less) fresh water in an otherwise arid and barren part of the county, while a number of rivers, including the Turkwel, Kerio, Athi-Galana, Tana and Northern and Southern Ewaso Ng iro, flow for long distances through dry parts of the country. Peoples & Culture Kenya is made up of more than 70 or so tribal groups. There are also small but influential minorities of Asian, Arab and European origin. More than 90% of the African population falls within the broad categories of Bantu and Nilotic speakers. The main Bantu speakers are Kikuyu, Luhya, Kamba, Gusii, Mijikenda, Embu and Meru. Nilitoc speakers are Maasai, Samburu, Pokot, Turkana, Luo and Kalenjin. At the coast, the interaction of Arabs, Persians and Bantu Africans has resulted in the Swahili people. The Swahili language is now widely spoken in Kenya and throughout Eastern and Central Africa. It is quite useful to have a working knowledge of Swahili if you intend to travel outside the main urban and tourist routes. English is widely understood in urban centers. 19

20 OVERVIEW OF INDUSTRIES TRADE AND COMMERCE TRADE: Following two decades of slow performance, Kenya s economy is on the upswing, with a country growth rate climbing from 2.8 percent in 2003 to approximately six (6) percent in Kenya s gross domestic product (GDP) is estimated to have been $20.77 billion in 2006, up from $ 16.1 billion in Recent growth in the agricultural sector is one factor which has contributed to the growth of the economy. From the mid-1980 s onwards, the agricultural sector experienced a decline after high growth rates of approximately 6 percent a year from 1963 to 1973 with a recorded low of 2.4 percent growth reduction in In 2003 the government launched the economic recovery strategy for wealth and employment creation Initiative, which included an agricultural component. By 2005 the agricultural sector had recorded a 6.7 percent growth, mainly as a result of improved earnings from the production of horticultural crops, cereals, and tea, sugarcane and dairy products INDUSTRIES: The manufacturing sector is a major sector of growth, with its share in GDP having risen from 13 percent in 2002 to 15.7 percent in Kenya, as the most politically stable country in East Africa, has attracted a large number of investors who now thrive in many sectors of manufacturing 20

21 The manufacturing sector comprises of more than 700 established enterprises and employed over 218,000 people in Kenya exports mainly to East Africa and COMESA markets. According to the Economic Recovery Strategy for Employment and Wealth Creation Report, the manufacturing sector is a major source of growth, with still high potential of growth and investment. Some key Kenyan manufacturing sub-sectors include galvanized iron sheets, cement, cigarettes, and beer and wheat flour. All of these have increased in production between 2003 and 2005; particularly cement which has always been a good indicator of economic activity. On the consumer goods side, products manufactured locally include stationery and grooming products. 21

22 OVERVIEW DIFFERENT ECONOMIC SECTOR OF KENYA AGRICULTURE Cultivation on the slopes of Mount Kenya The agricultural sector continues to dominate Kenya s economy, although only 15 percent of Kenya s total land area has sufficient fertility and rainfall to be farmed, and only 7 or 8 percent can be classified as first-class land. In 2006 almost 75 percent of working Kenyans made their living on the land, compared with 80 percent in About one-half of total agricultural output is non-marketed subsistence production. Agriculture is the second largest contributor to Kenya s gross domestic product (GDP), after the service sector. In 2005 agriculture, including forestry and fishing, accounted for about 24 percent of GDP, as well as for 18 percent of wage employment and 50 percent of revenue from exports. The principal cash crops are tea, horticultural produce, and coffee; horticultural produce and tea are the main growth sectors and the two most valuable of all of Kenya s exports. In 2005 horticulture accounted for 23 percent and tea for 22 percent of total export earnings. Coffee has declined in importance with depressed world prices, accounting for just 5 percent of export receipts in The production of major food staples such as corn is subject to sharp weather-related fluctuations. Production the doe downturns periodically necessitate food aid for example, in 2004 aid for 1.8 million people because of one of Kenya s intermittent droughts. However, the expansion of credit to the agricultural sector has enabled farmers to better deal with the large risk of agriculture based on rainfall and the dramatic fluctuations of the prices of agricultural products. Tea, coffee, sisal, pyrethrum, corn, and wheat are grown in the fertile highlands, one of the most successful agricultural production regions in Africa. Livestock predominates in the semi-arid savanna to the north and east. Coconuts, pineapples, cashew nuts, cotton, sugarcane, sisal, and corn are grown in the lower-lying areas. 22

23 Kenya's Agriculture Performance in 2010: The agriculture sector has been rebounding in 2010 and is expected to grow by 5 percent. This is an important development after two consecutive years of decline, when the sector contracted by a combined 6.7 percent. Favorable weather conditions and specific policy interventions under the government's economic stimulus program helped turn the sector around. The performance of Kenya's main agriculture exports in 2010 was strongest for tea which recovered rapidly from 2009 weather conditions. A combination of volume and price increases will see the sector perform even better than in 2008, which had previously been the best year for the sector. Although coffee is benefitting from an increase in global prices, output contracted as coffee production was slow to recover from the prolonged drought in early Horticulture exports contracted for the third consecutive year. The sector continued to be affected by a muted recovery in Europe, especially the fruits and vegetables. In addition, the volcanic ash crisis in April 2010 disrupted access to the key source markers in Europe. (Source: Kenya Economic Update, December 2010, Forestry and fishing Resource degradation has reduced output from forestry. In 2004 round wood removals came to 22,162,000 cubic meters. Fisheries are of local importance around Lake Victoria and have potential on Lake Turkana. Kenya s total catch reported in 2004 was 128,000 metric tons. However, output from fishing has been declining because of ecological disruption. Pollution, overfishing, and the use of unauthorized fishing equipment have led to falling catches and have endangered local fish species. 23

24 Mining and minerals Kenya has no significant mineral endowment. The mining and quarrying sector makes a negligible contribution to the economy, accounting for less than 1 percent of gross domestic product, the majority contributed by the soda ash operation at Lake Magadi in south-central Kenya. Thanks largely to rising soda ash output, Kenya s mineral production in 2005 reached more than 1 million tons. One of Kenya s largest foreign-investment projects in recent years is the planned expansion of Magadi Soda. Apart from soda ash, the chief minerals produced are limestone, gold, salt, and fluorspar. All unextracted minerals are government property, according to the Mining Act. The Department of Mines and Geology, under the Ministry of Environment and Natural Resources, controls exploration and exploitation of such minerals. Industry and manufacturing Although Kenya is the most industrially developed country in East Africa, manufacturing still accounts for only 14 percent of gross domestic product (GDP). This level of manufacturing GDP represents only a slight increase since independence. Expansion of the sector after independence, initially rapid, has stagnated since the 1980s, hampered by shortages in hydroelectric power, high energy costs, dilapidated transport infrastructure, and the dumping of cheap imports. However, due to urbanization, the industry and manufacturing sectors have become increasingly important to the Kenyan economy, and has been reflected by an increasing GDP per capita. Industrial activity, concentrated around the three largest urban centers, Nairobi, Mombasa, and Kisumu, is dominated by food-processing industries such as grain milling, beer production, and sugarcane crushing, and the fabrication of consumer goods, e.g., vehicles from kits. Kenya also has an oil refinery that processes imported crude petroleum into petroleum products, mainly for the domestic market. In addition, a substantial and 24 expanding informal sector engages in

25 small-scale manufacturing of household goods, motor-vehicle parts, and farm implements. About half of the investment in the industrial sector is foreign, with the United Kingdom providing half. The United States is the second largest investor. Kenya s inclusion among the beneficiaries of the U.S. Government s African Growth and Opportunity Act (AGOA) has given a boost to manufacturing in recent years. Since AGOA took effect in 2000, Kenya s clothing sales to the United States increased from US$44 million to US$270 million (2006). Other initiatives to strengthen manufacturing have been the new government s favorable tax measures, including the removal of duty on capital equipment and other raw materials. Energy The largest share of Kenya s electricity supply comes from hydroelectric stations at dams along the upper Tana River, as well as the Turkwel Gorge Dam in the west. A petroleum-fired plant on the coast, geothermal facilities at Olkaria (near Nairobi), and electricity imported from Uganda make up the rest of the supply. Kenya s installed capacity stood at 1,142 megawatts a year between 2001 and The state-owned Kenya Electricity Generating Company (KenGen), established in 1997 under the name of Kenya Power Company, handles the generation of electricity, while the Kenya Power and Lighting Company (KPLC), which is slated for privatization, handles transmission and distribution. Shortfalls of electricity occur periodically, when drought reduces water flow. In 1997 and 2000, for example, drought prompted severe power rationing, with economically damaging 12-hour blackouts. Frequent outages, as well as high cost, remain serious obstacles to economic activity. Tax and other concessions are planned to encourage investment in hydroelectricity and in geothermal energy, in which Kenya is a pioneer. The government plans to open two new power stations in 2008, Sondu Miriu (hydroelectric) and Olkaria IV (geothermal), but power demand growth is strong, and demand is still expected to outpace supply during periods of drought. Kenya has recently found some hydrocarbon reserves on its semi arid northern region of Turkana after several decades of intermittent exploration. Prospecting also continues off Kenya s shore. In the meantime, 25 Kenya currently imports all crude

26 petroleum requirements. Petroleum accounts for 20 to 25 percent of the national import bill. Kenya Petroleum Refineries a 50:50 joint venture between the government and several oil majors operates the country s sole oil refinery in Mombasa, which currently meets 60 percent of local demand for petroleum products. In 2004 oil consumption was estimated at 55,000 barrels (8,700 m3) a day. Most of the Mombasa refinery s production is transported via Kenya s Mombasa Nairobi pipeline. Tourism Tourists on a safari in Kenya Kenya s services sector, which contributes about 63 percent of GDP, is dominated by tourism. The tourism sector has exhibited steady growth in most years since independence and by the late 1980s had become the country s principal source of foreign exchange. In the late 1990s, tourism relinquished this position to tea exports, because of a terrorism-related downturn. The downturn followed the 1998 bombing of the U.S Embassy in Nairobi and later negative travel advisories from Western governments. Tourists, the largest number from Germany and the United Kingdom, are attracted mainly to the coastal beaches and the game reserves, notably, the expansive Tsavo National Park (20,808 square kilometers) in the southeast. The government and tourist industry organizations have taken steps to address the security problem and to reverse negative publicity. Such steps include establishing a tourist police and launching marketing campaigns in key tourist origin markets. Tourism has seen a substantial revival over the past several years and is the major contributor to the pick-up in the country s economic growth. Tourism is now Kenya's largest foreign exchange earning sector, followed by flowers, tea, and coffee. In 2006 tourism generated US$803 million, up from US$699 million the previous year. 26

27 OVERVIEW OF BUSINESS AND TRADE AT INTERNATIONAL LEVEL After weakening due to the country's political unrest in and the world recession, the country's growth increased again to 4.1% in 2010 and should strenghten in The drivers of the growth are the agricultural sector (horticulture and tea), tourism and remittances from the Kenyan diaspora. Kenya and IMF have signed an accord under the Extended Credit Facility program to implement a three-year program for Priority is given to investment into infrastructure and energy (geothermy), as well as to spending related to the implementation of the new Constitution. A gradual reduction of the fiscal deficit and a tighter control of the inflation are also planned. The country enjoys reasonably well developed infrastructures, an educated workforce and a strategic geographical location, factors which favor economic growth. However corruption, poverty and inter-ethnic conflicts are the main factors that the country has to overcome. Kenya remains a poor country, half of the population living under the poverty line and unemployment affecting probably a quarter of the population. FDI in Kenya Foreign investments in Kenya are meager and in fell sharply due to the political upheavals in the country, in 2007 and FDI flux should improve progressively in the coming years. Political tensions, corruption and security problems are some of the barriers Kenya has to overcome in order to increase FDI in-flow. Even though most sectors are open to foreign investments, infrastructures and media areas largely continue to be monopolized by the State. The banking and tourism sectors are the ones that attract most of the FDI. The United Kingdom, the Netherlands, Belgium and South Africa are the main investor countries. Foreign Trade Overview 27

28 Kenya is open to foreign trade, which represents 60% of the GDP (2009). The government's trade policy aims at further liberalizing the economy and making public spending more transparent. Most non-tariff barriers have been removed and customs duties are not very high. They range from 0% for raw materials, to 50% for certain products like imported matches, for example. Raw materials, capital goods, energy saving bulbs and tractors for agriculture are exempt from customs duties. Goods imported from COMESA (Common Market for Eastern and Southern Africa) member countries enjoy preferential tariffs. The country has some advantages that should enable it to promote trade, namely a skilled labor force and the implementation of a privatization policy. Nevertheless, some barriers remain such as the lack of transparency in tariff administration and high energy and labor costs. Kenya imports more than it exports, which translates into a largely deficitary trade balance. The country's main trade partners are COMESA member countries, the Gulf Cooperation Council and the United States. 28

29 PRESENT TRADE RELATION AND BUSINESS VOLUME OF DIFFERENT PRODUCT WITH INDIA/GUJARAT (TABLE-2.) 4-digit heading of Value (million US$) Unit value Harmonized System Units 2002 All Commodities Carpets and other US$/m2 textile floor coverings, knotted. Other nuts, fresh or dried thsd US$/kg Grapes, fresh or dried mln US$/kg Commodities not 42.3 specified according to kind Antiques of an age exceeding one hundred years 29.9 Vegetable saps and extracts; pectic substances Dates, figs, pineapples, avocados and mangos teens, fresh or dried... Coconuts, Brazil nuts and cashew nuts, fresh or dried... Guts, bladders and stomachs of animals (other than fish) thsd US$/kg Fruit, dried thsd US$/kg mln US$/kg mln US$/kg mln US$/kg Year Gross Domestic Product US Dollar Exchange 29

30 , Shlling , Shillings , Shillings , Shillings , Shillings ,449, Shillings Shillings Shillings Shillings Shillings 30

31 Main Sectors driving the Economy All the major sectors of the economy decelerated in growth 2010 However, Comparatively higher growths were witnessed in some sectors: TABLE-3 Sector 2010 Financial Intermediation 7.8 Wholesale & Retail Trade 7.3 Hotels & Restaurants 4.2 Transport & Communication 6.9 Education

32 WTO AND OTHER TRADE UNIONS AND ITS IMPACT ON COMMERCE AND INDUSTRY OF KENYA 32

33 WORLD TRADE ORGANIZATION AND OTHER TRADE UNION KENYA became an observer to the World Trade Organization (WTO) in December 2004 and established a Working Party (WP) to begin membership negotiations. The WTO Secretariat scheduled the first meeting for KENYA s Working Party for January 31, 2011 as the Government had replied to all questions submitted by WTO members on the Kenya Memorandum on Foreign Trade Regime (MFTR). This Memorandum, which KENYA submitted on March 31, 2009, outlines all aspects of a country s trade and legal regime, and is among the first steps in the accession process. The U.S. Government, through USAID s Trade and Accession Facilitation for KENYA (TAFA) project, has been providing technical assistance for such trade regime reform. USTR estimates accession negotiations will take a number of years, though should be somewhat less contentious since KENYA is a Least Developed Country (LDC), which can limit concession requests during negotiations. 33

34 (7) PESTEL ANALYSIS (Tourism Industry of Kenya) 34

35 PESTEL ANALYSIS Political Kenya is a presidential representative democratic republic, whereby the President is both the head of state and head of government, and of a multi-party system. Executive power is exercised by the government. Legislative power is vested in both the government and the National Assembly. The Judiciary is independent of the executive and the legislature. There was growing concern especially during former president Daniel arap Moi's tenure that the executive was increasingly meddling with the affairs of the judiciary. Kenya is divided into 47 semi-autonomous counties that are headed by governors who were elected in the first general election under the new constitution in March These 47 counties now form the first-order divisions of the country. Under the old constitution, Kenya comprised eight provinces each headed by a Provincial Commissioner (centrally appointed by the president). The provinces were subdivided into districts. Constituencies are an electoral subdivision, with each county comprising a whole number of constituencies. An Interim Boundaries commission was formed in year 2010 to review the constituencies and in its report, it recommended creation of an additional 80 constituencies. Previous to the 2013 elections, there were 210 Constituencies in Kenya. ECONOMIC Kenya's economy is market-based, with a few state-owned infrastructure enterprises, and maintains a liberalized external trade system. The country is generally perceived as Eastern and central Africa's hub for Financial, Communication and Transportation services. As at May 2010, economic prospects are positive with 4-5% GDP growth expected, largely because of expansions in tourism, telecommunications, transport, construction and a recovery in agriculture. These improvements are supported by a large pool of English speaking professional workers. There is a high level of computer literacy, especially among the youth. The government, generally perceived as investment friendly, has enacted several regulatory reforms to simplify both foreign and local investment. An increasingly significant portion of Kenya's foreign inflows is from remittances by non-resident Kenyans who work in the US, Middle East, Europe, Asia and Antarctica. Compared to its neighbors, Kenya has a well-developed social and physical infrastructure. It is considered the main alternative location to South Africa, for major corporations seeking entry into the African continent. 35

36 SOCIAL Kenya is a multi-ethnic state in the southern Great Lakes region of East Africa. It is primarily inhabited by Bantu and Nilotic populations, with some Cushitic ethnic minorities in the north. Its total population is estimated at 41 million inhabitants as of A national census was conducted in 1999, but its final results were never released. A new census was undertaken in 2009, but it turned out to be controversial, as the questions about ethnic affiliation seemed inappropriate after the ethnic violence of the previous year.[1] Preliminary results of the census were published in Kenya has a very diverse population that includes most major ethnic, racial and linguistic groups found in Africa. The majority of the country's population belongs to various Bantu sub-groups, with a significant number of Nilotes. Cushitic peoples form a small ethnic minority of about 2%, mostly represented by Oromo and Somali speakers. Swahili and English are official languages. Swahili is compulsory in primary education, and, along with English, serves as the main lingua franca between the various ethnic groups. Indians in Kenya are primarily noted for their business acumen. Many Kenyan Indians hail from the Gujrat region. While there have been some race-related tensions with the local Bantu and Nilotic majority, Indians nonetheless form one of the most prosperous communities in the region. Technology Kenya has been identified in recent times as one of the countries to watch in Africa as far as technology and innovation goes. Dubbed the Silicon Savanna, Kenya is rising fast as a technology powerhouse on the African continent and more so in Sub- Saharan Africa. The mobile money revolution started in Kenya. To date it has been fairly hard to replicate the success of mobile money in Kenya in the same way in other countries and regions. MPESA has won Safaricom, the country s leading Mobile Network Operator (MNO) award after award and has broken record after record for the volume of cash that passes through the mobile money system every single day. 36

37 Environment Kenya is Africa's most popular safari destination and it's capital Nairobi is East Africa's economic hub. Kenya has a decent tourist infrastructure and lots of resorts along its coastline. It's a testament to the country's many natural attractions that tourists continue to visit despite being under the official Travel Warning list in several countries including the US. Location: Kenya is located in Eastern Africa, bordering the Indian Ocean, between Somalia and Tanzania, see map. Area: 582,650 sq km, (slightly more than twice the size of Nevada or similar in size to France). Capital City: Nairobi Climate: It's generally sunny, dry and not too hot for most of the year in Kenya despite being situated on the equator. The main rainy seasons are from March to May and November to December but the amount of rainfall varies year to year -- more details on Kenya's climate. When to Go: January - March and July - October for safaris and beaches, February and August to climb Mount Kenya. More about "Best time to visit Kenya"... Legal A new constitution was promulgated on 27 August 2010, and became the supreme legislation of Kenya.8 This document contains eighteen chapters and six Schedules, where the chapters elaborate on the following: sovereignty of the people and supremacy of the constitution; the republic; citizenship; the bill of rights; land and environment; leadership and integrity; representation of the people; the legislature; the executive; judiciary; devolved government; public finance; the public service; national security; commissions and independent offices; amendment of this constitution; general provisions; and transitional and consequential provisions. The six Schedules present information on the following: counties; national symbols; national oaths and affirmations; distribution of functions between national and county governments; legislation to be enacted by Parliament; and transitional and consequential provisions. 37

38 TOURISM SECTOR SPECIFIC STUDY OF THE KENYA.

39 INDEX PART -2 TOURISM SECTOR SPECIFIC STUDY OF THE KENYA NUMBER CHAPTER NAME PAGE NO. 1 INTRODUCTION OF KENYA TOURISM PERFORMANCE 4 2 STRUCTURE, FUNCTIONS AND BUSINESS ACTIVITIES OF KENYA 13 3 SWOT ANALYSIS 19 4 COMPARATIVE POSITION WITH INDIA 24 5 PRESENT POSITION AND TREND OF BUSINESS WITH INDIA 29 6 POLICY AND NORMS OF KENYA TOURISM LICENSING, TAXATION 39 7 PROBLEMS AND PROSPECTS 46 8 SUGGESTIONS 50 9 WEBLIOGRAPHY & BIBLIOGRAPHY 52 2

40 LIST OF TABLES TABLE NO. TABLE NAME. PAGE NO. 1. Regional Trends in International Tourist Arrivals Travel & Tourism Direct Contribution to GDP Travel & Tourism Total Contribution to GDP 37 3

41 CHAPTER 1 INTRODUCTION OF KENYA TOURISM PERFORMANCE 4

42 Kenya recorded the highest number of tourists arrivals ever at 1,095,945 tourists as at 31ST December, This was a 15% growth compared to the 952,481 experienced in This figure excludes the cross border tourists arrivals which could add up to another approximately 700,000 tourists once the results are fully tallied by the Kenya National Bureau of Statistics. The 2010 Tourism performance has surpassed the 2007 record by 4.5 percent the later being the best recorded year in terms of tourist arrivals and earnings. This performance is impressive and is optimistic to achieving Kenya s vision target of 2million international tourists by 2012, the Minister for Tourism Hon. Najib Balala said today while releasing the results to the Press at Utalii House. The sector has earned Kshs billion in terms of revenue earnings within the same period. This is the highest tourist revenue ever recorded and it represents an impressive growth of revenue by 18 percent compared to the 2009 revenues. The Minister said, he was impressed by the performance of the sector that has shown great resilience in spite of the local and global challenges. He accrued the impressive performance to aggressive marketing in the new markets and efficient utilization of the resources available. He said Kenya Tourist Board has continued to reposition the destination since 2009 as a high value for high spending tourists and this is paying dividends. Hon. Balala said India, Russia, China and Middle East has shown great improvement though little resources were put into marketing in the regions. United Kingdom was leading in terms of arrivals with 174,051 followed by United States 107,842 while Italy and Germany took third and fourth positions at 87,694 and 63,011. France took the fifth position with 50,039 visitors. Uganda topped the African market with 33,900 followed by South Africa 33,076 and Tanzania with 30,264. From Asian markets, India led with 47,611 arrivals followed by China 28,480 and UAE 14,874.Hon. Balala lamented the decline of cruise tourism which 5

43 recorded only 508 arrivals as compared to 12,096 received in He blamed insecurity along the Indian Ocean for this decline. This data excluded cross-border travel, Kenyan Diaspora returning home and for-deign experts working in the country. 6

44 FAMOUS Places in Kenya Nairobi National Museum Keeps some of the most famous collections of history, culture and art from Kenya, as prehistoric artifacts, more than 900 stuffed birds and animals, fossils from Turkana Lake, exhibitions of ethnic tribal groups, watercolors of flowers and plants and a collection of rocks and minerals. In the section Hominid Vault contains the ''first men''- a collection of bones and fossils from the pre-historic era. Karen Blixen Museum Located on the suburbs of Nairobi, has acquired an international reputation after the release of the film Out of Africa'' based on the autobiographies of Karen. The museum is a shop of handicrafts, posters and postcards, books and other souvenirs of Kenya Fort Jesus Museum - Mombasa Built in 1593 by the Portuguese and used as barracks for soldiers between 1837 and 1895, the year that was converted into a prison. In 1958, was declared National Park and became museum in It keeps excavations finds and other items donated by individuals, the wreck of ''Santo Antonio Da Tanna'' which sank in the port of Mombasa in 1697 and ceramics recovered from the coast. Lamu Museum Located on Lamu Island, was built between 1813 and 1821 as a fortress, and from 1910 until 1984 served as a prison. The permanent exhibition on the ground floor is divided into three sections: marine, freshwater and terrestrial, each one divided into its different ecosystems. Upstairs are the offices laboratories, a shop and a restaurant. 7

45 Kalenguria Museum Keeps books and documents in a memorial library in honor of all the heroes who participated in the struggle for the independence of Kenya, artifacts and photographs collected on the Pokot people, finds that reveal the pre-colonial history, the slavery, the arrival of Europeans, the African resistance to the colonial domination and the activities of pioneering nationalists Meru Museum Keep the traditional culture and practices of Meru people and has a garden with shrubs and indigenous medicine grasses, traditional huts, an outdoor platform for dance, music and kiosks for selling. Kabernet Museum Have four galleries with exhibitions of culture, environment and indigenous knowledge. The main attraction is the exhibition on the culture of Keiyo / Marakwet, Samburu, Pokot, Nandi and Kipsigis. There are also exhibits from pre-colonial, colonial and post-independence period. Narok Museum Holds exhibitions of photos and artifacts to preserve the beauty and the strength of the traditional culture of the Maasai and Maa people, paintings and photographs depicting the traditional lifestyle. Rabai Museum Mombasa Known as the place where Christianity began in Kenya, is a monumental recall of events during the advent of the first missionaries. 8

46 Hyrax Hills National Monument - Nakuru Is an area of archaeological research and a reference point for the investigation of prehistory? Uhuru Garden Nairobi Is the largest memorial park in Kenya, in the Swahili language, Uhuru means independence. The name of the park has been given to commemorate the struggle for independence. As attraction in the garden there is a tower of 24 meters with a pair of hands covering a dove which means peace. The monument's column is on a triumphant statue of a group of freedom fighters raising a flag. Jumba la Mtwana Mombasa The name in Swahili means "the big house of slaves". Within the area are four mosques, a tomb and four houses: the House of cylinder, The House of Food, The House of Many Wells and the Great Mosque. Mnarani Kilifi The site contains the ruins of two mosques and a group of tombs. The first mosque was built around 1475, while the second in about 1500, were destroyed in the early seventeenth century. Siyu Fort Is the only fortress built by the natives? The local tradition says that was built by a Siyu leader in the nineteenth century as a safeguard for residents from Arab domination. Inside are the remains of a villa of stone built for himself. The fort preserves the remains of the tombs and magnificent mosques. 9

47 Koobi Fora The site is located on the east of Turkana Lake with an area of 1800 square kilometers and contains fossils of hominids from the Pleistocene and Pliocene period (about 5 million years ago) but also animal and plant fossils. The first Australopithecus skull was found here by the famous paleontologist Dr. Richard Leakey, but it was also founded fossils of Homo habilis and Homo erectus. Songhor The site is located in the Nyando district of the Nyanza Province and is spread over an area of 78 hectares. There are fossils of the eight species of animals and hominid from the Miocene period dating back to about 19 million years ago. Takwa Lamu These are the ruins of a flourishing Swahili city abandoned in the seventeenth century. You can see the ruins of the only mosque with a large pillar that symbolizes the burial of Sheikh under the walls Thimlich Ohinga Located in the Migori district of the Nyanza province is a "terrible dense forest." The stone structure is high by 1 to 4.2 meters and was built without mortar or sanding. The materials found on the site are older than 500 years and it seems that was built by the Bantu population. Olorgesailie Is a basin of a lake that existed during the latter part of the Middle Pleistocene period, approximately 200,000 and 100,000 years ago? It preserve biological and cultural items that proof the evolution of mankind thanks to heavy fall of volcanic alkaline ash. The subsequent movements of the earth have stratified the fossils giving us the opportunity to study them. Most important of all fossils in the area are the human instruments who give importance to the international site 10

48 CHAPTER-2 STRUCTURE, FUNCTIONS AND BUSINESS ACTIVITIES OF KENYA MINISTRY OF TOURISM 11

49 PREAMBLE This service charter puts in place service standards that will guide the Ministry s Management and staff in providing quality services to our clients and the general Public. It therefore enumerates: Information on a range of services on offer from the Ministry. Standards associated with such services based on clients expectation. How to redress clients concerns or issues. MINISTRY S VISION AND MISSION Vision: To make Kenya the destination of choice and a global leader in sustainable Tourism. Mission: To facilitate sustainable tourism for national development and posterity. MINISTRY S MANDATE AND RESPONSIBILITY The Ministry of Tourism is responsible for the formulation, co ordination and Administration of policy in respect to the tourism sector. This mandate is derived from Presidential Circular No. 1/2004 dated September 2004 and various Acts of Parliament. The Acts include: The Tourist Industry Licensing Act (TILA), Cap 381, Laws of Kenya; The Hotels and Restaurants Act (HRA), Cap 494, Laws of Kenya; The Ministry is also responsible for overall guidance and policy coordination of the 12

50 Following parastatals that are charged with specific mandates Kenya Tourist Development Corporation (KTDC) Tourism investments Bomas of Kenya Cultural tourism Kenya Tourist Board (KTB) Tourism marketing and promotion Kenya Utalii College (KUC) Human resources development for hospitality industry3 Catering and Tourism Development Levy Trustee (CTDLT) Tourism training Standards and levy collection Kenyatta International Conference Centre (KICC) Conference tourism. CORE FUNCTIONS Tourism policy making and planning. The Ministry formulates tourism Policies. Overall coordination. The Ministry is in charge of coordination of all tourism Efforts among government institutions, international and regional Organizations, and other related institutions. Investments promotion. The Ministry is in charge of seeking for internal and External resources for tourism sector development. Facilitation. The Ministry facilitates allocation of resources, conservation of Biodiversity, security and safety of tourists, flow of investments, and creation Of an enabling environment. Marketing and Promotion. The Ministry ensures promotion and marketing 13

51 Of international and domestic tourism. Regulation and Monitoring. The Ministry sets and monitors standards for all operators in the sector. Product Development and Diversification. The Ministry ensures Development of tourism products in all parts of the country and ensures Community participation. Manpower Training and Development. The Ministry is responsible for Quality human resources development in the sector. Tourist security and safety. The Ministry in collaboration with the Tourist Police Unit is in charge of ensuring safety and security of tourists. MANAGEMENT STRUCTURE The Ministry is headed by the Minister for Tourism and assisted by one Assistant Ministers at the policy level. Below this level is the Permanent Secretary who oversees policy implementation. The Ministry has two main departments: Management Support Department Tourism Department The Ministry also works with the Tourist Police Unit for safety and security of tourists. Our Guiding Principles To offer quality services to our clients that maximizes sustainable exploitation of The tourism sector. To uphold integrity, honesty and transparency in all our operations. 14

52 To cultivate a culture of goodwill among stakeholders and clients. To promote efficient and effective utilization of public resources To promote social equity. To provide leadership in all matters related to the tourism industry. To cultivate team spirit among the entire Ministry s staff. COMMITMENT TO CLIENTS This Charter is a commitment by the Ministry to provide high quality service delivery To clientele and the general public. They therefore commit to serve you Effectively, efficiently, with courtesy, honesty and integrity. SERVICE DELIVERY OBLIGATIONS (I) General Service Delivery Answer your telephone promptly. Attend to you within 10 minutes of your visit. Respond to your correspondence within 14 days upon receipt of your letter. Treat your concern with confidentiality. (ii) License Application A new application which meets all the requirements will be issued within two months Upon receipt of application. (iii) License Renewal Issuance of license for a new restaurant takes not more than 2 months. Licenses renewal will be issued within 14 days if there are no new issues. 15

53 (iv) Tour operators licenses Issued within 7 days (v) Classification of Hotels and Restaurants Upon application, a hotel or restaurant will be classified within two months. (vi) Tourists security and safety The Tourist Police Unit will respond immediately to reported incidences involving Tourists security or safety. (vii) Work Permit Issues The ministry s response to issuing of work permit will be within 14 days upon receipt of The application. (viii) Payment of suppliers Suppliers of goods and services will be paid within 14 days upon satisfactory delivery Of goods or services 16

54 CHAPTER -3 SWOT ANALYSIS OF KENYA TOURISM INDUSTRY 17

55 SWOT ANALYSIS A SWOT is an acronym for a business analysis used to assess strengths and weaknesses of a business, as well as the opportunities and threats in the marketplace. The main strengths, weaknesses, opportunities and threats affecting the Kenya tourism sector are summarized as follows: STRENGTHES The strengths of a business are its beneficial features. The strengths of Kenya s tourism business could be things such as an international network of affiliates or a recognized brand in the industry. 1. Sophisticated and efficient industry 2. Known to tour operators 3. Quality wildlife 4. Quality beaches 5. Nairobi regional hub 6. Customer awareness 7. Hospitable friendly people 8. Excellent all-year climate 9. Change of government in Good medical/rescue facilities 11.Good tourism training facilities 12. English speaking 13.No jet lag from Europe 18

56 WEAKNESSES A business's weaknesses are its negative features. For a tourism business of Kenya this might include following nagative features. 1. Deteriorated infrastructure 2. Insecurity and crime 3. Poor public relations 4. Mass market image 5. Perceived as cheap beach destination 6. Tired hotels infrastructure 7. Old product Anti-competitive trade practices in the marketing and sales distribution system. 8. Limitations on air access & seat capacity Entry and visa impediments 9. Malaria and HIV/AIDS 10. Lack of quality control and standards 11. Inadequate database and information 12. Beach harassment Tourists herded and restricted by operators 19

57 OPPORTUNITIES. Opportunities are any external situations that can be leveraged to the advantage of a business. For a tourism business of Kenya, opportunities are as following. 1. Ecological and topographic diversity. 2. Potential product diversity. 3. Films and books about the destination. 4. Upgrading visitor interpretation. 5. Diverse heritage, cultures and traditions. 6. East African co-operation. 7. Kenya s teas, flowers, coffee, etc. 8. Kenya s sport personalities. 9. Tourist Police and KTF Safety Centre. 10. Public/Private partnerships. 11. Boutique camps, lodges, home stays. 20

58 THREATS Threats are external possibilities that threaten a business. In tourism a recession could be a major threat to a business. Other threats related to Kenya tourism indiustry are as following. 1. Lack of controls, planning, management. 2. Acts of terrorism. 3. Negative travel advisories. 4. Increased competition. 5. Tour operator price pressures. 6. Community envy/resentment. 7. Human-wildlife conflict 8. Animal poaching. 9. Shortage of future investment capital. 10. Over-reliance on a few major markets. 11. Corruption and bribery. 21

59 CHAPTER- 4 COMPARATIVE POSITION OF TOURISM SECTOR WITH INDIA 22

60 Tourism Developing Countries Kenya The concept of sustainable tourism strives to harmonise and reconcile issues of intergenerational equity, and the goals of economic growth, environmental protection and social justice. It recognizes the need for fairness between local individuals and groups, and between hosts and guests (Mbaiwa, 2005). If the concept of sustainable tourism is transformed into action, it is expected to contribute to the sustainability of the environment, social and cultural resources and overall socio-economic development. The increasing popularity of the concept derives from the widely held view that there is a need to alter current forms of consumption that perceive existing resources as being infinite. A lot of attention has been paid to the economic and ecological aspects of sustainable development, especially at the national level (Roe & Khanya, 2001; Scheyvens, 2002), but little has been given to the analysis of the implications of sustainable tourism on septic local communities and on the industry s impaction the quality of life and on socio-ecological aspects of communities that are directly affected by the tourism industry, particularly in developing countries such as Kenya. This paper addresses those issues 23

61 Tourism development in Kenya Kenya provides a good example of a developing country that has embraced tourism as a tool for socio-economic development. Kenya has increasingly become a popular tourist destination for visitors from Europe, North America and emerging tourist-generating regions, particularly South-east Asia. Country receives over 6% of the total international tourist arrivals to Africa, and the relative importance of tourism in Kenya s economy has risen steadily over the last 40 years (Kenya Government, 2004). However, to be of any meaning to marginalized local communities and individuals, especially in developing countries such as Kenya, tourism development should be part of a broader alternative policy framework that is designed to achieve a sustainable society. Sustainable tourism development should, therefore, not be seen as an end in itself, but as one of the several alternative development strategies that can assist local communities overcome their socioeconomic and developmental weaknesses, preserve their strengths and enhance their developmental opportunities. 24

62 INDIAN TOURISM INDUSTRY Indian tourism sector is one of the most crucial sectors of the economy in the country. It is not only a significant contributor to GDP and foreign exchange reserve of the country, but also it provides widespread employment. Tourism sector can also be considered the backbone for allied sectors, like hospitality, civil aviation, and transport. Sensing the importance of the sector, Indian Government has invested abundantly in the past for infrastructure development. It has been partially successful with increase in foreign tourist arrivals over the last decade, courtesy Incredible India Campaign. Infrastructure in the hospitality sector is still a matter of concern amongst other factors like season-based tourism in some states. Domestic tourism is very huge in the country, promoted by various intents. Pilgrim and leisure tourism are two very important sectors. A lot of scope is available for new businesses to enter and tap the segment. With the rising economic status of the middle class and affluent population, outbound travel is on the rise. Though Thailand, Malaysia, and Singapore circuit the most favored destinations among the tourists, interest for off-track destinations are also increasing. Foreign tourist arrivals in the country have increased substantially during the past decade motivated by both, business and leisure needs and are further expected to grow at a CAGR of around 8% during , as per our new research report Indian Tourism Industry Analysis. Our thorough analysis of the tourism sector in India has revealed that it is set for a fast growth stage marked by a huge potential in various segments in the industry. Government initiatives, both at center and state level have facilitated rapid development in the sector and are expected to continue in future as well. The market is fragmented and unorganized but is highly competitive. Also, various trends have emerged during the last few years, which are discussed in details in the report. 25

63 Our report, Indian Tourism Industry Analysis provides detailed analysis of the tourism sector in India. The report facilitates current industry trends and forecast for foreign tourist arrivals, outbound tourists, domestic tourist visits, and several other factors crucial to future developments at regional level. In addition, a detailed analysis of hotel industry has also been provided. Description of key players is also included to efficiently gauge the competition in the market and to provide a balanced research outlook of the tourism industry. 26

64 CHAPTER 5 PRESENT TRADE AND RELATION OF BUSINESS WITH INDIA 27

65 PRESENT POSITION AND TREND OF BUSINESS WITH INDIA India-Kenya to Enhance Bilateral Trade to $ 2.5 Billion by India and Kenya have growing trade and commercial ties. Bilateral trade amounted to $2.4 billion in but with Kenyan imports from India accounting for $2.3 billion, the balance of trade was heavily in India's favour. India is Kenya's sixth largest trading partner and the largest exporter to Kenya. Indian exports to Kenya include pharmaceuticals, steel, machinery and automobiles while Kenyan exports to India are largely primary commodities such as soda ash, vegetables and tea. Indian companies have a significant presence in Kenya with Indian corporates like the Tata Group, Essar, Reliance Industries and Bharti Airtel operating there. The Indian public sector banks Bank of Baroda and Bank of India have operations in Kenya.Kenya has been trying to promote itself as a tourist destination in India. However air connectivity between the two countries is limited and is provided by Kenya Airways between Mumbai and Delhi to Nairobi. Services to Nairobi, which was Air India's second international destination, begun to in 1951 was finally shut down by the airline in Both sides welcomed the proposed MoU between India and Kenya in the field of Tourism. In view of the Vast tourism potential existing in the sector, the Kenyan side requested the Indian side to fast track the finalization of the various aspects in the MoU. The Indian side informed the JTC that the mutually agreed MoU is being processed for Indian cabinet approval. The Indian side will contact the concerned ministry with a view to speed up the conclusion of the MoU to facilitate signing of the same between the two countries at the earliest Balala lamented the decline of cruise tourism which recorded only 508 arrivals as compared to 12,096 received in He blamed insecurity along the Indian Ocean for this decline. Indian visited to Kenya is around 23,648 people it means 4.5% of total tourist. The Kenya of tourism since 1950 has been remarkable in terms of growth, spread and diversification. The international tourist arrivals since then have grown from mere 25 million to reach 940 million in The fast growth and spread not only resulted the globalization of people s movements as never before but also contributed in creating a vibrant industry and opportunities for millions of people. 28

66 CENTURIES OLD RELATIONSHIP In one of the most publicised documentary aired on the number one Television station in Kenya, Kenyans learnt that there was a certain section of black Indians whose origin is believed to have been in Kenya. The Indians are believed to have been shipped to India 300 years ago. The fact is, India has been doing business with Africa for innumerable years. Kenya is one of those countries that have greatly benefited from the trade. The only railway line existing in the country was built by Indians at the beginning of the 20th century and paved way for the thousands of Indians who have settled in Kenya and Uganda. This relationship has not been exploited, especially the rich history it presents to the two countries. Kenya especially has enjoyed a friendly and cordial relationship, unlike Uganda which chased the Indian business community in 1970s, hurting the relationship that has taken decades to rebuild. Presently, there two Indian legislators in the Kenyan parliament elected in unlikely regions. The two have lived in the areas and worked as businessmen to the extent they are a part of the community and very popular as well. This demonstrates the success of businessmen of Indian origin in various towns in Kenya and points out of the many opportunities that exist for the Indians who should tour the country and explore the opportunities as well enjoy the country s renowned world famous tourist s attractions. There are thousands very successful Indian businessmen and industrialists in the country and there is even more room for expansion. That is the message that should be preached to boost the business relationship between the two countries. 29

67 Thousands of Kenyans have studied in India over the last four decades and India still remains one of the major attractions in academic matters. This is another linkage that should be explored and utilized. Beyond the educational matters, there is still more that this particular association can give 30

68 New opportunities of business between India and Kenya India emerges as largest tourism source market for Kenya. Following the largely peaceful elections on 4 March, the Kenyan tourism sector has heaved a sigh of relief and has embarked on an aggressive marketing plan to boost the industry increasingly facing uncertainties. The players are generally buoyant with the elections whose outcome has been contested but the battle has been taken to the courts and not the streets as it happened five years ago. Now Kenyans have faith in the Supreme Court after the 2010 constitutional referendum overhauled the judiciary system that was highly compromised and corrupt. Now it is a lean, professionally run arm of the government and the last resort of the electoral dispute. The faith in the courts has kept Kenyans from the streets this This is a bigboost to the tourism sector. The post-election violence largely affected the tourism industry and it was after a long time that the sector recovered. In the last four years, the performance has not been optimal following the economical melt-down in Europe and the insecurity in Kenya. The insecurity has been occasioned by the random bombing of buildings and bus stops by the separatistal Qaeda affiliated al-shabab militia based in the neighbouring Somalia as well the secessionist group called the Mombasa Republican Council (MRC) who are calling for Mombasa, the famous tourist town in the Kenyan Coast tocut off from the motherland. But, the Kenya Defence Forces s recent conquest in Somalia that saw them take over the al-shabab stronghold of Kisimayu port and the Kenyan government instructive containment of the MRC has restored faith in the sector. While the number of tourists from Europe will remain unpredictable as the Eurozone economic crises hit even harder, the Kenyan Tourism Board has been reaching out to the emerging market, mainly in Asia to bolster the industry. India is one such country that the board is trying reach in order to boost the numbers that have averaged 20,00 over the last few years. 31

69 Last year, India overtook France as the number five source market. The number of tourists from India to Kenya was 12, 330. This is likely to go up in the coming year as India strengthens its economic ties with Kenya the more. Sibabrata Tripathi, the Indian High Commissioner to Kenya has indicated in past that the trade between the two countries is about $2 billion. Tourism will play a key role in bolstering in boosting the trade between the two countries in The next years. 32

70 International Tourist Arrivals and Receipts It is equally remarkable that irrespective of many challenges- at times far reaching in nature like economic threats, war and political instabilities, natural calamities and the like tourism as an economic activity could withstand the test of the time and demonstrated its resilience as well as positioning in the modern way of living. Figure- 1 is revealing of the contemporary nature of tourism. During , international tourist arrivals grew from 435 million to 940 million, recording an average annual growth of 5.8%, hiccups in some years notwithstanding. During this period, the international receipts also recorded considerable growth from USD 262 bn. to USD 919 bn., and its average growth has been more than double to that of the arrivals at about 12.54%. Regionally, international arrivals can be seen growing faster in emerging economies at a rate of about 7% compared to the world average of 4.45% during

71 Table-1: Regional Trends in International Tourist Arrivals International tourist arrivals(millions) Market Share Avg.An nual Growth Region/Year World Advanced Economies Emerging Economies Tourism Industry, World GDP and Employment With passage of time, the travel and tourism industry has evolved to become one of the largest and most dynamic industries of the global economy. A WTTC study has estimated in 2010 that the contribution of travel and tourism to the world GDP was to the tune of 9%, whereas, its total employment effect was more than 235 million jobs, representing 8% of global employment. 34

72 Economic Effects of Global Tourism and Travel Sector (WTTC) Travel & Tourism Direct Contribution to GDP: TABLE-2 World In US$bn Price(US $ bn) Real Growth (%) % Share TABLE-3. Travel & Tourism Total Contribution to GDP: World In Sub Price(US $ ban) Real Growth (%) % Share

73 GDP: Direct Contribution The direct contribution of Travel &Tourism to GDP is expected to be INR1,570.5bn (1.9% of total GDP) in 2011, rising by 8.1% pa to INR3,414.8bn (2.0%) in 2021 (in constant 2011 prices) GDP: Total Contribution The total contribution of Travel &Tourism to GDP, including its wider economic impacts, is forecast to rise by 8.8% pa from INR3,680.4bn (4.5% of GDP) in 2011 to INR8,523.1bn (4.9%) by Employment: Direct Contribution Travel & Tourism is expected to support directly 24,931,000 jobs (5.0% of total employment) in 2011, rising by 2.0% pa to 30,439,000 jobs (5.2%) by Employment: Total Contribution The total contribution of Travel & Tourism to employment, including jobs indirectly supported by the industry, is forecast to rise by 2.3% pa from37, 655,000 jobs (7.5% of total employment) in 2011 to 47,480,000 jobs (8.1%) by Visitor Exports Travel & Tourism visitor exports are expected to generate INR678.6bn (3.8% of total exports) in 2011, growing by 11.4%pa (in nominal terms) to INR1,344.7bn (2.1%) in Investment Travel & Tourism investment is estimated at INR1, 233.0bn or 4.7% of total investment in It should rise by 8.7% pa to reach INR2, 827.5bn (or 4.8%) of total investment in

74 CHAPTER - 6 POLICY AND NORMS OF KENYA TOURISM LICENSING AND TAXATION. 37

75 The tourism Industry in Kenya is regulated by two Acts of Parliament. Namely: the Hotels and Restaurants Act (Cap 494) and the Tourist Industry Licensing Act (Cap 381). Hotels and Restaurants Act Cap 494 Introduction This act was enacted by parliament in 1972 to make provision for the licensing of hotels, hotel managers, and restaurant Objective This was done with a view to regulate hotels and restaurants, for the imposition of a levy for training persons to be employed in hotels and restaurants. Licensing and regulation under this act is administered through the Hotels and Restaurant Authority, which is a board constituted by the Minister for Tourism and Wildlife. There are 3 types of licenses issued under Cap 494, annual renewals, classification certificates and entry permits issued by the section: Requirements for Hotel licenses Requirements for Hotel Manager s Licenses Requirements for Restaurant License Requirements for Renewals Requirements for Classification Certificates Requirements for Entry Permits Requirements for Hotel License Requirements for Renewals of Permits 38

76 Requirements for Hotel licenses In considering applications for Hotel License, the board requires that operators present the following before approval: 1. Title Deed/ lease Agreement for the premises. 2. Valid copies of work permit where applicable. 3. Health clearance certificate, which confirms that the premises has been inspected by the Public Health personnel and have therefore met the required health standards. 4. Tariff (bed/ room charges)/ and menu. 5. Appropriate license fee according to category, size, bed capacity and extent of services provided. Requirements for Hotel Manager s License The fee is equivalent to 10% of the annual license fee of the hotel the licensee intends to manage. The board requires that an application be supported by: 1. Prospective Manager s Curriculum Vitae. 2. Manager s professional certificates for perusal by the Board to verify competence of the applicant. 3. Requirements for Restaurant License 39

77 Requirements for Restaurant License In consideration for a restaurant license, the following requirements need be in place: 1. Certificate of incorporation/ Pin No. in special cases 2. Health certificates 3. Copy of tariffs 4. Lease agreement 5. Copies of manager s professional qualifications & testimonials/ C.V 6. Work permit for foreigner 7. Relevant license fee 8. Forms requirements HRA 1/ HRA 2 dully filled. Requirements for Renewals When considering renewals of licenses. The following requirements are considered: 1. Health certificate 2. Copy of menu/ tariff 3. Application form HRA 1, HRA 2 dully filled 4. Valid work permits where applicable 5. Relevant license fee 6. Classification Certificate 40

78 Requirements for Classification Certificates It is a certificate issued to a hotel or restaurant after every National Classification exercise such as the one carried out in 2002/2003. Only those properties that voluntarily request for classification or reclassification are charged a standard fee of Ksh. 3,000. This certificate is catered for under the HRA Act. Requirements for Entry Permits There are various classes of entry permits, these are Class-A, Class H and special passes. This arrangement is normally provided to foreign hotel and restaurant employees. Requirements for Hotel License (Class A-Employee) These are requirements for an employee in the tourism sector, who is not a Kenyan citizen who is applying for a work permit for the first time. 1. Dully completed application form 3 2. Letter of application explaining the purpose of the permit addresses to the Permanent Secretary 3. Copy of valid passport 4. C.V and Professional Certificates 5. C.V. and Professional Certificates for the understudy. 6. Copy of tourism license of the establishment forwarding the application. (Class H (Investor) 41

79 These are considerations put in place for an investor who is not a citizen of this country. 1. Dully completed application form 3. This is a form under the Immigration Act Cap Bank statement and/ or Audited report in case of renewal 3. Copy of valid passport 4. Letter explaining the purpose of the permit addressed to Permanent Secretary 5. Certificate of Incorporation, Articles of Association and Memorandum. 6. Personal Identification Number Certificate (PIN) 7. Title deed/ Lease Agreement of the premises bearing stamp duty 8. Copy of tourism license of the establishment forwarding the application (in case of renewal) (Special Pass (90 days) These are requirements for a temporary 3-month special pass for foreigners: 1. Duly completed application form 2. Letter explaining the purpose of the special pass addressed to P.S 3. No implications of Permanent Employment 4. C.V. and professional certificates 5. Copy of Passport 6. Copy of tourism license 42

80 Requirements for Renewals for Permits For renewal cases a copy of the current work permit must be attached. One full set of documents (with 2 color photographs) should be submitted to the Immigration Department and a similar set with above documents submitted to this office. 43

81 CHAPTER -7 PROBLEMS AND PROSPECTS. 44

82 PROBLEMS 1. CULTURAL CONFLICTS Kenya is a country with variety of culture and this thing create lots of conflicts Among the people of various culture.so its hamper the growth of tourism industry. 2.INSECURITY AND CRIME There is a environment of insecurity is prevailng due to high crime rate in Kenya. So,tourist feel insecure in Kenya, which stop them to move freely. 3.MALARIYA AND HIV/AIDS. There is a huge problem like malariya and HIV so,its create fear in the mind of tourist. 4.LACK OF QUALITY CONTROL STANDERED As compare to other famous countries of the world for tourism, Kenya s services and products are less qualitative. 5.TERRORISM Kenya is suffering from threat of terrorism,which is a big challenge for the Kenya s Government. 6.HUMAN AND WILD LIFE CONFLICTS survival. There are conflicts prevail between tribles and wild life animals for 7.CORRUPTION AND BRIBERY Corruption and bribery are very big challenge for Kenya tourism. 45

83 8.INTERNATIONAL AIRPORTS There is inadequate international airports available in Kenya.so,its create problem for tourists movement. 46

84 PROSPECTS: 1.MEDICAL FACILITIES: It provide a good medical facilities to the tourist which enhance their income form tourisam. 2. ENGLISH SPEAKING PEOPLE: Majority people of Kenya is speaking English,so the communication between local people and tourist is easy. 3. QUALITY WILD LIFE: Wild life of Kenya is full of variety,which enhance the joy of tourist,and create attraction. 4. TOUR OPERATERS Tour operaters are providing good services to the tourist,and make their Trip more entertaining. 5.PRODUCT DIVERSITY Tourist get number of products which make their trip memorable for life long. 6.DIVERSE HERITAGE,CULTURE AND TRADITION Keneya has diverse heritage,cultur and tradition which attracts the tourist. 7.CLIMATE Climate of the Kenya is good all year,which promote promote the tourism Business for all year. 47

85 CHAPTER - 8 SUGGESTION. 48

86 SUGGESTION Government should develop a good infrastructure for the boosting the development of country as well as tourism sector. Law and order of the any country is very necessary for development of any sector of business,so Kenya government should place emphasize on maintaining law and Order in the country. Beaches of Kenya perceived as a cheap destination,so it is a very necessary to remove this images in the mind of tourist by providing a world class facilities. Infrastructure of a hotels are also necessary to make world class to provide a best services to tourist. Malariya and AIDS are big health problems so,government should take a proper health measures to prevent these dieses and conduct various programs of awerness. Government should make a proper arrangement at various beaches of Kenya,many times tourist harassed by some local people. Terrorism is a major problem in Kenya,government should take a proper measures for safety of tourist. Corruption and bribery hamper the development of any sector of country so,it is necessary to take actions against corruption. They should also provide a wide variety of products to their customer, which attreact the more tourist. They should also maintain high quality standards in providing services and goods to tourist. 49

87 CHAPTER 9 WEBLIOGRAPHY & BIBLIOGRAPHY 50

88 Web sites: web.worldbank.org Countries Africa Kenya Kenya Economy

89 1. THE SOURCE OF COMPARATIVE ADVANTAGE IN TOURISM. BY LEON DU TOIT, JOHAN FOURIE AND DEVON TREW 2. TRAVEL INDIA BY MINISTRY OF INDIA TOURISM 52