The United Arab Emirates (UAE) and Kenya have a long trade history, dating back decades. This relationship has culminated in the signing of the Comprehensive Economic Partnership Agreement (CEPA) on January 14, 2025.
The deal is currently awaiting ratification by the Kenyan National Assembly and aims to enhance trade between the two nations.
A History of Growing Trade:
Let us have a look at key trade figures between Kenya and the UAE:
- Trade between Kenya and the UAE has been on an upward trend over the past couple of years.
- In 2023, the UAE was Kenya’s 6th-largest export market, accounting for 5.5% of Kenya’s total exports.
- In the same year, the UAE was Kenya’s 2nd largest source of imports, accounting for 15.7% of all goods entering Kenya.
- Over nine years between 2013 and 2022, the total two-way trade surged by an impressive 169.24% from Ksh. 142.5 billion to Ksh. 383.68 billion.
- Kenya’s exports to the UAE were valued at USD 373.6 million in 2022 and USD 401.5 million in 2023.
- Imports from the UAE stood at USD 3.45 billion in 2022 and USD 2.95 billion in 2023, showing a drop.
- Key Kenyan Exports to UAE: Tea, meat of sheep or goats, fruits, vegetables, and cut flowers.
- Key Kenyan Imports from UAE: Petroleum oils, polymers of propylene, telephone sets, and cement clinker.
Significance of the New CEPA Deal:
- Market Access: The agreement aims to abolish trade barriers, simplify customs procedures, and promote industrialization, enabling market access for Kenyan products in the UAE and vice versa.
- Investment Opportunities: To open up avenues for investments in sectors such as energy, water, agriculture, health, ports, airports, logistics, human resource development, and ICT.
- Economic Growth: By enhancing investments and economic growth, the CEPA aligns with Kenya’s Bottom-Up Economic Transformation Agenda (BETA), aiming to unlock new markets, attract foreign direct investment, and promote technology transfer.
- Strategic Access: The UAE’s membership in the Gulf Cooperation Council (GCC) and the Greater Arab Free Trade Area Agreement (GAFTA) provides Kenya with potential strategic access to a wider market in the Middle East.
- Joint Implementation: A Joint Committee, chaired by Kenya’s Cabinet Secretary for International Trade, will be established to oversee the implementation of the CEPA.
Benefits for Kenya:
- Increased Exports: The deal is expected to increase the exports of key Kenyan products like meat, horticultural produce (fruits, vegetables, flowers), tea, and coffee to the UAE and the wider Middle East.
- Trade Facilitation: There will be streamlined customs procedures, and trade facilitation measures will make it easier and more efficient for Kenyan businesses to trade with the UAE.
- Services Sector Growth: Creation of a common framework for services trade rules, opening up new opportunities for Kenyan service providers.
- Increased Investment: Kenya anticipates greater investment from the UAE in crucial sectors such as ICT, healthcare, agriculture, and others.
- Technical Cooperation and Budget Support: The CEPA is expected to lead to expanded technical cooperation and potential budget support for Kenya.
Kenyans in the UAE:
- Employment and Business: Dubai is home to over 50,000 Kenyans. A majority of this number have relocated to Dubai in search of work opportunities or to establish businesses, drawn by the favorable economic environment.
Related: Kenyans in Dubai, UAE - Tourism and Leisure: The UAE, particularly Dubai, is a popular travel destination for Kenyan tourists seeking leisure experiences, attracted by its world-class amenities and attractions. such as the Burj Khalifa or the Global Village.
- Real Estate Investment: Many wealthy Kenyans are increasingly investing in Dubai’s real estate market, attracted by favourable factors such as:
- Tax-Free Environment: Dubai offers a tax-free income on property investments, with no capital gains taxes, increasing profitability.
- Lucrative Rental Yields: The real estate market in Dubai has some of the highest rental yields and ROI globally, averaging between 7% to 15% annually.
- Political Stability: Dubai provides a secure and politically stable environment for property investment, governed by clear real estate laws and a stable government.
- Golden Visa: Investing in property valued at a minimum of AED 2 million (approximately Ksh. 80 million) grants one eligibility to obtain the UAE’s Golden Visa, offering long-term residency benefits.
Addressing Potential Concerns
This agreement poses some potential challenges, especially for Kenya, with the major issue being:
- Increased Competition: Local Kenyan industries will most likely face increased competition from zero-rated UAE products over time.
Measures to Mitigate Negative Effects
With that said, the agreement includes several provisions to address such challenges including:
- Trade Remedies: Safeguards, countervailing measures, and anti-dumping provisions are in place to protect against unfair trade practices.
- Amendment Clause: Allows for flexibility to amend provisions if needed.
- Mandatory 5-Year Review: Ensures a comprehensive review of the agreement every five years.
- Exit Clause: Provides an option for either party to exit the agreement with a one-year written notice.
Next Steps
The Kenya – UAE CEPA now awaits ratification by the Kenyan National Assembly. This process will determine the timeline for the agreement to come into full effect, paving the way for a new era of enhanced economic cooperation between the two nations. This deal holds the promise of unlocking significant economic benefits for Kenya and further solidifying its relationship with the UAE, a key player in the global economy.
