Kenya’s President William Ruto and his Ugandan counterpart Yoweri Museveni launched separate trips to South Korea and Vietnam this week, in a bid to strengthen existing commercial ties and diversify their Asian trade partners.
As China slowly retreats as the world’s leading manufacturer, while India bans exports of certain products to boost supply and calm the rise of domestic prices, East African economies such as Uganda and Kenya must find alternative partners within the Asiatic realm.
The presidents are also addressing significant trade deficits with the two Asian economies worth several million dollars.
Kenya seeks to swap agriculture exports for tech
President Ruto landed in South Korea’s capital city Seoul on Tuesday with a mandate to deepen “strategic partnerships and enhance bilateral trade,” particularly in tea, coffee, avocado and tobacco, Kenya’s leading industries.
The newly elected president hopes to step up agricultural exports to South Korea in exchange for tech products. Currently Kenya ‘s trade imbalance runs into several tens of millions of dollars.
In 2021, Kenya exported $37.26m worth of products to South Korea, while importing $493.92m from the Asian country – 2.5% of its total imports.
“The imbalance of trade favours Korea and parliament can be instrumental in addressing this situation,” said President Ruto during a speech at South Korea’s parliament in Seoul.
While China is by far Kenya’s biggest trading partner, accounting for 20.5% of its imports in 2021, South Korea plays a critical role in the import of high-value products to Kenya.
Out of the $493.92m worth of products imported last year, $290m are categorised as “railways and ships” by the World Trade Organisation. In the African context, these are products which grow interdependence and common business cycles, while fostering productivity growth. One concrete example is a recent private sector partnership between Kenya and South Korea.
Last September, the Korean Overseas Infrastructure and Urban Development Corporation (KIND) was awarded the $3bn contract for the construction of the Nairobi-Mombasa Highway, a roadway that could significantly boost Kenya’s economic development.
Against this backdrop, Kenyan and South Korean business organisations in Seoul signed a partnership agreement to fast-track trade and investment between the two countries, during a business forum organised on the side-lines of Ruto’s visit.
KenInvest, the government agency that markets Kenya as an investment destination, made their pitch to the South Korean business community and urged them to take part in major infrastructure projects in Kenya.
Richard Ngatia, president of Kenya’s Chamber of Commerce, invited “Kenyan and Korean businesses to build on the momentum of the forum’s discussions and the newly established partnerships to leverage on greater business opportunities,” he said.
More than business opportunities, South Korea provides an inspiring economic model to President Ruto, who paid a visit to the Incheon Free Economic Zone located a few kilometres west of Seoul.
President Ruto has already laid out his ambitions to build similar zones at home, notably in the port city of Mombasa with the Dongo Kundu project, which he said was hedged for completion in two years.
“Special Economic Zones will support a wide range of business activities by providing tax benefits, quality administrative services and a comfortable living environment,” he said during the visit to Korea’s largest Special Economic Zone.
During a bilateral meeting with South Korean representatives, Kenya also secured a $1bn loan to fund projects in health, ICT and agriculture, energy, housing, and urban transport.
Museveni bids to diversify economic partners
Uganda’s President Yoweri Museveni kicked off his visit to Vietnam by visiting the Ho Chi Minh Mausoleum in Hanoi to pay his respects to the leader of the country’s independence struggle. After that, business matters topped the agenda of the three-day visit.
Despite 50 years of bilateral cooperation between Vietnam and Uganda, and the establishment of the first Consulate of Vietnam in Kampala in 2017, trade flows between the two countries remain rather thin.
In 2020, Uganda imported a total of $49.8m worth of products from Vietnam – mostly textiles and fertilisers – representing 0.60% of its total imports. In comparison, China and India represented 16% and 11% respectively of the country’s total imports over the same period.
On the other side, Uganda exported a total of $7.14m worth of products to Vietnam – mostly cotton and vegetables.
The trade imbalance between the two countries, which mirrors Kenya and South Korea’s but on a smaller scale, prompted President Museveni’s call to Vietnam’s President Xuan Phuc “and the Vietnamese wealth creators to invest in Uganda which now has a bigger market backed by the East African Community,” he said.
“Our countries commit to deepening trade, ICT, Agriculture and Health cooperation in a bid to unlock employment opportunities for our people,” Museveni said during bilateral talks with President Phuc, which saw the signing of several bilateral deals.
On the side-lines of the visit, the first Uganda-Vietnam business summit took place under the theme “Unlocking Investment Opportunities”. Ugandan and Vietnamese companies met to explore opportunities in their respective private sectors in a bid to create a commercial dynamic beyond China.
“With a market of more than 600 million increasingly affluent consumers, ASEAN [the Association of Southeast Asian Nations] presents a huge opportunity for the likes of Museveni and other African countries,” says Eric Olander, editor in chief of The China-Global South Project website.
“But they’re going to have to work hard to make inroads here. Southeast Asia is very similar to Africa in its diversity of languages, cultures, religions, and political systems, so it requires people who know the region, speak the local languages, and have the right relationships to break into these markets,” says Olander.
Museveni’s choice of Vietnam, when this latter represents just a fraction of Uganda’s economic activities, speaks volumes on the president’s diversification strategy, at a time when Uganda’s economy faces tough headwinds. Last August, the Bank of Uganda confirmed weaker consumer and business sentiments as high inflation and commodity prices continue to whip households.
“Given that the development levels in most ASEAN countries are comparable to that of many African countries and the fragmentation in this region mirrors that in much of Africa, both ASEAN and Africa have a lot that they can learn from one another rather than these regions continually looking to the EU, US, China and Japan for development inspiration,” Olander adds.