Effect of customs operations on the growth of cross-border trade in Kenya

Abstract

In Kenya, the volume of cross-border trade has been declining. The country's current account deficit increased by 10.2% in Q1 2020, to Kshs 110.9 billion from Kshs 100.6 billion in Q1 2019. The goal of this research was to see how customs operations affected the growth of cross-border trade in Kenya. The study's main goal was to see how trade facilitation, border coordination management, and risk management affected cross-border trade in Kenya. The study is guided by the gravity, monopolistic trade and new trade theories. The explanatory research design was considered in analyzing the effects of customs operations on cross border trade in Kenya. The target population of this study was 4117 customs administration officers working at Kenya revenue authority. The sample size for the research was 364 officials selected using stratified random sampling technique. Structured questionnaires were used to collect primary data. Descriptive and inferential statistics were used to analyze the data. To determine the effect of independent variables on the dependent variable, the researchers used multiple regression analysis. The findings revealed that trade facilitation had a positive and significant effect of growth of cross-border trade (β= 0.379, p=0.000). Border Coordination and Management had a positive and significant effect of growth of cross-border trade (β= 0.313, p=0.000). Risk management had a positive and significant effect of growth of cross-border trade (β= 0.13, p=0.049). The conclusion of the study is that customs operations have significant contribution to growth of Cross-Border Trade in Kenya. The study further concluded that trade facilitation, border coordination and management and risk management positively and significantly influence growth of Cross-Border Trade in Kenya. The study recommended that management of Kenya Revenue Authority should ensure review of the aspects relating to trade facilitation including trade barriers, system integration, complexity of customs clearance procedures and automation. The management should also review aspects relating to border coordination & management such as cooperation of different agencies, policies to promote international cooperation and multilateral mechanisms, efficient and secured border coordination and management, strategic partnership and efficient automation of border processes and procedures. Further, the management should review aspects relating to risk management including global approach to customs risk management, identification of risks, risk analysis, and risk evaluation. Furthermore, scholars should consider investigating variables that would influence the relationship between electronic customs systems and growth of Cross-Border Trade such as government policy and technology adoption.