Special economic zones as gateway for sustainable foreign direct investments in Kenya: towards a special regime in labour regulation

Abstract

The role of Special Economic Zones (SEZs) in promoting foreign direct investment (FDI) cannot be gainsaid. In particular, developing and least developed countries have been keen on attracting FDIs through SEZs as a way of ensuring economic growth and development. In recent years, Kenya has received an increased flow of FDIs into its SEZs. Such an influx of FDIs into SEZs has, among other benefits, contributed to job creation and stimulated skill transfers. In Kenya, SEZs enjoy a liberal administration. The national legislation governing investment, tax and labour, among other matters, is often excluded from application in the SEZs. For instance, Kenya’s labour legislation provides for labour rights which apply even in the SEZs. However, the government has continuously allowed a flexible legal framework for labour regulation for companies setting up in the SEZs, such as the provision of cheap labour. Such flexibility goes against not only the tenets of the current national labour legislation but also the interests of the workers. The failure to enforce the application of the national labour legislation in the SEZs provides a flexible legal framework for labour regulation, which has allowed SEZs’ companies to compromise labour rights in order to remain competitive and attract FDIs. On this premise and related to labour legislation, the mini-thesis focuses on the unlimited application of Kenya’s labour legislation in the SEZs – the inclusionary approach. Also, the mini-thesis analyses the implications of the inclusionary approach for the flow of FDIs into SEZs. Furthermore, the mini-thesis assesses the impact of the failure to either ensure application of the national labour legislation in the SEZs or to provide for labour rights in the SEZ Act. The mini-thesis then recommends that in order to attract and retain the flow of FDIs into SEZs whilst also ensuring sustainable investment and inclusive development, a special regime is suitable in which the SEZs Act provides for special labour rights.