Sample Kenyan Government to Enhance its Engagement in Digital Trade

Executive Summary

The traditional forms of economy and commerce have evolved into the contemporary knowledge-based economy and digital trade. Digital trade, backed up by proper statutory mechanisms and structures, has picked up quite well in the developed world compared to most developing nations. The slow adoption of digital trade and its facets in the developing world is largely due to the lack of requisite technology and statutory requirements needed to fully tap into the economic benefits of digital trade. Kenya, a developing nation in Africa, has not fully tapped into the economic benefits of digital trade due to limited technical expertise and the lack of necessary regulatory frameworks. This policy brief recommends a number of policy options that the Kenyan government can implement in order to benefit from the digital trade economy. The policy options broadly include; enactment of a national data regulatory policy, negotiation of digital trade agreements, and development of Kenya’s digital competency. Implementing the above policy recommendations will enable the Kenyan government to benefit from the numerous economic benefits of modern commerce, hence growing its economy significantly

Policy Options for the Kenyan Government to Enhance its Engagement in Digital Trade

The 21st century is characterized by the global proliferation of the internet, data, and the establishment of digital trade. The ubiquitous use of the internet has made the world a global village with unprecedented levels of interconnectedness. Economic globalization, buttressed by both data and internet usage, has resulted in the creation of data-driven economies that represent an evolution of the traditional economic concepts. The contemporary economic age, characterized by powerful network externalities and steep economies of scale, relies on data as its capital. A developing nation, such as Kenya, can invest in and exploit the massive intangible capital generated in data-driven economies to improve their market capitalization and enhance economic growth. Kenya requires salient economic policies, grounded on contemporary knowledge-based and data-driven economic principles for economic development and enhanced protection of its citizen’s privacy.

Kenya is a developing nation in Africa and is considered among the top economic powerhouses in the continent. The country has one of the best economies in East Africa, where it is regionally located, supported by a thriving international trade, and relative political stability (Ndemo & Weiss, 2017). The development and widespread use of the internet in the country has led to an unprecedented transformation of the nation’s economy, resulting in the nation being more reliant on knowledge-based and data-driven aspects of manufacture, production, and commerce (Ndemo & Weiss, 2017). Indeed, the usage of data-based technologies, such as cloud computing and artificial intelligence (AI) in Kenya has resulted in the country registering unprecedented levels of economic growth (Ndemo & Weiss, 2017). Statistics from the McKinsey Global Institute estimate that, in 2014 alone, global data flows in Kenya were more valuable than the trade in goods in the nation (UNCTAD, 2018). Moreover, data from the Kenya National Bureau of Statistics indicate that digital trade in Kenya resulted in a 3.5% increase in the nation’s GDP in 2018 alone (Ndemo & Weiss, 2017). Undoubtedly, digital trade has massively contributed to the entrenchment of Kenya as a regional economic powerhouse in Eastern and Central Africa.

The contemporary data-driven economy is characterized by cross-border and global data flow that buttress international trade, but this capability has caused an issue. Global data flows, together with the income-generating potential and the power implicit in the access and control of data in Kenya, has raised several questions with regard to data collection, protection, and usage in the country. Kenyan citizens are concerned over the safety of their data, which most of them deem confidential. More than 72% of active internet users in Kenya are concerned about the safety of their personal data and advocate for the enactment of stringent data regulation policies in the country (Ndemo & Weiss, 2017). Indeed, such data faces a lot of threats. For instance, it can be utilized by unscrupulous individuals in society to influence elections, as was witnessed in the Facebook and Cambridge Analytica Saga in the United States (Wolfe, 2019). Moreover, if not properly guarded and regulated, information can be used for societal manipulation, especially in heterogeneous societies like Kenya. The data-driven economy of the 21st century also raises economic governance concerns with regard to income distribution, corporate concentration, and the ability of nations to capture its benefits (Ciuriak, 2018). As such, the contemporary data-driven economy is a double-edged sword with a set of advantages and disadvantages.

The Kenyan government can navigate the fine line between the two extremes of digital trade through the enactment and implementation of salient data policies. Kenya is a developing nation thus it has to enact policies informed by the best modern practices of developed nations such as America, Europe, and Canada (Ndemo & Weiss, 2017). The nation’s policies should be influenced by those of the industrialized nations because most of these countries have well-established digital trade policies that have enabled them to become global economic giants. The nation also has to benchmark its digital trade policies on the e-commerce provisions of the World Trade Organization (WTO) and other international institutions (UNCTAD, 2018). International institutions, such as WTO, International Monetary Fund, and World Bank offer policies and insights on digital trade that are globally accepted and recognized. Lastly, the policies have to reflect the actual economic dispensation of the country for seamless integration into the nitty-gritty of the Kenyan economic landscape.

Policy Recommendations

Devising of a National Data Regulatory Policy

The Kenyan government has to devise, enact, and implement an autochthonous national data regulatory policy to control and benefit in the contemporary digital trade that characterizes the 21st century.  Data is both the capital and fuel of the digital age and opens huge profit opportunities to its owners, thus its need for safeguarding (Meltzer, 2019). Therefore, the relevant policies have to be enacted to ensure equitable distribution of gains arising from data generated within Kenya’s territorial boundaries. According to UNCTAD (2018), most developing countries, including Kenya, lack proper and well-structured laws in data gathering, dissemination, and distribution of the benefits derived from it. Consequently, most of the data in Kenya is owned by super-firms and multinational corporations that have invested in digital services in the nation (Ndemo &Weiss, 2017). These multinational corporations and digital super firms not only enjoy a monopoly on data harnessing and generation but also enjoy unlimited proprietary rights on it. The monopolization of data by digital super firms poses a huge problem to Kenya’s economy as it results in the untimely collapse of infant domestic firms and unfair competition.

The national data regulation policy has to address all issues related to data sovereignty, ownership, collection, usage, and control. In order to be comprehensive, the Kenya government’s data regulation policy should be based on five integral issues: data ownership, data collection, data usage, terms of usage, and sovereignty. Data ownership should distinguish who owns proprietary rights of collected data between data companies and individual Kenyans. The collection should deal with how data is to be collected and stored to guarantee the privacy of individuals. The data usage will determine how data can be used in the country and whether consent is required for usage. Both the facets of data collection and usage should be regulated by stringent rules, terms, and conditions. Lastly, the national data regulation policy also has to address the issue of data sovereignty, which is quite controversial in the international field. A national policy that addresses all the above facets of data regulations will ensure that the Kenyan government has the requisite mechanisms required to tap into the benefits of the data economy.

The national data regulation policy should put much emphasis on data sovereignty as it is essential in the determination of data-based conflicts in the global field. The issue of data sovereignty addresses the kind of data that can be allowed to leave a country and is not regulated by domestic laws but international conventions (Aaronson & Leblond, 2018; Meltzer, 2019). Unlimited global data flow, being at the center of international trade, has caused a global uproar with many nations holding divergent opinions on whether data should be delocalized or localized. Kenya can benchmark the Data Revolutionary Policy of Rwanda that provides a practical framework for data generation and usage in the country. The Data Revolutionary Policy of Rwanda limits the transfer of the country’s data to nations that have similar data protection regulations and safeguards (UNCTAD, 2018). Kenya should borrow from this provision to safeguard the privacy of its citizens’ data in the international plane.

Critics of the enactment of a national data regulation policy in Kenya can argue that the regulations will be worthless without the development of big-data processing capabilities in the country, but the issue is not insurmountable. Indeed, data is useless unless processed using relevant algorithms that enable us to derive important knowledge and information from it (UNCTAD, 2018). Kenya has limited ability in the sphere of data processing and this will limit its capacity to turn data from an abstract phenomenon into an economically viable asset that can fuel its economy to greater heights (Ndemo & Weiss, 2017). Without a relevant data processing capacity, any data regulation policy enacted by the country will remain worthless and largely inoperative. Moreover, without the development of national data-processing capabilities, the unscrupulous usage and ownership of data by super firms will remain unchecked and continue unabated. This challenge can be resolved by proper investment in data-processing technology by the Kenyan government. Data-processing technology based on cloud computing and intricate algorithms, such as those utilized by the Rwandan government, can be used to help analyze and process big data in Kenya (Ndemo & Weiss, 2017; UNCTAD, 2018). Moreover, Kenya will also have to invest in massive human resource development and training to ensure that the data-processing facilities are professionally and competently run.

Negotiation of Digital Trade Agreements

In the contemporary world, marked by unprecedented levels of economic globalization, digital trade agreements are one of the best ways of domestic data protection. Economic globalization is based on global data flow, which ensures the smooth and efficient operation of international commerce. Digital trade agreements are negotiated commerce rules that govern the sharing of data between two or more countries (Meltzer, 2016; Meltzer, 2019). According to statistics from the WTO by May 2017, 75% of the 275 bilateral trade agreements (RTAs) currently in existence have e-commerce provisions (Wolfe, 2019). Kenya also needs to incorporate digital trade agreements in all of its bilateral negotiations and treaties to eliminate uncertainty in its sphere of e-commerce. These trade agreements should be centered on the issue of privacy of personal information of Kenyans, the economic interests of the nations, and the protection of Kenyan companies both in the domestic and international planes.

The protection of Kenyan’s personal information should be paramount in all digital trade negotiations between the nation and its international trading partners. The increase in internet access and usage throughout the world has resulted in an unprecedented increase in the flow of personal information of individuals (Meltzer, 2016). Consequently, it has become harder for individuals to protect their privacy, which is their inherent right not only in Kenya but also in almost all democratic nations globally (Ndemo & Weiss, 2017). The need for heightened data security has been thrust into the limelight in recent years due to several data breaches and cyber-attacks that have led to the illegal phishing of peoples’ private data. A good example is the Cambridge Analytica – Facebook exposé that brought into light the damning allegations that Facebook had used data from millions of American citizens to compromise elections and campaigns in America (Wolfe, 2019). Kenya has to negotiate proper data protection with its trading partners to ensure that the personal data of its citizens are protected not only nationally but also in foreign countries.

The agreements negotiated and ratified by Kenya should also promote the economic interests of the nation with sectors lagging in development being given more consideration. For example, Kenya, in its agreements, should stress inter-country data flow aimed at industrializing its agricultural sector and digitizing its manufacturing sector (Ndemo & Weiss, 2017). Though unitary global data protection and privacy framework are desirable, it is nonexistent and only a highly fragmented regulation mechanism is currently available, thus complicating international data trade (Wolfe, 2019; Meltzer, 2019). The global digital realm is fragmented into three realms including the European Union (EU), the U.S., and China (Wolfe, 2019; Meltzer, 2019). These divergent digital realms have different basic features that distinguish them. For example, the EU digital realm regulates tightly against rapacious firms while the American realm focuses on limiting government intrusion (Wolfe, 2019). Both the American and EU digital realms have been criticized for transferring or imposing their regulatory regimes to other countries more so the developing ones (Meltzer, 2019). Kenya must thus weigh the three digital realms and choose one that promotes its economic interests.

Critics of digital trade agreements argue that they are barriers to international trade and should be discouraged in the first place. Those who advocate for unfettered global data flow hold that negotiated trade agreements limit data transfer between nations and are a huge challenge to the core principles of international trade (Wolfe, 2019). Moreover, they view negotiated digital trade agreements not only as camouflage for protectionism but also as a restrain to trade. Therefore, most developed nations in the international arena, such as the U.S., EU, Canada, and other G20 member states are constantly advocating and pushing against protectionism (Aaronson & Leblond, 2018). More criticism of the negotiated digital trade agreements comes from proponents of the decolonization theory of international law who find that the rules appertaining to digital trade agreements are largely imperial and Western(Meltzer, 2018). Almost all data companies from developing nations need to comply with the European Union’s General Data Protection Regulation (GDPR) to operate internationally (UNCTAD, 2018). The negotiation of digital trade agreements by Kenya may be viewed not only as of the advancement of protectionism but also the promotion of neo-imperialism by decolonization scholars and proponents.

Kenya can mitigate the mentioned concerns in several ways. First, on the issue of protectionism, Kenya is still a developing state and is obliged to protect its domestic industries. Developed nations such as the EU can advocate against protectionism as their industries are extremely wealthy, powerful, and form part of the multinational conglomerate that rakes billions in profits for the First World countries (Ndemo & Weiss, 2017). On the other hand, the Kenyan domestic industries still lack the digital infrastructure, data, and financial ability needed to compete evenly with multinational corporations in the modern-day knowledge economy. This, therefore, disadvantages Kenyan companies when competing with multinational firms in the ambit of the data-driven economy. Their existence lies in their protection from exploitation and unfair competition from multinational corporations. Thus, by negotiating digital trade agreements that promote protectionism, Kenya will be able to secure the existence and development of its domestic companies (Ndemo & Weiss, 2017). On the issue of neo-imperialism, the enacting of a negotiated digital trade agreement with the nation’s trading partners does not make Kenya a subservient nation docile to the wills of developed nations such as the EU.  According to Wolfe (2019), the ubiquitous use of the EU’s data regime globally and the lack of a coherent U.S. data framework has made the GDPR the de facto global standard in the domain of data regulation. Thus, the reliance of Kenya on the GDPR framework is a big step forward in the establishment of a universally accepted international data regime.

Develop Digital Competencies

For Kenya to fully enjoy the economic benefit of the knowledge-based and data-driven economy, it has to develop its digital competencies. Developing a comprehensive digital competency framework in a largely heterogeneous developing nation such as Kenya is not an easy task for several reasons. Apart from the general lack of funds and skills to facilitate the development of digital competencies, Kenya is largely a consumer nation in terms of modern technology (Ndemo & Weiss, 2017). According to data from the Kenya National Bureau of Statistics, Kenya imports more than 80% of the technology currently in use in the nation (Ndemo & Weiss, 2017). The general lack of innovation and invention, which are key for harnessing digital startups in the country, is a big impediment to the development of digital competencies in Kenya. The country has to first focus on enacting a comprehensive framework and policy that covers digital start-ups, their patenting, and financial utility (Ndemo & Weiss, 2017). The policy also has to promote reverse innovations while guarding against the shipping of innovative ideas to the developed nations through brain drain (UNCTAD, 2018). Digital competency has to be facilitated through proper and advanced digital education and development. The Kenyan government should inject direct investments into digital education programs and institutions in the nation to bolster digital competency and Kenya’s engagement in the data-driven economy.

The policy option appertaining to the development of digital competencies in Kenya can be challenged by the uncertainty surrounding accepted data guidelines both nationally and internationally.  The constant evolution of technology and the internet has resulted in several uncertainties concerning the basic features of data and their application in commerce globally (Wolfe, 2019). The related impacts of technology are still not properly understood and the lack of international cooperation on the issue just acerbates uncertainty in the sphere of international data (UNCTAD, 2018). The lack of a unitary regiment in the sphere of data usage, generation, and regulation can be used to challenge Kenya’s bid to develop digital competencies. Moreover, critics can argue that the development of autochthonous digital competencies in the country and innovation hubs will only delay the digitization of the nation.  According to Meltzer (2019), data developers, innovators, and inventors are required to meet certain requirements before their inventions can be internationally accepted. The GDPR data regimen of the EU puts into place several regulations that are to be met before innovations and inventions can be authorized for use in Europe and several other nations globally (Ciuriak, 2018). The high requirements of GDPR coupled with the global uncertainties in the sphere of data usage and regulation may pose a stumbling block to the development of indigenous digital competencies and data innovations.

Objections to the development of indigenous Kenyan digital competencies can be countered by reliance on the e-commerce provisions of the WTO. The b provides several conventions that regulate international digital trading and data usage and regulation principles. Irrespective of the fact that most of the WTO digital trading regulations were made in the early 1990s when the internet barely existed, they are still universally accepted and adhered to (Wolfe, 2019). Kenya can easily avoid the uncertainties that plague the international data usage and regulation regimen by basing its digital competencies on WTO standards. Doing so would ensure that the nation’s data and digital products are universally accepted among countries that have ratified WTO conventions.

Conclusion

The 21st century is characterized by the massive evolution of the traditional form of the economy into the data-based economy. The data-based economy is based on cross-border data flows, network externalities, and massive economies of scale. With its immense economic benefits, the data-based economy offers the best opportunity for developing nations such as Kenya to improve their national GDP and economic growth levels. Most developing nations currently lack the requisite policies and mechanisms required to ensure they draw massive economic benefits from the data-based economic systems. Kenya and other Third World countries should focus on developing their national data regulation policies, negotiating astute trade agreements, and creating their digital competencies. This will enable them to compete at the same level as developed nations that are currently making billions of dollars from their data-based economies.

 

References

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