Partial fulfillment for award of Master of Business Administration

This study set out to establish the linkage between performance of the Export Processing Zones programme and garment manufacturing in Kenya. The spe cific objective was to determine the competitiveness of garment firms operating at Athi River EPZ and Kenya as host nation using Porter's Diamond Competitiveness Model framework for analysis. This research employed a case study approach and collected a largely qualitative data. Qualitative techniques were used in the analysis and interpretation of the data. Results of the study confirmed that the incentives provided to investors by Kenya's EPZ programme as well as market access under AGOA has had a positive impact on the growth of the garment sector. The growth is largely seen in terms of investment attractions, exports and employment generation. The results further revealed that despite the growth, the costs of production and in particular that of electricity and transport costs remains the biggest challenge to the competitiveness of Kenya's exports. It therefore means that the government must attract large power projects and improve the transport system to attract more manufacturing otherwise Kenya will remain a high cost production country. The findings also reveal that Kenya's main strength in the textile and garment value chain is in garment manufacturing which only constitutes 30 per cent of the value chain. The sector is also over dependant on the AGOA market in the USA meaning the government should seriously move to diversify Kenya's export markets and refocus on promoting the whole value chain which entails cotton growing, ginning, yam making and textiles. This is so as to maximize the benefits in terms of investment and employment creation. In the end the study concluded that the garment sector is not truly internationally competitive and is only being sustained by the incentives in the EPZ programme and duty free market access under AGOA to the USA market.