VZCZCXYZ0000
PP RUEHWEB

DE RUEHNR #0472/01 0431428
ZNR UUUUU ZZH
P 121428Z FEB 08
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC PRIORITY 4681
INFO RUEHXR/RWANDA COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS NAIROBI 000472 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR AF/E, AF/EPS, EEB/IFD/OMA 
DEPT ALSO PASS TO DOT FOR CONNIE HUNTER 
DEPT ALSO PASS TO USTR FOR BILL JACKSON 
DEPT ALSO PASS TO DEPT OF LABOR FOR SUDHA HALEY, PATRICK WHITE AND 
MAUREEN PETTIS 
TREASURY FOR VIRGINIA BRANDON 
DEPT ALSO PASS TO USAID/EA 
DEPT ALSO PASS TO USITC FOR RALPH WATKINS 
 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON EAID ELAB ETRD EIND EINV KE
SUBJECT: KENYA PRIVATE SECTOR BRIEFS FOREIGN MISSIONS 
 
REFS: A) Nairobi 383,  B) NAIROBI 353,  C) NAIROBI 336 
 
SENSITIVE BUT UNCLASSIFIED.  FOR USG USE ONLY. 
 
¶1. (SBU) Summary: The Kenya Private Sector Alliance met with foreign 
mission reps on February 6 to brief them on the February 5 CEOs 
statement to politicians, and to ask the European missions to 
clarify their public position on aid cutoffs and to revise their 
travel advisories.  They confirmed their estimate that the Kenyan 
economy could lose $4.71 billion and contract in 2008, absent a 
swift political settlement and return to normalcy.  The European 
Missions said decisions on assistance will depend on the outcome of 
the talks, and that stability is needed before they would revise 
their travel advisories.  Both groups agreed the Annan-mediated 
talks must reach a successful result soon.  End summary. 
 
Private Sector Support Annan-Mediated Talks 
------------------------------------------- 
¶2. (SBU) The Kenya Private Sector Alliance (KEPSA) met with foreign 
mission officials on February 6 to brief them on the February 5 CEOs 
statement to the politicians (ref A), and discuss aid programs and 
travel advisories.  KEPSA representatives stressed the private 
sector's complete and unified support for the PNU-ODM negotiations 
mediated by Kofi Annan, and that the talks must not fail.  The 
private sector does not back either side, KEPSA reps emphasized, but 
rather puts Kenya first.  The violence is no longer about the 
election, they contended, but is based on tribal and land issues, 
and aims to inflict pain.  (Note: The organization's press statement 
called for all leaders, public and private, from the top down, to 
make clear public statements at the grass roots level calling for an 
end to violence. End Note.) 
 
Are You Cutting Off Aid? 
------------------------ 
¶3. (SBU) The KEPSA reps asked that Foreign Missions provide more 
public clarity on their policies on assistance to Kenya.  Many 
Kenyans, they suggested, have the misimpression the donors are 
cutting off aid and abandoning them, contributing to the misery of 
poor Kenyans and making the politicians less likely  to heed the 
advice of donors.. 
 
Aid Decisions Pending 
--------------------- 
¶4. (SBU) In response, Danish Ambassador Bo Jenson, who also 
co-chairs the local Donor Coordination Group, commended the private 
sector for its strong public statement of support for Kofi Annan and 
the negotiations.  He stressed that no donor has taken a definite 
position on long term assistance levels.  Donors are waiting for the 
outcome of the talks before making decisions.  Until then, they 
cannot do business as usual.  Mission staffs, he added, are very 
busy on humanitarian programs, giving further impetus to a go-slow 
approach to existing or new long-term development programs. 
 
¶5. (SBU) The Swedish ambassador urged the private sector to maintain 
pressure on the political leaders by providing information on the 
urgency of the country's economic and humanitarian crises.   KEPSA 
said it has have met with both President Mwai Kibaki and ODM leader 
Raila Odinga and will seek more meetings.  For the private sector as 
well, it is not business as usual. 
 
Economic Damage Remains Severe 
------------------------------- 
¶6. (SBU) Reports from KEPSA members show manufacturing activity was 
down an average of 50-55% in January, with some firms down 70-75%. 
Exporters are still operating, but with disruptions.  They told the 
foreign mission reps that the government should use whatever force 
is needed to keep the roads open so they can supply goods to the 
Northern Corridor countries.  The government is responsible for 
providing security and clearing militias and opportunistic criminals 
from the roads. 
 
¶7. (U) A member of KEPSA, the Kenya Association of Manufacturers 
(KAM) estimates losses to the economy as follows: 
 
- Property destruction: Ksh 16 billion ($228 million) and rising. 
- Lost business in January: Operations down 40-50%, Ksh 88 billion 
($1.26 billion) in lost production, Ksh 21 billion ($300 million) 
lost tax revenue to GOK. 
- 250,000 workers laid off or on paid leave in the formal sector, 
over 1 million jobs estimated lost in the informal sector. 
- Forecast business will be down 20% in the first half of 2008, and 
down 10% in the second half; loss to the economy would be Ksh 220 
billion ($3.14 billion) and Ksh 110 billion ($1.57 billion) 
respectively for annual loss of Ksh 330 billion ($4.71 billion), 
which means economic contraction, not growth, in 2008. 
- Tax is 24% of GDP, so tax revenues would decline Ksh 80 billion 
($1.14 billion). 
 
KAM nevertheless remains hopeful.  If the situation is resolved 
quickly, and transportation to western Kenya and the Northern 
Corridor is restored, it believes the damage to the economy will be 
limited. 
 
Tourism Sector Proactive Recovery Measures 
------------------------------------------ 
¶8. (U) The Kenya Tourism Federation (KTF) rep said tourism is down 
85-90%.  In 2007, tourism earned Ksh 65 billion ($1 billion) and 
attracted over one million tourists for the first time in Kenya's 
history (ref C).  It paid Ksh 10.4 billion (about $148 million) in 
VAT to the government in 2007, and an unknown level of income tax, 
most of which, he noted, would be lost in the first quarter. 
However, cancellations are only until June, and all facilities are 
intact.  Tourism could bounce back quickly in his estimation. 
Although media images were a factor, KTF said it was the European 
travel advisories that were killing tourism. The Kenya Tourism Board 
(KTB) told EconOff on February 8 that it expects only 27,000 
 
visitors in the first quarter, down 94% from the agency's original 
forecast of 350,000.  KTB announced on February 10 a paltry 8,000 
tourist arrivals in January, and predicted earnings in the first 
quarter of only Sh8.4 billion ($120 million), rather than the Sh21 
billion ($300 million) predicted before the crisis. 
 
¶9. (SBU) Public and private tourism industry stakeholders have 
formed a task force that has been meeting senior politicians face to 
face to highlight the impact of the crisis on the sector and its 
stakeholders.  The media committee encouraged journalists to 
interview those tourists still here, to demonstrate the resort areas 
are safe.  It also urged the media to move the violence off the 
front page, not to highlight isolated incidents of violence, and to 
cover stories of recovery as well as loss.  KTF issues daily 
security updates to the industry and media to ensure that any 
outbreaks are noted, and tour operators warned to steer clear.  The 
updates show the violence is well away from most tourist routes. 
The Ministry of Foreign Affairs instructed Kenyan Embassies to brief 
source country governments and lobby for revision of the travel 
advisories. 
 
Stability First, Advisories Second 
---------------------------------- 
¶10. (SBU) The KTF rep accordingly urged the European governments to 
revise their travel advisories so that they warn against travel only 
to western Kenya, and not against Kenya as a whole,  as the UK and 
U.S. have done.  He claimed that, if the advisories were limited, 
travelers' insurance policies, including life and health, would 
remain valid for the other parts of Kenya, removing a critical 
barrier to renewed bookings.  Ambassador Jensen responded that 
source countries must have more certainty that violence has stopped 
and will not restart in a few weeks before lifting the advisories. 
He appreciated the efforts of tour operators to keep their customers 
safe, but pointed out that some tourists come independently, and 
more stability is needed before revising the advisories.  Officials 
from the other missions echoed this theme. 
 
Comment 
------- 
¶11. (SBU) Despite the tension on the travel advisories, the private 
sector and the Missions are in complete agreement that the Kofi 
Annan-mediated negotiations are the only possible solution, and that 
both will continue to coordinate their efforts to push the 
government and ODM to reach an agreement as soon as possible. 
 
RANNEBERGER