Global Journal of Human Social Science, E: Economics, Volume 21 Issue 4

Global growth in maritime trade is closely correlated with changes in real GDP as a 1% change in real GDP corresponds to a 1.1% change in in maritime trade (UNCTAD, 2017). Maritime transport services are directly driven by global economic growth and the need to carry goods internationally, and thus they are subject to developments in the global economy. In other words, global economic growth directly influences international trade, which, in turn, directly affects transport services and therefore the world’s seaborne trade volumes. As demand for both maritime transport services and logistics services derives from global economic growth and the need to carry out international trade, the global shipping industry and maritime transport activities could not escape from performance of the global GDP and international trade volumes (Song & Panayides, 2015). World tourism has always been enhanced by the maritime transport industry. In 2005, an estimated 10.5% of total world tourism expenditure was directly related to maritime transport (The Philippine Environmental Governance, 2006). The tourism sector of the maritime transport industry also helps in generating revenue to a nation. Cruise shipping is an area with huge potential, targeting high end tourists. Industry experts say that 400 cruise tourists are equivalent to 4000 tourist by air. Kenya Ships Agents Association estimates that 40 cruise ships calling at the port could translate to US$ 20 million (Sh2 billion) and there is a positive development with the Kenya Ports Authority (KPA) currently developing a cruise (Marete, 2018). The importance of the maritime transport to the Kenya economy is seen in the following contribution: Transportation, Facilitation of Trade and commerce, Revenue generation, tourism, Promotion of Tourism, Development of related economic activities, Employment and job opportunities, Enhancement of industrial growth and development and Institutional development. Kenya’s territorial waters cover 230,000 square kilometers and a distance of 200 nautical miles offshore and 10,700 square kilometers of inland waters, thus the country’s maritime sector has a huge potential to turnaround the economy. However, in 2015 for example, the maritime domain contributed only $1.83 billion to the GDP. Fisheries account for only about 0.5 per cent of the Gross Domestic Product and generate employment for around two million Kenyans through fishing, boat building, equipment repair, fish processing, and other ancillary activities. The Government of Kenya has undertaken several initiatives to streamline the public sector to improve service delivery to its citizens. As a result, the public sector reform program (PSRP) was introduced in Kenya in 1991 after International donors supporting Kenya’s development strategies tied aid to implementation of policy and sectorial reforms (PTPR, 2013). These efforts however, have still not yielded much result. The Government, through Sessional Paper No. 10 of 1965 on African Socialism and its Application to Planning in Kenya, resolved to establish state corporations in the Maritime industry like Kenya Ports Authority, Kenya Maritime Authority and Kenya Ferry services with a view to: accelerating economic growth and social development, redress regional economic imbalances, increase Kenyan citizen’s participation in the economy, promote indigenous entrepreneurship, and promote foreign investments through joint ventures. Maritime transport remains the backbone of globalized trade and the manufacturing supply chain, as more than 80 percent of world merchandise trade by volume is carried by sea (UNCTAD, 2019). One subject that has been hotly debated among maritime economists is the way in which shipping and ports facilitate trade (Song & Panayides, 2015). The economic impact of an industry, even though often measured by the level of economic activity of that industry, in the form of value added to GDP and employment generation, is not only restricted to these economic activities but also include the impact of these industry on other aspects of the economy. Studies on the importance of maritime sector has divided this industry contribution into several economic impact. Maritime sector remains the backbone of globalized trade and the manufacturing supply chain, as more than 80 percent of world merchandise trade by volume is carried by sea (UNCTAD, 2019). Maritime sector in Kenya takes care of 92 percent of Kenya’s international trade by volume, which is expected to grow as the country seeks to implement the early crude oil exportation project. However, State corporations in the maritime sector in Kenya have been experiencing redundancies, cost cutting, closure of operations and challenges to the quality of their services. They have become more complex to manage because of the demands of the dynamic business environment. They are finding it difficult to meet the challenge of customer demands as well as complicated service technologies and production processes (Awuondo et al , 2013). Competitiveness of the Mombasa port was ranked number 114 among the world's best 120 best ports that handle container cargo. The latest ranking now puts the Mombasa Port at position 6 in Africa behind other best performing Ports in Africa including Tangier Med Port in Morocco which handled 3.3 million TEUs, Durban (South Africa) did 2.6 million TEUs and Lagos Nigeria that made it into the list for the first time clocking 1.5 million TEUs in 2017. Africa's other best performing Ports are Alexandria and Port Said both in Egypt. (PMAESA, 2017). Kenya Vision 2030, the country's development blueprint, has set ambitious targets of transforming Kenya into a newly industrialized, globally competitive, middle-income country. The long-term agenda, which is Volume XXI Issue IV Version I 26 ( E ) Global Journal of Human Social Science - Year 2021 © 2021 Global Journals Effect of Foreign Exchange Rate on Maritime Sector Performance in Enhancing Economic Growth in Kenya