The multi-billion shilling cut flower industry has become the latest wing of Kenya's ailing agriculture sector to ask for an incentive scheme from the Government citing escalating cost of inputs and its impact on profitability in the sector.

The plea, which has been channelled to the state through the Kenya Private Sector Alliance (KEPSA), seeks an Export Processing Zone (EPZ)-like status for the horticulture sector to cushion them from the impact of high inflation and high fuel prices.

Yesterday, the Kenya Flower Council chief executive officer, Jane Ngige, said EPZ-like concessions would be the most suitable to prevent a looming exit of major players to neighbouring states with better investment climate.

"Emerging horticultural hubs like Ethiopia and Uganda with their sight on the long term benefits are offering special treatment to horticulture industry investors," Ms Ngige said.

This plea from flower farmers, who have been doing better than traditional export produce such as tea and coffee, is expected to serve as an awakening to policy makers on the negative impact that the prevailing macro-economic environment is having on key productive sectors.

Meanwhile, the global economic slowdown that began with America's sub-prime mortgage meltdown is set to creep into the Kenyan economy in the next few months but from unexpected quarters.

Over the past seven months that US has been struggling to find a way out of the home loans debt crisis, it has been unable to effectively absorb much of the goods and services that it consumes from all corners of the globe leading to a slowdown in exports.

This slowdown in exports coupled with the fact that some economies were directly hit by the sub-prime crisis, is beginning to cause an economic meltdown in Europe.

Figures released on August 14 show that the euro-area economy shrank at an annualised rate of 0.8 per cent in the second quarter, the first such reversal since 2001. And things are unlikely to improve soon.

Flower industry experts now say this slow down means Europe will be unable to absorb more Kenyan flowers this year - ruling out any hope of market growth. Mr Peter van Ostaijen, the director of Dutch flower information service HBAG and vice secretary general of the international trade association, Union Fleurs, says demand for flowers in Europe is stagnating.

"Exports are clearly in a phase of going down," he told Business Daily, referring to sales from Holland to large European markets like Germany and UK. "We expect to sustain the current level of exports but growth will be at zero, not the two to three per cent we realised in the previous years."

During times of recession, consumers tend to economise on luxury items and for most people, cut flowers fall into this category.

"The sales figures are going down. Last year the Dutch industry grew by four per cent over 2007. In the first half of this year, growth has been flat,' said Mr van Ostaijen.

Cut flowers are Kenya's most valuable export and more than 90 per cent of total exports is sold in the European market. Many growers sell to the Dutch auction house Floraholland, where Kenya is the single largest foreign supplier.

Last year, sales of Kenyan flowers through the auction grew by 8.5 per cent. But Mr Van Ostaijen believes the European market will not absorb any more flowers this year. "I don't expect there will be room for expansion of Kenyan exports."

This gloomy outlook is coming at a time when Kenyan farmers attracted by high and prompt payments and comparatively low labour needs, are ditching traditional cash crops like coffee and tea in favour of cut flowers.

But with the prospects of a recession appearing increasingly high, the flower industry may not be such an appealing market. New figures out last week showed that Europe's economy contracted last quarter for the first time since the introduction of the euro.

Soaring costs have eroded consumer spending power and companies facing slowing sales and weaker demand for exports as the downturn hits globally are cutting investment. Economists warned that the risk of a recession, defined as two consecutive quarters of contraction, has increased.

By George Omondi, Citizen Correspondent, Nairobi

The multi-billion shilling cut flower industry has become the latest wing of Kenya's ailing agriculture sector to ask for an incentive scheme from the Government citing escalating cost of inputs and its impact on profitability in the sector.

The plea, which has been channelled to the state through the Kenya Private Sector Alliance (KEPSA), seeks an Export Processing Zone (EPZ)-like status for the horticulture sector to cushion them from the impact of high inflation and high fuel prices.

Yesterday, the Kenya Flower Council chief executive officer, Jane Ngige, said EPZ-like concessions would be the most suitable to prevent a looming exit of major players to neighbouring states with better investment climate.

"Emerging horticultural hubs like Ethiopia and Uganda with their sight on the long term benefits are offering special treatment to horticulture industry investors," Ms Ngige said.

This plea from flower farmers, who have been doing better than traditional export produce such as tea and coffee, is expected to serve as an awakening to policy makers on the negative impact that the prevailing macro-economic environment is having on key productive sectors.

Meanwhile, the global economic slowdown that began with America's sub-prime mortgage meltdown is set to creep into the Kenyan economy in the next few months but from unexpected quarters.

Over the past seven months that US has been struggling to find a way out of the home loans debt crisis, it has been unable to effectively absorb much of the goods and services that it consumes from all corners of the globe leading to a slowdown in exports.

This slowdown in exports coupled with the fact that some economies were directly hit by the sub-prime crisis, is beginning to cause an economic meltdown in Europe.

Figures released on August 14 show that the euro-area economy shrank at an annualised rate of 0.8 per cent in the second quarter, the first such reversal since 2001. And things are unlikely to improve soon.

Flower industry experts now say this slow down means Europe will be unable to absorb more Kenyan flowers this year - ruling out any hope of market growth. Mr Peter van Ostaijen, the director of Dutch flower information service HBAG and vice secretary general of the international trade association, Union Fleurs, says demand for flowers in Europe is stagnating.

"Exports are clearly in a phase of going down," he told Business Daily, referring to sales from Holland to large European markets like Germany and UK. "We expect to sustain the current level of exports but growth will be at zero, not the two to three per cent we realised in the previous years."

During times of recession, consumers tend to economise on luxury items and for most people, cut flowers fall into this category.

"The sales figures are going down. Last year the Dutch industry grew by four per cent over 2007. In the first half of this year, growth has been flat,' said Mr van Ostaijen.

Cut flowers are Kenya's most valuable export and more than 90 per cent of total exports is sold in the European market. Many growers sell to the Dutch auction house Floraholland, where Kenya is the single largest foreign supplier.

Last year, sales of Kenyan flowers through the auction grew by 8.5 per cent. But Mr Van Ostaijen believes the European market will not absorb any more flowers this year. "I don't expect there will be room for expansion of Kenyan exports."

This gloomy outlook is coming at a time when Kenyan farmers attracted by high and prompt payments and comparatively low labour needs, are ditching traditional cash crops like coffee and tea in favour of cut flowers.

But with the prospects of a recession appearing increasingly high, the flower industry may not be such an appealing market. New figures out last week showed that Europe's economy contracted last quarter for the first time since the introduction of the euro.

Soaring costs have eroded consumer spending power and companies facing slowing sales and weaker demand for exports as the downturn hits globally are cutting investment. Economists warned that the risk of a recession, defined as two consecutive quarters of contraction, has increased.