WB concerned over Kenya’s business climate

August 23, 2011
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, NAIROBI, Kenya, Aug 23 – The World Bank has raised concern that Kenya may be ignoring reforms to improve the country’s business climate as it remains engrossed in implementing the new Constitution.

World Bank’s Africa Regional Manager for Investment Climate Advisory Services David Bridgman pointed out on Tuesday that although the constitutional implementation process augurs well for Kenya, the country risks losing ground as a favourite investment destination to its neighbours that are aggressively undertaking business regulation reforms.

‘The reality for Kenya is that over the last few years, it has kind of been standing still on doing business matters. It has been focusing more on a new constitution that will bind the country together and this has taken a lot of the political energy from the issues of competitiveness,” he emphasised.

Given that the Sub-Saharan Africa is one of the fastest reforming regions in the world and many countries have been focusing a lot in addressing critical obstacles to entrepreneurial activity, Kenya is clearly thus lagging behind.

The attractiveness of Kenya as a top investment destination in the East African region is already waning with most investors preferring Rwanda which was recently ranked a top performer for the second year running in the ‘Doing Business 2011’ report.

Out of 183 polled, Rwanda was position 58 on the ease of doing business while Kenya was ranked 98th which was a drop from the 94th position it held in the previous year.

This performance was against the backdrop of several measures that are being implemented to make life better for business but unfortunately have not been good enough.

The same report further indicated that Uganda has improved greatly moving seven places up to rank 122.

“Many of your competing countries, the ones that you want to take business from are getting better and better,” Mr Bridgman warned.

However, this situation can be reversed and once again put Kenya on the world map as a top performer as it happened in 2007. This would for instance involve improving the business climate for firms operating at the local level.

It is this recognition that local businesses are the lifeline of the domestic economy that saw the government partner with the World Bank and its investment arm the International Finance Corporation to try and look at the business regulations from the perspective of a small to medium size business.

The partners in 2009 launched a report which mainly focused on regulations and their enforcement in 11 Kenyan local authorities and placed Kenya in the 95th position out of 183 economies that it covered.

It looked at four indicators including starting a business, dealing with construction permits, registering property and enforcing contracts which saw Narok Town emerge tops as the easiest place to start and operate a business.

Nairobi was 10th in the study.

“Doing Business indicators are an invaluable resource. They point out areas that are in need of reform and allow for deeper analysis of the causes of the underlying problems. With this analysis, the policy makers can move efficiently towards reducing the costs and risks of business and thereby improve the business and investment climate,” Local Government Permanent Secretary Prof Karega Mutahi said.

He underscored the importance of the study and its findings particularly at a time that the country is implementing the devolved system of governance.

Drawing on the lessons learnt from that study, these organisations have launched the second wave of process that will focus on 13 cities with Kakamega and Nakuru joining the list of the towns that will be profiled.

The report will be launched in June 2012 and is expected to continue informing policy makers on how to have transparent and efficient regulations at the municipal level that would in turn have overall benefits for the country.

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