NAIROBI, Kenya, Jul 7 – Industrialisation Minister Henry Kosgey has called for very close linkages between the various Government Ministries and working committees that are supposed to deliver on industrialisation by the year 2030.
The Minister made the call while chairing the National Economic and Social Council Committee on Industrialisation on Tuesday.
He said that the country has never had a single comprehensive industrialisation policy since independence and that the policies and strategies that have guided industrial development have been scattered in various Sessional Papers and National Development Plans.
The Committee also attended by Assistant Minister Nderitu Mureithi, PS Industrialisation Professor John Lonyangapuo, PS Information and Communication Dr Bitange Ndemo and representatives of seven key ministries went through seven past Sessional policy strategies from 1965 to the current Vision 2030. Past key Industrialisation Strategies included the: –
• Import Substitution Strategy (ISI) which focused on protecting domestic industries were quantitative restrictions; import licensing; foreign exchange controls; high tariffs on competing imports; and overvalued Kenya Shillings.
• Structural Adjustment Policies (SAPs) which focused on lifting of quotas and administrative controls, decontrol of prices and import tariffs, tariff reforms, reforming of state corporations and liberalisation of the financial sector
• Export Oriented Industrialisation Strategy which focused on improving efficiency, stimulating private investment and increasing the foreign exchange earnings. It introduced incentives to encourage production for export.
It was observed that these key strategies never succeeded because of various reasons including lack of political commitment to implement them, failure to allocate, adequate funds for infrastructure development, failure to expand, modernise and maintain physical infrastructure, and the adverse and unpredictable business environment.
The meeting also revealed that subsequent policies were neither building on the successes of the previous policies nor benefiting from the lessons learnt in their implementation, failure to allocate adequate funds to match the plans, failure to establish appropriate institutional framework, including institutions of governance and industrial development, failure to invest in human capital development and the lack of coordination between Government Ministries and agencies. There was also lack of affordable capital for industrial investment, it was noted.
Towards her industrialisation, Kenya is using international benchmarks like Indonesia, Malaysia, Thailand, Singapore, Vietnam and South Korea where the industrial sector took a larger share of GDP gaining on agriculture. The economic growth in these countries was guided by the adoption of an export-orientation in their industrial and trade policies, which actively encouraged the export of manufactured goods.
Among the key challenges that industrialisation in Kenya faces includes low value addition and diversification, lack of sufficient investment, influx of counterfeits, a narrow export base and entrepreneurship and technological skills development.
To support the overall goal of the manufacturing sector of increasing its contribution to GDP by at least 10 percent per annum, the meeting resolved to pursue four key objectives, including :-
• Strengthening production capacity and local content of domestically-manufactured goods;
• Increasing the generation and utilisation of research and development results;
• Raising the share of products in the regional market from seven to 15 percent; and
• Developing niche products for existing and new markets.
To address these four objectives, the meeting underscored the need to adopt and implement a strategy for promoting investment outside Nairobi. Currently, industrial activities are concentrated in Nairobi and a few other urban centres. This is because the industrial supporting system is weak outside Nairobi and these urban centres.
To address the problem of low investment, a narrow export base and technological capability, a strategy to promote Foreign Direct Investment (FDI) will be implemented. To increase value addition and bring about multiplier effects to other economic sectors, a strategy to strengthen the domestic linkages with other economic sectors will be implemented through both forward and backward linkages. The multiplier effect is also expected to make a larger impact on job creation with wider sections of the labour markets.
In order to promote the development of Micro, Small, Medium Industries (MSMIs), a strategy to promote the growth, graduation and competitiveness of MSMIs has been adopted.
The MSMIs sector is recognised as the main source of employment and income for the nation. Under increasing global competition, it is necessary to place stronger emphasis on creation of competitiveness of the sector.