Low investment slows jobs

The political instability in parts of the Arab world is largely a result of economic policy failures.

The challenge facing many countries was youth unemployment, noted Mr Paul Collier, an expert on African economies, during the launch of a book that highlights policy options on development to developing countries like Kenya.

“If ever we needed a demonstration of the need for the right policies, what has happened in Tunisia and Egypt are a pointer,” said Mr Collier, a co-editor of the book, Kenya: Policies for Prosperity.

“What is happening (there) is a result of failure of policy to produce jobs. We have to avoid taking policy debate to the streets, which has unknown consequences.”

The book is a collection of insights by experts on various sectors and is edited by Mr Collier, Mr Christopher Adam and the Central Bank of Kenya governor, Prof Njuguna Ndung’u.

It is published by the Central Bank in partnership with the Centre for the Study of African Economies of the University of Oxford.

“The country has very low rates of investments, even by moderate standards,” Mr Collier said.

Offshore investments

While in Asia the levels of investment were over 30 per cent of the Gross Domestic Product, in Kenya it was below 20 per cent, he said, adding that the country was well positioned to host offshore investments projected to start spilling over from the Asian economic tigers.

This will require the country to invest in value addition of its products.

Mr Collier said Kenya had the opportunity to borrow from international lenders, with the recent favourable ratings by Standard & Poor’s.

“Over the next decade Kenya can break into the market currently dominated by Asia, which will start to offshore their investments.”

The expert told leaders to emulate Rwanda, which had considerably improved its environment for doing business surpassing even some developed countries.

President Kibaki, who presided over the launch, said release of the book was timely and would inform the implementation of the government’s development blueprint, Vision 2030, whose objective is to turn the country into a medium income status in the next 20 years.

The President said the country was on a growth path after overcoming the challenges experienced in the last two years due to the 2008 post-election violence.

He added that economic growth had risen from 1.6 per cent in 2008 to six per cent.

Mr Collier, however, said that although the country was more united, the issues of ethnicity and lack of trust in the political arena remained a challenge.

He noted that since political risks had reduced, this would have a positive bearing on the country’s credit rating.