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Missing links in Kenya’s economic growth

Monday June 19 2017

Standard gauge railway terminus in Miritini. The mega project is expected to boost growth. PHOTO | SALATON NJAU | NMG

Standard gauge railway terminus in Miritini. The mega project is expected to boost growth. PHOTO | SALATON NJAU | NMG 

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When Kenya launched the standard gauge railway stretching 487 kilometres from the port city of Mombasa to Nairobi, the country was keen to make a huge economic statement.

The message that the East African economic giant was banking on infrastructure to bolster its economic leadership in the region was loud and clear.

However, despite these massive investments, opinion is divided as to whether Kenya will stay on the lead in the near future.

This doubt is informed by the fact that Kenya seems to be allowing golden economic opportunities to slip through its fingers.

Analysts agree that Kenya has all the ingredients to continue being the hub of commerce in East Africa, but only if it takes serious steps to promote the growth of the pillars that have sustained it at the top.

Because of missed opportunities, Kenya has allowed Tanzania whose gross domestic product has been growing faster, to threaten its regional powerhouse status. In the larger eastern Africa, Ethiopia has since overtaken Kenya.

Where did Kenya lose it? Exports to the neighbouring East Africa are dwindling as the countries in the region individually work extra harder to raise their industrial standing and lower dependency on Kenya.

In its latest Economic Update, the World Bank says Kenya’s merchandise trade performance is fast decreasing due to the influx of cheap goods from China into Uganda and Tanzania that are the major export destinations for Kenya.

The data show that exports contracted by an estimated 23.3 per cent in 2016 despite the region’s relative resilience underlined by a growth in the EAC intra-regional trade.

This set of factors is increasingly shaking Kenya’s economic dominance in the region where the country’s competitiveness has remained highest over time.

China exports

“Kenya has become less competitive in the EAC due mostly to cheaper products to EAC markets from elsewhere, in particular, East Asia (such as China). For instance, in both Tanzania and Uganda, the share of China e