Infrastructure growth should be targeted

Friday March 25 2016

The overpass pillars for the standard gauge railway at Mtito Andei. In the last decade, Kenya has been implementing massive infrastructure projects.  One of them is the standard gauge railway from Mombasa to eventually reach the Malaba border, the single largest infrastructure project since independence. PHOTO | LABAN WALLOGA |

The overpass pillars for the standard gauge railway at Mtito Andei. In the last decade, Kenya has been implementing massive infrastructure projects. One of them is the standard gauge railway from Mombasa to eventually reach the Malaba border, the single largest infrastructure project since independence. PHOTO | LABAN WALLOGA | NATION MEDIA GROUP

By SIMON GITHUKU
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By AUGUSTUS MULUVI
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In the last decade, Kenya has been implementing massive infrastructure projects.

One of them is the standard gauge railway from Mombasa to eventually reach the Malaba border, the single largest infrastructure project since independence.

Infrastructural deficit has been identified as a major constraint to the growth of African economies.

Poor infrastructure increases transport costs and consequently reduces overall competitiveness of an economy.

Studies indicate that infrastructural deficit may be lowering Africa’s growth rate by 2 per cent per year.

Investment in physical infrastructure such as roads, energy, and railways should help improve the flexibility of an economy and in effect stimulate income growth.

Employment creation and demand for locally available raw materials can also be expected in the short-run in regions where infrastructure is being developed.

Infrastructure is considered to form the network of the arteries of an economic system. Investment in infrastructure should buttress growth and development.

INFRASTRUCTURE DEFICIT

There is no doubt that infrastructure is an enabler of economic growth and that Kenya suffers from infrastructure deficit.

But an important question to ask is: what facets of the economy are being enabled?

The assumption is that infrastructural development leads to improvement in the domestic investment climate, therefore attracting both domestic and foreign investors.

This is true but generic and can amount to making a wrong assumption. The process may not be necessarily automatic.

When one looks at infrastructure development in Kenya, it is difficult to tell with precision which economic sector is being enabled.

The development is not directed to specific economic sectors.

It is often said that Kenya is an agricultural economy because agriculture is the largest economic sector. This is more by default than design.

It is not the result of a deliberate policy strategy to make agriculture the engine of the economy.

Kenya’s growth model is not clear on this and it is important that specific thought be devoted to it.

CHINESE MODEL

The Chinese model is largely based on investment and exports.

Exports have been promoted through a strong manufacturing sector with large shares of foreign investments in the form of multinationals.

China is considering changing this economic model to one that relies on domestic consumption because of the current sluggish external demand occasioned by a weak global economy.

Policy makers must come up with a clear economic growth model based on domestic realities.

We can have strategies that focus on export-led, manufacturing sector-led, agricultural, and services-led growth.

A “cocktail” growth model comprising a variety of economic sectors would be ideal.

This would minimise the risks to the economy associated with over-reliance on one sector and avoid disruptive adjustments in the future, as is likely to happen with China.

If policy makers decide that economic growth will be driven by agriculture, this does not necessarily imply that other sectors should be ignored.

And agriculture is wide enough to allow the development of infrastructure to support specific sub-sectors, for example hides and skins, fisheries and aquaculture, cotton, sugar, dairy, coffee, and tea.

While the private sector can help, it may lack the incentive or financial and technical capacity to invest in some categories of infrastructure.

Therefore, public investments to achieve the common good have to be made.

There are multiple economic sectors that can be the engine of growth, but they require that sector-specific infrastructure gaps be overcome.

Infrastructure development should be selective and targeted. It should strive to enable specific sectors or regions that have been identified for their potential to generate economy-wide productivity gains.

In addition, there should be regional equity of infrastructure development to ensure balanced growth.

Dr Muluvi and Mr Githuku, experts in trade and foreign policy, work at Kenya Institute for Public Policy Research and Analysis.