Kenya, look East but not to China

Recently I wrote a piece about Kenya’s shifting international relations for the Saturday Nation, as part of its review of the record of the Jubilee Alliance. I pointed out that the expected rift in Kenya’s relations with the UK and the US if Uhuru Kenyatta and William Ruto were elected has not really occurred.

Relations are strained, for sure, but there has not been the kind of radical paradigm shift that some expected. I also pointed out that there has been a gradual shift in the orientation of Kenya’s international partnerships from West to East. But which “Eastern” countries are the most important for Kenya?

The most common answer to this question is China. And there is now considerable evidence of the depth and seriousness of Chinese engagement. A few facts and figures make this clear. Total trade between the two countries continues to rise and is now worth in excess of $2.8 billion.

This has gone hand in hand with direct investment, concessional loans, preferential export buyer’s credit worth, and special loans for the development of small and medium enterprises in areas such as tea production, power generation and rural power grids. It is hard to calculate the exact value of all of this activity, but when you consider the projects involved, it clearly amounts to billions and billions of dollars. As a result, China is playing a major role in strengthening Kenyan infrastructure.

Other more cultural ties between the two countries are also increasing, as evidenced by the growing number of Chinese restaurants in Kenya, and the fact that around 50,000 Chinese citizens visit Kenya every year, an upward trend since 2004 when China granted Kenya Approved Destination Status. Yet despite China’s clear and growing importance, there are areas in which it has not yet eclipsed the influence of other Asian states, such as India, Singapore and Malaysia.

TRADING GOODS

Given all the discussion about the growing importance of China, you would be forgiven for thinking that China was the source of most of Kenya’s imports. But this is not actually true. The country that supplies Kenya with the most imports, by value, is actually India (27 per cent). China is still a fair way off (20 per cent), followed by South Africa (5.1 per cent), Japan (4.6 per cent), and the United Kingdom (4.3 per cent).

What is imported? Unsurprisingly, the highest value import is refined petroleum (19 per cent), followed by packaged medicines (2.9 per cent), cars (2.8 per cent), trucks (2.1 per cent) and hot-rolled iron (2.1 per cent).

This suggests that the country’s trade dependence on China is not yet as great as it is sometimes purported to be, and that more attention needs to be devoted to the economic relationship between Kenya and India.

These figures also show just how far the East African Community has to go in terms of boosting regional trade. No East African country makes it in to the list of Kenya’s top five import destinations.

That said, it is clear that Kenya benefits greatly from its involvement in the EAC, because while it is a negligible source of imports, Uganda (12 per cent) and Tanzania (12 per cent) are the country’s most important export destinations. They are followed by some of Kenya’s traditional international trading partners: The Netherlands (10 per cent), the UK (9.8 per cent), and the US (8.2 per cent).

One clear implication of these export and import figures, when viewed in the round, is quite how much China benefits from its economic relationship with Kenya — at least as far as trade is concerned.

Although Kenyan trade with China continues to grow, goods are mostly flowing one way. Last year, Kenya’s exports to China were worth just $ 48,539,140 – 1.1% of the total, behind Kazakhstan, Belgium, and Sweden.

By contrast, Chinese imports were worth some $2,758,842,408. That represents a trade deficit of some $2,710,303,268. This is one reason that the country’s trade deficit has widened in recent years, accelerating to $1.8 billion a month in early 2015.

On the one hand, exports have shrunk to around $450 million a month, due to the stagnant or falling value of tea, coffee and horticulture. On the other hand, imports continue to rise. In 2014, total imports topped $15 billion, while exports were stuck at $6 billion, an overall deficit of around $9 billion.

One consequence of this shift is that the country’s foreign exchange reserves have shrunk, which has contributed to the weakening of the Kenyan Shilling, which is currently trading at 91 to the dollar, up from 86 not long ago.

TRADING IDEAS

China’s influence on Kenyan economic and political policy may also not be as considerable as it is sometimes thought to be. A paper recently published in the journal African Affairs by Elsje Fourie of the University of Maastricht argues that Kenyan politicians have sought to adopt policy models from outside of the country, but that they have not tended to look to the countries you might expect (for the full paper see http://afraf.oxfordjournals.org/content/113/453/540).

As she puts it, “Far from representing an ahistorical shift towards the emulation of the much-discussed “Chinese Model” … this lesson drawing resonates with policy makers’ reading of Kenya’s own post-colonial past — and results in a shift towards the paradigm of modernisation that prevailed immediately following independence.”

According to Fourie, Kenyan elites “strive to emulate certain East Asian countries by employing a narrative that emphasises the erstwhile developmental parity and common colonial heritage of Kenya and these states prior to their own country’s “fall from grace” under Moi.”

In doing so, they draw parallels not just with China, but more significantly with Malaysia under Prime Minister Mahathir Mohamad and with Singapore under Prime Minister Lee Kuan Yew. Her careful analysis should be required reading for anyone seeking to understand how Kenya’s economic policy is designed, and what directions it is likely to take in the future.

Fourie is able to show the way in which lessons from Singapore and Malaysia shaped the country’s Vision 2030 through interviews with senior policy makers and by looking at the composition of the various committees that helped to draw up, and advise on, the document.

For example, she finds that the composition of the National Economic and Social Council (NESC), set up by President Kibaki in 2004 to lead economic decision-making, contained four international experts.

These were not drawn from traditional donors such as the UK or the US, or from countries whose influence is said to be on the rise, such as China. Rather, “the four international experts to sit on the NESC from 2009 to 2011 comprised a Malaysian engineer, a South Korean energy consultant, a Japanese economist, and a Singaporean management consultant”.

Singapore and Malaysia were seen to be particularly good countries to learn from because of the level of modernity they have achieved, because they have managed to achieve growth while limiting the disruption cause by electoral cycles, and because they have managed to develop in a context in which the international system was stacked against them. Significantly, Fourie suggests that these countries were identified as particularly good role models by Kenya’s economic planners because they were “age-mates that continued along the path towards modernisation [set in the 1960s and 1970s] from which Kenya later diverged.”

It also helped that the Singaporean and Malaysian governments were eager to provide technical assistance. Malaysia opened a diplomatic mission in Nairobi in 2005 and in 2007 the Malaysian Prime Minister, Abdullah Ahmad Badawi met with President Kibaki.

At that meeting two memoranda of understanding were signed in which Malaysia committed to assist Kenya with infrastructure projects. In 2011, the then Vice President, Kalonzo Muysoka, publicly expressed the government’s desire to learn more from Malaysia in the area of information and communication technology.

In case you think that analysis overstates the influence that countries such as Singapore and Malaysia have exerted on the economic imagination of Kenyan elites, Fourie has a great kicker to her argument: Even the very name of Kenya’s development plan – Vision 2030 – has East Asian roots, as it was directly inspired by Malaysia’s Vision 2020.

WHERE NEXT?

It is not just Malaysia and Singapore whose influence on Kenya has risen over the last twenty years. Other countries such as Brazil, Turkey, South Korea, are playing an increasingly important role too.

The cumulative impact of these trends will be to make Kenya’s international relations evermore complicated and evermore interesting. In the 1980s, the world was “bi-polar”, torn between two great superpowers, the US and the USSR. Following the collapse of the Soviet Union in the late 1980s there was a brief period of a “uni-polar” system in which America appeared to be the dominant power.

Now, some people suggest the rise of China means we are back to a bipolar world. But the future will not be like the past. Instead, the growing economic weight of countries like Brazil and India mean the international system will not be dominated by two states, but shaped by the interaction of many. It is always risky to predict Kenya’s future but one thing seems certain: it will be “multi-polar”.

Dr Nic Cheeseman teaches African Politics at Oxford University ([email protected]) and is the founder of www.democracyinafrica.org