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Value addition only way to growth

Thursday April 18 2019

VISION 2030

Kenya Vision 2030 Deliver Board chairman James Mwangi. The development blueprint seeks to transform Kenya into an economically competitive nation. PHOTO | FILE | NATION MEDIA GROUP 

PETER K. BIWOTT
By PETER K. BIWOTT
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Vision 2030 seeks to transform Kenya into an economically competitive nation with a high quality of life and an issue-based political system.

It aims to achieve an upper middle-income economy, which means our wealth per capita would increase from $166 (Sh16,600) to between $3,896 and $12,055.

To make our market economy work to create wealth for Kenyans, we must have, among others, the easing of entry into entrepreneurship by the Companies Act, expansion of infrastructure, enabling of the ease of doing business, lowering of energy costs and strengthening of public-private partnerships.

Others include a strong drive to curb corruption and illicit trade, buttressing devolution, opening of markets and increasing access by youth and women to business opportunities and public sector reforms.

The ‘Big Four Agenda’ presents a take-off stage as it goes to the heart of strengthening Kenya as an industrial hub, bolstering its quest to expand our wealth.

MANUFACTURING

In How Rich Countries Got Rich and Why Poor Countries Stay Poor, Prof Erik Reinert recounts the history of nations that transitioned from agrarian economies to high-income ones of over $12,055 (Sh1.2 million) largely on industrialisation.

One of the leading scholars of all time, the Norwegian development economist shows how countries that depend on manufacturing and value addition transition to economic prosperity rather than in the agrarian ones.

Manufacturing brings to developing nations increasing returns; a higher potential for employment and wealth creation.

No country ever attained higher incomes by producing and exporting primary products. That is why the Big Four is the best opportunity for Kenya to reverse itself from decreasing returns of agricultural or extractive raw exports to increasing ones through manufactured or value-added exports.

It also calls for a radical restructuring of our economic set-up to focus on increased productivity, manufacturing and value addition of all our primary exportable commodities.

OPEN MARKET

For Kenya to leapfrog to upper middle-income status, export of manufactured and value-added products is key.

An open market economy, despite enormous trade and investment earning opportunities, is a challenge to navigating a potential “Dutch disease” phenomenon (negative consequences from spikes in local currency value) and ‘primitivising’ effects to the economy.

An aggressive drive towards this realisation is on course with the new Integrated National Exports Development and Promotion Strategy, which has set an annual macro- and sector targets.

This safeguards against long-term focus on easing the pains of underdevelopment rather than benefiting from the gains of increased productivity and surplus forex due to increased export and investment incomes.

The ongoing creation of a database for exporters will ease the creation of sector-specific targets of valued-added and manufactured exports in sectors such as textiles, leather, handicrafts, extractive, livestock, agriculture and services.

FOREX

Establishing a repository of exportable products and country-specific buyers directories worldwide will push the realisation of country-specific export targets.

Prioritising markets based on, in part, trade imbalance, distance, purchasing power parity, economic status, population, duty-free access and market access will spur exports and forex earnings.

Of importance is evidence-based scientific positioning of our foreign representation to deliver on export targets in countries of high interest to Kenya.

A repository of Kenyans in the diaspora and regular travellers has brought about tailor-made interventions for them to play a role in promoting exports and investments.

Kenyan companies should take advantage of duty-free market access, for example, in Africa, to net more forex.

REFORMS

The Kenya-Uganda Business Forum, during the State visit by Uganda’s President Yoweri Museveni to Kenya, highlighted the importance of creation of local companies as leading conglomerates and transnational corporations across the continent.

However, to enhance export competitiveness, Kenya’s move to correct local market access through regulatory reforms is desirable.

Evidence has shown that highly regulated economies do not guarantee a higher harvest of forex earnings through trade.

Kenya seeks to achieve a below-50 ranking in global ease of doing business from 61.

This is, thus, a defining moment for Kenya, and every patriot needs to seize the moment and make our contribution to the Big Four achievable in our generation.

Mr Biwott is the chief executive officer, Export Promotion Council. [email protected]

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