REPUBLIC OF KENYA

SPEECH BY MS ANNE WAIGURU, OGW, KENYAS CABINET

SECRETARY, MINISTRY OF DEVOLUTION AND PLANNING DURING
THE STRATEGY OF SUPPORT TO MIDDLE INCOME COUNTRIES
MEETING ORGANIZED BY THE UNITED NATIONS DEVELOPMENT
GROUP FOR MIDDLE INCOME COUNTRIES (MICs) FOR EASTERN
AND SOUTHERN AFRICA (ESA) AND FOR WEST AND CENTRAL
AFRICAN COUNTRIES (WCA).
PANEL 3: DISCUSSION TOPIC: Transitioning to MICs: National
Perspectives, Experiences and Lessons Learnt.
Ladies and Gentlemen,
It is indeed a great pleasure to join my colleagues and other
contemporaries, to discuss, strategies for supporting Middle Income
Countries in Sub-Saharan Africa. As you are all aware, Middle-Income
Countries account for at least 43% of the world gross domestic product but
are still home to 73% of the worlds poorest particularly women and
children. It is therefore suffices to say, that though MICs have new found
wealth, they remain exposed to various shocks and vulnerabilities that
could undermine their progress to the next level. As such it is an
imperative that approaches in development take cognisance of this, and
seek to reduce the impact of the shocks and vulnerabilities.
As a country transitioning from developing to middle income status, we all
appreciate that economic growth though critical for development is not
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enough. Lasting and sustainable development needs to take into

consideration other factor like environmental sustainability; protection of
vulnerable groups including women and children; equitable distribution of
economic development amongst others.
Ladies and Gentleman,
Kenya is at a very critical juncture in its history and is undergoing various
transitions. On the one hand, it is implementing a new constitutional order
that marks a transformational shift from the past while on the other it is
presiding over a new governance framework with a devolved system of
governance. Over and above all this, the country is in the middle of a youth
bulge that the government sees as an asset to be grown. Economic
decisions that Kenya makes in the present will fundamentally shape its
future socio-economic prospects.
Kenya is becoming increasingly diversified with additional investment in
energy and infrastructure projects, as well as investments in education,
health and other social sectors. In 2014 following the rebasing of the
economy, Kenya attained lower middle income status, with a GDP per
capita of USD1,246. Of the 5.6% overall GDP growth in the same year, the
country registered growth from multiple sources including manufacturing,
which contributed 9.21%, wholesale and retail trade contributed 10.18%,
transport and communication 9.33% and agriculture 25.94%.
The devolved government has also brought about a great number of
opportunities at the local level. Counties are the new frontiers for economic
growth because economic resources and political power have been
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devolved. Statutorily, they are required to allocate 30% of their annual

budget towards development projects automatically translating into
business opportunities for investors at the local level to bid and partake in
government led projects. Devolution has also incentivized counties to focus
on their comparative advantages.
Vision 2030 lays out an elaborate vision for attaining middle-income status
that is founded on a three-pronged framework, which seeks to elevate the
countrys performance socially, economically and politically.

Ladies and Gentlemen,

The critical question remains: within this backdrop, what are the
opportunities and challenges of building strong sustainable economies,
broad based development and shared prosperity? I will seek to lay out
some of the fundamental tensions that Kenya has identified as it transitions
towards

middle

income

country

keen

in

pursuing

sustainable

development.
It has become increasingly clear that for a country to develop sustainably
there is need to create a conducive and attractive business environment
that is inclusive and efficient. The government has focussed on addressing
the barriers that affect the ease of doing business in the country. Through
the One-Stop Shop service delivery centres (Huduma centres), the
government through my Ministry is reducing the transactional costs of
starting and running a business by ensuring that all facilitative services can
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be provided under one roof. This is aimed at reducing the bureaucratic red
tape that often acts as hindrance to enterprise.
However even with the sustained attention on enterprise development,
there is need to strike a balance between facilitating private sector activity,
while maintaining the integrity of the public good. There is need for a
balance between regulation and facilitation, to ensure that private
enterprise operates within the law, and does not exploit the weak and
vulnerable. An enterprise friendly regulatory regime, should therefore also
seek to address issues of environmental pollution, quality and standards,
tax remission, local content amongst others.

Ladies and Gentlemen,

The Kenya Vision 2030, has identified infrastructure development as critical
to economic development. One way to achieve shared prosperity is to
ensure that there is equity in opportunities through the provision of critical
services and infrastructure. This is a necessary pre-condition for wealth
and employment creation and to spur growth and development. It is for
this reason that the government has embarked on a massive road
construction programme aimed at building an additional 10,000Km of roads
in the next 5 years; construction of the Standard Gauge Railway;
improving the port capacity; increasing electricity generation to 5000MW
amongst others. Through implementation of infrastructure projects in
energy, roads, railways, ICT and ports there will be a remarkable unlocking
of the potential of different parts of the country.
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The challenge with massive investment in infrastructure projects, is that

they tend to be very capital intensive. Countries such as Kenya therefore
find themselves facing the dual challenge of the need to bolster the
infrastructure layout while facing real fiscal constraints. Running a balanced
and prudent budget, often runs counter intuitively to addressing the
infrastructure deficit.
There is need therefore to identify creative financing models that can be
used to address the infrastructure needs for countries such as ours to
ensure that we are laying the foundation for long term development,
without compromising short term economic health.
Ladies and Gentlemen,
Over 70% of Kenyas population is below the age of 35. 12% of this
population faces unemployment and an even greater percentage is
underemployed. It is therefore a policy imperative to address the issue of
unemployment by promoting policies that enhance job creation, coupled
with investment in the human capital potential. A skilled workforce is an
important foundation for sustainable economic growth. Countries that
invest heavily in human capital usually demonstrate the strongest growth.
It is in achieving the latter, that the government through my Ministry has
implemented the restructured National Youth Service Programme, that
aims to build a new cadre of trained, disciplined, patriotic youth committed
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to national service, hard work and a sense of civic duty. Through the NYS,
we are recruiting over 20,000 youth annually, who will be trained as
artisans and technicians, to fill the critical technical skills gap, as we
transition from primary production to secondary production economies.
For Middle income countries with high unemployment, there is the tension
between investing in high return sectors, viz a viz labour intensive sectors.
Labour intensive sectors tend to be inefficient and low return, while high
return sectors tend to be more capital intensive and efficient. Striking a
balance that addresses the prevailing social reality thus becomes a
challenging policy decision.

Ladies and Gentlemen,

Regional and demographic inequalities greatly undermine a countrys
development and economic prosperity. Women, youth and marginalised
communities, the world over oftentimes face the unfortunate challenge of
being left out of enjoying the gains of national development. It is for this
main reason, that Kenya adopted devolution as a mechanism for sharing
resources equitably across the country, to address the issues of regional
inequalities. Further, the national government, has focussed on an
aggressive programme of empowerment of women, youth and persons
with disabilities (PWDs). This is being achieved through various means
including providing accessible and affordable credit instruments for
enterprises, where we have disbursed over USD220Million; reserving for
them through regulation 30% of all government procurement spend, an
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equivalent of USD2.2Billion; and developing training and mentorship

partnerships that will further enhance their capacities amongst other
programmes.
As a country we have learnt that equitable development is smart and
sustainable development. The social cost of inequality has the potential to
erode all positive economic strides made. It is for this reason that youth
and women have become central to our national development policy.

Ladies and Gentlemen,

Let me conclude by saying that challenge here is not that we have attained
a better status than the low income countries, but that we are on our way
to becoming high income countries (HICs). Being a MIC is a step to our
ultimate destination a HIC. The challenge therefore is how do we, and
when do we get there? Indeed the challenge is when do we get past
vulnerability and risk of falling back into low income status and make sure
that we are well on our way to becoming a prospering middle income
country?