Security concerns notwithstanding, the underlying principles of the government’s development strategies of reducing production costs form a strong launching pad for our economic takeoff and its sustainability.
While the impact of such policies might not be immediate, once entrenched their impact can be structurally transformative.
Such policies, if patiently and deliberatively executed, may facilitate economic growth with low inflation for a long time.
It is in this predictive assertion that conjecturally lies the explanation of the paradox of bullish global confidence of Kenya’s future prospects in the midst of local pessimism.
At its embryonic phase, Kenya’s Vision 2030 goal of becoming a middle-income country was a mere dream whose realisation raised many doubts among a host of local and international policy makers.
Unexpectedly, but quite pleasantly, these doubts are gradually being displaced by a can-do attitude that emanates from various government initiatives like promulgation of the Constitution.
These prospects have been further rejuvenated by the recent rebasing statistics, which confirmed that our economy was bigger than previously estimated.
The rebasing of the economy took into account previously underreported activities due to unavailability of credible data like the booming real estate sector and increased the size of the economy by 25 per cent. This configuration instantly pushed Kenya into middle-income status before the expected time.
While the new status drew local cynicism, it was nonetheless a reaffirmation of global confidence in our development path.
This confidence is embodied in a series of international activities like the notable increase of foreign direct investment, including the successful debut of the Eurobond in the international market.
The government takes cognisance of the overwhelming contribution of energy and transport costs to the overall production cost. With an ambitious initiative of generating 5,000 megawatts and having added 280 megawatts to the national power grid, the government expects to significantly reduce energy costs.
If the Thika highway is the benchmark, then predictably the implementation of infrastructure projects like the standard gauge railway and the Lapsset Corridor will reduce transport costs. Moreover, the local initiative of tarmacking 10,000 kilometres will be a plus.
Evidence of declining production costs is captured by an improved competitiveness index. Kenya continued its upward trend from last year and moved up six places to 90th place, with a rank of infrastructure slight below average.
To achieve the ultimate policy objective of inclusive growth based on equitable distribution, the reduction of production cost strategy must be pursued in tandem with competition policy strategy.
This strategy will ensure that the social benefits accrued from reduction of production cost must equitably shared between and producer and the consumers.
Such competition strategy must be anchored on the consumer sovereignty doctrine that is enshrined in the Constitution and other laws on competition and consumer protection.
Prof Kieyah is a principal policy analyst at Kenya Institute of Public Policy Research Analysis (KIPPRA). Views expressed in the article are personal.
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