Columnists

Push for China, Japan investment deals will stimulate Kenya’s industrialisation

When the Japanese descended on Nairobi last month during the Tokyo International Conference on Africa’s Development (Ticad) conference, I found myself reminiscing over the country’s history in Kenya which started immediately after our independence.

I also found myself comparing Japan with China, a country that has of late become a virtual fixture in Kenya’s economy. The two countries’ models of engagement (trade, investments and development) with Kenya are as different as their economic cultures.

Japanese trade with Kenyan started at independence when their goods became an alternative to traditional imports from European sources. In the 1960s Japanese electronic goods, synthetic fabrics, and cars entered the Kenyan market to challenge the European merchandise. All along the hallmark of Japanese goods have been quality, technology and affordability.

Economic links

At that time China was a laggard economy struggling through Chairman Mao’s Cultural Revolution. China was on the wrong side of the cold war, and as such had little economic links with the western leaning Kenya.

It was only towards the end of the cold war in late 1980s that Chinese goods appeared in Kenya, and these have generally remained defined by lower prices, poorer quality, and mostly of replicated technology.

Moving to bilateral development projects, Japan has probably implemented the highest number of projects in Kenya than any other nation. Off my memory I can list the Mombasa Airport project in the 1970s and its later expansion in late 1990s. Then there was a series of bridges starting with Nyali Bridge and followed in succession by Mtwapa, Kilifi and Sabaki in Malindi.

In the 1980s, Japan was involved in the development of the Jomo Kenyatta University of Agriculture and Technology (JKUAT) as a seat of excellence for agricultural engineering.

Then in 2000s they embarked on the Mombasa Port revamp and now they are into Dongo Kudu area of Mombasa. Recently Japan has embarked on the ambitious Mwea rice irrigation project.

Their development agency, the Japan International Cooperation Agency, has undertaken many other activities including socio-economic capacity building across Kenya. The Japanese model of engagement with Kenya appears to be defined by developmental assistance through soft loans, grants and aid.

The only development project of significance done by the Chinese was the Kasarani Stadium in the mid 1980s when the country was erecting stadiums in nearly all sub-Saharan countries in Africa towards the end of the cold war. Recently they constructed the Lucy Kibaki Hospital as a gift to Kenya.

However, since the early 2000’s the Chinese have found their niche in “infrastructure construction contacts” during the tenures of Kibaki/Uhuru administrations. These Chinese projects are essentially contracts negotiated with Chinese firms which seek a profit while also widening the net to maximise value for the nation of China.

The Chinese government’s agencies normally avail project credit funding, which is usually a key challenge for Kenya. The projects funded with Chinese credit sustain Chinese contractors and jobs, and are outlets for Chinese equipment and materials.

In the early 2000s the overheated Chinese economy forced them to come out to Africa looking for raw materials and fossil energy. In their search for these, they came across a continent desperately in need of infrastructure and with limited funding capacity.

This became the golden opportunity for China which soon became a country of mega global contractors backed by Chinese state credit financing agencies.

Over time, the Chinese firms have become the construction “contractors of choice” doing both government and private sector jobs. The Chinese have also ventured into property development. In respect of trade the Chinese not only became the predominant exporter into Kenya, but went further into local wholesale and retail of their goods.

Checking through World Bank 2015 statistics Japan had a per capita Gross Domestic Product (GDP) of $32,477, China ($7,924). Kenya’s was $ 1,377 and this in a way explains the economic scenarios of the two eastern countries.

China is still upgrading its economy and per capita incomes. As such, engaging in the development aid to the lower GDP countries of Africa is not likely to be a key priority for China any time soon.

Non-patronising

Japan is a highly developed country which has greatly benefited from global trade for over half a century. As such the country can afford, and perhaps feels morally obligated, to partner in upgrading the less developed world which also doubles as a market for their exports.

A characteristic of Japanese engagement in Africa and Kenya is non-patronising co-operation and partnerships for development.

Investment partnerships should be the next arena of activities that both Japan and China should fully engage Kenya in. Of late a Japanese firm Toyota has invested in a fertiliser plant at Eldoret and this should serve as a good example of partnerships to stimulate local industrialisation to add value to local resources.

In respect of trade, Kenya has no option but to proactively and affirmatively continue to redress the import/export imbalances by reducing reliance on imports and strengthen its capacity for exports.

This way we create wealth that can easily fund our social and economic infrastructure with reduced urge for development aid or burdensome offshore project credit funding.

Mr Wachira is director, Petroleum Focus Consultants

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