I was recently in a networking forum where a participant asked how we can fix our economy. The question is dominant on the minds of many running businesses in this country. Revitalising our economy need not be a long and complicated task, it is quite easily achievable if we prioritise lowering the cost of doing business and driving competitiveness of local industries.
Vietnam, one of the rising economic markets in the world, was considered one of the poorest economies following a 20-year old war that ended in 1975. Ranked position 67th in the 2019 World Bank’s Global Competitive Index, Vietnam continues to improve the most globally. Its economic growth of 6 — 7 percent rivals China’s whilst its exports are worth as much as its total value of GDP.
Analysts attribute the rise to three main factors, 1.) trade liberalisation, 2.) domestic reforms such as deregulation and lower cost of doing business aimed at complementing trade liberalisation and 3.) investments in human capital and infrastructure.
Whilst Kenya continues to make headway in trade liberalisation and human capital development, high cost of doing business remains a huge challenge for industrialists and businesses. How then do we manage this?
First, we need a streamlined regulatory environment that encourages investments into the manufacturing sector, in turn, creating new jobs. The sector continues to face numerous regulations and over-taxation. Manufacturing SMEs tend to face bigger challenges with regards to compliance, especially in an unpredictable regulatory environment. Hence, well-structured regulatory frameworks and tax policies will spur industrial growth and innovation.
This also has an impact on the purchasing power of consumers due to increased sustainable jobs, which in turn increases their demand for goods and services. It also encourages more industries to leverage export markets.
Second is a prompt payment-driven economy. Late payments by the government and the private sector have contributed to cash flow constraints in the country. Delayed payments create a vicious cycle that sets off a chain reaction causing delays and instability in the economy. To address this, Kenya needs an all-encompassing solution to promote prompt payment across all sectors of the economy.
Prompt payment is critical to a business’ performance and operations since it ensures necessary cash flows and smooth operations.
Third is combating corruption. Corruption is an obstacle to economic and social development. Not only does it threaten sustainable development in the country, but also increases the cost of doing business and limits our global competitiveness. The increased cost of business attributed to fraudulent practices and malfeasance result in investors moving to more lucrative markets that have stronger governance structures and institutions.
They are attracted to the strong establishment of structures that oversee the execution of seamless and predictable policies and regulations. Transparency and adherence to the rule of law is most critical in addressing this vice.
With only two years left to realise the aspirations of the Big 4 Agenda, 2020 presents us with a huge opportunity to address the competitiveness of local industries. Progressive changes towards a competitive industry will see us reinvigorate our economy, create wealth and jobs for all in the country.