IMPORTANCE OF STRUCTURAL TRANSFORMATION IN KENYA’S INVESTMENT AND TRADE AGENDA – THE CASE FOR KWALE COUNTY A paper presented by Hon. Gervase B K Akhaabi, LLB (Hons.) (Nbi); Dip. Phil.; PGD Trade Policy and Law (Dist.) (Lund). AT THE INAUGRAL KWALE COUNTY INVESTMENT CONFERENCE 24 th to 30 th August, 2014

Introduction The economic structure of a country refers to;  the economic diversification;  the variety of the export sectors and commodities. Economic structure  will determine the value of the produce;  The price of the produce;  the technological sophistication of the economy; and  Ability to withstand shocks

Structural Transformation diversification of the economy; by re-allocating resources from low economic productive activities to the more productive ones expansion of the production and export sectors and commodities. modernization of small-holder agriculture integration into fast growing agri-business and agro- industries decline in the share of agriculture and increase of manufacturing and services in GDP and employment. When focused on economic efficiency an economy’s ability to trade and invest are increased and growth and development will result

Structural reforms come in different forms, shapes and effects in different societies. However, they should have as primary objectives of:- a)Opening the market through trade reforms; b)Lowering the cost of doing business; c)Increasing production; d)Stimulating growth and investments; and e)Creating wealth and improving the people’s wellbeing

Kenya’s Economic Structure Agricultural commodity production and export (21% of GDP); narrow and low level manufacturing and export (16%); services especially tourism, financial and telecommunication (62.3%); and development assistance

Kenya:-  largest economy in the East Africanregion  growing at about 4.7 %,  low income devolping economy  GDP the US$54 billion in 2014  Steady growth and 1973  Decline –  Stagnation – 1994 – 2003  Trade and investment catalytic in economic development

Kenya’s economic structure base  Trade and investment in agricultural production and commodities  Development assistance  Services including financial telecommunication and tourism  Industrial production and manufacturing  and better performance than many other African countries in similar circumstances

Aspiration Middle-income economy  Vision by 2030  International Monetary Fund (IMF) and the World Bank (WB) – on the verge  Kenya and the Kwale County should both focus on economic growth and development  Both economic structural and trade reforms are mandatory

 Potential of County as Kenya transits to middle-income economy.  The economic structure and the resources in Kwale County -  How do these structures and resources help the people of Kwale to make the transition.  What reforms if any are required to facilitate the transition.

Kwale County An agricultural commodity-dependent county Dominated by small-scale agriculture - County 98% low agricultural potential; sparse and unpredictable rainfall dry and poor soils; high soil erosion Other than sugar cane no major cash crop Tourism – major employer challenged by insecurity Mining; and Manufacturing – sugar mills Land not registered or otherwise with issues

County Government Commodity-dependence – a factor for Africa’s economic stagnation Constitution of Kenya, 2010  Establishes a county government  Devolution - right of the people to participate in making decisions  managing their own affairs and furthering their development.  Efficient and effective service delivery.

Articles 174 and 175 of the Constitution Promotion of social and economic development; and Guaranteeing the provision of proximate, easily available services based upon set values and principles. County governments to have reliable sources of revenue to enable them to govern and deliver services effectively Consultation and cooperation with national government.

Under the Fourth Schedule of the Constitution Agriculture, veterinary services, other than policy - functions the county governments. trade, other than international trade and trade policy in as far as it may form part of the National economic policy - county governments. Two levels of government to ensure that Kenya attains the middle-income status. Counties and their governments active and critical participants in this transition.

Structural Transformation Kwale County Address land ownership and tenure to facilitate access to bank credit Improve agricultural production – facilitate access to farm inputs and raise incomes from farming Where possible, use irrigation Address marketing by improving transport infrastructure Establish agribusiness and encourage value addition - industrialize Form and improve cooperatives

Conclusion and recommendations Transformation possible if- a)Both the national and county governments commit themselves to develop infrastructure; b)Prudently trade with and utilize the natural resources for the benefit of the people c)Transparent and accountable processes are used. d)Both levels of government invest in education and skills development and

Cont. e) Both levels of government promote improvement in agricultural productivity and value addition. f) Diversification and expansion of the sources of economic growth and opportunity are g) The Country encouraged to expand its market hold by actively promoting and participating in regional economic integration processes

Structural reforms  Foster an environment that supports efficient functioning of the market  Contribute to macroeconomic stability, productivity and growth  Lead to higher real wages, higher standards of living and more attractive returns to investment