Posted by Samora
in Monday, August 23, 2010
First of all, I want to wish everyone a great week ahead and if you can, you should attend the Signing of the new constitution ceremony on August the 27th. It is a shame that I cannot attend it. However, having passed the referendum and celebrated in pomp and fanfare as the newspapers suggest, the honeymoon period should end as soon as possible as the daunting task of rebuilding our country lies ahead of us. Luckily we already have a masterplan in the name of Vision 2030.
The Vision 2030 masterplan was drawn up in the middle part of this decade by the National Economic and Social Council of Kenya lead by Dr. Wahome Gakuru and the other directors at the NESC. It is a long term vision aimed at turning Kenya into a middle income country by 2030. It seeks to achieve this through cross-sector reform and targeting key growth sectors such as I.T, Agriculture and Manufacturing that will help drive this vision. The Vision has been adapted by the current government and will likely given the nature of its popularity, be adopted by future governments. In terms of the key vision, turning Kenya into a middle income country is the main objective. However, such objectives as increasing the literacy rate, improving health care provision and improving our national infrastructure are amongst a raft of other metrics that the Vision will seek to improve.
However, how feasible is this plan? Some friends have called me unpatriotic due to my questioning of the feasibility of this program. I don't agree with the term patriotism, how can one be proud of something that he didn't have any control over. I did not choose to be a Kenyan, I am happy to be one but since I had nothing to do with it, I can't be proud of it. It is like being proud of winning a coin toss. I am backed up by Albert Einstein in his assertion that " Heroism on command, senseless violence and all the loathsome nonsense that goes by the name of patriotism, how I passionately hate them". Having said this, I just want to give my views on how becoming a middle income country by 2030 is a tough task and nearly impossible given the variables that Kenya has to deal with.
A definition of what a middle income country is would be a good start. A middle income country is classified into two categories; first is a lower middle income country and second is an upper middle income country. This is according to the World Bank. The lower middle income country category consists of countries whose GDP per capita ranges from $946 to $3,946 and an upper middle income country ranges from $3,946 to $12, 195. Kenya is seeking to be an upper middle income country by 2030 i.e. get a GDP per capita of 3,946 to 12,195 dollars. For the sake of simplicity, we will analyse the situation by using $3,946 as the bulls eye.
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Doubts over Feasibility |
Now to why I am doubtful of this Vision. Kenya currently stands at a GDP per capita of roughly $468.70. This puts us in the lower income category of countries. Our aim is to improve to around $3,946 per capita. The NESC estimate that we will need annualised growth of 10% from 2006 onwards to reach this target. However two factors present will require us to reestimate this growth rate. Firstly; four years have passed since then and we haven't touched double digit growth rates, 2007 saw 7.1%, 2008 was 1.55%, 2009 saw 2.59% and IMF projections state that in 2010 the growth rate will be 4%. The second factor is the implicit and yet wrong assumption that global growth will be zero during this 20 year horizon. The issue is that, since GDP per capita is a relative measure then $3,946 in 2010 is not going to be the same in 2030. What this means is that since the world will record GDP growth then the income categories for different countries will change. This means that the figures will have to be revised upwards in view of Global growth. In lay man terms, if everyone gets rich then the definition of a poor man in monetary terms will have to be revised upwards.
To make the analysis simple, let us take a conservative scenario where global growth over the next twenty years is 3.5%, this is a conservative but yet slightly plausible scenario given the uncertain nature of our global environment. If the rate is 3.5% then the definition of a middle income country assuming equity of growth should then be a country whose GDP per capita ranges from $7,851 to $24,265. Now to make the analysis simpler, let us stick to $7,851. We will now have 20 years to move our GDP/Capita from $468.70 to $7,851 dollars in twenty years. Mind you 20 years is a very short time. Again, as Einstein would say "I never think of the future, it comes soon enough". Now this would leave us with two choices if we want to hit the bulls eye of upper middle income country by 2030. Either we could restructure our economy so as to hit 15.11% annual growth rates or kill off all our newborn babies so that we can avoid population growth. The latter is not acceptable so we are left with the former. A daunting challenge if ever there was one.
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Leading us into the future are the sons of former President and Vice President |
The challenge is made worse by the fact that our major trading partners in the West e.g United Kingdom and the United States are facing uncertain futures. It is made worse by the fact that the UK is implementing tough budget cuts that will see the British consumer cut down on discretionary spending e.g flowers. Furthermore, Uganda having discovered oil may well see us suffer as it is our largest single trading partner. Allied to these challenges is the fact that the Kenyan manufacturing sector according to the IMF as well has fallen from contributing 40% GDP in the 1960s to only 26%. All factors bar the signing in of a new constitution will work against us. I am not yet sold to the thought of the new constitution being a panacea to all our woes. I just read an article in the
Daily Nation that suggests that Hon. Uhuru Kenyatta will be the running mate to Hon. Raila Odinga in the 2012 presidential elections. Given this and many other combinations for the top two, the dynastic nature of our political landscape leaves us with very few reformers who can genuinely tackle the issue of political, social and economic reform that will see us achieve 15.11% growth and therefore the Nirvana that is Vision 2030. I am not a patriot however, a prosperous Kenya is a situation that I would want and hope for.
Great article. Remember however that Vision 2030 is a platform. I think it would be satisfactory if the necessary reforms are done in the short to medium term even if the accomplishments don't reflect the goals set. Question though, are income levels determined by PPP or by real GDP per capita rates? Which method do you think is more sensible?
Thanks for the comment
I am not so sure about PPP, to me it is an intellectual novelty for economists. I prefer GDP per capita, purchasing power parity brings in too many complexities in my view.
Anyway, I am aware that Vision 2030 is a platform. Just like the targets set for Coal miners in the USSR were not really meant to be achieved but to be aimed for. My issue is that there doesn't seem to be urgency by either the steering committee or the government on this issue. They should be at least communicating the need to hit 10% per annum and making it an aim for everyone to strive for. It is suspended in animation and it should be a National priority.
I don't think policymakers are unaware of the need to hit high rates of growth, I just think that perhaps there's not a lot of courage to reform. It's two years from the next election, the referendum needed strange bed-fellows e.t.c... Govt by committee is the norm. So the reform u need to get high growth is probably three years away at best.