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September 19, 2018

Our industry can compete globally

Nokia C3 handset./JACK OWUOR
Nokia C3 handset./JACK OWUOR

With globalisation and fast changes in technology, the setting in which industry growth occurs keeps changing. Markets have to constantly build capacity to compete. This means the drivers of industry for the four Asian tigers – Hong Kong, Singapore, South Korea and Taiwan– are different from those that will drive Kenya’s industry. However, one of the lessons we learn from the Asian tigers is that industry growth did not happen; it was driven on purpose. Today, each of the tigers has established its own highly successful niche in the global market. The four are among the most productive, profitable and stable economies of the world.

The challenge for Kenya is to identify and pursue its own path for growth of industry. The industrial transformation programme by the Ministry of Industry, Trade and Co-operatives points to the need to focus on opportunities where we believe we can win in the regional and global competition. The point is to prioritise efforts on the core strengths, while actively working to overcome obstacles along the path.

First among the global advantages is the rich agricultural potential. For instance, Kenya has the highest market share in tea, but over 90 per cent of it is exported in bulk form. Other agricultural exports are cut flowers, coffee and leguminous vegetables. However, only 16 per cent of the exported agricultural output is processed. There are prospects for agri-processing.

Secondly is favourable trade agreements, notably AGOA with the US and EPA with EU, that provide a competitive advantage in a wide range of sectors and products. While the country has utilised the AGOA for textiles, there is scope for other locally available products such as dried fruits such as mangos and nuts. An entrepreneur in Kirinyaga is working on orders for dried spinach for the US market.

Thirdly, the rising cost of labour in the more advanced Asian countries and China provides opportunities for factories to shift to Kenya and Africa at large.

Fourthly, there are regional advantages that position the country as a suitable regional industrial hub. These include having the most competitive port, a well-educated labour force, a highly developed ICT sector, an advanced banking sector and the most innovative private sector.

These advantages put Kenya in a privileged position to compete both at the regional and global market. That said, the window of opportunity is transitory and need pursuing while it remains open. There is need to critically identify the obstacles and to actively work to overcome them. Among the areas to continually improve is the ease of doing business, both for local and foreign investors. Other obstacles are the high cost of electricity and financing.

Finally, globalisation means the competition is even fiercer, and industry is racing with growing imports. The urgency to step-up industrialisation efforts is real.

 

The writer is the MD of IDB Capital

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