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Lessons from KIND roadshow

SOEs are focusing on lucrative global Public-Private Partnership market.

In Summary
  • Time has come for Kenya to dismantle extractive economic institutions set up during colonial days 
  • The government must push Kenyan SOEs to venture out and do business to improve their appropriation-in-aid and act as trailblazers for the private sector.

The Korea Overseas Infrastructure and Urban Development Corporation  African roadshow in Nairobi on December 10 was revealing and an eye-opener to African policymakers.

It illuminated how developed countries are using state-owned enterprises (SOEs) as instruments of implementing public policy to provide a fillip to their private sector.

Kenya has only one choice now: The government must push Kenyan SOEs to venture out and transact business to improve their appropriation-in-aid and act as trailblazers for the private sector companies the way China, South Korea and others are doing.

 

KIND, as a Korean SOE, and Team Korea’s leader is owned by another nine Korean SOEs. They are focusing on the lucrative global Public-Private Partnership market. Their guidelines for investment in overseas PPP projects are as follows: Korean members participate in equity investment; KIND will not take the role of major shareholder among Korean members; KIND’s upper limit of investment is up to 30 per cent of total equity volume.

So, who are these Korean SOEs minting money in the lucrative PPP market and who are their counterparts in Kenya?

On top of the list is Korea Land and Housing Corporation responsible for the development of land in cities, and the maintenance and management of land and housing.

LH was established to improve the quality of life and develop the national economy by creating stable housing for the citizens and efficiently utilize national land.

Their major duties include to construct and supply decent and affordable housing to those in need, develop residential areas, new towns, multi-functional administrative cities, innovation cities and to execute projects aimed at regenerating cities to create comfortable residential spaces, to develop industrial and logistics complexes, FEZs, and overseas land to boost national competitiveness and create employment.

The second last shareholder is the Export and Import Bank of Korea. Korea Eximbank is the official export credit agency of the ROK. It was established to facilitate the development of Korea's economy and enhance economic cooperation with foreign countries through the provision of financial supports for export and import transactions, overseas investment projects, and the development of overseas natural resources. There is no equivalent in Kenya.

It also ensures land reserve and management, rental housing management, and land and housing informatisation. Its Kenyan equivalent is the National Housing Corporation.

Another shareholder is the Korea Expressway Corporation. It provides civil contracting for infrastructure projects, including expressway construction,  maintenance, and traffic management. This is the corporation also running the toll roads of South Korea. There is no similar corporation in Kenya.

 

Then we have Korea Water Resources Corporation.  Its duties include construction, operation, and management of facilities for the comprehensive use and development of water resources, construction and management of metropolitan waterworks (including industrial waterworks) facilities, development of industrial complexes and special-purpose zones, contracted-out operation of local waterworks and sewage, and construction, operation, and management of renewable energy facilities. Kenyan equivalent is probably the National Water Conservation and Pipeline Corporation.

There is Incheon International Airport Corporation whose core business is airport construction and airport operation. (There is no equivalent in Kenya but JKIA would be a good candidate).

The fifth shareholder is Korea Airports Corporation established to carry out construction, management and operation of airports and to manage air transportation efficiently.

KAC manages and operates a total of 14 airports, manages the Area Control Centre, 10 VORTACs and Korea Civil Aviation Training Centre. The Kenyan equivalent is the Kenya Airports Authority.

Korea Railroad Corporation is another shareholder. Their business includes passenger transport, metro, freight transport, and facility maintenance. The Kenyan equivalent is Kenya Railways Corporation.

The seventh shareholder is the Korea Rail Network Authority established for construction and management of railways, including high speed, conventional and urban rail infrastructures. There is no Kenyan equivalent.

The second last shareholder is the Export and Import Bank of Korea. Korea Eximbank is the official export credit agency of the ROK. It was established to facilitate the development of Korea's economy and enhance economic cooperation with foreign countries through the provision of financial supports for export and import transactions, overseas investment projects, and the development of overseas natural resources. There is no equivalent in Kenya.

The last shareholder is Construction Guarantee Cooperative. CG is a cooperative established in 1963 to promote construction industry growth and development by offering financing and guarantee insurance services to members. It has a strong state and heavy state involvement in its activities. There is no equivalent in Kenya.

All these SOEs, in addition to investing in KIND for the overseas PPP projects, are individually doing business abroad in their fields of specialisation. This is because they have project capacity and equity investment capacity that SMEs might not have.

Another very active Korean SOE is KEPCO which is the equivalent of KPLC/KenGen. They are doing a booming business worth trillions of dollars in designing, building, and operating power plants in the US, the UK, UAE, and many other countries.

The time has come when Kenya must dismantle extractive economic institutions set up during colonial days and transform them into instruments of implementing public policy to provide a fillip to their private sector.

First Kenyan Ambassador to the Republic of Korea (2009-2014). [email protected]