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Viewing cable 07NAIROBI1981, KENYA'S VISION 2030: THINKING BIG, BUT IS IT REALISTIC?
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| Reference ID | Created | Released | Classification | Origin |
|---|---|---|---|---|
| 07NAIROBI1981 | 2007-05-09 14:27 | 2011-08-25 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Nairobi |
VZCZCXRO0123
RR RUEHGI RUEHRN
DE RUEHNR #1981/01 1291427
ZNR UUUUU ZZH
R 091427Z MAY 07
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC 9546
RUEHLMC/MILLENNIUM CHALLENGE CORP
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUEHXR/RWANDA COLLECTIVE
UNCLAS SECTION 01 OF 04 NAIROBI 001981
SIPDIS
SENSITIVE
SIPDIS
DEPT FOR AF/E, AF/EPS, EB/IFD/OMA
USAIQFOR AFR/DP WADE WARREN, AFR/EA JEFF BORNS AND
JULIA ESCALONA
TREASURY FOR VIRGINIA BRANDON
LONDON AND PARIS FOR AFRICA WATCHERS
E.O. 12958: N/A
TAGS: ECON EAID EFIN PGOV KE
SUBJECT: KENYA'S VISION 2030: THINKING BIG, BUT IS IT REALISTIC?
NAIROBI 00001981 001.2 OF 004
Sensitive-but-unclassified. Not for release outside USG channels.
¶1. (SBU) Summary: Kenya has unveiled Vision 2030, an audacious
national development plan whose goal is middle-income status for the
country by 2030. The Vision calls for 10% GDP growth annually over
the next 25 years (up from the current 6%), allowing Kenya to
multiply per capita income by six times within one generation. The
Vision captures nearly the entire reform agenda and is thus
awesomely ambitious in scope - and by the same token, probably
unrealistic. Consistent and coherent implementation of anything so
large will be problematic, so Vision planners are considering the
creation of a new "super agency" empowered to force change from
above. Cynics will see Vision 2030 as merely creating the illusion
of reform where there is none. But with the right leadership and a
little bit of luck, Vision 2030, even if only partially successful,
could help frame a reform agenda that puts Kenya on a higher growth
path. End summary.
--------------------------
The Origins of Vision 2030
--------------------------
¶2. (U) Since independence in 1963, Kenya has had two long-term
economic policy strategies (in 1965 and 1986), together with a
series of five-year development plans to guide investment and
economic policy-making. In the long run, none worked very well --
per capita income in Kenya actually shrank in the 1990s. After
elections in 2002, the Government of Kenya (GOK) tried again,
launching the five-year Economic Recovery Strategy (ERS), a reform
blueprint under which the economy gradually recovered, reaching 6%
growth in 2006. With the ERS coming to an end in 2007, the GOK
began a new effort in 2006 to develop an overarching national
development plan under the rhetoric of "Vision 2030: Transforming
National Development." Described as "a long-term plan to transform
the lives of Kenyans," the vision is summed up in its mission
statement: "A globally competitive and prosperous nation with a high
quality of life by 2030".
¶3. (U) Formally launched by President Mwai Kibaki in October, 2006,
Vision 2030 was developed by a subcommittee of the National Economic
and Social Council (NESC), a group of "eminent persons" appointed by
Kibaki in 2004 to provide policy advice to the GOK on economic and
social matters. Despite the fact that 15 of the 31 members of the
NESC are high-level GOK officials, it does not appear that Vision
2030 is a political ploy to gain voter support in an election year.
Rather, for all its potential faults, it seems to be a good faith
effort to forge a national consensus around where Kenyans want their
country to be in 25 years, regardless of the political leadership in
power at any given time. The project is self-funded by the GOK, but
the GOK has contracted with McKinsey Consultants to assist the NESC
in preparing the Vision.
---------------------------
What Exactly is the Vision?
---------------------------
¶4. (U) According the GOK literature on the topic, Vision 2030 is
built around change and reform under three developmental pillars:
economic, social, and political. The project's current emphasis,
however, is clearly on the economic pillar, under which Vision 2030
calls for:
-- Sustained economic growth of 10 percent per year over the next 25
years.
-- An increase in nominal GDP by nearly 11 times to $169 billion by
¶2030.
-- An increase in per capita GDP by 6.6 times by 2030 to $3,065 per
head from 2005's $464.
-------------------
The Big Six Sectors
-------------------
¶5. (U) According to the NESC's most recent (and very slick)
powerpoint on the status of Vision 2030, the project has moved
beyond the lofty vision stage to the formulation of "high-level
strategies," or roadmaps, on how to reach the vision goals under
each of the three pillars. Under the economic pillar, the NESC
Vision team has conducted a "portfolio diagnostic" which has
concluded that focused reforms and investments in a handful of key
"growth engines" are needed to generate stronger economic growth
NAIROBI 00001981 002.2 OF 004
initially. Identified according to a mixed bag of criteria ranging
from current size to growth potential, the Vision identifies the
following six sectors of the economy, in priority order:
-- Tourism: Enjoying strong growth; largest contributor to foreign
exchange earnings; still has growth potential when compared to other
top tourist destinations.
-- Agriculture: pillar of economy with 25% of GDP; significantly
lower productivity vs. international benchmarks; offers huge growth
potential with appropriate land reforms.
-- Wholesale and retail: Accounts for 30% of GDP and 50% of
employment, but extremely fragmented and informal; inefficient
supply chains; offers big opportunities if brought into formal
economy.
-- Manufacturing: Stagnant at 10% of GDP over past 30 years;
currently uncompetitive internationally; offers huge upside if
business climate can be improved; export opportunities in regional
markets and global niche markets.
-- Business Process Outsourcing (BPO): Currently a nascent industry,
but cost-competitive globally if there are appropriate investments
in infrastructure.
-- Financial Services: Sector plays critical cross-cutting enabling
role in economy; has had good growth in recent years, with
significant potential for further growth.
------------------------------
Vision 2030 Tries To Do It All
------------------------------
¶6. (SBU) When questioned about Vision 2030 trying to "pick winners"
through this sectoral approach to boosting growth, Dr. Wahome
Gakuru, Director of Vision 2030 at the NESC, told Econ/C on May 7
that the Vision is not purely sector-based. It also calls for
investment and reforms in five key "enablers" that will stimulate
growth across all sectors of the economy. These cross-cutting
"enablers" are infrastructure, information and communications
technologies, energy, and public services, e.g. health and
education. The soft-spoken, U.S.-educated Gakuru went on to
articulate an even broader and deeper reform vision for Kenya. In
order to get the higher growth it wants, Kenya will also have to
reform its justice system in fundamental ways to make it not just
more business-friendly, but also more efficient and more just.
Additionally, the relationship of the GOK to the economy requires a
paradigm shift. The GOK has to become more of a facilitator and a
regulator than a direct participant in the economy. This, he said,
will require more privatization and a deepening of ongoing civil
service reforms.
--------------------------
Realism vs. Pie in the Sky
--------------------------
¶7. (SBU) As skillfully articulated by Gakuru, then, Vision 2030 is
awesomely ambitious. It captures pretty much the entire reform
agenda - everything the country needs to do to get to the status of
a mature democracy and middle-income economy within one generation.
It thus appears highly unrealistic. Indeed, Vision 2030 often reads
like a naive call for a perfect society, smacking a bit of
old-fashioned socialist central planning.
¶8. (SBU) At the same time, however, while the Vision in its
broadest terms may seem utopian, the means to achieve it are
pragmatic. Indeed, Vision 2030 is refreshingly candid - and often
accurate - about Kenya's past economic failings and current
challenges. It points out, for example, the need to transform the
skewed structure of Kenya's economy, which remains heavily weighted
in favor of agriculture and the informal sector, while formal sector
manufacturing and services remain stunted in terms of their
contributions to GDP and employment. The Vision's underlying
philosophy is on balance more capitalist than it is populist. There
is an orientation towards empowering and unleashing the potential of
the private sector as the path to higher growth rates. All good
stuff, on paper at least.
-------------------------------------
Implementation: The Old Achilles Heel
-------------------------------------
NAIROBI 00001981 003.2 OF 004
¶9. (SBU) While no one is questioning the virtues of much faster
growth along with greater democracy and social equity, the big
question, of course, is how, when, or whether the Vision becomes a
reality. The GOK is superbly skilled at composing thoughtful and
ambitious plans and strategies addressing the key challenges of the
day, such as economic development, rule of law, and corruption. The
GOK is equally infamous for failing to implement such plans. One
recalls plans drawn up 20 years ago to build by-pass roads around
Nairobi - roads that still haven't been built. Vision 2030 Director
Gakuru acknowledges that implementing the many economic, social, and
political reforms covered by Vision 2030 will be a long, arduous,
and even dangerous journey.
--------------------------
A New Super Agency Coming?
--------------------------
¶10. (SBU) To overcome the GOK's traditional inability/unwillingness
to implement needed reforms, Gakuru said that with the Vision may
come a new paradigm for implementation: A kind of "super agency"
with the powers and political clout to force change down through
recalcitrant line ministries. He said discussions are underway at
senior levels on the structure and authority of such an agency,
which in his view, must fall under the Office of the President to be
effective. It must also, he noted, be staffed by "really, really
good and powerful people."
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Local Donors and Economists Have Their Doubts
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¶11. (SBU) Further on the theme of realism, GOK officials realize
10% GDP growth starting in 2008 is all but impossible. But Finance
Minister Amos Kimunya has said publicly that the economy can achieve
a 10% rate of growth by 2012. Others are skeptical that even this
timeline is feasible. At a free-flowing discussion of economists
and donor country reps on May 4, the International Monetary Fund's
Resident Representative said 10% growth by 2012 would require
massive foreign direct investment (FDI) in Kenya's economy. He went
on to question whether any Kenyan government has the ability or the
will to enact the myriad fundamental reforms required to make
Kenya's business climate attractive enough to stimulate such inflows
of FDI. The usual litany of intractable impediments were cited: the
poor state of infrastructure, excessive red tape and a
business-hostile bureaucracy, corruption, and insecurity.
¶12. (SBU) The local World Bank economist agreed, saying that 10% by
2012 required major changes: a higher savings rate and higher
productivity in Kenya, and massive new FDI. The Bank feels without
additional reform measures, the economy can probably continue to
grow by the current 6% through 2010, and maybe bump up to 6-8% by
¶2013. Poor infrastructure is the most critical binding constraint
to higher growth, according to the Bank's analysis.
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Comment: Shooting for the Stars
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¶13. (SBU) On the one hand, one has to take Vision 2030 with a big
grain of salt. With history to support them, skeptics will be right
to see Vision 2030 in the same light as previous national plans and
strategies - not much more than a grandiose paper exercise designed
to create the illusion of reform where there is none, and to put
money in the pockets of smooth-talking consultants like Gakuru.
Also, the creation of a new "super agency" to drive implementation,
while superficially appealing, might lead to further concentration
and abuse of power in the Office of the President. Finally, it's
right to ask why the GOK doesn't move away central planning
altogether and simply get on with the sweaty work of implementing
needed reforms on the ground - now.
¶14. (SBU) On the other hand, the GOK and the authors of Vision 2030
should be complimented for thinking big -- for aspiring to
international competitiveness and middle income status for Kenya
within a generation. A detailed framework can improve policy
consistency by indicating the direction in which everything and
everyone needs to move to achieve the goal. With the right
combination of luck and good leadership (always the X Factor) over
the next 5-10 years, Kenya indeed has the potential to reach this
goal and become in the words of Pulitzer Prize-winning journalist
Tom Friedman an "African Tiger" economy. However, time is wasting,
and it's unlikely Kenya will reach 10% growth even within the next
3-5 years absent immediate, large-scale investments in
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infrastructure and implementation of a host of cross-cutting (and
politically painful) governance reforms. None of this is happening
quickly enough. But Vision 2030 shoots for the stars. If Kenya
only gets half way there, much will still be gained.
Ranneberger