The government of Kenya recently (2018) announced that it is pursuing a five year development agenda centered on four focus areas namely ; manufacturing, universal healthcare, affordable housing, and food security (The Big Four Agenda). In order to gauge the possible outcome Kenya's proposed plan, we look at Ethiopia's experience in the last decade and specifically on the need to achieve a balance between a development agenda and achieving the actual economic benefits.
In 2002/03 Ethiopia adopted a similar economic agenda that placed a great emphasis to smallholder agriculture, urban and industrial development. Various policy instruments were introduced to support and guide industrial development. Ethiopia's development agenda led to a double digit economic growth between 2003/04 and 2010/11. The country's GDP grew by about 10.6 per cent annual average during the period. All the major sectors including industry were also reported to have grown by more than 10 per cent over the same period .
However, in spite of Ethiopia's remarkable success story , the structure of the country's economy remained unchanged. The sect-oral value added composition of the economy remained the same except in the service sector which became the largest sector overtaking agriculture. The industry value added share to GDP (this was the main focus of the development agenda) remained relatively static and never exceeded 14 per cent during the growth decade.
So where did the economic growth come from ? It came from Ethiopia's infrastructure spending. According to Grant-Makokera and Rantao (2012) the Ethiopian government c spent 10 per cent of its GDP (about US$1.3 billion annually) on infrastructure during the growth period. In contrast, during the same period, other basic sectors such as chemicals, basic metal, and engineering remained underdeveloped. For example in 2010, the basic metal and engineering sector which included the manufactures of fabricated metal products, machinery and equipment, and motor vehicles and trailers accounted for no more than 7 per cent of employment and 12 per cent of value.Similarly, the chemical sector only accounted for only 6 per cent of employment and 5 per cent of value added in the same year.
The challenge to these critical sectors turned out to be the fact that despite huge and continued investment in its infrastructure, Ethiopia, as a landlocked country, still remained one of the most difficult places in the world from which to engage in the global economy. This was because of the absence of a competitive network of global logistics within the country . According to the World Bank Trade Facilitation indicators, Ethiopia ranked 123rd out of 155 countries in the world overall Logistics Performance Index (LPI) in 2009. The country also remained among the lowest in terms of use of information and communication technology (ICT). The country failed to develop the prerequisite systems that support the primary sectors of economic development.
The government of Ethiopia is currently undertaking different measures to address the pre-requisite issues that prevented it from achieving real and tangible economic growth with its economic system including a wide range of socio-political reforms.
From this case study we learn that declaring a growth agenda can prove insufficient to achieve overall success. According to a draft budget policy statement released in 2018, the government of Kenya seeks to raise the share of manufacturing sector from nine to 15 per cent of the gross domestic product (GDP) by 2022, expand food production and supply, provide universal health coverage for all Kenyan homes and build 500,000 affordable houses.
However, if the country fails to develop the underlying socio-economic systemic issues , the big four agenda may not make much difference in the lives of Kenyans. Some of the underlying prerequisite actions may include but not limited to:
1) Wide ranging reforms to modernize Kenya's civil service including dealing with economic crimes
2) A regular review of the policies and instruments that need to be instituted with the aim of identifying emerging bottlenecks to the growth agenda
3)Framing of policies with a view of addressing constraints along the whole economic value chain and its horizontal linkages
The Ethiopian experience suggests that although the Kenyan government may have its own list of priority sectors a priori, they should allow flexibility and revise their choice of actions through time.
Kennedy Gumbe
www.trd.co.ke
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