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Wednesday, February 07, 2007

India to power ahead with 9% growth while Kenya manages a mere 6%

Kenyan (govt) politicians keep on crowing about 2005's 5.8% growth like this was going to pull us out of the current economic doldrums! Estimates for 2006 are 5.7%.

India expects a 2006 growth rate of 9.2%... which means the additional growth in the Indian economy could be greater is larger than Kenya's entire economy! BTW, this is on top of India's 8% growth over the past 3 years!

India's estimated 2006 GDP (PPP) is just shy of $4 Trillion... so a 9% growth = $360 Billion!

The compounding factor year after year is what separates the men from the boys... The difference of 3% between the two growth rates means India's economy ccould grow at a rate that is 50% higher i.e. 9% vs 6%.

If India continues at this pace & Kenya lags, then compounding kicks in thus the gap between 2 economies will grow even faster!

Indian firms, & by proxy India, is the 3rd largest investor in UK. Tata Steel's recent purchase of Corus (UK) made headlines the world over as they beat off a challenge from Brazil.
Kenya's Magadi Soda is part of the Tata Group through Tata's purchase of Brunner Mond (UK) which gave Tata control of Magadi Soda.

Magadi Soda was recently in the news after Exim Bank rejected their application to finance locomotives & rail stock. Nevertheless, Magadi Soda did secure financing since it had the support of GE & Tata.

Kenya needs to wake up from its reverie... Stop comparisons with regional poorhouses & our benchmarks should be Powerhouses like India & China.

Kenyans can't use the "Western Oppression" excuse this time round when India & China start making our life difficult! As an example, Kenya has lost most of its USA textile market to China, Pakistan & India in the past 2 years. We had many years under AGOA to build up our competitiveness but squandered it to inane populist politics & economic blunders! Kenya should have built up its infrastructure:
  • Reliable & cost-effective electricity supply
  • Transport efficiencies incl Railroads, Shipping & Raods
What can we do to ensure we don't get steam-rolled by these fast developing countries while all we can manage is a mere 6% growth amidst increasing insecurity & poverty?

23 comments:

mwangi said...

I don't know what is worse:

Your statistical naivete or the blatantly ignorant analogy of Kenya and India + China. Either way, there is no clear relationship between the numbers you present and your message.

Kenyanomics said...

Maintaining or improving the much hyped 6% growth can only be achieved through entrepreneurial minded policies, less populist policies, and political accountability.

Its nonsensical for politicians to yell about high petrol prices, whereas the government pockets close to Kshs 50 for every litre of petrol. It hurts that parliament passed an Energy Bill that asks for price controls on petrol prices instead of arguing for less taxation in the energy sector. This is given the fact that high energy prices make Kenyan goods less competitive.

Populist policies such as Ngilu's free healthcare, the Youth Fund, "free education," and the politically-controlled CDF are development shortcuts that will hurt us good, at least in the long run.

Holding our politicians accountable through the ballot and judiciary is not an option. But how can we do that when they are the ones who make laws?

coldtusker said...

mwangi - Take your pick... but do explain your comments further... I am curious...

BTW, how can an analogy be blatantly ignorant?

MainaT said...

I think his message was we need to be growing at consistently higher rates. Remember both India and China have lower population growth rates and lower infation.

coldtusker said...

kenyanomics - We need to change the politicians in power.

Unfortunately, the ignorant (or stupid) masses (yes, I sound - not am - elitist but my views will be borne out) will vote for their tribesman/woman irrespective of their crimes...

Sadly, Kenya remains ethnically separate except in (I think) in Nairobi.

MainaT said...

KenyaEconomics, disagree with you on the "free education". Education is foundation of the economic growth in South East Asia. India sponosred IT engineers to go and work in the Silicon Valley as did China with scientists.

CDF-is hurt by poor implementation. As for health, I think its good we are thinking about ways of providing basic healthcare for all to raise life expectancy and lower child mortality rates among others.

coldtusker said...

MainaT - Our economic growth rate barely outpaces our population growth rate.

Large swathes of the Indian economy are controlled e.g. oil industry but they are liberalising their economy. I expect they will grow even faster thereafter. I am NOT dealing with social ills.

Kenya needs to liberalise even faster. Many industries are dying after the Big Brother approach fostered corruption & inefficiencies:
- Pyrethrum is sent to Rwanda for processing!
- Coffee is a much smaller industry but I expect improvements after the 2nd Window was opened.
- Telecommunications was under Telkom for many years. The fight over SNO continues & that pushes us even further back in the BPO industry!

coldtusker said...

MainaT & Kenyanomics - Interesting questions...
-What is better free or paid education?
- What should the govt support elementary &/or tertiary (assuming limited funds thus one suffers at the expense of the other)?

Kenyanomics said...

MainaT. Implementation of the subsidized education makes it a disaster. Kalonzo et al are abruptly declaring certain levels of education free. Nobody sits down to prioritize on the level to target, or even say where funds will come from. Unlike Indians or Chinese, Kenyan politicians target education levels that yield more votes from electorates and more funds from donors. Kenya is not poor because of lack of education; our literacy level (73%) is higher than that of India (61%).

We are failing to grow like India because our educated class (Form four or college grads) are not advancing into high demand courses or careers. We should therefore emphasize on tertiary education. That does not mean “free education” for university students, but deregulation of the higher education sub-sector, which would eliminate micro-management of public varsities by bureaucrats and politicians. Deregulation would also foster participation of the private sector in higher education. Elimination of government influence on the telecommunications sector is another key to faster penetration of knowledge into the country’s hinterlands.

Please refer to my post on “Taxed to Death,” which touches on healthcare.

alexcia said...

What a rant! Comparing India to good-for-nothing Kenya. Unless we united as EA, we are just another small country among the poorest of the poor

coldtusker said...

In the land of the blind, the one-eyed man is king...

When elephants fight (China vs "West") the grass suffers...

Kenya HAS potential but (sometimes) I fear that is all it shall remain!

kenyanomics: Its a tought choice between choosing a few (Univs) vs many (thru primary or secondary)...

I will blog on this some day but I think tertiary should include/encompass many more polytechnics & trade schools...

Kenya will need more electrical technicians if real estate development booms... as we will need plumbers, carpenters, etc.

These jobs can't be outsourced unless the we allow Chinese & Indian immigration. Remember the Chinese did bring in the Chinese to build Kasarani Stadium!

coldtusker said...

In the land of the blind, the one-eyed man is king... We can't keep on comparing our "good" fortune to Somalia, Sudan or Uganda!

When elephants fight (China vs "West") the grass suffers...

Kenya HAS potential but (sometimes) I fear that is all it shall remain!

kenyanomics: Its a tough choice between choosing to educate a few in Univs (who may emigrate to USA, UK, etc) vs many more thru primary or secondary (who are likely to remain in Kenya)...

A blog on the pros & cons is coming up! IMHO, Kenya needs more polytechnics & trade schools...

Kenya will need more electrical technicians if real estate development booms... as well as plumbers, carpenters, etc.

These jobs can't be outsourced unless the we allow Chinese & Indian immigration. Remember the Chinese did bring in the Chinese to build Kasarani Stadium!

These workers can also be "exported" to the Mid-east & other African countries.

MainaT said...

CT, first off on education. We do free education to secondary level so that we can educate Kenyans beyond just doing the basic 3Rs. This may involve even thinking a bit more deeply about the curriculum. I think it is important that we are educated enough to be able to tell a lie from a politician to think about institutional frameworks and creating an enabling framework for the same and so forth.
On tertiary education, I think the CDF needs to be tailored in such that it provides for certain projects and this would be one for them so that technical education is meeting the needs of the local populace.

As always in Kenya, the major drawback is implemntation.

KE said...

CT:

Your analysis of Kenya to India misses some important facts, which I will point out to you.

First point:
India's climb to economic prosperity began in the early 1990's -- that 9% growth you quoted has taken a good 15 years to build up. Manmohan Singh, the current prime minister of India is the man who is responsible for opening up India's economy. He was appointed by Rajiv Gandhi over 15 years ago. Kibaki has been in power for a mere five years. If your comparison is to be fair, perhaps you should evaluate Kibaki in another 10 years. These changes do take time.

Second Point:
Even during it's era of socialism, India had one thing that Kenya never had -- it had a vibrant democracy (India had an independent judiciary and it's had opposition parties throughout it's post-independent history). Kenya has never had this: either under Kenyatta and definitely not under Moi. Kenya is literally starting everything from scratch.

Now, I am not saying Kibaki has been perfect and should not be criticized. He should be criticized for the many mistakes he has made. However, if you are going to make these kinds of geo-political comparisons, you need understand the historical record.

kenyanentrepreneur.com

coldtusker said...

KE - Manmohan Singh was Finance Minister for say 20 years - but with a stint in opposition when BJP coalition was in power.

Kibz has been in government since the 1960s!!! He was Finance Minister (just like Singh) then became VP... I think the Finance docket remained under him even as VP...

So Manmohan's 20(less opposition) vs kibz 40(less opposition) leaves kibz far ahead in that category.

Democracy in India - Yes, but they have had more regional conflicts, numerous parties/coalitions, 3 or so official wars, 1 billion people, (I think) poverty levels higher than Kenya's in 1963...

My point/question is... If they can do it after all these problems... why can't we?

I did not pick China though I alluded to it is coz they are a "dictatorial" state... I do not agree with their politics...

coldtusker said...

MainaT - Sigh... implementation... How do we do it UNLESS we have a political leadership with the will to do the right thing?

How, if we elect inepts like gumo & mugo?

MainaT said...

Its not just the politicians-capacity-wise, we seem to be falling short in a lot of ways. Just look at the Roads ministry-every yr, they take back money to Treasury because they've been unable to utilize it either via lack of engineers, project evaluators and finally procurement red-tape. The judiciary doesn't funtion, infrastructure et al
Btw, like the gumo&mugo anagram.

Ke said...

CT:

Your counter-points do not square. Moi ruled that country with an iron fist and he micro-managed everything.Kibaki may have been finance minister, but how much power did he really have?? Moi never took any of the policy advise he received. He just did whatever he wanted. That's why I said that Kenya was NOT democratic.Rajiv Gandhi AGREED to implement Singh's economic policies. Kibaki could have given him all the advice he wanted, but if moi refused to implement, then what?

What 3 official wars has india had??? Besides, having numerous parties and coalitions is part of the democratice process. What's wrong with that? The same thing is just beginning to happen in kenya today. Nothing wrong with that.

And remember that India and China achieved food security in the 70's: i.e.Their citizens may have been poor, but they were not starving to death because the government had enough food reserves to feed them. Kenya and the entire African continent has not achieved this yet. So, neither country was ever as poor as kenya.

Odegle said...

Wa! i wonder how i missed such an informed debate. my late sentiments though. if you look at three economies and compare; am talking of UK & France , then US & USSR, and finaly India & China, you find only one constant, they all achieved the ultimate, at least at some point. managed to develop and attain the coveted status. but the way they did it is different for all of them. UK was and still is to a certain extent a mornachy and by and large thats how they developed, explorers, inventors etc did it for the queen. even conqurors did it for the queen. US had a diff approach, through individual improvement wht they later called capitalism. the american dream, that any one of us can manage because of sheer determnination etc. China is still a communist state, yet they are now rivaling the US as far as development and investments are concerned.

i am drawing these parallels in order to bring my argument home , that countries only prosper if they implement home grown solutions. u can remember how the SAPS destroyed africa in the 90s. i think the CDF is a brilliant idea in fact thats the best that has ever happened to kenya in a long time. when u go down to the rural, u discover that the CDF has achieved a lot. ok i agree politicians have missused it. but politicians misuse any good thing everywhere. thats how bush is misusing the word democrasy in iraq and so on. the recent suggestion to oficilize CDF by appointing managers is quite welcome. and am thinking that CDF is just a brilliant way of introducing federalism as far as development is concerned. through CDF, there will be reasonable regional development.

Sijui said...

ColdTusker,
Let's first start with regional benchmarks before we graduate to the BRIC economies.....how about, how does the dynamism of the Kenyan economy compare to well established high middle income economies in Africa i.e. South Africa, Botswana, Mauritius and Seychelles? It does poorly...if you look at the most competitive economies in Africa in terms of economic diversification and depth, we're easily beaten by lesser mortals such as Ghana and TZ.....we barely make top 15.

I agree with you completely, all conventional wisdom points to the fact that countries like Kenya must maintain average growth in the 7-9% range consistently for the next 10 to 15 years just to make high middle income status.
That's why it is important that all Kenyans educate themselves on the economic platform of all presidential pretenders.......the stakes are too high to squander another 5 years. Right now, we're not even on track to reach low middle income status by 2015, conversely many of our poor neighbors are!!!!!!!!

Sijui said...

'A blog on the pros & cons is coming up! IMHO, Kenya needs more polytechnics & trade schools...'
EUREKA!!!!! I don't understand why people treat this like rocket science......HELLO! An industrialized economy is only built when you have the large middle possessing relevant technical expertise and skills. I'm not talking about the top form four grads who make it to university, I'm talking about the 70% of the population who dropped out of primary school and/or didn't make the cut after high school. This is the large midddle that must have the skills to be productive in the formal economy.....India and China are not making it because of advanced and specialized technical expertise, they're making it because their low income masses are being moved in to the manufacturing, telecommunications and services sectors. Ditto for Europe during the industrial revolution and so on and so forth.
We miss the river, let alone the boat when we keep prioritizing primary/secondary education.....basic literacy is not good enough in this global economy, you need technical skills to fuel industrial growth and expansion.

coldtusker said...

Sijui - Do you maintain a blog?

The brightest do not always go to university... some cannot for financial or personal reasons but can be admitted to Polytechnics...

Furthermore, I contend they learn more real-life in Polytechnics than Univs!!!

Michael Joseph of Safaricom said (HBS ABC 2007 Conference) that UoN engineers need retraining over 2 years since they are taught a curriculum that is 40 years out of date!

Sijui said...

CT.....unfortunately no. BTW can you give me a quick and dirty on the HBS ABC 2007? How was it? The roster was impressive!