MINISTRY OF INDUSTRIALIZATION
Facilitating & Promoting Industrialization
THE 20TH ENGINEERS INTERNATIONAL
CONFERENCE 2013,
THE TOM MBOYA LABOUR COLLEGE, KISUMU
WEDNESDAY 8TH TO FRIDAY 10TH MAY 2013.
Kenya’s Industrialization Process; its
Status, Challenges and Strategic
Interventions.
DR CYRUS NJIRU, PhD, CBS
Permanent Secretary
CONTEXT -Why Industrialize?
• Kenya is primarily an agricultural based economy,
strategically located and is endowed with natural
resources that can be tapped through Value Addition
(VA) to serve as a regional industrial hub in East
Africa.
• The industrial sector is therefore a key driver for
increasing economic growth rates, generation of
sufficient employment opportunities, and fostering
Kenya’s integration into the global economy.
Cont....
2
Industrialization Policy
• Experiences from successful economies indicate that
having a coherent National Industrialization Policy is
a prerequisite for the advancement of industrial
development in any country.
• Policy provides a broader engagement framework for
stakeholders participation - public and private sector;
civil society and development partners to contribute
and play their respective roles in industrial
development.
3
Objectives of the NIP
• To transform Kenya into a regional leader in
industrial growth & development;
• To spur industrial economic growth by creating
an enabling environment with targeted
incentives in priority sectors that promote
country-wide dispersal of industries in order to
realize equitable economic empowerment for all
Kenyans;
• To increase contribution of manufacturing sector
to GDP by at least 10 per cent per annum.
4
INDUSTRIALIZATION
• The term "industry" refers mainly to
manufacturing activity.
• Agriculture, mining, and most other services are
excluded from it.
• However the term "industrialization”
means the growth of manufacturing
industry.
• It is thus a part of the much broader process of
economic development, which involves the
raising of standard of living, through a steady
increase in the efficiency of factors of production.
Review of Past Policies
•
•
•
•
Import Substitution Policy (1970-1980’s)
Structural Adjustment policies (1980 – 1990’s)
Export oriented Strategies (1990’s onwards)
Sessional Paper No. 1 of 1986 on Economic
Management for renewed growth
• Sessional Paper No. 2 of 1992 on Small
Enterprise and Jua Kali development in Kenya
• Sessional Paper No. 2 of 1997 on Industrial
transformation to the year 2020
• Economic Recovery Strategy for Wealth and
Employment Creation (2003 – 2007)
Industrial Sector & Vision 2030
Transform Kenya into a newly industrializing, globally
competitive middle-income country providing a high quality
of life to all its citizens by the year 2030
Policy developed in the context of Vision 2030, review of past policies, problems
& challenges of industrialization, and experiences from successful economies.
Targets of the Manufacturing Sector Under Vision 2030
Snapshot of High Level Strategy
1st MTP targets
• Vision
Flagship projects
– To improve competitiveness in
manufacturing in order to revolutionise
the sector
1.
• Develop concept, pilot, and launch
1-2 Special Economic Clusters,
focusing on select industries (e.g.
agro-processing, building
materials), target players, and
incentive packages
• Goals
– Stimulate additional Ksh ~30bn
increase in GDP by
• Reducing imports in key local
industries by 25%
• Growing market share in regional
market from 7 % to 15%
• Attracting at least 10 large strategic
investors in key agro-processing
industries
• Strategy
– Local Production: Defend and
restructure key industries that have
local raw material availability, but no
competitive edge (e.g. sugar, paper)
2.
at least 5 Small & Medium
Enterprise (SME) Industrial Parks
Economics and impact
GDP
KSh
Billion*
– Global Niche: Strategically drive
increased level of value addition in
niche exports (e.g. agro-processing)
CAGR
174
– Regional Domination: Exploit
opportunities to further process imports
and capture the “last step” of value
addition (e.g. metals, plastics)
• Develop concept, pilot, and create
132
201
+8.8%
27
5.7%
2007**
2012
Baseline
Additional 2012 with
GDP with Vision 2030
strategy
Challenges affecting Industrial
Development
Inadequate
Institutional
framework
ENERGY
Low Value
addition &
Diversification
Low productivity
Access to
Counterfeits and
and
affordable long Sub- standards competitiveness
term finance.
Training in
Science, Eng.
Technology
Low funding for
R & D in
industrial
activities
Lack of
harmonized
Industrial
policies
Infrastructure, all
including
Industrial land &
ICT
Limited
Industrial
Incentives
Limited sector
budgetary
support
Industrial Sector and Vision 2030
Kenya Vision 2030 identified Industrial sector as
potential growth area because it:
1. Enjoys strong forward and backward linkages with
other important economic sectors, such as
agriculture and services thereby offering high
prospects for strengthening Kenya’s drive to
integrate further into the regional and global
economy; and
2. Offers high prospects for employment-creation,
specially in labour-intensive industries;
3. Acts as a catalyst for technology transfer, attraction
of FDI, & increasing foreign exchange earnings.
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Specific Objectives
1. Strengthening local production capacity to
increase domestically-manufactured goods by
focusing on improving the sector’s productivity
and value addition by 20 per cent;
2. Raising the share of Kenyan products in the
regional market from 7 to 15 per cent.
3. Developing niche products through which
Kenya can achieve a global competitive
advantage;
Specific Objectives…Cont’d
4.
Developing at least 2 Special Economic Zones and 5 SME
Industrial Parks;
5. Establishing an Industrial Development Fund with a minimum of
Kshs. 10 billion for long-term financing of manufacturing
enterprises;
6. Increasing by 20 per cent the share of manufacturing in total MSME
Output.
7. Increase the local content of locally manufactured goods for export
to at least 60 per cent.
8.
Increasing the share of industries located outside major urban
centres (Nairobi, Mombasa, Kisumu, Nakuru, Eldoret) to 50 per
cent.
Foundation Pillars & Enablers
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
Physical infrastructure and ICT
MSMI Growth, graduation and expansion
Industrial land and worksites
Standards and Quality Infrastructure
Intellectual Property Rights
Governance and legal framework
Occupational safety and health
Technical, production, managerial and entrepreneurial
skills
Industrial Research, Development and Innovation
Industrial Market Access
Dispersion of Industries in Kenya
Cleaner production and Environmental Conservation
Trade policy to support industrialization
Priority subsectors
AgroIron and Steel Machine tools
processing & industry
and spares
Value addition
Wood and Wood
Paper and Paper
Automotive
Products
and Auto parts Industries
Meat and Dairy
Products
Agro Machinery
and farm
implements
Textiles and
Clothing
Electrical and
Electronic
Products
Mining and
Quarrying
Ceramics Industry Glass Industry
Pharmaceuticals
Industry
Recycling
Materials
Packaging
Industry
Fish and Fishery
products
Petrochemicals
Industry
Green Energy
Biotechnology
Nanotechnology
Leather and
Leather
Products
Manufacturing
Clusters
Medium
Large
Job Creation
Small
GDP Growth
Micro
Institutional Framework
CABINET
NATIONAL ECONOMIC
AND SOCIAL COUNCIL
(NESC)
NATIONAL COUNCIL FOR
SMALL ENTERPRISES
(NCSE)
UNIVERSITIES,
RESEARCH
INSTITUTIONS
NATIONAL
INDUSTRIAL
DEVELOPMENT
COMMISSION
UNIVERSITIES,
RESEARCH
INSTITUTIONS
COLLABORATING
MINISTRIES AND
AGENCIES
COLLABORATING
MINISTRIES AND
AGENCIES
SECRETARIAT
(MINISTRY OF INDUSTRIALIZATION
AND ENTERPRISE DEVELOPMENT)
COORDINATING MINISTRY
CONSULTATIVE FORUMS
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Functions of NIDC
1. Generate policy innovations that will accelerate the pace of
industrialization;
2. Advice the Government on the strategic industrial development
models to pursue in light of the dynamics in the international
business arena;
3. Through the relevant specialized agencies, direct research on
thematic issues affecting industrial development and propose
appropriate interventions;
4. Provide routine advice and policy direction on the
administration of the Industrial Development Fund;
5. Receive, synthesize and evaluate policy proposals from the
Industry Consultative Forum and make appropriate
recommendations that can be passed on to the Cabinet.
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Financial Resource Mapping
1. Establish an Industrial Development Fund (IDF) and
provide mechanisms to subsidize commercial loans.
2. Develop a funding structure to the IDF through a 2%
levy of CIF to all imported finished goods; flotation of
industrial bonds; public private partnerships;
cooperatives; pension funds; insurance schemes and
National budgetary allocation.
3. Re-capitalization of DFIs through IDF, national
budgetary allocation, and government guarantees to
external lines of credit.
4. Increase from 0.1% to 10% of the National budget to
fund activities in the Industrial Sector.
Financial Resource Mapping…Cont’d
5. Fast track the enactment of the insolvency bill to
include provisions for protection of ‘sick’ industries due
to external factors that will cover the lenders, creditors
and taxation.
6. Provide globally competitive fiscal incentives for new
industrial investments & revival of ‘dead’ industries.
7. Provide a framework for establishment of moveable
bank - loans security documents to enhance
competitiveness in the banking sector.
5. Institute prudent monetary and fiscal policies to sustain
the macro-economic stability.
SUB-CONTRACTING ARRANGEMENT
Policy Issue
Policy Constraint
Proposed Policy Intervention by Government
Adoption of
technology
Low Adoption of
technology
Standardization
Lack of conformity
to standards
•
•
•
•
•
Management
Poor Management
•
•
Affordable
Financing
Inadequate access
to finance
•
•
Research and
Development
Low Research
and Development
•
Attitude
Negative attitude to
inter-linkages
•
•
Initiate mentorship scheme
Sensitize MSMEs on business ethics
Market
Challenges on
Market access
Infrastructure
Poor infrastructure
•
•
•
•
Enforce the Anti-counterfeit Act
Negotiate for better market access terms
Enforce other legal provisions on procurement
Collaborate with relevant ministries to develop
infrastructure
•
Increase funding to R&D institutions
Invest in reverse engineering technology
Promote business and technology incubation
Facilitate inter-firm linkages
Sensitize MSME on the need to meet quality
standards
Ensure conformity to standards
Encourage enterprises to adopt modern
management practices.
Factor in financing in the Industrialization Fund
Provide for MSME funding in the budgetary
provisions
Factor and increase financing of Research and
Development
Facilitate commercialization of research findings
BUSINESS AND TECHNOLOGY
INCUBATION
Policy Issue
Policy Constraint
Proposed Policy Intervention by Government
Minimize failure rate
of MSMEs
High failure rate of MSMEs •
•
Embark on entrepreneurship skills
Match the technical and entrepreneurial skills within the
incubation process.
Employment
creation
High rate of
•
Sensitize and re-orient the growing labour force towards the
entrepreneurial mindset.
Business entrepreneurship skills development
Inculcate the business culture in the Kenyan education system
unemployment
Policy
Framework Lack of policy
Framework on
on incubation
•
•
•
harmonize the policy framework for incubation in the country.
incubation
Appropriate
infrastructure
Lack of appropriate
infrastructure
•
Innovative
entrepreneurship
Lack of Innovative
entrepreneurship
•
put in place a framework for identifying and incubating
innovative products and services
Business
information
advocacy
Commercialization
of innovations
Lack of business
information and
advocacy
•
Develop awareness aimed at disseminating information on
business incubation.
Facilitate the gathering and dissemination of statistics for use by
entrepreneurs
Limited
commercialization of
innovations
•
•
•
•
Embracing PPPs such as Build-Operate and Transfer (BOT)/
Build Operate and Own (BOO) concept.
Develop world class facilities.
Encourage the establishment of research and business
development units within the incubators.
Encourage technology adoption, reverse engineering and
transfer through enhancement of incubation facilities.
National Intellectual Property
Policy and Strategy (NIPPS)
• The Government acknowledges:
– the provision and maintenance of a National Intellectual
Property Policy will encourage development of intellectual
creations
• Intellectual property is a product of human
creation
– IP is therefore born out of three different objects,
• creation of the mind, commerce and `industry or craft.
•
The Ministry has prepared a National Intellectual
Property Policy and Strategy (NIPPS)
– to strengthen the management and administration of the
intellectual property system and to encourage innovation
and creativity in Kenya.
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THANK YOU!