Transcript - The Institution of Engineers of Kenya
MINISTRY OF INDUSTRIALIZATION
Facilitating & Promoting Industrialization
THE 20 TH ENGINEERS INTERNATIONAL CONFERENCE 2013, THE TOM MBOYA LABOUR COLLEGE, KISUMU WEDNESDAY 8 TH TO FRIDAY 10 TH MAY 2013 .
Kenya’s Industrialization Process; its Status, Challenges and Strategic Interventions.
DR CYRUS NJIRU, PhD, CBS Permanent Secretary
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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....
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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.
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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.
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Targets of the Manufacturing Sector Under Vision 2030 Snapshot of High Level Strategy
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Vision 1 st MTP targets Flagship projects
– To improve competitiveness in manufacturing in order to revolutionise the sector
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
Economics and impact 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
2.
• Develop concept, pilot, and create at least 5 Small & Medium Enterprise (SME) Industrial Parks •
Strategy
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Local Production:
Defend and restructure key industries that have local raw material availability, but no competitive edge (e.g. sugar, paper)
GDP
KSh Billion* 174 27 201 CAGR
+8.8%
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Regional Domination:
Exploit opportunities to further process imports and capture the “last step” of value addition (e.g. metals, plastics)
5.7%
132 –
Global Niche:
Strategically drive increased level of value addition in niche exports (e.g. agro-processing) 2007** 2012 Baseline Additional GDP with strategy 2012 with Vision 2030
Inadequate Institutional framework
Challenges affecting Industrial Development
ENERGY
Low Value addition & Diversification Infrastructure, all including Industrial land & ICT Counterfeits and Sub- standards Low productivity and competitiveness Access to affordable long term finance.
Limited Industrial Incentives
Training in Science, Eng. Technology
Low funding for R & D in industrial activities
Lack of harmonized Industrial policies 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 advantage; achieve a global competitive
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 Kshs.
10 billion for long-term financing of
minimum
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.
Physical infrastructure and ICT 2. MSMI Growth, graduation and expansion 3.
4.
Industrial land and worksites Standards and Quality Infrastructure 5.
Intellectual Property Rights 6. Governance and legal framework 7.
8.
Occupational safety and health Technical, production, managerial and entrepreneurial skills 9. Industrial Research, Development and Innovation 10. Industrial Market Access 11. Dispersion of Industries in Kenya 12. Cleaner production and Environmental Conservation 13. Trade policy to support industrialization
Priority subsectors
Agro processing & Value addition Automotive and Auto parts Iron and Steel industry
Wood and Wood Industries
Machine tools and spares
Paper and Paper Products
Agro Machinery and farm implements Textiles and Clothing
Meat and Dairy Products
Leather and Leather Products
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
Manufacturing Clusters Micro Small Medium Large
Institutional Framework
CABINET NATIONAL COUNCIL FOR SMALL ENTERPRISES (NCSE) NATIONAL ECONOMIC AND SOCIAL COUNCIL (NESC) NATIONAL INDUSTRIAL DEVELOPMENT COMMISSION UNIVERSITIES, RESEARCH INSTITUTIONS COLLABORATING MINISTRIES AND AGENCIES UNIVERSITIES, RESEARCH INSTITUTIONS 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.
Policy Issue Adoption of technology Standardization Management Affordable Financing Research and Development Attitude Market Infrastructure SUB-CONTRACTING ARRANGEMENT Policy Constraint Low Adoption of technology Lack of conformity to standards Poor Management Inadequate access to finance
• • • • • • • • •
Proposed Policy Intervention by Government 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 Low Research and Development
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Negative attitude to inter-linkages
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Challenges on Market access Poor infrastructure
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Factor and increase financing of Research and Development Facilitate commercialization of research findings Initiate mentorship scheme Sensitize MSMEs on business ethics Enforce the Anti-counterfeit Act Negotiate for better market access terms Enforce other legal provisions on procurement Collaborate with relevant ministries to develop infrastructure
BUSINESS AND TECHNOLOGY INCUBATION Policy Issue Policy Constraint Minimize failure rate of MSMEs High failure rate of MSMEs Employment creation High rate of
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unemployment
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Policy Framework on incubation Lack of policy Framework on incubation Lack of appropriate infrastructure Appropriate infrastructure Innovative entrepreneurship Business information advocacy Commercialization of innovations Lack of Innovative entrepreneurship Lack of business information and advocacy Limited commercialization of innovations
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Proposed Policy Intervention by Government Embark on entrepreneurship skills Match the technical and entrepreneurial skills within the incubation process.
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 harmonize the policy framework for incubation in the country.
Embracing PPPs such as Build-Operate and Transfer (BOT)/ Build Operate and Own (BOO) concept.
Develop world class facilities.
put in place a framework for identifying and incubating innovative products and services Develop awareness aimed at disseminating information on business incubation.
Facilitate the gathering and dissemination of statistics for use by entrepreneurs Encourage the establishment of research development units within the incubators.
and business Encourage technology adoption, reverse engineering transfer through enhancement of incubation facilities.
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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. 22