NATIONAL ICT CONVENTION 23-25 March 2004

1. NATIONAL ICT CONVENTION23-25 March 2004 “Top-Down” or “Bottom-Up”? Locating ICT Strategy in Kenya’s Growth, Equity & Poverty Reduction Agenda Dennis Kabaara CEO, Institute of Economic Affairs – Kenya 23 March 2004, Safari Park Hotel

2. PRESENTATION OUTLINE PART I: ICT IN ECONOMIC GROWTH & DEVELOPMENT CONTEXT PART II: ICT AND KENYA’S GROWTH, EQUITY & POVERTY REDUCTION AGENDA PART III: TOWARDS AN ICT-ENABLED GROWTH AND HUMAN DEVELOPMENT FRAMEWORK

3. PART IICT IN ECONOMIC GROWTH & DEVELOPMENT CONTEXT

4. SOCIO-ECONOMIC SNAPSHOT: KENYA’S PEOPLE PEOPLE DATA: Expressed as a proportion of every 100 Kenyans Rest of Kenya Kenya (TOTAL) Nairobi 100 7 93 Spatial Distribution Living below US$1 a day 4 52 56 5 47 52 Working age population 2 10 12 Paid employees Self-employed 1 26 27 13 2 11 Unemployed non-participants 0 13 13 “Kids at work” (5-17) 57 57 44-64 Life Expectancy 53 54 52-63 Male Life Expectancy Female Life Expectancy 60 60 48-68 Infant survival probability past 1 year of age 92 95 64-89 Source: Ministry of Planning and National Development, 1999 Population and Housing Census, Economic Survey 2003

5. SOCIO-ECONOMIC SNAPSHOT: KENYA’S HOUSEHOLDS HOUSING DATA: Expressed per 100 households in Kenya Rest of Kenya Kenya (TOTAL) Nairobi 10 90 100 Spatial Distribution - Households 1.6 1.7 1.7 Rooms per house (average) 2 2.7 2.6 People per room (average) Houses - 3 rooms or more 45 2 43 72 2 70 Self-Owned Houses 8 10 18 Rented Houses 30 - 30 Makuti, Grass, Tin Roof 64 2 62 Wood, Earth Floor 55 3 52 Mud, Wood, Grass Wall 57 1 56 Pond, Dam, River, Well Water 90 5 85 Pit, Bucket, Bush Sanitation 96 8 78 Paraffin, firewood, charcoal cooking 85 5 80 Lantern, lamp, wood lighting Source: Ministry of Planning and National Development, 1999 Population and Housing Census

6. INEQUALITY-REDUCING CHOICES: WHITHER ICT? Source: World Bank. A Policy Agenda for Growth, August 2003

7. ICT IN ECONOMIC GROWTH CONTEXT • ECONOMIC GROWTH is measured as the sum of • MORE CAPITAL • MORE LABOUR • BETTER TOTAL FACTOR PRODUCTIVITY • POINTER 1: STUDIES SHOW THAT ICT KEY CONTRIBUTION is • MORE CAPITAL (Equipment,Infrastructure, Software Assets) and not • BETTER TOTAL FACTOR PRODUCTIVITY (Productivity Paradox) • ICT ESTIMATED AT 0.3-0.9% of 3-4% OECD late1990’s GROWTH • POINTER 2: STUDIES ALSO REVEAL • LOCAL ICT PRODUCTION not as ICT DIFFUSION • ICT GROWTH LIMIT IS IN RAPID ASSET DEPRECIATION • SOME ICT GROWTH EFFECTS RESULT FROM REPLACING • OTHER FORMS OF CAPITAL

8. PART IIICT IN KENYA’s GROWTH, EQUITY & POVERTY REDUCTION AGENDA

9. 6 Macro-targets 500,000 jobs per annum GDP Growth 7% in 2007 Poverty down 5 per centum Annual inflation below 5% pa Forex up 2.8 to 3.5 months Increased domestic savings 5 key growth sectors: Average growth projection during strategy period Building and construction 16.7% pa Manufacturing 8.6% pa Tourism 5.4% pa ICT 5% pa Agriculture 3.1% pa 5 Cross-cutting themes Financial Sector Framework Land Administration Information and Communications Technology Environment and Natural Resources Regional Development Rehabilitate and expand physical infrastructure Invest in the human capital of the poor Stable macro-economic framework Strengthen institutions Of governance 4 Strategic Pillars ERSWEC – A QUICK REFRESHER Source: Economic Recovery Strategy for Wealth and Employment Creation 2003

10. Hist. 5-yr average 2002 actual 2003 promise ERS 5-yr average Real Growth %ages for key sectors 2003 To Oct Building & Construction (0.2%) 0.3% 9.5% 16.7% 0.4% 1.2% 5.3% 8.6% Manufacturing 0.2% 1.5% 1.6% 2.7% 5.4% Tourism 1.2% 2.5% 0.3% 0.7% 1.5% 3.1% Agriculture N/A 1.0% 0.7% 2.7% 5.3% Finance, Biz Services 1.3% NIL 1.2% 3.2% 4.8% Elect. & Water 1.5% N/A N/A N/A 5.0% ICT 2.3% 2.5% 2.4% N/A 5.0% Trans& Comms 3.0% OVERALL ECONOMY (including other sectors) 0.8% 1.1% 2.3% 4.7% 1.4% ERSWEC – THE PROMISED LAND Source: Economic Survey 2003, Economic Recovery Strategy for Wealth and Employment Creation 2003, Central Bank of Kenya Monthly Economic Review December 2003

11. Rates of Return? • Financial Infrastructure • Economic Infrastructure • Social Infrastructure • Governance Superstructure ERSWEC Investment Programme Export/BoP Strategy Govt Invmt. Govt (Reform) Saving THECONSUMPTIONFACTOR? Domestic Saving Financing Strategy Domestic Invmt. FDI ODA Foreign Saving FROM ERSWEC TO IP…TO FINANCING

12. Billions of Kenya Shillings These data are 4-year estimates presented in Government’s Interim Investment Programme. SNAPSHOT OF ICT IN THE INVESTMENT PROGRAMME

13. PART IIITOWARDS AN ICT-ENABLED GROWTH & HUMAN DEVELOPMENT FRAMEWORK

14. FOOD FOR THOUGHT TOP-DOWN STRATEGIC CONTEXT • NATIONAL ICT STRATEGY: • IS CROSS-CUTTING, NOT SECTOR-SPECIFIC. • HENCE MAINSTREAM WITHIN ALL SECTORS, DON’T MARGINALISE • MUST REFLECT OTHER CROSS-CUTTING CONSTITUENCIES E.G. • THEMATIC PRSP GROUPS - GENDER, PASTORALISTS, M&E • REQUIRES A HOLISTIC FOCUS DRIVEN NOT BY LOCATIONS, OR • INSTITUTIONS, BUT REAL DEVELOPMENT MEASURES (IS THERE A PRO- • POOR NATIONAL ICT STRATEGY OR POLICY) • AT BOTTOM, CAN WE FIND A BALANCED NATIONAL ICT STRATEGY? BOTTOM-UP DEVELOPMENT CONTEXT

15. REFERENCES

16. ANNEXSECTOR-BY-SECTOR COMPARISON OFERSWEC,PRSP andINVESTMENT PROGRAM

17. AGRICULTURE AND RURAL DEVELOPMENT • ERSWEC PRIORITY OBJECTIVES • Legal and institutional reforms • Empowering resource-poor farmers through applied research • Improved extension services • Agricultural credit • Cooperatives • SELECTED PRSP PRIORITIES NOT IN ERSWEC ACTION PLAN • Improved crop development, including extension services (including PSP) and credit through micro-finance • Food Security • Improved Local Market Infrastructure to support agricultural livelihoods is not covered by the ERS • Research and Development

18. AGRICULTURE AND RURAL DEVELOPMENT • NEW THRUSTS INTRODUCED IN THE INVESTMENT PROGRAMME • Competition and legal reform to reduce the cost of agricultural inputs • Commercialisation of farm and non-farm products as the means to • increasing rural incomes. Possible reduced role for cooperatives? • Review of laws relating to inheritance of agricultural land as a means • to mainstreaming gender • Liberalisation of sugar and maize sectors to improve food security • Liberalisation of pyrethrum sector • Modelling of coffee sector on tea sector to increase farmer returns • Support to livestock sector through better disease control, single permits for • movement and private sector-owned slaughterhouse network • Rationalisation of spending on agricultural parastatals • Private sector participation in rural infrastructure, fisheries, and • livestock exports Available GoK Funding – KShs 14 billion Available donor funding – KShs 4 billion Potential PSP – KShs 3 billion 4 year FUNDING – KShs 21 billion 4 year NEED KShs 38 billion FUNDING GAP – KShs 17 billion (45% of TOTAL NEED)

19. EDUCATION • ERSWEC PRIORITY OBJECTIVES • UPE • Support for secondary enrolment in ASAL and poor families • SELECTED PRSP PRIORITIES NOT IN ERSWEC ACTION PLAN • Early Childhood Development • Access, retention, completion and attainment at primary level • Monitoring and control of parent exploitation through rationalised curricula and control over user charges • Expansion of bursaries, subsidies (e.g. for exam fees for the poor) and school feeding (for the poor) • Provision of school equipment and other materials to day schools • Encourage PSP in school development • Non-formal education • Resource management (Quantitative and curriculum-based P/T ratios) • Adult education, especially young adults • Capacity-building for PTAs and School Boards

20. EDUCATION • NEW THRUSTS INTRODUCED IN THE INVESTMENT PROGRAMME • Improve quality and internal efficiency through teacher training and • redeployment • Reform curriculum to focus on core skills, learning materials and • learning environment • Redefine the role of local authorities in education • Decentralise decision-making to district and school-level administrators Available GoK Funding – KShs 21 billion Available donor funding – KShs 5 billion Potential PSP – KShs NIL 4 year FUNDING – KShs 26 billion 4 year NEED KShs 76 billion FUNDING GAP – KShs 50 billion (66% of TOTAL NEED)

21. HEALTH CARE (including HIV/AIDS) • ERSWEC PRIORITY OBJECTIVES • Health • National Social Health Insurance • Health care programmes for vulnerable groups • Rehabilitation of health facilities and equipment • Overhaul of drugs procurement and distribution • HIV/AIDS • Reduce prevalence • SELECTED PRSP PRIORITIES NOT IN ERSWEC ACTION PLAN • HEALTH • Equity, quality, accessibility and affordability of health care, including specific poverty-focused resource allocations to districts • Essential package of health services, emphasis on women and children under 5 • Decentralisation of health services • HIV/AIDS • Prevention and advocacy 2. Treatment and care of the infected and affected • Mitigation of socio-economic impact 4. Creation of improved work environment

22. HEALTH CARE (including HIV/AIDS) • NEW THRUSTS INTRODUCED IN THE INVESTMENT PROGRAMME • HEALTH • Interim health sector financing strategy prior to social health insurance scheme • Focus investment on interventions for poor and vulnerable groups • Improve cross-sectoral cooperation for health promotion • Establish National Health Sector Strategy • Increase government spending on health (by 115%) • HIV/AIDS • Intensify advocacy campaigns • Coordinate strategies for prevention, treatment and mitigation • Develop a roll-out plan for treatment and intensify prevention activities Available GoK Funding – KShs 16 billion Available donor funding – KShs 5 billion Potential PSP – KShs NIL 4 year FUNDING – KShs 21 billion 4 year NEED KShs 57 billion FUNDING GAP – KShs 36 billion (63% of TOTAL NEED)

23. SHELTER AND HOUSING (incl. SLUM UPGRADING) • ERSWEC PRIORITY OBJECTIVES • Increase urban housing • Improve urban sanitation and residential infrastructure • SELECTED PRSP PRIORITIES NOT IN ERSWEC ACTION PLAN • Establish national housing policy • Establish a mortgage-based securities market • Facilitate provision of decent, affordable housing • Prolong economic lifespan of government buildings • Complete all outstanding, viable building projects • Terminate all stalled and suspended building projects • Suspend initiation of new government projects except in emergencies

24. Available GoK Funding – KShs 0.04 billion Available donor funding – KShs 0.3 billion Potential PSP – KShs NIL 4 year FUNDING – KShs 0.34 billion 4 year NEED KShs 8.6 billion FUNDING GAP – KShs 8.26 billion (96% of TOTAL NEED) SHELTER AND HOUSING (incl. SLUM UPGRADING) • NEW THRUSTS INTRODUCED IN THE INVESTMENT PROGRAMME • Develop slum upgrading and relocation plans • Construct 150,000 housing units annually • Complete stalled housing projects • Provide new tenant purchase housing schemes • Promote secondary mortgage market • Invite PSP in construction of low-cost housing

25. ERSWEC PRIORITY OBJECTIVES • Civil service reform • Local government reform • Privatisation • Regulation • Competition • SELECTED PRSP PRIORITIES NOT IN ERSWEC ACTION PLAN • Improve efficiency and effectiveness of local authorities • Creation of a leaner, efficient public sector, with pay reform • Enhance economic planning and development administration • Strengthen financial management (budgeting, control, monitoring, accounting, audit) • Better disaster and emergencies management PUBLIC SERVICE (excl. SAFETY LAW AND ORDER)

26. Available GoK Funding – KShs 0.2 billion Available donor funding – KShs 0.5 billion Potential PSP – KShs NIL 4 year FUNDING – KShs 0.7 billion 4 year NEED KShs 7 billion FUNDING GAP – KShs 6.3 billion (90% of TOTAL NEED) PUBLIC SERVICE (excl. SAFETY LAW AND ORDER) • NEW THRUSTS INTRODUCED IN THE INVESTMENT PROGRAMME • Cabinet review of viability of 136 state corporations • Expenditure restructuring • Wages and salaries restructuring through retrenchment of 45,000 public • employees (including parastatals and public universities), delayed • implementation of salary awards and hiring freeze • Pensions restructuring through introduction of contributory pension • scheme • Debt interest restructuring using privatisation proceeds and liquidation • of non-core state corporations • Cost savings in goods and services purchases through streamlined • procurement and better governance • Cost savings in Defence/NSIS through restrictions in purchase of • equipment through short-term commercial borrowing • Privatisation proceeds are not factored into the financing framework

27. ERSWEC PRIORITY OBJECTIVES • GOVERNANCE - Good governance and anti-corruption strategy • SECURITY • Improved service delivery • Improved welfare for disciplined forces • IMMIGRATION - Regulate and control entry, exit, residence and citizenship • RULE OF LAW • Predictable and impartial justice system • Speed up prosecutions to clear backlog • Improve service delivery in civil legislation • PRISONS - Less congestion and crime (NO ACTION SPECIFIED) • SELECTED PRSP PRIORITIES NOT IN ERSWEC ACTION PLAN • Protect national sovereignty • Institute offendor rehabilitation programmes • Decentralise probation services • Gender mainstreaming PUBLIC SAFETY, LAW AND ORDER

28. Available GoK Funding – KShs 15 billion Available donor funding – KShs NIL Potential PSP – KShs NIL 4 year FUNDING – KShs 15 billion 4 year NEED KShs 28 billion FUNDING GAP – KShs 13 billion (46% of TOTAL NEED) PUBLIC SAFETY, LAW AND ORDER • NEW THRUSTS INTRODUCED IN THE INVESTMENT PROGRAMME • POLICE • Implement a framework for cross-border policing and collaboration • Provide decent accommodation for police • Establish anti-banditry units • Comprehensive intelligence research in crime and security • ANTI-CORRUPTION • Cancel all stalled projects (but refer to SHELTER AND HOUSING) • NOTE: Main thrusts from the ERSWEC are retained

29. ERSWEC PRIORITY OBJECTIVES • Investment Code • Export Promotion • Tourism – increased arrivals and diversified source markets • Manufacturing – export-focused growth • Medium and Small-Scale Enterprises – Growth and employment creation • Trade policy • Fisheries development • Forestry development • Mining development • Quarrying • SELECTED PRSP PRIORITIES NOT IN ERSWEC ACTION PLAN • Enhanced TTI information networks (Industrial Database) • Specific internal and external trade strategy TOURISM, TRADE AND INDUSTRY

30. Available GoK Funding – KShs 2 billion Available donor funding – KShs NIL Potential PSP – KShs 5 billion 4 year FUNDING – KShs 7 billion 4 year NEED KShs 15 billion FUNDING GAP – KShs 8 billion (53% of TOTAL NEED) TOURISM • NEW THRUSTS INTRODUCED IN THE INVESTMENT PROGRAMME • Security • Review of tax structures in tourism sub-sector • Pro-poor thrusts • Foster community-based and eco-tourism in northern and western • Kenya, targeted at backpackers and nationals • Compensation policy for human-wildlife conflict • Guidance, credit and incentives to SMEs • Review park tariffs in less-visited areas • Restructure KTDC into an investment and SME credit institution

31. Available GoK Funding – KShs 0.8 billion Available donor funding – KShs NIL Potential PSP – KShs NIL 4 year FUNDING – KShs 0.8 billion 4 year NEED KShs 9 billion FUNDING GAP – KShs 8.2 billion (91% of TOTAL NEED) TRADE, INDUSTRY AND SMEs • NEW THRUSTS INTRODUCED IN THE INVESTMENT PROGRAMME • TRADE AND INVESTMENT • World Bank-GoK trade diagnostic study – to influence trade policy • New regulatory framework for finance and infrastructure • Investment authority and investment road map by 2005 • INDUSTRY • Liberalise trade • Deepen financial market • Facilitate use of technology licenses • Review mechanisms for wage determination • Improve access to quality training • Benchmarking studies of textiles (AGOA?) and sugar (But refer to Agriculture) • SMEs • Strengthen credit institutions, including KIE • Develop training market for SMEs

32. ROADS, ENERGY AND WATER • ERSWEC PRIORITY OBJECTIVES • ROADS • Efficient road transport • ENERGY • Adequate affordable supply (KPLC, Ken-Gen) • Increased oil refinery efficiency • Oil pipeline extension to Kampala • WATER • Rural access to water • Sustainable management of water resources • SELECTED PRSP PRIORITIES NOT IN ERSWEC ACTION PLAN • ROADS • Improved road transport, focus on rural areas • Road network maintenance • Reform of Mechanical and Transport Dept operations • ENERGY • Rural access • Diversified energy sources • Reduced dependence on imported petroleum • WATER • Improved access to water and sanitation, especially poor and vulnerable groups • Increased coverage of urban sewerage and sanitation

33. Available GoK Funding – KShs 40 billion Available donor funding – KShs 16 billion Potential PSP – KShs 37 billion 4 year FUNDING – KShs 93 billion 4 year NEED KShs 162 billion FUNDING GAP – KShs 69 billion (43% of TOTAL NEED) ROADS, ENERGY AND WATER • NEW THRUSTS INTRODUCED IN THE INVESTMENT PROGRAMME • ROADS • Road inventory and condition survey • Conventional tolling for 1,208 kms of Northern Corridor. 3 concessions – (1) Mombasa • -Machakos (2) Machakos-Rironi (3) Rironi-Malaba via Eldoret and to Busia via • Kisumu • First concession – Machakos-Nairobi under BOT • Rehabilitate 2,805 km • Reconstruct 150km roads per annum • ENERGY • Create Rural Electrification Authority • Increase rural electrification penetration from 4% to 40% • Develop framework for solar power • WATER • Increase fresh water resource availability by over 250% by 2007 • Rehabilitate 600 rural water schemes by 2006 • Rehabilitate and hand to communities 100 dams per year • Drill and hand to communities 500 boreholes per year

34. ERSWEC PRIORITY OBJECTIVES • RAIL • Develop an efficient railway (Kenya Railways) and sell gulf marine services • MARINE • Develop efficient marine transport • Replace ferry service at Likoni with Dongo Kundu bypass • AIR • Improve and strengthen management and operations to ICAO standards • Increase handling capacity of regional airports • PSP in airports management • PORTS • KPA as a landlord port, with outsourced services • SELECTED PRSP PRIORITIES NOT IN ERSWEC ACTION PLAN • METEOROLOGY • Improved efficiency and capacity of meteorological services RAIL, MARINE, AIR, PORTS AND MET

35. NEW THRUSTS INTRODUCED IN THE INVESTMENT PROGRAMME • RAIL • New legal framework for PSP in rail • Kisumu line upgrading • Thika-Nanyuki line relaying • Nairobi-Mombasa mainline spot rehabilitation • Joint concessioning of KR and Uganda Railways? KR Staff retrenchment? • AIR • Achieve FAA/ICAO Category 1 rating • Relocate domestic terminal to old airport at Embakasi • PSP in airport management and financing • MARINE AND PORTS • KPA as a landlord port • Privatise all KPA inland container terminals (Nairobi, Kisumu, Eldoret) • Purchase 2 new ferries for Mombasa Available GoK Funding – KShs 1.2 billion Available donor funding – KShs 0.2 billion Potential PSP – KShs 43 billion 4 year FUNDING – KShs 44.4 billion 4 year NEED KShs 48.7 billion FUNDING GAP – KShs 4.3 billion (9% of TOTAL NEED) RAIL, MARINE, AIR, PORTS AND MET

36. ERSWEC PRIORITY OBJECTIVES • Reliable, efficient and affordable communications (Telkom Kenya) • Improved public access to information • SELECTED PRSP PRIORITIES NOT IN ERSWEC ACTION PLAN • Strengthen ICT capacity to support core government functions • Support communications workflow processes and service delivery • Facilitate information management and sharing • Stimulate and support the nation’s participation in the global economy • REDUCE THE DIGITAL DIVIDE TELECOMMS AND ICT

37. Available GoK Funding – KShs 0.7 billion Available donor funding – KShs NIL billion Potential PSP – KShs NIL billion 4 year FUNDING – KShs 0.7 billion 4 year NEED KShs 1.2 billion FUNDING GAP – KShs 0.5 billion (42% of TOTAL NEED) TELECOMMS AND ICT • NEW THRUSTS INTRODUCED IN THE INVESTMENT PROGRAMME • TELECOMMS • East cost submarine cable • ICT • Countrywide ICT awareness campaign • ICT skill enhancement campaign • E-government initiative – centrally, then to districts

38. The ERSWEC and IP identifies special interest groups as: • ASALs/Pastoralists • but ignores the following thematic groups from PRSP • Gender • Disabilities • Youth THE CASE OF SPECIAL INTEREST GROUPS