THE 20 TH ENGINEERS INTERNATIONAL CONFERENCE 2013, THE TOM MBOYA LABOUR COLLEGE, KISUMU

1. 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

2. 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....

3. 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.

4. 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.

5. 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.

6. 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)

7. 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.

8. 201 Targets of the Manufacturing Sector Under Vision 20301st MTP targets Snapshot of High Level Strategy • Vision • 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 • Strategy • Local Production: Defend and restructure key industries that have local raw material availability, but no competitive edge (e.g. sugar, paper) • Regional Domination: Exploit opportunities to further process imports and capture the “last step” of value addition (e.g. metals, plastics) • Global Niche: Strategically drive increased level of value addition in niche exports (e.g. agro-processing) Flagship projects • 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 • Develop concept, pilot, and create at least 5 Small & Medium Enterprise (SME) Industrial Parks 1. 2. Economics and impact GDP KSh Billion* CAGR +8.8% 27 5.7% 2007** 2012 Baseline Additional GDP withstrategy 2012 with Vision 2030

9. Challenges affecting Industrial Development ENERGY Limited sector budgetary support Training in Science, Eng. Technology Lack of harmonized Industrial policies

10. Industrial Sector and Vision 2030 Kenya Vision 2030 identified Industrial sector as potential growth area because it: • 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 • Offers high prospects for employment-creation, specially in labour-intensive industries; • Acts as a catalyst for technology transfer, attraction of FDI, & increasing foreign exchange earnings.

11. Specific Objectives Strengthening local production capacity to increase domestically-manufactured goods by focusing on improving the sector’s productivity and value addition by 20 per cent; 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;

12. 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.

13. Foundation Pillars & Enablers • 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

14. Priority subsectors • Machine tools and spares Agro Machinery and farm implements Agro-processing & Value addition Iron and Steel industry Automotive and Auto parts Textiles and Clothing Mining and Quarrying Leather and Leather Products

15. Job Creation GDP Growth

16. Institutional Framework CABINET NATIONAL ECONOMIC AND SOCIAL COUNCIL (NESC) NATIONAL COUNCIL FOR SMALL ENTERPRISES (NCSE) 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

17. Functions of NIDC • Generate policy innovations that will accelerate the pace of industrialization; • Advice the Government on the strategic industrial development models to pursue in light of the dynamics in the international business arena; • Through the relevant specialized agencies, direct research on thematic issues affecting industrial development and propose appropriate interventions; • Provide routine advice and policy direction on the administration of the Industrial Development Fund; • Receive, synthesize and evaluate policy proposals from the Industry Consultative Forum and make appropriate recommendations that can be passed on to the Cabinet.

18. Financial Resource Mapping Establish an Industrial Development Fund (IDF) and provide mechanisms to subsidize commercial loans. 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. Re-capitalization of DFIs through IDF, national budgetary allocation, and government guarantees to external lines of credit. Increase from 0.1% to 10% of the National budget to fund activities in the Industrial Sector.

19. Financial Resource Mapping…Cont’d 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. Provide globally competitive fiscal incentives for new industrial investments & revival of ‘dead’ industries. Provide a framework for establishment of moveable bank - loans security documents to enhance competitiveness in the banking sector. Institute prudent monetary and fiscal policies to sustain the macro-economic stability.

20. SUB-CONTRACTING ARRANGEMENT

21. BUSINESS AND TECHNOLOGY INCUBATION

22. 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.

23. THANK YOU!