Leveraging on Regional blocs to spur industrial growth

By Tobias Alando,

The core of any economy is the ability of economic agents to convert inputs – capital, labour, energy, raw materials and purchased services – into useful products. Productivity matters because it is the cornerstone and fundamental component of economic success, as well as the building block that determines how fast an economy can grow. The more productive we are, the better we are able to compete locally, nationally and globally.

One fundamental objective of devolution is to promote social and economic development through the provision of proximate, easily accessible services throughout Kenya. This is an objective that the Manufacturing sector treasured in the Constitution but since the advent of devolution, the sector has faced a surfeit of challenges at the County level that have impeded the general growth of the sector. The Manufacturing sector has been subjected to punitive taxation regimes at the County level that hinder business at both levels of government. Challenges around conflict on own revenue-raising policies at the County level have prejudiced economic activities and mobility of goods nationally.

The idea of forming regional economic blocs among counties is laudable since it will leverage economies of scale in the regions and maximize utilization of existing opportunities and advantages that come from opportunities of scale for development. The establishment of regional blocs is an acknowledgement by the counties that investment will play a key role in the realization of Vision 2030, which is the development blueprint which seeks to transform Kenya into an industrialized middle-income country, providing a high-quality life to all its citizens by the year 2030.

Historically, the idea of economic integration and the establishment of regional blocs were more responsive to the aspirations of economies with geographical identities. The Blocs, if properly managed, will unlock regional economic development in productive sectors such as agriculture, tourism, trade and industrialization in the Counties that form them. The Manufacturing sector will also benefit from these blocs as revenue-raising policies will be coordinated within these Blocs hence harmonious revenue-raising policies.

Regional blocs have worked in other parts of the world. According to 2017 data by the Government of India, Ministry of Statistics and Programme Implementation Data, interstate trade is estimated to generate close to 54% of India’s GDP in India. The analysis of the data further shows that inter-state trade between contiguous states exceeds the intra-state trade.

For County governments to realize growth in social and economic, the principle of cooperation and consultation both horizontally and vertically is inevitable. The counties must liaise with government at the other level for the purpose of exchanging information, coordinating policies and administration and enhancing capacity. The principle of cooperation and consultation require that counties co-operate in the performance of functions and exercise of powers, which is unfettered in Article 189 of the Constitution of Kenya. This principle of cooperation also implies that cooperation should include other stakeholders, for example, the manufacturing sector.

Apart from coordinated policies that will eventually spur economic growth, the regional blocs are expected to revamp collapsed regional industries in the sugar, cotton, fish and general horticultural sectors within the counties, rehabilitation of the poor state of roads so as to promote trade and business travel and maximum utilization of infrastructures like Airport to spur trade and investment potential as it serves the entire bloc among others. The national government and other stakeholders like the captains in the manufacturing sector should support the initiative for maximum benefit to the national economy.

The writer is the Head of Membership Development at Kenya Association of Manufacturers (KAM). He can be reached at tobias.alando@kam.co.ke.