Post by Onyango Oloo on Sept 30, 2005 14:24:46 GMT 3
by Mwai Kibaki (from the East African Standard)
As I pledged on assuming leadership, my Government has remained focused on getting our economy back on the growth path. Last year, the economy grew by 4.3 per cent compared to 2.8 per cent in 2003 and 0.4 percent in 2002. Indeed, real GDP growth is forecast to exceed 5 per cent this year. This sustained economic recovery over the last two years is attributed to the firm actions we have taken to ensure a sound policy environment, provide the requisite infrastructure and reform our basic institutions of management, business and governance.
At the policy level, my government has pursued a conducive and predictable macro-economic policy to enable investors make long-term investment plans. Our efforts in this regard have resulted in the stabilization of interest rates, inflation and the exchange rate. A reduction in borrowing rates and the stability of the Kenya Shilling have supported increased credit to the private sector, thus supporting consumer demand and investment. This year, credit to the private sector increased by 20 per cent compared with 14 per cent in July last year.
However, the achievements we have made in maintaining a low inflation rate are under threat from the high international oil prices. Oil plays a crucial role in the production and transportation of many commodities. Increases in oil prices will, therefore, have adverse implications for domestic prices. I am pleased to note that some of the measures we announced during the current budget have had a moderating effect on the rising inflation. These measures include, elimination of Value Added Tax on kerosene, cooking gas, maize flour and milk.
Besides the macro-economic environment, my government has also continued to take measures to improve our external trade. In this connection, we have remained committed to regional integration arrangements such as the East African Community and Comesa. We recognize that in the modern global economy, no country will be able to achieve economic success without increasing trade with the rest of the world. We must continuously work hard to increase our level of trade and investments.
Accordingly, we are making consistent efforts to expand the range of markets beyond the European Union to new markets in North America, Middle East and the Far East.
As a result of these efforts, the volume of our exports increased by 24 per cent last year. Total exports to the African region expanded by 20 per cent, thus raising our share of exports in the African region to 48 percent. Within the Comesa region, our exports increased by 21 per cent, while exports to the European Union rose by 9 per cent. In value terms, our export earnings rose significantly on account of improved international commodity prices and expanded export volumes.
My government has also taken measures to attract investors and create the appropriate conditions for industrial development. In the last two financial years, we introduced tax reforms including duty waivers on capital goods, plant andequipment. We also increased investment allowance from 60 percent to 100 per cent.
In the current budget, the government also simplified the licensing regime in order to reduce the cost of doing business. We have also ratified the Common External Tariff under the East African Community and other trade agreements in order to expand our market horizon.
These measures have begun to bear fruits as indicated by the performance of the manufacturing sector. Last year, the sector expanded by 2.7 per cent up from 1.4 percent.
The increase in output was largely realized in the agro-processing industries, cement, galvanized iron sheets and motor vehicles assembly. To encourage expansion of our manufacturing industry, the government will continue to review our tariffs regime and investment incentives to attract investors. I urge our business community to take advantage of these opportunities and expand their operations.
Growth in trade and investments has been slowed by operational constraints, particularly the cost of power, slow progress in rehabilitation of critical infrastructure particularly roads, and lengthy clearing procedures at the Port of
Let me assure you that my government is addressing these issues. In the energy sector, the government is increasing electricity generation and streamlining distribution to ensure efficiency and reliability of electric power supply at competitive tariffs. As a result of these efforts, total power generation in the first half of this year increased by 11 per cent. The on-going work at the Sondu
Miriu hydro-power plant and Olkaria Geothermal extension project are part of the government’s efforts to increase electricity generation and keep pace with the growing energy consumption.
However, power losses due to a weak transmission system continue to be a serious problem. I urge the Kenya Power and Lighting Company, to step up measures that will ensure an efficient power transmission and distribution system.
On infrastructure, we have made progress in improving roads, railway transport, port services, air transport and telecommunications. A major modernization programme for our airports is underway. Plans are also underway to extend the railway to Southern Sudan, while the concessioning of the Kenya and Uganda Railways is expected to be complete by the end of December this year.
On roads, we have allocated a substantial amount of funds for roads rehabilitation and re-construction. What is critical is to ensure speedy and timely implementation of roads projects. I also appeal to Members of Parliament to give priority to rural access roads when allocating funds from the Constituency Development Fund.
Turning to agriculture, I am glad to note that the reform measures we have implemented in the last two years have resulted in improved performance in key agricultural sub-sectors. In the tea industry, export earnings increased by 9.4 per cent to 44 billion shillings. Milk deliveries in the formal dairy sub-sector increased by 9 percent in the first half of this year as the Kenya Co-operative Creameries continued to play a lead role in stablisation of prices.
Total horticulture export volumes increased from 133,000 metric tonnes in 2003 to 166,000 tonnes last year earning the country 33 billion shillings from exports last year.
In the sugar sub-sector, cane production increased by 12 per cent. Consequently, sugar production improved by 15 per cent from 449,000 metric tonnes to 517,000 tonnes.
In recognition of the importance of agriculture as the lead sector of our economy, my Government will increase resource allocation to the sector by 74 per cent over the next three years. We have further sought to boost the sector by introducing tax concessions and policy reforms as indicated in the current national budget. These reforms include allocation of 250 million shillings for revival of cotton production, allocation of 1.5 billion shillings to the Agricultural Finance
Corporation for lending to farmers; allocation of 1.5 billion shillings for drilling of boreholes and dams in marginal areas to increase livestock production; removal of duty on spare parts for agricultural equipment and provision for direct exportation of coffee.
* This was part of the President’s speech during the Official Opening of the Nairobi International Trade Fair.
As I pledged on assuming leadership, my Government has remained focused on getting our economy back on the growth path. Last year, the economy grew by 4.3 per cent compared to 2.8 per cent in 2003 and 0.4 percent in 2002. Indeed, real GDP growth is forecast to exceed 5 per cent this year. This sustained economic recovery over the last two years is attributed to the firm actions we have taken to ensure a sound policy environment, provide the requisite infrastructure and reform our basic institutions of management, business and governance.
At the policy level, my government has pursued a conducive and predictable macro-economic policy to enable investors make long-term investment plans. Our efforts in this regard have resulted in the stabilization of interest rates, inflation and the exchange rate. A reduction in borrowing rates and the stability of the Kenya Shilling have supported increased credit to the private sector, thus supporting consumer demand and investment. This year, credit to the private sector increased by 20 per cent compared with 14 per cent in July last year.
However, the achievements we have made in maintaining a low inflation rate are under threat from the high international oil prices. Oil plays a crucial role in the production and transportation of many commodities. Increases in oil prices will, therefore, have adverse implications for domestic prices. I am pleased to note that some of the measures we announced during the current budget have had a moderating effect on the rising inflation. These measures include, elimination of Value Added Tax on kerosene, cooking gas, maize flour and milk.
Besides the macro-economic environment, my government has also continued to take measures to improve our external trade. In this connection, we have remained committed to regional integration arrangements such as the East African Community and Comesa. We recognize that in the modern global economy, no country will be able to achieve economic success without increasing trade with the rest of the world. We must continuously work hard to increase our level of trade and investments.
Accordingly, we are making consistent efforts to expand the range of markets beyond the European Union to new markets in North America, Middle East and the Far East.
As a result of these efforts, the volume of our exports increased by 24 per cent last year. Total exports to the African region expanded by 20 per cent, thus raising our share of exports in the African region to 48 percent. Within the Comesa region, our exports increased by 21 per cent, while exports to the European Union rose by 9 per cent. In value terms, our export earnings rose significantly on account of improved international commodity prices and expanded export volumes.
My government has also taken measures to attract investors and create the appropriate conditions for industrial development. In the last two financial years, we introduced tax reforms including duty waivers on capital goods, plant andequipment. We also increased investment allowance from 60 percent to 100 per cent.
In the current budget, the government also simplified the licensing regime in order to reduce the cost of doing business. We have also ratified the Common External Tariff under the East African Community and other trade agreements in order to expand our market horizon.
These measures have begun to bear fruits as indicated by the performance of the manufacturing sector. Last year, the sector expanded by 2.7 per cent up from 1.4 percent.
The increase in output was largely realized in the agro-processing industries, cement, galvanized iron sheets and motor vehicles assembly. To encourage expansion of our manufacturing industry, the government will continue to review our tariffs regime and investment incentives to attract investors. I urge our business community to take advantage of these opportunities and expand their operations.
Growth in trade and investments has been slowed by operational constraints, particularly the cost of power, slow progress in rehabilitation of critical infrastructure particularly roads, and lengthy clearing procedures at the Port of
Let me assure you that my government is addressing these issues. In the energy sector, the government is increasing electricity generation and streamlining distribution to ensure efficiency and reliability of electric power supply at competitive tariffs. As a result of these efforts, total power generation in the first half of this year increased by 11 per cent. The on-going work at the Sondu
Miriu hydro-power plant and Olkaria Geothermal extension project are part of the government’s efforts to increase electricity generation and keep pace with the growing energy consumption.
However, power losses due to a weak transmission system continue to be a serious problem. I urge the Kenya Power and Lighting Company, to step up measures that will ensure an efficient power transmission and distribution system.
On infrastructure, we have made progress in improving roads, railway transport, port services, air transport and telecommunications. A major modernization programme for our airports is underway. Plans are also underway to extend the railway to Southern Sudan, while the concessioning of the Kenya and Uganda Railways is expected to be complete by the end of December this year.
On roads, we have allocated a substantial amount of funds for roads rehabilitation and re-construction. What is critical is to ensure speedy and timely implementation of roads projects. I also appeal to Members of Parliament to give priority to rural access roads when allocating funds from the Constituency Development Fund.
Turning to agriculture, I am glad to note that the reform measures we have implemented in the last two years have resulted in improved performance in key agricultural sub-sectors. In the tea industry, export earnings increased by 9.4 per cent to 44 billion shillings. Milk deliveries in the formal dairy sub-sector increased by 9 percent in the first half of this year as the Kenya Co-operative Creameries continued to play a lead role in stablisation of prices.
Total horticulture export volumes increased from 133,000 metric tonnes in 2003 to 166,000 tonnes last year earning the country 33 billion shillings from exports last year.
In the sugar sub-sector, cane production increased by 12 per cent. Consequently, sugar production improved by 15 per cent from 449,000 metric tonnes to 517,000 tonnes.
In recognition of the importance of agriculture as the lead sector of our economy, my Government will increase resource allocation to the sector by 74 per cent over the next three years. We have further sought to boost the sector by introducing tax concessions and policy reforms as indicated in the current national budget. These reforms include allocation of 250 million shillings for revival of cotton production, allocation of 1.5 billion shillings to the Agricultural Finance
Corporation for lending to farmers; allocation of 1.5 billion shillings for drilling of boreholes and dams in marginal areas to increase livestock production; removal of duty on spare parts for agricultural equipment and provision for direct exportation of coffee.
* This was part of the President’s speech during the Official Opening of the Nairobi International Trade Fair.