ILO Statement for Kenya at the 2012 ECOSOC session

How can growth be made more job-rich in Kenya?

Despite many interventions targeted at employment and the relatively good growth performance of the Kenyan economy, unemployment, underemployment and the working poor continue to be Kenya’s most difficult and persistent problems.

Statement | New York | 03 July 2012
I would like to thank the Government of Kenya for their kind invitation to the ILO to be a “friend” of Kenya in this voluntary presentation.

The ILO is privileged to be supporting the government, employers and workers in Kenya on a number of issues, in the context of the DWCP of Kenya, in areas such as labour intensive investments in infrastructure, youth employment, HIVAIDS, the expansion of social protection and the strengthening of tripartism. And we celebrate the strength of both employers and workers organizations in Kenya.

We also congratulate His Excellency, Minister Munyes Kiyong'a, for a very successful National Consultation Event on youth employment in April, as part of the preparations for the Youth Employment Crisis discussion at the ILO International Labour Conference.

Congratulations, Honorable Minister, on a well integrated and well structured document and presentation. You have made some clear distinctions between lessons learned, best practices, challenges and opportunities. Please allow me, Mr President, to comment briefly on each.

Lessons: the growth and jobs linkage in Kenya

On lessons learned, the document identifies four, all of which are quite right:
•that policies matter, and can lead to improved outcomes, as many examples in the document suggest
•that when there is a disconnect between policies and programme implementation, results are bad or mixed, and that policy implementation and coordination are key;
•that financing is also key; and
•that public-private partnerships are essential to complement public resources.

A lesson mentioned in the text, but not picked up in this short list, is the link between growth and jobs in Kenya. The document states that despite the many policy interventions targeted at employment, and despite the relatively good growth performance of the Kenyan economy in recent years, unemployment, underemployment and the working poor continue to be Kenya’s most difficult and persistent problems, including in particular youth unemployment.

Why is this so? How can growth be made more job-rich in Kenya? These are key policy questions.

Part of the answer is that although a 5% rate of economic growth is not bad, it is not high enough: it is still below the African average, and substantially below that of its neighbors in the East African Community. Kenya’s economy would need a higher growth rate of at least 7 percent sustained over 8 to 10 years to effectively achieve higher standards of living, increased poverty reduction, significant employment growth.

The good news are that Kenya’s per capita income is now exceeding US$ 800 for the first time, and the country is firmly on the path to Middle income status. Debt levels are below 45% of GDP. If Kenya were part of the European Union, it would be one of its least-indebted members! So the country has space to run higher fiscal effort and maintain public investment and social programs. However, the external sector, with a large trade deficit, is a bit out of balance. Therefore, a major priority for growth and job creation is to increase its exports of both goods and services.

In this respect, the East African Community is a major source of dynamism that Kenya is well advised to use to the maximum. The EAC is one of the fastest regions in the world, it has grown at 5.8% on average in the last ten years, just below ASEAN, that has grown at 6.1%. It is already a market of 145 million people, estimated to reach 200 million in 2030.

A fundamental issue is competitiveness. Kenya is ranked 102 in the latest Global Competitiveness Report, out of 142 countries, and has scored high marks in a number of dimensions. However, Kenya’s overall competitiveness is undermined by serious health concerns rated in the 122nd place due to high prevalence of communicable diseases contributing to a low life expectancy and low productivity; and the security situation which is rated at 129th. Another key issue for better quality jobs and higher standards of living is productivity promotion, and the work that the National Productivity Centre is doing in Kenya, documented in the paper, is very strategic and central to this.

Best practices

And this takes me to the issue of best practices. The document singles out four, although you mentioned some additional ones in your presentation: • the Kenya Constitution • The strengthening of labour market institutions • The performance based management in the public sector • The introduction of the mobile phone money transfer services, known as M-PESA.

There is no doubt that the new Kenya Constitution was a major step forward. The M-PESA money transfer service has been a great success. a true example for the international community, which is now well documented. The system processes more transactions domestically than Western Union does globally, around US$ 320 million dollars per month. On an annualized basis this is 10% of Kenyan GDP. It has opened a whole new dimension for policies of financial inclusion.

While these two examples of best practice are clear, what is not so clear, at least from the document, is what criteria make the other two examples - strengthening labour market institutions and the introduction of performance-based management in the public sector- a best practice? It would be good if you can give us a bit more information on these two examples of good practice.

Challenges

On challenges, the document picks up three:
•Climate change
•Inadequate human and financial capacity in some sectors
•Uncoordinated and fragmented policies These are major challenges indeed.
But three more seem quite binding in Kenya as well:

•First, the need to correct large infrastructure deficits.
•Second, the need to dramatically expand the education and skills base of the labour force. And,
•Third, the need to improve certain aspects of the enabling environment for sustainable enterprises, including but not limited to the political environment, as well as the high levels of crime.
Opportunities

Finally… opportunities. The document refers to three of them:


•The action plan to implement the National Climate Change Response Strategy
•The implementation of the 120 or so projects into which the Kenya Vision 2030 has been translated and,
•Further regional integration into the East African Community Common Market.

These three can indeed be major sources of growth and employment in Kenya. For instance, Kenya’s trade with its EAC partners has already overtaken trade with Europe! And given the relatively gloomy growth prospects in Europe that were discussed this morning, versus the high demographic and economic growth of the East African Community, the EAC and intra-regional trade in the African continent in general, seems to be the best bet as an engine of growth.

Within this perspective my question to Minister Munyes Kiyong’a is: what is the government of Kenya and the private sector doing to further tap the full potential of the EAC?

Finally, I would like to say that one more source of dynamism, which perhaps was not mentioned in the paper because Kenya is already profiting highly from it, is the so called “Look East policy”. This does not mean not to look West, or North, but certainly the relationship with China, India, Thailand and other countries of the East, as well as with countries like Brazil, in other words the whole South-South trade and cooperation relationship is producing an important growth and modernization impetus.

In summary, intelligent use of globalization’s opportunities, complemented by the right employment, social protection and decent work policies internally, can be a major source of growth and jobs for Kenya.

Thank you.