Investment Opportunities in Manufacturing Sector

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Introduction

The Vision 2030 aims to transform Kenya into “a newly-industrializing, middle-income country providing a high quality of life by 2030”. The industrial sector has been identified as key to addressing incidences of high poverty levels, unemployment, disparities in regional development, and meagre foreign exchange earnings from exports of primary or semi-processed agricultural produce. The industrial sector also has strong linkages with other sectors and its growth will positively affect the other sectors. The sector, despite its potential, has not been dynamic enough to function as "the engine for growth" for the Kenyan economy as has been the case of the newly industrializing economies of South East Asia such as Indonesia, Malaysia, Thailand, Singapore and Korea.

Over the years, the industrial sector’s share of monetary GDP has remained about 15-16% out of which that of manufacturing sector has remained at a little more than 10% over the last two decades. The manufacturing sector’s contribution to GDP grew by an annual average of 5.5 per cent between the period 2003 and 2007. However, the sector’s growth in 2008 was 3.8 per cent, the lowest in the last five years. This has been attributed to the slowdown in the global economy, spill over effects from the post elections violence and other economic challenges such as high inflationary pressures, depreciation of the Kenya shilling, low levels of productivity, high cost of production, unfair competition from counterfeits and stiff competition from cheap imports.

In order to curb further job losses, decline of the industrial sector’s contribution to the economy and deteriorating standards of living on majority of Kenyans, the National Economic and Social Council (NESC) mandated the Committee on Industrialization to develop a National Policy Agenda on Industrialization to reverse the declining trend and make recommendations that will fast track the industrialization process. This paper is the outcome of that NESC decision.

The Government of Kenya in recognition of the role of private sector in spear heading Industrialization has put in place a policy frame-work to foster the creation of a Conducive environment for private sector participation in the economic development. Kenya is located on the eastern coast of Africa, bordering Somalia to the east; Ethiopia to the north; Sudan to the north-west; Uganda to the west and Tanzania to the south. The Indian Ocean lies to the south-east. Kenya’s geographical position makes it a major gateway for trade in the Eastern and Central Africa region. Kenya has a total area of 582,650 sq km out of which 569,250
sq Km is land and 13,400 sq Km is under water. Kenya has a population of approximately 36 million people with a national literacy rate of over 78%. Kenya has abundant, skilled and educated labour.

Kenya’s infrastructure is relatively developed in the sub-Saharan region. There are three International airports located in Nairobi, Mombasa and Eldoret. The main international airport, Jomo Kenyatta, is strategically located to serve major markets such as Europe and the Middle East, as well as other African countries. There are more than 150 other airports and airstrips located across the country.

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