Structural Implications of Economic Liberalization on Agriculture and Rural Development in Kenya PAUL GAMBA

Historical perspective Import Substitution Policy (ISP) dominated the pre and post colonial Kenyan economy up to Created dualities in the agricultural and rural economy 1980 onwards- SAPs and Economic reforms 1993 Economy classified as open Coincided with Political reforms especially the clamor for increased democratic space.

Macro and micro variables were perceived to be stable during ISP Changed to instability from early 1990s following Economic and Political reforms Several policies reformulated, Acts were amended while organizations, institutions and parastatals commercialized and privatized Unsynchronized liberalization processes created major hurdles in effecting reforms

GDP and AgGDP trend Real GDP mirror AgGDP but AgGDP is declining-more non-agricultural contribution

Causes of structural changes Political reforms that resulted in Economic Recovery Strategy and Strategy for RevitalizingAgriculture Economic reforms:-trade reforms, monetary and fiscal reforms, institutional and market reforms Changing environmental regimes and production levels Increasing population pressure on natural resources-resulting to land subdivision into uneconomical plots Rural poverty

Observed Outcomes of economic reforms Generally declining agricultural productivity Declining agricultural revenue Changes in production structure-increased/ decreased input use/ adoption of intensive production technologies Emerging, diminishing markets and enhanced distribution systems (labour, land markets)

Shifts in sources of rural household incomes and new livelihood strategies Increasing poverty incidences Labour force migration (shifting) i.e. rural depopulation and increasing urban population concentration

Changing value chains (integration and concentration) Improved institutional efficiency

Influence on the on-going processes of segmentation and concentration 1)Changes in production and productivity trends Productivity (output per Hectare) declining on specific sub-sectors coffee, sugarcane and maize, while increasing in tea.

2)Input productivity-land and labour While initially increased, now declining

3)Changes in rural household income sources Source of income%change 1997/04 Crops-40% Livestock-57% Business+20% Salaries and remittances+198% Total income-60%

4) Declining agricultural revenue Revenue from agricultural production currently declining in all major agricultural productions Coffee Tea Sugar maize

5)Poverty incidence increasing Rural46.33%46.75%52.93% Urban29.29%28.95%49.2% overall46.3%52.3%56.78%

6)Value chain integration and concentration Domestic Input markets Fertilizer Seed AI Domestic Output markets Initially dominated by Parastatals Liberalization opened up market to multiple players Risk of private monopolies real

6)Value chain integration and concentration Effects of globalization on producers beginning to bear EUREPGAP (Horticulture) Traceability (Livestock)

6)Value chain integration and concentration Coffee and Tea export chains are integrated (producer and export price differentiation minimal) coffee Nairobi auction and producer prices

Tea producer and export prices

Dairy industry Increasing consumer and declining producers prices in dairy industry Dairy producer and consumer prices

Concentration ratio Dairy industry-segmented i.e. increasing consumer and declining producer prices Dairy industry value chain CR CR42%64.5% 4CR65%79.5%

7)Land and labour markets Labour market opening up-increasing wage levels Land markets diminishing-declining proportion land offered for rent

Transition impasses Diminishing on-farm employment opportunities Weak producer organizations Declining productive land Fixed capital that cannot be adjusted in the short run (constrains engagement in new enterprises) Prohibitively high compliance costs

Transition impasses Under-developed contract and business ethics culture Inappropriate Legislative and regulatory framework

Adjustments in rural and agricultural economies Reduced R-U migration (New urban centres) PeriodMigration rate Pre liberalization 1961/ Transition 1981/ Liberalization 1993/ Post-liberalization 2003/

Forest products marketing- forest degradation Increased off-farm income and remittances (developing rural financial services) Adoption of intensive production technologies Intensified use of inputs such as fertilizers

Perceived GAPS for the second phase  Migration and labour force Determinants of migration, destination and sector of choice  Remittances- from abroad and within the country Remittances, poverty, investment and welfare in migrants home area

 Value chain analysis Market (input and output) concentration in major value chains. Market integration (vertical and horizontal integration)  Impacts of liberalization (reanalysis) on specific sectors of the rural economy, poverty and household welfare

 Examine livelihood strategies adopted due to the effects of liberalization especially in selected areas and enterprises Discern factors influencing choice of enterprise mix / livelihood strategies

 Liberalization, urbanization and poverty  Effects of liberalization on urbanization and urban poverty

Baby Sereria

Thank you