1. Industrialization Models: Lessons for Kenya
Thoughts from a paper being developed at Kenya Institute for Public Policy Research & Analysis (KIPPRA)

2. Introduction-1
Kenya’s industrialisation requires fresh thinking in the face of liberalisation and globalisation.
In the circumstances, is it realistic to rely exclusively on the market for industrial development?
Can the experience of Industrialised countries and NICs inform?

3. Introduction-2
KIPPRA is looking at these questions though the paper is not complete
The team is exploring the experiences of 3 industrial, 3 newly industrialised economies, and 1 Eastern European economy
Kenya’s experience so far is compared with these 7 countries

4. Industrialisation Principles
From the case studies, two broad categories of development policies have guided Industrial and NIEs:
Market oriented and Structuralist policies. The latter brings into perspective the important role of the government,
However, more emphasis has been laid on the market although none of industrialised countries has strictly developed through that approach
Korea and Singapore, which are seen as models of modern industrial development followed state-led strategy

5. How have the countries done it?
The case studies show that 8 factors have led to successful industrialisation:
Macro- economic stability
Favourable business environment
Efficient infrastructure
Research and Development
FDI
Selective intervention
Skilled labour
Industrial development status

6. How have the countries done it? XXXX = very high; XXX= high; XX= low; X= very low
Country
Macro stability
Favourable Business environment
Efficient infrastructure
Selective intervention
USA
xxxx xx
France
xxx
Germany
S. Korea
Singapore
Hungary
Brazil
Kenya

7. How have the countries done it? XXXX = very high; XXX= high; XX= low; X= very low
Country
R & D
FDI
Skilled labour
Industrial Development status
USA
xxxx xx
France
Germany
S. Korea x
xxx
Singapore
Hungary
Brazil
Kenya

8. Lessons
To a large measure, the success of industrial and NIE countries is explained by principles of:
Free enterprise;
Macroeconomic stability;
Human capital; and
Appropriate institutional and physical infrastructure
For NIEs, this is reinforced by:
Selective and functional interventions in limited number of enterprises with potential for technological and development linkages (strategic positioning and niche markets)
Efficient and focused bureaucracy, choosing winners, setting and enforcing performance targets

9. Challenge
Due to globalisation, markets are unlikely to deliver industrial development for LDCs. Reasons:
Weak competitiveness: low technological innovation & human capital
increased international inequality: globalisation has concentrated innovative capabilities in the industrialised countries
Externalities that affect proper functioning of market and the need to protect infant industries in the process of industrialisation.
Attracting export-oriented FDI increasingly requires selective promotion and targeting

10. What should Kenya do?
Place and nature of industry must be clearly specified in Vision 2030!
Commit seriously (harness adequate resources, have performance targets) to the 8 success factors while continuously monitoring outcome: Focus, Focus, Focus! Adapt policies!
Develop selective interventions based on specific objective criteria:
export markets & country’s comparative and competitive advantages
technological adaptation: need to develop requisite capability and skills; intellectual infrastructure is key to facilitate technology transfer
promotion of a few successful industries: pick winners and direct resources there!

11. What should Kenya do? Condition support on performance targets
Building and sustaining Kenyan entrepreneurs and local talent; and enhancing innovativeness as a societal value.
Develop institutional structures to implement short-term and medium-term actions: lets do what we plan and do it well with or without donor support.
Exploit the location advantage of the country for contract manufacturing, i.e. to integrate Kenyan firms into global supply chains.