Thursday, 8 December 2011

Devolution, one of the most ambitious programmes in the world - World Bank

“Individual dreams, aspirations, needs and efforts when combined produce more beautiful, more inclusive and more sustainable results,” Anonymous.

Bungoma town.

Kenya must build political institutions that generate dynamic stability.  Just as the Assistant Minister for Planning and Vision 2030 Peter Kenneth says “Let’s define the kind of leadership that will work for Kenyans… to spiral the economy to the lowest level.”

The World Bank in its fifth economic update dubbed “Navigating the Storm Delivering the Promise” cut Kenya’s economic growth forecast for 2011 to 4.3 percent from its earlier forecast of 4.8 percent.

“This will be higher than Kenya’s long-term growth rate of 3.7 percent but still a full percentage point below the average projected for Sub-Sahara Africa,” the bank said in its latest twice-a-year report on east Africa’s biggest economy.

However, it projected its growth to rise to 5 percent next year and 5.5 percent in 2013, but this would depend on whether Kenya can navigate this year’s economic crisis caused by inflation and a weaker shilling, as well as have peaceful elections in 2012, implement the constitution and devolution which it said will “provide more equity and prosperity” if “ Government policies strike balance between redistribution and growth enhancing policies, service delivery and simple and transparent fiscal transfer architecture monitored and understood by the citizens for accountability purposes.”

Economic analysts say, Security, employment, infrastructure are some of the key areas that need to be checked.
Internal security must be guaranteed to enable a stable civil environment that upholds security of persons, property, access to and equality before the law. Governments must build social cohesion, eliminate conflict and ease the paths to self betterment for their citizens through equitable access to resources, services and opportunities that will improve earnings, consumer purchasing power, savings and investments.

Moreover, an efficient infrastructure network is the backbone of the productive sectors of the economy, which are key drivers of economic growth and social progress.

According to this view, economic infrastructure does not exist for its own sake, but rather to support various kinds of economic activity.

By efficiently moving goods and services to where they can be used most effectively, transport adds value and spurs growth.

Investments in infrastructure can also be used as a springboard to fight poverty through investments in agriculture, health and education services. Infrastructure development is also an enormous untapped potential for the creation of productive employment.

In addition, a well-developed economic and social infrastructure is an important indicator of the quality of a country’s investment climate for would-be investors, both local and foreign.

Road construction of the Eldoret -Malaba Highway in Western Kenya.

Snippets to the World Banks’ report on Kenya’s economic Outlook Navigating the Storm Delivering the Promise gives the following

  • 2012 will be a defining year for Kenya.  National elections, the establishment of a new system of devolved government, and the possibility of deterioration in global economic conditions will make the next twelve months extremely challenging.  At the same time, if Kenya manages these challenges well–peaceful elections and transition to a new government, successful introduction of a new system of devolved government and continued growth during a global financial crisis–2012 will set the foundation for a more prosperous future.

  • Kenya is navigating rough economic waters, which will lower growth prospects for 2011 and possibly 2012 as well.
  • High food and fuel prices, the drought in the Horn of Africa, and the Euro crisis have weakened Kenya’s external position, which was already fragile given the large current account deficit.  These economic challenges will lower growth to an estimated 4.3 percent in 2011.  For 2012, the World Bank projects growth to recover slightly and reach 5.0 percent, if Kenya succeeds in managing the risks.
  • Kenya’s constitutionally-mandated devolution is one of the most ambitious programs of its type in the world.  The bulk of decentralization reforms will be implemented in 2012 and will impact Kenya’s social stability, service delivery, and fiscal health for years to come.  In responding to the economic crisis, Kenya’s policy makers will need to find the fiscal space required to deliver on the promise of devolution, while protecting public investment.

Key Recommendations to respond to the economic turbulence

  • Remain steadfast in containing macroeconomic pressures, by reigning in inflation expectations while containing the debt-to-GDP ratio.  This will require maintaining tight monetary policies and fiscal prudence to manage the economy over the short term.
  • Guarantee a level playing field for all market participants and avoid regressive economic policies.  Price and currency controls distort economic activity and typically result in worse outcomes, namely higher prices and a weaker currency, while increasing opportunities for corruption.
  •  Enhance export competitiveness.  Kenya will succeed economically and be less vulnerable to shocks only if it balances its economy through stronger exports.  It now needs to move beyond tea, tourism and horticulture, where it is already performing strongly.  Kenya is well positioned to make new products (such as textiles, chemicals and automotive parts) and enter new markets (such as Asia) if it continues to improve its infrastructure and investment climate.  Increased domestic energy production, especially geo-thermal, would play a critical role, as it will also reduce dependence on expensive fossil-based thermal energy.

Key Recommendations to manage Kenya’s decentralization successfully

  • Ensure a fair distribution of national resources commensurate with county needs and capacity and balancing national interests.  This will involve clarifying the responsibilities of county governments and the process for transfering of functions will be phased over time.


  •  Devise a simple and transparent transfer architecture that promotes spatial redistribution without compromising growth and efficiency objectives.  While tackling geographic inequities is a central promise of devolution, this will need to happen over time, so as not to jeopardize future growth and existing service delivery.  The objective should be to equalize opportunities for all Kenyans, while recognizing that economic growth will be concentrated in certain areas.
  • Build capacity in Kenya’s counties, particularly the weaker ones.  Paradoxically, those counties that stand to benefit the most from devolution in theory (the more remote, least developed counties) could lose out in practice, if their capacity to manage devolved funds effectively and transparently is not sufficiently developed.
  • Get accountability right from the start.  Accountability should focus on both funds and performance, and systems should emphasize both central monitoring and reporting, but also maximize the involvement of citizens so they can hold their representatives accountable.
  • Ensure transition does not interrupt service delivery.  Effective coordination of the transition at both national and county levels will be crucial.  Urban services will be particularly vulnerable since the existing institutions in charge of urban services will be abolished. This will require a clear and inclusive decision on who is in charge of coordination and agreement on a high-level strategy for implementation


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