Role of Government in Promoting and Supporting Private Sector Development

--------KENYA

Vision 2030

National forward looking development blueprint launched by His Excellency Mwai Kibaki in 2006

Covering the period 2008-2030, implemented in 5 year Medium Term Plans

Aims to transform Kenya into a newly industrializing, middle income country with an annual average growth rate of 10%

Anchored on 3 pillars – economic, social and political governance

Growth momentum has been strong and underpinned by structural reforms, a new constitution and a dynamic private sector

Social and political pillars to address necessary reforms to ensure realization and sustainability of economic goals

Economic Pillar

Aims to improve the prosperity of Kenyans through an economic development programme, covering all regions of Kenya and achieving an annual average GDP growth rate of 10% per annum

Sector based: Tourism Agriculture Wholesale and Retail Manufacturing Business Process Offshoring / IT Enabled Services Financial Services

Sectors identified based on potential to make a widely inclusive economic impact and feasibility of unlocking potential for economic growth, employment and poverty reduction

Creating an Enabling Environment for Private Sector Development Increased the ease of starting a business and obtaining licenses through ‘one-

stop-shop’ process

Incentives to encourage investment through corporate tax relief for investments , training subsidies, establishment of free ports and free trade zones

Developing modern trans-country infrastructureRoadsRailwaysPortsAirportsWater and sanitationTelecommunications

Creating an Enabling Environment for Private Sector Development Increasing energy supply by encouraging more private generation of

power and separating generation from distribution Geothermal Coal Renewable energy- solar, wind Connecting Kenya to energy – surplus counties in the region

Land reform Protection of property rights, computerization of land regimes, facilitating

the process of land administration, establishment of national spatial data infrastructure to track land use patterns; enhanced legal framework for faster resolution of land disputes

Public Sector Reform an efficient, well trained and motivated public service that values

transparency Accountability to Kenyan citizens based on results based assessments

Creating an Enabling Environment…

Reforming governance institutions and regulatory frameworks.

Human Resource Development Training Subsidies Establishment of Technical Training Institutions Closer collaboration between industry and training institutions

Security Police sector reform and training

SEZ Incentives- free ports, trade zone, agriculture and tourism zones, and science and technology parks ..

Top income and corporate tax rates

30%

Fiscal Incentives 10 year corporate income tax holiday and a 25% tax rate for a further 10 years thereafter

Dividend Taxation 10 year withholding tax holiday on dividends and other remittances to non-resident parties

VAT Perpetual exemption from VAT and customs import duty on inputs including energy. VAT exemption also applies on local purchases of goods and services supplied by Kenyan companies.

Other Incentives Perpetual exemption from payment of stamp duty on legal instruments. 100% investment deduction on new investment in buildings and machinery, applicable over 20 years

Training incentives Entire cost of training with (DIT certified trainer) can be reimbursed. Registration with Department of Industrial Training(DIT) is required

Infrastructure DevelopmentRoads, railways, seaports, airports, water, sanitation and telecommunications

Lamu Port •30 berths, 18m deep, 1000 acres•Serve Kenya, EAC, Southern Sudan, Ethiopia, Central Africa Republic, DR Congo, Congo Brazzaville and Chad•Largest port on the continent serving as a trans African Port•Will also serve as a trade corridor to Juba after construction of standard gauge rail track

Lamu-Sudan-Ethiopia Record Transport (LAPSSET) Corridor Project

•Shortest distance to the sea for Southern Sudan. Objective to export oil from Sudan.•Remote and dry Northern parts of Kenya to be opened for development. (Hola: irrigation; Wajir: cement deposits; Lamu West: titanium; Mwingi & Matuu : coal & iron ore deposits . Lamu port to provide easy access to the mines for shipment.•Isiolo: resort city , free economic zone; intersection point for the three corridor routes.

Ethiopia •Increased volume of Ethiopian goods transiting the ports in Kenya•Reduction of transport and shipment costs between Kenya & Ethiopia•Reduced transit time for imports and exports•Promoting trade & regional integration and increasing intra-regional trade between Ethiopia and Kenya

Modernization of the EAC Railways

•Reduce inter-regional freight transport costs from 45-15%•Meet increased transport demands that are projected to be in excess of 30 million tonnes.•Railway will be a high capacity and able to sustain trains hauling a minimum of 4,000 tons traveling at an average speed of 120 km/h.

Airports and Resorts International airports to be constructed in Lamu, Isiolo and Lokichogio; three important centers along the new transport corridor, whichwill also be made resort centers

Upgrade of the existing Jomo Kenyatta International Airport

Oil Refinery Oil refinery with a capacity to process 120,000 barrels per day to be constructed at Lamu

Refinery to refine crude oil from Southern Sudan and other parts of the East African region.

Power Generation •Kenyan electricity producer, Kengen, opened its 15 billion public infrastructure bond offer to investors in September 2009. •Kengen received subscriptions worth 335 million, meaning the issue was oversubscribed by 68 %•Funds from the bond will be invested in generation of diverse sources of energy.•80% of the capital will used in generation of thermal power•20% will go to upgrade of hydo energy e.g. Tana River Delta power plants.

Infrastructure DevelopmentRoads, railways, seaports, airports, water, sanitation and telecommunications

Vision 2030 Sample ProjectsDevelopment of five SME Parks

•Establishing processing parks in five strategic locations with raw materials hinterlands.•47 Constituency Industrial Development Centers one in each county have been identified for upgrading to SME Parks.

Creation of Producer Business Groups

•To create 1000 to 1500 Producer Business Groups countrywide•PBGs at the producer level which will in turn feed large wholesale hubs principally in rural areas. Catchment area is Central & Eastern provinces and a total number of 465 producer business groups have been formed.•Increased wholesale business activities and increased efficiency through sharing production skills and resources will be achieved.

Building Tier Markets •Tier 1 retail market build•Creation of jobs•Increased economic activity in area

Deepening of Capital Markets

• Development of new products & services progress•A SME segment is being established at NSE•A roundtable meeting held with Islamic community to chart way forward for development of Sharia capital compliant market products

Development of Special Economic Zones

•Will facilitate importation of necessary raw materials and exporting of finished goods•Project will include agro-industrial zone incorporating activities such as blending and packaging of fertilizers, teas and coffees, and a consolidated meat and fish processing facility to encourage growth of offshore fishing.

Establish a major BPO park – info City

•Establish a modern ICT Park in Nairobi with reputable local and International BPO suppliers•Promote Kenya as a BPO services from Kenya globally•Increase ICT talent pool to meet the increasing demand and provide a set of BPO specific incentives to attract investments.

Case Study : ICT Sector

Establishment of Kenya ICT Board in 2007 to advance the development of the ICT sector and use ICT as an enabler in achievement of national development

Goal for Kenya to become a top 10 global ICT hub by 2030; a top 3 BPO destination for Africa by 2012; and grow IT contribution to GDP from 3% to more than 10% in 3 years via:

Governance BPO/ITES ( create a sustainable environment for investment in

BPO/ITES Assume role of managing BPO parks Drive local industry development in ITES

Communications Bill to liberalize IT sector and Data Protection Bill to address IT and IP security

Application of PPP framework to encourage joint ventures with local and international invetors

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National Optic Fibre Network has createdworld class telecoms infrastructureTerrestrial fibre network Undersea cables

ForeignName Owner/ operator landed terminal

Seacom ▪ Seacom Intl.(65%)

▪ KenyanInvestor (35%)

June2009

FranceandEgypt

Nairobi

Teams ▪ GOK (20%)▪ Etisalat (15%)▪ Private

investors

Sept2009

UAE

(65%)

Mombasa

Eassy ▪ DevelopmentBank of SA

▪ World Bank

2010 SA

Central region

Coast & North Eastern region

Telkom Kenya network

Western region

SOURCE: Team analysis

Three fibre optic undersea cables _ Teams, SEACOM, and EASSY

ICT MNCs headquarters in Kenya

Digital Villages- Pasha Centres

Creation of “electronic centres” and upgrading of existing e-centres

Hubs that provide a host of services to the public via computers connected to the internet, or by using and marketing other ICT-enabled applications

Kenya ICT Board will also provide technical support to successful PASHA entrepreneurs

An entrepreneur will obtain a loan from a local Bank for up to a maximum of KES 3Mm to set-up or expand an existing digital access centre

Kenya ICT Board will provide a technical consultant to support the technical set up and management

Pasha cont’d…

Branding and communication support in order to manage thePasha Brand and drive consumer interest and usage

Management of the Pasha Community portal to allow collaboration and knowledge sharing among Pasha Managers

Continuous training and skills development for Pasha Owners

Liaison with public sector and local and international content providers who may want to access the public through the Pasha network

Tandaa- Development of National Digital Content Strategy and Local Content development

The Kenya ICT Board is Implementing a World Bank supported Content Grant disbursement program to support entrepreneurs in local content and applications development

Specific focus to be given to software applications and e-government products that can impact delivery of social services and preserve culture

A national campaign, TANDAA, has been launched to driving national awareness and capacity building

KNET and Wezesha

Support to universities through bandwidth purchase through long term IRU on high capacity submarine fiber

‘Wezesha’ Is a Swahili word meaning ‘ to enable’ and is an initiative is to provide a financial incentive towards purchasing a laptop for registered university students in participating public and private universities and colleges

The laptop initiative is funded by the World Bank and implemented by The Kenya ICT Board under the Kenya Transparency and Communications Infrastructure Project (TCIP), as part of a component to implement the Computers for the Communities Initiative

The Government is actively stimulating the private sector and the time to invest in Kenya is

NOW!