SPEECH BY HIS EXCELLENCY HON. MWAI KIBAKI, C.G.H., M.P., PRESIDENT AND COMMANDER-IN-CHIEF OF THE ARMED FORCES OF THE REPUBLIC OF KENYA DURING THE NATIONAL ECONOMIC AND SOCIAL COUNCIL MEETING AT K.I.C.C, NAIROBI, 28TH MARCH, 2009

Ladies and Gentlemen,

Let me begin by thanking the National Economic and Social Council for the briefing on the highly productive sessions following your deliberations over the last two days. Your recommendations on matters such as the energy strategy, youth employment strategies, land policy, and other crucial matters facing the economy will be taken seriously and factored into policy making and implementation by Cabinet and the Government. I wish to thank all the members for the commitment and dedication you continue to show, and I assure you of my continued support for the Council.

Ladies and Gentlemen,

It is clear that the world’s financial markets are faced with the worst crisis in a century. In Kenya we must ensure that we face the consequences of the crises in a competent manner so that our people are shielded from its worst effects. As a Government we are very clear in our mind about implementing the VISION TWENTY THIRTY. We know what we must do, which is to be focused, disciplined, and single-minded in the pursuit of the goals, targets and objectives of these plans within the timelines provided. This requires us to think of new ways of revitalizing our economy and creating employment. A few weeks ago my Government approved the transformation of Export Processing Zones into Special Economic Zones. The Zones will be developed in key cities, towns, and urban centres throughout the country with the deliberate intention of spreading business and employment opportunities. We expect each Special Economic Zone to have land set aside by Government for investors, and serviced by roads, railway, fibre optic cables, electricity, and adequate water supply. The investors will bring the required capital and productive capacity for various economic activities such as agricultural value-addition, I.C.T. parks and free ports. The Government has already identified the first of the Special Economic Zones, which is the Athi Basin Industrial Corridor that will consist primarily of I.C.T. Parks, Industrial Parks, and Science and Technology Parks. The Athi Special Economic Zone will host the business processes and outsourcing sector that is expected to grow rapidly following completion of the submarine fibre optic cables this year, and contribute over 20,000 direct jobs for youth in the next three years.

With regard to agriculture, we are determined as a Government to establish efficient and commercialized agricultural and livestock production sector throughout the country. Over the next three years we will revise our land policies and laws to bring about better land use and increased productivity in this sector. We will also promote partnerships between Government, cooperatives, and private sector that will enable our farmers enter into better paying production contracts and access quality affordable inputs. These partnerships will also strengthen linkages between producers and the wholesale and retail markets giving producers better prices for their produce. We have several flagship projects under VISION TWENTY THIRTY for each of the other key sectors such as tourism, financial services, and manufacturing. The success of the turnaround we are looking for, in these sectors over the next two to three years will depend heavily on how we expand and maintain our national physical infrastructure.

We have set aside large sums of money for investing in new roads, airports, ports, rural electrification, electricity generation, water supply, and telecommunications infrastructure. By building infrastructure throughout the country, we shall be creating access to new opportunities by individuals and communities for economic, social, and political development. Our desire for equitable development for all Kenyans makes us keenly aware of the fact that most of our cities, towns, and productive activities have been concentrated for a century within one to two hundred kilometers radius from the Mombasa Nairobi-Kisumu-Busia and Mombasa-Eldoret-Malaba transport and infrastructure corridors. We need to build more transport and infrastructure corridors if we are to achieve the Vision’s goal for a more equitable and prosperous country. In this regard, over the next decade, we shall build two new transport corridors, namely, the Lamu-Garissa-Isiolo-Lokichoggio and Lamu-Garissa-Isiolo-Moyale.

The construction work has begun on the Isiolo-Moyale road, and my Government recently set aside 3.6 billion shillings to begin the dredging work in preparation for building a new port of Lamu. In doing so, we shall open up opportunities for the growth and development of new towns, industries, airports, resort cities, and other employment creation opportunities in Northern Kenya, and facilitate the growth of regional markets and economies among our northern neighbours. To finance these developments, we will be using a wide range of instruments including tax revenues, development assistance, and the newly launched infrastructure bonds. We shall be working closely with key development partners such as the World Bank, IMF, and African Development Bank to ensure timely delivery of loans and grants during this crisis period. At the same time, following the recent gazettement of the regulations, the Government will vigorously pursue co-financing infrastructure projects with investors under the public-private partnerships. Let me at this point remind us that we do not yet have a local banking or financial crisis. Our local banks are relatively well capitalized and the loans on their books are largely sound. While the stock market is depressed because of governance and financial management problems, the Government paper market is robust as can be seen from the excellent response to the infrastructure bond.

My Government through the Central Bank has acted by cutting its benchmark interest rate to 8.25 percent from 8.5 percent, and has further reduced the level of cash ratios so as to pump more money into the economy. This will help make borrowing more affordable thereby reducing the possibility of Kenya experiencing a credit squeeze in the near future. Our banks should therefore continue lending to the productive sectors so that we do not create a crisis where there is none. My Government will not sacrifice long term growth for short-term goals. Even as we undertake austerity measures in the use of budget resources, we will not take the easy way and compromise our country’s future by cutting spending on development infrastructure and institutions. I am directing the Ministry of Finance to ensure that development budgets are not cut. We should find other non-essential areas in which to make the cuts so that our restructured budget places Kenya in a strategically advantageous position for renewed economic growth. Let me remind all of us that while the economy faces severe challenges with many indicators showing downward trends, we must also take note of those that are showing signs of upward recovery.

For instance, in February this year, power generation and cement production recorded monthly growth of 20 and 10 percent respectively, after several months of downturn last year. Government revenues also grew in February 2009, with tax collection rising by 25 percent for income taxes, 31 percent for excise taxes, and 29 percent for value added tax, compared to January 2009. Indeed, the challenges we now face give us an opportunity to implement some fundamental changes in our mindsets and attitudes towards doing business. For a long time, we as a country have invested heavily in agricultural extension, and by doing so, we have seen the transformation of the sector into a more productive and commercial enterprise. We should now invest heavily in business extension over the next few decades by training our young people in schools, colleges, and society to value business enterprise and self-employment, especially in the service sector, agro-processing and manufacture of basic goods for domestic and regional markets. This is what will be needed to turn our country into a manufacturing and services powerhouse as well as create employment for our young people. I therefore expect the ministries of trade and industrialization to take up the challenge and promote establishment of thousands of new businesses and industries.

Ladies and Gentlemen,

I would like the Council to concentrate its work in the next two years on enabling the Government speed up its project management processes which are too slow and bureaucratic. We have millions of young people unemployed looking for jobs, and thousands of local and foreign investors desiring to put up projects and factories in Kenya. What we have lacked is the ability to speedily implement our policy decisions and programmes, so that these investors can implement their projects and create employment for the unemployed millions. I would like the Council to especially focus in providing recommendations on two key areas; The successful establishment of the Special Economic Zones throughout the country, and The speedy design, construction, and operation of all the infrastructure projects that are planned from now on till 2012. I am directing the Council to set up technical teams that will work closely with Government, the private sector, and development partners to ensure the successful delivery of the Special Economic Zones and infrastructure projects. In doing so, we shall clearly show Kenyans that this Government has a credible, consistent and predictable framework for dealing with the economic challenges the country faces, and in return the business community and ordinary Kenyans will give us their full support.

Before I conclude my remarks, I wish to assure all Kenyans that the Grand Coalition Government is working as evidenced by the many projects the government is undertaking in infrastructure and social sectors all over the country. This has been made possible by the fact that there is good working relation between the Prime Minister and I. Equally, the Cabinet is functioning fully and harmoniously, in designing and overseeing implementation of these and many projects. As a government, we are fully committed to delivering on the promises we made to the Kenyan people.

Thank You and May God Bless You All.