Mr. Chairman

Members of the Nairobi Stock Exchange,

Distinguished Ladies and Gentlemen,

I am pleased to join you all in launching the Nairobi Stock Exchange Automated Trading System. The automation of the trading system will create more confidence in Kenya’s capital markets and make it easier for Kenyans and foreigners to invest through the Stock Exchange.

Moreover, the system will increase the capacity of our markets to absorb larger issues and further enable the Government and the private sector to access long-term financial resources for investment and development projects.

The launch of the Automated Trading System today is, therefore, a landmark achievement for the Nairobi Stock Exchange. I take this opportunity to congratulate the board, management and members of the Nairobi Stock Exchange for modernizing the trading system. Indeed, the installation of the Automated Trading System is a major step forward for the Nairobi Stock Exchange, which is now well positioned to join the league of the major Stock Exchanges in the world.

I would also like to thank the Nairobi Stock Exchange for being at the forefront in taking full advantage of the measures that my Government has been taking to spur economic growth.

Ladies and Gentlemen,

The Stock Exchange plays a crucial role in the economic development of our country. It enables companies to gain access to long-term investment funds by issuing shares and debt securities to the public. This enables more Kenyans to own the factors of production in their country, and therefore play an active role in development. It is, therefore, encouraging to note that the stock exchange has recorded remarkable growth over the last three years.

The market capitalization of the Nairobi Stock Exchange has increased by 550 percent to approximately 730 billion shillings, from 112 billion shillings in December 2002. In the same period, the Nairobi Stock Exchange 20-Share Index has increased by 260 percent to 4890. The government’s divestiture programme has played its part in this growth of the Nairobi Stock Exchange. We all recall the recent sale of 30 percent of the Government shareholding at the Kenya Electricity Generating Company (KenGen), which raised 8 billion Shillings, and was oversubscribed by 330 percent.

Following the success of the KenGen issue, my Government has chosen the transaction advisors for the offer of 18 percent Government stake in Mumias Sugar Company and 40 percent government stake in Kenya Re-insurance Corporation. The process of restructuring Telkom Kenya is also well underway, with the planned sale of a 26 percent stake to a strategic investor, followed by the sale of a 34 percent stake to the public through the Nairobi Stock Exchange.

The resounding success of Initial Public Offers in recent times is a clear indication that Kenyans are now knowledgeable about the stock market. It is also evident that there are investment funds, which can be quickly mobilized for development of critical sectors of Kenya’s economy. What is important is to create more awareness among Kenyans, so that it is not only people in the urban centres who benefit, but also those in the rural areas.

Indeed, this country has the potential of joining the ranks of newly industrialized countries by raising the required financial resources from the capital market. My government is also looking for ways of raising development funds through the issuance of Infrastructure Bonds, which will also be traded in the secondary market of the Exchange.

However, I would like to challenge the private sector to come forward and enjoy the advantages of being listed at the stock exchange. Already, my Government has put in place a series of measures to attract private businesses to raise capital through the stock exchange. Such measures include corporate tax reductions for newly listed companies.

I would also like to note that the pension sector, which has been streamlined under the Retirement Benefits Authority, continues to be a major player on the stock exchange. I urge the pension sector to invest the substantial pension funds at their disposal on the Nairobi Stock Exchange. I challenge the Nairobi Stock Exchange to work hard to ensure that more companies list their shareholding.

For the Government, ladies and gentlemen, the stock exchange has provided an avenue for privatization, widening ownership of productive assets among Kenyans and a secondary market for our treasury bonds.

The Central Bank of Kenya, acting as the agent of the Government, has continued to use the stock market to issue treasury bonds to fund recurrent expenditure, lengthen the maturity profile of domestic debt as well as reduce Government’s reliance on short-term maturity treasury bills.

This year, Treasury Bonds with a face value of 75 billion shillings have been issued and listed at the Nairobi Stock Exchange. The total face value of all listed Government of Kenya treasury bonds is 234 billion shillings. A 12-year treasury bond, with a face value of 4 billion shillings, was successfully issued and listed at the end of August 2006. Plans are also underway to issue a 15-year treasury bond for the first time. This is an indication that we are truly seeing our capital market come of age.

Ladies and Gentlemen,

As we look forward towards launching a vision to develop this country into a middle-income country by the year 2030, the Nairobi Stock Exchange must see itself as a key institution, which will facilitate sustained economic growth of 10 percent per annum. Going by current trends, I have no doubt that the Nairobi Stock Exchange is equal to the task.

However, as the market records unprecedented growth, new challenges emerge. Ethics among market players are particularly essential as the lack of transparency and accountability can easily undermine the market. The Stock Exchange and all market players must also continuously upgrade their systems and capacity of their personnel.

In addition, listed companies are expected to adhere to the disclosure obligations required under the listing requirements of the Capital Markets Authority and the Nairobi Stock Exchange, as well as the corporate governance guidelines of the Capital Markets Authority. These statutes and guidelines are designed to ensure that listed companies safeguard stakeholders’ interests and increase shareholder value. This creates an atmosphere where more investors feel confident to put money in our economy, thus creating a more competitive and larger Kenyan private sector.

Ladies and Gentlemen,

Regional integration remains a key commitment of my Government. This is because regionalization, and indeed, the globalization of financial and securities markets is a major force driving change in the financial services industry.

The Capital Markets Development Committee of the East African Community on which the Capital Markets Authority and the Nairobi Stock Exchange have representation, is charged with the responsibility of facilitating implementation of the relevant Articles of the East African Community Treaty. It is, therefore, reassuring to note that the Automated Trading System software being used by the Nairobi Stock Exchange and the Central Depository System software will soon be deployed by the Uganda Securities Exchange and the Dar-es-Salaam Stock Exchange. This means that a regional securities exchange will be a reality.

In conclusion, ladies and gentlemen, I would like to point out that the growth of the Nairobi Stock Exchange reflects the growth that we have witnessed in the economy for the last three years. These improvements are the result of continued implementation of economic recovery measures. Indeed, this growth has contributed greatly to the performance of individual listed companies with some of them recording more than one hundred percent increase in profits last year. Clearly, many listed companies have been beneficiaries of this growth.

My Government will continue to manage the economy prudently in order to achieve more growth and raise the standards of living of all Kenyans.

Mr. Chairman,

Ladies and Gentlemen,

It is now my great pleasure to officially launch the Nairobi Stock Exchange Automated Trading System.

Thank you and God Bless You all.