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RR RUEHGI RUEHRN
DE RUEHNR #1981/01 1291427
ZNR UUUUU ZZH
R 091427Z MAY 07
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC 9546
RUEHLMC/MILLENNIUM CHALLENGE CORP
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUEHXR/RWANDA COLLECTIVE

UNCLAS SECTION 01 OF 04 NAIROBI 001981 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
DEPT FOR AF/E, AF/EPS, EB/IFD/OMA 
USAIQFOR AFR/DP WADE WARREN, AFR/EA JEFF BORNS AND 
JULIA ESCALONA 
TREASURY FOR VIRGINIA BRANDON 
LONDON AND PARIS FOR AFRICA WATCHERS 
 
E.O. 12958:  N/A 
TAGS: ECON EAID EFIN PGOV KE
SUBJECT: KENYA'S VISION 2030: THINKING BIG, BUT IS IT REALISTIC? 
 
NAIROBI 00001981  001.2 OF 004 
 
 
Sensitive-but-unclassified.  Not for release outside USG channels. 
 
¶1.  (SBU) Summary: Kenya has unveiled Vision 2030, an audacious 
national development plan whose goal is middle-income status for the 
country by 2030.  The Vision calls for 10% GDP growth annually over 
the next 25 years (up from the current 6%), allowing Kenya to 
multiply per capita income by six times within one generation.  The 
Vision captures nearly the entire reform agenda and is thus 
awesomely ambitious in scope - and by the same token, probably 
unrealistic.  Consistent and coherent implementation of anything so 
large will be problematic, so Vision planners are considering the 
creation of a new "super agency" empowered to force change from 
above.  Cynics will see Vision 2030 as merely creating the illusion 
of reform where there is none.  But with the right leadership and a 
little bit of luck, Vision 2030, even if only partially successful, 
could help frame a reform agenda that puts Kenya on a higher growth 
path.  End summary. 
 
-------------------------- 
The Origins of Vision 2030 
-------------------------- 
 
¶2.  (U) Since independence in 1963, Kenya has had two long-term 
economic policy strategies (in 1965 and 1986), together with a 
series of five-year development plans to guide investment and 
economic policy-making.  In the long run, none worked very well -- 
per capita income in Kenya actually shrank in the 1990s.  After 
elections in 2002, the Government of Kenya (GOK) tried again, 
launching the five-year Economic Recovery Strategy (ERS), a reform 
blueprint under which the economy gradually recovered, reaching 6% 
growth in 2006.  With the ERS coming to an end in 2007, the GOK 
began a new effort in 2006 to develop an overarching national 
development plan under the rhetoric of "Vision 2030: Transforming 
National Development."  Described as "a long-term plan to transform 
the lives of Kenyans," the vision is summed up in its mission 
statement: "A globally competitive and prosperous nation with a high 
quality of life by 2030". 
 
¶3.  (U) Formally launched by President Mwai Kibaki in October, 2006, 
Vision 2030 was developed by a subcommittee of the National Economic 
and Social Council (NESC), a group of "eminent persons" appointed by 
Kibaki in 2004 to provide policy advice to the GOK on economic and 
social matters.  Despite the fact that 15 of the 31 members of the 
NESC are high-level GOK officials, it does not appear that Vision 
2030 is a political ploy to gain voter support in an election year. 
Rather, for all its potential faults, it seems to be a good faith 
effort to forge a national consensus around where Kenyans want their 
country to be in 25 years, regardless of the political leadership in 
power at any given time.  The project is self-funded by the GOK, but 
the GOK has contracted with McKinsey Consultants to assist the NESC 
in preparing the Vision. 
 
--------------------------- 
What Exactly is the Vision? 
--------------------------- 
 
¶4. (U) According the GOK literature on the topic, Vision 2030 is 
built around change and reform under three developmental pillars: 
economic, social, and political.  The project's current emphasis, 
however, is clearly on the economic pillar, under which Vision 2030 
calls for: 
 
-- Sustained economic growth of 10 percent per year over the next 25 
years. 
 
-- An increase in nominal GDP by nearly 11 times to $169 billion by 
¶2030. 
 
-- An increase in per capita GDP by 6.6 times by 2030 to $3,065 per 
head from 2005's $464. 
 
------------------- 
The Big Six Sectors 
------------------- 
 
¶5.  (U) According to the NESC's most recent (and very slick) 
powerpoint on the status of Vision 2030, the project has moved 
beyond the lofty vision stage to the formulation of "high-level 
strategies," or roadmaps, on how to reach the vision goals under 
each of the three pillars.  Under the economic pillar, the NESC 
Vision team has conducted a "portfolio diagnostic" which has 
concluded that focused reforms and investments in a handful of key 
"growth engines" are needed to generate stronger economic growth 
 
NAIROBI 00001981  002.2 OF 004 
 
 
initially.  Identified according to a mixed bag of criteria ranging 
from current size to growth potential, the Vision identifies the 
following six sectors of the economy, in priority order: 
 
-- Tourism: Enjoying strong growth; largest contributor to foreign 
exchange earnings; still has growth potential when compared to other 
top tourist destinations. 
 
-- Agriculture: pillar of economy with 25% of GDP; significantly 
lower productivity vs. international benchmarks; offers huge growth 
potential with appropriate land reforms. 
 
-- Wholesale and retail: Accounts for 30% of GDP and 50% of 
employment, but extremely fragmented and informal; inefficient 
supply chains; offers big opportunities if brought into formal 
economy. 
 
-- Manufacturing: Stagnant at 10% of GDP over past 30 years; 
currently uncompetitive internationally; offers huge upside if 
business climate can be improved; export opportunities in regional 
markets and global niche markets. 
 
-- Business Process Outsourcing (BPO): Currently a nascent industry, 
but cost-competitive globally if there are appropriate investments 
in infrastructure. 
 
-- Financial Services: Sector plays critical cross-cutting enabling 
role in economy; has had good growth in recent years, with 
significant potential for further growth. 
 
------------------------------ 
Vision 2030 Tries To Do It All 
------------------------------ 
 
¶6.  (SBU) When questioned about Vision 2030 trying to "pick winners" 
through this sectoral approach to boosting growth, Dr. Wahome 
Gakuru, Director of Vision 2030 at the NESC, told Econ/C on May 7 
that the Vision is not purely sector-based.  It also calls for 
investment and reforms in five key "enablers" that will stimulate 
growth across all sectors of the economy.  These cross-cutting 
"enablers" are infrastructure, information and communications 
technologies, energy, and public services, e.g. health and 
education.  The soft-spoken, U.S.-educated Gakuru went on to 
articulate an even broader and deeper reform vision for Kenya.  In 
order to get the higher growth it wants, Kenya will also have to 
reform its justice system in fundamental ways to make it not just 
more business-friendly, but also more efficient and more just. 
Additionally, the relationship of the GOK to the economy requires a 
paradigm shift.  The GOK has to become more of a facilitator and a 
regulator than a direct participant in the economy.  This, he said, 
will require more privatization and a deepening of ongoing civil 
service reforms. 
 
-------------------------- 
Realism vs. Pie in the Sky 
-------------------------- 
 
¶7.  (SBU) As skillfully articulated by Gakuru, then, Vision 2030 is 
awesomely ambitious.  It captures pretty much the entire reform 
agenda - everything the country needs to do to get to the status of 
a mature democracy and middle-income economy within one generation. 
It thus appears highly unrealistic.  Indeed, Vision 2030 often reads 
like a naive call for a perfect society, smacking a bit of 
old-fashioned socialist central planning. 
 
¶8.  (SBU) At the same time, however, while the Vision in its 
broadest terms may seem utopian, the means to achieve it are 
pragmatic.  Indeed, Vision 2030 is refreshingly candid - and often 
accurate - about Kenya's past economic failings and current 
challenges.  It points out, for example, the need to transform the 
skewed structure of Kenya's economy, which remains heavily weighted 
in favor of agriculture and the informal sector, while formal sector 
manufacturing and services remain stunted in terms of their 
contributions to GDP and employment. The Vision's underlying 
philosophy is on balance more capitalist than it is populist.  There 
is an orientation towards empowering and unleashing the potential of 
the private sector as the path to higher growth rates.  All good 
stuff, on paper at least. 
 
------------------------------------- 
Implementation: The Old Achilles Heel 
------------------------------------- 
 
 
NAIROBI 00001981  003.2 OF 004 
 
 
¶9.  (SBU) While no one is questioning the virtues of much faster 
growth along with greater democracy and social equity, the big 
question, of course, is how, when, or whether the Vision becomes a 
reality.  The GOK is superbly skilled at composing thoughtful and 
ambitious plans and strategies addressing the key challenges of the 
day, such as economic development, rule of law, and corruption.  The 
GOK is equally infamous for failing to implement such plans.  One 
recalls plans drawn up 20 years ago to build by-pass roads around 
Nairobi - roads that still haven't been built.  Vision 2030 Director 
Gakuru acknowledges that implementing the many economic, social, and 
political reforms covered by Vision 2030 will be a long, arduous, 
and even dangerous journey. 
 
-------------------------- 
A New Super Agency Coming? 
-------------------------- 
 
¶10.  (SBU) To overcome the GOK's traditional inability/unwillingness 
to implement needed reforms, Gakuru said that with the Vision may 
come a new paradigm for implementation: A kind of "super agency" 
with the powers and political clout to force change down through 
recalcitrant line ministries.  He said discussions are underway at 
senior levels on the structure and authority of such an agency, 
which in his view, must fall under the Office of the President to be 
effective.  It must also, he noted, be staffed by "really, really 
good and powerful people." 
 
--------------------------------------------- 
Local Donors and Economists Have Their Doubts 
--------------------------------------------- 
 
¶11.  (SBU) Further on the theme of realism, GOK officials realize 
10% GDP growth starting in 2008 is all but impossible.  But Finance 
Minister Amos Kimunya has said publicly that the economy can achieve 
a 10% rate of growth by 2012.  Others are skeptical that even this 
timeline is feasible.  At a free-flowing discussion of economists 
and donor country reps on May 4, the International Monetary Fund's 
Resident Representative said 10% growth by 2012 would require 
massive foreign direct investment (FDI) in Kenya's economy.  He went 
on to question whether any Kenyan government has the ability or the 
will to enact the myriad fundamental reforms required to make 
Kenya's business climate attractive enough to stimulate such inflows 
of FDI.  The usual litany of intractable impediments were cited: the 
poor state of infrastructure, excessive red tape and a 
business-hostile bureaucracy, corruption, and insecurity. 
 
¶12.  (SBU) The local World Bank economist agreed, saying that 10% by 
2012 required major changes: a higher savings rate and higher 
productivity in Kenya, and massive new FDI.  The Bank feels without 
additional reform measures, the economy can probably continue to 
grow by the current 6% through 2010, and maybe bump up to 6-8% by 
¶2013.  Poor infrastructure is the most critical binding constraint 
to higher growth, according to the Bank's analysis. 
 
------------------------------- 
Comment: Shooting for the Stars 
------------------------------- 
 
¶13.  (SBU) On the one hand, one has to take Vision 2030 with a big 
grain of salt.  With history to support them, skeptics will be right 
to see Vision 2030 in the same light as previous national plans and 
strategies - not much more than a grandiose paper exercise designed 
to create the illusion of reform where there is none, and to put 
money in the pockets of smooth-talking consultants like Gakuru. 
Also, the creation of a new "super agency" to drive implementation, 
while superficially appealing, might lead to further concentration 
and abuse of power in the Office of the President.  Finally, it's 
right to ask why the GOK doesn't move away central planning 
altogether and simply get on with the sweaty work of implementing 
needed reforms on the ground - now. 
 
¶14.  (SBU) On the other hand, the GOK and the authors of Vision 2030 
should be complimented for thinking big -- for aspiring to 
international competitiveness and middle income status for Kenya 
within a generation.  A detailed framework can improve policy 
consistency by indicating the direction in which everything and 
everyone needs to move to achieve the goal.  With the right 
combination of luck and good leadership (always the X Factor) over 
the next 5-10 years, Kenya indeed has the potential to reach this 
goal and become in the words of Pulitzer Prize-winning journalist 
Tom Friedman an "African Tiger" economy.  However, time is wasting, 
and it's unlikely Kenya will reach 10% growth even within the next 
3-5 years absent immediate, large-scale investments in 
 
NAIROBI 00001981  004.2 OF 004 
 
 
infrastructure and implementation of a host of cross-cutting (and 
politically painful) governance reforms.  None of this is happening 
quickly enough.  But Vision 2030 shoots for the stars.  If Kenya 
only gets half way there, much will still be gained. 
Ranneberger