Jaindi Kisero
2 November 2005
column
Nairobi — Comparing growth statistics year-on-year has become very difficult these days. We all remember that in May this year, the whole baseline for computing national accounts was changed.
Our statisticians told us that they changed the system after realising that they had been working with out-dated statistics that did not reflect the reality on the ground.
The old formula, they said, did not capture developments in the informal sector.
That is where the calculation of 4.3 per cent Gross Domestic Product (GDP) growth rate for the year 2004 came from.
So, if you want to compare how the economy performed during the era of President Moi and since President Kibaki took over, you have to apply the same formula.
Lately, I have seen even fairly well-informed people making these comparisons without recognising this fact. When you do so, you engage in intellectual dishonesty.
A proper comparison is only possible if you apply the same formula to the Moi years. You have to compare like with like.
For instance, looking at the Economic Survey of 2004, the growth rate for the year 2003 is indicated as 1.8 per cent compared to 1.2 per cent in 2002.
However, when you apply the formula, the figure for 2003 works out at 2.8 per cent while the figure for the year 2000 slides from 1.2 to 0.4 per cent.
Thus, between the year 2003 and last year, the economy grew from 2.8 per cent to 4.3 per cent. Those who say that the economy grew from 1.2 per cent to 4.3 last year are exaggerating.
By the way, the Central Bureau of Statistics (CBS) has re-computed growth figures up to the year 1996.
Still, even the most ardent critic of the Government must agree that some positive growth has taken place in the last two years.
In the same vein, Government supporters should not be deluded into declaring that the economy is now healthy and ready to take off to the heights of the Asian Tigers.
Indeed, GDP statistics can be very deceptive as a measure of the wealth and standard of living of a country's citizens.
Even as we celebrate the positive picture portrayed by GDP growth statistics, we must remember that our neighbours, Uganda and Tanzania, have been consistently posting GDP growth rates of above 5 per cent for a very long time indeed.
Last year, the economy of Uganda delivered a growth rate of 5.8 per cent. In Tanzania, the GDP grew by 6.3 per cent in 2003, compared to 6.3 per cent in 2002.
Yet these are weaker economies running on perpetual budget deficits and with national budgets that are highly vulnerable to cuts in donor aid.
In both countries, donors fund more than 40 per cent of the national budget.
Furthermore, Tanzania and Uganda are both members of the Highly Indebted Poor Countries (HIPC) that are enjoying higher debt relief and higher aid flows.
What is my point? That the hyperbolic discussion about high economic growth in Kenya needs an injection of reality.
Why would you want to stand on the roof-top to brag about a 4.3 per cent growth in an economy where 50 per cent of the citizens live below the poverty line?
If you look at the typical profile of the people who attend the charged referendum rallies today, it will not escape you that most of them are youths - unemployed school drop-outs and unemployed university graduates wallowing in a culture of defiance, and with the predisposition to join any protest movement at hand.
We abandoned the policy of automatic employment of university graduates several years ago. Even school teachers who leave Government training institutes are no longer assured of jobs, despite the huge demand for education services.
History will record that the greatest mistake this country made this decade was to make far less investment in human beings - investment in education, nutrition and in public health - than in brick and mortar plants and factories.
That is why, although our Gross National Product will increase, the Gross National Happiness will not change.
Yet we all know that the purpose of economic activity is to increase the well-being of individuals. Improving living standards is the objective of economics and development much more than mere accumulation of capital.
Achieving high GDP rates is a good thing. But we have to keep our eyes on the ultimate objective - employment and living standards - not GDP rates, inflation rates and exchange rates.
The point here is this. Until we translate the impressive GDP statistics the Government is bragging about into jobs, better health, and improved nutrition, we will be merely playing politics.
In its current issue, The EastAfrican reports of uncertainty that has gripped the capital markets over the introduction by the Government of the so-called investment certificates.
According to the new rules, any Foreign Direct Investment (FDI) coming into the country will have to be screened by the Kenya Investment Authority.
The present confusion has come about because the Government has rushed to make the new law effective by publishing rules stipulating how the requirement will be implemented.
Indeed, even the Kenya Investment Authority itself has not been fully established.
Meanwhile, a widely-circulated opinion by leading Nairobi law firms has warned that any investor who brings his money into Kenya without a certificate faces major risks.
My views are the following. First, if we are to introduce these certificates, the purpose must be to merely monitor and regulate - not to restrict and control.
Kenya has traditionally had one of the most open FDI regimes in Africa. We should not spoil this record by giving too much power and discretion to meddling bureaucrats who will be only too keen to flex muscle and dictate terms to potential investors.
We often forget that where FDI is concerned, Kenya is in competition with countries of East Asia. These certificates will only undermine our competitive advantage as a location for FDI. Why not make them optional?
Mr Kisero is the managing editor, The EastAfrican
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