Disparity in Economic Growth and Development between Singapore and Kenya - Case Study Example

THE DISPARITY IN ECONMIC GROWTH AND DEVELOPMENT BETWEEN SINGAPORE AND KENYA: AN INDEPTH ANALYSIS Singapore is ified as an industrialized nation, and categorized as one with a rapidly growing economy (Blomqvist, 2005). Kenya, on the other hand is a developing nation still faced with immense problems of poverty, huge national debt, slow economic growth and a faulty social welfare system (Findlay, Wellitsz & World Bank, 1993). The irony is that hardly fifty years ago in the sixties, both countries, having just been declared independent, faced the same challenges. What has created the great disparities in their level of economic growth and development in the present day In two chapters, the paper examines what hindered Kenya's progress and what helped Singapore in building itself into a success story. Chapter one examines Kenya's shortcomings in its bid for development and economic growth while chapter two analyses what earmarks Singapore's success. Introduction It is said that time and chance is the same for all men. It is then left up to man what he does with the opportunities that are presented him and the time allocated him. Even nations have to adhere to this. Fifty years ago, both Kenya and Singapore were newly established sovereign states, both having gained independence from their colonizer - Britain. Both young nations faced the same problems: new economies unrecognized in the world market, poverty and illiteracy, poor infrastructure and the foreign concept of self governance (Findlay, Wellitsz & World Bank, 1993) . The colonial masters who had never had any real interest in improving the state of the native, had left gaping holes in several sectors when they left their colonies, the political, social and economic structures wee weak, having been cut out to suit the needs of the masters, not the natives (Findlay, Wellitsz & World Bank, 1993). These young nations were thus called upon to formulate their own policies, governments and social structures. What is intriguing is that while they were both faced with the same dilemma, with almost equal opportunities, one country built itself up successfully while the other did not. Leading to the question, what made Singapore -which is now, termed an industrializing nation - work, that Kenya -still labeled as a developing country- did not do The statistics that are available for the measures in development are the clearest indication of just how far apart these two nations are in terms of economic growth. According to the data provided by the World Bank, in 2007, Singapore had a GDP of 161.3 billion US$ and a GNI per capita of 32,470 US$ while the GDP for Kenya in the same year was 29.5 billion US$ and the GNI per capita was 680US$. The life expectancy at the time of birth for the two countries was recorded to be 80years and 53years respectively (WB, 2009). It could not be any more apparent that Kenya and Singapore are now on two very different spectrums. Tracing Kenya's economic growth and her development from the time of independence It is interesting to observe that Kenya's economic growth in the first two decades after independence was quick and steady but took a downward destabilized turn after that. This stands out so clearly that as Legovini (2002) points out, her economic history can be classified under two time periods: the first running from 1963 at the time of independence through to the early 1980s, and the second from the early eighties to the present day. The major difference between the two defined time periods is that while the first was one of prosperity, with notable advancements made in both the economic and social sectors, Legovini explains that the second time period was one where the country experienced growing imbalances in the macro economy, a falling life expectancy, increased poverty and the degradation of the social welfare system. Legovini surmises that what brought about these negative trends were a combination of poor policy formation as well as the focus that was put on politics instead of on policy implementation. Between the years of 1963 and 1970, Kenya experienced a real average economic growth of five per cent (Legovini, 2002), and an even more impressive real economic growth rate of eight per cent from 1970 to 1980. At the same time, the per capita GDP for 1980 was found to be almost 60 per cent greater than that of 1963. After the initial promising beginning, the Kenyan economy came to an almost complete standstill, with the real economic growth dropping to between two and four per cent for the subsequent two decades. Legovini (2002) explains that the drop in economic growth rate had a ripple effect across all sectors; agriculture, which was one of Kenya's strong points, experienced a fall from growing at a respectable five percent to a minimal one percent. The industrial sector was also badly hit, in the sixties and seventies, this sector had been experiencing a phenomenal growth rate of 11 per cent, however in the eighties, it fell to a dismal two per cent and hovered at a not impressive four per cent in the nineties. In the service sector, there was also seen a decline from 8 per cent to a slower 5 per cent in the eighties ad 3 per cent in the nineties. Factors that contributed towards Kenya's favorable start From the above figures, the indication is that Kenya started out on the right footing and had she kept up with her initial trend, she might have had a different story to tell today. There were a multiple number of factors that were working in Kenya's favor and upon which she could have built a stable and impressionable economy (Meredith, 2006). Agriculture Even during the colonial era, Kenya was doing a thriving business in agriculture. This is because there are sections of the country which support the growing of cash crops such as coffee and tea. The government capitalized on this by allocating land to small scale farmers, who then used it to grow these cash crops as well as other horticultural products. The government also supported small scale farmers who wanted to practice dairy farming. The system of cooperatives was still functional at the time, with farmers in these groups getting paid for their produce in good time as well as having a source of money to make improvements on their farms and to expand. All these factors, coupled with the fact that their products were fetching fair prices on the world market, acted as a stimulus for the agricultural sector (legovini, 2002). Industry The Kenyan government at the time adopted policies that sheltered Kenya's young industries and provided an environment where they could flourish. The tactic adopted was that of import substitution where there were several restrictions made on importing that discouraged traders from doing so while at the same time, locally manufactured goods were made easily accessible. However, this tactic had its short comings in that it created a dependence on capital intensive technology if there was to be growth; hence it laid down the groundwork for an incompetent industrial sector (Holtham & Arthur, 1976). Infrastructure Though the country's infrastructure back in the sixties and seventies was not extensive, it was sound. Kenyan roads were in good condition and they connected the most crucial agricultural regions in the interior to towns where products could be processed. The good infrastructure paved way for developments to be made and spurred growth (Meredith, 2006). The human factor Kenya as a young nation, had patriots and zealots who, with the memory of the struggle for independence still fresh in their minds, were determined to make the country a success. They were committed to the all rounded progress of the country, be it political social or economic. Their passion helped to see to the formulation and implementation of policies that were practical and applicable. It was at this time that the 'harambee' spirit was strongest in the country. Harambee loosely translates from Kiswahili to mean 'togetherness'. Taking their cue from inspired leaders, the Kenyan people were willing to work together at building the nation. There was still a great sense of hope, unity and optimism ran high. With such a positive outlook, Kenyans were willing to work together, and to combine resources to improve their lot. If this attitude had lasted the Kenya would have has more to show today than what can be seen (Murunga & Nasong'o, 2007). Minimum external debt When Kenya started out as a sovereign state in 1963, lending by international institutions such as the World Bank, had not been glorified as being the salvation of developing countries. Kenya's economy albeit being a small economy was self sustaining. The concept of foreign debt was still just that; foreign. With the lack of such a constraint, the government could allocate funds where they would be most beneficial, be it in the agricultural, service or industrial sectors (Holtham & Arthur, 1976). Factors that led to the decline and stagnation of Kenya's economic growth and development Corruption Corruption, graft and grand larceny are evils that seem to be too deeply rooted in this country to be eradicated. Over the years, the acts of graft have grown ever larger in size in terms of monies involved, and more morally appalling. In the year 2000, there was formed the Kenya Anti Corruption Commission which was to investigate convict cases of corruption. Even though KACC has exposed numerous under the table deals, the problem still remains because there are no convictions. Most of the people who are implicated are very powerful within the government, and they use their influence to wangle their way out of trouble (Johnston, 2005). In the recent years, Kenya has had to deal with major corruption scandals such as the Goldenberg affair which ran into billions of Kenyan shillings, the Anglo-leasing affair and the Grand Regency affair. Ironically, in all these cases there were government ministers and officials implicated (Wainaina, 2009). Education Kenya's curriculum sidelined the science and technical subjects. The effect of this has been seen over the years and its repercussions are still being felt to date. Kenyan schools were rarely adequately equipped to teach technical subjects with a stronger emphasis being on art subjects. It is in more recent times that in a bid to rectify this anomaly, Kenya has launched a program where all schools and learning institutions will be equipped with adequate computers, a step that Singapore took in the eighties (McMahon, 1999). Delayed reaction to change in market conditions and lack of follow through for formulated policies Though the policies that were created at the time were favorable, and had the capacity to uphold the Kenyan economy, there was hardly ever any follow up on them to see that they were implemented. A good example is how the country reacted to the dissolution of the regional customs zone that she had shared with Uganda and Tanzania. This dissolution should have called for an instant revision of trade policies that would push for a focus on export-oriented trade. However, there was slackness in doing this that led to Kenya losing her pace in international markets (Findlay, Wellitsz & World Bank, 1993). The government also developed the tendency to create policies that protected its own interests. Since most companies were parastatals, the government had vested interests in them and was subjective when it came to how they were run. This resulted in there being substitution policies that only exacerbated inefficiencies and lowered the economy's capability to adjust to external factors (Ndulu, 2008). Endemics and other natural calamities The HIV/AIDS scourge has left its mark on the country. In the 1980s and early nineties when the disease was treated as an enigma, there was little preventive measures taken to curb its spread. Before the government took note and decided to tackle HIV/AIDS as being a serious issue, it had taken hold and the number of people living with the disease was numerous. Since most new infections occurred among the youth, it resulted in a diminishing work force. Further more, the government had to spend funds in looking after the needs of those who were infected and could no longer support themselves. Currently in Kenya, the government apportions a good part of the national budget to dealing with the scourge of HIV/AIDS (HIV/AIDS Fact sheet, 2005). Kenya is still ravished by other diseases such as malaria, which claims the lives of millions of infants annually. There are natural calamities which disrupted the natural order of things such as the droughts of 1984 and 1997-2000, and the El Nio floods of 1998. Since Kenya relies heavily on agriculture, with agricultural practices done traditionally, any changes in the weather patterns adversely affects food production. Incidences of internal conflicts and unrest have also hindered progress. Kenya is made up of over forty two ethnic groups which at times clash with each other. During the general elections of 1992 and 1997, the warring between communities was very apparent and caused tension within the country. This scared away investors as well as the international business community and made them reluctant to do business with the country (Ndulu, 2008). Government expenditures Today, the members of parliament are, compared to their compatriots from other parts of the world, some of the best paid. If their salaries are taken in consideration to Kenya's GDP, M.Ps salaries are found to be grossly disproportionate. Kenya also has a large parliament with over 224 members. These two traits are not recent, between 1972 and 1994 the budget for government expenditure grew by 60 per cent. By 1994, the domestic credit supplied by lending institutions which had been kept at a low of averagely 12 per cent through the sixties, shot up to an incredulous 56 per cent. This took its toll on domestic credit, leading to inflation as the government tried to put up with its extravagant spending habits. Furthermore, inflation which had remained at a low of 10 per cent in the sixties, had sky rocketed to 45 per cent in 1997 (Johnston, 2005). To date, the Kenyan government might have its priorities wrong, if one is to look at the percentage allocated to government spending be it in M.Ps salaries, or other superfluous expenses, as that of the GDP per capita. To male it worse, a good number of Kenyans live in abject poverty while still having to cough up taxes that support the government's spending habits (Murunga & Nasong'o, 2007). In recent years, Kenya has been working to reform her economic policies in a bid to get back on the right track. Kenya has formulated her own development strategy that is outlined in the ambitious Vision 2030. The aim of this vision is to improve the quality of life for all Kenyans and is based on three pillars: economic, social and political. Kenya wants to have a real GDP per capita of 10 per cent annually until the year 2030 (Kenya's Vision 2030, 2007). Chapter two Tracing Singapore's economic growth and her development since the 1960s Compared to Kenya, Singapore was at a greater disadvantage in it's strive for development. It had a more limited number of natural resources, with the only tangible resource being the people themselves. Another resource that Singapore had at her disposal was her geographical location; she was placed centrally between eastern Eastern and Western Asia- possible sources for trade goods, and near enough to Europe who could act as a buyer of these goods. However, with the exit of the colonial powers, Singapore suffered a major blow because Britain, which had been a ready and established market, was no longer so readily accessible. Singapore had to work at rebuilding new markets as well as redefining its trading partners (Dent, 2000). How Singapore worked at building her economy and trade Embracing foreign investors When Singapore realized that they could not capitalize on their export trade since they did not have much to sell, they worked on another strategy; that of luring foreign investors into bringing industries into the country, since she was not equipped with the capacity to build them on her own. However, even this turned out to be quite a challenge because other developing nations were trying to work on this ploy as well (Chong-Yah, 1996). What made Singapore stand out from this other nations was the fact that it worked at building confidence in its own government. Corporations who saw Singapore as a potential investment partner were also attracted by its well laid beaurocracy as well as its efficiency in functioning. Corporate organizations making investments in foreign countries have to keenly analyze the political environment of this country because the greater risk of political unrest, the higher the risks that they might face losses. Singapore built a stable and sound government that earned repute as being completely secure and wrangle free. This in turn instilled confidence in its potential foreign investors (Daquila, 2000). Fight against corruption Singapore also worked at creating an untarnished reputation where corruption was concerned. She laid down strict guidelines for its own people and institutions on how cases of graft would be handled. Their tough approach and no nonsense attitude to dealing with graft ensured that cases of corruption were kept at a minimum. This also impressed potential foreign investors who knew that they would not be slowed down by having to bribe officials or go through unnecessary red tape (Yew, 2000). Taxation Singapore looked appealing to foreign investors because it offered low tax rates that were at times even lower than those for local investors (Geiger & Geiger, 1973). Infrastructure The Singapore government realized that it was critical to have a sound infrastructure, therefore, it worked at building its streets, airports, roads and other facilities. In the bid to achieve a sound infrastructure, Singapore still managed to observe her culture of self reliance, and did not turn to foreign institutions for the funds needed, but constituted a special tax that was specifically targeted for infrastructure(Geiger & Geiger, 1973) . The people factor When Singapore set out on the road to attain development, the firs item on her agenda was improving the quality of life for her people, meaning that she had to come up with a way of keeping them in meaningful employment. She was faced with the task of finding jobs for a highly skilled workforce; this is the group who had formerly been employed by the British army at their naval and air force bases, and had now been left without work. This was dealt with and by 1970 Singapore had one of the lowest unemployment rates among all Asian countries (Yew, 2000). The Singaporean government then proceeded to ensuring that its workforce had the necessary skills to work with the industries that were coming up. The focus shifted from encouraging low wage industries to the building capital-intensive industries that were more technologically sophisticated (Huff, 1997). Through the eighties, Singapore worked at investing in the computer industry as well as related industrial sectors such as the production of electronic medical equipment, automotive parts, optical and photocopying equipment (Le Blanc, 2008). With the nineties Singapore realigned her development strategy to embrace both the service and manufacturing sectors (Geiger & Geiger, 1973). Singapore's development strategy was almost upset by president's Lee Kuan Yew's attempts - which were noble though- to increase workers' minimum wage levels (Yew, 200). Corporations reacted negatively to this because they were put off by the high wages. However, the more serious implication was that Singapore would turn out the same as other developing nations which would encourage investors, then put them into a tight corner once the corporations were committed. Singapore experienced a recession between 1985 and 1986 but managed to pick up again. Lee Kuan Yew took it as a lesson learnt and rearranged his strategy (Todaro & Smith, 2003). Another approach that the Singaporean government adopted was improving the qualifications and skills of Singaporean employees. This was achieved by implementing a program where workers met at a government institute to train for three hour training sessions over a period of two years (Mirza, 1986). This training was offered freely and was also voluntary. The response was positively overwhelming, and the results remarkable (Mirza, 1986). This training encouraged Singaporean employees to be innovative as well as instilling strong work ethics and discipline. But that was not to be the end of it. The technical training institutes became the forerunners to other government programs. These other programs were such as: . The creation of a 'science park' which became an avenue through which the government could share research and information with industries in the country. This was a very clever move because in most cases industries view the government with a level of hostility. By creating a channel for dialogue, the Singaporean government overcame this huddle (Mirza, 1986) . . The focus on improving the quality of technical education at institutions of higher learning that resulted in the tripling in size of the then two engineering universities (Mirza, 1986) . The formation of a computer board which was specifically charged with the task of seeing computers installed in the schools, institutions and homes of Singapore (Mirza, 1986). . the ambitious yet very strategic laying aside of 50 million US$ I a venture capital fund which was to be used to fund young companies in Singapore as well as those outside the country that were keen on developing technology (Mirza, 1986). These objectives clearly indicate that Singapore understood her strong points and worked at building them with everything that she had. Having few options, Singapore did not spend time, energy and resources trying to get the right footing. Having identified a possible road to economic growth, she walked it firmly without stumbling or looking back (Mirza, 1986). Another unique attribute of Singapore is that though she relied on foreigners to jumpstart her to economic freedom, she however controlled these relations such that she did not become financially dependent on them. This is a pitfall that most developing nations fall into, in a situation where there is a heavy reliance on foreign investors. Singapore avoided this by building the capacity of its own workers, providing them with the needed technological know how, and then stepping in to get these workers of the ground in the event that they wanted to start their own companies (Todaro & Smith, 2003). Conclusion So it just might turn out to be true that time and chance is the same for all men. However, this does not make it true that two men with the same chances under the same time span will end up in the same place. It depends on who makes the best use of opportunities. The case of Kenya and Singapore prove very enlightening because they illustrate how one determined country can pull itself from the gutters while on the other hand how easy it is for a country's economic state to deteriorate or stagnate all together if it is not nurtured (Todaro & Smith, 2003). The government of any country plays a vital and central role in nurturing economic growth and laying down the foundation for development. Not only does the government act as the institution that formulates the policies that will shape the economy of a country, but it is furthermore charged with the responsibility that these policies are actually implemented. As Kenya and Singapore clearly illustrate, a government has to be keen on its follow up actions if policies are to work (Todaro & Smith, 2003). Social vices such as corruption and greed can actually hinder the progress made by a nation. Kenya, which has been crippled by cases of graft and grand larceny, grapples with its effects because due to the misappropriation of funds, there are sectors of the economy that have to suffer. The attitude of a people is important because this attitude evolves into a culture and a culture into a way of life. While Singapore cultivated an attitude of self reliance and hard work, Kenya's dependence on foreign aid has led to its people being complacent and reluctant about coming up with inbred solutions to the country's problems (Ndulu, 2008). But the long and short of it remains that development is not a term that is preserved for a chosen few. Any country can develop, as long as there is in place a well thought strategy, adequate policies, positive attitude and a willingness to work. Bibliography Blomqvist H, 2005, Swimming with the Sharks: Global and Regional Dimensions of Singapore, Marshall Cavendish Academic, CA. 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