Country Development Report - Essay Example

page COUNTRY DEVELOPMENT REPORT BASED ON FOUR DEVELOPMENT MODELS – KENYA Executive summary The post-world war II intellectual and historical perspectives on scholarly thinking examined developmental agenda using four competing theories. Each of these theories provides a valuable insight on how development should take place. From a neoclassical counterrevolution, the Kenyan perspective of overreliance on foreign firms and investments drained their foreign exchange. Besides, it led to increased borrowing from the foreign organisations thereby hampering their development agenda. From a linear model perspective, Kenyan economy did not respond to the government’s respond when they introduced legislatives to encourage locally owned companies to trade specific products and commodities. From an international dependency theory, Kenya relies heavily on western countries on tourism, exports, and imports. However, the foreign organisations repatriated investment exchange from the Kenyan economy. The structural patterns showed that Kenya has fragmented an imbalanced urban and the rural fabrics, which signifies high unemployment rate in the urban leading to informal settlements like slum. Table of Contents Title page i Executive summary ii Table of Contents iii Introduction 1 Literature review 1 Statistical trends 2 International dependence revolution 4 Structural patterns 5 Linear stages as a model for development 6 Neoclassical neoliberal counterrevolution 8 Conclusion 10 REFERENCES 12 Introduction Development forms the main agenda of any progressive nation. Although economic progress forms the essential part of development, it is not the only aspect of development because economy is not the only aspect of development (Sen, 1999; Orwa, 1992). Therefore, development is a multidimensional process that requires reorientation and reorganisation of the social and economic systems. From a nonprofessional’s perspective, economic development should improve wealth output and income; however, it involves other changes like the surgical changes of administrative, institutions and social fabrics (Edet-Nkpubre, 2013). Besides, the process aims to change the beliefs, customs, and attitude of the people to focus on certain agendas that forms the receipt for development and avoid issues that may jeopardise growth associated with development (Mshomba, 1997). A holistic approach of defining development is based on a national perspective, which also may require international perspective and the social system (Scanteam and Norad, 2009). The objectives of this paper involved synthesising the four main theories of development namely the linear stage, neoclassical counter-revolution, structural patterns, and international dependence from a Kenyan perspective. These theories form the principal concepts for the explanation and interpretation of development efforts of a country selected for instance Kenya. Literature review Kenya is located on the east cost of the African continent. The land is characterised with striking landscapes like mountains and lakes. It boarders with countries like Uganda, Sudan, Ethiopia and Somalia. Besides, the Indian Ocean stretches on its east coast. The country was under the British colony from 1922 (Greene, 1989). The association with its colonial master has played a critical role in determining its path of development. The British administration entrenched administrative rules and erected institutions that served their goals. The colonial master does not intend to colonize Kenya; however, to safeguard their interest for the Uganda, they had to control and establish administrative approach in Kenya (Getzel, 1970; Leys, 1975). They ended up occupying the fertile highlands. The Kenyan history is characterised with the ethnic groupings, which can be described as unchained social groupings that represented a particular region of the country. During the colonial era, the different tribes were taken through ethnocentrism, which played a critical role in shaping economic, political, and social roles after independence. The ethnic blueprint has endured even after independence (Greene, 1989; Getzel, 1970; Leys, 1975). The economic impression left by the colonial master has affected and mirrored the Kenyan economic strategies. Most of the policies enacted by the Kenyan government after independence were meant to retain the interest of the British. For instance, the country depended on exports of agricultural products, which apparently were dominated by the colonial masters since all the white highlands were owned by the European farmers. These means that Kenyan economy still relied heavily on the colonial master. The Kenyan economic perspective is best studied from a colonial point of view. After independence, Kenya carried on with the colonial model. The model from the British government was characterised with a centralised state consisting of an executive power, which was the most dominant. Statistical trends The Kenyan economic trends has been changing from time to time, for instance, it deteriorated in early 1980 owing to the deficit in trade with its partners. Other contributing factors included financial mismanagement and governance challenges. The slow rate of growth in the economy led to expanding deficits of the budget. However, in the recent time the country has been growing despite the huge financial debts. This has led to increase in populations (KNBS and ICF Macro, 2010; UN; Population Division, 2012). For instance, in 1948, the population was about 5.4 million people, which has since rose to around 42 million in 2012. The country statistical bureau projects that the country would have a population more than 90 million people in 2050 (KNBS and ICF Macro (2010; UN; Population Division, 2012). These rises in population are attributed to high fertility rate, which is projected at around 8.1 children before 1980s but which has declined to 4.6 in 2008 (figure 1). The inability of the government to provide social amenities has led to increase in informal settlements as shown in figure 2 (KNBS and ICF Macro, 2010; UN; Population Division, 2012) Figure 1: Changes in population of Kenya over time despite the economic challenges (KNBS and ICF Macro, 2010; UN; Population Division, 2012) Figure 2: Changes in population between the urban and slums in Kenya over time despite the economic challenges International dependence revolution This model gained support in the 1970s especially in countries categorised as developing with a country like Kenyan being a good example (Edet-Nkpubre, 2013). The model has two sides; one side is a country caught up in the dependency category while on the other side is a dominant county that not only controls its economic, but also political and institutional systems. This theory assumes a political and fundamental perspective. The changes associated with underdevelopment were associated with power relations between the county and international allies. Other relations associated with these relationships include the rigid structural economy, institutions, and the social system (McCarthy, 1994). Factors that affect economic development include the constraints associated with institutions from both the external and internal as well as the political relationship of a country with its allies. The theory emphasise on the need to develop policies that aim to eradicating poverty, increase the prospects for employment opportunities and a reduction to income inequality (Edet-Nkpubre, 2013). The development initiatives in Kenya is characterised by the importation of manufactured goods and capital, large amount of these capital originating from the foreigners, high dependency on exportation, restrictions that hinder development of industries, and the supremacy of agriculture (Ochieng’, 1992; Nulty, 2012). Soon after Kenya gained independence in 1964, the parliament enacted an act that sought to protect the foreign owned investments. The act safeguards the investments by the foreigners if the government decides to nationalise the investments owned by the foreigners. Such steps would require compensation by the national government. However, with time the act became untenable and forced the government to come up with strategies of preventing foreign owned organisation from moving their headquarters to other parts. For instance, the number of USA based multinationals declined to 125 from a previous 140 owing to issues related to political instabilities and the autonomy (Nulty, 2012; Mwembe, 1989). The increasing decline meant that the Kenyan authority needed to amend their foreign investment act of 1964. The government created an export processing zones at the main international airports in Nairobi and Mombasa to exempt multinationals from customs and other levies associated with manufactured exports and importation of raw materials (Hall, 2000). Structural patterns This theory focuses on strategies that a country applies to change and transform its economic approach. For instance, a country may change from subsistence agricultural practice to a modern practise, which will involve urbanization, diversification, and industrialisation of the economy. The concept alludes to the fact that expanding the economy largely depends on the expansion of the internal and local economic strategies (Svedberg, 1995). The model has two perspectives, the empirical analysis anchored on patterns of development by Chenery, and the two-sector model developed by Lewis. Therefore, this theory uses modern theories of economy as well as statistical analysis when portraying internal processes associated with changes in the structural domains. These changes underpins the patterns that developing nations ought to go through to succeed in the effort meant to generate and sustain economic development (Edet-Nkpubre, 2013). From a Lewis perspective, analysis of the Kenyan structural pattern by focusing on the growth output and the transfer of labour shows that the development in the rural and the urban areas were different. The rural were marginalised from the urban sections, so that the nation lacked equal sharing of outputs between the two sections. To a larger extend the urban areas provided employment to the high number of people migrating from the rural areas (Helliwell, 1994). The wages in the urban sector did not portray a perfectly elastic supply because the wages were not constant and depended on the several factors. Besides, the unemployment ballooned in the urban sectors, which created informal settlements to the majority of the people in the urban areas who did not have job. One of the tenants associated with labour transfer and unemployment in the urban areas is the Kibera Slum, which is one of the largest slums in the world located in the outskirts of the capital city Nairobi (Ochieng’, 1992; Waggoner, 2000). Linear stages as a model for development The model puts more emphasis on the need to save and invest in order to promote development and sustainable growth. The model ascribes that savings and investments require implementation of programs that provide capital to the economy. The injection of capital should also have the goodwill of the public sector in accelerating economic development. Previously, Thirwall (2004) demonstrated that this model depend on the accumulation of capital. However, the accumulation of capital depends on the pace of the investment into the economy. Therefore, a particular accumulation will define the level of growth that matches with the savings. The Kenyan government played a significant role in encouraging the national and private investment by the Kenyans. For instance, one of the major steps in enhancing effective participation of the Kenyan based firms in the economy was to come up with an act of parliament. In 1967, the parliament enacted a provision named trade licensing act, which aimed to prevent the non-Kenyans from doing commercial activities with specific types if products. The list of products in the act was limited to non-urban areas. However, three years later, the list was modified to include both the products and commodities (Oucho, 2002). The act of parliament was amended in 1975 to include a broader aspect. The new amendments required that all foreign manufacturing plants to allow the Kenyan body to distribute the produce and commodities. For instance, the Kenyan national trading corporation was to play a significant role in the distribution of the commodities, thereby handing over the exclusive control to the people of Kenya (Bradshaw and Zwelakhe, 1990). The government played a helping role in extending this provision to reaching out to the majority of the citizens. These initiatives were organised through government owned corporations. For instance, the government owned corporations like the National Housing Corporation, National Trading Corporation, Agricultural Finance Corporation, and the Commercial Development Corporation (Nulty, 2012). Even after independence, the Kenyan government wanted to maintain some political and economic structures that were associated with colonialism. For instance, the development of tourism depended on these relations. So that foreign relations with China, India and the western nation were driven by the opportunities in the oversee markets, tourism opportunities and aid assistance (Ochieng’, 1992). The Kenyan government sought to avoid privatisation of standing industries, which provided opportunities for the foreign investments. These strategies opened the Kenyan economy to the control of the foreigners. These strategies played a significant role in jeopardising the autonomy of the nation because the authority could not control and exercise power in their post independent country (Waggoner, 2000). One would argue that the Kenyan authority did not assess the demerits associated with the investments vis-a-vis the loss of authority. Neoclassical neoliberal counterrevolution The theory emphasised on the need to have free markets and to ensure the economy around the world is open. Besides, the concept aimed to privatise public enterprises that were not profitable and inefficient. Unlike the manipulation of a country by the external and internal forces as described by the dependency theory, this concept allude to the fact the government may have excessive regulative mechanisms that may jeopardise the efforts to development (Kweman, 2004; Collier and Gunning, 1999). Economic regulation and excessive intervention by the government may not provide an ample environment for development and growth. Most government in the developing countries came up with policies to encourage development and economic growth. Some of the policies may not play a significant role in development (Greene, 1989; Cornia and Helleiner, 1994). The government focussed most of its policies on the development and growth of agriculture. However, the goods generated from the agricultural practices were mainly for the export to the western and other nations across the globe (Nasong’o, 2005). On one hand, the policies gave the Kenyan people the opportunity to have control of their economy; besides, it provided empowerment to defining the condition of the market. On the other hand, the move by the government to encourage exportation of agricultural commodities is a damaging trend to the economy (Leys, 1975). The country stands to benefit when the leadership encourage success in the production chain, effective facilitation of the manufacturing, and the diversification of the revenue so that the people can benefit from revenues generated from primary products and the profitable margins enjoyed by foreign firms. From a Kenyan perspective, the policies developed by the authority seemed to favour the foreign-based firms to invest in Kenya. These firms were assumed to increase the inflow of capital and other funding from the external sources mostly from the foreign-based firms, which were to increase the exchange savings. However, from an analytical point of view, these firms played a significant role in draining the foreign exchange (Getzel, 1970; Ndulu, and O’Connell, 1999). The existing evidence shows that multinationals bring in a fraction of the capital as compared to the amount they take out of their country of investment. For instance, the amount of cash repatriated from Kenya between 1984 and 1983 by the MNCs amounted to Ksh 5.6 billion (Nulty, 2012). These policies have affected the Kenyan ability to curb the unfavourable conditions, which affect the repatriation of revenues. The ratio between export and import has been widening in Kenya. The Kenyan government imports more than it can export, which affects the cash flow (Chitere, 2005). This dimension puts Kenya in a bad situation forcing the country to borrow from the western allies, the foreigners, and the International Monetary Fund to pay the debts. For instance, the Kenyan government serviced the debts it owed the US by borrowing $3 billion from the international monetary fund. Although the concept of government intervention to improve development through development of policies is aimed at encouraging the agenda, the Kenyan government provided immense opportunity to the international and foreign monetary organisations to influence their domestic policies thereby hampering their development agenda (Hyden, 1970). Conclusion From a neoclassical counterrevolution, the Kenyan authority enacted legislations that aimed to favour MNCs and other foreign firms hoping that their involvement in the economy was to have a positive impact by increasing the capital savings. However, these foreign companies expatriated most of their funds from Kenya. In fact, these firms played a significant role in draining the foreign exchange. The Kenya economy relied on increased borrowing from the foreign monetary organisations and from the western countries, which later played a crucial role in influencing their domestic policies thereby hampering their development agenda. From a linear model perspective, Kenyan economy is classified as subsistence, lacks labour intensiveness. A few cases of labour intensive originate from foreign sponsors. The capital provided by the MNCs generated investments that were repatriated. Although the government introduced legislations that encourage locally owned companies to trade specific products and commodities, these legislatives did not create an ample environment for the MNCs, which relocated their headquarters to other regions, thereby hampering economic agenda of the nation. From an international dependency theory, Kenya relies heavily on western countries as tourist, and tourism thrive with political stability, which is a challenge to the country. Besides, the economy depends hugely on exports and imports, with the former exceeding the latter. Kenya came up with legislations aiming to encourage and promote MNCs and other foreign firms to establish their firms in their country. However, the demerits of these strategies outweigh the merits. For instance, the repatriation of investment exchange meant low exchange funds into the Kenyan economy. One would argue that the Kenyan authority did not assess the demerits associated with the investments vis-a-vis the loss of authority. The structural patterns showed that the society has imbalance labour force between the urban and the rural fabrics, so that the high unemployment rate in the urban areas has led to up surging informal settlements like the largest slum in the world named Kibera. 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