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Can Kenya replicate Indonesia’s turnaround?

Wolfgang Fengler's picture

JakartaRecently, a friend from Indonesia visited me in Nairobi. He is one of the world’s leading experts on social development and a long-term Jakarta resident. One of his observations stuck in my mind: “Kenya is just like Indonesia ten years ago”, he said. 

Comparing Kenya with Indonesia is counterintuitive—except perhaps when it comes to traffic jams—because of the many differences between the two countries. Indonesia is the world largest island state with more than 17.000 islands and a demographic heavyweight with 240 million people (six times more than Kenya). It is also 85 percent Muslim, while Kenya is about 85 percent Christian. Indonesia has massive natural resources – coal and gas (and some oil) – that it exports to other Asian countries, especially China, while Kenya’s economy is fuelled by a strong service sector.

There are many more reasons to challenge a comparison between these two countries but when one digs below the surface, there are also some similarities. Economically my friend was spot on: in GDP per capita terms, Kenya is roughly at the level of Indonesia a decade ago (about US$800 per capita). Today Indonesia is far ahead, but I don’t see any reason why Kenya couldn’t follow suit. Indeed, Indonesia is a good benchmark case for Kenya because it was never a “star reformer”, but instead a consistently strong performer.

About Development Economics

Shanta Devarajan's picture

UPDATE (May 15th, 2012) Caroline Freund, World Bank Chief Economist for the Middle East and North Africa has joined the debate. See her remarks.

The Chief Economists of all the regions where the World Bank implements programs got together recently to exchange thoughts about the current state of development economics.

You can read a summary of our views related to Africa, South Asia, and Europe and Central Asia here. 

And we hope you can participate in this debate by sharing your own views via the comments section below.  

Tanzania: Building bridges through education and small businesses

Jacques Morisset's picture

Attracted by the prospects of large unexploited natural gas reserves in the south of Tanzania, big players are in town. The British Gas Group has publicly announced that it may invest over US$35 billion in the next 25 years – 1.5 times Tanzania’s current GDP. Policymakers and donors are jockeying to position themselves and understand what is at stake.

The excitement is well founded but perhaps a little bit premature. According to the most optimistic projections, revenues from natural gas will not materialize for 5-7 years. Moreover, international experience shows that commodity-driven growth does not guarantee success. The Tanzanian authorities are therefore right to prepare for the future by setting up the fiscal and financial rules required for future transparent and rational use of these funds now. They should not forget also to focus on the coming 5-7 years because the economy is facing a number of challenges.

The effects of the Euro zone crisis on the CFA franc zone: a View from Cameroon

Raju Jan Singh's picture

For French, click here.

As the sovereign debt crisis is unfolding, many are wondering what could be its effects on the economies of the CFA franc zone, a part of Africa with close relations with Europe, especially France. In the case of Cameroon, the Euro zone still represents the main market for the country’s exports and hosts the largest community of Cameroonians abroad.

La crise de la zone euro et ses impacts sur l’Afrique sub-saharienne

Shanta Devarajan's picture

Lors d’une mission au Mali, j’ai présenté les constats du dernier « Pouls Africain » à un séminaire avec une centaine de participants, y inclus le ministre des finances du pays.   J’ai soulevé quatre points:

Recent reforms in Sierra Leone: Beating the effects of global economic downturn

Vijay Pillai's picture

Pay phone operator in FreetownThe year 2011 ended on a high note for the reformers in Sierra Leone.  There were two significant reforms which the government saw through – reforms that had been long overdue, but which now hold the potential of unleashing new investments and economic growth in the country.  Can Sierra Leone’s use these reforms to beat the potential effects of a global economic downturn?  One hopes so.

The energy sector in Sierra Leone has long faced under-investments. Not very long ago Freetown had the dubious distinction of being the darkest capital in the world and the Bumbuna dam remained elusive.

Africa’s 2012 growth prospects appear bright, but downside risks could dampen momentum

Punam Chuhan-Pole's picture

Sub-Saharan African countries bucked the slowdown in the global economy and grew at a robust pace in 2011 (see Africia's Pulse, February 2012 Update).  

The region’s output expanded by an estimated 4.9 percent, faster than in 2010 and just shy of the pre-crisis (average of 2003-08) level of 5 percent.  Excluding South Africa, the regional growth rate was 5.9 percent.  Particularly notable is the fact that this growth was widespread:  over a third of countries posted 6 percent or higher growth; another 40 percent grew at between 4-6 percent.  Equally important is the fact that several countries saw sustained growth rates of over 6 percent a year in both 2010 and 2011.

So what can Sub-Saharan Africa expect in 2012?  Barring a serious deterioration in the global economy, the outlook for the region seems bright, with a pickup in GDP growth to 5.3 percent in 2012 and 5.6 percent in 2013.  High commodity prices and strong domestic demand, especially buoyant private consumption, are expected to sustain the expansion.

But these factors also point to Africa’s vulnerability. 

Emerging signs of structural transformation in Tanzania

Jacques Morisset's picture

"How was school today and please don’t forget to bring milk on your way back home". This simple conversation between Halima, a 36–year-old woman from Dodoma and her young daughter on their mobile phones was almost impossible 15 years ago: only 2 percent of Tanzanians had a phone and only one of two children attended a primary school (Figures). Today those figures reach 50 and almost 100 percent respectively. Daily life has evolved in Tanzania with technology and education as the main drivers.

Learning from a Kenyan revolution

Wolfgang Fengler's picture

Who would have thought, 20 years ago, that a poor African country would become a powerhouse of global innovation in Information and Communication Technology (ICT)? Definitely not me! As student on a long road trip through Africa in 1990, I often struggled to make expensive calls home to Europe. Making an international call typically involved finding an Indian-African merchant, who was one of the few people with a phone that could connect you to other parts of the world, in theory. In practice, I often waited for at least an hour and, when I was lucky enough to get through, paid the equivalent of what today would be about 600 Shillings per minute.

Now zoom back to today and look at the abundance of mobile devices, even in the poorest parts of Africa, and incredibly low calling rates. This year Kenyans could call the US from their cell phones for as little as 3 Shillings per minute! Something extremely remarkable must have happened. In describing the transformation of the telecom industry over the last 10-15 years in Africa, especially in Kenya, the term “revolution” is not an exaggeration.

Since 2000, the Kenyan ICT sector has grown on average 20 percent each year, outperforming every other sector by a wide margin (the second best performer was hotels and restaurants which grew at 8 percent). The ICT sector has been driving growth in Kenya: without it, instead of the 3.7 percent average growth it achieved, the economy would have seen lackluster growth of 2.8 percent (barely enough to keep up with population growth).

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