Published here is a response by the ODM candidate to the last budget speech. In it, he lays out his vision on how Kenya can both create wealth and distribute it in a more equitable manner.
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I feel greatly honoured, to have been invited to give a keynote address
on Public Expenditure and Wealth Creation in light of the just read
government financial estimates for the year 2007/2008.
Allow me
to share with you some deep thoughts that I have held and cherished as
guiding principles every time I remember my responsibility as head of
my family as well as a leader in this country.
There are four
moral principles that negate economic and societal development, and
these I must flag out for our consideration. The first is that poverty
has dehumanizing effects on us. Second, that waste of public resources
negates the principle of good governance. Thirdly, inequality amongst
our people has tremendous negative effects on us as a people and a
nation. And finally, that the family remains a strong nucleus of
economic and social support.
I believe strongly in these virtues. Most of you here tonight, I am sure do also.
We
have come along way in our political maturity as a country. I applaud
the people of Kenya for many reasons, three of which I consider most
important in the present context.
First, I applaud your
patriotism and commitment to building a free and just society. This is
a continuous process and not a one time event. Secondly for your
response to the call to pay taxes as a duty to our nation and country.
For this reason more than 93% of the budget is today funded from
domestic resources. Thirdly and finally, that in spite of lapses in
security, administration of justice and laxity in governance, Kenyans
have remained steadfast and abhor narrow sectarianism, parochialism and
tribalism.
However I hasten to add that, we must not take our people's patriotism and steadfastness for granted.
The
NARC government, which we established in December 2002, had very good
macro-economic policies. The limited successes that we have been able
to witness to date were expected. Our Manifesto indicated stimulation
of economic recovery; creation of employment and the ushering in of the
era of good governance.
The macro-economic policies in the NARC
Manifesto and Economic Recovery Strategy for Wealth and Employment
Creation have delivered some apparent successes. Although the
establishment of development funds to local areas and constituencies
has been successful, the potential successes have been superficial, and
the interventions poorly targeted and therefore have not achieved the
desired results of poverty reduction and the amelioration of existing
inequality.
Gross Domestic Product has grown by 6.1% per annum.
But the economy has not expanded, employment has not been created and
that is why the recurrent budget estimates remains disproportionately
high. Inflation increased from 10.3 percent in 2005 to 19.1% in 2006.
The widening trade deficits shrank any GDP growth benefits. As a result
household economic stability has been grossly eroded and our people
have not experienced Gross National Happiness that needs to accompany
such GDP growth.
Free primary education and support to secondary
schools do not deal with inequality. Growth in the tourism sector has
not translated into more jobs. Although growth in transportation and
communication sectors has increased low-level jobs the cost of
operations and maintenance appears to wipe any gains made. Performance
contracts as currently treated in a very narrow sense cannot be
evaluated nor sanctions enforced. As a result; rather than improve
service delivery to the public they remain largely ceremonial.
Minimum
reforms on the budgetary process, such as Medium Term Expenditure
Framework (MTEF), Budget Outlook Paper, and Budget Strategy Paper have
been attempted. This is especially seen in the budgeting process, which
was meant to create linkages between policy, programmes and results as
well as predictability of the resource envelope. The impacts of these
reforms have been minimal.
In summary, inequality has increased
due to poor targeting and priority setting because in spite of the
so-called pro-poor budget, the budgeting process is not enforceable by
law and hence remains in the hands of a few technicians, with limited
participation of stakeholders.
The present question is how do we
broaden this apparent growth in GDP to create wealth? I shall deal with
this subject in the remaining minutes and then propose key result areas.
No
doubt; the government has a fiduciary responsibility. A responsibility
to ensure that public funds are spent in well-targeted areas,
equitably, appropriately and in a timely manner to give value for money
obtained from the tax payers. As a matter of fact, the "prudent man
rule" which presupposes that the public has put in a blind trust the
resources they have given to government in the form of taxes assumes
that the government will invest in a manner that the public is happy to
continue paying taxes.
However, the public is forced to incur
unnecessary further expenses on security, transportation, bad roads and
poor health and among others which the government should be providing.
At
the implementation level, we still lack technical and absorption
capacity not to mention local level infrastructures that would
facilitate the effective use of devolved funds. In fact, civil servants
working in provinces and districts demand payment for services on CDF,
LATF and other devolved funds. Project design still takes very long and
execution of locally funded programmes has become a cash cow in some
instances. The lack of accountability, not only of devolved funds but
also of public servants, local politicians and community organizations
has resulted in failure to achieve desired results.
In my view,
the government should not be in the business of dishing out funds but
rather should provide the necessary conditions, guidance and structures
for prudent investment. The Controller and Auditor General, Public
Accounts Committee and Kenya Anti-Corruption Authority continue to
raise serious questions regarding devolved funds that generally go
un-addressed.
Low utilization of development funds
We
need to deal with low utilization of development funds. In the current
budget the government has increased development funds by 77.2 percent.
However, no consideration has been taken to ensure full utilization of
the same. I can safely say that, these funds shall find their way back
to Treasury for re-allocation which is typically inequitable. In other
cases the funds will be returned unspent. Critical therefore is; more
accountability and clear sanctions put in place to deal with both
non-achievement of targets and perennial reallocations.
Infrastructure
Not
too long ago, I launched my vision in which I emphasized three
priorities for our country: and that is infrastructure, infrastructure
and infrastructure. Infrastructure still remains our major Achilles
heel towards achieving sustainable development. Our roads and rail
serve the entire Great Lakes, Sudan and beyond through the port of
Mombasa. We therefore must change the design criteria and standards.
I
have been very keen on Housing and Upgrading of Slum settlements.
However, first we must concede that there has been physical planning
failures; poor resource allocation; over-dependence on private sector
to invest in housing. To a large extent, corruption has been the major
handicap not only in the past but also to day.
We need to be
creative in many ways. New financing solutions must be found such as
creation of infrastructure bonds. There is need for harmonization of
infrastructure standards and enforcement of axle load regulation.
Further, I would investigate and broaden linkages between private
sector activities, resource availability and construction industry; and
finally invigorate public housing development while promoting
public-private sector partnerships.
Regarding Science and
Innovation, we need a science and technology-led economy. Furthermore,
research and development of linkages between private sector and
institutions of higher learning and well-targeted research priorities
for public funding needs to be established. This should be accompanied
by rapid deployment of fiber optic networks to connect our cities,
towns and urban centers as a priority in this age of global digital
communication if we are going to succeed in baking a larger national
cake. This needs to be rolled out without delay since it does not
require reinvention.
Key Areas that have delivered desired results
*
Empowering Kenyans not only through distribution of money to various
groups, but developing a better way through strong legislation and
implementable policies.
* Procurement is another area that offers the possibility for innovation and discipline.
*
Expand investment opportunities through grassroots' infrastructures,
Marshall Plan approach and balancing of resources to marginalized
regions.
* Capacity development strategy for the public service
*
Release potential of regions such as: the trade in mangrove poles at
the Coast, livestock trade in North Eastern Kenya as it has been done
in coffee, tea, milk and pyrethrum regions.
In all this, Ladies and Gentlemen, we must bring to the administration of public affairs a sense of urgency.
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I then wonder, just what has grown in Kenya then? For instance, tax collection has grown four-fold in the same period. Just who are these Kenyans and dies it mean that this growth is only account of tax evaders now paying taxes or is it that more and more Kenyans are actually paying their taxes arising from increased incomes? In the last 5 years, PAYE has not been increased (whilst the bands have been broadened to knowck out low income workers) nor has the rate of VAT - but the revenues have actually gone up! Safaricom which was a 2 billion shilling profit company in 2003 is now a 17 billion shilling profit company whilst EABL alos joing the big league with a 12 billion shilling profit up from 3 billion in 2002! Just where are these profits coming from unless Kenyans are not spending money from increased incomes? Why do we have 12000 new vehicles registered every month whilst only 2,000 were bing registered in May 2003?
Which are these Kenyans with this kind of Money? Are they not the same Kenyans that we had in 2003 or have we had a new lot come in to replace us?
We cannot measure the growth of the economy on the people who live in Kibera. The people in Kibera get poorer not because they do not have similar opportunities to those in Kawangware or other city slums, but because they are a tourist site that tends to be used as the mirror for all else happenign in Kenya!!!
Finally on Raila's economic masterplan, the ideas are good, the vision even better, but he still does not tell us how he intends to fund all these nice ideas without sending us deeper into debt or taxing us even higher!!! I hope no one gives us the excuse that private sector will be the key to all the projects - it is the same private sector we have today!