Exporting services could be magic bullet for growth, says ‘Vision’ DG

Acting Vision 2030 Director-General Gituro Wainaina with head of International Economic Development Group, Dr Dirk Willem during a workshop hosted by the Vision 2030 on Kenya as a services hub at the Inter-Continental Hotel, Nairobi, on April 28, 2014. PHOTO | DIANA NGILA | NATION MEDIA GROUP 

In Summary

• Prof Wainaina, who was speaking at a workshop on, ‘The Role of Services in Economic Transformation’, yesterday, said services such as health, education, water and sanitation would directly support social-economic development.
• Kenya, which is a hub for the services sector in East and Central Africa, is, however, at crossroads on how to further improve competitiveness in this area.
• The challenge for the services sector is that while it has generated the much-needed jobs for skilled workers, its direct impact on the number of openings created has been minimal.

By JOSHUA MASINDE
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Kenya needs to position itself as an exporter of services in order to drive economic growth and create new jobs. This will be crucial in supporting poverty eradication efforts.

According to Vision 2030 acting director-general Gituro Wainaina, there is a need to increase focus on investments in the sector by targeting the external market, which is critical in raising the country’s global competitiveness.

“It makes a direct and significant contribution to the GDP and job creation, and provides crucial inputs (such as logistics, energy, financial or ICT services) for the rest of the economy. This has a significant effect on the overall investment climate, which is an essential determinant of growth and development,” he said.

Prof Wainaina, who was speaking at a workshop on, ‘The Role of Services in Economic Transformation’, yesterday, said services such as health, education, water and sanitation would directly support social-economic development.

Kenya, which is a hub for the services sector in East and Central Africa, is, however, at crossroads on how to further improve competitiveness in this area. This is according to Dr Dirk Willem, a director of Supporting Economic Transformation (SET), a programme of the Overseas Development Institute (ODI).

“Kenya is rapidly consolidating itself as a regional services hub in financial services, transport and information communication technology, but it needs a more strategic action both to become a successful global exporter and to ensure the benefits are widely shared,” Dr Willem said.

The challenge for the services sector is that while it has generated the much-needed jobs for skilled workers, its direct impact on the number of openings created has been minimal. A further challenge is the poor linkage between the services sector and others such as manufacturing and agriculture.

“A sector that is at the service of the economy at large is obviously good. However, isolated exportable services may hamper the competitiveness of the manufacturing sector,” Dr Willem said, adding that the links between it and productive sectors needed strengthening.

Kenya’s exports of services rose from Sh177 billion ($1.9 billion) in 2005 to Sh456 billion ($4.9 billion) in 2012, with the share of total trade standing at 44 per cent, compared to 33 per cent in countries of similar income levels.