“PRIVATE SECTOR DEVELOPMENT STRATEGY”

1. “PRIVATE SECTOR DEVELOPMENT STRATEGY” MINISTRY OF TRADE AND INDUSTRY(MOTI)

2. Introduction • Government acknowledges the key role played by the private sector in wealth and employment creation • Various challenges and constraints have been identified as impediments to the business and investment climate in Kenya • Various fora and studies have identified the following as the key challenges: Ministry of Trade and Industry

3. Poor governance Cost of Finance Insecurity Tax Rates Anti-competitive or Informal Practices Economic and regulatory policy Uncertainty Tax Administration Electricity Telecommunications Access to Finance Customs and Trade Administration Transportation Skills and education of workers Access to land Labour Regulations Licensing and permits CONSTRAINTS FACING KENYA PRIVATE SECTOR Ministry of Trade and Industry

4. Barriers to Business in Kenya - Firms rating the constraints as a "major" or "severe" impediment to Business 73% Corruption 74% 73% Cost of finance 73% 73% Crime, theft and disorder 70% 62% Tax rates 68% 64% Anti-competitive or informal practices 65% 57% Economic and regulatory policy uncertainty 52% 52% Macroeconomic instability 51% 51% Tax administration 51% 56% Electricity 48% 56% Telecommunications 44% 39% Access to finance 44% 45% Customs and trade administrator 40% 44% Exporters Transportation 37% 31% Skills and education of workers All firms 28% 21% Access to land 25% 21% Labour regulations 23% 16% Licensing and permits 15% Challenges to Business & Investment Ministry of Trade and Industry

5. Private Sector Development Strategy (PSDS) The PSDS is a Government intervention to provide the general direction and a medium - to long-term road map to support private sector development and eliminate the constraints hampering growth and competitiveness of the private sector in Kenya . Ministry of Trade and Industry

6. PSDS Concept That PSDS is about reorientation of public policy in favour of private initiatives for national development. Strategic areas of focus identified to provide an enabling environment for an effective private sector include: • How the private sector can complement the public sector in achieving the overarching goal of employment and wealth creation. • How public policy can be designed to promote private sector development • The appropriate business environment required for the private sector development • The identification of legal and regulatory impediments to private sector development; and • Capacities and capabilities required by public and private sector institutions for effective promotion of development. • The appropriate role of development partners in private sector development Ministry of Trade and Industry

7. PSDS Process and Stakeholders • The development of PSDS has been highly consultative, involving government, private sector and development partners • In order to promote ownership, the PSDS process embraced a fully participatory approach by involving all the stakeholders. The first task in the process was the identification of players. • A Technical Committee was constituted and brainstormed over along period of time then agreed on the way forward, and the milestones for the PSDS process. It comprised government, private sector and development partners Ministry of Trade and Industry

8. PSDS Process • The process of formulating the PSDS was planned around three phases as follows: • Phase 1: Drafting the PSDS (Secretariat at MOTI & Consultants, SWOT Analysis) • Phase II: Validation process (focus groups, peer review) • Phase III: Development of PSDS action plan Ministry of Trade and Industry

9. PSDSObjectives • Objective: To enhance private sector growth and competitiveness which will contribute to the country’s medium-term objectives as outlined in the Economic Recovery Strategy for Wealth and Employment Creation (ERS) • Strategic Objectives: The two strategic objectives of the PSDS are: • To create a conducive business environment, and (ii) To enhance the growth and competitiveness of the private sector, Ministry of Trade and Industry

10. PSDS Goals • Improve Kenya’s Business Environment; • Accelerate public sector institutional transformation; • Facilitate growth through greater Trade Expansion; • Improve productivity of enterprises; and • Support entrepreneurship and indigenous enterprise Development. Ministry of Trade and Industry

11. The Strategy Address: Poor business environment Address: Limited growth and competitiveness of the private sector, especially MSMEs. Goal 1: Improve Kenya’s Business Environment Goal 2: Accelerate institutional transformation Goal 3: Facilitate growth through greater trade expansion Goal 4: Improve productivity of enterprises Goal 5: Support entrepreneurship and indigenous enterprise development. Outcome 1 Rising private sector confidence; improved investment rating Outcome 2 More efficient public institutions responsive to private sector needs. Outcome 3 At least 20% annual growth in export trade by 2007. Outcome 4 Increased Private Sector Productivity as measured by input capital output ratio Outcome 5 A growing dynamic and integrated indigenous enterprise sector. Ministry of Trade and Industry

12. CROSS-CUTTING ISSUES There are SIX cross-cutting issues namely: • Public Private Partnerships • Gender Concerns • Information, Communications and Technology • Environment • HIV/AIDS • Youth Affairs Ministry of Trade and Industry

13. IMPLEMENTATION FRAMEWORK This builds on the existing structures and takes cognizance of the numerous actors involved: • Cabinet: This provides the policy direction of the PSDS process. • Steering Committee: This will be the decision and policy making organ of the PSDS process responsible for coordination and monitoring of the implementation. • Coordinating Office:shall act as Secretariat to the Steering Committee and will be the link between the Government, the Private sector and the Development Partners. Ministry of Trade and Industry

14. CABINET STEERING COMMITTEE DEVELOPMENT PARTNERS TECHNICAL COMMITTEE PRIVATE SECTOR COLLABORATING MINISTRIES MoTI (COORDINATING MINISTRY) MTEF SECTOR WORKING GROUPS (SWGs) PSDS COORDINATING OFFICE Ministry of Trade and Industry

15. Implementation of PSDS • The Investment Climate Action Plan (ICAP) was formulated as a short-term initiative for PSDS implementation. ICAP focuses on quick wins or activities that would yield maximum results over the short term. • ICAP focuses on a number of priority areas that have been recognized as key to a conducive business environment. These organized into the following nine “clusters”: Ministry of Trade and Industry

16. ICAP CLUSTERS • Controlling rampant and escalating insecurity • Addressing the poor state of roads • Fast-tracking construction approvals • Removing inefficient, unnecessary, unfriendly and cumbersome licensing • Improving business registration • Improving land administration • Improving power hook-ups • Updating the Company Law • Improving customs and tax administration Ministry of Trade and Industry

17. FUNDING FOR PSDS • The PSDS funding mechanism will integrate the government budgetary provisions, the private sector contributions and the development partner component. • The funding approach encourages development partners to either channel their support through basket funding mechanism or direct programmatic approach for specific activities. Ministry of Trade and Industry

18. MONITORING AND EVALUATION • The proposed M&E system is aligned to the National M&E System of the ERS as developed by MoPND • Objective: to be participatory, simple, efficient and based on assessment of easily measurable indicators Ministry of Trade and Industry

19. Way Forward for PSDS • The ICAP has a two year implementation period. The 1st Phase has lapsed and the implementation of the 2nd phase is underway • The implementation of the various components of the PSDS has commenced • Opportunities exist to partner with private sector and development partners in implementing the PSDS Ministry of Trade and Industry

20. Ministry of Trade and Industry