| dc.description.abstract | The Kenyan and South Korean economies have had highly varied industrial performance in the last three decades and this difference is likely to continue in the foreseeable future. Between 1960 and 1995, the period covered by this study, Korea experienced a highly impressive economic performance while Kenya recorded abysmal performance. From a promising start after independence, Kenya's growth declined after the first oil shock of 1973 and since then recovery has been difficult and unless serious reforms are implemented industrialization will remain elusive.
Considering the period covered by this study, Korea had a head start in industrialization. Both external and internal factors explain this impressive growth. External factors include large inflows of Japanese capital and administrators. There was substantive Japanese investment and entry of managerial and technical personnel from Japan to Korea. Firms which were established during this period had substantial technological input from Japan .Education was expanded so that by 1945 a quarter of the Koreans had received formal education. The Japanese also contributed in building and improving infrastructure network in South-Korea and helped to modernize the country's agricultural system through highly developed extensions systems. In the same respect
there was substantial aid assistance from US and UK particularly after the Second World War. Domestic factors were that, by early 1960s Korean planners were seriously implementingexport incentive policies which opened the economy to the challenges and opportunities of international trade. In addition, land reforms were already complete, makingthe economy engage in the growth process with a fairly even distribution of income among its people. The educated and industrious labor-force facilitated efficient
production of exports at minimum costs thereby making them price competitive in the export market. Prudence utilization of the foreign aid among other factors ensured that by early 1960s Korea was in a better position for industrial take-off than Kenya.
Trade policies in South-Korea passed through an import substitution phase with high and variable protection of domestic industries. Policies that favored production of imports at the expense of exports were abandoned. Korea established pro-export policies which led to a free trade regime and offered a wide range of other export incentives . These policies provided a mechanism by which industry moved rapidly towards international best practice despite a highly imperfect market for technology. The emphasis on export competitiveness gave businessmen and bureaucrats a transparent and objective system to gauge the desirability of specific policies.
Kenya has not come close to the industrialization level of South- Korea for a number of reasons. After tension and fear that faced the economy during the immediate years preceding independence, the country's planners adopted import-substitution industrialization strategy. Heavy- handed government policies to promote import substitution initially led to rapid growth but soon petered out because it had been pushed beyond its efficient limits. There were many inefficient manufacturing industries which distorted the industrial structure. This was partly because no downsizing and restructuring the economy was done to allow for a smooth transition to the second stage of the import substitution strategy. Although Korea had a head- start in industrialization process. Kenyan planners pursued inward looking policies for along time and it was not until 1992 that significant economic reforms were initiated to make the economy more
outward-looking. The planners adopted a more "directional intervention" as opposed to
"promotional intervention".
There are several lessons which Kenya can learn from South- Korea's spectacular industrial success. The Korean authorities intervened systematically but carefully in many ways to foster general development and in most cases the development of specific industries. There were policies to bolster savings and promote investment. Credit from the established government financial institutions were channeled to selected industries. Protection was given to domestic import substitutes and financial support sometimes extended to declining industries. Export markets were diversified simultaneously with the nature of exports. Thus there is a need for a greater emphasis on aggressive export
market drive in terms of export promotion. while paying more attention to improve the quality exports and diversify the export commodities. There is urgent need to make the existing institutions and legal framework more efficient. Lack of sufficient funds for effective implementation of the set objectives, unnecessary government interference in the running of the institutions particularly in the areas of staff recruitment and overlapping goals which have frustrated effective operations among other constraints must be
removed.
Industrial policies must lead to a sustained average GDP growth rate and manufacturing sector of over 8% and above for reasonably long period. The role of state and the private sector must be clearly defined. Liberalization should be part and parcel of the entire growth strategies. An outward-looking economic policies provides a more conducive environment for faster sustained growth than the inward looking ones. Theoretically, there is no ideal development paradigm but an integration of suitable
elements of various development theories. The general approach should take into account the country's resource endowment, nature of resources, international economic environment and the ability to implement the policies. Other lessons include total commitment to implement the policies and flexibility in replacing unsuitable ones with
better options. Foreign aid should be seen as a supplement to the growth process while the aid assistance is used prudently. Finally, the policies must focus both short term and long term aspirations. This demands good leadership and vision.
The ability of Kenya to replicate of the policies adopted in Korea may be limited, partly due to the current slow growth of the international economic system. There is stiff competition particularly for external markets because most developing countries have gradually launched major export promotion activities. Foreign pressure on the implementation of the SAPs as opposed to "free to initiate and halt' kind of atmosphere which prevailed in Korea makes replicability of Korean policies on uphill task.
Not all aspects in Kenya compare unfavorably with Korea. There are many lessons to learn from industrialization in Russia, whose industrialization experience demonstrates that centralized command planning could induce a high rate of industrialization in an under- developed economy. An important role for government has been widely accepted in market economies. USA Britain and more important from the Newly Industrializing Countries (Nics) particularly from South-East Asia. Kenya has a fairly developed and diversified industrial base and is yet to exploit its preferences in various international protocols such as the Lome convention. In addition, Kenya should strive to strengthen Intra-African trade links which are still under-developed.
In order for Kenya to take -off the government needs to address factors which have been discouraging active participation in the international trade. An industrial policy is needed to be implemented seriously and simultaneously with the ongoing economic reforms to enable the country enter the 21 st century on a meaningful industrial path. | en |
