A fellow columnist recently argued that the main requirement for a Singapore-type economic transformation is a national mindset change.
A shared mental model of success is needed, he said. While we may not be there yet, the discourse continues. In the last two weeks, two governors - Kisumu's Anyang Nyong’o and Muranga's Irungu Kang’ata, have weighed in - the first with a formal concept note to the Head of State, and the second in his weekly column.
It seems reasonable to ask what role counties can play in the desired transformation. Is devolution the platform and drivers of the rapid economic change? To answer this question, let us examine lessons from the small population (micro) states that have made the transition to high income status in recent times?
Five high-income states come to mind - Seychelles, Mauritius, Antigua & Barbuda, Trinidad & Tobago and Costa Rica – All have population sizes comparable to our counties.
Seychelles has 107,000 people comparable to Lamu’s 170,000. Mauritius has 1.27 million, comparable to Mombasa’s 1.3 million. Antigua & Barbuda have 94,000. Trinidad and Tobago has 1.5 million, similar to Kilifi.
Cost Rica has 5.2 million, similar to Nairobi County.
Good governance, strong institutions and significant investment in education are common to all. The Kenya’s long-term (since 1971) average expenditure on education is 5.36 percent of GDP, comparable to Costa Rica’s 5.2 percent.
Costa Rica’s become high income through transition from an agrarian society to a diverse, export-led economy, driven by high-tech manufacturing and services.
The key foundational pillars included political stability, a shift from import substitution to export-led growth, and economic diversification. Once dependent on bananas and coffee, it excels in high-value exports such as medical devices, electronics, and IT services.
Its special economic zones that offer tax incentives to multinationals such as Intel, Amazon, and IBM, which contributed roughly 14 percent of GDP in 2023.
By protecting 25 percent of its land as national parks, the country is a global leader in sustainable tourism, which earns more foreign exchange than agriculture.
Over 98 percent of the country's electricity is generated from renewable sources (hydro, geothermal, wind), reducing vulnerability to volatile fossil fuel markets. They have worked hard at fiscal responsibility, with specific limits on government spending.
Mauritius transformed to high-income status through economic diversification, going from a one crop, sugar economy in the 1970s, to a diversified services hub by the 2020s. Favourable EU sugar export quotas generated rents, which were used to fund Export Processing Zones (EPZs), which made textiles and apparel.
In the 1990s, Mauritius expanded into tourism and established a taxation framework attractive to offshore banking and financial services. Recently it has branched into ICT/BPO, seafood processing, high-end real estate, medical tourism and a "knowledge hub" for regional education. Progressive social policies have helped maintain social cohesion in a highly diverse multi-ethnic society.
At $ 21,630 per capita, Seychelles is currently the richest country in Africa. It transitioned from a plantation-based economy to a service-led one, based on high-end tourism and industrial fisheries.
In 2008, it defaulted on its international debt. This led to a structural adjustment programme to transform the economy:- The government liberalised the exchange rate, allowing the Seychellois rupee to trade freely. They implemented a 15 percent reduction in public sector employment and abolished universal price subsidies, replacing them with a targeted social safety net.
The reforms allowed the country to successfully restructure its external debt, nearly halving its public debt-to-GDP ratio within five years.
The country has now diversified into financial services, developing a robust offshore financial services sector.
Trinidad and Tobago achieved high-income status through the strategic exploitation of its oil and natural gas reserves, together with significant investments in downstream petrochemical industries.
Since the 1990s, the government has focused on adding value to raw natural gas by developing a world-class petrochemical hub at the Point Lisas Industrial Estate, which produces fertilisers and industrial chemicals for global markets.
With forward looking governors in Kenya, is devolution the country's platform for transformation?
Ndiritu Muriithi is an economist and partner at Ecocapp Capital. He is also the chairman of KRA and former governor of Laikipia County. Email: [email protected]
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