Kenya Adopts Cluster Strategy to Boost Industrial Competitiveness

The government has adopted a cluster strategy to improve the country’s competitiveness and help actualize the goal of rapid and accelerated economic growth articulated in Vision 2030, the Permanent Secretary at the Ministry of Trade, Eng (Engineer) Abdulrazak Ali has said. The Government has adopted the cluster framework, Eng Ali says since it offers firms the opportunity to access knowledge, reduce research and development costs, achieve economies of scale, build skills and a qualified labour force, solve common problems and reduce costs due to geographical proximity and increased interaction between firms. The PS says the Cluster Initiative (CI) calls for focus and structured action by the public sector, business, researchers and development partners to leverage CI in order to step up productivity and competitiveness. The CI strategy is also linked to the Kenya Private Sector Development Strategy (KPSDS) being coordinated by the Ministry of Trade. The PSDS has five goals, among which, goal four aims at improving the productivity and competitiveness of enterprises. “The cluster strategy is an innovative framework for coordinated efforts between public sector, cluster businesses, research and academic community and relevant non-state actors to improve growth and competitiveness,” Ali says, adding that “it is a paradigm shift in organizing economic policy as a collaborative effort between, not only business community and government, but the ‘triple helix,’ that also includes the academic community.” He points out that the framework provides businesses with benefits they would not have, if they operated in isolation. “Clusters have also been identified as drivers for innovation, because companies co-operating and competing at close geographic proximity can learn from one another and from knowledge institutions and thus create positive externalities,” he said. The Government support for clusters is aimed at addressing market failures especially in the provision of public goods such as training, education, infrastructure, research and information. Governments also seek to overcome coordination failures within clusters by supporting such activities as university – industry linkages, establishment of supplier associations, and ensuring effective technical support. By virtue of its design, the cluster approach is therefore mid-way between free markets and strong government intervention. “The Government of Kenya, specifically the Ministry of Trade will support and facilitate the clusters already identified to develop and grow,” he says. It is noteworthy that the Ministry of Trade commissioned the Kenya Institute for Public Policy Research and Analysis (KIPPRA) to carry out a study on cluster analysis for Kenya. This study was presented to and adopted by National Economic and Social Council (NESC). From the study, priority sectors were identified and six clusters selected for development. The selected clusters are: Transport and logistics at Port of Mombasa, Coast Beach Tourism, Inland Fisheries in Kisumu, ICT in Nairobi, Beef in Garissa, and Horticulture in Naivasha – Limuru. The facilitator training workshop is part of the government initiative to equip key stakeholders from the prioritized sectors with the knowledge and best practice that will enable them to facilitate the development of the selected sectors. The NESC is charged with the responsibility to spearhead the cluster process as it blends various government ministries in collaboration with the Swedish International Development Agency (SIDA) and the Pan African Competitiveness Forum Kenyan chapter (PACF-K). The NESC, secretary, Julius Muia says the CI brings together government (ministries and state agencies), business firms, research organizations, development partners and other institutions to work together in a formal framework, called the Triple Helix to enhance competitiveness and growth. The strategy involves the development and upgrading of related businesses that have a close geographic proximity or have virtual location through the collaboration of key actors, Muia says, adding that “the major benefits of business clusters are innovation, a reduced cost of doing business, an increased volume of business and an increase in employment.” NESC secretary says a number of Government ministries have taken up the cluster agenda seriously and are mainstreaming some clusters into their work plans. The University of Nairobi, Director Board of Common Undergraduate Courses, Prof Jacob Midiwo says the CI will enhance the utilization of various experts in the universities involved in research and teaching in their areas of competency. Prof Midiwo is one of the trained cluster facilitators in the in the country said experts in the universities have access to vast sources of knowledge which the CI will harness to further the quality of products into the market. He said the CI will scale the confidence of society, the private sector and government in universities as they will collaborate to respond to persistent and dynamic challenges facing the country through training, research and sharing of expertise to spur innovations in the context of a knowledge driven economy. It is noteworthy that the Kenyan government is putting up all necessary strategies for a knowledge driven economy. However, for country to anchor its economy knowledge economy trade the World Bank provides four core requirements in their Knowledge Assessment Methodology that a country must have. The World Bank defines the requirements as having sound institutional and economic regime, education system, and telecommunications infrastructure, and an innovative system. Thus, NESC, secretary Muia says cluster strategy will create a link, collaboration and strategic partnership between firms, the government and research institutions to exploit complementarity and synergies towards innovative economic policy making to meet competitiveness challenges the country is going through. Muia says firms working individually may fail to take advantage of business opportunities arising from the activities of other firms thus sub-optimal – exploit synergies and complementarity. The council says rampant skill mismatch emanating from wanting industry and research linkages will be addressed thus giving new blood to small and large business in the country to compete globally as it will address lack of credit facilities for businesses ventures. The strategy will further look into means to scale up value addition at the consumer market level. Energy will be put into serious consideration as its deficit cost has extremely scaled up production costs – scaring away investors. Nevertheless, cluster approach will focus on economic policy on microeconomics constraints to competitiveness without neglecting macro and sectoral policy framework as well as identify geographic concentrations of natural products in the country. The cluster will spearhead the adoption of direct approach in the planning and execution of cluster initiatives as it been a tool of successful economies in Asia, Europe, and Latin America notwithstanding few countries have adopted cluster strategy such as South Africa, Morocco and Ethiopia which has a vibrant skins and leather cluster and World Bank is funding them to develop a national cluster policy. So far two groups of cluster facilitators, about 100 have been trained with the collaboration between NESC, SIDA and the PACF-K chapter as well as representatives from the Tanzania government that has successful integrated CI in their economic growth. The next training is slated earlier next year.