Kenya. Country Profile 2004

Transcription

1 Country Profile 2004 Kenya This Country Profile is a reference work, analysing the country's history, politics, infrastructure and economy. It is revised and updated annually. The Economist Intelligence Unit's Country Reports analyse current trends and provide a two-year forecast. The full publishing schedule for Country Profiles is now available on our website at The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom

2 The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The Economist Intelligence Unit delivers its information in four ways: through its digital portfolio, where its latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London The Economist Intelligence Unit 15 Regent St London SW1Y 4LR United Kingdom Tel: (44.20) Fax: (44.20) london@eiu.com Website: New York The Economist Intelligence Unit The Economist Building 111 West 57th Street New York NY 10019, US Tel: (1.212) Fax: (1.212) newyork@eiu.com Hong Kong The Economist Intelligence Unit 60/F, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) Fax: (852) hongkong@eiu.com Electronic delivery This publication can be viewed by subscribing online at Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, on-line databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright 2004 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the Economist Intelligence Unit does not accept responsibility for any loss arising from reliance on it. ISSN Symbols for tables "n/a" means not available; " " means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK.

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4 Country Profile The Economist Intelligence Unit Limited 2004

5 Kenya 1 Contents Kenya 3 Basic data 4 Politics 4 Political background 6 Recent political developments 9 Constitution, institutions and administration 11 Political forces 13 International relations and defence 16 Resources and infrastructure 16 Population 18 Education 19 Health 20 Natural resources and the environment 20 Transport, communications and the Internet 24 Energy provision 26 The economy 26 Economic structure 27 Economic policy 35 Economic performance 37 Economic sectors 37 Agriculture 40 Mining and semi-processing 41 Manufacturing 43 Construction 43 Financial services 44 Other services 45 The external sector 45 Trade in goods 47 Invisibles and the current account 48 Capital flows and foreign debt 50 Foreign reserves and the exchange rate 51 Regional overview 51 Membership of organisations 58 Appendices 58 Sources of information 60 Reference tables 60 Population 60 Labour force 60 Transport and communications 61 National energy statistics 61 Government finances The Economist Intelligence Unit Limited Country Profile 2004

6 2 Kenya 62 Government revenue and expenditure 62 Money supply and credit 62 Interest rates 63 Gross domestic product at factor cost 63 Gross domestic product by expenditure 63 Gross domestic product by sector 64 Consumer prices 64 Average wage earnings per employee 64 Agricultural production 65 Forestry and fishing 65 Minerals production 65 Industrial production 66 Construction statistics 66 Banking statistics 66 Tourism statistics 67 Import and export prices 67 Exports by value 67 Main exports by volume 68 Imports by value 68 Main trading partners 69 Balance of payments 69 External debt, World Bank series 70 Net official development assistance 70 Foreign reserves 70 Exchange rates Country Profile The Economist Intelligence Unit Limited 2004

7 Kenya 3 Kenya Basic data Land area Population Main towns 569,259 sq km 28.7m (1999 national census), 31.5m (2002 estimate) Population in!000, 1999 census Nairobi (capital) 1,346 Mombasa 465 Kisumu 185 Nakuru 163 Ethnic groups Climate Weather in Nairobi (altitude 1,820 metres) Languages Measures Currency Fiscal year Time Public holidays African"Kikuyu 21%, Luhya 14%, Luo 13%, Kalenjin 11%, Kamba 11%, Kisii 6%, Meru 5%. Non-African"Asian, European, Arab 1%. Religions: Indigenous beliefs 10%, Protestant 40%, Roman Catholic 30%, Muslim 20% Tropical Hottest month, February, C; coldest month, July, C; driest month, August, 24 mm average rainfall; wettest month, April, 266 mm average rainfall English, Swahili and more than 40 local ethnic languages Metric system Kenya shilling (KSh)=100 cents. KSh20=1 Kenya pound (K ). Average exchange rate in 2003: KSh75.9:US$1. Exchange rate on 25th September 2004: KSh80.8:US$1 July 1st-June 30th 3 hours ahead of GMT January 1st; Good Friday; Easter Monday; May 1st; June 1st; Eid ul Fitr; Christmas holiday, December 25th-26th The Economist Intelligence Unit Limited Country Profile 2004

8 4 Kenya Politics Kenya!s political environment has been transformed by the landslide victory of Mwai Kibaki and his National Rainbow Coalition (NARC) in the presidential and legislative elections held on December 27th The Kenya African National Union (KANU) was pushed into opposition for the first time since independence in 1963, and Daniel arap Moi!s 24-year reign was brought to a close. The elections were described as largely free and fair, with little of the violence and intimidation that marked the previous two polls in the 1990s. This bodes well for Kenya!s future elections. The political and economic challenges confronting Mr Kibaki and his NARC government are, nevertheless, daunting. NARC has inherited a run-down infrastructure, weak and corrupt institutions, a country riven with ethnic divisions and one of Africa!s worst-performing economies. Progress in tackling these issues has been slowed by infighting within NARC, which has left Mr Kibaki struggling to maintain the parliamentary majority needed to push through his legislative agenda. Kenya!s next presidential and legislative elections are scheduled to take place in December Political background Before independence The coastal region of what is now modern Kenya has developed through more than five centuries of Indian Ocean trade, evolving into a sophisticated Swahili culture with strong Arabic influences. In the mid-19th century trade to the interior opened up the tribal lands of the Kikuyu, Luhya, Luo, Kalenjin and Kamba, which remain the five largest ethnic groups. Kenya was declared a British protectorate in 1895, and white settlement started in the early 1900s. The first genuine African nationalist movement, the Kenya African Union (KAU), was established in 1944, with Jomo Kenyatta, a Kikuyu, as its president. In 1952 the Mau Mau, a secret society made up largely of Kikuyu, launched a guerrilla campaign against white settlers in the fertile Central Highlands. Of the many thousands who died during the Mau Mau rebellion, which lasted until 1956, fewer than 50 were white settlers. A constitutional conference was held in London in 1960, leading to a transitional constitution permitting the formation of political parties and giving Africans a comfortable majority on the Legislative Council. KANU was formed, dominated by the Kikuyu and the Luo"although Mr Kenyatta, who had been imprisoned in 1953, remained in detention. Other politicians, wary of Kikuyu-Luo hegemony, formed the Kenya African Democratic Union (KADU). Mr Kenyatta was released in August 1961, led KANU to victory in the legislative election of May 1963, and was appointed prime minister. A formal declaration of independence followed in December Early years of independence Kenya became a republic in December 1964, with Mr Kenyatta as its first president. The entire KADU membership had earlier defected to KANU, thus turning Kenya into a de facto one-party state. Mr Kenyatta was elected unopposed for a third presidential term in September He died in August 1978 at the age of 82. The presidency passed to the now retired Daniel arap Moi, Country Profile The Economist Intelligence Unit Limited 2004

9 Kenya 5 a member of the Kalenjin ethnic group from the Rift Valley region of central and northern Kenya. In 1982 a constitutional amendment officially made Kenya a one-party state. A coup attempt led by air force personnel, apparently with strong Luo backing, was foiled later that year. Daniel arap Moi Daniel arap Moi, a member of the Kalenjin tribe from the Rift Valley region of central and northern Kenya, was one of Africa!s longest-serving presidents when he stepped down after 24 years at the end of He was a skilled politician who managed to divide the opposition, but his rule was marked by severe political oppression, virtual state control of the media, human rights abuses, rampant corruption and severe economic decline. He stepped down as chairman of the Kenya African National Union (KANU) in early 2003 after losing the presidential election in December His decision to stand down after electoral defeat, rather than subvert the will of the people, helped to partly restore his image. Moi era KANU splits in the run up to the 2002 election During the 1980s Mr Moi!s government became increasingly intolerant of political dissent, and constitutional amendments substantially increased the president!s powers. In 1988 Mr Moi was re-elected for a third term, but widespread irregularities in voting for the legislature helped to discredit the one-party system, and calls mounted for a return to a multiparty system. Following strong pressure from donors and popular protests in Nairobi the government relented, and in December 1991 parliament scrapped the constitutional amendment making Kenya a one-party state. Despite widespread initial support for the new opposition parties, political rivalry and internal division in the run-up to both the 1992 and 1997 elections destroyed their chances of defeating KANU. The balance was tipped further in the government!s favour by KANU!s control over the state-run media and the composition of the electoral commission. By these means Mr Moi and KANU won both elections fairly easily. The opposition vote, although large, was hopelessly split. Mr Moi was not allowed to stand again in 2002, according to the constitution, but made a fruitless attempt to dictate the KANU succession. He merged KANU and the opposition National Democratic Party (NDP), led by Raila Odinga, in March 2002, in an attempt to build wider support in the run-up to the pending election. However, Mr Moi then alienated the NDP and other KANU factions by appointing Uhuru Kenyatta, the 41-year-old inexperienced son of the country!s first president, as KANU!s presidential candidate. The NDP left KANU, taking with it many KANU stalwarts, to form the Liberal Democratic Party (LDP). At the same time several opposition parties united under the banner of the National Alliance of Kenya (NAK), led by Mwai Kibaki. The LDP joined with the NAK to form the National Rainbow Coalition (NARC) and confirmed Mr Kibaki as presidential candidate. However, a secret memorandum of understanding between the two NARC segments purportedly guaranteed the LDP an equal share of responsibility in the new government. Mr Kibaki!s supposed failure to The Economist Intelligence Unit Limited Country Profile 2004

10 6 Kenya fulfil this promise has fuelled a bitter dispute between the two opposition partners, which shows little sign of being resolved. Recent political developments Opposition secures an overwhelming election victory Mr Kibaki!s landslide victory in Kenya!s December 2002 presidential election" accompanied by a similarly convincing win for the NARC in the parliamentary election"signals a major shift in Kenya!s political environment. Not only did it end the stagnant and corrupt presidency of Mr Moi, but it also gave Kenya a new ruling party for the first time since independence in Presidential election, Dec 2002 (% of vote) Emilio Mwai Kibaki (National Rainbow Coalition) 62.2 Uhuru Kenyatta (Kenya African National Union) 31.3 Simeon Nyachae (Forum for the Restoration of Democracy-People) 5.9 James Orengo (Social Democratic Party) 0.4 David Ng'ethe (Chama Cha Uma) 0.1 Sources: Daily Nation. Mr Kibaki, beaten into second place in the previous two elections, gained 3.65m votes (62% of the total)"almost exactly double those for KANU!s candidate, Uhuru Kenyatta"and the NARC took 125 of the 210 directly elected seats in parliament, compared with KANU!s 64 seats. Some 60% (over 10m) of registered voters cast a ballot. Despite some reports of voting irregularities, the poll was described as mostly free and fair by local and international observers, and, unlike the previous two elections, was not marred by widespread political violence and intimidation. Parliamentary election, Dec 2002 (seats) Directly elected Appointed Total National Rainbow Coalition Kenya African National Union Forum for the Restoration of Democracy-People Safina 2 2 Sisi Kwa Sisi 2 2 Forum for the Restoration of Democracy-Asili 2 2 Shirikisho 1 1 Ex-officio 2 Total Sources: Daily Nation. The new president faces many challenges The challenges confronting Mr Kibaki!s government are at least as great as those faced by any previous Kenyan government. Apart from fulfilling his party!s election pledges on education, corruption, the constitution and reviving the economy, he faces the daunting task of holding the NARC together. The party is an unprecedented (for Kenya) alliance of diverse interests, which cuts across the boundaries of both ethnicity and ideology and whose main spur to unity was the desire to bring the Moi era to a close. Although the constitution obliged the former president to retire, Mr Moi and his associates would have retained Country Profile The Economist Intelligence Unit Limited 2004

11 Kenya 7 considerable influence had KANU won. With the NARC!s main objective achieved, the forces acting on the party have tended to promote fragmentation rather than unity, especially after the euphoria of victory had faded. Disagreements mount within the ruling coalition After a year in power it became clear that the NARC coalition was seriously divided between the largely pro-kibaki NAK and the LDP headed by Mr Odinga. The two factions profoundly disagree over whether Kenya should stick with a presidential style of government, as has been the case since independence"the NAK view"or switch to a prime-ministerial system, as favoured by the LDP. Kenya does not currently have a prime minister, but draft constitutional proposals call for the creation of such a position, with strong executive powers. The LDP feels that it is owed the prime ministership under the controversial pre-election memorandum of understanding, and that its de facto leader, Raila Odinga, should fill the post. However, the NAK, despite its opposition to a powerful presidency during the Moi era, is now keen to preserve Mr Kibaki!s authority and says that having twin centres of power would be a recipe for conflict and confusion. The dispute is not yet settled (see Constitution, institutions and administration). The two factions are also divided over whether the NARC coalition should merge into a single entity or stay as a union of separate parties. Mr Kibaki stated his clear preference on this at the end of December 2003, claiming that the NARC!s constituent parties were obsolete and should be dissolved. However, the LDP is firmly opposed to this. The situation is complicated by the position of the Forum for the Restoration of Democracy-Kenya (Ford-Kenya), which, unlike the other large parties in the NAK"the National Party of Kenya and the United Democratic Party"favours retaining its separate identity because, like the LDP, it has a strong regional base and fears being swamped by a national organisation. Coalition in-fighting has spawned a climate of political uncertainty and has made it difficult for the president to push forward his legislative agenda, threatening the drive towards improved governance. Mr Kibaki reshuffles his cabinet: June 2004 In an attempt to deal with in-fighting and build a new parliamentary majority, the president, Mwai Kibaki, undertook his first-ever cabinet reshuffle at the end of June He demoted (although he did not sack) several ministers from his erstwhile coalition partner, the Liberal Democratic Party (LDP), and brought in members of the opposition, including the Kenya African National Union (KANU), the former ruling party, and the Forum for the Restoration of Democracy-People. In addition, extra posts were given to his National Alliance of Kenya (NAK) partner, the Forum for the Restoration of Democracy-Kenya. Mr Kibaki is hoping to break the parliamentary deadlock that has been holding up key legislation by ending his reliance on the LDP. By bringing in ministers from outside the National Rainbow Coalition (NARC), the president signalled that he has no intention of implementing the preelection Memorandum of Understanding between the NAK and the LDP, which purportedly guaranteed a 50:50 division of power and responsibility. The new cabinet has been called a government of "national unity", but this is a misnomer; opposition members have been co-opted as individuals and the KANU hierarchy was against the move. Nor is it truly a coalition government any longer, as, although LDP ministers remain in government and the party has not formally resigned from the NARC, most backbenchers have crossed to the opposition side. The Economist Intelligence Unit Limited Country Profile 2004

12 8 Kenya Another feature of the reshuffle was the relative victory of the "old guard" over the "young Turks". There are now several ministers over 70 years old, including the president himself, but whether the experience they offer is a positive force or not is a moot point. Important recent events July 2000 The IMF agrees a new poverty reduction and growth facility (PRGF) with the Kenyan government and resumes lending following a three-year freeze. However, the PRGF sets very strict performance targets, which the government fails to meet, and the programme comes unstuck before the end of the year. March-July 2002 In March the ruling Kenya African National Union (KANU) merges with the National Development Party (NDP). Later, in July, the then president, Daniel arap Moi, chooses Uhuru Kenyatta, the 41-year-old son of Kenya!s independence leader, Jomo Kenyatta, as KANU!s next presidential candidate, provoking a crisis in the ruling party. August-October 2002 KANU splits in August, with the NDP and other disgruntled KANU members forming the Liberal Democratic Party (LDP). At the same time, three opposition parties unite under the banner of the National Alliance of Kenya (NAK). In October, the LDP and NAK form the National Rainbow Coalition (NARC), with Mwai Kibaki at its head. September 2002 The Constitution of Kenya Review Commission (CKRC) publishes a draft constitution; although flawed and incomplete, the most contentious constitutional proposal is to create the post of prime minister, with executive powers. December 2002 Mr Kibaki!s landslide victory in Kenya!s December 2002 presidential election" accompanied by a similarly convincing win for the NARC in the parliamentary election"signals a major shift in Kenya!s political environment. May 2003 Security risks are highlighted when warnings of terrorist attacks lead to a six-week suspension of commercial flights from the UK and the release of negative travel advisories by several Western countries, which damage the vital tourism industry. March-October 2003 The new government!s fight against corruption gathers momentum with the appointment of the Goldenberg Commission of Inquiry into funds looted from the Central Bank of Kenya, the passage of two anti-corruption laws and the sacking of almost half the top judges. November 2003 Country Profile The Economist Intelligence Unit Limited 2004

13 Kenya 9 The IMF awards Kenya a new PRGF, worth US$252m over three years, which unlocks other forms of multilateral and bilateral funding. Donors in the consultative group pledge over US$4bn in support of the economic recovery programme. The Economist Intelligence Unit Limited Country Profile 2004

14 10 Kenya March 2004 The National Constitutional Conference releases its final "zero draft", based on a separation of executive powers between the president and a putative prime minister. Kibaki loyalists within the NARC oppose the zero draft, although the LDP supports it. The constitutional court rules that any new constitution must be subject to referendum. June 2004 Mr Kibaki reshuffles his cabinet, demoting LDP ministers and bringing in members of the opposition in order to build a new, workable majority in parliament. This seems to have worked in the short term, but the situation remains volatile and the parliamentary arithmetic uncertain. July 2004 Rallies in Nairobi and Kisumu called in support of the zero draft descend into widespread rioting. Fortunately, further rallies have been "trouble-free" although recent events show that Mr Kibaki cannot take civil peace for granted. August-September 2004 The EU delays the disbursement of US$59m towards the 2004/05 budget (July-June) until October at the earliest, pending a review of the government!s action against corruption and, in particular, against corrupt members within the administration. The EU move comes just three weeks after the IMF postpones the release of the second US$36m tranche of the PRGF agreed last November"which had been due in May"pending the outcome of a review mission in late September. The IMF cites the government!s failure to enact key legislation, especially the privatisation bill, and to appoint a director to the Kenya Anti-Corruption Commission. Constitution, institutions and administration The president has wideranging powers Constitutional reform proves controversial and slow moving Under the current constitution a president can serve for two five-year terms only. The constitution was drawn up at independence and draws heavily on English law, although it has been amended more than 30 times. The constitution gives the president extensive powers and is not well adapted to multiparty politics, despite the repeal in December 1991 of Section 2a, which had formalised the one-party state. Judges are appointed by the president, and although they have security of tenure, and should therefore be relatively immune to political pressure, the legal process was hamstrung by heavy-handed political interference. Under Mr Moi and his predecessor, Mr Kenyatta, the constitutional powers of the presidency were sharply increased: government policy was directed almost exclusively through the office of the president, which had the largest departmental budget and direct control of key areas of security and defence. There is widespread agreement that Kenya needs a new constitution, but the path to devising one has been long and arduous, and has still not reached a conclusion. Following sustained pressure from the opposition and from international donors, minor constitutional reforms were enacted in the run-up to the 1997 elections, which marginally reduced the president!s powers. In Country Profile The Economist Intelligence Unit Limited 2004

15 Kenya , after several more twists and turns, Mr Moi appointed a respected academic, Yash Pal Ghai, to chair the Constitution of Kenya Review Commission (CKRC), a body charged with devising a new constitution. Furthermore, a National Constitutional Conference (NCC), comprising 629 delegates, including all 224 members of parliament as well as a broad swathe of civil society, was convened at Bomas, a town outside Nairobi. A first draft constitution, published in September 2002, contained several controversial proposals, including the creation of a post of prime minister, with executive powers. Constitutional affairs took a lower profile in the immediate aftermath of the NARC!s election victory, but soon emerged as one of the main issues dividing the constituent parties of the ruling coalition. Kibaki loyalists opposed the loss of presidential powers to a putative prime minister, but the LDP favoured such a change. As a result of the split in government ranks, Bomas II, which ended in November 2003, made little headway. Bomas convened for its third and final session in January 2004, but attempts to unite the NARC around a common position proved fruitless, and the final "zero draft", released in March 2004, did not have the support of the president!s supporters. Apart from calling for the transfer of executive powers from the president to a prime minister, the zero draft also included other controversial proposals, including the devolution of powers to district level; the creation of a second, upper chamber of parliament; and granting constitutional recognition to Islamic kadhi courts, which is vehemently opposed by the dominant Christian churches. The constitutional court demands a referendum Mr Kibaki seeks cross-party consensus Within a week of the zero draft being published, the entire process was again thrown into confusion when the constitutional court, in a 2:1 majority ruling, said that any new constitution must be subject to a referendum and that some parts of the Constitution of Kenya Review Act, under which the new constitution has been formulated, were incompatible with the existing constitution. As a result of the court ruling, Mr Kibaki found a convenient excuse to miss his self-imposed deadline to deliver a new constitution by the end of June However, despite the extra delays, the court ruling has provided much-needed breathing space for parliament!s disparate factions to reach a consensus on a new constitution. Mr Kibaki has sought to build a cross-party consensus in favour of amending the zero draft before submitting it to a referendum, and despite initial setbacks his efforts appear to be paying dividends. However, nothing about the constitution can be taken for granted. In early August 2004 parliament passed the key "consensus" bill, paving the way for parliament to amend the zero draft, but in a further twist to the saga the attorney-general rejected the bill on technical grounds. Despite this setback, the deadlock is now closer to being broken and the key protagonists are narrowing their differences. Officials are now talking of a system based on the Tanzanian model, with the president preserving most of his powers but with some executive functions being taken over by a prime minister. Any "new" draft that emerges will then be subject to a referendum, after a national publicity exercise lasting two to three months. Given the number of obstacles that still need to be overcome, the Economist Intelligence Unit does not expect Kenya to have a new constitution much The Economist Intelligence Unit Limited Country Profile 2004

16 12 Kenya before It is not so much the delay that is causing the greatest disruption, but rather the uncertainty. Until Kenya can chart a way out of the current quagmire, the political system will remain in a state of flux. Political forces Politics is characterised by shifting allegiances KANU retreats to lick its wounds Kenya!s political environment was dominated by KANU for almost 40 years ( ) while the opposition remained fractured. However, within this context, the political map was constantly being redrawn as political factions formed a succession of temporary alliances, sometimes joining KANU and sometimes leaving it. Ethnicity has long played a key role in Kenyan politics, and the drive by successive governments to win the support of the country!s main tribes, especially in the run-up to elections, has been a major factor behind such party-hopping. Personal ambition has also played a part, although ideological reasons are seldom the cause. As a result, most opposition leaders have served under a KANU administration at some stage. The only fixed and certain feature was the all-powerful president. That Kenya remains riven by factions, often though not exclusively based on ethnic or regional identity, is obvious from the wrangling that has bedevilled the new NARC administration. The political balance shifted yet again in June 2004, when Mr Kibaki brought members of the KANU opposition into his cabinet (as well as members of the Forum for the Restoration of Democracy-People"Ford-People) and effectively ended the coalition with the LDP (see Recent political developments). Further shifts in allegiance and the composition of government can be expected in the run-up to the scheduled 2007 elections. Formed in 1960, the former ruling party, KANU, has now entered a period of self-examination. According to the inquiry set up by KANU to analyse the reasons for its historic 2002 election defeat, the merger with Mr Odinga!s NDP in March 2002 marked the start of the party!s decline. In addition, the inquiry has blamed its flawed and opaque procedure for choosing a presidential candidate, the misuse of campaign funds and a failure to communicate the party!s new vision to voters. Its recommendations included abolishing the unwieldy hierarchy of four vice-chairmen and reducing the powers of the party!s chairperson. The ex-president, Daniel arap Moi, stepped down as chair in early 2004, to be replaced on an acting basis by Uhuru Kenyatta. Plans for the first grassroots conference for 15 years have been repeatedly delayed, as the party has struggled to adjust to its new role as official opposition. Despite its defeat, KANU remains a large national organisation and its prospects for the future are by no means entirely gloomy. The NARC coalition in its present form is unlikely to fight the next election on a united platform and, should Mr Kibaki fail to deliver on his promises, the way would be open for the return of a KANU government. Country Profile The Economist Intelligence Unit Limited 2004

17 Kenya 13 Key political figures Emilio Mwai Kibaki (aged 72) Mr Kibaki, a trained economist, rose to high office in the Kenya African National Union (KANU) government in the 1980s, but moved into opposition"under the banner of his own Democratic Party"after the restoration of multiparty democracy in the early 1990s. In terms of sheer numbers and popular exuberance, Mr Kibaki!s public inauguration ceremony in January 2003 almost matched that of the triumphal celebrations of 1963, when Jomo Kenyatta led the country to independence. Both men are from the dominant Kikuyu ethnic group, unlike Mr Moi. MrKibaki remains broadly popular but has been criticised for his laid-back leadership style and apparent reluctance to control his squabbling ministers. The president also suffers from poor health, especially after a serious road accident in the run-up to the 2002 election, and may not see out his full term. Arthur Moody Awori (aged 77) Mr Awori was appointed vice-president in September 2002, following the death of his predecessor, Michael Wamalwa. Mr Awori, like Mr Wamalwa, is a member of the Luhya, the second largest of Kenya!s 40-plus ethnic tribes. Mr Awori is respected as an elder statesman (hence his nickname of "Uncle Moody") and is one of the few Liberal Democratic Party (LDP) ministers who remains close to the president. Raila Odinga (aged 57) Mr Odinga commands considerable support among Luo voters. He is one of the most ambitious politicians in Kenya, and has switched party allegiance several times. After leading the LDP into the National Rainbow Coalition (NARC), he and his party fell out with the president on a range of issues. Mr Odinga feels that he is owed the putative post of executive prime minister (proposed in the new draft constitution) and seeks to trim the president!s powers. David Mwiraria (aged 63) Mr Mwiraria, a close associate of the president, took over the Ministry of Finance after the NARC!s election victory. An economist by training, he has a reputation for honesty and efficiency, but his position has been threatened by the exposure of new corruption in the Treasury. Anyang Nyong'o (aged 57) Mr Nyong!o, a highly respected technocrat, is the minister for planning and national development. Along with Mr Mwiraria, he plays a key role in economic development and will be one of the main points of contact for donors. Kiraitu Murungi (aged 56) Mr Murungi, a human rights lawyer and long-term opponent of the Moi regime, heads the Ministry of Justice and Constitutional Affairs, with overall responsibility for the office of the attorney-general, the judiciary and the Electoral Commission. Although Mr Kibaki retained Amos Wako"a Moi appointee"as attorney-general, the position is no longer of cabinet rank. Kalonzo Musyoka (aged 50) Mr Musyoka defected from the Moi camp in 2002 as part of the LDP and returned to the Ministry of Foreign Affairs, which he had headed between 1993 and A close The Economist Intelligence Unit Limited Country Profile 2004

18 14 Kenya ally of Raila Odinga and the LDP!s presidential candidate for 2007, he was demoted to natural resources minister by President Kibaki in June Uhuru Kenyatta (aged 42) Mr Kenyatta, the leader of the former ruling party, KANU, and son of Kenya!s first president, Jomo Kenyatta, is a successful businessman in his own right, although he no doubt benefited from his family connections. His main challenge is to turn KANU into an effective opposition. He is a possible president of the future. Simeon Nyachae (aged 71) A former finance minister in the Moi era, Mr Nyachae is an ethnic Kisii who impressed international donors with his commitment to the economic reform programme. He enjoys considerable support in the private sector and among young professionals, as well as from donors. He leads the Forum for the Restoration of Democracy-People (Ford-People), the third largest party, and returned to the cabinet as energy minister in the June 2004 reshuffle. International relations and defence The EAC is revitalised Kenya backs the global war on terror The East African Community (EAC), which broke up in 1977"mainly because of personal and ideological differences between the heads of state of its members, Kenya, Uganda and Tanzania"was officially relaunched on January 15th The EAC!s long-term plan calls for the creation, in order, of a customs union, a currency union and a political federation. The first major step was taken in March 2004 with the signing of a customs union agreement, which is scheduled to come into force from 1st January This aims to eliminate all tariff and non-tariff barriers to internal trade within five years, and sets a common external tariff (see The external sector: Trade in goods). As a sign of the importance of the EAC to Kenya, Tanzania was the destination for Mr Kibaki!s first foreign visit. Apart from dealing with the usual range of bilateral issues, the three-day summit in mid-2003 tackled the customs union agreement as well as the terrorist threat faced by all Horn of Africa countries. In an attempt to improve regional security, Kenya opened the new National Counter-Terrorism Centre, the first of its kind in Africa, in January It aims to co-ordinate information from throughout the East Africa region. Kenya has also played a key role in mediating the civil wars in neighbouring Somalia and Sudan. After the September 11th 2001 attacks on the US the Kenyan government stated categorically its support for the US-led "war on terror". Kenya!s vulnerability to Islamic terrorists operating under the al-qaida banner was clearly illustrated by the bombing of the US embassy in 1998, the suicide bomb attack on the Paradise Hotel near Mombasa in November 2002 (which left 13 dead) and the failed attempt at the same time to bring down an Israeli airliner using shoulderlaunched missiles. Security risks were again highlighted in May 2003, when warnings of further attacks led to a six-week suspension of commercial flights from the UK and negative travel advisories by several Western countries. The advisories were withdrawn later in the year, except for the one issued by the US, but although this remains in force the language was significantly softened in May The US has also pledged US$40m to help to upgrade Kenya!s aviation infrastructure and enhance airport security, which represents a large Country Profile The Economist Intelligence Unit Limited 2004

19 Kenya 15 chunk of the US$100m set aside by the US for the Africa region. Furthermore, the US and Kenya resumed their annual military exercises in January No threat from the Kenyan security forces Apart from an attempted coup by the air force in 1982, Kenya!s armed forces have not sought to dictate to politicians. In addition to the regular armed forces the government can call on a special security force, the 5,000-strong General Service Unit, which it frequently does in order to control demonstrations and political rallies. Regular military forces, mid-2003 Army 20,000 Navy 1,620 Air force 2,500 Total 24,120 Source: International Institute for Strategic Studies, The Military Balance, 2003/04. Security risk in Kenya Terrorism In 1998 Nairobi was the site of one of the most serious attacks on American interests outside the US itself, when almost 250 people (most of them Kenyans) were killed in a car bomb attack on the US embassy. Kenya!s vulnerability to Islamic terrorists operating under the al-qaida banner was again illustrated by the Paradise Hotel suicide bombing in November 2002, and by warnings of possible terrorist activity in May 2003, which led to a six-week suspension of commercial flights from the UK and the issuing of negative travel advisories by several Western countries. These have now been withdrawn, save the one from the US, which has been watered down. Under pressure from the West, Kenya has cracked down on suspected Islamic extremists and the country!s first ever terrorism trial opened in early 2004, with five people charged with the Paradise Hotel attacks. Kenya remains particularly vulnerable to Islamic terrorism because of its long, porous border with Somalia, where the rule of law is weak and the fundamentalist presence strong. A recent UN report has noted that the terrorist attacks in Kenya in late 2002 had been planned and prepared in neighbouring Somalia, and warned that the proliferation of arms in Somalia, mainly smuggled in from Yemen in violation of the UN arms embargo, represented a serious threat to neighbouring states, and that further attacks in East Africa could be in the offing. On the plus side, attempts to reconcile Somali factions and restore a central government, in which Kenya has taken a leading role, are finally making headway. Foreign firms and visitors are advised to check foreign office websites for the most recent advice on security and safety. Crime In January 2001 the UN downgraded its security rating for Nairobi from "B" to "C", giving the Kenyan capital a worse overall security rating than either Bogotá or Jerusalem. The reasons behind the rating"which assesses security conditions and the quality of life for the UN!s own personnel"are clear enough. Crime is a serious and growing problem in Kenya, particularly in Nairobi. According to the Nairobi Central Business Association, the proliferation of homeless families in the capital has led to a rise in street crime. Although much of this crime is opportunistic and low- The Economist Intelligence Unit Limited Country Profile 2004

20 16 Kenya level, there is also a substantial risk of more serious attacks. These include daytime "car-jackings" at traffic lights in central city areas, as well as group raids on houses and, on occasion, direct armed attacks on businesspeople at their workplaces. Recent examples include a series of raids on businesses in which raiders armed with handguns and semi-automatic rifles held staff members hostage and stole a total of more than KSh4m (over US$50,000). In an attempt to stem the sharp rise in crime, which has seen armed robberies become a near-daily occurrence, the president, Mwai Kibaki, sacked the police commissioner, Edwin Nyaseda, in April 2004 (after little more than a year in post) and replaced him with an army officer, Brigadier Mohammed Hussein Ali. The appointment of an "outsider" (that is, a non-policeman), for the first time since independence, is an acknowledgement that reform from within was impossible because of long-standing loyalty networks between officers. The hefty pay rise for the police in early 2004 failed to improve performance, while ongoing collusion between officers and criminals has been at least partly responsible for the recent rise in criminal activity. The government!s five-year strategic plan for (costed at KSh50bn"US$625m), aims to transform the police force into a modern, well-run institution dedicated to upholding the rule of law. However, in the meantime, crime remains a serious problem. Corruption Kenya is one of the world!s most corrupt states. Pay-offs are common in the political, commercial and business arenas, with kickbacks and inflated contracts undermining aid programmes and deterring foreign investors. According to the 2003 Corruption Perceptions Index (CPI), published by a Berlin-based corruption-monitoring nongovernmental organisation, Transparency International, Kenya scored 1.9 in 2003 (where zero is totally corrupt and 10 totally clean), the same as in 2002 but lower than the 2.2 scored in 1996, when the country was first rated. Kenya was the 11th most corrupt country in the world out of the 133 assessed, and in sub-saharan Africa only Angola, Cameroon and Nigeria scored lower. Kenya!s high level of corruption affects business directly, through demands for bribes, and indirectly, since it contributes to the widening of the gap between rich and poor, and thus to crime and social breakdown. The new government made considerable progress in tackling corruption in 2003, including the passage of new laws and a purging of the judiciary, but the momentum stalled in In July 2004 the UK High Commissioner, Edward Clay, launched a highly scathing attack on corrupt officials, especially those linked to the Anglo Leasing scandal, and donors have warned that funding will be suspended unless action is taken. In a positive move, Kenya finally secured parliamentary approval, in August 2004, for the appointment of Justice Aaron Ringera to head the Kenya Anti-Corruption Commission (KACC). Ethnic violence Before both the 1992 and 1997 elections there was an upsurge of inter-tribal violence. This is widely perceived to have been provoked by KANU representatives in order to drive potential opposition voters out of marginal constituencies. However, genuine ethnic tensions exist: in September 2001, for example, clashes between the Wardey and Pokomo communities in the east of the country resulted in a number of deaths. Anticipated further clashes during the December 2002 elections failed to take place. Country Profile The Economist Intelligence Unit Limited 2004

21 Kenya 17 Poor infrastructure Perhaps the greatest threat to foreign businesspeople arises from car use. Kenya has the highest rate of road accidents in the world, with 510 fatal accidents per 100,000 vehicles, largely owing to poor roads and transportation. Second-ranked South Africa has 260 fatal accidents per 100,000 vehicles; the UK figure is just 20. By comparison, the terrorist threat is negligible. In February 2004, in an attempt to improve its appalling record, Kenya obliged matuta (minibus) owners to install new safety equipment on their vehicles. This has led to a sharp rise in fares, to the detriment of consumers, but is expected to cut road fatalities. Ongoing investment in road projects will also help. Resources and infrastructure Population Population indicators, 2002 Population (mid-year; m) 31.5 Population growth rate (%) 2.5 Life expectancy (years) 45.2 Urbanisation (%) 36.9 Projected population in 2025 (m)a 50.2 a HDR projection. Source: UN Development Programme, Human Development Report, Population growth is on a downward trend During the 1970s and 1980s Kenya had one of the fastest-growing populations in the world. The 1979 census revealed very rapid annual growth of 4.1%, although the rate subsequently slowed to 3.3% in 1989 and 2% in The decline is partly a result of a successful family planning campaign (which has brought about a decline in fertility) and partly because of the impact of the HIV/AIDS pandemic (which was declared a national disaster by the then president, Daniel arap Moi, in 1999). Kenya!s population is estimated to have reached 31.5 million, according to the most recent Human Development Report (2004) from the UN Development Programme (UNDP). The 1999 census put Kenya!s population at 28.7m, although this is likely to have been an underestimate, based on past experience. Population projections with AIDS and without AIDS, With AIDS (m) Without AIDS (m) Source: Central Bureau of Statistics, Ministry of Finance and Planning, Economic Survey, Wide regional and income disparities Kenya!s population is heavily concentrated in the central and western regions. These contain the fertile agricultural areas of the Central Highlands and the productive sugar- and tea-producing regions to the west. The semi-arid and desert regions of the north-east, with their nomadic pastoral communities, occupy 22% of the land area but support just 1.7% of the population. In addition, Kenyan society is characterised by wide income disparities. In 1994 the poorest 20% of the rural population received only 3.5% of rural income. In urban areas the situation was marginally better, the poorest 20% receiving 5.4% of total The Economist Intelligence Unit Limited Country Profile 2004

22 18 Kenya income. The richest 20% of the population controlled 61% of rural and 51% of urban income. The data also indicate that these disparities widened in both urban and rural areas between 1982 and Distribution of population, 2000a Province '000 % of total Rift Valley 6, Eastern 4, Nyanza 4, Central 3, Western 3, Coast 2, Nairobi 2, North-eastern Total 28, a Provisional estimates. Source: Ministry of Planning and National Development, Population Census Report. The UNDP highlights the country's decline The stagnation of the economy and the rise in poverty was highlighted by the UNDP!s latest Human Development Report, which ranked Kenya 148th out of 177 countries. Kenya!s score on the Human Development Index (HDI)"an amalgam of figures for life expectancy, adult literacy, school enrolment and GDP per head"has fallen steadily in recent years, from 0.52 in 1995 to 0.49 in The report also ranked Kenya as one of the six worst performers in terms of infant mortality, with the rate jumping from 99 to 122 per 1,000 live births between 1990 and The fall in the country!s ratings is not surprising given the lack of investment in health and education, and the decline in income per head. The number of people living below the poverty line (of US$1 per day) is estimated to have increased from 11.3m (48.4% of the population) in 1990, to 17.1m (55.4% of the population) in As well as the low GDP growth rates of recent years, other factors driving the fall in the HDI ranking were the country!s poor health and education services and its HIV/AIDS crisis. Prospects are brighter in the medium term, provided that the government implements the Economic Recovery Strategy for Wealth and Employment Creation (ERSWEC), unveiled in mid Development indicators, 2002 Country HDI rank a HDI index a Life expectancyb Adult literacy c GDP per headd Norway ,600 UK ,150 South Africa ,070 Uganda ,390 Kenya ,020 Tanzania a Human Development Index of the UN Development Programme. b At birth in years. c % of population aged 15 and above. d US$ at purchasing power parity. Source: UN Development Programme, Human Development Report, Country Profile The Economist Intelligence Unit Limited 2004

23 Kenya 19 Education High expenditure levels help to increase access to education Universal, free free education primary education becomes a reality Official data for 2002 suggest that higher government spending on education (8% of GDP) is helping to reverse the declining trend in educational standards. Primary school enrolment increased marginally by 0.9%, from 6,314,600 in 2001 to 6,371,200 in 2002, and secondary school enrolment rose by a much higher 5.3%, from 804,510 in 2001 to 847,287 in In previous years the downturn was attributable to a combination of factors, including the introduction of user charges in the 1990s and the impact of HIV/AIDS on pupils and teachers. User charges in particular limited poor families! access to education, as many parents could not pay the fees, and enrolment dropped from near 100% in the late 1980s to just 68% in Moreover, less than one-half of those who enrolled completed their primary education, and, because of the large size of families in Kenya, often only the eldest one or two children (generally the boys) were sent to school. The rest remained at home as productive members of the family. The government of Mwai Kibaki, which was elected in December 2002, moved quickly to fulfil its electoral promise of free primary-level education for all children. The president recalled parliament barely a week after his election victory in order to push through the abolition of user charges and special fees: head teachers who ignored this faced prosecution. To alleviate the impact on schools, especially in densely populated, low-income areas, the government released KSh519m (US$7m) for equipment purchases. The government conceded that the extra annual cost would be closer to KSh5bn (US$63m) than the initial forecast of KSh2.5bn. This does not include funding the 150% pay rise for teachers negotiated by the previous government, which the new government agreed to honour. As education already accounts for around 30% of recurrent spending, the pressure on Kenya!s large fiscal deficit will be considerable, and savings may have to be made in other areas. The government is also relying on the receipt of donor funds earmarked for education and has received commit-ments from the UN Children!s Fund (UNICEF), OPEC and the World Bank totalling US$40m-50m. Education facts Primary school completion rate 44%"well below national (70%) and UN (80%) targets. National literacy rate 75% in 1994 (83% for men, compared with only 67% for women) against a UN global target of 85%. Large regional disparities in basic education Enrolment rate in North-eastern province only 20%, compared with 90% in Western and Central provinces. Average performance In most subjects at Certificate of Primary Education level, average performance declined between 1991 and Poorest performance was in mathematics, science and agriculture subjects, with average scores below 50% since The Economist Intelligence Unit Limited Country Profile 2004