Policy Recommendation

Kenya does have some policies in place in order to help with growth. Some of these policies help but some may actually end up hindering Kenyan citizens. The Kenya Trade Policy was put in place in the 1990s by Kenyan government to give Kenyans free trade so they could obtain goods and services cheaper than they can produce them for (International Monetary Fund, 2009). The central bank of Kenya Act was passed in 1966 by the Kenyan government in order to create a central bank. This central bank is responsible for maintaining financial stability throughout Kenya (Central Bank of Kenya, 2009). Kenya also has a minimum wage policy and some unions to help protect workers (CIA, 2009). According to the CIA factbook, this year Kenya’s minimum wage was increased to 2,536 Shillings per month.
First and foremost I would modify Kenya’s trade policy. This policy is making Kenya too dependent upon other countries for necessities. I would slowly place trade restrictions on Kenya until they are able to produce several necessities on their own. I would begin by closing off trade with all countries that import machinery. This would remain in place until Kenya could produce these machines for themselves. After Kenyans accomplish this productively, I would reopen trade with the countries that produce machinery but close trade with countries that Kenya relies on for other necessities. This would continue on until Kenya is completely self-sufficient. Since Kenya is so in debt to other countries at this point in time I believe it would be to Kenya’s benefit to be completely self-sufficient. Perhaps in a few years when Kenya gets back on its feet it could then begin trading once again.
There are some possible adverse effects from modifying this policy. For one there is a chance that Kenyans will not have the money or the human capital to make this policy work. If they are unable to purchase the capital to produce these new goods and services then this policy will fail and poverty will consume even more people. People could starve. If this happens for longer than two years then I would reopen trade and start saving Kenya’s money. I would then try the policy again in ten years or so. If this policy works Kenya would not only reduce its imports but it could also possibly increase its exports, increasing their net exports even more. Since net exports is added to government spending, consumption, and investment to obtain GDP, the more net exports increase the more GDP increases.
I would also implement a policy that would require all children, including girls, to go to school until they are at least sixteen years old. Currently in Kenya not all girls go to school because men are regarded as superior to women (Irin, 2009). If this policy is implemented it should raise the literacy rate while creating more workers per household at the same time. It could also help to curb population growth. If women are educated then they will better be able to work, and they should be able to increase the per capita GDP and help to eliminate poverty. I would permanently keep this policy in place.
This policy could cause the unemployment rate to skyrocket even higher though. There is already structural unemployment due to a mismatch of qualified people and jobs available. To combat this I would mix boys and girls together in schools and then take the highest achieving five percent of each grade and send them to a college in another country. The government would try to get a grant or financial assistance to pay for their education with the understanding that the student will return to Kenya and work there. I would keep this part of the policy in place for twenty years, until the per capita GDP increases. It will take a lot of work to get the grant but it has to be done, because Kenya needs more of a variety of workers. Some of these students could even become engineers and help to build some of the capital necessary for my previous policy to work.
I would additionally put a policy into place to combat inflation. In this policy I would hire successful financial advisors from other countries to come into Kenya and monitor the Central Bank. One of the Central Bank’s jobs is to make sure inflation does not get out of hand. In recent years however inflation has increased substantially. The financial advisors would help Kenyans better invest the reserves they do have. Then hopefully they will make more money. I would also put a limit on how much inflation there can be in each year. The Central Bank simply will not be allowed to print money when inflation reaches over ten percent. Cameron is currently trying to do this in England (Chapman, 2009). I would keep these policies in place for ten years, until Kenya’s currency becomes stable.
One problem with this is obviously that the investors cost money. The investors may also invest the money poorly. Kenya could become even more destitute than it already is. Kenya additionally will not be able to pay off its debts without inflation. Even if the investors do cost money, in the long run it will be worth it. The money Kenya is expected to make and save should easily cover the cost of the advisors and beyond. If the investors do not pick good stocks to put the money into then Kenya could become even more destitute. However Kenya’s economy is already suffering a lot. In this case the potential benefits outweigh the risks. In response to Kenya’s debts, Kenya is constantly in debt. It does not matter if there is inflation for Kenya to pay those off or not. There will always be new debts. Kenya needs to nip this problem in the bud before it becomes even worse. If Kenya keeps going on the way it is then in a few years their debt could increase exponentially.
Lastly I would implement a policy to help bring more money into Kenya. Kenya is already a major tourist attraction. I would build more hotels and make commercials to air in rich countries like the United States, Britain, and Germany. There are already several natural tourist attractions so no other work would need to be done. When tourists come they will increase per capita GDP because they will buy from local merchants. New hotels and commercials would also create unskilled labor jobs for countless Kenyans, decreasing unemployment.
It is fair to say that this will cost a fair amount of money. However the money Kenya would make in return makes this idea well worthwhile. Building the hotels would employ even more people as well. If this idea fails then there will still be hotels, which can be used as apartment housing for locals. Therefore even if this policy fails, it would not be a complete loss.
Overall I would implement all of these policies at different times. It would be far too risky and it would be too much change to put all of these policies into effect at one time. However, I believe if I began each of these policies twenty years after the previous policy then Kenya’s economy would improve tenfold. All in all I believe these policies have the potential to substantially help Kenyans economically.

References:

International Monetary Fund. "Kenya - International trade." Encyclopedia of the Nations. N.p., 1998. Web. 24 Nov. 2009. .

Central Bank of Kenya. "About Us." Central Bank of Kenya. N.p., 2009. Web. 1 Dec. 2009. .

CIA. "Kenya Economy." CIA World Factbook. CIA, Nov. 2009. Web. 18 Nov. 2009. .

Chapman. "Cameron under fire for his promise to stop printing money Mail Online." Home Mail Online. 2009. Web. 08 Dec. 2009. .

Irin. "IRIN Africa KENYA: Women weighed down by culture East Africa Kenya Children Gender Issues Health & Nutrition Human Rights Feature." IRIN " humanitarian news and analysis from Africa, Asia and the Middle East - updated daily. 2009. Web. 08 Dec. 2009. .