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                   BANK NEWS RELEASE                                    OCTOBER 30, 1975



                             WORLD BANK STUDY SEES KENYAN ECONOMY AT CRITICAL POINT


                                After a remarkable record of economic growth during its

                   first decade of Independence, Kenya has reached a critical point in

                   its development, a new World Bank publication states.

                                Kenya:     Into the Second Decade is the latest in a current

                   series of country economic reports prepared initially by the World

                   Bank as working documents and selected for general publication in




•                  consultation with the governments concerned .

                                A postscript to the report says that the need for a new

                   economic strategy that Kenya faced at the close of its first devel-

                   opment decade in 1973 has been brought into sharper focus by the

                   increase in oil prices and the upsurge in world inflation.

                                The report describes how Kenya was outstanding among de-

                   veloping countries in achieving an average yearly rate of growth

                   in Gross Domestic Product of about 7% between 1964 and 1972.                This

                   enabled a significant increase in per capita incomes despite one

                   of the highest rates of population growth in the world.

                                However, this economic growth did not make an effective

                   impact on the poverty of the lowest income groups, while unemployment

                   reached increasingly S-=rious proportions.               Yet "the difficulties of



•                  distributing the benefits of development equitably over as diverse

                   a community as Kenya's are immense", the report recognizes.

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          It points out that by following the pattern of the 60e

Kenya would find it increasingly difficult to maintain a high rate

of growth without creating an unmanageable balance of payments def-
                                                                      •
icit.   As the country has expanded its investment program, it has

neared the limits of the rate at which its development resources

can be mobilized.

          For example, Kenya's level of domestic savings is already

impressive compared with other developing countries; much invest-

ment has been in the simpler forms of import substitution in manu-

facturing, in high potential land for agriculture, and in infra-

structure; and during its first decade Kenya introduced most of the

'' easier" taxes to tap additional sources of revenue.

          The report says that "a significant change in the pattern

and process of growth is needed if Kenya is to achieve rapid growth

in incomes and employment within the resources likely to be avail-

able, and a more intensive and rather different style of economic
                                                                      •
management may well be necessary."

          To achieve this, the report proposes a greater emphasis

on agriculture and other resource-based industries to increase

employment and attack poverty; and emphasize the importance of

appropriate pricing of the factors of production to encourage

efficient resource use in all sectors.

          The report also examines the successful contribution of

private enterprise to Kenya's economic growth in its first decade.

It suggests ways of making the urban formal sector compatible with




                                                                      •
the development of the more traditional informal sector, and com-
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•             In adopting such an overall strategy, the report says,

    Kenya would make an exceptionally good case   for external assist-

    ance, the donors themselves perhaps helping to promote the changes.

              The Government of Kenya was broadly in agreement with the

    general strategy proposed by the report, and in taking action to

    meet some of its recent economic problems has introduced a number

    of measures that are consistent with such a strategy.

              Kenya:   Into the Second Decade is published for the World

    Bank by The Johns Hopkins University Press, Baltimore and London;

    at $18.50 (£10.15) hardcover and $6.95 (£3.50) paperback •




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