1. D
omestic-led growth is merely a directional
economic campaign whose sole purpose is to
inject fresh air into a misty atmosphere polluted
by a mindset that sees increasing exports as the
one way ticket to economic liberation.
More than half of Kenya’s exports are accounted for
by agro-related products, which are disproportionately
counter balanced by the high value imports that enter the
country. For this reason increasing our exports quanti-
ty and value multifold becomes an imperative and not an
option to finance the imports of primary commodities and
capital goods required for ongoing industrialization efforts.
A domestic demand led economy is a game-chang-
er by all means. This paraphrased means that there is an
available market for goods produced matched by a popu-
lation with strengthened purchasing power. However for
such an outcome to be realized it requires a total overhaul
in the constellation of concerned policies.
Many developing nations have pursued export-led
growth strategies for over three decades which is often
contingent on a rapidly growing global demand and the
ability of a country to enter market segments with high de-
mand growth and potential for their respective products.
Therefore a nation is left with no option but to swim with
the tide, fingers crossed hoping lady luck has their number.
In contrast to dominant contemporary approaches
that focus on global economic integration and export-led
strategies Brazil, India and China underscore the necessity
of having a thriving domestic market believed to spur all
inclusive socioeconomic growth.
However pundits may pose a case that the three ju-
risdictions under which the domestic market approach has
proved feasible is due to the size of the economies with In-
Why domestic–demand led
economic growth should be a
priority
For a country that is seriously aligning itself to become an economic powerhouse in Sub-Saharan
Africa , Kenya needs to reinvigorate efforts towards enhancing the domestic market’s purchasing
power. This does not mean we wean existing efforts towards fortifying the country’s export front.
Far from it!
By George Wainaina
dia and China each having over a billion people.
This may be partially true but there is more to it than
meets the eye. Factors that facilitate existence of a thriv-
ing local consumer economy revolve around crafting of en-
abling policy framework.
According to research by United Nations Conference on
Trade and Development domestic led economic growth is an-
chored on four key pillars: improved income distribution;
good governance; adequate supply of development finance;
and government policies aimed at neutralizing anti-social
effects of economic cycles (counter cyclical policies). To
complement these policies the research further adds that
a combination of debt relief and increased foreign aid mea-
sures would significantly advance the expansion of a local
consumer economy.
In Kenya, if there is a sector that should already be
reaping colossal from this approach is the brittle tourism
sector. For a sector whose revenue generating capability is
greatly influenced by the country’s perception in the global
arena and where an ounce of negativity leads to plummet-
ing of income, domestic tourism is an idea whose time is
already here.
Leisure travel spending both inbound and domestic
generated 62.5 percent of direct travel and tourism GDP
in 2014 amounting to Ksh 238.6 billion compared to 37.5
percent spent on business travel. By the year 2025, leisure
travel spending is expected to experience a 5 percent annu-
al growth to Ksh 400.6 billion in 2025 if information from
World Tourism Council is anything to go by.
Experts in the tourism sector have been calling for
increased awareness on the domestic front to capitalize on
the emerging Kenyan middle class who have more dispos-
able income to spend on.
20 | THINK BUSINESS • OCTOBER 2015
INDUSTRY

2. Cabinet Secretary for Industrialization and Enter-
prise Development Adan Mohamed during the launch of
the industrialization blueprint emphasized that inclusive
economic growth is the sure way of poverty reduction and
an integral part of growing the local industries.
This statement was echoed by Ambassador Tatsushi
Terada who gave critical examples likening Kenya’s present
economic conditions to the 70s Japan as the country was
gearing up economic resuscitation efforts on the backdrop
of a devastating war that brought the Eastern Asia nation’s
economy to its knees.
Mr. Tatushi added that the objective of such a blue-
print is broad based improvement of socioeconomic con-
ditions which is effected through the rapid growth of the
GDP. However the rapid growth in GDP should translate to
expansion of total income and production and if the growth
is effectively inclusive it directly translates to improved
livelihoods by creating employment and providing alterna-
tive opportunities for income generating activities.
Lessons from Japan
After the World War 2, Japan was left in disarray and
had to start off on a clean slate. There was no infrastruc-
ture, no capital and no resources to advance any develop-
ment agenda.
Japan’s reconstruction of its economy to become a
great economic power in less than 40 years after its defeat
has become the most remarkable tale of the modern eco-
nomic era. Due to the concentration of focus and resources
towards the war the survivors upon return to their country
faced chaos, starvation and unemployment with a quarter
of the nation’s housing accommodation leveled.
However in the beginning of the 1950s era, towards
the 1970s Japan experienced rapid economic growth. This
was a result of amalgamation of special government poli-
cies and availability of highly skilled human capital with a
relentless desire to rebuild a nation which was playing eco-
nomic catch-up to other world majors.
A key element in Japan’s resuscitation process were
huge business groups that linked individual businesses to
banks, industrialists and trading companies developing
long-standing relationships. The supported businesses
gained financial strength and connections that allowed
them to compete with the foreign business entities were
already infiltrating in the country to take advantage of the
desolate state.
The then emerging domestic business frontier, cre-
ated a business environment of extreme competition across
the sectors which led to heightened product innovation and
unprecedented technological advancement.
Ambassador Tatushi Terada emphasizes that con-
certed efforts in economic growth friendly policies could
help Kenya develop a robust internal economic structure.
“Just like Japan there is need for critical structural re-
bound in land administration, a deliberate investment that
will yield high quality of human capital with well structured
policies shifting focus from large industries to heavy in-
dustries and in Kenya’s case-oil and gas.”
He adds that in order to fortify the domestic market
there is need for high level of investment in public spend-
ing in relation to human capital. This encapsulates educa-
tion and health sectors primarily.
“The Japanese government has provided free primary
education to children since 1900 and universal health cov-
erage since 1962. This ensures a healthy workforce leading
to high level of productivity,” says Ambassador Terada.
The government of Japan has donated US $40 million
to aid national health coverage program. Alongside this the
South East Asian nation in collaboration with the Kenya In-
dustrial Training Institute is to introduce the Kaizen pro-
gram in Kenya, conducted for 3 years. Kaizen is a Japanese
term meaning ‘continuous improvement’ and is aimed at
human resource development for overall industrial devel-
opment. Kaizen’s mantra of operation is that big results
emanate from small changes accumulated over a period of
time.
MOIED (Ministry of Industrialization and Enterprise
Development) has a significant role to play in creating a do-
mestic market frontier which is being likened to MITI(Min-
istry of International Trade and Industry) that was at the
heart of the Japanese economic recovery.
“Government initiatives under the ministry will
oversee economic growth in the country and Japan’s ex-
perience coupled with Kenya’s willingness to forge ahead
will see Kenya become a fortress within the region and this
process can be hastened with improving macroeconomics
and relative sociopolitical stability compared to Japan’s sit-
uation when it was undergoing the transformation,” adds
Ambassador Terada.
Terada Tatsushi- Japanese Ambassador to Kenya
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