AI GENERATED PHOTO
Kenya and Malaysia,
two nations that gained
independence in the late
1950s and early 1960s,
once had relatively equal
economic footing.
Endowed with vast agricultural resources and a strategic position in East Africa, Kenya was seen as a potential economic powerhouse.
In contrast, Malaysia, rich in palm oil and rubber, faced challenges similar to Kenya’s at independence. However, over the decades, Malaysia surpassed Kenya in economic advancement while achieving industrial success and broader prosperity.
Ironically, in 1968, Kenya, which gave a $5 million (Sh547 million) donation to the government of Malaysia in aid to assist it in economic development, recently sent delegations to benchmark economic progress from its former beneficiary.
In the 1960s, Kenya and Malaysia were classified as low-income countries with economies heavily reliant on agriculture.
Specific data on their GDP during this period is limited; however, both nations faced similar economic challenges and opportunities.
Over the subsequent decades, Malaysia implemented strategic policies that led to significant economic growth, transforming it into a middle-income country, while Kenya’s progress has been comparatively modest.
Kenya and Malaysia had predominantly agricultural economies, with Kenya relying on cash crops like coffee and tea, while Malaysia focused on rubber and palm oil.
These two nations shared comparable colonial economic models that required them to find strategies for industrial development and economic independence.
Malaysia successfully expanded its economy by transitioning into manufacturing and exporting sectors. At the same time, Kenya mounted its economic future on agricultural production despite its weakness in global market price changes and climate effects.
Industrialisation strategies developed by Malaysia serve as the primary reason behind the nation’s current achievements.
During the 1980s, Malaysia firmly adopted an export-focused industrialisation approach by welcoming large multinational companies to establish production facilities in the electronics, automotive and petroleum sectors.
The government dedicated substantial financial resources to developing infrastructure institutions and technological advancements that backed those industries.
Malaysia’s remarkable economic transformation can be attributed to several key strategies: Diversification and industrialization, export-oriented policies, infrastructure development, human capital development and political stability and governance.
In contrast, Kenya’s industrialisation efforts were sluggish. The economy depended predominantly on agricultural product exports and services, particularly tourism and finance.
Despite the Vision 2030 industrialisation plan for manufacturing growth, various bureaucratic problems, structural deficiencies and corruption have reduced its effectiveness.
Over the years, Kenya and Malaysia have maintained strong trade relations, but the balance has been in Malaysia’s favour.
Malaysia is a significant palm oil, electronics manufacturer and machinery exporter to Kenya, while Kenya mainly exports agricultural products such as tea and coffee.
This trade imbalance has resulted in Malaysia benefiting more from the partnership, strengthening its economy, while Kenya continues to rely on primary goods with lower value addition.
Malaysia’s ability to attract foreign direct investment has been another key driver of its rapid economic growth.
The supportive policy framework, political stability and well-developed infrastructure have made Malaysia the preferred place for multinational companies.
Kenya, on the other hand, has faced challenges in attracting FDI due to concerns over corruption, bureaucracy and inconsistent policies.
While Kenya has made strides in fintech innovation (such as M-Pesa), these advancements have not been matched by a strong manufacturing sector or export-driven industrial policies.
The government of Malaysia took responsibility for developing technological innovations in the country. The nation has dedicated substantial funds to research and development activities, establishing a favourable business environment for developing semiconductor production and biotechnology sectors.
Kenya is behind Malaysia because it lacks manufacturing production and technology export capabilities. The consistent implementation of economic policies presents an ongoing challenge to Kenya’s economy.
Kenya’s economic potential remains promising, yet it faces developmental obstacles due to changing policy direction, governance issues and limited manufacturing investments.
Kenya can learn important insights by examining Malaysia’s experience in economic development. The economy of Kenya needs to broaden by establishing industrial production and manufacturing alongside a plan to shift away from centring only on agriculture.
Special economic zones, together with industry-oriented incentives, will act as stimulants towards economic diversification.
Kenya should develop policies that enable its participation in international value chain networks. Economic development and employment opportunities come from manufacturing products for international markets.
The writer is an Economist and business consultant.
