As boom fades, an East African mainstay looks to US
Stand on almost any corner in the heart of this East African capital and it is immediately apparent why it has earned the reputation as perhaps the most modern and progressive city in black Africa. Late-model private cars, taxis, and city buses flow along wide, tree-lined boulevards.Skip to next paragraph
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High-rise office and government buildings literally overshadow the quaint but anachronistic old British colonial structures. And even more are under construction in the commercial district around Koinage Street and Kenyatta Avenue.
With all this activity swirling about, it's hard to accept an appraisal heard almost universally in the foreign business community: ''The economy of Kenya is in desperate straits. It hasn't reached the crisis level yet, but it could soon.''
That's because in the past 18 months to two years, just about everything that could go wrong has. Admittedly some events, such as the world recession, skyrocketing oil prices, and a drastic drop in coffee prices, are beyond the control of the government. But the administration of President Daniel arap Moi is coming in for much of the blame.
Poor planning, widespread corruption, and faulty application of potentially sound policies by a generally lethargic civil service have all been cited for sending what had been a booming economy into the present nose dive. One foreign resident said, ''This government has flopped about for two years with its head in the sand. Now it is talking about taking remedial steps, but it may be too late.''
Few economic indicators offer any encouragement. The gross domestic product back in the 1970s had been increasing at an average of perhaps 7.5 percent a year. Buoyed by record-high coffee prices, the country was taking in enough foreign exchange that danger signals were barely noticed. Consumer goods were liberally imported and foreign exchange earned by Kenyan business interests was dissipated or tucked away abroad instead of being saved.
Kenya had previously been seen as the keystone in an East African Economic Community, able to sell its goods to less developed neighbors in the area while profiting from the receipt and transport of imports through its port of Mombasa to other African nations.
But then what had been hailed by some as ''Kenya's economic miracle'' came unglued. World coffee prices that hit about $44.34 a ton at today's rate of exchange plummeted by half, with demand also off. Tea, another important foreign exchange earner, was also hit by declines in price and demand. Even tourism, which had contributed significantly to the nation's currency holdings, failed to grow as the recession cut into the market for those able to afford safaris.
To restore order, the Moi government initiated a number of programs, including an effort to conserve rapidly dwindling foreign exchange reserves by initiating an import substitution program, a technique common among underdeveloped countries. Foreign experts argued unsuccessfully that the country instead should have set up labor-intensive industries that could compete with those in the Far East and the Indian subcontinent.