Special Paper No. 13 of 2012 on Enhancing Productivity and Competitiveness of the Kenyan Economy Through a Cluster Development Strategy

Abstract

The world economy is undergoing rapid change associated with globalization and liberalization, which has increased the need for industrial competitiveness. Kenya ranks low in global competitiveness and compares unfavourably with the East Asian economies that Kenya aspires to catch up with. During the past four decades, the government has implemented various policy tools to enhance competitiveness and transformation of the economy, but the level of success has been low. Conscious of the challenges facing the Kenyan economy, the National Economic and Social Council (NESC) recommended the adoption of a cluster development strategy. Cluster development strategies and the new structural economics represent an emerging middle ground in development thinking between heavy state interventions and unbridled free markets. Clusterbased development strategies recognize the fundamental role of the invisible hand of the market and the strategic role of the state in facilitation and coordination of development efforts towards economic transformation.