TABLE OF CONTENTS
Table of contents 1
Figures and tables 2
Abbreviations and acronyms 3
PART I: RESEARCH BACKGROUND AND OVERVIEW
I Introduction 5
II Theoretical framework: a model of economic evolution 11
i. Evolution 11
ii. Physical Technologies 12
iii. Social Technologies 14
iv. Business Plans 16
v. Co-evolution 18
III Method 18
IV Traditional vs complexity economics 20
PART II: ANALYSIS AND DISCUSSION
V Evolution in Physical Technologies: the Mombasa-Nairobi SGR 21 VI Evolution in Social Technologies: Sino-African cooperation and Kenyan social change 24
i. Potential cooperation benefits 24
ii. Cooperation incentive 25
iii. Defecting mechanisms and/or the coordination of communication 27
VII Evolution in Business Plans: Vision 2030 28
i. Vision 2030 as a portfolio of experiments 31
VIII Economic evolution: Kenya’s economy as a complex adaptive system 32
CONCLUSION 36
FIGURES AND TABLES
Figures
Figure 1 The New East African Railway, with the completed Mombasa-Nairobi railway line Figure 2 Increasing returns
Figure 3 Technology S-curves
Figure 4 Payoff matrix of the Prisoner’s Dilemma
Figure 5 Co-evolution: continuous transitions of form and function Figure 6 A model of economic evolution
Figure 7 Thematic overview of Kenya’s Vision 2030 Figure 8 Kenya’s GDP (current US$)
Tables
Table 1 Points of divergence between conventional economics and complexity economics Table 2 Kenya’s projected infrastructure financing gap per sector, 2012-2020 (US$ billions) Table 3 Second MTP (sectoral) growth targets and actual growth targets (%), 2012-2020
ABBREVIATIONS AND ACRONYMS
AICAD African Institute for Capacity Development AIIB Asian Infrastructure Investment Bank
BP Business Plan
CEO chief executive operator
CPCS Canadian Pacific Consultancy Services CRCC China Railway Construction Corporation CRBC China Road and Bridge Corporation EAC East African Community
EAF East African Federation
EARM East African Railway Masterplan EIA Energy Information Administration ERS Economic Recovery Strategy EXIM Export Import
FDI foreign direct investment
FOCAC Forum on China-African Cooperation GDP gross domestic product
GNP gross national product GoK Government of Kenya GoU Government of Uganda IEA Institute of Economic Affairs IR International Relations
KNBS Kenya National Bureau of Statistics KRC Kenya Railway Corporation
MoU Memorandum of Understanding MTP Medium Term Plan
NGO non-governmental organization NSR New Silk Road
OPHI Oxford Poverty and Human Development Initiative PD Prisoner’s Dilemma
PPP Public Private Partnership
PT Physical Technology
RDL Railways Development Levy
SAIS-CARI School of Advanced International Studies China Africa Research Institute SAP Structural Adjustment Policy
SGR standard gauge railway ST Social Technology TPP Trans-Pacific Partnership
TTIP Transatlantic Trade and Investment Partnership UNDP United Nations Development Programme
US United States
WB World Bank
I. INTRODUCTION
The story of development is essentially a story of competing ideologies, interests, and agendas. This is especially salient in Africa. Particularly, two development strategies are important in the political problematization of the continent’s lack of performance: the ‘Washington Consensus’ and the ‘Beijing Consensus’. The Washington Consensus characterizes the Western capitalist development approach since 1945. Rooted in modernization theory, it assumes that Third World countries will develop along a similar linear process that advanced nations have experienced since the Industrial Revolution (Hönke and Lederer 2013: 5). During the period of decolonization and the Cold War, the Washington Consensus has been instrumental in preventing communism from spreading in developing countries. In other words, development has been securitized not only on ideological grounds. It is also driven by interest, entitlement, and identity (Comaroff 2011: 145, 146). Hence, it is embedded in a Western power structure that politically defines underdevelopment (Nayak and Serbian 2010: 103).
As such, Western financial and technical assistance to developing countries have been provided on a concessional basis that reflect countries’ foreign policy tools for intervening economically and politically in these states (Brautigam 2009: 16). Inherently, the Washington Consensus has always centered around the free market and democracy. A free market is a self-regulating, automatically adjusting system that moves towards a static equilibrium of demand and supply (Gilpin 2011b: 54, 55). Nevertheless, the focus of development projects has shifted frequently: from internally oriented “trickle down” economics in the 1960s and “human needs” approaches in the 1970s, to externally oriented neoliberal Structural Adjustment Policies (SAP) and micro credits since the 1980s. These ‘conditionalities’ have created paternalistic expectations that many African countries have not been able to meet (Woods 2007: 4, 5). Moreover, it implies a process of “responsibilization” (Innes 2013: 239). That is, governments of developing countries are presumed to be ignorant of embracing capitalism as a universal savior. Hereby, potential contributions of other factors than capitalism are actively diverted. For these reasons, exporting the Western utopian belief in market fundamentalism to underdeveloped countries is highly problematic because it is still based upon the experiences of a small number of wealthy nation-states (Andreasson 2006: 72). As such, the Washington Consensus has never achieved full legitimacy as an effective development approach.
The Beijing Consensus has emerged as an alternative development model in Africa. It is based on China’s domestic experiences with modernization. In the early 1980s, Deng Xiaoping’s Open Door policy transformed China’s socialist economy into a state-planned open market.
Agriculture forms the basis of society, which has been consolidated by appropriating rural labor (Ravallion 2009: 310). Industry is the extending arm, emphasized by heavy infrastructure investments. Rapid industrialization, economic expansion, and urbanization have reduced absolute poverty in China from 53 to only 8 percent in the past four decades (Ravallion and Chen 2007: 2). In contrast to the Washington Consensus, the Beijing Consensus relies on a mix of pragmatism and idealism rather than theoretical certainties. Furthermore, aid is perceived as a partnership that is politically and economically unconditional. This position is driven by the “Five Principles of Peaceful Coexistence,” the bedrock of China’s development strategy (Brautigam 2009: 30):
1. Mutual respect for sovereignty and territorial integrity; 2. Mutual non-aggression;
3. Non-interference in each other’s internal affairs; 4. Equality and mutual benefit, and
5. Peaceful coexistence
According to Liu (2014: 478), such values appeal for constructive dialogues between different civilizations. Especially in Africa, China’s aspiration of a “community of common destiny” has found large resonance because it rejects (at least theoretically) colonialism, imperialism, and hegemony. French’s work on Africa as China’s ‘second continent’ mirrors this view (2014).
The literature on development pays too little attention to contemporary circumstances. Both traditional and revisionist development discourses remain rooted in the consideration that the pursuit of growth is a necessity for improving societal, individual, economic, and environmental conditions (Andreasson 2006: 60, 63). Moreover, these narratives express a teleological view on development in the sense that ‘being developed’ marks the end stage of a transformation process. Particular “governmentalities,” i.e. political ideas that shape governments’ strategies to organize and rule societies, have defined the spectrum of modern development thinking (Nieto 2012: 142). As such, International Relations (IR) has failed to overcome the marginalization and exclusion of the post-colonial world in intellectually developing the discipline. Acharya argues for a new orientation of IR that is grounded in a true world history, thereby recognizing regional diversity (2014: 650).
Thus, it is urgent to start rethinking development by putting it into relevant contexts and realities. First, the reality of persisting poverty increasingly challenges the validity of the relationship between growth and prosperity (Rapley 2008: 177). In discussing the diversity of growth experiences across the developing world, too little attention is paid to what Rodrik calls “country narratives” (Rodrik 2003: 3). The hypocrisy lies partly in wealthy countries advocating
market-friendly structures while continuing to rely on protectionist measures (Shaikh 2016: 492, 493). Second, the centrality of economic growth is a belief that is both unsustainable and unattainable. Contributions of post-development and ecological economics show the relevance of local traditional knowledge and a finite biosphere respectively. For example, Daly’s concept of ‘uneconomic growth’ (2007: 12) and Jackson’s ‘zero-growth’ economics (2010: 14) refer to a beyond-optimum point where productivity is at such levels that the environment cannot restore its ecosystem services anymore. They address the problem of exponential resource extraction by connecting it to a number of essential issues: intergenerational distributive justice, the political non-viability of radically altering production and consumption lifestyles, and the erosion of social capital (Schlosberg 2004: 518; Kocha 2016b: 167, 168). Third, the ongoing domination of Western management approaches to the implementation of development has prevented development to materialize in Africa (Lavangnon 2012: 31); Crawford and Bryce 2003: 364). Albeit articulated universally, development is not transcultural (Igwe 2010: 103).
As the pendulum is shifting towards China as the world’s new center of gravity, the New Silk Road (NSR) is a relevant stage for analyzing contemporary African development. The NSR is China’s latest geopolitical strategy that aims to revive the ancient Silk Roads by (re-)connecting more than 40 countries that together account for over 55 percent of world gross national product (GNP), 70 percent of the global population, and 75 percent of existing energy reserves (Godement et al. 2015: 3, 4). Interaction across the entire Afro-Eurasian region materializes through a land-based ‘Silk Road Economic Belt’ and a ‘Maritime Silk Road’ network. By exporting its comparative advantage in infrastructure, China facilitates the exchange of commerce, resources, capital, knowledge, peoples, cultures, civilizations, and religions (Christian 2000: 1, 2; NDRC 2013). This geosystems approach, i.e. an economic geography that highlights human interaction across space and time, lifts the scope and breadth of connectivity to a historically unprecedented level (Waug 2007: 2, 3).
Africa has a spill function within China’s foreign policy framework in a number of ways. First, the success of the NSR hinges on Africa’s involvement. Africa’s abundant energy and natural resource reserves are essential for securing China’s future domestic development. Capturing energy security is also driven by the United States’ (US) policy of energy independence. According to a recent Energy Information Administration (EIA) report, the US could be a net exporter of oil and gas by 2026 (Worland 2017). Second, Africa’s inclusion into the NSR marks the continent’s engagement in the global order in a non-violent way for the first time. Western transnational economic cooperation initiatives such as the Trans-Pacific Partnership (TPP) and the Transatlantic
Trade and Investment Partnership (TTIP) still exclude African participation. For Africa, participation in the NSR marks the beginning of a new historical epoch. For China, it provides a window of opportunity to increase its presence in the international arena and to complement the (currently unrepresentative) balance of power (Campbell 2007: 123; Mead 2014: 70).
New circumstances require that modern development studies are critically reflected by exploring alternative epistemological, ontological, and methodological approaches to development that move away from the Western reductionist outlook on (scientific) progress. Reductionism is dividing a complex system into many, easily understandable parts and analyzing them separately. All understandings are subsequently accumulated to a total understanding (Mitchell 2009: ix). Reductionism has increasingly failed to explain many complex phenomena of our time, African underdevelopment being a pertinent case. Africa has been the site of multiple development experiments by developed countries, development agencies, and non-governmental organizations (NGOs) to lift more than 400 million people out of poverty and to enhance the quality of economic, social, and political life (Phelps and Crabtree 2013). Nevertheless, Africa’s poverty rate has remained stagnant around 40% for the past three decades.
The current globalization era is an “age of transition” within which established development imperatives can be advanced by incorporating new understandings of development (Wallerstein 2000: 250). Such approaches exhibit a transformative rather than reactive potential for future development. By decentralizing conventional accounts, it becomes possible to transcend the preoccupation with ‘underdevelopment’. In her work on ‘borderscapes,’ Brambilla highlights a ‘processual shift’ from border to bordering that is at the center of the evolution of critical border studies (2015: 15, emphasis in original). Development literature demands the same change. The transition from a fixed concept of development into an interdisciplinary notion of developing allows for viewing development as a multidimensional, dynamic, and constructive process. ‘Developing’ allows for reconsidering and recognizing the various forms, functions, and practices of development across space and time, and along different social and political settings. In addition, by uniting performative, participatory, and (geo-)political dimensions, specific experiences and representations of development reveal that development is in a “‘constant state of becoming’” (Brambilla 2015: 17). In this way, it abandons the teleological outlook and creates space for a fluid complexity of the concept.
Hence, traditional IR needs to acknowledge more explicitly the interdependence of different disciplines and contexts when explaining African development. Economics, politics, society, and the environment are inseparable when generating an understanding of the economy and vice versa;
all events are embedded within broader historical contexts (Gilpin 2011a: 41). The Washington Consensus and the Beijing Consensus have only focused on technological, social, and/or economic dimensions of African development. I aim to integrate these explanations by applying complexity science to the global political economy (GPE). Complexity science is a field of study of which the boundaries are wide-ranging, but yet remain undefined. It deals with questions that challenge conventional classifications, because they refer to “complex adaptive systems” (Waldrop 1992: 11). Complex, because the system is a communication network constructed through the interactions of many independent agents. These interactions allow for spontaneous self-organization. At multiple levels, agents are constantly repositioning themselves in relation to their counterparts. As a result, they acquire unique collective characteristics that are increasingly complex. Adaptive, because the system adjusts to its changing environment according to knowledge that is accumulated by learning from experiences (trial and error). In other words, complex adaptive systems have problem solving abilities that enable them to predict and anticipate their continuity. They have an inherent sub-consciousness from which a dynamic unity emerges (Waldrop 1992: 9, 146, 158). The discipline that views the political economy as a complex adaptive system is called ‘complexity economics’.
Complexity economics has not been adopted within IR. This research fills the lack of revising African development in contemporary, constantly changing environments. A critical approach is urgent because development should no longer be framed as a delineated trajectory. Rather, it should be addressed as an ongoing, increasingly complex process. The continued relevance of economics within development studies remains acknowledged. Yet, it is re-examined in terms of economic evolution. By treating the political economy as a complex adaptive system, the aim is to explore whether or not this sheds a new light on African development that other theories cannot provide. Complexity science has proven useful for systematically analyzing processes of urbanization and social planning (see, for example, the works of Batty (2005) and Portugali (1997)).
I will employ a model of economic evolution in examining a compelling case—Kenya’s developing, driven by the realization of the transnational East African Railway Masterplan (EARM) that has been the result of China-African cooperation in the NSR. The EARM is one of China’s first major infrastructure projects overseas (figure 1). Its objective is connecting East African countries by establishing an East-African internal market and transforming the intergovernmental East African Community (EAC) (Kenya, Uganda, Rwanda, Burundi, Tanzania, and South Sudan) into the East African Federation (EAF) through modernizing the rail network of the sub-Saharan region
(Korybko 2016). Kenya is the first site of this project. Specifically, the construction of a standard gauge railway (SGR) between Mombasa and Nairobi is subject of study. I ask the question:
To what extent can economic evolution explain Kenya’s developing in the context of the NSR?
Herein, economic evolution is traced to the process of co-evolution among technological, institutional, and strategic dimensions. This model translates into a diagnostic practice that involves identifying evolution in each of these three distinct, yet interrelated dimensions. Jointly, they may facilitate a simultaneous transition in structure and function of the economy (economic evolution). According to this procedure, I have formulated four subquestions. First, to what extent has technological evolution occurred? Second, to what extent has institutional evolution occurred? Third, to what extent has strategic evolution occurred? Finally, is there verifiable co-evolution among these three factors?
As I hope to demonstrate, the implementation of established theoretical and methodological development discourses in Africa has been problematic for both African people and newly independent governments. Very often, development projects have been projections of elite power instead of securing community rights and needs (Andreasson 2005: 67). On a pragmatic level, I aim
to show the potential of a complexity approach, and to shed light on how Africa’s growth is promising when pursuing developing.
This work is structured in two parts. Part I represents the historical backgrounds and overview of the research. Chapter 2 outlines the theoretical framework of economic evolution. It introduces each of the model’s dimensions. It also demonstrates how co-evolution works. Chapter 3 discusses the methodology. Chapter 4 provides a brief comparison of conventional and complexity economics to inform the reader about points of divergence, and about the limitations and potential of the two approaches. Part II contains the analysis and discussion. Chapter 5, 6, 7, and 8 answer the subquestions as formulated in the above. The conclusion interprets these results and connects it to the concept of developing. It concludes with an annotated bibliography.
II. A MODEL OF ECONOMIC EVOLUTION
The model of economic evolution that I will apply derives from Beinhocker’s interpretation of economic evolution as the result of co-evolution across Physical Technologies, Social Technologies, and Business Plans (2006: 238, 239). This definition is somewhat limited, since developing will always be influenced by more factors than technology, institutions, and economics only. Nevertheless, testing this assumption is crucial to gain insights in how and why the economy as a complex adaptive system might facilitate developing. It gives a more nuanced view of theory testing, since it is about how an object of study is (not) influenced by other components. Moreover, an evolutionary approach has the potential to overcome a growing polarization of intellectual disciplines. I have neither presumed opinions nor expectations about the directions and outcomes of the research.
i. Evolution
Evolution is the creation of a complex adaptive system from independent building blocks or, as Daniel Dennett describes, creating “design without a designer” (Beinhocker 2006: 187). Implicitly, it suggests the search for a certain ‘fit’ for a specific purpose. This fit is determined by a changing environment. Essentially, evolution works like an algorithm: it is a ‘black box’ that transforms inputs (independent building blocks) into a set of outputs (complex adaptive system) on the basis of processing information.
Evolution unfolds by three consecutive mechanisms: variation, selection, and replication. Variation in building blocks arises out of experimentation with different combinations of building blocks. The building blocks contain knowledge that is codified into schemata. The schemata are translated by schemata readers. Schemata readers are not perfectly rational, meaning that translation errors (mutations) may accidentally occur. Therefore, it is important that a degree of conformity exists in transforming intelligence. An illustrative example of a translation standard is language. When a combination of building blocks proves fit for a purpose, it is selected. Fit combinations are replicated over time. This is because evolution is circular, i.e. the output of the first evolution cycle serves as the input for the next loop. With each round of evolution, the building blocks are combined into increasingly complex configurations. Thus, a complex adaptive system emerges as the result of the hierarchical modularity of the building blocks. Hereby, a fit path is locked in over time (Beinhocker 2006: 192-197). This process is called “increasing returns” (figure 2) (Waldrop 1992: 147, 149).
ii. Physical Technologies
Physical Technologies (PT) transform (natural) resources, energy, and/or knowledge into products and services for specific purposes. It is technology as we understand it today: the science as well as the ‘manuals’ for using that science, such as techniques, methods, and instructions (Beinhocker 2006: 244).
Resources/energy/knowledge (input) → transforming matter and information → products and services (output) → economic value
From a complexity perspective, PTs are regarded as complex adaptive systems rather than exogenous forces to productivity. This gives insight into how technologies exactly work and have worked throughout history (Mokyr 2000: 5). The algorithm of evolution drives technology innovation. Out of various experiments with competing PTs, the market environment selects those technologies that have economic value. I will clarify my interpretation of economic value by adopting three qualifications formulated by ecological economist Georgescu-Roegen (hereafter called “G-R conditions”): irreversibility, entropy, and fitness. All criteria have to be met simultaneously in order to speak of PTs creating economic value. The key strength of these criteria is that they connect the idea of the economy as a complex adaptive system to the creation of wealth, thus enabling the processual shift to from development to developing. In this view, the economy is an integral sub-system that is supported by the larger natural environment (Herrmann-Pillath 2015: 433). Moreover, the G-R conditions are empirically testable because they are relatively easy to measure.
Irreversibility means that the transformation of matter and/or information into products and services is thermodynamically irrevocable: the value created in this transformation cannot be preserved if the process would be undone. Energy is required to make and unmake things. Irreversibility shows that time has an arrow, namely forward. Entropy is a measurement of the change from order into disorder. It is linked to the concept of irreversibility. Low entropy (resources, raw materials, fossil fuels, minerals etc.) is extracted locally from the environment. Production processes transform it into high entropy (finished goods) globally. As a result, the natural order disappears. High entropy is essentially ‘waste’ that is released back into the environment. This creates disorder, because man-made capital is generally not naturally degradable. Market expansion as the fundamental driver of the economy is therefore problematic, because it inevitably leads to a growing dissipation of energy. In fact, economic growth is the very manifestation of fundamental thermodynamic causalities (Herrmann-Pillath 2015: 433, 434). In modern macroeconomics, an optimum point at which growth is limited in order to secure a balance between benefits and costs is absent. Fitness relates to PTs meeting peoples’ dynamic and adapting preferences that have originated out of previous circumstances. Fitness is therefore a contingent concept that is indirectly shaped by political, social, economic, and environmental realties.
Technology S-curves show how economic value is created. Initial technological advancement is gradual. As more resources are devoted, technology develops and improves exponentially. When a technology matures, a vacuum emerges in which established and new technologies form the set for a new evolution cycle. Every advancement creates both a chance and a
need for further innovation. This demonstrates increasing returns. The inherent modularity of PTs allows for either the diffusion of PTs into new niches, or for recycling PTs into novel forms (Squicciarini et al. 2013: 7). Hence, the market ‘jumps’ technology S-curves in order to discover those PTs that have (more) economic value (figure 3). Therefore, PTs act as the first independent variable in the research.
iii. Social Technologies
Social Technologies (ST) are the ways and forms in which a society is organized for specific purposes (Beinhocker 2006: 262, 263). The most common understanding of STs are institutions. Formal institutions are officially documented (physical) structures, roles, and processes. Informal institutions are ‘tacit’ institutions that imply common sense, shared norms, or cultural traditions (North 1990: 3, 4). Both formal and informal institutions define the ‘rules of the game’ for every actor. The rule of law, economic transparency, lack of corruption, and property rights are relevant institutions for a robust society (Kocha 2016a: 115).
Complexity science views STs as complex adaptive systems. Social (institutional) innovation is informed by game theory, particularly by non-zero sum games. Game theory is the study on “those social phenomena that result from the strategic interactions of two or more goal-oriented actors” (Kueln 2013: 53). Non-zero sum games imply the possibility of synergies, i.e. agents can jointly gain more than in case of acting individually (1+1=3). Conclusions of non-zero sum games are products of agents’ options at a given point in time.
Organizing of collective of people → organizational form → cooperation
Effort (time) Technology 1 P erform anc e discontinuity
Figure 3. Technology S-curves (Beinhocker 2006: 255).
A famous example is the Prisoner’s Dilemma (PD) (figure 4). Two prisoners are suspects of a crime, but decisive evidence lacks. Each prisoner has two options: testifying or defecting. However, communication between them is not possible. If prisoner 1 testifies, he will be rewarded with releasing under the condition that prisoner 2 remains silent. If both prisoners testify, they both face reduced jail time in exchange for their collaboration. If prisoner 1 remains silent, two possibilities arise. The first scenario is that prisoner 2 remains silent as well. Then, both prisoners will be released due to lacking evidence. The second scenario is that prisoner 2 testifies. Then, prisoner 1 faces a long jail time and prisoner 2 will be released. The PD shows that “competition to cooperate drives social innovation” (Beinhocker 2006: 266).
STs are selected and replicated when three conditions are present (hereafter called “cooperative conditions”): the potential of cooperation benefits, a cooperation incentive, and mechanisms that deal with defecting. Four types of synergies indicate a potential for cooperation benefits. First, a division of labor implies that agents have different skills and knowledge, which makes cooperation attractive. Second, heterogeneous needs and demands create mutually beneficial cooperation opportunities. Third, increasing returns are likely to occur when agents cooperate. Fourth, cooperation reduces risk on the long-term. A cooperation incentive depends on how cooperation benefits are distributed. The traditional Nash equilibrium demonstrates that effective cooperation emerges when no agent has a reason to change position, given the actions of other agents (Beinhocker 2006: 267, 268). Mechanisms that coordinate defecting are essential for successful cooperation. The PD shows that gains from cooperation outweigh the gains from deserting. When defecting mechanisms are absent, the coordination of communication between agents is crucial for cooperation to be the natural response. According to Eggertson, the absence of Third World development is not about the inability to adapt foreign production technologies. Rather, countries fail to adapt institutions such that they create growth opportunities and behavior (Nyhan 2006: 239). Therefore, STs act as the second independent variable in the research.
Prisoner 1
Figure 4. Payoff matrix of the Prisoner’s Dilemma (adapted from Beinhocker 2006: 222). Silent Testify
Silent free, free free, long Testify long, free reduced, reduced
P
ri
sone
iv. Business Plans
Business Plans (BP) ‘glue’ particular combinations of PTs and STs, called ‘modules,’ into strategies. Strategies are hypotheses of which modules are considered profitable in the market environment. Strategies are created for the purpose of transforming BPs into businesses. Businesses are defined as (groups of) individuals that transform matter, energy, and information from one modus into another with the intention of profit making (Beinhocker 2006: 280). I find this definition limited because social and/or ecological purposes have become increasingly relevant for businesses to commit to. A contemporary example is the B Corp, which stands for ‘benefit corporation’. The power of private enterprise is employed to create public benefit. Conducting business is purpose-driven: being the best for people and planet. They act with the understanding that stakeholders and shareholders are dependent upon another, thus sharing responsibility for creating benefits for and not inflicting harm to current and future generations (Honeyman 2014: 1).
PTs + STs (modules) → strategy → business → profit, social/ecological return
BP evolution is ultimately driven by peoples’ dynamic preferences. Various differential BPs are chosen and tested through individual decision-making and group think that are inherent to the process of starting a business. After evaluating, BPs are further modified and communicated through business levels. BPs are selected by both social hierarchies and markets. In the global capitalist order, BPs are generally selected by influential individuals who chose those BPs that tend to center around maximizing power and wealth for small groups of people at the expense of entire populations (Beinhocker 2006: 287, 288). Such interventions in the free market economy have created asymmetrical relationships in the world system: a core of developed countries versus peripheral underdeveloped countries (Wallerstein 2004a: 28). More recently, a trend of socio-economic disparities within developed countries has become visible (Milanovic 2016: 23-24). Furthermore, it demonstrates that traditional markets are rather ideologically, socio-political constructs than freely adjusting mechanisms (Stiglitz 2001: ix; Block and Somers 2014: 107).
In contrast, complexity economics views the market as a complex adaptive system that continuously responds and reinvents its purpose in alignment with the needs of populations. The market selects and amplifies BPs according to these needs. From a dynamic perspective, not only insights into how and why BP evolution has emerged are generated. Strategies are merely functioning as communication frames that inform decision-making agents about the evolutionary context of doing business. By preparing mindsets for a shared purpose of developing, it moves
beyond the predictive nature of traditional development strategies. By internalizing the mechanisms of evolution (differentiation, selection, and replication), strategies become diversified experiment portfolios. That is, spreading successful performance across different segments. In this way, businesses are stimulated to innovate and being able to reconstruct technologies and institutions to the evolutionary economy, instead of anticipating a pre-defined and future oriented strategy towards superior performance (Beinhocker 2006: 324, 334, 338).
Fit BPs are amplified when business performance increases or when a business’s share of resources and capabilities within the market grows. Product changes or reallocations of peoples and/or budgets can contribute to enhanced performance. BPs form the third independent variable in the research.
v. Co-evolution
Economic evolution emerges from the joint evolution of PTs, STs, and BPs. It is the endogenous outcome of a dialectic between the actions of agents and their changing environments. It implies that no innovation in one dimension could possibly have been materialized without a specific prior evolution in another dimension. The added insight of the model is that the economy, and thus developing, emerges causally in different ways by the interdependency of different forces. It integrates not only distinctive top-down models of development implementation. It also highlights peoples’ preferences that materialize bottom-up. It is the juxtaposition of PTs, STs, and BPs on the one hand, and the adaptive (re-)working of the economy and public preferences on the other. As such, structure and function of the economy transition together (figure 5). This shows that “the essence of evolution lays in the journey, the endlessly unfolding surprise” (Waldrop 1992: 165).
Figure 5. Co-evolution: continuous transitions of form and function (adapted from De Roo 2016).
III. METHOD
All analyses regarding the single case study derive from academic peer-reviewed articles and books; government data; institutional reports; working papers; renowned newspaper articles; and data distributed by companies. Content analysis, discourse analysis, and historical analysis are essential to this research because data include relevant policies, figures, statistics, speeches, and interviews. The advantage of combining various data sets is that it approaches the case from different angles, thus providing a more complete picture of the considerations at hand. Academic literature has been used to provide historical and contemporary backgrounds of the case, present the theoretical framework, and outline the research method. Since no academic literature is yet available on the case due to its recency, the analysis mainly relied on government data, institutional reports, working papers, newspaper articles, and information distributed by companies. Government data and institutional reports are generally reliable because experts and epistemic communities have prepared such studies. Nevertheless, China’s closed attitude towards its foreign aid agenda has affected data gathering. Newspaper articles and company data are more limited sources insofar they are not scientifically reviewed. Moreover, they may reflect authors’ subjectivities towards the content. For these reasons, I have collected information only from established media channels.
The selection of Kenya as country of study is motivated by the consideration that the Mombasa-Nairobi SGR (Phase I) is the largest project since Kenyan independence in 1963. It is also the first realized flagship project of Kenya’s latest development strategy ‘Vision 2030,’ which entails the enhancement of various transport nodes such as maritime ports, rail networks, air ports, and oil pipelines since 2007 (Jackson 2016: 36). Therefore, the timeframe of the case runs from 2007 until present, covering 10 years of data. The Mombasa-Nairobi SGR is estimated to cost 4 billion dollars. 90% of the total funding comes from China’s EXIM Bank; the other 10% is funded by the Government of Kenya (GoK) (Morlin-Yron 2017). Canadian Pacific Consultancy Services (CPCS), a niche operator in Africa’s rail branch, has advised the EAC on the Mombasa-Nairobi SGR. Kenya Railway Corp (KRC), a provider of railway transport services in Kenya, has developed the rail line. China Road and Bridge Corporation (CRBC), a Chinese contractor company, has built the section (Parke 2016). A ceremony on 28 November 2013 preluded the project. Real construction started at 12 December 2014 (BBC 2014). On 31 May 2017, the track has been completed 18 months ahead of schedule (Wambare 2017).
Process tracing has been conducted, i.e. examining diagnostic evidence from temporal sequences of events that either support or reject potential causal relations (Collier 2011: 823; Mahoney 2012: 571). All analysis regarding the case has focused around identifying economic
evolution. The model of economic evolution as applied herein suggests a two-step procedure. The first step is finding proof of evolution in each respective dimension of economic evolution as defined by Beinhocker. The second step is finding proof that these dimensions have co-evolved (figure 6). In order to identify key steps in all of these processes, process tracing requires that events are precisely described. Additionally, the sequence of events is crucial in mapping how events evolve over time (Collier 2011: 824). To this end, the researcher has constructed a timeline that highlights essential events within all three dimensions. The study employed textual and documentary analyses vis-à-vis compiling the timeline. The timeline enabled to find critical junctures that may have triggered economic evolution.
Economic evolution may be identified as I look for actual manifestations of interactions between PTs, STs, and BPs and trace it to Kenya’s developing within the NSR. This framework of analysis draws on insights from complexity science and the model of “institutional fit” (Lian and Lejano 2014: 2-3). Sustainable economies should express a diversity of strategies that correspond to various contexts. History shows that technological, institutional, and strategic knowledge and innovations in development are not simply dispersed outwards but regularly adjusted by local cultures. Out of this organic relationship between the economy as a complex adaptive system and its contexts, developing emerges.
The subquestions as formulated in the introduction suggest the direction of the research. Every subquestion focuses on one element of economic evolution. Yet they are analyzed in relation to each other, because the research is about how different dimensions of the economy influence and are influenced by each other and how their co-evolution facilitates economic evolution. The first subquestion focuses on Chinese railway technology as the PT. It shows the dialectic relationship between technology and nature, illustrated by the Mombasa-Nairobi SGR project. The three G-R conditions demonstrate that the thermodynamic basis of the economy drives PT evolution, thereby changing the mode of production.
The second subquestion focuses on China-Kenyan cooperation as the ST. China’s rhetoric of mutually beneficial cooperation reflects, at least theoretically, the presence of a Nash equilibrium. The question also investigates if and how the railway has led to a change in Kenya’s social organization (Harvey 2010). Process tracing is helpful in testing this modelled cooperation game because it can tell us something about the dynamics of real world cooperation. The qualitative case study provides in-depth evidence that can be assessed to evaluate the accuracy and persuasiveness of the modelled cooperation game. This can contribute to theory development and refinement (Kueln 2013: 54, 55).
The third subquestion focuses on Vision 2030 as the BP. The BP is the final factor because the focus is on economic evolution. The BP merges PTs and STs under the umbrella of a strategy, from which they converge as an economic output. Process tracing can discover and explain changes in economic outputs by demonstrating the interdependence of PTs, STs, and BPs.
The final subquestion combines these three elements and traces whether or not their co-evolution has occurred. Together, the sub-questions provide the answer to the central question to what extent economic evolution can explain Kenya’s developing within the NSR framework.
IV. TRADITIONAL VS COMPLEXITY ECONOMICS
Complexity economics diverges from conventional neoliberal economics with respect to dynamics, agents, levels of analysis, equilibria, and feedback (table 1) (Waldrop 1992: 37-38).
Conventional economics assumes a closed, linear economy that already exists, always tending towards a generic equilibrium (Watson 2014: 40). Therefore, it has no real dynamics. Conventional economics is rooted in natural physics. Complexity economics views the economy as a complex adaptive system. It is an open, non-linear structure that dynamically re-creates itself as a result of adaptation to the environment. There is no stable equilibrium because it is always in a stage of transition: the economy emerges rather than is. Complexity economics is rooted in biology. Conventional economics regards agents as homogenous, rational actors with access to perfect information. A deductive cost-benefit calculus produces unbiased decisions. Assuming methodological individualism and perfect information implies that there is no need for agents to learn and adapt. Since these assumptions do not reflect reality, essentially wrong problems are solved and predictions about future economic trends are not accurate (Shaikh 2016: 495; McMichael 2013: 75). Complexity economics sees heterogeneous agents in a context of incomplete information. Decisions are made on the basis of experiences through which knowledge is accumulated (Waldrop 1992: 141-142). As such, agents constantly learn and adapt to their environments.
PT evolution ST evolution
Figure 6. A model of economic evolution (designed by author).
BP evolution
Conventional economics differentiates between micro and macro levels of analysis in which agents interact through market mechanisms such as prices and quantities. In complexity economics, the macro level emerges from micro level activity as the result of modularity.
Conventional economics assumes a market that tends towards an equilibrium. Equilibria only change due to external shocks, such as technological innovation and policy changes altering resource allocations. There is no internal mechanism that produces incentives for innovation. From a complexity perspective, the economy is driven by the process of evolution. As such, equilibria are temporary or punctuated because the system endlessly innovates itself.
Finally, conventional economics assumes decreasing returns. This form of feedback implies that an innovation cycle is eventually pushed back to a status quo. For example, no agent can achieve superior dominance in the market because the substitutability of products generates declining interests in using them as alternatives are introduced. On the other hand, complexity economics regards increasing returns as the basis of economic evolution. The economy is in fact always driven away from equilibrium because of its self-reinforcing character.
V. EVOLUTION IN PHYSICAL TECHNOLOGIES: THE MOMBASA-NAIROBI SGR
Through the NSR, Chinese railway infrastructure technology is the PT being exported as a ‘best practice’ of development to Africa. Hence, Chinese railway technology has been selected by the market environment for its economic value out of repeated experimentation with different technologies. Africa has been the working field of many development projects by both the Washington Consensus and the Beijing Consensus. The former has produced a poor record of programs: roughly 75% of the World Bank’s (WB) projects have been unsuccessful (Peron 2001). The latter has been more pragmatic, but blessings have been nonetheless mixed.
Table 1. Points of divergence between conventional economics and complexity economics (adapted from Waldrop 1992: 38).
Conventional economics versus complexity economics
Conventional economics Complexity economics
Dynamics Closed system, linearity, no real dynamics Open system, non-linearity, dynamic Agents Homogenous rational actors, perfect information, therefore no learning and
adaptation
Heterogeneous actors, imperfect information, learning and adaptation on the basis of experiences and accumulated knowledge Level of
analysis Separate micro and macro levels Macro levels emerge from micro levels
Equilibrium Generic Punctuated
Infrastructure has become China’s comparative advantage. According to Jin Liqun, President of the Asian Infrastructure Investment Bank (AIIB), infrastructure is vital for modernization (VPRO Tegenlicht 2016). Its own modernization is characterized by heavy investment in infrastructure, which has facilitated rapid urbanization. Cities serve as economic hubs for increased, efficient production (Lian and Lejano 2014: 4). Hence, China has conducted many experiments with infrastructure technology. In the case, the PT’s manifestation is the Mombasa-Nairobi SGR. On behalf of the EAC, KRC has developed the Kenyan railway. Chinese and Kenyan laborers have jointly built the railway according to Chinese instructions, expertise, and methods.
Chinese railway technology, material, money, labor → transmission of information and material by involved actors → Mombasa-Nairobi SGR → developing (economic value)
The G-R conditions demonstrate that the PT has economic value. First, the construction of the Mombasa-Nairobi SGR is an irreversible process. Reversing the Mombasa-Nairobi SGR would cost significantly more value than its realization. The 472 kilometer railway replaces and expands the British colonial railroad (Peralta 2017). It is the beginning of standardizing the East African rail network, which has different gauges due to multiple former colonizers and variations in local terrain (Etyang 2015). However, the EARM is realized to Chinese standards which still differ from European and American standards (Railway Gazette 2017). No universal standard exists for transporting cargo. The new diesel train is expected to transport up to 50% of total cargo volumes from the Mombasa port to African inlands within significantly shorter transit times of maximum 8 hours, compared to 16-24 hours for only 5% of total freight with the old train. Lower transport costs are likely to attract investment, stimulate regional trade, and provide new export opportunities (Duggan and Muktar 2017; Railway Gazette 2017). Furthermore, CRBC claims to have provided 30,000 local employment opportunities (Parke 2016).
Second, the construction process reflects the conversion of low entropy locally into high entropy globally. Resource extraction, the reshaping of Kenyan landscapes, and the building of supportive construction facilities have transformed the natural environment for building the Mombasa-Nairobi track (Jackson 2016: 37). As a result, the order of developing has emerged. In the context of developing, the (political) value of land is particularly high (Garric 2015). One way to illustrate the relationship between technology and nature is the growing controversy about the railway crossing the wildlife sanctuary Nairobi National Park. Although an agreement has secured “a pragmatic balance of wildlife and development concerns,” environmental compliance implementing development projects is a central public concern (The Guardian 2015). Kahumbu
(2016), CEO of Wildlife Direct, argues for a dialogue between relevant stakeholders in order to establish democratic legitimacy for both the project and the wider issues it has revealed.
Finally, the construction meets Kenya’s preference for a renovated rail network. This preference has evolved from the colonial system that has been blamed for Kenya’s economic stagnation. According to Kisero (2012), the prospect of an interconnected Africa contributes to peoples’ feelings of prosperity coming closer (Financial Times 2013). As such, the Mombasa-Nairobi SGR serves as a prototype for future projects (Oirere 2016). The choice to use diesel trains has been motivated by Kenya lacking the infrastructure for electric trains (Peralta 2017). Although it is likely to increase production and trade, these circumstances provided a momentum to bypass traditional development paths and integrate sustainable modernization from the very beginning. This raises the question if China has integrated the negative externalities of environmental degradation and air pollution into its development strategy and the NSR (Yang et al. 2014: 7046).
Arguably, the Mombasa-Nairobi SGR has been replicated from the “Tan-Zam railway” (Brautigam 2009: 40, 84-85, 163). In the 1960s and 1970s, this flagship project aimed to connect land-locked Zambia to the sea through Tanzania. China Railway Construction Corporation (CRCC) delivered the railway two years ahead of schedule. Despite technical training by the Chinese, the railway’s performance deteriorated due to local operation. After re-stationing Chinese workers begin 1980s, the railway started to become profitable. However, Monson argues that the narrative of local workers has been deliberately obscured. Different perceptions of the sacrifice have raised the question about who has benefited from the construction (2013: 48). This knowledge has been acted upon in the context of the Mombasa-Nairobi SGR. On 30 May this year, the GoK and CRBC signed an Operation and Maintenance contract that ensures the transfer of knowledge to local people. For the first five years, the line will be operated by China. During this period, around 15,000 Kenyans will be trained to operate and maintain the “Madaraka Express” (Pius 2016). Hence, the accumulation and transfer of knowledge demonstrates that Chinese railway technology has evolved.
Evidence suggests that the PT is being replicated. On 4-5 December 2015 at the Forum on China-Africa Cooperation (FOCAC), the decision was made to extend the Mombasa-Nairobi SGR. The three-stage Phase II of the EARM runs from Nairobi to Naivasha, to Kisumu, and to Malaba (Jackson 2016: 37). On 20 October 2016, Kenyatta launched the construction of Phase 2A (Railway Gazette International 2016).
V. EVOLUTION IN SOCIAL TECHNOLOGIES: SINO-AFRICAN COOPERATION AND KENYAN SOCIAL CHANGE
Through the NSR, the “connectivity bottleneck” is broken in order to revive the historical Afro-Eurasian region (Zhao 2014; Christian 2000: 1). The ST of Sino-African cooperation has been selected by the market environment because cooperative conditions have been present. China is well aware of Africa’s chances for prosperity. In the case, the ST’s manifestation is the cooperation agreement between the EAC, CPCS, CRBC, and KRC. They have established and signed an Engineering, Procurement, and Construction contract that has realized the Mombasa-Nairobi SGR. The EAC aims to harmonize an East African trade region through the EARM.
EAC, CPCS, CRBC, KRC → Engineering, Procurement, and Construction contract → East African trade region → Sino-African cooperation
i. Potential cooperation benefits
Regarding the potential for cooperation benefits, all forms of synergies can be identified. First, a clear division of labor exist. Kenya’s demand for enhancing its economic environment has been met by China supplying the PT that is essential for achieving it. Second, China and Kenya have heterogeneous needs. Kenya needs developing to reduce poverty; China needs new energy sources to secure its domestic development (Rocha 2007: 15). Africa’s abundant natural resource reserves are used to pay back Chinese loans (Brautigam 2009: 78). Additionally, Kenya provides new export and sales markets to which China can trade its infrastructure overcapacity and manufactured commodities. In these ways, China effectively develops brand equity (Forough 2016). Moreover, economic engagement in Africa involves low entry costs and less competition from the US and Europe. Third, increasing returns have been present in at least two ways. In 2008, EAC countries have jointly committed to develop the EARM, and they have engaged the Chinese for funding. Their cooperation has increased the total expected value of the project. According to Johns Hopkins School of Advanced International Studies China Africa Research Initiative (SAIS-CARI), Africa has borrowed roughly 10 billion dollars from China between 2004 and 2014 to fund African inter-city railways (Morlin-Yron 2017). Fourth, long-term risk has been reduced for both parties. For Kenya, the Mombasa-Nairobi SGR will define the country’s developing path. For China, this engagement directly provides energy security and continued domestic development. On a higher level, it consolidates its image of a peaceful, responsible rising power that supplements the existing globalized world order (Glaser and Medeiros 2007: 295-296).
ii. Cooperation incentive
With respect to a cooperation incentive, more caution is required. The question of how benefits are divided is difficult to assess, not least because of the secrecy around China’s foreign aid agenda. China has also been criticized by the West for collaborating with authoritarian regimes and importing Chinese labor (Morlin-Yron 2017). The problem of integrating environmental and social concerns is a recurrent issue here too. At the same time, gains flowing from the new railway is a continuous process. With the Mombasa-Nairobi SGR just finished, these flows will become more concrete in the next years. China’s rhetoric of win-win cooperation will ultimately depend on how effectively Kenya is able to build institutional capacity to use Chinese investment for country’s benefit. According to Tebagana, fragile institutional capacity, incompetent regulative frameworks, and disparate legal systems prevent the development of a sustainable and effective transnational railway foundation (2014: 6-7). Roads development can enhance connectivity and regional integration (Kaunda 2014b: 10-11). Foreign direct investment (FDI) needs to be directed such that it contributes to national economic growth. Local employment can be generated by creating a labor intensive environment. At the same time, labor and environmental laws need to be implemented to conform Chinese practices to African benchmarks (Karumbidza 2007: 87, 88).
Financial reforms. In its transition to a developed economy, Kenya has sought to implement financial, social, and political reforms as the Mombasa-Nairobi SGR materialized. In 2013, Kenya introduced the Public Private Partnership (PPP) Act. A PPP enables private sector participation in financing, developing, constructing, operating, and/or maintaining infrastructure and development projects of the GoK by means of contracts and institutional coordination. In return, the private actor receives a compensation for performing public activities through government funds or fees that are charged for provided services. The private party carries general risk liability conform the project’s terms and conditions (Public Private Partnership Act 2013: 7). Existing infrastructure has prevented the emergence of a regionally interconnected environment that can stimulate economic growth (Oguso 2015: 2). Although the GoK’s expenditures on infrastructure have increased over the past fifteen years, the country still has a financing gap in the budget of Vision 2030 (table 2). The PPP Act allows the GoK to access financial and technical resources necessary for realizing its infrastructure development. In 2014, the Railways Development Levy (RLD) was introduced. It is a 1.5% tax on imports to acquire supplemental capital to finance the Mombasa-Nairobi SGR (Kaunda 2014a: 6). Kenya’s Institute of Economic Affairs (IEA) has criticized the RLD for being inadequate (2014: 2).
Social reforms. Social reforms have taken shape in the forms of constructing civil dialogue and human capacity development. Civil dialogue has been recognized as crucial to create democratic legitimacy for the Mombasa-Nairobi SGR. The political value of land has been acknowledged in the previous chapter. Persisting landlessness and land related conflicts in various Kenyan regions stress the urgency of land reform, particularly in terms of land adjudication and strengthening land property rights. Land tenure security is an important indicator for economic productivity, business climate, and land property rights. It is positively related to poverty reduction, because land titles allows parcel owners to give their own meanings to how lands are used (Kieyah and Nyaga 2010: 13, 26). Discussions about land acquisition and compensation have been held at a SGR symposium on 16 June 2014. The GoK’s Ministry of Infrastructure and Transport and KRC have ensured that the interests of local communities living along the construction sites “will be paramount before, during, and after the construction period” (Kaunda 2014a: 7).
Human capacity development focuses on building human capital to strengthen socio-economic capital, to deal with capacity scarcity at decentralized government levels, and to alleviate Kenya’s youth unemployment (AICAD 2010). Central to Sino-African cooperation is knowledge transfer. CRBC has pledged to invest in competence training centers that educate Kenyans to become engineers, technicians, and surveyors for constructing, operating, and maintaining the Mombasa-Nairobi SGR. In July 2015, the first facility opened at Voi (Jackson 2016: 37).
Table 2. Kenya’s projected infrastructure financing gap per sector, 2012-2020. Source: Vision 2030 Secretariat (adapted from Oguso 2015: 1).
Kenya’s projected infrastructure financing gap per sector, 2012-2020 (US$ billions)
Sub-sector Costs (US$ billions)
Energy 19.8
Roads 9.0
ICT 7.8
Railways 7.2
Ports 4.8
Water and sanitation 4.6
Lamu Transport Corridor 3.7
Housing 2.9
Airports 0.9
Total infrastructure financing needs 60.7
Exptected financing available to GoK (2012-2020) 25.0
Additionally, the GoK has committed itself to engage in collaborations with universities and technical institutes (Uchukuzi 2014: 4).
Political reforms. The Mombasa-Nairobi SGR has also generated change in the political organization on both national and regional levels. On the national level, President Kenyatta has used the railway for this re-election campaign (Kivoi and Nduvi 2017). On 11 August this year, Kenyatta claimed victory over the elections with 54% of the votes. After criticism from the opposition and human rights organizations about hacking the Electoral Committee and governmental corruption, the national high court judged the result invalid. This decision is considered historical. For the first time in Kenyan history, elections must be held again (Eveleens 2017a; Eveleens 2017b). It shows that the rule of law has won over corruption. On the regional level, the Mombasa-Nairobi SGR is the first step towards transforming the EAC into the EAF. Hence, reforms in the social sector have emerged out of technological novelties. This demonstrates the interactions between PTs and STs.
iii. Defecting mechanisms and/or the coordination of communication
Concerning defecting mechanisms, the research has not found an instance of a procedure that holds any of the involved agents accountable for not cooperating. Therefore, the way in which communication is organized becomes relevant in order to say something about how and why China-Kenyan cooperation can be considered successful. Particularly, informal institutions have played a substantial role in the realization of the Mombasa-Nairobi SGR. During construction work, a “local tuning of reciprocity norms” occurred due to different languages and cultures (Beinhocker 2006: 270). This has uncovered divergent working ethos and work ethics of China and Africa. Kuo (2016) argues that the import of Chinese labor in early building stages has not only hindered local employment. It has also showed the different working philosophy of Chinese laborers compared to Kenyan standards. Poor working conditions and low payments have led to a series of raids against CRBC by Kenyan employers (K24TV 2016). Rocha warns that the “emergence of China as a key player in Africa could […] make African countries increasingly reliant on China rather than on their own domestic resources and the resourcefulness of their people” (2007: 26). Nevertheless, the Operation and Maintenance contract indicates that the power transfer from Chinese to Kenyan people is properly managed. CRBC’s goal is to employ the Mombasa-Nairobi locally for 80% by 2020 (CRBC 2017).
As such, it is not so much about Kenya having reasons to change its position given China’s actions, but Kenya being confident enough to cooperate according to its own principles. Possibly, it
may be a friction between the structural legacy of Western development approaches and China’s “Middle Kingdom mentality” that assumes accepted, embedded hierarchical relations of cooperation and harmony (Jacques 2012: 303-305; Godehardt 2016: 12-17). Lian and Lejano’s model of institutional fit verifies such incongruences between foreign and national institutions (2014: 9).
VII. EVOLUTION IN BUSINESS PLANS: VISION 2030
Translating the model of economic evolution to the context of developing in IR, national economies are the businesses that primarily aim to increase gross domestic product (GDP). Governments are the schemata readers that translate PTs and STs into development policies. Through the NSR, Chinese railway technology (PT) and Sino-African cooperation (ST) have converged in Vision 2030 (BP), Kenya’s latest long-term development policy. On 30 October 2006, Vision 2030 was selected by former President Kibaki and the market environment out of the Kenyan population’s needs. Vision 2030 aims to transform the East African country into a newly industrializing, middle income country by 2030. It has an economic, social, and political pillar (figure 7). These pillars are grounded in ten foundations: macroeconomic stability; continuous government reforms; enhanced equity and wealth creation opportunities for poor people; infrastructure; energy; science, technology, and innovation; land reform; human resources development; security; and public sector reforms (Kenya Vision 2030 2007a: 6-10). Consultative involvement of civil society and other
Figure 7. Thematic overview of Kenya’s Vision 2030. Source: NESC Vision workshop (Naivasha, 13-14 January 2006) (Kenya Vision 2030 2007c: 1).
relevant stakeholders have been central to gain a deeper understanding of the opportunities and challenges of Kenya’s development. The Mombasa-Nairobi SGR is the first realized strategy of Vision 2030.
Chinese railway technology + Sino-African cooperation → Vision 2030 → Mombasa-Nairobi SGR → Kenyan economy → developing
Vision 2030 has been the evolutionary result of the previous experiences of the 2001 Poverty Reduction Strategy Paper (PRSP) and the 2003-2007 Economic Recovery Strategy for Wealth and Employment Creation (ERS). This shows increasing returns, hence indicating evolution. Formulated by the International Monetary Fund (IMF) and the WB, PRSPs are neoliberal strategies that promote macroeconomic, structural, and socio-political stability. Democracy and civil empowerment have recovered Kenyan unemployment, poverty, and corruption (IMF 2016; GoK MPND 2003: v). Implementation of the ERS led to the growth of Kenya’s GDP from 0.6% in 2002 to 6.1% in 2006. As a result, poverty levels lowered from 56% in 2002 to 46% in 2006. The BPs also had a positive impact on other domains, e.g. health, gender, and education (Kenya Vision 2030 2007b: vii). Thus, the market has evaluated these successful BPs by rewarding them with growth in GDP, poverty reduction, and the availability of more resources to address other issues. On the basis
of the accumulated knowledge, population and government preferences have tuned towards developing. The BPs have been modified into Vision 2030.
Feedback from the market indicates that Vision 2030 has been amplified. Vision 2030 is the ‘gluing’ factor that converges Chinese railway technology and Sino-African cooperation into an economic output. The indicators of GDP, unemployment rates, and the share of Kenya’s economy in regional and international trade are therefore evaluated. Kenya’s GDP has grown substantially since 2007 to US$ 70.53 billion (figure 8) (World Bank 2017). By increasing infrastructure expenditures and human capacity development, the Mombasa-Nairobi SGR has successfully materialized. The railway not only adds value, but directly drives the Kenyan economy (Goldman 2016). Specifically, the transport sector contributed 8.4% to Kenyan GDP in 2016. The port of Mombasa was able to transit more cargo due to Kenya’s investment in becoming a central infrastructure hub in East Africa (KIPPRA 2017: 67, 69, 76).
Combatting the challenge of youth unemployment is crucial for Kenya to become a robust middle income country. Kenya has a relatively young population. This is a profound potential that can be exploited in Kenya's developing. Kenyan youth between the ages of 15 and 34 account for 35% of the total population, and 60% of Kenya’s total labor force (KIPPRA 2015: 155, 156). However, the combination of relatively high poverty rates and the absence of social protection measures increases the risk of informal employment as a means of survival (KIPPRA 2015: 162). According to the latest report of the United Nations Development Programme (UNDP), Kenya’s unemployment rate of 39.1% signals a problematic paradox: creating sustained growth without generating jobs (OPHI 2017). Kenya’s economy is currently “missing out on the labor dividend it should be reaping from the bulge in its youthful population in terms of forgone productivity, innovation, and consumer market growth” (Otuki 2017). Although the building of the Mombasa-Nairobi SGR has facilitated local employment in the construction sector, formal sector employment should be created in order to expand job opportunities for the youth. In other words, human capacity development programmes and education facilities need to be more aligned with market realities (KIPPRA 2015: 173; Otuki 2016).
After the Kenya National Bureau of Statistics (KNBS) statistically reassessed Kenya’s economic base because of its dynamic nature, the country became Africa’s ninth largest economy (Gundan 2014). This supports the argument that Kenya has adopted an evolutionary approach to the economy. According to Kenya Economic Update 2016, the country is on its way to become a regional leader in transport and logistics (World Bank 2016: 7). The EAC is the primary export destination for Kenya’s products (Muluvi et al. 2012: 20). This has led to a positive trade balance
