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Kenya-Systematic-Country-Diagnostic.Pdf Public Disclosure Authorized Public Disclosure Authorized Systematic Public Disclosure Authorized Country Diagnostic Kenya Public Disclosure Authorized 10190-Kenya SCD.indd 1 10/20/20 10:49 AM © 2020 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Cover image of Nairobi city courtesy of UN-Habitat. 10190-Kenya SCD.indd 2 10/20/20 8:59 AM Contents Acknowledgments ............................................................................................................................................................................................................8 Acronyms .........................................................................................................................................................................................................................................................9 Executive summary .......................................................................................................................................................................................................10 1. Country context .........................................................................................................................................................................................................21 1.1 Geography and people: A land of great diversity ......................................................................................................21 1.2 Ethnic fractionalization, social cohesion, and governance: The journey so far .........................21 1.3 Governance and development outcomes ...................................................................................................................... 24 1.4 SCD conceptual framework: Growth, inclusiveness, and sustainability ..........................................25 2. Critical factors driving output and productivity growth ....................27 2.1 Growth experience: From economic slump to robust growth ...................................................................27 2.2 Drivers of Kenya’s growth experience .................................................................................................................................29 2.2.1. Supply- and demand-side drivers of growth ...................................................................................29 2.2.2. Growth accounting: The productivity challenge ......................................................................... 30 2.2.3. Structural reforms, productivity, and governance .......................................................................32 2.3 Constraints on productivity growth in Kenya ............................................................................................................. 34 2.3.1. Macroeconomic constraints on productivity growth..................................................................35 2.3.2. Microeconomic constraints on productivity growth ................................................................. 38 2.3.3. Challenges in human capital development and better development outcomes for women ..................................................................................................................................... 41 2.3.4 Constraints on productivity from inadequacy of physical capital ...................................... 43 2.3.5. Constraints on productivity from inadequacy of use of natural capital......................... 45 2.3.6. Constraints on productivity and growth due to climate change ....................................... 47 10190-Kenya SCD.indd 3 10/20/20 8:59 AM CONTENTS 3. Critical drivers of inclusiveness in Kenya ........................................................................................49 3.1 Trends in poverty and shared prosperity ......................................................................................................................... 49 3.2 Drivers of monetary measures of inclusiveness ........................................................................................................53 3.3 Drivers of nonmonetary measures of inclusiveness ............................................................................................ 54 3.3.1. Health ..................................................................................................................................................................... 54 3.3.2. Education .............................................................................................................................................................55 3.3.3. Water ......................................................................................................................................................................56 3.4 Gender and inclusion ............................................................................................................................................................................57 4. Pathways to reduce poverty and boost shared prosperity ........60 4.1 Boosting productivity and job creation ..............................................................................................................................61 4.1.1. Fostering macroeconomic stability and fiscal sustainability .................................................. 61 4.1.2. Improving access to finance for MSMEs ............................................................................................63 4.1.3. Removing regulatory hurdles .................................................................................................................. 64 4.1.4. Addressing inefficiencies in the land market and land use .................................................. 64 4.1.5. Addressing the infrastructure challenge ...........................................................................................65 4.1.6. Enhancing worker capabilities through integrated interventions on skills development, self-employment, and entrepreneurship ....................................... 66 4.1.7. Enhancing capabilities by leveraging digital technologies and fostering innovation ..............................................................................................................................67 4.1.8. Strengthening regional trade integration and boosting participation in global value chains ................................................................................................................................... 68 4.1.9. Boosting agricultural sector productivity and output .............................................................. 70 4.1.10. Development of the blue economy and wildlife conservation ...........................................72 4.2 Reducing inequality of opportunities through advancing human capital ....................................72 4.2.1. Health .....................................................................................................................................................................73 4.2.2. Education ............................................................................................................................................................73 4.2.3. Water, sanitation, and hygiene ...............................................................................................................75 4.2.4. Social protection .............................................................................................................................................75 4.2.5. Digital technologies ......................................................................................................................................76 4.3 Improving governance for service delivery ....................................................................................................................77 4.3.1. Establishing effective and accountable institutions ...................................................................77 4.3.2. Strengthening devolution to enhance service delivery .......................................................... 78 4.4 Foundational issues .................................................................................................................................................................................81 4.4.1. Fiscal, social, and environmental sustainability............................................................................. 81 4.4.2. Inclusivity and gender ................................................................................................................................ 83 4.4.3. Digital transformation ...............................................................................................................................
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