The effects of import-substitution: the case of Kenya's manufacturing sector

This paper attempts to assess to what extent growth of the manufacturing sector in Kenya has contributed to a process of integrated and wide spread economic development. There are three sections. The first reviews the general arguments of development theory to promote industrial development in the Third World countries. The second section deals with the pros and cons of the 'import-substitution' policy, which was adopted to speed up growth of the manufacturing sector. The last section brings together relevant research findings concerning the effects of this policy on the structure of the manufacturing sector, employment creation, income distribution and the operations of multi-national firms in Kenya. The conclusion is that the type of industrialization that occurred has not led to 'a structural transformation' of the Kenyan economy. Growth in the manufacturing sector, although fast in terms of output, has been growth within existing types of industries. Few 'forwardand backward linkages' were developed and the impact of the policy on employment creation and income distribution can hardly be viewed favourably. Resources have been concentrated on a small part of the economy and to a large extent have neglected others, in particular agriculture. Multinational firms in Kenya have been a hindrance to the establishment of an integrated, balanced type of economic development. Import-substitution did not lessen Kenya's external dependency, but merely changed its nature. Consequently, the policy was not effective in alleviating the balance of payments difficulties.