Hon Raila Odinga's Response to the Budget


The MAN is very technical.
- - Elias .O. Ratten'g

---

SPEECH DELIVERED BY
HON. ENG. RAILA AMOLO ODINGA

MP TO THE 2007 KPMG BUDGET SUPER PRESENTATION AT NORFOLK HOTEL ON THE 14TH JUNE 2007 ON

"PUBLIC EXPENDITURE AND WEALTH CREATION: SUCCESS, FAILURES AND PARADIGM SHIFT"

I feel greatly honoured, to have been invited to give a keynote address on Public Expenditure and Wealth Creation in light of the just read government financial estimates for the year 2007/2008.

Allow me to share with you some deep thoughts that I have held and cherished as guiding principles every time I remember my responsibility as head of my family as well as a leader in this country.

There are four moral principles that negate economic and societal development, and these I must flag out for our consideration. The first is that poverty has dehumanizing effects on us. Second, that waste of public resources negates the principle of good governance. Thirdly, inequality amongst our people has tremendous negative effects on us as a people and a nation. And finally, that the family remains a strong nucleus of economic and social support.

I believe strongly in these virtues. Most of you here tonight, I am sure do also.

Ladies and gentlemen

We have come along way in our political maturity as a country. I applaud the people of Kenya for many reasons, three of which I consider most important in the present context.

First, I applaud your patriotism and commitment to building a free and just society. This is a continuous process and not a one time event. Secondly for your response to the call to pay taxes as a duty to our nation and country. For this reason more than 93% of the budget is today funded from domestic resources. Thirdly and finally, that in spite of lapses in security, administration of justice and laxity in governance, Kenyans have remained steadfast and abhor narrow sectarianism, parochialism and tribalism.

HOWEVER I hasten to add that, we must not take our people's patriotism and steadfastness for granted.

The NARC government, which we established in December 2002, had very good macro-economic policies. The limited successes that we have been able to witness to date were expected. Our Manifesto indicated stimulation of economic recovery; creation of employment and the ushering in of the era of good governance.

The macro-economic policies in the NARC Manifesto and Economic Recovery Strategy for Wealth and Employment Creation have delivered some apparent successes. Although the establishment of development funds to local areas and constituencies has been successful, the potential successes have been superficial, and the interventions poorly targeted and therefore have not achieved the desired results of poverty reduction and the amelioration of existing inequality.

Gross Domestic Product has grown by 6.1% per annum. But the economy has not expanded, employment has not been created and that is why the recurrent budget estimates remains disproportionately high. Inflation increased from 10.3 percent in 2005 to 19.1% in 2006. The widening trade deficits shrank any GDP growth benefits. As a result household economic stability has been grossly eroded and our people have not experienced Gross National Happiness that needs to accompany such GDP growth.

Free primary education and support to secondary schools do not deal with inequality. Growth in the tourism sector has not translated into more jobs. Although growth in transportation and communication sectors has increased low-level jobs the cost of operations and maintenance appears to wipe any gains made. Performance contracts as currently treated in a very narrow sense cannot be evaluated nor sanctions enforced. As a result; rather than improve service delivery to the public they remain largely ceremonial.

Minimum reforms on the budgetary process, such as Medium Term Expenditure Framework (MTEF), Budget Outlook Paper, and Budget Strategy Paper have been attempted. This is especially seen in the budgeting process, which was meant to create linkages between policy, programmes and results as well as predictability of the resource envelope. The impacts of these reforms have been minimal.

In summary, inequality has increased due to poor targeting and priority setting because in spite of the so-called pro-poor budget, the budgeting process is not enforceable by law and hence remains in the hands of a few technicians, with limited participation of stakeholders.

The present question is how do we broaden this apparent growth in GDP to create wealth? I shall deal with this subject in the remaining minutes and then propose key result areas.

Ladies and gentlemen

No doubt; the government has a fiduciary responsibility. A responsibility to ensure that public funds are spent in well-targeted areas, equitably, appropriately and in a timely manner to give value for money obtained from the tax payers. As a matter of fact, the "prudent man rule" which presupposes that the public has put in a blind trust the resources they have given to government in the form of taxes assumes that the government will invest in a manner that the public is happy to continue paying taxes.

However, the public is forced to incur unnecessary further expenses on security, transportation, bad roads and poor health and among others which the government should be providing.

At the implementation level, we still lack technical and absorption capacity not to mention local level infrastructures that would facilitate the effective use of devolved funds. In fact, civil servants working in provinces and districts demand payment for services on CDF, LATF and other devolved funds. Project design still takes very long and execution of locally funded programmes has become a cash cow in some instances. The lack of accountability, not only of devolved funds but also of public servants, local politicians and community organizations has resulted in failure to achieve desired results.

In my view, the government should not be in the business of dishing out funds but rather should provide the necessary conditions, guidance and structures for prudent investment. The Controller and Auditor General, Public Accounts Committee and Kenya Anti-Corruption Authority continue to raise serious questions regarding devolved funds that generally go un-addressed.

Low utilization of development funds

We need to deal with low utilization of development funds. In the current budget the government has increased development funds by 77.2 percent. However, no consideration has been taken to ensure full utilization of the same. I can safely say that, these funds shall find their way back to Treasury for re-allocation which is typically inequitable. In other cases the funds will be returned unspent. Critical therefore is; more accountability and clear sanctions put in place to deal with both non-achievement of targets and perennial reallocations.

Infrastructure

Not too long ago, I launched my vision in which I emphasized three priorities for our country: and that is infrastructure, infrastructure and infrastructure. Infrastructure still remains our major Achilles heel towards achieving sustainable development. Our roads and rail serve the entire Great Lakes, Sudan and beyond through the port of Mombasa. We therefore must change the design criteria and standards.

I have been very keen on Housing and Upgrading of Slum settlements. However, first we must concede that there has been physical planning failures; poor resource allocation; over-dependence on private sector to invest in housing. To a large extent, corruption has been the major handicap not only in the past but also to day.

We need to be creative in many ways. New financing solutions must be found such as creation of infrastructure bonds. There is need for harmonization of infrastructure standards and enforcement of axle load regulation. Further, I would investigate and broaden linkages between private sector activities, resource availability and construction industry; and finally invigorate public housing development while promoting public-private sector partnerships.

Regarding Science and Innovation, we need a science and technology-led economy. Furthermore, research and development of linkages between private sector and institutions of higher learning and well-targeted research priorities for public funding needs to be established. This should be accompanied by rapid deployment of fiber optic networks to connect our cities, towns and urban centers as a priority in this age of global digital communication if we are going to succeed in baking a larger national cake. This needs to be rolled out without delay since it does not require reinvention.

KEY AREAS THAT WILL DELIVER DESIRED RESULTS

* Empowering Kenyans not only through distribution of money to various groups, but developing a better way through strong legislation and implementable policies.

* Procurement is another area that offers the possibility for innovation and discipline.

* Expand investment opportunities through grassroots' infrastructures, Marshall Plan approach and balancing of resources to marginalized regions.

* Capacity development strategy for the public service

* Release potential of regions such as: the trade in mangrove poles at the Coast, livestock trade in North Eastern Kenya as it has been done in coffee, tea, milk and pyrethrum regions.

In all this, Ladies and Gentlemen, we must bring to the administration of public affairs a sense of urgency.

I thank you for your attention.

14TH JULY 2004
NAIROBI