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Rethink economic growth model : The Standard

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Deputy President William Ruto’s revelation that the expansion of Nairobi-Nakuru Highway would begin in December this year is a welcome reminder that the State is still intent on funding infrastructure projects despite suffering recent setbacks.

China’s reluctance to grant a Sh380 billion loan to finance the extension of the Standard Gauge Railway (SGR) line from Naivasha to Kisumu is a notable setback to Jubilee Government’s ambitious infrastructure expansion strategy. At first sight, the deferment is regrettable.
But on second thoughts, this could turn out to be the best outcome provided the government re-thinks its development model.
The current model holds that the construction of roads and railway lines will automatically spur the production of goods and services to be ferried to and from the market.

SEE ALSO :Mudavadi: How Uhuru and Ruto tricked me

The Chinese seem to have questioned this model and instead advised President Uhuru Kenyatta and Raila Odinga to first set up industries in and around Kisumu that would generate the volume of cargo required to make the railway line viable.
According to Odinga, the State will spend about Sh8 billion to set up industries that would prove to China Export-Import Bank that the volume and value of trade generated by the SGR extension to Kisumu would repay the loan.
Although it was embarrassing for the Kenyan delegation to be taken back to the basics of economics, the hope is that this lesson will inform future infrastructure development projects.
Inflate prices
In addition, the State needs to fix the loopholes that give individuals implementing these projects room to inflate prices.

SEE ALSO :Ruto says SMEs key in government’s agenda

After all, it does not require rocket science to come up with a lower and an upper band of prices for land that would be acquired.
Interestingly, President Kenyatta once suggested the passing of legislation that would make the compulsory acquisition of land required for public infrastructure projects.
Perhaps, time is ripe for the President to revisit the issue.
The huge difference in costs paid by various countries for the construction of roads and railways should be addressed.
Arguments that the differences are due to the terrain and other factors no longer hold because the tendering and execution of many projects are mired in graft.  

SEE ALSO :Uhuru loses Kiambu to Ruto

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DP William RutoSGRChina loansEurobondDebtInflation





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