Effect Of Government Infrastructure Development Expenditure On Performance Of Manufacturing In Kenya

ABSTRACT 

The need for infrastructure development in Kenya was initiated in the early years of economic planning. For instance, the Sessional Paper No. 10 of 1965 among other strategic objectives provided a premise for infrastructure development to fuel rapid industrialization and make Kenya a market economy. Emphases have since been made in the subsequent economic development plans in 1970s, National Development Plans in 1980s, the Economic Recovery Strategy for Wealth and Employment creation 2003-2007 and recently, the Kenya Vision 2030 that targets to transform Kenya into an industrialized middle-income economy by the year 2030. As such the government of Kenya has directed large amounts of money to the country’s infrastructure development specifically in transport, energy and information communication and technology development with the objective to enhance efficiency in production, trade and investments. However, the performance of the manufacturing sector has stagnated, exhibiting a slower growth rate than that of the economy. The sector’s share of Gross Domestic Product increased marginally only in the first three decades of independence then stopped and stagnated below 10 per cent to date. Most studies in Kenya have focused on relationship between government expenditure on infrastructure and economic growth or specifically road infrastructure expenditure and economic growth. No study considering the transport sector in totality - road, air, water and railway as well as energy and fuels and information communication and technology infrastructure has been conducted. It was against this backdrop that this study sought to empirically investigate the effect of infrastructure development expenditure on performance of the manufacturing sector in Kenya. It specifically intended to determine the effect of government expenditure on the development of transport infrastructure, energy infrastructure as well as information communication and technology infrastructure on the share of manufacturing in Gross Domestic Product in Kenya. This study used times series data for the period 1990 to 2017 and used the Ordinary Least Squares method to estimate parameters in its linear equation. The study found that the coefficient of transport was positive (0.128), energy was negative (-0.23974) and information was positive (0.11345) and statistically significant. The study recommends that government should allocate more funds on the development of transport and information, communication and technology infrastructures in order to realize a significant contribution of manufacturing in the share of gross domestic product and economic growth and development in Kenya.