Saturday, 24 December 2011

Konza Technology City: Keynesian Economics or a Grandiose Vanity Project?

There is absolutely no doubt that Kenya is determined to become a prosperous, newly industrializing country that is globally competitive by the year 2030 and the futuristic Konza Technology City, is concrete proof of this great ambition. The Technology City is designed to feature world class civic and commercial architecture including Business Process Outsourcing, Technology Park, Science Park, international finance centre, shopping malls, hotels and accommodation facilities. Konza City is billed to become one of the most successful cities in Africa, competing economically and culturally with the best cities in the world.

Naturally, governments play catch-up with the private sector on matters of development but Konza is a rare exception. When the government officially unveiled the plan to build a specialized city from a scratch, complete with 3-D models, the private sector and indeed the entire country was taken by surprise.

 The Konza City concept is an exhibit of the genius of planned developments in which governments initiate and accelerate a process of development that would otherwise take place very slowly or perhaps not at all.  Many however have dismissed it as a grandiose plan which they do not expect to take off in the near future something which has translated into local investors showing little interest in the project and dampened enthusiasm for the project.

Konza however, is the latest addition to an ever increasing global trend of building new cities from scratch. Building new cities from scratch is a radical alternative to the traditional model of urban development – they are brand new, eco-friendly, fully-working cities from the first day they open for business.

The master plan for the 2,000 hectare city is based on successful new town projects around the world put together by an international team of experts, drawing on best practice from places such as the UK, China and Brazil to ensure global competitiveness.
Having a new city built from scratch has somewhat become a status symbol in the community of nations. These cities being built from scratch are to be found in countries which are not short on cash and they seem to be in what appears to a global race for them. Konza City however is different; whereas it may appear to be a vanity project and there is circumstantial evidence that the project is aimed at being impressive, the government seems to be employing Keynesian economics in its justification for the project. Through its own development expenditure and foreign direct investment, the government somehow it seems, expects this project to spur economic growth and development. There are however, no official indicative figures showing the expected return from the project which can be used to validate the projects overall contribution to economic growth.
The jury however is still out there on whether building new cities from the scratch is a good idea. China’s experience with building "model concept cities" has some dramatic failures. Masdar City in Abu Dhabi, Unite Arab Emirate –the world’s capital for building cities from scratch is said to be a disaster. There is an alternative to building new cities from the scratch and it is upgrading an existing town centre into a city.
Upgrading an existing town centre into a city, can be a lot cheaper and simpler than building new cities, or demolishing existing cities for redevelopment. It certainly takes a lot more planning but the long-term results are better. And in terms of jobs, fixing up old buildings is a better job creator than building new buildings: repair and rehab is more labour-intensive than new construction, about 2/3 labour and 1/3 materials, while new construction is more like 1/2 labour and 1/2 materials. So for each shilling spent, more jobs are created for a rehab project than a new building. You also get to reuse the existing infrastructure (which often needs repair, but at least it's there) and don't have to build new infrastructure altogether.
The official price tag of the Konza City project is 630 billion shillings but it actually estimated to cost double that figure. The government has allocated a paltry 1 billion shillings to the project which means this is yet another massive project that the government is expects to be financed by foreign savings. The government is rightly concerned over the low number of local investors that have shown interest in the Konza City project. According to Communications permanent Secretary Bitange Ndemo, in the initial 500 acres of the project, only 40% of local investors have taken up space, with 60% taken by international investors. The trouble with foreign direct investment and especially in the ICT sector, is that it is incessantly capital intensive and not labour intensive as hoped for. Another significant problem with massive investment projects financed by foreign savings, however productive, is that they have little impact on income growth and even economic growth when host-country policies are poorly situated to capture a worthwhile share of the returns of the project.
It will be startling to Kenyans to learn that the awe-inspiring Konza Technology City project is actually not a Vision 2030 flagship project contrary to popular belief. The Kenya Vision 2030 Popular Version identifies infrastructure including ICT as one of the enablers that will help achieve our development aspirations as stated in Vision 2030. It further identifies and priorities Business Process Outsourcing (BPO) as one of the six key economic sectors that will drive growth. The first Vision 2030 Medium-Term Plan (MTP), identifies 15 programmes and projects under ICT infrastructure and whereas emphasis is laid on the development of ICT parks and Digital villages, there is no mention whatsoever of an ICT city. Needless to say, ICT parks and digital village cannot pass for an ICT city of the scale envisaged by Konza Technology City project.

During the launch of the Kenya Vision 2030 Popular Version and its first Medium-Term Plan (MTP) 2008-2012 on the 10th of June 2008, President Kibaki directed that the preparation of Kenya Vision 2030 Sector Plans based on the MTP detailing policies, reforms, programmes, and projects to be implemented in each sector aimed at the realization of the goals and objectives of Vision 2030. Again, the ICT Sector Specific Plan did not envisage the Konza Technology City but rather envisaged the establishment of a whopping 800 billion shilling ICT Park in which the government would make available 3 billion shillings for local amenities while the investors would under a Public Private Partnership (PPP) framework would establish BPO services in the Park.
It is indeed baffling that the proposed Konza Technology City now features world class civic and commercial architecture including Business Process Outsourcing, Technology Park, Science Park, International Finance Centre, shopping malls, hotels and accommodation facilities at a cost of 600 billion shillings -200 billion less than that the projected cost for a mere ICT Park.
This situation begs several questions. First, could it be the government hyping up a glorified gated-community by branding it a city? Considering the project price tag, you can’t quickly rule out the employment of crude means to attract unsuspecting investors but that’s just preposterous. I don’t think so; the additional features appear to satisfy the requirement of at least a dynamic commercial town if not a small city. Second and most importantly, what does it take to build a city from scratch?

A vibrant city, like a good wine, needs time to develop. It takes decades or centuries to turn a cluster of villages into a living, breathing metropolis. It simply does not happen overnight. Much like the human body which is a highly complex organism in which multiple systems and subsystems work together as a seamless unity to maintain health and support growth and development, cities are astoundingly complex multiple systems and subsystems working together and which are broadly understood yet extremely hard to replicate to form a living, breathing metropolis from the word go.
No doubt, modern science and technology makes it feasible to actually build a city from scratch but the costs and potential risks are astronomical which explains why most all such plan smacks of oil-fuelled excesses. You simply cannot build a viable city from scratch when you are a middle income economy let alone a developing country like Kenya. Becoming a resident in a city built from scratch is a lot like planning a holiday on the moon –it is the preserve of the super rich. How many people do you know have gone on a holiday trip to the moon? Given that Konza City is pitched as a technology city; the majority of residents would be the disenfranchised tech savvy youth who simply couldn’t possible afford beats its very purpose.
How the proposed ICT Park metamorphosed into a fully fledged city is a mystery but what is absolutely clear is that Konza City despite being based on successful new town projects around the world and allegedly put together by an international team of experts, drawing on best practice from places such as the UK, China and Brazil, Konza Technology City is an afterthought. It is indeed a massive investment project of the scale of the 1.2 trillion shilling Lamu Port Project and the 1000 MW Nuclear Power Plant but unlike them, it is not in the Summary of Key Investment Opportunities in Kenya that was published by the Office of the Prime Minister Ministry of State for Planning, National development, and Vision 2030.
During a meeting with the government, local investors in August this year, the information PS Bitange Ndemo revealed that his ministry was working in line the ministry of water to ensure the City will be supplied with 100 cubic meters of water it will need on a daily basis. He further revealed that his ministry was currently in talks with KenGen for the supply of the much needed electric energy that the city will need. What the PS unwittingly revealed was that the relevant government departments that crucial stakeholders for the success of the project were never involved in its planning.
Konza is not just a technology city with a technology park; it will also have a Science Park and be an International Financial Centre. Your guess is as good as mine; stakeholders in the various fields of science and the financial sector have never been involved in the project planning.

It is very clear that not only has there been inadequate involvement of all the stakeholders both in government and the private sector which by the way, is expected to fork out a whopping amount of money anywhere 600 billion to over a trillion shillings something which explains its scepticism.

Building an ICT Park is one thing but building an ICT City is another thing altogether. The project development model is without a doubt, that of an ICT Park which is being poorly retrofitted to build a specialized futuristic city. What are the odds of success?

To be sure, a brand new futuristic city is highly desirable for our country in the same way a brand new a luxury vehicle and a brand new house in an upmarket suburb is desirable to everyone even though very few can actually afford such things. Konza Technology City is possible, if only it can be reworked to incorporate several Vision 2030 projects and goals so that it kills many birds with one stone so to speak, but as things stand right now, the planning of the project has condemned it to a big failure which is a national embarrassment in the drawing board.

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