3. COOPERATION BETWEEN KENYA AND DENMARK

3.1 General Objectives and Strategic Goals

The country strategy for Danish development cooperation with Kenya for 2006-2010 will build on a) the Kenyan government’s development plans, as outlined in the ERSWEC, b) Denmark’s development policy³, c) the extensive past experience of development cooperation between Denmark and Kenya, and d) the already agreed goal of steadily closer cooperation with other development partners. In accordance with this framework, the overarching objective of the Danish-Kenyan development cooperation will be the reduction of poverty and the creation of sustainable development through pro-poor economic growth.

The major strategic directions in Danish development cooperation with Kenya in the period 2006-2010 will be:

These directions will be implemented with due caution, taking into consideration the Kenyan government’s capacity and political will to adhere to best practices with regard to transparency and accountability. The cooperation will be designed with a view to promoting Kenyan ownership of the development processes in the country and strengthening the necessary, but not always popular, administrative and economic reforms. Improved access to information and popular participation in the decision-making process will remain a major challenge in the years to come. This means that support needs to be given to the public administration system, in order to enable it to deliver results, increase transparency and demonstrate greater responsibility vis-à-vis the public, not least in the districts.

In order to achieve its development aspirations, Kenya will need an even stronger growth than what has been achieved since 2002. In this endeavour Kenya will build on its private sector, which has demonstrated its strength and resilience over the years. In order to develop this potential, the Danish Country Strategy for Kenya targets two productive sectors: agriculture and business. Better conditions for private initiatives will generate employment and improve living conditions in Kenya. Private sector-led economic growth requires a positive business climate that can attract investors. Marginal areas and small producers should be involved in this effort in order to secure optimal impact on poverty alleviation.

In order to reach the targets set for poverty alleviation and improved human development, a concerted effort is required in the social sectors. The Danish Country Strategy for Kenya thus focuses on two areas: health and water & sanitation. Improved health is at the heart of the MDGs and also directly affects the productivity of the labour force. The same is true for water; indeed, improved access to water is at the top of the priority list for many local communities in Kenya. Water is also crucial for the intensification of Kenya’s agriculture. Water and health have been chosen rather than education because of the strong Danish experience in these sectors and the opportunity to build synergies also with the agricultural and environmental programmes.

Improved governance is a key to societal development, where the economic growth of the productive sectors is invested in human development and poverty alleviation. Against this background, the Danish Country Strategy for Kenya includes support to government reforms, enhancing the democratic space and strengthening the respect for human rights, including the role of CSOs. The challenges posed by fundamentalist and terrorist groups are of particular concern. This effort is supplemented by Danish support for regional peace and stability.

Natural resources provide the foundation for economic growth: Kenya’s environment is very rich but also very fragile, and care must be taken not to cause environmental degradation or over-exploit natural resources. Long-term sustainable growth and development is the goal. That is why the Danish Country Strategy for Kenya includes an environmental sector support programme.

It has been decided to terminate Danish support for the road sector. Infrastructure is generally well funded and several other donors have become involved in implementing the approaches developed through the Danish assistance to the road sector.

A change from the present project approach to first-generation SPS will be initiated in the country strategy period, 2006-2010. This represents a major challenge given the fact that comprehensive and coherent national sector policies are still being elaborated for most sectors, putting considerable strain on national capacity. Whenever capacity problems, institutional weaknesses and/or lack of proper policies or enforcement are not conducive to implementing SPS, Denmark will actively and in close collaboration with other development partners address these shortcomings through policy dialogue and direct support, including technical assistance (TA) for reforms in public sector management, not least in financial management. The outcome of the constitutional debate will set a new framework for decentralisation, which Denmark will support, while continuing to encourage civil society and local communities to take an active part in planning and managing development activities.

Even though some donors, including the World Bank and the EC Delegation, are providing budget support, Kenya is not found at present to have the capacity in terms of financial management and accountability to meet Danish requirements. Denmark will, however, in close collaboration with other development partners, explore the possibilities for offering sector budget support and actively support initiatives to strengthen public financial management. Progress may be achieved within the strategy period that will prepare the ground for this type of support.

The changes in the Danish-Kenyan development cooperation are expected to result in greater ownership of development efforts by the Kenyan government that will ensure long-term sustainability. At the same time, coordination and harmonisation of support - with a view to aligning development cooperation fully with Kenyan policies and structures - are expected to reduce transaction costs and improve the quality of development cooperation in the medium and long term.

Multiparty democracy has created a very fluid political situation. The constitutional referendum and the 2007 elections are likely to create considerable tension. Some of the proposed reforms, not least the anti-corruption drive, are likely to generate resistance from influential circles. Although the Kenyan economy is doing better, there are some concerns that the growth is mainly concentrated in a few sectors (the flower industry, tea and tourism), while the broad-based growth needed for sustainable economic growth might be lacking. The recent surge in oil prices has contributed to increasing inflation, pointing towards vulnerability vis-à-vis external shocks. Despite the emerging economic recovery, international business confidence in Kenya has remained fairly low, and Kenyan capital rather than foreign direct investments (FDIs) presently generates most investments. In view of these uncertainties, this strategy will adopt a flexible approach.

If the government is successful not only in implementing its reform programme –especially prioritisation of its development initiatives, civil service reform, anti-corruption drive and deregulation – but also in achieving concrete, confidence building results, there will be scope for increasing and deepening the development cooperation between Kenya and Denmark as described in the following presentation. If, on the other hand, the reform process stalls or is slowed down, it will hardly be possible to go beyond the current level of cooperation.

However, if political progress is reversed and oppression increases again, if instability develops and new examples of corruption at the higher levels are revealed or similar developments occur, it will be difficult to maintain the current level and form of assistance. Another mode of assistance focused at direct interventions at local level, capacity building and support for civil society will be considered.

3.2 Performance Goals

The overall performance objectives for the Danish-Kenyan development cooperation are based on the targets and indicators laid down in the ERSWEC and conform with the MDGs where relevant. The ERSWEC entails a number of targets and indicators, the most important of which are listed below. Where relevant, these will be supplemented by performance goals from sector strategies. As the ERSWEC covers the period 2003-2007, no targets have yet been formulated for 2010. These targets will be integrated in the Danish-Kenyan cooperation as soon as the Kenyan government identifies them. Progress towards achieving the Kenyan government’s general objectives and the country strategy’s performance goals will be reported annually in connection with the Embassy’s ’Assessment of Country Programme’.

3.3 Alignment and Harmonisation of Development Cooperation

The Kenyan government’s efforts to coordinate, harmonise and align development cooperation are concentrated in the Kenya Coordination Group (KCG) under the chairmanship of the Ministry of Finance (MoF). On the donor side, the major development partners in Kenya are organised in the Donor Coordination Group (DCG). The DCG has a number of sector sub-groups, including a special group on Harmonisation, Alignment and Coordination (HAC), which has been set up to streamline procedures. A sector group system on the government side exists, although, not all the groups are functioning.

In general, coordination, harmonisation and alignment in Kenya have not progressed as far as in some other Danish programme countries. This is mainly due to legacy from the previous government, where Kenyan government/donor cooperation cooled down. This has left the Kenyan side unaccustomed to development coordination at all levels. However, the situation is improving. The Kenyan government as well as development partners adhere to the Paris Declaration and the parties work towards improving aid effectiveness. Development partners have declared their commitment to coordinate, harmonise and align cooperation with the ERSWEC as the central framework. The special donor harmonisation group, HAC, coordinates its efforts with the government, especially the MoF, which in turn works to improve the coordination of line ministries.

As the latest initiative, the HAC-donors in cooperation with the Kenyan government have embarked on the development of a Kenya Joint Assistance Strategy (KJAS), along the same lines as joint strategies that have been developed or will be developed in Tanzania, Uganda and Zambia. The work on the KJAS is in its initial phases, although a completed KJAS is expected to be presented at the KCG meeting in April 2007. Denmark intends to participate fully in the KJAS. The KJAS process may lead to adjustments in the current strategy – most likely closer cooperation with other donors or the reduction of Denmark’s involvement in one or two sectors.

Denmark is an active HAC member and Danish efforts within coordination, harmonisation and alignment will, therefore, be supporting the objectives identified by HAC: ’To increase the effectiveness and efficiency of aid and reduce transaction costs of the government by avoiding duplication of work, simplifying and standardising procedures, and supporting development partners efforts to align their support with mutually agreed development priorities to the extent possible’. Specifically, Denmark will pursue the following targets:

All progress on indicators will be reported annually in connection with the Embassy’s ’Assessment of Country Programme’.

3.4 General Strategic Priorities

The need for development of the private sector on the one side and the delivery of sustainable services in the social sectors on the other as reflected in the Kenyan ERSWEC, as well as experience gained from the past Danish development cooperation has led the country strategy to focus on four sectors: health: water and sanitation, agriculture and the business sector. Human rights, democracy and good governance; environment; the Private Sector Development Programme (OSDP); anti-terrorism; and support to the Refugee-Affected Areas Programme are other areas of cooperation.

In order to maintain an overall focus and reduce the management burden, maximum coordination and synergy among the programmes will be pursued where relevant. Areas where mutual reinforcement will be promoted include, for example, agriculture, business and the PSDP as well as agriculture, water and environment programmes. Actions implemented through the Human Rights, Democracy and Good Governance Programme will contribute to the promotion of pertinent reforms vis-à-vis all sectors.

The sector distribution of the country budget frame is as follows:

In addition, the following activities are supported outside the country frame (million DKK):

Cross-cutting issues - gender equality; environment; and human rights, democracy and good governance - are reflected in the bilateral activities both through programmatic support and mainstreaming into the SPS. These issues are considered when designing the interventions to ensure maximum impact. Equal participation in the implementation process and monitoring of the ER-SWEC, as well as equal access to the outcomes is a priority for Danish development cooperation. This is particularly important in rural areas, where female-headed households and subsistence farmers experience a higher incidence of poverty than the population in general. In order to maximise impact and facilitate strong mainstreaming, the new good governance programme will be designed with a view to securing a close coordination with the governance aspects of other Danish-supported sector programmes. Involving local communities’ management of public services, such as water supply and health facilities, will be a key feature of new programmes. Despite renewed focus on improvement of human rights, women in Kenya still face serious discrimination. In general, this complex of law and tradition implies that women in the Kenyan society are more vulnerable than men, and women’s participation in decision-making processes is restricted. To contribute to the deconstruction of these imbalances and ensure maximum impact, gender equality is considered when designing the interventions both within the selected sectors and thematic areas of interventions as well as across the country programme.

Environmental degradation is threatening the livelihoods of millions of Kenyans, especially in the ASAL. Thus, the existing activities, notably the agricultural projects, have been designed to take environmental issues into consideration. In addition to the designated environment of support, mainstreaming environmental aspects will continue in all relevant sectors, especially within agricultural and water sectors. Environmental impact assessments are carried out in connection with the planning of new activities where relevant.

3.5 Assumptions and Obligations of Both Parties

The cooperation between Denmark and Kenya is based on the assumption that both parties fulfil the obligations presented below. The obligations of each party are summarised as follows:

Denmark is fully committed to supporting the ERSWEC as the framework for Kenya’s social and economic development. Denmark will assist Kenya in its endeavours to combat poverty through support to the selected sectors described in the country strategy. Denmark is committed to initiating first-generation SPS within the strategy period with a view to integrating its assistance fully in the implementation of the ERSWEC. Denmark is obliged to report on the flow of funds to the MoF on a regular basis to contribute to transparency with respect to use of funds.

In order to reduce transaction costs of support and improve the quality, timely delivery and cost-effectiveness of Danish bilateral cooperation, both Denmark and Kenya are committed to the coordination, harmonisation and alignment of external support.

Kenya is expected to stay committed to the priorities in the ERSWEC. Poverty in Kenya cannot be alleviated without the profound economic, social and political reforms outlined in this strategy. The implementation of the ERSWEC will be monitored through the annual progress reports of which the first was published in March 2005 covering the financial year 2003/2004.

Wealth is distributed very unevenly among the few rich and the vast majority of poor people in Kenya. Efforts to bridge this gap are crucial for the further development of a cohesive, peaceful and just society. Economic growth is paramount for the Kenyan government’s efforts to alleviate poverty and create better living conditions for the poor. It is, therefore, expected that the Kenyan government will continue to address the necessary reforms of the economy and the private sector outlined in the ERSWEC in order to secure growth.

The commitment and efforts of the Kenyan government to improve governance and especially to take firm steps to combat corruption are crucial for the continued strengthening of the modalities for Danish-Kenyan development cooperation. The Kenyan government is, therefore, expected to implement its own action plan to fight corruption in the form it was given after the KCG-meeting in 2005 and any subsequent versions of the plan that may follow.

The continuation of the positive trend of constructive dialogue with civil society remains highly important in the ongoing process of improving governance. The Kenyan government is expected to respect the pluralism of civil society, including the media, and to continue the process of transparency and dialogue with all sections of Kenyan society. At the same time, the government is expected to refrain from introducing limitations on the freedom of speech or the freedom to organise.

Despite the falling rate of HIV/AIDS prevalence found in official Kenyan statistics, the pandemic continues to be the most severe social threat to the country’s economic development. If the spread of HIV/AIDS is not curbed, development efforts will be undermined. The Kenyan government is expected to forcefully implement its policies to combat HIV/AIDS.

³ ’Globalisation - Progress through Partnership. Priorities of the Danish Development for Assistance 2006-2010’, based on the strategic foundation of “Partnership 2000”.

⁴ Strategy for Revitalisation of Agriculture, March 2004.

⁵ The Kenya Bribery Index is developed by Transparency International. The baseline and the target for the Danish Country Strategy for Kenya will be the same as the ones chosen for the GJLOS programme. However, these have not been fixed yet.

⁶ The Citizen Satisfaction Rating is under development by the Kenya Human Rights Commission, which will also monitor and report on the indicator. The baseline and the target for the Danish Country Strategy for Kenya will be the same as the ones chosen for the GJLOS programme. However, these have not been fixed yet.

⁷ The Human Rights Index is under development by the Kenya National Human Rights Commission, which will also monitor and report on the indicator. The baseline and the target for the Danish Country Strategy for Kenya will be the same as the ones chosen by the GJLOS programme. However, these have not been fixed yet.

⁸ Based on the Draft Danish 2006 Finance Bill.

⁹ The figure includes bilateral assistance, multilateral assistance as well as assistance through Danish NGOs.