State of Use of Country System (UCS) in Infrastructure Financing in Kenya
Category: Finance
By: Stephen Jairo,
Most countries on the African Continent, consider infrastructure development as a key enabler of development as it stimulates job creation, creates trade opportunities and corridors, and thus yield to investment opportunities for a large majority.
Kenya as a country,has witnessed enormous development on the infrastructure front in recent years, supported by financial muscles from far and wide i.e. from both the East and the West. For Kenya, just like many developing countries, Multilateral Development Banks (MDBs) provide the much needed plug-in with respect to financial aid especially in areas where large infrastructural projects need to be undertaken.
The downside to this in most instances has been the requirement for countries that benefit from such financing opportunities to adhere to certain minimum standards or stringent requirements and conditions outlined by these MDBs. It is important to underscore the fact that these standards may, or may not be in tandem with the individual country standards and requirements, as well as with their existing laws, rules, and regulations.
The question however is, what has brought about the increased Use of Country System (UCS)?
In the recent past, there has been a shift towards the Use of Country based Systems (UCS) for funds acquisition on the one hand, and in implementation of such infrastructure projects on the other. This progress, is hinged on the development of institutions and putting in place systems that ensure accountability and good reporting on these projects while also ensuring that loopholes that may lead to misappropriation and embezzlement of such project’s funds are eradicated completely, if not, then highly minimized.
Among others, the traditional development partners for Kenya include the International Monetary Fund, The World Bank, and The European Union. However, the entry of China through China Development Bank has come with what can be referred to as ‘positive benefits’ to most African states. This includes a review of the terms and conditions in order for one to qualify, gain or be granted access to these funds which have subsequently led to deployment and uptake of UCS not only for Kenya, but for majority of developing states on the African continent.
In this day and age, where independence is seen as imperative for each country, UCS in infrastructure financing is seen as a way of showing respect to a country’s sovereignty, as it ensures they follow their own legislations, institutions, processes, rules and regulations, as opposed to the terms and conditions set out by these external financiers i.e. MDBs.
Use of Country System is also seen to bring about strengthening of domestic systems through increased usage which is as a result of a realization of the shortcomings, if any, and subsequently, swiftly putting in place corrective steps to mitigate them as soon as they are noted or noticed. In the same vein, UCS has led to a decrease in terms of project implementation timelines on the one hand since deadlines are met, as well as implementation costs on the other. This has no doubt meant that activities are carried out within the timelines outlined and agreed upon, and also within the financial constraints therein.
This, we contrast with the requirements set by the MDBs that expose the process of material acquisition to lots of bureaucracy often leading to delays in procurement. This has the potential of yielding to inflated costs of the required project raw materials.
Ultimately, UCS aims to enhance projects’ development impact on countries. It is clear that it therefore calls for a more equitable relationship between development partners and countries. While its implementation has been challenging for both MDBs and borrowers, this does not negate the pressing need to scale up, address and promote further cooperation, especially as new and alternative sources of finance continue to emerge.
More information can be accessed from the Full Discussion Paper on the link http://www.ieakenya.or.ke/publications/research-papers/informing-the-approach-of-multilateral-development-banks-to-use-of-country-systems
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State of Use of Country System (UCS) in Infrastructure Financing in Kenya
| Post date: Thu, Nov 16, 2017 |
| Category: Finance |
| By: Stephen Jairo, |
Most countries on the African Continent, consider infrastructure development as a key enabler of development as it stimulates job creation, creates trade opportunities and corridors, and thus yield to investment opportunities for a large majority.
Kenya as a country,has witnessed enormous development on the infrastructure front in recent years, supported by financial muscles from far and wide i.e. from both the East and the West. For Kenya, just like many developing countries, Multilateral Development Banks (MDBs) provide the much needed plug-in with respect to financial aid especially in areas where large infrastructural projects need to be undertaken.
The downside to this in most instances has been the requirement for countries that benefit from such financing opportunities to adhere to certain minimum standards or stringent requirements and conditions outlined by these MDBs. It is important to underscore the fact that these standards may, or may not be in tandem with the individual country standards and requirements, as well as with their existing laws, rules, and regulations.
The question however is, what has brought about the increased Use of Country System (UCS)?
In the recent past, there has been a shift towards the Use of Country based Systems (UCS) for funds acquisition on the one hand, and in implementation of such infrastructure projects on the other. This progress, is hinged on the development of institutions and putting in place systems that ensure accountability and good reporting on these projects while also ensuring that loopholes that may lead to misappropriation and embezzlement of such project’s funds are eradicated completely, if not, then highly minimized.
Among others, the traditional development partners for Kenya include the International Monetary Fund, The World Bank, and The European Union. However, the entry of China through China Development Bank has come with what can be referred to as ‘positive benefits’ to most African states. This includes a review of the terms and conditions in order for one to qualify, gain or be granted access to these funds which have subsequently led to deployment and uptake of UCS not only for Kenya, but for majority of developing states on the African continent.
In this day and age, where independence is seen as imperative for each country, UCS in infrastructure financing is seen as a way of showing respect to a country’s sovereignty, as it ensures they follow their own legislations, institutions, processes, rules and regulations, as opposed to the terms and conditions set out by these external financiers i.e. MDBs.
Use of Country System is also seen to bring about strengthening of domestic systems through increased usage which is as a result of a realization of the shortcomings, if any, and subsequently, swiftly putting in place corrective steps to mitigate them as soon as they are noted or noticed. In the same vein, UCS has led to a decrease in terms of project implementation timelines on the one hand since deadlines are met, as well as implementation costs on the other. This has no doubt meant that activities are carried out within the timelines outlined and agreed upon, and also within the financial constraints therein.
This, we contrast with the requirements set by the MDBs that expose the process of material acquisition to lots of bureaucracy often leading to delays in procurement. This has the potential of yielding to inflated costs of the required project raw materials.
Ultimately, UCS aims to enhance projects’ development impact on countries. It is clear that it therefore calls for a more equitable relationship between development partners and countries. While its implementation has been challenging for both MDBs and borrowers, this does not negate the pressing need to scale up, address and promote further cooperation, especially as new and alternative sources of finance continue to emerge.
More information can be accessed from the Full Discussion Paper on the link http://www.ieakenya.or.ke/publications/research-papers/informing-the-approach-of-multilateral-development-banks-to-use-of-country-systems
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