Kenya’s proposal to establish a Ksh. 5 trillion national investment fund has reignited debate about the country’s long-standing aspiration to achieve Singapore-level economic outcomes. Singapore’s remarkable transformation from a vulnerable post-colonial state into one of the world’s most competitive economies demonstrates what deliberate development strategy and disciplined institutions can achieve (Guah, 2015; World Bank, 2024).
However, Singapore’s success was not driven by the creation of a large investment fund. Rather, such funds emerged after the country had established a clear economic vision, disciplined fiscal management, capable public institutions, and a workforce aligned with strategic growth priorities. Two issues matter most in this comparison. First, Singapore treated finance as an instrument of a clearly articulated development strategy, not as a substitute for it. Second, the institutional discipline required to insulate such instruments from political interference was itself a product of that broader strategic and political settlement.
This article argues that Kenya’s debate has inverted this sequence—placing disproportionate emphasis on capital mobilization while underestimating the strategic and institutional preconditions required for it to be effective. Kenya’s challenge lies precisely in the fragility of these foundations. In their absence, a national investment fund risks functioning as a financial instrument without a guiding development logic.
Can Kenya follow Singapore’s path to prosperity?
Singapore’s post-independence trajectory was shaped by deliberate choices grounded in economic realities rather than optimism. With limited natural resources and a small domestic market, it rejected import substitution in favor of export-led industrialization and deliberately courted multinational corporations as vehicles for industrial growth and skills transfer. These choices were reinforced by disciplined fiscal and monetary policies, sustained investment in infrastructure and human capital, and a governance environment that prioritized productivity and investor confidence. As conditions evolved, Singapore shifted from labour-intensive manufacturing into high-tech industries and modern services, with investment vehicles complementing—rather than substituting for—this strategic framework (World Bank, 2024; Huff, 1995; Temasek Holdings, 2023).
Kenya’s context diverges in three interrelated respects. First, despite major gains in education access and near-universal youth literacy, persistent skills mismatches and weak alignment between education and labour-market demand continue to constrain industrial upgrading (World Bank, 2023; Kenya National Treasury, 2023). Second, governance conditions differ sharply: Singapore’s strict anti-corruption regime ensured that public resources and private capital supported growth, whereas Kenya ranked 126 out of 180 countries on the 2023 Corruption Perceptions Index, reflecting enduring accountability risks that undermine investment efficiency (Transparency International, 2023). Third, and most importantly, the development strategy itself diverges. Singapore—alongside other East Asian “miracle” economies—pursued long-term, export-oriented strategies, continuous industrial upgrading, and disciplined fiscal management. Kenya’s development path has been less consistent, marked by recurring fiscal deficits, public debt of about 65 percent of GDP, and episodic policy shifts that constrain sustained structural transformation (IMF, 2023; Kenya National Treasury, 2023).
Disciplined Institutions Must Precede Capital
From a legal standpoint, Kenya can establish a national investment fund under Section 24 of the Public Finance Management (PFM) Act. Legal authorization, however, is not the binding constraint. The effectiveness of such a fund depends on governance quality: independence from political interference, professional management, clear mandates, and credible accountability mechanisms.
In principle, Kenya could design a fund with independent boards and professional management, similar to Singapore’s experience. In practice, however, Kenya’s broader governance environment makes this difficult to sustain. Where political influence routinely permeates public institutions, attempts to ring-fence capital through special-purpose funds often reproduce—rather than escape—existing weaknesses. In such contexts, funds risk becoming vehicles for politically motivated investment decisions, weak oversight, and blurred lines between policy, patronage, and capital allocation (IMF, 2023; World Bank, 2023; OECD, 2023). Singapore avoided these pitfalls not simply through fund design, but through an unusually disciplined political and institutional order that enforced autonomy, professionalism, and long-term mandates (Guah, 2015; Temasek Holdings, 2023).
More fundamentally, even a well-governed fund cannot substitute for the absence of a coherent economic strategy. Singapore and the broader East Asian Miracle economies treated finance as an instrument of a clearly articulated development vision—anchored in export-led growth, industrial upgrading, and productivity expansion. Kenya lacks a comparable strategic anchor. Persistent fiscal imbalances, uneven public investment quality, fragmented institutions, and weak skills alignment continue to constrain productivity growth.
These constraints point to a deeper issue: capital is not Kenya’s binding constraint. Strategy, institutional capability, and political discipline are. Without addressing these foundations, a national investment fund risks magnifying existing inefficiencies rather than catalyzing structural transformation. For Kenya to realize a ‘Singapore moment’, it must first commit to strengthening its economic, fiscal, and institutional foundations. Only then can national investment funds become effective instruments.
References
- Guah, E. S. (2015). Economic growth and structural transformation in Singapore. Singapore Economic Review Conference.
- Huff, W. G. (1995). The economic growth of Singapore. Cambridge University Press.
- International Monetary Fund (IMF). (2023). Kenya: Article IV Consultation—Staff Report.
- Kenya National Treasury. (2023). Budget Review and Outlook Paper (BROP)..
- Organisation for Economic Co-operation and Development (OECD). (2023). Public investment governance.
- Public Finance Management Act, No. 18 of 2012 (Kenya).
- Temasek Holdings. (2023). Annual report.
- Transparency International. (2023). Corruption Perceptions Index.
- World Bank. (2023–2024). World Development Indicators.
This blog has been authored by Timothy Kiprono, Project Officer at the Institute of Public Finance
