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Aid freeze, boycotts could hurt
Kenyan economy
Fri Jan 18, 2008 4:15am EST
By Helen Nyambura-Mwaura
NAIROBI, Jan 18 (Reuters) - The threat of a freeze on aid to Kenya
by western donors and opposition plans to boycott companies owned
by people close to President Mwai Kibaki will delay the country's
economic recovery, analysts said on Friday.
The European Parliament on Thursday asked for a halt on budgetary
support until Kibaki and his challenger, who is accusing him of
rigging the Dec. 27 election, reach a political resolution to a
crisis in which around 650 people have been killed.
The opposition Orange Democratic Movement (ODM) is demanding
Kibaki step down from power and plans to boycott companies run by
what it called hardliners backing Kibaki. Party supporters have
held banned street protests since Wednesday.
"Locally, we have an environment that is denying us a chance to
generate money which the government needs for taxes and
internationally, we are faced with a threat that the money they
have received in support will not come," said James Shikwati,
executive director of the Inter Regional Economic Network.
The EU planned to give 383 million euros ($561 million) over
2008-2013. A decision to stop donations would however need the
green light from all 27 members of the bloc.
Kenya receives miniscule aid compared to other African countries
but a withdrawal of it by Western powers would be noticed by the
investors and tourists who have flocked to the east African
economic powerhouse in the last five years.
"A freeze on this stream of financing only means that the country
must be ready to live much longer with bad roads, faulty power and
water systems, all because those we call our leaders cannot find a
solution to a problem that is of their own making," an editorial
in the Business Daily said.
BOYCOTTS, THEN STRIKES
ODM said it would end three days of street protests on Friday but
move on to other tactics to force Kibaki out. It plans boycotts
and then labour union strikes.
Companies targeted for boycotts are Equity Bank (EQTY.NR: Quote,
Profile, Research), Brookside Dairies and bus companies CityHoppa
and Kenya Bus.
Equity, which begun as a building society in the heartland of
Kibaki's support in central Kenya, derives most of its business
from there.
The business community, civil society and religious leaders have
all urged the two political leaders to sit down and talk and avert
a bigger crisis.
"The business community has suffered immensely during the previous
two weeks with loss of staff, property, opportunities and long
term confidence," said Steven Smith, chairman of the Kenya
Association of Manufacturers.
International mediation efforts by African Union leader John
Kufour, Washington's top diplomat to Africa Jendayi Frazer and
Nobel Laureate Desmond Tutu, have so far failed to soften the two
sides.
Former Tanzanian president Benjamin Mkapa and Graca Machel, wife
of South Africa's Nelson Mandela, are in the country to continue
the efforts. Former UN head Kofi Annan was supposed to lead the
team but took ill before he left for Kenya.
"Whoever emerges out of the current stalemate will inherit a
tattered economy that has been needlessly driven to its knees,"
Smith said.
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