Planning Cabinet Secretary Ann Waiguru told journalists in Nairobi that this will help to bridge the financing gap that is currently constraining industrialization in the country.
"The government intends to establish an Industrial Development Fund for long-term financing so as to increase the share of Foreign Direct Investment (FDI) in industrial sectors by 10 per cent in the next five years," Waiguru said during the launch of the 2014 Edition of the Economic Report on Africa.
The report is a joint publication of the United Nations Economic Commission for Africa (ECA) and the Africa Union Commission.
The east African nation faces various impediments that have stagnated industrialization over the decades.
"This includes usage of inappropriate industrial technologies, insufficient physical infrastructure, inadequate access finance, research and development," she said.
"Despite this, Kenya's manufacturing sector has the potential to promote structural transformation by providing stimulus for growth of the agricultural sector," the devolution secretary said.
"The sector offers significant opportunities for export expansion, job creation and inclusive growth," she said.
Government data indicates that the sector grew at an annual average of 3.2 per cent during the past five years, with an average contribution to the Gross Domestic Product (GDP) of 9.8 percent over the same period.
In a bid to expand its industrial base, Kenya has recently formulated National Industrial Policy 2011–2015 to foster industrialization and a globally competitive manufacturing sector by 2030.
"This is to be achieved through improved industrial infrastructure, enhanced access to financial services and markets, especially for small and medium industries," she said.
The government official said that in order to address existing infrastructural deficits, Kenya has adopted the growth pole strategy which aims to develop Special Economic Zones and Industrial Parks to foster industrial production.
"This will help to increase the share of industries located outside major urban centers to 50 per cent," she noted.
Kenya has partnered with its neighboring countries, to initiate the Lamu Port–South Sudan–Ethiopia Transport Development Corridor Project (LAPSSET).
The project aims to enhance transport connectivity, increase cross-border trade so as to promote large investments in industrial sector.
Ministry of Planning Economic Planning secretary Stephen Wainaina said that in order to ensure sustained growth in industry, the government is investing heavily in increasing electricity generation. "This follows the realization that energy is needed for rapid industrialization," Wainaina said.
"The target is to raise the share of Kenyan exports in the regional market from the current seven percent to 15 per cent by 2030," he said. The economic secretary added that Kenya is planning to diversify its exports in order to ensure that there is more value addition of raw materials.
"This will cushion the country from price volatility of primary commodities," he said. He noted that industrialization creates employment opportunities which can help to bridge the existing income inequalities.
Kenya Institute for Public Policy and Analysis (KIPPRA) Executive Dr John Omiti said that Kenya should improve its domestic productive capabilities by enhancing technology accumulation.
"This can be achieved by boosting science, technology and innovation in manufacturing as well as increasing investments in research and development," he said.
Economic Commission for Africa chief of industrialization Soteri Gatera said that there is need to foster Public-Private Partnerships in industrialization in order to enhance technology transfer and innovation.
"Increasingly sophisticated productive capabilities are needed to produce internationally competitive goods and services," he said.