* Says lack of strong institutions holding country back
* Warns investors spooked by weak African leaders, graft
* Kenyan foreign minister says reforms on course
(Adds quotes, details from trade conference)
By Sue Pleming
NAIROBI, Aug 5 U.S. Secretary of State Hillary Clinton told Kenya's government on Wednesday it must quickly implement long-delayed reforms and that corruption, impunity and human rights abuses were holding the country back.
Carrying a personal message from U.S. President Barack Obama, whose father was Kenyan, Clinton said she told President Mwai Kibaki and Prime Minister Raila Odinga they must work harder to fully implement a power-sharing deal that ended bloodletting after a disputed December 2007 election.
Clinton is in Nairobi for a U.S. trade conference with sub-Saharan African countries, where she warned that investors would shun states on the continent that had weak leaders and economies riddled with corruption and crime.
At a press conference with Kenyan Foreign Minister Moses Wetangula, she used unusually harsh language about the situation in Kenya.
"The absence of strong, effective democratic institutions has permitted ongoing corruption, impunity, politically motivated violence, human rights abuses and a lack of respect for the rule of law," Clinton said.
"These conditions helped fuel the post-election violence and they are continuing to hold Kenya back."
Wetangula said his government was doing everything it could and it was important for nations to talk to each other candidly.
"President Kibaki and his team assured the Secretary of State that reforms are on course and that the war against impunity in the country is on, that a war against corruption is on," he said at the joint news conference.
"All sanctuaries of corruption will be destroyed to make Kenya a cleaner and safer place to do business," he promised.
Last month, Kenya was ranked by Transparency International as east Africa's most graft-prone nation, with a bribe expected or solicited in nearly half of all transactions.
At the trade meeting, Clinton repeated a message given last month by U.S. President Barack Obama during a speech in Ghana.
"True economic progress in Africa ... also depends on responsible governments that reject corruption, enforce the rule of law and deliver results for their people. This is not just about good governance, this is about good business," she said.
"Investors will be attracted to states that do this. And they will not be attracted to states with failed or weak leadership, or crime and civil unrest, or corruption that taints every transaction and decision."
In a video message after Clinton spoke, Obama said that only Africans could unlock the continent's potential.
"Open markets alone are not enough. Development requires the rule of law, transparency, accountability, and an atmosphere that welcomes investment," he said.
Washington is looking at ways to boost trade with the 48 countries in sub-Saharan Africa, which accounts for little more than one percent of U.S. exports and only three percent of imports.
Kenyan Prime Minister Raila Odinga told the meeting African goods could not compete against subsidised U.S. products.
"We need partnership and not patronage," Odinga said.
The U.S. African Growth and Opportunity Act (AGOA) is due to expire in 2015. Some African countries would like that extended as the deadline causes uncertainty among potential investors.
Clinton said Africa had an opportunity to create its own "Green Revolution" thanks to new technology and innovation that would let countries bypass the "dirty" stages of development.
"Right now, Africa suffers from a severe shortage of electric power and too many countries rely on oil as virtually their only source of revenue. But the capacity for producing renewable and clean energy is far and wide," she said.
Clinton said empowering women in Africa would be a valuable step to boosting development, and respecting their rights was a moral and economic imperative.
"The social, political and economic marginalisation of women across Africa has left a void in this continent that undermines progress and prosperity every day," she said.