25 September 2008
editorial
Kampala — The UN Conference on Trade and Development has released its annual world investment report that shows Foreign Direct Investment (FDI) to Uganda is up to $368m from $308m in 2006. These figures exclude inflows in the last quarter of the respective years.
Most of these inflows were directed at petroleum extraction, telecommunications, manufacturing and Information Communication Technologies.
FDI compared to portfolio inflows - money imported to buy treasury bills and invest in the stock exchange - is a more durable effect, creating jobs, paying taxes and providing some token corporate social responsibility.
However, from a global perspective, Uganda's share of FDI is insignificant and, therefore, provides hope that this can be increased. The oil exploitation industries that will spring up around our newly-found oil are expected to push FDI significantly in coming years.
Beyond oil, we will need more FDI into the financial, communications, energy and manufacturing sectors and the attendant technology transfer that comes with it. Our poor transport and energy infrastructure continues to put a ceiling on FDI growth.
But FDI is fickle. With the deepening world financial crisis, expectations are that FDI to the Third World will fall off as investors shirk risky investment destinations. It is, therefore, critical that we nurture a local investment base that looks to more than just return on investment in deciding whether to commit money to Uganda or not.
Interestingly FDI takes its cue from local investors and is attracted to a country to the extent that there is strong local interest in that economy.
As a first step, the Government has to show more commitment to the fight against corruption. Transparency International this week released their annual report which showed that there was a perception that corruption is growing rather than reducing.
At the same time, the Government should enact policies to push up savings rates, strengthen property rights and lower the fiscal deficit as a way to lower lending rates, a significant step in encouraging local investors.
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