16 February 2013

Uganda: Eliminate Trade Barriers, WB Tells Uganda

Uganda can earn an additional US$2.5 billion from non-traditional trading partners in the region and close the trade deficit in the next five years if it removes trade barriers with neighbours, the World Bank has announced.

The World Bank says doing so could also help the country stabilise the economy in the face of a slowdown in overall growth and reduced aid flows.

"Looking beyond the East African Community, Uganda must position herself as the land bridge to link other landlocked countries to the coastal economies," it says.

"Regional integration and trade is the best opportunity for a brighter economic outlook".

In the first economic update for Uganda titled "Bridges across Borders: Unleashing Uganda's Regional Trade Potential", the World Bank urges the country that a more rapid diversification of the economy and the appropriate use of resources, including oil, will drive renewed growth momentum.

The report also points out that Uganda should work at eliminating nontariff trade barriers to reduce the cost of doing business, reduce transport costs in order to raise productivity and increase connectivity, and improve transport logistics to make the country a better land-linked partner.

While Uganda's economy is poised to grow by 4.5 percent during the Financial Year ending June 30, 2013, up from 3.4 percent GDP growth in 2012, the World Bank cautioned authorities that it falls below potential and far lower than recent historic rates.

"Uganda has entered into a number of regional agreements, including the East African Community (EAC) and Common Market for Eastern and Southern Africa (COMESA). These regional agreements have yielded significant dividends, almost doubling Uganda's regional exports over five years, to 25 percent of total exports in FY11," says Hon. Maria Kiwanuka, Minister of Finance, Planning & Economic development in the World Bank statement.

"To benefit more from regional trade, we would need to ensure that the transport corridors are working properly to allow more efficient flow of goods to the regional markets".

For its part, The Bank suggests Uganda will need to boost trade with African countries as it has with the rest of the world. In 2012, Official Development Assistance (ODA) to Uganda was approximately $882 million, almost same amount as average annual exports to Sudan and DRC. The World bank says gradual deceleration in economic growth over the past few years was the result of a combination of factors, including but not limited to negative climatic conditions while the agricultural sector grew at the slower pace of 1.6 percent per annum in the period from 2006 to 2012, less than half of the average rate of growth of 3.4 percent in the period from 1991 to 2005.

Over the same periods, the rate of growth of manufacturing sector decelerated from 9.8 percent to 6.1 percent. The rate of growth of the previously booming construction sector also declined from 9.6 percent to below 7.4 percent between these two periods. The exception has been the rate of growth for the services sector, which accelerated from 7.3 percent to 7.7 percent, largely as a result of the rapid expansion of the communication and banking sectors, the new World Bank analysis concludes.

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