22 February 2013

Uganda: Regional Trade Constraints

For many Ugandan business journalists, it is never easy to cover a function about the release of a new report on regional trade. All the key issues have been raised over and over again year after year; how do you fish out something new to tell your readers or listeners?

At the launch of a new report by the World Bank on regional trade in Kampala on Feb.14, it was Gideon Badagawa, the Private Sector Foundation Uganda executive director, who summarized the frustration of the media and the business community in the country.

"There is nothing new that has been said here that has not been said before," he said without a flinch, adding that the challenge is and has always been poor implementation of the key policy suggestions that are always put on the table.

Indeed, the World Bank report, titled, "Uganda Economic Update: Bridges Across Borders - Unleashing Uganda's Regional Trade Potential," presents a detailed account of the cumbersome regional trade obstacles and constraints that Uganda's business community has to contend with. Unfortunately, most of the issues including the recommendations to overcome them have been in the public domain for years.

Indeed, at the function to launch the report, the ministers of Trade and that of Finance, economists, policy makers, consultants, the business community and donors were unanimous in their assertion that the constraints were real and something needed to be done. But some critics like Arthur Bainomugisha of ACODE and Beatrice Anywar, the Kitgum Women MP, described as the "usual rhetoric." Development experts like Prof.

Sam Tulya-Muhika would understand Badagawa's frustrations in the context of the poor implementation capacity of proposals by the government. He told The Independent on the sidelines of the event, that Uganda's main problem is that it lacks institutions that can coordinate and manage the 'national vision' to ensure that we get where we want to go. He said decades ago, countries like Malaysia realized the importance of such institutions, which is why they have managed to reach where they are now.

"Developed countries carry out comparative studies and national dialogues before they come up with key policies and they also have well-facilitated coordination units to report back on what has been achieved, what has not been achieved and why," he said. "That dynamic is lacking here." He suggested that if it had effective think tanks to articulate and refine policy matters and a coordination unit to monitor and evaluate implementation, it would avoid the 'fire-fighting' approach to policy implementation that characterizes the country's management style. "The government has good intentions but most of the otherwise good policies basically remain on paper," he said.

Badagawa was of a similar view. He suggested that Uganda's main problems largely rotated around not having the right people in the right places to formulate policy, weak institutions that have no capacity to implement them and lack of a system to monitor and evaluate implementation.

While launching the report, Maria Kiwanuka, the finance minister, admitted that "the implementation of policy and many of the government initiatives remains a challenge," mainly due to what she referred to as "capacity challenges" both within the private and public sectors.

"There is need for more diagnostic information on how to resolve persistent problems in implementation," she said.

As highlighted by earlier reports by other institutions, the new World Bank report documents various barriers and constraints, which it says must be addressed if Uganda is to "stabilize the economy" in the face of a slowdown in overall growth and reduced aid flows. These bottlenecks include poor infrastructure that cause wastage and make the cost of transport too high, the high cost of doing business and non-tariff barriers among others, which it says, are serious impediments to trade within the region.

If these constraints are dealt with, the report adds, Uganda could earn an additional $2.5 billion from non-traditional trading partners in the region and close the trade deficit in the next five years. Ahmadou Moustapha Ndiaye, the World Bank country manager, said Uganda must harness its position as a "land bridge" linking other landlocked countries to the coastal economies.

The report says Uganda should boost trade on the African continent if it is to realize its "positive economic outlook." To achieve this, Uganda has to concentrate her efforts to improve productivity in agriculture, which contributes to approximately 25% of Uganda's total production and employs approximately 75% of its workforce, manufacturing and service sectors like tourism and education.

"This increased rate of growth will largely be driven by reduction in binding constraints as investments in infrastructure including oil materialize and a higher level of integration between Uganda's economy and regional and world economies," said Rachel K. Sebudde, the World Bank senior economist and lead author of the report.

The report, cheekily described by prominent businessman Patrick Bitature, the UIA board chairman, as a "Valentine's gift" from the World Bank, says intensifying regional trade would be the catalyst for a market-oriented growth strategy but to harness the potential of regional trade, Uganda needs to adopt a multi-pronged approach to raise productivity and to get the products to markets.

In this regard, interventions that create incentives for farmers, firms and services providers are vital measures to raise productivity. But how to implement these recommendations - even when they are budgeted for - is what remains a challenge, as evidenced in the low rate of absorption for the development budget, which stood at a mere 69.6%. While the issues raised in the report are not entirely new, it is time to "walk the talk" as Dr. Luis Kasekende, the Bank of Uganda deputy governor, suggested. That is probably when business journalists will once again start getting excited about reporting on regional trade issues.

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