TRALAC - Trade Law Centre

Export Promotion is the way to go for Uganda

Wednesday, 03 November 2010

Source: Daily Monitor (Uganda)

Analysis: It was pleasing to read in one of the local newspapers recently that President Museveni scoffed at exporters who seem to be satisfied with the country’s combined total export earnings estimated at a paltry $3.6 billion, which is equal to an average company’s annual turnover in some countries. ‘Are you a company?’ the President asked. The President was presiding over the 11th Presidential Exports Awards Ceremony.

It was reported that exports in Uganda contribute 20 per cent of the Gross Domestic Product. This is corroborated by the fact that the import clearing agencies handle 90 per cent of cross-border trade, while forwarding of exports account for only 10 per cent.

This qualifies Uganda to be a net importer, implying high vulnerability to macroeconomic instability characterised by high inflation rates, unstable exchange rate and currency inconvertibility, not to mention a huge public debt.

What is more disturbing is that even the shrinking export sector is dominated by primary products. Coffee export companies led by Kyagalanyi Coffee dominate the export sector. Coffee alone accounts for 90.4 per cent of the country’s export revenue. As a sector, agriculture accounts for more than 60 per cent of the country’s exports.

Shouldn’t it be only logical therefore, that to increase our exports we must heavily invest in agriculture and agro-processing? Whereas Uganda is endowed with a favourable climate and good soils, we have not taken advantage of them. The northern region for example has a great potential for mango production on a large scale. With strategic government intervention, the country could earn a lot of foreign exchange by exporting fresh mangoes and fruit juice to the East African region and beyond.

One way in which agro-processing can be promoted in Uganda is by providing agricultural finance to agro-processors at concessional rates. This will create the much needed incentive for more investors to go into agricultural processing and more farmers to engage in commercial farming. The government can even start an agricultural bank to manage such a fund. It should be acknowledged that for the poor agriculture-led countries like Uganda, specialisation is the only way to build our capital stock. After the World War II, the Japanese economy was totally destroyed. The Japanese government then adopted a maxim, “EXPORT OR DIE”.

It was their determination to increase exports that propelled the Japanese to become the world leader in the automobile industry. If Japan had not specialised in the commodity in which they had comparative advantage, it is doubtful whether they would be where they are today.

The message for Ugandan policy makers is therefore clear. We have a comparative advantage in agriculture. With the East African customs Union now in place, we must brace ourselves for stiff competition. Kenya and Tanzania may outcompete us in manufacturing, but if we are organised, we can dominate the agricultural market. It is not too late to revive the textile industry even after the AGOA-Kananathan- Tristar saga. The sugar industry is one other area we need to focus on. Have you realised that all the local sugar companies combined can only meet 30 per cent of the domestic sugar demand and that almost 70 per cent of the sugar we use is imported?

The most relevant question therefore is this: In the 24 years of NRM regime, what commodity has been prioritised for export? If you get the answer, you will have solved the puzzle. Is it surprising then that our export sector is performing poorly? The truth is that there has been no deliberate effort to increase exports. Agriculture receives a paltry 3-4 per cent of the national budget. The only sure remedy to the weak export sector is to be found in increasing the agricultural budget to at least 10 per cent of the national budget.

The writer is a free lance researcher Uganda Forum for Economic Policy Analysis.

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