Why Uganda needs appropriate, coherent trade-related polices

By Kiiza Africa

On November 24, 2016, Uganda joined the rest of Africa to celebrate Africa Industrialisation Day. The day was commemorated under the theme "Financing Industrialisation in Africa: Challenges and Winning Strategies".

The major aim of the Africa Industrialisation Day is to provide for a forum where African governments and other organizations will examine ways to stimulate the continent's industrialization process.  

The quest for achieving industrialisation is back on the agenda today and is rapidly advancing in development discourse in Africa. At the continental level, the African Union (AU) Agenda 2063 strives to transform, grow and industrialise Africa's economy through beneficiation and value addition of natural resources by implementing the African Industrial Development Action Plan.

At the regional level, strengthening backward and forward linkages through widening industrialisation is seen as one of the precursors of achieving the EAC Vision 2050. At national level, Uganda has out in place a national industrial policy whose major aim is to act as a framework for Uganda's transformation, competitiveness and prosperity.

Efforts to revolutionise the industry sector in Uganda have come at a time when the country is still recovering from what many analysts have termed as the disappointing effects of the Structural Adjustment Programs (SAPs) and their neo-liberal approach of development. Since the SAPs, proactive go­vernment involvement in development of their eco­nomies and nurturing of their nascent industries was largely discouraged.

Countries like Uganda were conditioned to withdraw considerably from the industrialization process so as to enable market forces to shape development trajectories. The result of this has been evidently largely disappointing.  Uganda continues to run a high trade deficit (reported at Shs1.2 trillion during the quarter that ended in August 2016), and has experienced de-industrialisation.

The major cause of this trade deficit is stressed by the President Museveni during his State of the Nation address 2016, noting that Uganda is donating $875m to China, $1.154b to India, $406m to UAE, and $637m to EU  each year in form of imports, majorly in primary form.

The withdrawal of the State from the market also resulted into collapse of State Owned Enterprises, hence deindustrialisation. In Uganda, some of the collapsed industries include the Lira Spinning Mill, the African Textile Mills Ltd (ATM) Mbale; the Uganda Garment Industry Limited (UGIL); the juice processing plant in Masaka, the Diary Corporation, Uganda Airlines, among others.   Other existing industries like Nyanza Textiles Industries Limited which closed down in 1992 under privatisation, re-emerged as Nytil Picfare in 1996 and later changed to Southern Range Nyanza Textiles Ltd continue to operate below their capacity.  This collapse has had implications both on employment and agriculture production in vital sectors, thus translating into increased poverty, inequalities and vulnerabilities. Furthermore, while Uganda continues to experience one of the highest growth rates recorded at 4.6% in the FY 2015/2016, this growth has been jobless and has not resulted into increased agricultural production and productivity and rural transformation.

Therefore, the quest for the revival of industry sector in Uganda comes at a timely moment, especially when  the President has issued 23 Strategic Guidelines aimed at ensuring that Uganda becomes a middle income status country by 2020, and a developed country within the next 30 years. Key to note is that point 3 of the strategic guidelines aims at fast-tracking the industrialization.   

In order to achieve industrialization, supportive trade related policies and frameworks should be put in place and should be crafted in a way that they grant the State the right to nurture nascent industries in order to develop their competitiveness. Contemporary trade agreements, especially reciprocal Free Trade Agreements are aimed at promoting a neoliberal regime and thus continue to shrink development policy space by disallowing Uganda to regulate markets.  

This is evidenced from agreements like the Economic Partnership Agreement where Uganda together with other EAC Partner States have been compelled to liberalize 82.6% of its imports from the EU over a 25 year transition period. The agreement also constrains the usage of export taxes, yet these are very critical tools for industrialization as they encourage producers to engage in value-added processing which ultimately encourages diversification and the upgrading of production capacities. These tools are also critical to a country like Uganda which has already abandoned other tools to support industrialization like tariffs .Disallowing the usage of export taxes will force Uganda into a position where it perpetually supplies raw materials to the EU which results in the creation of jobs abroad rather than at home.

As Uganda commemorates Africa Industrialisation Day, it is important that the country reassesses her trade related policies in order to ensure that they support and reinforce her industrialization and development plans and strategies.  The policies should not only enhance value addition, but should ensure that investments create forward and backward linkages between the industry and Agriculture sectors. Policies like the "Buy Uganda Build Uganda" which aim at promoting domestic production and competitiveness of nascent industries should not be undermined by free trade agreements. Above all, these policies should aim at reviving the pro-active developmental arm of the State if industrialisation is to be realised in Uganda!

The writer is a programme officer trade policies and negotiations with Southern and Eastern African Trade Information and Negotiations Institute -Uganda