By Henry Sekanjako
Regional economic integration can help Uganda to break out of this low productivity equilibrium through several channels, Deputy Governor Bank of Uganda Louis Kasekende has said.
According to Kasekende, First access to regional markets offers a stepping stone for Ugandan producers to begin exporting, without first having to become globally competitive.
“Ugandan exports to our East African community (EAC) partners are not subject to tariffs whereas competing goods from outside of the EAC are subject to the common external tariff,” said Kasekende.
He added that; “If Ugandan exporters can exploit this advantage, access to the EAC market offers them the opportunity to realise economies of scale which should reduce the unit costs of their production, thus boosting their competitiveness”.
Kasekende made the remarks recently while addressing members of the Uganda association of African development bank to mark Uganda golden jubilee independence celebrations where he presented a paper entitled ‘regional integration in East Africa, some lessons from history and thoughts on the way forward’.
He noted that Domestic food production is a good example of how intra-regional trade could stimulate major changes in productivity, output and incomes.
“Productivity in this sector is pitifully low; the average value added per worker in Ugandan agriculture is only slightly more than $200 per year, which is lower than even the average for sub-Saharan Africa and far less than in most regions of the world which have undergone a green revolution,” he stated.
Kasekende attributed the low Productivity per worker in Uganda to rudimentary farm technology employed and the low level of commercialisation saying most of the food growing smallholders are mainly subsistence farmers.
He said Uganda’s large sections of its economy are characterised by low productivity which is not anywhere near competitiveness on the world markets. “Because many goods and services are inputs into the production of other goods and services, low productivity in one sector often has adverse consequences for the competitiveness of other sectors of the economy,” he explained.
He noted that Uganda has recorded buoyant economic growth over the last two decades, averaging 7 percent in real terms saying a large part of this growth is attributable to the rapid expansion of the workforce, which in the 2000s grew by 4.7 percent a year, rather than to growth in factor productivity which has been very modest.
He said the country had not achieved very much structural transformation of the economy to raise productivity adding that until it does, growth of income per capita will remain very slow.
Kasekende further noted that Regional economic integration unavoidably requires a pooling of sovereignty at the regional level adding that decisions which were once taken at the national level on an individual basis by each partner state must now be made collectively at the regional level.