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Uganda needs more effective industrial policy

By John Odyek

Added 17th August 2016 01:09 PM

This is according to the UN Economic Commission for Africa (UNECA) Uganda country profile report that was launched at Imperial Royale Hotel, Kampala.

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This is according to the UN Economic Commission for Africa (UNECA) Uganda country profile report that was launched at Imperial Royale Hotel, Kampala.

Uganda should focus on developing a more effective industrial policy based on its economic specificities and the opportunities created by regional integration.

This is according to the UN Economic Commission for Africa (UNECA) Uganda country profile report that was launched at Imperial Royale Hotel, Kampala. The report notes that despite an economic growth rate reaching 5.2 % on average over the past five years, Uganda's strong economic performance has not kept in pace with its East African neighbours, the sub-regional average growth rate was 6.9% over the past five years. It said the growth rate not proven efficient enough to create quality employment and economic diversification.

While the national poverty rate declined to 19.7 per cent in 2012/13, from 50 per cent in 1995, more than 40% of the population is still classified as being insecure (living below twice the poverty line) the report notes. Dr Rodgers Mukwaya, economic affairs officer UNECA, Sub-Regional Office for Eastern Africa said Uganda has achieved remarkable economic growth since the 1990's, and yet the strong performance has not generated economic diversification.

Mukwaya compared Uganda's average share of manufacturing in GDP which was 6.7 percent between 2005 and 2014, lower than both the average for low-income countries 12.7% and the global average of 16.2%.

"Because of these challenges in Uganda and the rest of Africa UNECA has argued for a more effective industrial policy that can promote structural transformation. Regional integration is important for achieving industrialization. Regional integration expands the opportunities for intra-African trade especially in manufactured products," Mukwaya explained.

He added that past failures in industrialization were due to implementation issues: "Design of policies; lack of political will and implementation capabilities". He noted boosting the low agricultural productivity was important because agriculture employs 71.9 % the working population.

He underscored that tourism where Uganda earns about US$ 1.4 b annually in foreign exchange is one of the main sources of foreign exchange for Uganda and it can finance industrial policy if the sector's productive capabilities can be enhanced.

He said knowledge of a range of industrial policy experiences, real cases from other countries is important, shrinking policy space and the rise of global value chains make 'smart' industrial policy even more important.

"Good industrial policy can be run in difficult circumstances – with reasonable theoretical and empirical knowledge of industrial policy and self-confidence to defy the conventional wisdom," he said.

Hadijah Nakakande, the trade ministry spokesperson said Uganda developed a National Industrial Policy in 2008, under the theme 'A Framework for Uganda's Transformation, Competitiveness and Prosperity'. Nakakande said the policy seeks to provide long-term perspectives needed for Uganda to achieve sustained transformation of the economy. "The vision of the policy is to build the industrial sector into a modern, competitive and dynamic sector fully integrated into the domestic, regional and global economies".

 

Nakakande said the vision is to promote sustainable industrial development, economic growth and transformation through harmonized coordination within government and solid partnership with the private sector and focus on the following:

 

• Develop resource- based, Agro-Industries for value added products; and provision of transport, power and other infrastructural facilities which will provide a more favorable atmosphere for industrial progress and agricultural production

• Continue promoting Science, Technology, and Innovation, Vocational, education and training, and information services; to produce a workforce with skills and competences for jobs in changing structures of the economy.

• Promote sustainable production and consumption by influencing suppliers to produce and customers to consume sustain ably.

• Create support systems for sustainable micro and small industries development.

• Protect the consumers against hazards to health and safety caused by contaminated, defective or dangerous products

• Promote the protection of the environment against potentially polluting industries

• Promote "buy local and build Uganda" strategy. Uganda's industrial policy is supposed to be reviewed after 10 years from 2008.

Lily Sommer, trade policy fellow, UNECA noted that many African countries were low in level in terms of innovation and competitiveness which are necessary to drive transformation. Sommer said many African countries had put emphasis on infrastructure development but less attention had been put to human capital development.

"The numbers of Africans enrolled in science, technology, engineering and mathematics disciplines at graduate level are low relative to other global regions, with especially low female participation. Yet with rapid technological change, the need for these types of graduates is rising significantly".

"Special attention should be paid to higher education. Science and technology need higher focus. There is need for increased female participation in science, technology and mathematics," Sommer said.

Sommer said Africa does not perform well on many measurements of innovation and competitiveness. According to the 2014 Global Innovation Index rankings of the performance of 143 counties, including 33 African countries, six out of the 10 countries that scored the lowest were from African; Uganda is the seventh best performer in Africa. This index looks at whether the prevailing conditions for innovations are present, namely institutions, human capital and research, infrastructure, market sophistication and business sophistication.

Dr Swaibu Mbowa, senior research fellow, Economic Policy Research Center, Makerere University while discussing this report said few countries except those rich in oil have achieved high and sustainable standards of living without developing a significant manufacturing sector.

Mbowa said Uganda needs targeted industry policy promotion targeting certain industries but also taking some risks in industrial policy for certain industries like oil refinery which is a new area for the country.

 

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