The need for regional balancing to achieve middle income status

By Grace Akello

This is the last of three articles on leapfrogging into middle income status. The other two were on Africa's demographic transition and structural transformation published by the New Vision of August 5, 2016 and August 12, 2016 respectively.

This concludes my contribution to the debate on how Uganda is to attain middle-income status. The three articles were prompted by President Yoweri Museveni's specific reference to industrialisation as the pathway to Uganda's economic growth in the State of the Nation Address.

Some of the key processes in getting Uganda on a firm path to economic growth in order to attain middle-income status  in the next 10 or so years were debated, within the broader context of African countries, in the Organisation of Economic Development (OECD) publication Africa Outlook 2015.  Outlook refers to three issues which are a relevant backdrop to our own on-going debate about the demographic transition, structural transformation and spatial balancing.

This article highlights some challenges of regional balancing in structural transformation of African economies.

Regional balancing

A lot of debate about regional balancing took place in the 1994 Constituent Assembly.

This is evidenced by the tenor of the national objectives and directive principles of state policy in the Constitution on this matter. The objectives and principles capture national concerns for balanced regional economic growth and development succinctly.

The Constitution compels the Government to honour "balanced and equitable development". It directs the Government to take necessary measures to bring about balanced development of the different areas of Uganda and between the rural and urban areas". The emphasis is not only just on "balancing", it is also on ensuring catch-up by lagging regions. Thus government is directed to "take special measures in favour of the development of the least developed areas".  

In the Constituent Assembly, the concern about regional balancing did not just end in the non-justiciable articles of the Constitution.

It was taken up during the local governments debate where the system of decentralised governance at district and lower levels was endorsed; as a cure for unbalanced development.

Furthermore, the Constitution provided for the creation of a Local Government Finance Commission to advise on financial allocations to local governments, on equalisation grants to be given to lagging districts and on how local governments can raise financial resources.

Debate around financing local governments as well as the broader question of regional growth is bound to attain a higher pitch as Uganda gears up to the challenge of becoming a middle income country in the next 20 years. But the OECD paper looks at Africa as a whole and, therefore, the need to keep this article focused at the continental level.

As the debate, the objectives and directives and the tenor of the 1995 Constitution captured it, regional balancing is about spatial inequality. Spatial inequality is a broad way of looking at inequality not only between and among individuals, but between and among communities, as well as between and within geographical places. These geographical places can be within any physical units including continents, regions, countries, districts, sub-counties etc.

Comparisons are carried out not only on income, but on a wide range of social indicators as well.

Spatial inequalities are a reality in many African economies and can be attributed to a number of causes, including colonial legacies, differentials in natural resource endowments, the effects of international trade or by the effects of agglomeration of capital.

Putting  agglomeration of capital more explicitly, business firms will concentrate their location into an area, which provides them with  a ready market,  good infrastructure such as transport infrastructure as well as essential amenities.

On the effects of international trade, it is argued that in any given country, regions with some internationally tradable commodities will grow faster than regions without; as the latter are likely to engage only in local (domestic) trade. As a consequence, regions falling in the latter category will lag. Regional lag can be caused by these or by a mixture of some or all of these factors.

For example, the colonial policy of indirect rule as applied in Uganda spawned a legacy felt not only in the politics of the country but also in the nature of her economic development to-date. One of the aspects of this legacy is the distinct underdevelopment of certain regional economies, compared to others. This is a long-term consequence of certain areas of the country having been declared labour recruitment reserves. Labour in such reserves was drafted to work in other regions, leaving those regions without any labour or indeed without any remunerative economic activity.

Historians teach us how indirect rule impacts have hung as an albatross on the neck of the country's  political, economic and social development. In the specific area of economic growth, many poverty studies recently carried out by Government and University research bodies prove a disquieting spatial dimension to Ugandan poverty.

Spatial inequalities can manifest in several ways, including inequalities in income, political representation, in access to education, inequalities before the law and to justice, as well as inequalities in access to health services, to employment opportunities or even gender and religious inequalities. In this context, inequality is another name for discrimination.

The OECD paper decries the consequent lag that results specifically from regional inequalities whereby some geographical areas in a country are left out of national development. The paper observes that Africa's structural transformation is "… also a social transformation" in which issues of economic efficiency must be balanced with concerns for equity". The paper sees "spatial inclusion" as "a pillar of inclusive growth, together with economic, social and political inclusion". On the matter of "inclusion" and "exclusion", Outlook skirts around a highly sensitive legacy of policies of inclusion and exclusion perfected on the continent during the colonial period. Such policies affected not just the economies of African countries, but more fundamentally the continent's political and social development.

Usually, such policies emanated at worst from  some frivolous morphological attribute or the other of Africa's rich bounty of peoples. They also stemmed from a preference of one system of governance over others in pre-colonial Africa. Policies deriving from these tenuous bases decided which African ethnic group was superior to the other: the superior group immediately belonging to the ruling class and the inferior group into the labouring class, being subservient and providing menial services to their rulers.

African political as well as economic development immediately after independence was encumbered by the effects of these policies, with their typical negatively reinforcing character. For example, a national leader coming from the non-ruling "class" ran the risk of rejection from the so-called "ruling class"; while a leader from that same class ran the risk of rejection from the non-ruling class. In those circumstances, leadership of African countries was only supposed to come from an outsider: thus perpetuating exogenous governance of the Continent.  A discerning view of Africa today indicates that half a century after colonial rule, Africa has not quite yet purged herself of this fiend.

Economic corridors can double as physical bridges, linking developed and less developed regions. The paper commends the establishment of Africa's economic corridors as way of resolving spatial exclusion challenges. These corridors are aimed at constructing industries and amenities together with "soft and physical infrastructure "across neighbouring regions.

Regional lag can also be dealt with by creating cities "as poles of growth". Some of these cities, such as Abuja in Nigeria and Dodoma in Tanzania, also double as new capitals. Others created specifically as growth poles include Kara in Togo, Kilamba with a mega-housing scheme in Angola and over 20 cities built by Egypt in a bid to "decongest Cairo".

Other initiatives to resolve spatial inequalities involve co-operation in lagging regions across the borders of neighbouring countries for joint exploitation or sharing of scarce resources. Examples include the co-operation in the exploitation of the waters of the Congo and Ubangi Rivers and the Lake Victoria Basin Commission of the East African Community and the Lake Tanganyika Authority.

In addition to these largely physical responses to the problem of regional lag, there are also policy options. These include the creation of special agencies in Government to open up lagging regions, encourage production and give them access to markets through improved infrastructure.

One other policy prescription for reducing spatial inequality that the OECD paper examines is decentralisation. It argues a strong case for ensuring a stable financial base for local governments. Decentralisation is a very powerful policy tool for regional balancing.

The paper further observes that in many experiences, decentralised governments have restricted powers for resource mobilisation. Taxation of local citizens is circumscribed. Governments are warned against fouling the macro-economic framework of their countries. And they certainly may not incur external debt. The paradox of a local government, the ideal vehicle to promote and implement spatially balanced economic growth, itself bereft of resources to run its own affairs, is an unfortunate  reality in many African settings. The OECD Report warns that without the requisite financial resources, decentralisation is highly compromised.

The writer is Uganda's ambassador to Rome