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Why there is no need to fear BUBU policy?

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Added 9th June 2017 10:28 AM

It makes absolute sense for Uganda to create economic incentives that would make its home-grown companies competitive

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It makes absolute sense for Uganda to create economic incentives that would make its home-grown companies competitive

By Mike Ibrahim Okumu

Recently a few key policy makers and members of the private sector have expressed negative sentiments towards the BUBU policy on grounds that the policy is anti-East African Community (EAC) Customs Union (to mean free trade among EAC member countries and setting of common external tariffs). I wish to once again allay fears about the BUBU policy, especially in light of the EAC Customs Union.

First, the very essence of a Custom’s Union is economic relevance among member states, which among other things, involves the movement of goods and services across borders with the most competitive firms taking the day irrespective of the country of production. This implies that consumers within the union have better choices in terms of consumption goods and services. At the same time, member state governments have a duty to ensure that even within the EAC Custom’s Union their electorate have jobs and this can only be achieved by specializing in producing goods and or services that would be consumed domestically and in the Union member states. The risks of failing to produce any goods or services are high. Take the example of Greece in the European Union (EU) where it failed to produce goods and services to gainfully participate in the EU. The results of this were high unemployment, social unrest, their affairs being managed by Germany and France etc. Some even argued that Greece was becoming a burden to the EU and needed to be thrown out.

Therefore with such experiences, it makes absolute sense for Uganda to create economic incentives that would make its home-grown companies competitive locally through for example BUBU. BUBU allows for learning by doing. In doing so, one experiment with the domestic market, is able to perfect on standards and quality and thereafter transitions to the regional or international markets. For instance, it is public knowledge that we are an economy that has a huge infrastructure gap. Indeed, we are to undertake massive infrastructure projects such as oil pipeline, Standard Gauge Railway (SGR) and construction of bridges; why then wouldn’t we support the growth of our own steel industry given that we already have good quality iron ore? Must we continue exporting iron ore and then import steel? Even if we do not have coal deposits to run the steel mills, these can be imported from Kenya, Tanzania, Mozambique or even South Africa.

Supporting domestic production through BUBU is one of the ways of growing the private sector and in doing so enabling the private sector provide more decent jobs as opposed to over reliance on public sector jobs. Without the domestic production powerbase, the thoughts of a sustainable regional trade arrangement will be untenable. Also the rising levels of unemployment will be compounded which will lead to more crime and insecurity.

Therefore, for national security purposes, we need employment that allows for a decent livelihood, this implies supporting our production sectors as much as possible and one of the ways to do this is by promoting the purchase of Made in Uganda Brand which is what the BUBU policy is all about.

Otherwise, being left to the whims of regional trade arrangements implies perpetuation of Uganda as a regional and global supermarket where even tooth picks or even sanitary pads are imported. How horrendous can it get? Besides, even the same supermarkets could collapse if the domestic buyers have no money to purchase their goods. Indeed, the recent and pending collapse of some of the supermarkets in the country has partly been attributed to a weak customer base. One of the ways of abating a weak customer base is to support the private sector to grow and so as to boast consumer spending to sustain the supermarkets.

My view is that we need to support BUBU while being accommodative of the EAC. Remember, As Adam Smith once said, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages.” As such, it is not from the benevolence of the EAC Customs Union that we expect to trade with the member countries, rather it is as a result of their self-interest. For as long as the EAC Customs Union member countries have an interest in Uganda, trade can always prevail. As such there is no reason whatsoever why we cannot think Uganda first and then the EAC Customs Union second!

Finally, while we may clamor for BUBU to support private sector growth we must be cognizant of the fact that it will take time before we can see the results. Besides, government must ensure that the cost of production related to public services such as electricity and transport among others must come down. Also, empowering Uganda National Bureau of Standards (UNBS) to enable it ensure quality and quantity controls is paramount. Otherwise we cannot afford to give up on BUBU.

Writer is a lecturer at the School of Economics, Makerere University.

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