A free zone is an industrial area, where goods are regarded as being outside the customs territory, and importation of raw materials is tax exempt.
PIC: Roofings marketing manager Steward Mwesiga (left) and chairman Sikander Lalani (centre) with Standard Bank Africa chief Chris Newton at their factory at the Namanve Industrial park
The Uganda Free Zones Authority (UFZA) has urged manufacturers to form industrial parks, in order to benefit from tax exemptions, cut costs and accelerate government’s export led industrialisation strategy.
According to the UFZA executive Director, Richard Jabo, investors who manufacture from within the parks will be exempted from import duties for raw materials and enjoy economies of scale accruing from planned production zones.
“The idea is to encourage productivity and value addition in order to boost exports and reduce the trade deficit as a country,” he said during a meeting with the private sector at Hotel Africana over the weekend.
“When you invest in free zones, it will help government to increase export earnings by at least $100m (sh361b) per year, and create more than 2,500 direct jobs. Government can only rely on members of the private sector to achieve this aspiration. We therefore need more investment from you,” he said.
So far, nine privately owned free industrial parks have been created.
He said the government’s objective is to attract $1b (sh3.6trillion) worth of investments from the private sector by 2020, and build two public free zone parks to boost value addition, innovation and exports.
A free zone is an industrial area, where goods are regarded as being outside the customs territory and importation of raw materials is tax exempt. It usually takes the form of manufacturing or processing facilities, science and technology parks or tourism development zones.
Peter Ngategize, the national coordinator of the Competitiveness and Investment Climate Strategy at Ministry of Finance said companies under the free zones will increase the contribution of industry to Gross Domestic Product which is currently at 21 %, by investing approximately $1b by 2024.
“We need to pull up our performance because last year, our growth was only 17%, which affected government programmes and efforts to eliminate poverty,” he said.
He said in a bid to accelerate growth and make it more inclusive, government has made industrial development an integral part of its overall development strategy.
He said the industrial sector development is at a nascent stage in Uganda, accounting for approximately 20% of GDP, and as such more effort is required to grow it and ultimately increase GDP growth.
“Our GDP is currently $27b (sh70.2trillion) and this is because we hardly have things to export. The country needs to begin focusing on investment and research, to develop timely solutions for the challenges we face,” Ngategize said.
He said trade statistics indicate Uganda’s deficit stood at $85.1m (sh306.36b) in March 2017, a year on year decline of 24.6% which can partly be closed by investment in free zones.