Investment: Remarkable strides a thousand miles ahead

INVESTMENT

By Robert Ssuuna

An interaction with any lay businessman on Uganda's urban streets on factors affecting investment decision in Uganda highlights a unanimous accusation, "Uganda's investment regime favours foreigners as opposed to domestic investors". Interaction with another  actual investor (domestic or foreign), the issues raised are lack of cheap/affordable credit, rent seeking amongst public servants, protracted procurement processes, red tape, limited capacity to mobilise startup capital and crown it all with the proverbial high-cost of doing business!

Drawing conclusions without the consideration of the views from the two categories could be problematic. For instance, let us look at the process of incorporation, the cost of incorporation and basic incentives available for investors. The process for incorporating a company from obtaining a business name to a company seal in both cases (local or foreign) takes seven steps. In terms of the costs, incorporating a local company whose share capital is below sh5m ( three copies) on average takes less than $100 as opposed to about $305 for foreign companies (estimates based on statutory figures from Uganda Registration Services Bureau).

Going by the numbers as reflected in the Uganda Investment Abstracts, taking financial years 2014/15-2015/16, we can deduce the following.  Three hundred twenty seven projects were licensed in the financial year 2014/15, out of which 55 (17%) were local, 40(12%) were Joint ventures and 232(71%) were foreign-owned. 

In the financial year 2015/16, this trend improved. Out of the 353 licensed projects, 91 (25.8%) were local, 16 (4.5%) joint ventures and 246 (69.7%), foreign. We are, therefore, seeing an improvement in the number of local investments.

The above figures point to the fact that all investors (local or foreign), require a favourable investment environment with simplified and seamless registration process before we even think of other cooperant factors such as market access, access to credit, cheaper energy and perfect transport infrastructure. Investment decision is influenced by both promotion and investment facilitation activities.

Uganda's investment promotion initiatives overtime include first setting up an autonomous agency responsible for investment; providing investment incentives such as issuance of land, special economic zones and granting tax holidays where applicable. However, no matter how robust the investment promotion initiatives are, without a formidable investment facilitation strategy, the investment regime is as good as incomplete. For a successful investment regime, trade promotion must go hand in hand with investment facilitation.

The Uganda Investment Authority should be applauded for the establishment of a one-stop centre for investors where company registration, tax registration and advice, issuance of work permits and other immigration documents, verification of land ownership, assessment of investor environmental compliance and standards advice can be obtained under one roof. This is but a step into investment facilitation. However, a lot more is at hand for Uganda to realise full benefits of an investments regime.

It is, therefore, prudent that the effectiveness of the Uganda Investment Authority's planning framework is evaluated based on the following pillars as extracted from the United Nations Conference on Trade and Development (UNCTAD) global action menu for investment facilitation.

Promote accessibility and transparency in investment policies and regulations, and procedures relevant to investors.

Enhance predictability and consistency in application of investment policies.   

Improve the efficiency of investment administrative procedures.   

Build constructive stakeholder relationships in investment policy practice.   

Establish monitoring and review mechanisms for investment facilitation.  

Enhance international cooperation on investment facilitation.   

Complement investment facilitation by enhancing international co-operation for investment promotion for development, including through provisions of international Investment agreements.                                                        

My hope is that the earmarked business facilitation centre, once complete, will address most of the above pointers.
However, executing the above also requires adequate resources human and financial. There is need to train a team of competent investment experts, consequently the importance of capacity building at the authority cannot be overly underscored.

The writer is a graduate student of international trade law and trade policy at the Trade Policy Training Centre (TRAPCA) - Arusha Tanzania and Lund University, Sweden