Govt should invest more in agriculture, accountability
Jul 14, 2011
ALLOW me to add my voice to those of others who have already commented on the past and current economic situation in our country.
By Drake Kyalimpa
ALLOW me to add my voice to those of others who have already commented on the past and current economic situation in our country.
Quantitative economic research from experienced fellows at home and abroad (i.e. World Bank, IMF, Uganda Investment Authority) and various poverty reduction-growth intervention studies that have been conducted in Uganda can shed light on what we need to embrace or should have embraced.
A good example is the persistent advice to the Government by the donor community to increase budgetary spending on agriculture to at least 10 to 20% based on a number of comprehensive poverty alleviation and economic growth studies. To the surprise of many, this advice has been ignored by the Government.
If spending on agriculture is efficiently implemented and monitored (helping farmers with inputs, marketing of produce, feeder roads), exports will increase (this improves our current account balance), household incomes in rural and urban areas will increase, our foreign savings will increase too, this will put a downward pressure on our shilling (shilling appreciates).
It is not surprising that the current depreciation of the shilling is partly, due to a weak export base. Creating a conducive environment for business at home will also attract Foreign Development Index and increase our domestic and international competitiveness.
In addition, encouraging Ugandans abroad to invest at home by creating an enabling environment is another option. Remittances by Ugandans are a good source of investment in real estate, and supplements household incomes since they are directly received by households, helping them to pay for food and scholastic materials (poverty alleviation checks) — World Bank Remittances Fact book (2010/2011).
I would advise policy makers and the Government to understand the socio-economic linkages of the Uganda economy first before designing and implementing policies especially those that are aimed at achieving sustainable growth and meaningful poverty reduction. It is of no use to celebrate when the macro aggregates reflect better economic performance when indeed the micro aggregates reflect a worsening situation. It is unfortunate that this has been the situation since the structural reforms of the 1990s. No one seems to care about which sectors are critical for growth and poverty reduction in Uganda, based on economy wide linkages. Unfortunately, all the efforts of policies designed and implemented are bound to fail or to yield minimal results if any. For example, it is on record that the real GDP growth in the last decade has been primarily driven by consumption expenditure (about 75% of GDP) and spearheaded by the service sector in terms of value added. Consumption expenditure is by the top rich 20% of the population. Let us not forget that even the rich 20% live in urban areas, further complicating the problem of the income of inequality.
It should be noted that growth accompanied by high levels of inequality slows down the path of poverty alleviation. For growth to be meaningful, it must occur in sectors where the poor participate or in regions where the poor live. What is more worrying is that rural areas contribute over 90% to national poverty. This must be seriously addressed.
This calls for understanding of the sectoral linkages. For example, if the Government stimulates the agricultural sector and economy by channelling funds through NAADS, (say an investment expenditure of sh200b), are we able to say or determine how and which economic agents are mostly affected? What is the size and significance of the policy shock?
How many jobs are created in each sector? How do you address regional imbalances arising from this policy? Do we have compensatory schemes to help those hurt by economic policies like trade liberalisation and tariff cuts? Or even when we liberalise, are we protecting our infant industries from imports from well developed manufacturing industries abroad? Do we gain nationally and at the household level? Theory can sometimes let us down, but it is better to try these ideas.
Socio-economic policies made based on sectoral linkages for growth and poverty reduction have proved successful in some developing countries. Despite the current emphasis by the Government on increased infrastructural spending, most productive areas in rural areas are not linked to the market. This remains a serious hindrance to transforming the agricultural sector and encouraging urban-rural migration.
We must not forget that the growth and productivity of the agricultural sector is still very low yet the sector employs over 70 % of the population, supplies almost all the food requirements, generates 75% of export earnings and supplies almost all the inputs used in the manufacturing sector (Uganda Human Development Report, 2007; MDGs Uganda Report, 2007).
The failure of policy makers and the Government to use ideas from socio-economic quantitative research that incorporates the needs of all economic agents and the continued implementation of policies without adequate knowledge of outcomes need to be seriously addressed. Handouts about policies to implement without ground work in all regions of the country are letting us down.
Planners need to be in the field to practically see and evaluate government policies and this must involve the local communities.
Let us be accountable. It is only by doing so, that round table debates, radio and TV talk-shows about the economy will be meaningful. The debates should be supported by evidence from the field and all regions of the country. Monitoring the impact of economic policies and projects should be enforced so as to identify gaps and improve on resource allocation and avoid wastage. My fellow economists and well wishers in and out of the country; let us give this a second thought. This country can rise and shine even more.
Lastly, I would like to suggest that the Government should design a new social accounting matrix (SAM) based on a comprehensive household and labour survey; perhaps a new census, rather than updating the old ones with aggregates.
My colleagues at the Bureau of Statistics and the Economic Policy Research Centre know this better than anyone. A lot has changed since the last census. The new SAM should integrate the nascent oil sector, a new addition to the Ugandan economy. When this is done, we can then speak of the impact of the oil revenues on growth and poverty reduction in Uganda.
Writer is a graduate researcher in economic policy analysis Dundee Business School, UK
ALLOW me to add my voice to those of others who have already commented on the past and current economic situation in our country.
Quantitative economic research from experienced fellows at home and abroad (i.e. World Bank, IMF, Uganda Investment Authority) and various poverty reduction-growth intervention studies that have been conducted in Uganda can shed light on what we need to embrace or should have embraced.
A good example is the persistent advice to the Government by the donor community to increase budgetary spending on agriculture to at least 10 to 20% based on a number of comprehensive poverty alleviation and economic growth studies. To the surprise of many, this advice has been ignored by the Government.
If spending on agriculture is efficiently implemented and monitored (helping farmers with inputs, marketing of produce, feeder roads), exports will increase (this improves our current account balance), household incomes in rural and urban areas will increase, our foreign savings will increase too, this will put a downward pressure on our shilling (shilling appreciates).
It is not surprising that the current depreciation of the shilling is partly, due to a weak export base. Creating a conducive environment for business at home will also attract Foreign Development Index and increase our domestic and international competitiveness.
In addition, encouraging Ugandans abroad to invest at home by creating an enabling environment is another option. Remittances by Ugandans are a good source of investment in real estate, and supplements household incomes since they are directly received by households, helping them to pay for food and scholastic materials (poverty alleviation checks) — World Bank Remittances Fact book (2010/2011).
I would advise policy makers and the Government to understand the socio-economic linkages of the Uganda economy first before designing and implementing policies especially those that are aimed at achieving sustainable growth and meaningful poverty reduction. It is of no use to celebrate when the macro aggregates reflect better economic performance when indeed the micro aggregates reflect a worsening situation. It is unfortunate that this has been the situation since the structural reforms of the 1990s. No one seems to care about which sectors are critical for growth and poverty reduction in Uganda, based on economy wide linkages. Unfortunately, all the efforts of policies designed and implemented are bound to fail or to yield minimal results if any. For example, it is on record that the real GDP growth in the last decade has been primarily driven by consumption expenditure (about 75% of GDP) and spearheaded by the service sector in terms of value added. Consumption expenditure is by the top rich 20% of the population. Let us not forget that even the rich 20% live in urban areas, further complicating the problem of the income of inequality.
It should be noted that growth accompanied by high levels of inequality slows down the path of poverty alleviation. For growth to be meaningful, it must occur in sectors where the poor participate or in regions where the poor live. What is more worrying is that rural areas contribute over 90% to national poverty. This must be seriously addressed.
This calls for understanding of the sectoral linkages. For example, if the Government stimulates the agricultural sector and economy by channelling funds through NAADS, (say an investment expenditure of sh200b), are we able to say or determine how and which economic agents are mostly affected? What is the size and significance of the policy shock?
How many jobs are created in each sector? How do you address regional imbalances arising from this policy? Do we have compensatory schemes to help those hurt by economic policies like trade liberalisation and tariff cuts? Or even when we liberalise, are we protecting our infant industries from imports from well developed manufacturing industries abroad? Do we gain nationally and at the household level? Theory can sometimes let us down, but it is better to try these ideas.
Socio-economic policies made based on sectoral linkages for growth and poverty reduction have proved successful in some developing countries. Despite the current emphasis by the Government on increased infrastructural spending, most productive areas in rural areas are not linked to the market. This remains a serious hindrance to transforming the agricultural sector and encouraging urban-rural migration.
We must not forget that the growth and productivity of the agricultural sector is still very low yet the sector employs over 70 % of the population, supplies almost all the food requirements, generates 75% of export earnings and supplies almost all the inputs used in the manufacturing sector (Uganda Human Development Report, 2007; MDGs Uganda Report, 2007).
The failure of policy makers and the Government to use ideas from socio-economic quantitative research that incorporates the needs of all economic agents and the continued implementation of policies without adequate knowledge of outcomes need to be seriously addressed. Handouts about policies to implement without ground work in all regions of the country are letting us down.
Planners need to be in the field to practically see and evaluate government policies and this must involve the local communities.
Let us be accountable. It is only by doing so, that round table debates, radio and TV talk-shows about the economy will be meaningful. The debates should be supported by evidence from the field and all regions of the country. Monitoring the impact of economic policies and projects should be enforced so as to identify gaps and improve on resource allocation and avoid wastage. My fellow economists and well wishers in and out of the country; let us give this a second thought. This country can rise and shine even more.
Lastly, I would like to suggest that the Government should design a new social accounting matrix (SAM) based on a comprehensive household and labour survey; perhaps a new census, rather than updating the old ones with aggregates.
My colleagues at the Bureau of Statistics and the Economic Policy Research Centre know this better than anyone. A lot has changed since the last census. The new SAM should integrate the nascent oil sector, a new addition to the Ugandan economy. When this is done, we can then speak of the impact of the oil revenues on growth and poverty reduction in Uganda.
Writer is a graduate researcher in economic policy analysis Dundee Business School, UK