Unfair competition kills economy

Jan 28, 2007

SIR — Local traders should by now know that unfair market competition is not good for our economy. However, trends in the local manufacturing industry show that the matter is apparently not as straight forward and as easy to understand.

SIR — Local traders should by now know that unfair market competition is not good for our economy. However, trends in the local manufacturing industry show that the matter is apparently not as straight forward and as easy to understand.

Take the concerns raised by the Kampala Traders Organisation who suggested that the government lowers tariffs on imported sugar, currently at 100 per cent so that domestic producers can be subjected to competition. Even local wheat production is under threat from imported wheat products which are selling at lower prices!

There is a general malaise among Ugandans of abusing the liberalised market and wasting scarce foreign exchange by importing commodities that can easily be produced locally. And consumers, too, always have the feeling that anything locally produced is sub-standard and unnecessarily expensive. While there could be merit in some cases, I would like to remind Ugandans that unfair competition is not only bad for local producers but for the nation at large. If we all supported local industries, it would mean more jobs and this has a multiplier effect on the national economy.

However, when people go for imported goods, they stifle business for local producers who may consequently reduce production or close shop altogether and in the process deprive some Ugandans of treasured jobs. On the other hand, government loses out because most of these importers cut corners thereby evading duty and depriving government of the much-needed tax for national development.

Government’s forex reserves are unnecessarily burdened with useless imports when they could have been used for more important purchases. But while we may be tempted to think that the importers are wholly to blame, some local producers do not help matters either. For example, how do they justify the fact that their prices are always higher than those of imported products? Is it not that more is spent in importation than local production?

Most local producers enjoy tax waivers and monopoly agreements with government but do not want to pass such benefits to consumers. And not wanting to be short-changed, consumers go for what is affordable. Under these economic hardships, this is the most prudent thing to do.

Business requires the participation of two stakeholders, generally, and these are sellers and buyers and when sellers become so greedy as to enjoy all benefits emanating from special government considerations, then they have no reason to accuse the buyer of betrayal or lack of support.

Local producers have to weigh the cost of reaping everything at once and faced closure or sharing the benefits and be assured of continued existence.

We need a benefits sharing arrangement between producers and buyers otherwise other businessmen will continue to capitalise on this by bringing in cheaper products from outside the country, which would be the people’s favourite. We need not remind local producers that when that happens, the consumers lose nothing as there are always alternative products on the market.

The same cannot be said of local producers. Some companies have already folded because of this selfish mentality and all those who continue to tread this path should not be surprised by their destiny.

Abu M. Matovu
Good Samaritan Primary School

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