To industrialise we need foreign investment
Apr 08, 2009
I refer to an article published in The New Vision where Patrick Bitature, the chairman of the Uganda Investment Authority board, reported that a sh80b government investment had attracted over 400 investors.
By Richard Musani
I refer to an article published in The New Vision where Patrick Bitature, the chairman of the Uganda Investment Authority board, reported that a sh80b government investment had attracted over 400 investors.
The investment in the construction of Kampala industrial business park, had 160 investors considered after a vetting exercise. The investors are projected to create over 50,000 jobs.
Currently the top ranking Ugandan investors are; the UK, Asians formerly exiled due to an expulsion by Idi Amin, Canadians, South Africans, Kenyans, the US and Nigeria.
It should be noted that the increasing competitiveness of Uganda in attracting foreign direct investment (FDI) results from:
The political stability in the country we have began to enjoy as efforts are directed to end the northern LRA conflict.
Free-market policies that the Government has adopted such as a 30% corporation tax, incentives to investors.
The Government is making it easier for foreign firms to do business. Considering the above reasons, the Government should be applauded because as a developing nation, we strongly need FDI if we are to successfully industrialise, especially in export-oriented sectors.
Allowing foreign direct investment in Uganda comes with a series of positive impacts, though if it is not sufficiently regulated, it has associated negative impacts. Uganda adopting FDI as a development strategy will benefit by means of:
Per capita income increase in real terms.
Inflation will easily be regulated.
Indigenous Ugandan manufacturers to benefit from; capital technologies, management skills and international markets.
However, it is important noting that all the above associated positive impacts may not be realised in the short term as we are still faced with a number of limitations, these include and are not limited to:
An insufficient regulatory framework, it should be noted that foreign investors in real sense are not interested in promoting industrialisation in host nations because their priority is typically to further their commercial interests, usually obtaining profits, it is a common phenomena especially among Asian investors to hire the cheapest labour at operational level, and they come with expatriates who play the senior managerial role positions, thus depriving the locals from acquiring capital technologies and managerial skills that would benefit them.
Severe infrastructural constraints, especially in the mobility of raw materials considering our wide natural resource base.
The small domestic market size.
A practical question for our legislators, therefore, is to understand the interaction among FDI, our current government policy on investment, and the indigenous industry that is made of the electorate Ugandan locals who in the value chain are to be the ultimate beneficiaries of FDI.
On one hand, extremely strict policies and regulations scare investors most especially in the current global crisis. On the other hand, a laissez faire attitude will often fail to protect our local interests as noted earlier.
In my opinion that a Government Interventionist approach of FDI is necessary if we are to benefit from FDI.
The interventionist approach by the Government should focus at creating a dynamic balance that satisfies the desires of both the investors and the Ugandan population. The areas that could be focused on include:
Guiding foreign investment towards specific industrial sectors majorly in a Ugandan case agro-processing, while building an understanding with upcoming investors to develop local population in capital technologies, and managerial skills empowerment.
The Government should allocate more resources to human resource development to match the likely investment opportunities; on this note Kyambogo University, that offers a degree in chemical engineering and Makerere University’s degree in petroleum engineering should be financially supported.
Exploit advantages of the current East African integration to widen the domestic market. The overall conventional goal of the Government should be to to ensure that local manufacturers acquire foreign capital, advance in technology and management skills. This way, we will emerge an industrialised nation in a shorter span and transform in areas of economic growth and development.
The writer is a strategic management analyst and an employee of Kampala Motors
I refer to an article published in The New Vision where Patrick Bitature, the chairman of the Uganda Investment Authority board, reported that a sh80b government investment had attracted over 400 investors.
The investment in the construction of Kampala industrial business park, had 160 investors considered after a vetting exercise. The investors are projected to create over 50,000 jobs.
Currently the top ranking Ugandan investors are; the UK, Asians formerly exiled due to an expulsion by Idi Amin, Canadians, South Africans, Kenyans, the US and Nigeria.
It should be noted that the increasing competitiveness of Uganda in attracting foreign direct investment (FDI) results from:
The political stability in the country we have began to enjoy as efforts are directed to end the northern LRA conflict.
Free-market policies that the Government has adopted such as a 30% corporation tax, incentives to investors.
The Government is making it easier for foreign firms to do business. Considering the above reasons, the Government should be applauded because as a developing nation, we strongly need FDI if we are to successfully industrialise, especially in export-oriented sectors.
Allowing foreign direct investment in Uganda comes with a series of positive impacts, though if it is not sufficiently regulated, it has associated negative impacts. Uganda adopting FDI as a development strategy will benefit by means of:
Per capita income increase in real terms.
Inflation will easily be regulated.
Indigenous Ugandan manufacturers to benefit from; capital technologies, management skills and international markets.
However, it is important noting that all the above associated positive impacts may not be realised in the short term as we are still faced with a number of limitations, these include and are not limited to:
An insufficient regulatory framework, it should be noted that foreign investors in real sense are not interested in promoting industrialisation in host nations because their priority is typically to further their commercial interests, usually obtaining profits, it is a common phenomena especially among Asian investors to hire the cheapest labour at operational level, and they come with expatriates who play the senior managerial role positions, thus depriving the locals from acquiring capital technologies and managerial skills that would benefit them.
Severe infrastructural constraints, especially in the mobility of raw materials considering our wide natural resource base.
The small domestic market size.
A practical question for our legislators, therefore, is to understand the interaction among FDI, our current government policy on investment, and the indigenous industry that is made of the electorate Ugandan locals who in the value chain are to be the ultimate beneficiaries of FDI.
On one hand, extremely strict policies and regulations scare investors most especially in the current global crisis. On the other hand, a laissez faire attitude will often fail to protect our local interests as noted earlier.
In my opinion that a Government Interventionist approach of FDI is necessary if we are to benefit from FDI.
The interventionist approach by the Government should focus at creating a dynamic balance that satisfies the desires of both the investors and the Ugandan population. The areas that could be focused on include:
Guiding foreign investment towards specific industrial sectors majorly in a Ugandan case agro-processing, while building an understanding with upcoming investors to develop local population in capital technologies, and managerial skills empowerment.
The Government should allocate more resources to human resource development to match the likely investment opportunities; on this note Kyambogo University, that offers a degree in chemical engineering and Makerere University’s degree in petroleum engineering should be financially supported.
Exploit advantages of the current East African integration to widen the domestic market. The overall conventional goal of the Government should be to to ensure that local manufacturers acquire foreign capital, advance in technology and management skills. This way, we will emerge an industrialised nation in a shorter span and transform in areas of economic growth and development.
The writer is a strategic management analyst and an employee of Kampala Motors