COVID-19 gives Uganda opportunity to adopt economic mercantilism

By Dixon  Kagurusi Ampumuza

OPINION   COVID-19
Covid-19 is a golden opportunity for Uganda to adopt Economic Mercantilism as the best model for her economic breakthrough. 

Economic Mercantilism as a theory has a venerable history From Alexander Hamilton (1792), Friedrich List (1841), to their twentieth-century successors in Latin America, Africa and Asia, including Kiiza, Julius (2008).

Economic Mercantilism has been an intellectual and ideological tool for poor countries trying to catch up with rich ones the way the advanced economies such as the US and German did to catch up with the UK that had already advanced in terms of industrialisation and indeed it worked for them. 

After attaining economic growth and development up to an advanced state, these countries wanted to penetrate the world market and decided to hide their mercantile history and fronted economic liberalism which has not been favourable for struggling infant economies like that of Uganda. 

However, given the COVID-19 pandemic impact on a globalised economic structure, infant economies such as Uganda have had a golden opportunity to adopt mercantile economic policies that will help in boosting domestic manufacturing through supporting import substitution industries, capacity building, technological advancement and research in a very closed and protective way than in the liberal way that exposes the infant economy to the suffocation of the already advanced economies. 

The mercantile policies that would be adopted or strengthened if already in existence during COVID-19 include the following.

Protection of Ugandan domestic infant manufacturing industries against the unfair competition from the Asian, European and American already advanced industries. 

This calls for a more protective industrial policy dominated by heavy import tariffs for foreign goods that are also manufactured domestically but with the use of non-tariff barriers such as subsidies, tax holidays, tax havens and at times tax exemptions and others to the domestic industries for purposes on national prosperity.

Massive investment in developmental infrastructure that can support a systematic shift from primary production (agriculture) to secondary (manufacturing) and tertiary (services) is fundamental. 

These include a clear and robust road network across the country, advanced bridges, a robust railway network and water transport to link with Kenya and Tanzania for easy and cheaper access to the seaport, industrial power generation but with supported increased consumption to reduce the cost of power, industrial water, increased number of advanced industrial parks as well as ICT infrastructure.

Controlling the exportation of valuable resources - basically raw materials and capital goods - to foreign countries but encourage their importation to support local manufacturing.

By all means, the already advanced economies like the UK criminalised the exportation of skin and wool to foreign countries between 17th and 18th centuries as a way of making sure that the local manufacturing industries get enough supplies at relatively low cost. 

Of recent, the US under the Trump administration has done almost the same by prohibiting farmers from exporting their produce to China and other European countries or doing it but at very high export tariffs. 

Limit the importation of luxurious and harmful products into the Ugandan economy and allow only valuable ones and of good quality to enter the economy while supporting import substitution. 

Expensive and luxurious products such as watches, bangos, cars, interior design products, cosmetics, jewels and others as well as poor quality and harmful products such as second-hand clothes, electronics, cars, harmful drugs like alcohol, cigarette, opium and others should be highly controlled so as to ensure the population's financial and healthy security.

Limiting the exportation of national unique and scarce skills to other countries ought to be done. This is very risky for any economy and for the already advanced economies, this was highly criminalised and national skills were utilised locally by good remuneration. 

The Ugandan government ought to emulate this by employing and paying the skilled human resource well and to prevent it from engaging in brain drain. 

For instance, many Ugandan teachers, engineers, health workers, researchers, ICT experts and many others have been taken on by other competing countries, well paid and fully exploit their skills to develop the economies of these foreign countries. This should be handled in a mercantile way.

Protection of the interests of the Ugandan nationals from the resource competition pressure from immigrants and minority groups which is key for any economy in the fourth industrial revolution to benefit its nationals. 

It should be noted that all advanced economies first protected the interests of their nationals in terms of utilization of national resources, employment opportunities, social services access security and many others. 

If this is done and priority put on Uganda for Ugandans first, this could help in empowering the population to be a great productive resource for the advancement of the economy. In all of the MNCs, it would work better if the biggest percentage of top administrative managers is of Ugandans working under the foreign owners so as to acquire skills. 

Establishment of a patriotic civil and public service that is willing to serve the nation diligently without being corrupt. Laws against corruption should be strengthened and penalties reaching confiscation of one's property to recover state funds whenever found guilty and even be banned from working with the government. 

Such measures have helped the Asian tigers such as Malaysia, Taiwan, China, Singapore and others to advance their economies. 

Heavy investment in military technology and reverse-engineering ought to be embarked on so as to protect and maintain the achievements of the previous policies. 

The military budget should now focus on reverse engineering so as to establish manufacturing capacity by the forces and reduce importation of military hardware and software. Military manufacturing can also be a basis for supporting agriculture and service industries as well as defending what they would have achieved. 

After achieving economic advancement, Uganda could gradually open its economy to a more liberal mercantile economic model of globalization fit for advanced economies with an aim of capturing foreign markets but with an economic muscle strong enough to withstand the challenges posed by the already advanced economies.