Deepening Modernization through investment promotion and wealth distribution

OPINION 

On Tuesday, July 29 2020, President Yoweri Museveni was nominated by the National Resistance Movement (NRM) as its candidate for the 2021 Presidential elections.

In his brief remarks, he highlighted three priorities for his next term. These are: deepening modernization, promoting regional integration and fighting COVID-19.  

In this article, I would like to share my thoughts on how the NRM Government has succeeded in modernizing this country and how it should proceed in deepening this modernization?

Before that, I would like to remind Ugandans, particularly, our young people, that the political and civil strife that engulfed our country in the 1970s and early 1980s led to a severe contraction in the economy through: widespread destruction of productive assets, human capital flight and diversion of Government expenditure towards unprincipled conflicts.

Through ideological sobriety, the NRM government has been able to modernize this country, while resolving the economic distortions that entrenched poverty in the population.  

I am aware that this background may seem irrelevant to some. However, it is impossible to assess our progress, as a country, without determining a proper baseline.

In this regard, therefore, 1986 provides the perfect baseline for the achievements that we can see today. How was this possible, for a new Government run by idealists with limited resources?

First, the NRM Government's 10 Point Programme laid a solid ideological foundation by seeking to create larger markets for Uganda's products through regional integration, the modernization of Agriculture and export oriented manufacturing.  

Over the years, a number of modernization programmes were implemented, including: The Economic Recovery Programme (ERP), the Poverty Eradication Action Plan (PEAP), the Plan for the Modernization of Agriculture (PMA), Structural Adjustment Programme (SAP), among others.

Secondly, the Government prioritized structural transformation of the economy and macroeconomic stability.  

Some of the notable reforms included: currency reform to tackle inflation, abolition of export taxes and liberalization of the foreign exchange market and the capital account to allow the free flow of capital.

In addition, the economy was oriented towards private sector growth, through the divestment of public enterprises.  

These sound macro and structural reforms led to Uganda experiencing one of the highest rates of per capita income growth in the world, which averaged 3.2% during the 1990s. 

Additionally, Uganda made remarkable strides in reducing poverty, through prioritizing the agricultural sector.

For instance, from 1992 to 2003, the percentage of Ugandan households living in poverty was halved. 

Indeed, the International Monetary Fund confirms that poverty fell across all income groups, regions, and districts.  

Thirdly, in pursuit of Foreign Direct Investment, Government abolished the existing investment incentive regime that favored local firms and established the Uganda Investment Authority, through the Investment Code of 1991.

Since then, Uganda is one of the countries that attracts the highest Foreign Direct Investment (FDI) inflows to East Africa.

For instance, the 2020 World Investment Report by the United Nations Conference on Trade and Development (UNCTAD), confirms that FDI flows to Uganda reached a record high of 1.3 billion dollars in 2019, representing a 20% increase from the 1 billion dollars of 2018.

In spite of the above successes, a number of challenges persist.  For example, the rising income inequality is a cause of concern to many.

The problem of income inequality is not unique to Uganda. Globally, the richest 10 percent have up to 40 percent of global income, while the poorest 10 percent only earn between 2 to 7 percent.

In Uganda's case, whereas, overall poverty is falling, rapid urbanization is pushing many people into low level services (boda boda, saloons etc.) which are fueling the appetite for imports.

This is a lost opportunity for domestic manufacturing. For this reason, Government's focus on import substitution and export promotion is timely.

 In addition, priority should be given to increasing the productivity of the informal sector-especially those in low level services.

Furthermore, emphasis should be placed on improving agricultural productivity, as well as, rolling out Social Protection Schemes such as: The Social Assistance Grants for Empowerment (SAGE) Programme which targets Senior Citizens aged 65 years and above, with financial grants.

Overall, President Museveni's prioritization of wealth distribution is apt and will address this enduring challenge of income inequality, by ensuring a more equitable distribution of this country's economic gains.

The second bottleneck, that still holds us back is that of youth unemployment.

You see, of the 700,000 young people that join the job market each year, only 75,000 jobs are created. This leaves many young people vulnerable, particularly those in urban areas.

Through various initiatives such as: The Youth Livelihoods Programme, the Youth Venture Fund, the "Emyooga" scheme, among others, Government has tackled this problem head on.

Long-term, it is important that focus remains on attracting FDI, as a catalyst for generating new jobs for these young people, through technology and know-how transfers.