Understanding why Uganda has performed well

By Admin

Is the glass half full or half empty? This is important. Let us look at what been achieved.

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OPINION

By Elly Twineyo Kamugisha

Like I said in my last article on “Understanding Why Nations Succeed” in the New Vision of December 21, 2018, we need to begin to focus on why nations succeed not fail. We need a positive outlook on society.

Is the glass half full or half empty? This is important. Let us look at what been achieved.

Why has it been achieved? What lessons can we learn from the achievements? How can we mover further ahead?

Uganda has performed well over the past three decades. In 1986, the total output of our economy was estimated between $4b to $5.2b. By the end of 2017, the total output of the economy was estimated at $27.2b.

During the 2016/17, revenue collection has risen to above sh12.7 trillion, which had been less than sh5b in 1986.

The collections have been growing and support the economy. By 1991, Uganda exported mainly primary merchandise commodities worth $184m.

During 2017, exports composed of primary and manufactured goods and stood at above $3.3b. Total exports, including services, exceeded $5b in 2017.

Before and during the 1990s, Uganda hardly exported services, except tourism.  The analysis of export data shows that since 1991 to 2017, exports receipts grew 18 times at an annual average rate of 65%.

During this period, imports grew from $522m to $5b. This means that our import bill grew 10 times at an annual average of 33%. We note that during this period, Uganda’s merchandise exports have grown twice faster than its import bill.

The Government has been importing a lot for the big projects such as Karuma and other infrastructure projects. These projects are vital for future growth of the economy.

It is against this background that, without following a chronological order, we will look at factors or conditions that have been important for Uganda’s growth.

Good neighbours and regional integration: Uganda is well placed in the middle of its markets with 60% of her exports going to the EAC and COMESA. Regional integration efforts should continue.

Marketing and engaging in international trade: Marketing is very important. In No Logo, Naomi Klein, shows that a plain cotton T- shirt sells at $10, but when given a logo of some known company (that is when branded) it sells for $150.

Branding is about marketing. Government support and interventions is paramount here.

The role of marketing the brand of companies is done by companies. The role of marketing Uganda is the due duty of the Government. Companies do business while countries trade. Marketing does not come cheap.

However, it cannot be avoided. We have reached a stage where our Uganda Brand needs to bring in a lot revenue from tourism, exports, FDI, and remittances.

We have to undertake serious marketing to differentiate the Uganda Brand from others in Africa and in the world, to remind/reassure and inform those whom we want to take interest in this brand.

Yes, if necessary, let us also persuade them. Let us promote Uganda because it is different. Travel magazines and other media have ranked Uganda as one of the world’s best destinations. It has become kind of the “Car you must drive before you die”. Let us beckon them.

Market friendly policies: Economic history teaches us that for a country to develop (and therefore ultimately reduce the number of those living in abject poverty), it needs to sustain per capita income growth over a number of generations.

Take the example of the USA, it has managed to grow at an average of 1.5% per year since 1860 to around 2012 (that is over 150 years). In Sub Saharan Africa, most countries have failed to achieve and sustain economic growth.

With the exception of Botswana, which managed to sustain growth at an annual rate of 6.8% between 1986 and 2001, which it did because of pursuing sound market-friendly policies. The other country is Uganda. In terms of total economy, not per capita income, Uganda’s economy is bigger than that of Botswana.

Uganda Government has continued to create an enabling environment for the private sector to engage in business through putting in place market-friendly laws.

It has also established institutions to implement a client focused government support to the private sector, investors and exporters.

Recently, an Italian professor of law informed Amelia Kyambadde, the Minister of Trade, Industry and Cooperatives, while handing her his book of the translated Uganda’s investment and trade laws, that Ugandan laws were better than those of Italy or other EU members.

Government support not interference: The Government realised early enough, at the beginning of the 1990s, that the role of Government was mainly to provide leadership, security and defense of the country. That the business was to be done by the business people.

This was important because while the Government sometimes makes some interventions to stabilise the economy (eg, buy the excess dollars in the economy to stabilise the Shilling), business is done by the private sector.

The Government can and should intervene in the market economy to stabilise the economy where there is a market failure.

Sometimes the market, through the market mechanism of the forces of demand and supply, fails to provide some goods that the people require. The Government can then come in and fill this gap.

Evidence has also shown that, with competent managers, the Government can engage in meaningful businesses that support the economy and boost its competitiveness.

We have examples of China, South Africa and those in South East Asia (Republic of Korea, Taiwan, Singapore, others) where the role of the state in development of industry, financial sector and indeed the entire economy was paramount.   

Government relations with the private sector with regular interactions. The Government regularly meets with the private sector, UMA and others to discuss how to grow the economy as it happened yesterday during the Presidential Investor Roundtable.

They discuss issues ranging from taxes, transport costs, power tariffs and markets. This is good for the economy since the private sector drives the economy in an open economy, but producing goods and services for domestic consumption and exports and creating jobs.

Leadership: History has shown that countries that developed and those that are advancing faster have had strong leadership.

Researchers including political analyst, Huntington, The Third Wave, and Easterly the Economist, and others have pointed to economic history showing that strong leadership has changed the fortune of countries.

This is true of the US and UK when they were developing. It is true of Singapore, Republic of Korea, China, and Uganda, among others.

Leadership has ensured political stability. Political stability is good for savings and investment, exports, and tourism. Money hates noise. Noise disturbs attention and focus. Good leadership reduces commotion in the economy and this is good for sustained economic prosperity of countries.

The writer is the Executive Director of the Uganda Export Promotion Board and author of Why Africa Fails (The Case for Growth before Democracy)