BoU’s Mutebile leads call for export driven policy instead
Amelia Kyambadde, the Minister for Trade, Industry and Cooperatives, has had a tough time selling her flagship policy plank, the `Buy Uganda Build Uganda’ (BUBU). But the latest criticism against the policy came from the most unexpected voice; that of the Governor of the central bank; Emmanuel Tumusiime-Mutebile and at the most surprising venue; a workshop Kyambadde was co-hosting in partnership with the International Growth Centre on export promotion and local content in Uganda on March 23 at the Sheraton Kampala Hotel.
Kyambadde recently unveiled the BUBU policy which aims at providing public procurement incentives in the domestic market to domestic producers and suppliers and to encourage the general public to consume locally produced products and services.
The move is aimed at increasing participation of the locally established firms in domestic trade, boosting their growth, and creating employment opportunities.
During the Kampala event, however, Central Bank Governor Mutebile said most countries have developed rapidly, achieved sustained and rapid growth and the structural transformation of their economies through outward-looking policies other than the inward-looking policies Kyambadde is pushing.
He mentioned countries in Asia (Taiwan, South Korea, Hong Kong, and Singapore).
“It is participation in export markets which provides the main stimulus for productivity gains and technological upgrading in developing countries,” Mutebile said, “The Buy Uganda, Build Uganda campaign and the export promotion strategy are not mutually compatible. We can choose one or the other, and not both.”
He said Uganda should adopt an export promotion strategy to give exporters incentives to maximise their production, adding that Uganda’s trade deficit of around 12% of the Gross Domestic Product is in contrast to the Asian countries that have continued to register sustained trade surpluses.
He said sound public policy rationales can be made for running large fiscal deficits if they can be financed in sustainable manner and aim at meeting demand for public goods and infrastructure.
Mutebile said for BUBU to have any significant impact, resources such as labour and capital must be shifted from other sectors of the economy into the sectors accorded protection.
“However, there’s no evidence that there are significant idle resources in the economy which could be re-allocated to import substituting industries,” he added.
The BUBU policy intends to promote local consumption of construction materials, textiles, leather and footwear, furniture, stationery, pharmaceutical, food and beverages, electronics as well as oil and gas.
It will also apply to consultancies, insurance, legal, and accountancy services.
The policy has good intentions but it might lead to creation of monopolies if not well handled, according Lawrence Bategeka, a former Research Fellow at the Economic Policy Research Centre, Makerere University who is now a politician.
He said the government, which is the largest spender, must purchase from various industries to avoid creating monopolies and suffocate other upcoming business entities.
For Prof. Erisa Ochieng, a consultant at the International Development Consultants Ltd, Uganda should first identify products that give it competitive advantage before embarking on promoting locally produced products.