The Independent Uganda: You get the Truth we Pay the Price
What Uganda can learn from countries that enjoyed industrial transformation
THE LAST WORD | ANDREW M. MWENDA | My friend, Ellison Karuhanga, wrote a brilliant defense of President Yoweri Museveni’s policy of allocating state benefits to private companies in pursuit of Uganda’s industrial development. He argued that the president’s critics focus on procedural technicalities and ignore the substance of his decisions. He gave an example of projects the president has supported and that have succeeded. He also argued that successful countries ignored such procedures and focused stubbornly on the outcome (Kaguta, Mwenda and the brutal truth about nation building).
I am a critic of sticklers to procedural niceties even when and where such indulgence undermines the purpose. I have criticized it severally in government procurement. There is a logical problem, however, with Ellison’s argument. It is called survivorship bias. This is a type of sample-selection bias that occurs when an observer mistakes a visible successful subgroup as the whole group. Ellison’s argument is like that in the famous, yet deceptively stupid, book The Millionaire Mind. The author claimed to have studied one thousand millionaires and found that they were of average intelligence (based on their performance at university), but they worked hard and took big risks. Had he studied bankrupt entrepreneurs, he would have found them to possess the same qualities. Same applies to Ellison’s argument. Had he looked at countries that failed at industrial transformation, he would have found that they employed the very same strategies.
It is true states that have been successful at industrial transformation such as Japan, Taiwan, South Korea, Singapore, etc., offered preferential benefits such as tax exemptions, subsidies, cheap loans, tariff protection, etc. to nascent industrial groups. This is what Museveni is doing in Uganda today. But it is also the case that states that failed, such as India, Brazil (in the 1970s and 1980s), Kenya, Pakistan, Argentina, the Philippines (under Ferdinand Marcos, 1966-85), the Ivory Coast, etc did similar things. So, what made some succeed and others fail when they were using similar policy tools?
This brings us to the second factor that Ellison ignored. Museveni has been in power for 40 years. And over that period, he has been consistent in supporting industrialists with state patronage. The Madhivanis and the Mehtas, Mukwano and Mulwana, Bidco and others have enjoyed his support. This has involved tax exemptions, tariff protection, free land, cheap loans or grants, different forms of subsidies, etc. Yet Uganda has not been as successful as South Korea or Singapore who underwent industrial transformation in 30 years. In 1990, about 70% of Ugandans depended on agriculture for a livelihood. In 2022, the same percentage depended on agriculture for a livelihood. This means there has been no structural transformation. Why?
Of course, I would like to be fair to Museveni on this. First he was constrained by the IMF and World Bank’s insistence that he should leave markets to allocate resources. At the time, Uganda heavily relied on these “donors” for financial sustenance. He could, therefore, not actively and consistently go against their will. But he had also ideologically bought into this neoliberal orthodoxy. Then the economic bureaucracy he had at the Ministry of Finance was strongly wedded to the IMF’s neoliberal policy prescriptions. Even I in the media was an ardent believer in this ideology. Thus, we formed a formidable intellectual coalition of resistance against state led industrialization. I began to distance myself from this coalition in the early 2000s.
Even if we had not opposed the president on his support for industrialists, there were other factors that would have made Uganda’s prospects dim. Many people ignore critical factors such as geographical location, like the authors of another very stupid book, Why Nations Fail. Neighborhood effects have powerful implications on the destiny of nations. Being a neighbour of countries in civil conflict (as Uganda has been with South Sudan, DRC, etc.) imposes high costs on your development prospects. Distance from the coast, limitations in human capital and other initial conditions have played an important role.
Where I fault Museveni is the belief that he alone can be an institution that assesses the viability of industrial projects and qualifies them for government support. He is the one who listens to industrialists in regard to the amount of capital they need and makes a decision to give it to them. Museveni is a great military strategist and an incredibly talented politician. But this does not make him a great business development strategist. And even if he were, as president he is too busy with too many issues to be the one to assess, analyze and scrutinize every single business plan.
Of course Ellison can retort that the president takes these decisions to cabinet. But ours (or the cabinet of any country for that matter) cannot be a competent institution to assess such projects at both a technical and financial level. This is even more so because our cabinet is not made of the best and brightest people in the country. Indeed, the president has called them fishermen. In fact, I am inclined to believe Museveni uses the cabinet to rubber-stamp his decisions, not to really assess these projects.
This brings use to what we learn from successful countries. Japan had the Ministry of International Trade and Industry (MITI) while South Korea has the Economic Planning Board (EPB). According to Chalmers Johnson, in his famous book, MITI and the Japanese Miracle, Japan would get the best graduates from the best universities to sit an entry exam to join MITI. Only 2-3% of those who sat this exam succeeded. Johnson says MITI had “the highest concentration of brainpower in Japan.” The same story applied to South Korea’s EPB: 97-98% of the people who sat its entry exam failed, according to Alice Amsden’s book, Asia’s Next Giant, South Korea and Late Industrialization.
The actual story of these countries is much more complex than this idealized version of Johnson and Amsden. There was corruption, there was political favoritism, etc. But there was a basic minimum of technical input into government support for industrial projects. The president needs to do two things. Our country has a blueprint of which economic sectors Uganda has selected as priorities for support. The pharmaceutical industry is not one of them. Second, we need to have rules stating the qualifications for benefiting and an institution that manages the process. Finally, we need clearly defined targets with timeframes for the beneficiaries of state patronage. We may not succeed even with all this. But we will have put in place the necessary measures for possible success.
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amwenda@ugindependent.co.ug
Decent follow-up to last week’s mea culpa – at least you didn’t capitulate entirely! It’s important to be clear that institutionalization of decision making cannot be done piece-meal. In a state that’s firmly under family rule, any attempts at institution building within individual sectors or value chains will inevitably fail, or get usurped to serve the interests of said family.
Eh Andrew,
It seems you have not heard of the STI-OP, or if you have, you are yet to internalise their operations. (and perhaps that is why you called one of their most celebrated Scientists – Magoola – a ‘witch doctor’!!!! Hmmmn!!)
Building the ‘Pathogen Economy’ is one of 7 pillars the STI-OP programs. In there, lies huge pharmaceutical opportunities that the country is trying to make advantage of! Of the targeted Science-driven Economy of US$ 500-550 Billion by 2040, 48.3 Bn or nearly 9% is to be built up from this sector. How then can pharmaceuticals not be a priority – my dear bro?
Secondly, I seem to get that your understanding of the whole science-led innovation/ivention to market process is wanting (Do not worry – I mean no evil – as that is normal for many people outside the process). Each of the 4 or 5 stages in there and their feedback loops have variable, often indeterminate durations, making rigidity of costs and timelines almost meaningless. This is the very reason Kiira and Muranga have taken decades and multi Billions to output anything (I actually at one time crtiqued Kiira in this paper or in The New Vision about not starting easier – with e-bikes). But when they do, every one celebrates with less consideration of the pains earlier invested.
100 % correct analysis: Where I fault Museveni is the belief that he alone can be an institution that assesses the viability of industrial projects and qualifies them for government support. He is the one who listens to industrialists in regard to the amount of capital they need and makes a decision to give it to them. Museveni is a great military strategist and an incredibly talented politician. But this does not make him a great business development strategist.
When and where did he (M7) say that he alone can assess and decide?And, as a Head-Of-State, what makes him the least able to assess and decide correctly, in your view? Are there no investors or innovators that are vetted by other government institutions such as UIA?
“Finally, we need clearly defined targets with timeframes for the beneficiaries of state patronage”.
Pipe dream.
To think that Uganda can compete in the highly, high-tech Pathogen, Pharmaceuticals or Vehicle manufacturing space is a pipe dream. First, there is virtually no ecosystem for any of these industries in Uganda. Second, our level of competences in these areas is comparatively very low, third, Uganda has no comparative advantage in any of these areas and, fourth our cost of production is too high compared to our ocean facing blessed neighbors. No wonder government has to keep subsidizing these industries. …meaning, they will collapse as soon as government stops subsidizing them.
Comparative advantage being the economic principle that a country should specialize in producing goods or services it can produce (almost naturally) at a lower opportunity cost than other countries. It appears Museveni needs a lot of help at this very basic level.
Uganda being landlocked, a service economy is the most obvious natural fit. This being one where the majority of economic activity is in the provision of services rather than the production of goods. These services include, education and health services, and leisure and hospitality.
All my life (I am now 70) I have silently observed the natural aptitude for Uganda to attract foreign students…even during our worst of political environments. This is not by accident. We are good at it. If we had good and organized leadership, Uganda by now would have developed world class institutions like of Havard, MIT and Cambridge University.
After all no other University in African can claim the likes of a Makerere University Notable Alumni list that includes: Harry Mwaanga Nkumbula, Bethwell Allan Ogot, Pamela Mboya, Ngũgĩ wa Thiong’o, Julius Nyerere, Mwai Kibaki, Benjamin Mkapa; Jaramogi Oginga Odinga; and Yasmin Alibhai-Brown.
Let us concentrate on what comes naturally to us by developing a first in class tourism/leisure industry and an excellent first in class lower and higher education destination.
This is our natural and obvious comparative advantage.
Please Note: To challengers of the current world order (which every African compatriot should ideally be), ‘Comparative Advantage’ is a ‘terrible’ term meant to keep the under developed always poorer. You cannot develop our MaK/MUK to Havard or MIT or for that matter, to China’s Tsinghua and Peking level with simply imported Techs. Every human being was endowed with a brain and well jointed limbs to explore nature and its laws so that s/he can use whatever energy and material resources available to her/him for self preservation and perpetuation (though some can deliberately use the same for self destruction). Clever chaps in search of some of these resources use this ‘comparative advantage’ thing to convince your likes to surrender resources in your neighbourhood for near nothing. Incidentally, later they can dump you and your so called resources after they have innovated/invented substitutes.
Being land locked does not stop us from exploiting opportunities in form of energy and materials endowment before us to primarily solve our (not others’) problems. Nor even should it stop us from handling the unique threats facing our society. On the Pathogen Economy, have you ever heard of the NTDs (Neglected Tropical Diseases)? Why do you think they are ‘Neglected’? – Simply because they affect only us in tropical areas, and we have since colonisation adopted that mentality of letting others solve our problems. Today, the ‘liberated’ Ugandan Scientists are saying: Here is an opportunity to help not only our society but even those in similar environments elsewhwere.
Talking of ecosystems to support home-grown industrialisation: Who creates these – if not pioneering risk takers? This business of ‘Ndya biyidde byokka’ should really have no place in a serious developing society. First of all, the basic raw materials (Iron, Carbon – from renewable sources, other minerals, renewable and non renewable energy —) are available. Even if they weren’t, why not get them from neighbouring DRC or SSD or even Rwanda for that matter? Do you need a coastline for that?
On competition with imports, yes – protection may be necessary in very big engineering products. But I can confirm to you that depending on how you segment the market, there are those where even Chinese can hardly compete by virtue of size, adaptability and customer service. I can also confirm to you that Technical skills are best developed as you go along in a production process.
Dear Andrew, you can wax poetic until kingdom comes but you will not derail Museveni from a path he is hell bent on pursuing.
In ‘Sowing the Mustard Seed’ a book that he authored almost 3 decades ago on page 94 concerning the debacle in Mbale at Maumbe Mukwana’s house he states , “When the boy told me the sad news of the death of my comrades, I got so angry, first with myself. Why did I not override Mwesiga on the issue….”.
Therein lies the mental construct of Museveni’s thinking processes in most subsequent decisions of import. ‘The buck stops here is’ is not a mere political dictum to him but rather a rule of thumb that he applies religiously to avoid; 1) putting strategic decisions in the hands of others 2) later regretting negative fallout if poorly managed.
You can understand that, though a military mind, Museveni has since moved on to other fields and he has become a veritable expert for the amount of thought he puts into them. His commitment to make things work, too, is unquestionable other factors notwithstanding.
On the matter of the an incoherent approach to industrial funding solicitation and approval/disbursement in President’s Office, I tend to agreed but in fairness to the president since this is one area he prefers to handle himself, I’d say the jury is still out on the wisdom of his choices as we wait to see how well tha Magoola’s do.
Bernard Urayeneza
Kigali