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Uganda unprepared for Common Market

By Patrick Kagenda

If First deputy Prime minister and Minister for East African Community (EAC) Affairs Eriya Kategaya sought to reassure the business community about the Common Market, his June 24 message showed a serious lack of preparedness.

The East African Common Market Protocol which came into force on July 1 launched the region into a regime of unrestricted movement of labour, capital, and other primary factors of production.

Unlike the first EAC Common market that collapsed in the 1970s, the new EAC is bigger; five countries instead of three but the issues remain the same. Kenya is still the most industrialised and biggest economy, Uganda remains uncompetitive, Tanzania introverted, and new entrants Rwanda and Burundi too small to matter.

The Executive Director at the Uganda Investment Authority (UIA) Maggie Kigozi has consistently warned that there is going to be a major shift in the way East Africans do business. Comparative advantage and ease of doing business are likely to be key factors.

But the government, according to Kategeya, is yet to develop a common market implementation plan to enable Uganda to follow on key actions, responsibilities and timelines required to implement obligations under the Common Market.

Kategaya said in a statement to the media that the July 1 date “does not mean a complete Common Market is now in place”. He said “the protocol calls for implementation of its provisions to be progressive to ensure that the common market is in place at a pace that is appropriate for Uganda and all EAC states”.

It is such an attitude that Finance Minister Uhuru Kenyatta warned about in his June 10 national budget speech to the Kenyan parliament.

“Kenya is prepared to fully implement the provisions of the Common Market Protocol from July 1st 2010,” Kenyatta said, “I also call upon our brothers in the community to do the same.”

Gideon Badagawa, the Chief Executive Officer of the Private Sector Foundation told The Independent that Uganda faces a challenge of readiness to freely participate in the Common Market. “Individual countries or governments are principally responsible for delivering a competitive private sector to regional and global competition,” he said in an interview.

Badagawa says the private sector has a role but cannot be competitive “unless the government has delivered.”

He adds: “The danger for Uganda of not acting in a manner that attracts resources is that investments and capital will be deployed elsewhere, jobs will be lost.”

A study, the Uganda Business Leaders Confidence Index, carried out by Synovate (fomer Steadman) between Feb. 1 and March 15 among 100 business leaders showed both optimism and apprehension. Similar studies in the region showed Kenya to have the highest business confidence level of countries surveyed at 68.9 percent followed by Uganda at 66.3 percent, and Tanzania at 61 percent.

Up to 49 percent of respondents in Uganda said competition is their top worry but 47 percent said they were exploring new regional markets.

Badagawa says the biggest challenges for Uganda remain the readiness of business to embrace the Common Market, easy access to business capital, lack of skilled labour and the low capacity of businesses. The IMF Resident Representative Richardson Thomas said tax harmonisation and revenue sharing are major challenges.

In preparation for the Common Market, Uganda was given a 5-year moratorium in 2005 to reduce the cost of doing business, improve infrastructure, energy, skills and training, cost of money, technology and innovations.

Some efforts have been made including establishment of an Energy Fund, a Road Fund, and an EAC Infrastructure fund. However, little progress has been made in implementation.

Kategaya recognises the futility of procrastination: “Ugandans should prepare for many changes. The changes may not be immediate or sudden (but) they will happen and we should be ready for them.”

He says Uganda has identified agriculture, education and geographical location in the region as areas of comparative advantage. Kenyatta noted the same comparative advantages for Kenya and proceeded to announce tax rebates, infrastructure investments, and policy incentives designed to take advantage of the Common Market. Uganda’s Finance minister Syda Bbumba did not announce a strategy regarding the Common Market.

Uganda`s volume of trade with EAC member states has grown from US$1.3billion in 2003 to over US$3 billion to date. The combined 130 million population of the region, intra-regional trade, and the combined GDP of US$ 60 billion are supposed to be a major attraction for investors.

Kigozi says, however, that under the common market, the partner states will promote investment as one bloc rather than as individual states which will enhance the region’s competitiveness. She says, as a new big market, East Africa will be attractive to investment promotion agencies and investors.

Kigozi says any companies that will suffer the effects of this integration, will only experience a temporary set-back.

“The onus will be on each partner state, and especially the individual companies to ensure their survival in this highly competitive environment,” she said.

Investment opportunities in Uganda

Agriculture and agro-processing, mining, tourism, infrastructure, construction, ICT, transport and logistics, petroleum, oil and gas, health, education and the services sector

Manufacturing:

Sector has been expanding by more than 10% annually over the last ten years. Opportunities exist in beverages, leather, tobacco, paper, textiles and garments, pharmaceuticals, fabrication, ceramics, glass, fertilizers, plastic, assembly of electronic goods, hi-tech and medical products.

Mining:

Uganda has large under-exploited mineral deposits of gold, oil, high grade tin, tungsten/wolfram, salt, beryllium, cobalt, kaolin, iron-ore, glass sand, vermiculite and phosphates. Oil has been discovered in the Lake Albert region.

Agribusiness:

Uganda is among leading producers of coffee and bananas. It is also a major producer of tea, cotton (including organic cotton), tobacco, cereals, oilseeds, fresh and preserved fruit, vegetables and nuts, essential oils, orchids, flowers and silk.

Tourism:

Tourism in Uganda is an important generator of foreign exchange, high-end employment, and investment.

Infrastructure:

Opportunities abound in transport & logistics and energy. Less than 10 percent of the mainstream capacity of 2,700 megawatts of power is exploited.

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