Export Diversification and Industrialization- A case for Sector Institutions“Implications for Policy Makers”

The Uganda ExperienceFlorence KataExecutive DirectorUganda Export Promotion Boardf.kata@ugandaexportsonline.comflorencekata@yahoo.com

Population, thousands (2002 census): 24 442 GDP per capita, $ (2001): 238

GDP growth rate (last 5 years’ average): 5.7

Life expectancy, (2001 – 2005): 46.0

Illiteracy rate (2001): 39

Inflation rate (single digit): 6.5

Exchange rate (5 year average): US$1 = Shs 1760

** Source: Key Economic Indicators, 59th Issue, Uganda Bureau of Statistics

Uganda: A Synopsis *

Uganda: A Synopsis continued *

2001/02 2002/03 2003/04 2004/05

Goods Account (Trade Balance) -530.26 - 622.76 - 663.16 - 821.47

Total Exports (fob) 474.04 507.91 647.18 786.32

Total Imports (fob) -1,004.30 -1,130.68 -1,310.34 -1,607.79

Source: Bank of Uganda 2004/05 annual report

POST-1986;

Policy shift from a state-controlled to a market led economy (macro-economic recovery and reform program early 90’s)

Divestiture and reform of government institutions (Marketing boards were closed; Coffee, Lint, etc - Deregulation of prices)

External sector & Foreign exchange liberalisation

price de-controls (to full price mechanism)

Rehabilitation of basic infrastructure and return of Departed Asians Properties

Privatisation of state enterprises *

Late 90’s to date – Realisation of the need for institutions in the framework of public private sector partnerships

Government divestiture reforms and the overestimated confidence in the private sector as “engine of growth for an export led, private sector driven, poverty eradicating economic philosophy”

Expanded and diversified export sector (indication in the next slide)

Establishment of more SSI’s strategically selected to oversee the fast growth of the diversification sectors

See http://www.perds.go.ug/

Economic conditions:Economic conditions:

Uganda: % Contribution to Value of Total Exports (1997 - 2005)

0%

10%

20%

30%

40%

50%

60%

70%

80%

1996 1998 2000 2002 2004 2006

Years

Per

cen

tag

e

Traditional export

Non-traditional exports

Uganda Exports by Value, US$ '000 (1997-2005)

  1997 1998 1999 2000 2001 2002 2003 2004 2005

Traditional 381,618 353,870 341,464 211,343 173,213 182,700 199,344 244,955 267,522

Non - Traditional 213,010 182,877 137,286 190,302 278,552 284,905 334,762 420,134 545,335

  594,628 536,747 478,750 401,645 451,765 467,605 534,106 665,089 812,857

Uganda: Export Diversification Trends

Uganda Bureau of Statistics

The Argument for Sector Specific Institutions Vs Economy wide approach

Our view is affirmative as SSI’s in weak government economies and a fledgling private sector have been seen to:

Spur export processing (e.g. Export Processing Zones) Accelerate export development and promotion (UEPB) Streamlining tax regimes and investment incentives (UIA) Assistance with standards compliance (UNBS) Accelerate trade with the USA (AGOA) Support development of tourism and conservation sites (UTB) Offer agriculture extension support services (NAADS) Promote investment in commercial forests and conservation (NFA) Spearhead the development of prototypes (incubation) and support

mechanisms for Industrialisation (UIRI) Engage in effective research and development (NARO) Initiate the process of commercial law reform (CLR) Introduction of the warehouse receipt system to improve collateral for

access to finance (UCE) Increase access to micro-finance (MFIU) Spearhead aqua culture development, landing sites management, and

enforcement of industry standards (Fisheries unit in MAAIF)

Who are the drivers of the diversification process? In Uganda, diversification is advancing at a rather slow pace. The

private sector does not have the sufficient thrust to accelerate the diversification. The SSI’s are ill equipped and under resourced

Accelerated diversification requires agro-industry and value addition for competitiveness which in turn requires infrastructure and reduced cost of doing business

The structure and management of these SSI’s should espouse a strong public-private partnership if export diversification is to be increased. Private sector is often weary of dealing directly with government. The SSI provide an intermediating platform.

The Argument for Sector Specific Institutions (Cont’d)

Quality and Capacity of Institutions

Must be technically efficient Must be well resourced and equipped Must have effective service delivery mechanisms Strong vertical and lateral participatory mechanisms Have the capacity for being the proactive “eyes and

ears” for the sector they represent High degree of innovativeness for solutions Exercise transparency and equity Strong regulatory responsibility and/or authority

Way forward and Implications for Policy Makers

Well managed and resourced sector specific institutions can serve as a catalyst for export diversification and economic growth

Resource mobilization

Positively influence policy

Advocacy forum/platform

Enhance public/private partnerships

Energies for entrepreneurship

Thank you for your attention

Ladies and Gentlemen