State Minister for Investment Evelyn Anite (2nd right) visits Pearl
Light Technology,a company assembling bulbs in Mbale Industrial Park.
Industrial parks are expected to boost Uganda’s producion capacity to
cut the country’s import bill. PHOTO BY MICHAEL KAKUMIRIZI
Uganda’s efforts to towards imports substitution are steadily taking shape, according to economic
sector players and analysts.
Despite notable challenges, Trade Minister Amelia Kyambadde is optimistic about the future. She is particularly excited by the ‘Buy Uganda, Build Uganda' policy (BUBU), which seeks to boost local production and consumption of domestically manufactured products.
sector players and analysts.
Despite notable challenges, Trade Minister Amelia Kyambadde is optimistic about the future. She is particularly excited by the ‘Buy Uganda, Build Uganda' policy (BUBU), which seeks to boost local production and consumption of domestically manufactured products.
Import substitution
Import substitution is all about replacing foreign imports or goods with domestic production. It is based on the premise that a country should endeavoúr to reduce its foreign dependency through the domestic production of industrialised products.
It should be noted that for the first time in history, Uganda had a surplus or favorauble balance of trade with Kenya in the Financial Year 2017/18 of $122.7 million (exports of $ 628.4 million against imports of $505.7 million). Uganda also registered a record highest trade balance in East Africa of $413.8 million (Exports of $ 1,220.63 million against Imports of $806.77 million), in the same period.
According to the annual Sector Performance Report released in October last year, the aforementioned feat is credited to the good integration and multilateral efforts spearheaded by the sector ministry.
Although there has been a slight change this year according to Uganda Revenue Authority Statistics in favour of Kenya, the Commissioner Customs, Mr Dicksons Collins Kateshumbwa believes this shouldn’t cause alarm, considering that more Kenyan firms are now prefer conducting the entire value chain operation from here.
Import substitution is all about replacing foreign imports or goods with domestic production. It is based on the premise that a country should endeavoúr to reduce its foreign dependency through the domestic production of industrialised products.
It should be noted that for the first time in history, Uganda had a surplus or favorauble balance of trade with Kenya in the Financial Year 2017/18 of $122.7 million (exports of $ 628.4 million against imports of $505.7 million). Uganda also registered a record highest trade balance in East Africa of $413.8 million (Exports of $ 1,220.63 million against Imports of $806.77 million), in the same period.
According to the annual Sector Performance Report released in October last year, the aforementioned feat is credited to the good integration and multilateral efforts spearheaded by the sector ministry.
Although there has been a slight change this year according to Uganda Revenue Authority Statistics in favour of Kenya, the Commissioner Customs, Mr Dicksons Collins Kateshumbwa believes this shouldn’t cause alarm, considering that more Kenyan firms are now prefer conducting the entire value chain operation from here.
Trade development
Over, the last five years, the economy has been producing more products locally and exporting more as exemplified by Uganda Export Board Promotion Board (UEPB) data.
According to the country’s export prefect data, beginning financial year 2014/15 to financial 2018/2019, Uganda’s exports increased from $2.7billion to $3.9 billion.
Despite efforts to produce more for local market consumption as well as for targeted export market, Uganda is still a net importer, meaning she imports more than she exports. The individual countries with which Uganda had high trade deficits (imports more from) were: China amounting to more than $855vmillion (representing over 30 of the deficit); India, amounting to $596 million (representing 22 per cent) and Saudi Arabia, amounting to $384 million (representing about 15 per cent).
Others are United Arab Emirates, accounting for $277 million (representing 10 per cent) and Japan for $247.83 million (representing about 10 per cent), out of a total deficit of $2,599 million over the last two years.
Therefore, these five countries were responsible for approximately 80 per cent of Uganda’s trade deficit, according to sector ministry (MTIC) data.
The good news is that the Common Market for Eastern and Southern Africa (COMESA) trading bloc, just like the EAC remained the main destination for Uganda’s formal exports with the share in total export earnings of 51 per cent over the last two to three years. The EU market ranked the second main destination for Uganda’s goods and services, with the Middle East bloc taking third position of the total market share, of which United Arab Emirates contributed 92 per cent of the Uganda-Middle East exports in 2017/2018.
For the economy to pick up at the level where everybody is rewarded for their contribution in the different economic sectors, the executive director of Private Sector Foundation Uganda, Mr Gideon Badagawa, believes that import substitution is the way to go.
Over, the last five years, the economy has been producing more products locally and exporting more as exemplified by Uganda Export Board Promotion Board (UEPB) data.
According to the country’s export prefect data, beginning financial year 2014/15 to financial 2018/2019, Uganda’s exports increased from $2.7billion to $3.9 billion.
Despite efforts to produce more for local market consumption as well as for targeted export market, Uganda is still a net importer, meaning she imports more than she exports. The individual countries with which Uganda had high trade deficits (imports more from) were: China amounting to more than $855vmillion (representing over 30 of the deficit); India, amounting to $596 million (representing 22 per cent) and Saudi Arabia, amounting to $384 million (representing about 15 per cent).
Others are United Arab Emirates, accounting for $277 million (representing 10 per cent) and Japan for $247.83 million (representing about 10 per cent), out of a total deficit of $2,599 million over the last two years.
Therefore, these five countries were responsible for approximately 80 per cent of Uganda’s trade deficit, according to sector ministry (MTIC) data.
The good news is that the Common Market for Eastern and Southern Africa (COMESA) trading bloc, just like the EAC remained the main destination for Uganda’s formal exports with the share in total export earnings of 51 per cent over the last two to three years. The EU market ranked the second main destination for Uganda’s goods and services, with the Middle East bloc taking third position of the total market share, of which United Arab Emirates contributed 92 per cent of the Uganda-Middle East exports in 2017/2018.
For the economy to pick up at the level where everybody is rewarded for their contribution in the different economic sectors, the executive director of Private Sector Foundation Uganda, Mr Gideon Badagawa, believes that import substitution is the way to go.
Issues
But first, concerns of a key sector player, the manufacturers must be addressed.
In a statement, the executive director of Uganda Manufacturers Association (UMA), Mr Daniel Birungi, noted that the government is using ad valorem method of evaluation – tax whose amount is based on the value of a transaction – something he said: “Isn’t sufficient to protect locally made products.”
For instance, he argues, a 25 per cent tax is placed on a bottle which is made outside the region. However, importers have learnt to negotiate to under invoice price or under value products bought outside the region while at the customs.
“Therefore, countries with lower cost of production will have low prices on products. But the cost of conversion is usually the same across all countries. This kind of playing field is not levelled for all players,” he said.
He continued: “In this year’s budget, the tax was increased to 35 per cent. However, this is not sufficient to protect the local market because the importers have mastered technics to play with invoice values. It is early to conclude but this is something that needs to be looked into.”
UMA, therefore, proposes that government adopts a valuation method for products prone to illicit declarations by considering specific duties/levies for products that are susceptible to under valuation/pricing.
Additionally, Mr Birungi believes that the operating environment specifically the tax administration has tied up funds for business operations. All this impacts on import substitution. For instance, he says government takes a long time to give VAT refunds which locks up money for operations, deterring growth and expansion.
As a result, manufacturers have been left to left to the mercy of commercial banks where they are compelled to borrow at exorbitant rates, ranging between 18 and 24 per cent interest rates.
In an interview on Saturday with the chairman of Spear Motors Ltd, Gordon Wavamunno, it emerged that government needs to stamp its foot more firmly. He said: “Why should we have imported plastics in the country yet we have the capacity to supply the market? This is not the only area of the economy where the local capacity is being constrained?”
He continued: “Where we are strong, we should be protected or helped to become better. We need to see that aggressively. The more we take charge of our economic sectors the better for the economy and the country in terms of creating more jobs, revenue generation for the government and it’s a matter of national pride as well.”
Fluctuation in the Shilling are largely as a result of Uganda being a net importer. The Shilling has largely been stable against major currencies. It strengthened against the US dollar by an average of 0.6 per cent for the period between July 2018 and April 2019 as a result of higher export performance among other things.
But first, concerns of a key sector player, the manufacturers must be addressed.
In a statement, the executive director of Uganda Manufacturers Association (UMA), Mr Daniel Birungi, noted that the government is using ad valorem method of evaluation – tax whose amount is based on the value of a transaction – something he said: “Isn’t sufficient to protect locally made products.”
For instance, he argues, a 25 per cent tax is placed on a bottle which is made outside the region. However, importers have learnt to negotiate to under invoice price or under value products bought outside the region while at the customs.
“Therefore, countries with lower cost of production will have low prices on products. But the cost of conversion is usually the same across all countries. This kind of playing field is not levelled for all players,” he said.
He continued: “In this year’s budget, the tax was increased to 35 per cent. However, this is not sufficient to protect the local market because the importers have mastered technics to play with invoice values. It is early to conclude but this is something that needs to be looked into.”
UMA, therefore, proposes that government adopts a valuation method for products prone to illicit declarations by considering specific duties/levies for products that are susceptible to under valuation/pricing.
Additionally, Mr Birungi believes that the operating environment specifically the tax administration has tied up funds for business operations. All this impacts on import substitution. For instance, he says government takes a long time to give VAT refunds which locks up money for operations, deterring growth and expansion.
As a result, manufacturers have been left to left to the mercy of commercial banks where they are compelled to borrow at exorbitant rates, ranging between 18 and 24 per cent interest rates.
In an interview on Saturday with the chairman of Spear Motors Ltd, Gordon Wavamunno, it emerged that government needs to stamp its foot more firmly. He said: “Why should we have imported plastics in the country yet we have the capacity to supply the market? This is not the only area of the economy where the local capacity is being constrained?”
He continued: “Where we are strong, we should be protected or helped to become better. We need to see that aggressively. The more we take charge of our economic sectors the better for the economy and the country in terms of creating more jobs, revenue generation for the government and it’s a matter of national pride as well.”
Fluctuation in the Shilling are largely as a result of Uganda being a net importer. The Shilling has largely been stable against major currencies. It strengthened against the US dollar by an average of 0.6 per cent for the period between July 2018 and April 2019 as a result of higher export performance among other things.
Improvements
Director trade information at Uganda Export Promotion Board Lawrence Micheal Oketcho is cogniSant of the challenges that bedevil import substitution.
He cited financing challenges, standards limitations and infrastructure challenges including high cost of production. But overall, he noted that there has been progress in import substitution.
He said: “There are evident gains as are result of government promoting BUBU. The security is also conducive to enable business thrive here. Issues of power and infrastructure will soon be a matter of the past. But it is no longer a big problem as it were many years ago. We now have more power than we ever had in many years. We also have abundant labour, not to mention a huge regional market at our disposal.”
He continued: “So compared to the 1990s when we were importing almost everything, first forward, we are now only importing raw materials for industries and machineries. So we have made progress in areas of textile, leather and generally value addition. ”
Director trade information at Uganda Export Promotion Board Lawrence Micheal Oketcho is cogniSant of the challenges that bedevil import substitution.
He cited financing challenges, standards limitations and infrastructure challenges including high cost of production. But overall, he noted that there has been progress in import substitution.
He said: “There are evident gains as are result of government promoting BUBU. The security is also conducive to enable business thrive here. Issues of power and infrastructure will soon be a matter of the past. But it is no longer a big problem as it were many years ago. We now have more power than we ever had in many years. We also have abundant labour, not to mention a huge regional market at our disposal.”
He continued: “So compared to the 1990s when we were importing almost everything, first forward, we are now only importing raw materials for industries and machineries. So we have made progress in areas of textile, leather and generally value addition. ”
Standards
On Friday last week, the Uganda National Bureau of Standards (UNBS), launched the first National Standardisation Strategy (2019 -2022) as a roadmap for developing standards in key priority sectors of the Ugandan economy.
The three-year strategy was developed in consultation with several stakeholders and industry experts in Manufacturing, Export Trade, Agribusiness and Consumer Organisations and supported by the Commonwealth Standards Network (CSN), among other things seeks to enhance the profile of locally manufactured goods and services.
Ms Kyambadde, Mr Badagawa, renowned businessman Wavamunno and Mr Oketcho all accentuated the importance of proper standards in deepening the uptake of import substitution.
While launching the Strategy at Skyz Hotel in Kampala, Ms Kyambadde, said, “The National Standardisation Strategy will improve the competitiveness of Uganda products and services, thus promoting Buy Uganda Build Uganda policy and improving access to regional and international markets.”
According to a statement issued by the standard body’s (UNBS) head of public relations and communication, Mr Godwin Bonge Muhwezi, during the implementation of the three-year strategy, over 2,000 priority standards will be developed in key sectors of the economy including chemicals, consumer products, engineering, food and agriculture as well as systems and services.
Government through UNBS is expected to spend Shs4.6 billion to develop the identified standards in the strategy.
UNBS executive director, Dr Ben Manyindo, said, “The strategy has been designed to support economic growth and national development plans by developing standards in sectors that contribute to the national GDP and national exports and imports in addition to addressing the most pressing non-economic issues such as security, safety and quality of products in the market.”
The areas for standards development were guided by results from the review and analysis of data national data on contribution to GDP, export and import; research of non-economic areas that are of key priority and review of the National Development Plans to identify emerging sectors which are expected to have significant importance in the transformation of the Uganda economy.
“The strategy addresses social and environmental issues facing the population such as health, safety and environment protection, poor infrastructure and quality of services, poor skills and unemployment. It also addresses the need for standards that contribute to enterprise competiveness, productivity and market access,” Dr Manyindo said.
On Friday last week, the Uganda National Bureau of Standards (UNBS), launched the first National Standardisation Strategy (2019 -2022) as a roadmap for developing standards in key priority sectors of the Ugandan economy.
The three-year strategy was developed in consultation with several stakeholders and industry experts in Manufacturing, Export Trade, Agribusiness and Consumer Organisations and supported by the Commonwealth Standards Network (CSN), among other things seeks to enhance the profile of locally manufactured goods and services.
Ms Kyambadde, Mr Badagawa, renowned businessman Wavamunno and Mr Oketcho all accentuated the importance of proper standards in deepening the uptake of import substitution.
While launching the Strategy at Skyz Hotel in Kampala, Ms Kyambadde, said, “The National Standardisation Strategy will improve the competitiveness of Uganda products and services, thus promoting Buy Uganda Build Uganda policy and improving access to regional and international markets.”
According to a statement issued by the standard body’s (UNBS) head of public relations and communication, Mr Godwin Bonge Muhwezi, during the implementation of the three-year strategy, over 2,000 priority standards will be developed in key sectors of the economy including chemicals, consumer products, engineering, food and agriculture as well as systems and services.
Government through UNBS is expected to spend Shs4.6 billion to develop the identified standards in the strategy.
UNBS executive director, Dr Ben Manyindo, said, “The strategy has been designed to support economic growth and national development plans by developing standards in sectors that contribute to the national GDP and national exports and imports in addition to addressing the most pressing non-economic issues such as security, safety and quality of products in the market.”
The areas for standards development were guided by results from the review and analysis of data national data on contribution to GDP, export and import; research of non-economic areas that are of key priority and review of the National Development Plans to identify emerging sectors which are expected to have significant importance in the transformation of the Uganda economy.
“The strategy addresses social and environmental issues facing the population such as health, safety and environment protection, poor infrastructure and quality of services, poor skills and unemployment. It also addresses the need for standards that contribute to enterprise competiveness, productivity and market access,” Dr Manyindo said.
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