By James Karuhanga

Senior Researcher Uganda

GLCSS

According to the 2006-2007 Global Competitiveness report, Uganda has slipped by 10 places to the 113th position in business competitiveness. In the most recent rating, the Global Competitiveness Report 2006-2007 ranks Uganda 113th out of 125 countries. The country was ranked 103rd in 2005.
 
Uganda Poverty Status Report, 2005 points out that Uganda’s competitiveness in the business environment when compared to other countries has continuously declined. During 2003-04, Uganda ranked 80th out of 102 countries. In 2004-05, it ranked 79th out of 104 countries but even though this was a slight improvement from the previous year, in 2005-06 it dipped to 87th position out of 117 countries.
 

”Tanzania and Uganda, two of the region’s largest economies, have not managed to significantly improve their competitiveness and are ranked 104th and 113th, respectively,’’ the latest World Economic Forum (WEF) report said.
 

‘’Even relative to these low overall rankings, they do even more poorly on health and primary education (118th and 123rd, respectively) and on higher education and training (112th and 107th, respectively).’’
 

First released in 1979, the Global Competitiveness Report is a yearly report published by the WEF. It assesses the ability of countries to provide high levels of prosperity to their citizens which in turn depends on how productive a country uses available resources. The Global Competitiveness Index measures the set of institutions, policies, and factors that set the sustainable current and medium-term levels of economic prosperity.
 

The recent report points out weaknesses in health and education as being behind Uganda’s slip in the tables and warns that failure to make a significant improvement in these basic requirements is likely to continue hampering growth.
 

‘’Although they do better on some of the innovation factors,” the report said, “their failure to make a significant improvement in the basic requirements sub-index are likely to continue to dent their growth prospects.’’
 

Uganda’s Overall Competitiveness Status
 

The 2005 Uganda Poverty Status Report underlines that most binding constraints to doing business in Uganda have not changed greatly over the past three to four years, despite the numerous interventions undertaken to address these problems. Access to financing remains the most critical constraint to firms that do business in Uganda, followed by corruption and inadequate infrastructure. 
 

Some of the other priority constraints in the last three to four years include inadequate supply of infrastructure, tax rates, inefficient bureaucracy and poor work ethics in the national labor force. Low pay and productivity of the labor force, poor quality of electricity supply, poor technologies, the negative impact of HIV/AIDS, irregular payments in public utilities and mismanagement of government spending are other notable competitive disadvantages included in the poverty status report.
 

Despite the above constraints, the report notes that Uganda also enjoys a number of competitive advantages that make it an attractive destination for doing business. The notable advantages during 2005-06 include: the favorable macro-economic environment; flexibility of wage determination; Foreign Direct Investment (FDI) and technology transfer; the positive effects of privatization on competition and the business environment; centralization of economic policy making; the quality of scientific research institutions; the reduced burden of government regulation; government success in ICT promotion and the local availability of  specialized research and training services.
 

 

Private Sector Competitiveness
 

The Poverty Status Report stresses that achieving the government’s growth targets will depend on the government’s ability to improve the basic investment climate to reduce risks and barriers to doing business and enhance private sector’s competitiveness. Since 2003, some progress has been realized in improving the business climate as a direct consequence of implementing the Medium Term Competitiveness Strategy (MTCS).
 

‘’The Investment Climate Assessment 2004 report indicates that the overall business climate has improved especially with regard to infrastructure, relevance of government regulations and promotion of public private partnerships,’’ (2005 Poverty Status report). 
 

In August 2000, the Government of Uganda launched the MTCS aimed at creating a favorable environment for increased private investment. The strategy, drafted by the Ministry of Finance, Economic Planning and Development, (in consultation with the private sector), aims at the stimulation of private sector growth and also has the stated objective of making the Ugandan private sector more competitive both domestically and globally. This is to be achieved mainly through removal of the key constraints, which impede business operations, that is, initiatives aimed at improving the enabling environment with respect to the following key areas:
 

·         Infrastructure sector reform
·          Strengthening the financial sector and improving access to credit
·         Commercial sector reform
·         Institutional reform for business promotional agencies
 

In addition, the document offers strategies aimed at supporting Ugandan firms in their efforts to face the challenges arising from globalization, i.e.
 

·         Business development services
·         Private sector growth and globalization                
 

Access to key Infrastructure, Commercial Justice and Commercial Laws
 

According to the poverty status report, private sector firms have increased access to some of the key infrastructures, although they remain largely inadequate and in some instances inefficient. The country’s energy crisis continues to constrain the economy’s business environment and poor conditions of rural and urban roads also heighten the problem.
 

‘’Low capacity among local contractors to undertake road works still remains a challenge,’’ emphasizes the report, while advising that, ‘’greater use needs to be made of private contractors to improve the efficiency, speed and quality of maintenance works.’’
 

Commercial justice and commercial laws are considered very important elements in business competitiveness. As reported, the commercial justice reform programme has made significant progress in reforming Kampala’s commercial court. The report points out that growing confidence in the commercial justice system has led to an increase in cases being registered at the court although the number of backlog cases remains high.            
 

The Great Lakes Centre for Strategic Studies is a London-based think tank with offices in Kigali and Kampala.

 

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