By James Karuhanga
Researcher, Great Lakes Centre for Strategic Studies
 

A new strategy, the Competitiveness and Investment Climate Strategy (CICS) 2006 – 2010 has been launched. According to the strategy document, it provides an instrument to guide policy development and resource allocation for the national competitiveness agenda.
 

Developed through a consultative process, it is to contribute to the Poverty Eradication Action Plan (PEAP) by enhancing productivity, competitiveness and incomes. This will be achieved by:

  • Addressing factors affecting the competitiveness of the country’s productive sectors,
  • Proposing means to mitigate the domestic business environment and investment climate and,
  • Addressing factors that impede capacity to compete in international and regional markets and to manage international trading relationships.

 

‘‘It is quite a challenge but it is not surmountable if we are focused,’’ admitted Dr. Peter Ngategize, the National Coordinator of the CICS Secretariat in the Ministry of Finance, Planning and Economic Development (MFPED). ‘‘We need to do more studies and mobilize resources,’’ he clarified.
 

As reported by the Great Lakes Center for Strategic Studies (GLCSS) last year, the 2006 – 2007 Global Competitiveness Report indicated that Uganda had slipped 10 places to the 113th position in business competitiveness. The 2005 Uganda Poverty Status Report underlined that most binding constraints to doing business in Uganda had not changed greatly over the 3-4 years, despite the numerous interventions undertaken to address these problems. Access to financing remained the most critical constraint to business firms in Uganda, followed by corruption and inadequate infrastructure.
The strategy, which replaces the earlier Medium Term Competitiveness Strategy (MTCS) 2000 – 2005 will contribute to attainment of a vision encapsulated in six targets:
 

-         A GDP growth rate of at least 7 percent per annum,
-         Export earnings amounting to at least US $2 billion per annum,
-         Private sector investments of at least 25 percent of GDP,
-         Revenue collection at 20 percent of GDP and,
-         Uganda to join the club of Middle Income Countries (MICs) and ranking among the top 10 most competitive countries in Africa.
 

Key interventions to meet targets
 

 In an earlier (New Vision, 22 January 2007) press statement, Dr. Ngategize stressed that Uganda is constrained by an inadequate energy supply, high cost of finance, poor transport network and weak institutions. He pointed out government’s intensified efforts in increasing power generation through the use of thermal energy and use of other non-renewable energy sources.
 

High commercial lending rates, between 15 and 24 percent per annum, even much higher with microfinance institutions are another challenge. Legislation aimed at facilitating the development of leasing and a Credit Referencing Bureau (CRB) will be introduced. The pension sector will also be liberalized.
 

With respect to transport, over 30 percent of the value of imports is attributed to transport costs between Kenya’s Mombasa port and Kampala – making consumer goods and inputs expensive. Government will operationalize the greater Kampala Metropolitarian area master plan, establish a road fund, improve cross border trade facilities, mobilize resources for the development of the air port infrastructure required for exports and facilitate the development of public-private partnerships for infrastructure investments.
 

Furthermore, Uganda’s competitiveness measured by the Public Institutions Index Rank has fallen from the 86th position out of 103 countries in 2004/05 down to 100th position in 2006/07 out of 125 countries.
 

These constraints have to be addressed through better planning and strengthening of public-private partnerships in areas which have hitherto been a preserve of the public sector.
 

Uganda has secured a loan of US$70 million from the World Bank Group to finance the Second Private Competitiveness Program (PSCP II) which has three main components: improving infrastructure, improving business environment and, enhancing enterprise competitiveness. The five year project will help in financing the development of an industrial and business park, modernization of the land and company registry and improved enterprise performance through grants to finance technology acquisition, quality improvement and other business development services.
 Three key output areas
 

 §         Strengthened Competitiveness of  Productive Sectors
 

The strategy document stresses that while enhancement of productivity, competitiveness and incomes may be facilitated by public sector actions aimed at improving the business environment, Uganda’s competitiveness will primarily be driven by four key productive sectors, that is, agriculture, industry, services and tourism sectors. According to Ngategize, the criterion for selection of the sectors takes into account both the need to gain competitiveness in the market place and their capacity to compete regionally.
 

In productive sectors, he noted the preference that the competitiveness agenda be private sector driven highlighting the importance of developing public-private partnerships. Where possible, using clusters to identify priorities and devising strategies to address them.
 

§         Competitiveness of the Business Environment
 

The document notes that exploitation of the potential provided by Uganda’s productive sectors will be constrained without a conducive business and investment climate. It points out six areas critical for the growth of enterprises and attraction of both local and foreign investments:
 

1] Infrastructure – especially power and roads,
2] Financial services,
3] Commercial justice – legal and regulatory framework,
4] Business registration,
5] Land registration and,
6] Weak and ineffective institutional frameworks within public and private sector institutions.
 

According to Ngategize’s press statement, the aim of this out put area is to reduce the cost of doing business and minimize delays associated with bureaucratic red-tape. The action areas will include undertaking key infrastructural investments aimed at ameliorating the power deficit, improving access to affordable financial services, ‘‘fast tracking’’ the revision process of key commercial laws and the reform of the land and company registries.
 

§         Competitiveness in the Global Market
 

‘‘The trade deficit during the last fiscal year (2005/06) stood at US $ 1013.7 million,’’ the strategy document illustrates an imbalance between exports and imports. It states that the unfavorable trend is demonstrated by the fact that exports, which for the period stood at US $ 877.39 million have been growing at a rate of 11.6 percent per year while imports stand at US $ 1013.7 million and have been growing at 16.5 percent per year.
 

Ngategize considers this output area to address international trading relations and covers negotiations relating to international and regional trading arrangements – transit trade facilitation and regional transportation issues, together with the systems to be established to confirm with export standards in international markets.
 

Accordingly, a CICS monitoring and evaluation framework linked to the PEAP matrix will be used to monitor output on an annual basis. An annual consultative forum on competitiveness will report directly to the Presidential Economic Council (PEC).
 

Critical to the success of the CICS will be the need to link the strategy priorities with the annual budget process. To effectively achieve this objective, there has been established a CICS Budget Advisory Working Group operating as a sub-committee of the CICS Steering Committee.

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