PROSPERITY FOR ALL THROUGH EMPLOYMENT PRIVATIZATION, LIBERALIZATION AND JOB CREATION.

The Movement’s Economic Gains

On the side of the economy, the Movement Government has made truly giant strides. We embarked on privatization and liberalization of the economy with emphasis on private sector-led growth as an engine of development. A majority of the parastatals which were limping and draining government funding have been privatised. Due to poor management and corruption Government money was not always put to good use hence draining the national budget. As a result of privatization, the level of direct subsidies dropped significantly from UShs 19 billion in 1994 to 9 billion in 1998. The companies that were privatized are now paying taxes to government.
We can now boast of the following economic gains:

High GDP growth rates averaging 6.5% per annum, over the last 19 years.
The contribution of the services sector to GDP has increased from 15% in 1986 to 40.6% in 2000/01 and 43.3% in 2004/05.
The high growth rate of the industrial and services sectors have reduced the overall contribution of agriculture to GDP from over 50% in 1986 to 36.4% in the year 2004/05. This is a positive step towards transforming the economy from predominantly agricultural to industrial and services- based economy.
Tax revenue collection has Increased from Shs 44 billion in 1986 to 1,877.2 billion in 2004/05 so that the share of revenue collections to GDP has increased from 4.5% in 1986/87 to 14% in 2004/5.
Telephone lines have increased from 26,000 in 1986 to now 1,235,028 mobile lines and 86,873 fixed lines;
To date, the NRM government has licensed 148 FM radio stations of which 145 are operational, with coverage across the whole country covering almost all dialects;
Television broadcasting has increased from 1 station in 1986 to 7 stations to date;
All the 56 districts of Uganda now have Internet Access.
The NRM Government has reduced poverty from 56% in the 1990s to 34%. About two years ago, poverty levels rose to 38% due to unforeseen circumstances in the world market. The leadership of the Movement has correctly and consistently illuminated the path forward at every stage of our struggle.
Liberalization of the marketing of crops, e.g. cotton, coffee. Farmers used to have problems of selling on credit to marketing boards. This is now history as they sell on a cash basis to private buyers.
The NRM Government fully liberalized the current and capital account and the selling and buying of foreign exchange. With licensed forex bureau operators open to all, there is no longer fervent need to apply for allocation of foreign exchange to Bank of Uganda, thus no need for ‘Kibanda’ as in the past.
There has been expansion of real estate construction in all the towns and districts of Uganda.
Industrial growth rate, which was 0.6% in 1986 had reached 7.1% per annum by 2002. Industry as a percentage of GDP was 6.8% in 1986, rising to 18.9% in 2002, beating the 9% target of the first two five year plans after independence. Industry as a share of GDP now stands at 20.4%.
Availability of essential commodities; Ugandans will recall the scarcity which existed before the advent of NRM, which had led to some people being allocated chits to purchase the scarce goods, which they in turn ended up hoarding and selling at exorbitant prices (okusamula). Other Ugandans had resorted to smuggling (magendo) of the scarce commodities. These practices are now a thing of the past because of the widespread availability of all commodities. The goods which were in scarcity with zero production levels are now being produced locally.

For example:

The following “Essential” Consumer Products were Produced in Uganda in 2004.

Sugar: 193,151 tonnes
Beer: 111,886 million litres
Soft drinks: 111,381 million litres
Textiles: 10,091 million sq. metres
Cement: 656,714 tonnes
Edible oil: 55,970 million litres
Laundry soap: 76,447 tonnes
Milk: 1.13 billion litres

In the Human Development Report of 2005, Uganda was reported to have graduated from Low Human Development group to a Medium Human Development group. The report further notes that life expectancy has improved from 43 years in 2000 to 45.7 in 2004. Literacy rates have gone up from 65% in 1997 to 70% in 2003, with more than 68% of the population aged more than 10 years and above literate.
On the other hand, an IMF Mission that visited Uganda, in their Press Release No. 05/241 of 26th October 2005, noted that “Uganda’s balance of payments position is strong”, and agreed that “Uganda is well placed to graduate from IMF financing”.

Uganda’s Non-Traditional Exports

The value of non-traditional exports has been increasing, highlighting their potential as a source of foreign exchange. The value of non-traditional exports increased from US$ 39.4 million in 1992/93 to US$ 253.2 million in 2000/01. In 2000/01 non-traditional export earnings were higher than traditional exports by US$ 81.3 million. The ratio of coffee exports has been steadily reducing, signifying a steadily growing diversification of the export sector. The following figures illustrate this:

NON-TRADITIONAL EXPORTS, 2002-2004
	2002		2003		2004
	Tonnes	(USD Millions)	Tonnes	(USD Millions)	Tonnes	(USD Millions)
Fish	25,525	(87,945 m)	26,301	(87,477 m)	31,808	(103,277 m)
Maize	59,642	(10,609 m)	60,298	(13,724 m)	90,576	(17,896 m)
Beans	10,753	(3,283 m)	18,070	(5,235 m)	26,233	(8,968 m)
Sesame	1,380	(510 m)	4,504	(2,183 m)	4,283	(2,788 m)
Flowers	4,504	(17,828 m)	5,637	(22,080 m)	6,092	(26,424 m)
Hides	20,049	(9,810 m)	18,565	(4,926 m)	18,502	(5,409 m)
Cocoa	1,626	(2,023 m)	4,328	(7,001 m)	5,155	(6,801 m)
Soap	7,594	(3,434 m)	11,399	(5,554 m)	16,281	(7,708 m)

	Kw	(USD '000)	Kw	(USD '000)	Kw	(USD '000)
Electricity	26,468	(16,279 m)	21,748	(13,580 m)	19,310	(11,877 m)

	Kgs	(USD '000)	Kgs	(USD '000)	Kgs	(USD '000)
Gold	7,117	(60,342 m)	3,779	(38,446 m)	3,969	(61,233 m)

Source: Bank of Uganda

The Financial Sector

Financial Rector Reforms

The banking industry has been strengthened in many important respects over the last few years. This has been achieved through tightening prudential regulations on the banking system, increased frequency of on-site inspections and surveillance and improvement of supervision. New prudential regulations have been introduced to increase the minimum capital requirements for financial institutions.

For example, the minimum paid up capital requirement for commercial banks was increased to Shs. 4.0 billion in January 2003 while Credit Institutions are required to have a minimum of Shs. 1.0 billion. The enhanced capital is intended to provide a cushion for losses and act as a safeguard to depositors’ funds. Most banks have successfully fulfilled these requirements. The enforcement of prudential regulations has also been improved, notably with the closure of insolvent banks in 1998, 1999 and 2001.

A Revised Financial Institutions Act was passed by parliament in 2003. It aims at further strengthening the prudential regulations. This statute strengthens licensing and delineates corporate governance requirements for the financial sector, strengthens restrictions on insider lending and large loan exposures, and introduces a requirement for mandatory prompt corrective action to be imposed on distressed banks. This will ensure that banks are prudently managed and that the safety of deposits is not jeopardized through mismanagement and fraud. The law includes provisions on corporate governance, which spell out clearly the duties and stringent management controls for the key players in the risk management process. The eligibility to audit a financial institution is restricted to accountancy firms.
There has also been an improvement in the financial depth of the economy; and the non-performing assets as a ratio of total outstanding loans have declined from 50% in June 1995 to 8% in September 2001. In an attempt to further increase efficiency and reduce transaction risk in the financial sector, an electronic cheque clearing system has been inaugurated.

Growth in Financial Savings

Private sector savings in the banking system, although still low, have maintained an upward trend. Total private sector deposits rose from Shs. 1,153.8 billion in September 2000 to Shs. 1,246.7 billion in September 2001, representing and increase as a share of GDP from 13.3 to 13.5. Savings and certificates of deposits rose from Shs. 350.1 billion in September 2000 to Shs. 379.1 billion in September 2001. There has also been a growth in total assets of the banking system from Shs 1,942.7 billion to Shs 2,194 billion, i.e. from 20.7% to 23.8% of GDP. The sector has witnessed a significant increase of transactions in both the domestic money market and foreign exchange markets. A central depository system has been set up in the Bank of Uganda to facilitate and support inter-bank shilling transactions.

Pension Reform

Social Security, pension and provident funds usually represent important sources of long-term capital in an economy. Pensions, and in particular defined contribution schemes such as the National Social Security Fund (NSSF) will therefore play an important role in the financial sector basically because they hold long-term funds, which can be invested in long-term productive assets. Substantial policy analysis has been done taking into account the interests of various stakeholders and reforms will be announced in the near future to improve the management and investment of these funds for the benefit of the contributors of these funds.

Insurance sub-sector

In the insurance sub-sector more effective supervision and regulation has been undertaken to ensure that insurance companies are financially sound, comply with the insurance statute and that the interests of policyholders are protected. As a result, the licenses of two local companies were revoked for failure to meet the minimum statutory paid-up capital. To further strengthen the sub-sector, necessary amendments in the Insurance Statute, 1996 and the Motor Vehicle Insurance (Third Party Risks) Statute of 1988 have been proposed and are under consideration by the Ministries of Finance and of Justice and Constitutional Affairs.

How Uganda can Develop its Capital Markets

Uganda can introduce Preferential Tax regime to encourage companies to list on the stock exchange. This reduces the costs associated with the preparations to list on the stock exchange. With more listed companies the public have greater opportunities to buy shares in successful companies. Increased public participation will create a need for brokerage firms which will take it upon themselves to increase public awareness of the availability of these financial instruments. These brokerage firms act as intermediaries between private customers and the companies in which they own shares.

Commerce

The liberal economic policies we have been implementing have created an enabling environment for our importers and exporters to conduct business without undue restriction. However, we are aware that there are problems that still need to be resolved. Some of these problems relate to the high costs of borrowing, high transport costs from Mombasa and Dar es Salaam ports, transit delays and unclear taxation systems.

We have initiated talks with the government of Kenya to improve the efficiency of the Mombasa harbour to eliminate problems like thefts of merchandise and to reduce delays in clearing and forwarding.

The concessioning of the Kenya-Uganda railway will improve the operation of railway transport, reduce the transport charges and the transiting period.

The restructuring of the Uganda Revenue Authority (URA), will be followed with the streamlining of the taxation system and sensitizing of the business community on tax valuation and tax payment methods so that the tax payer knows what is required of him in the process of paying tax.

We will extend to the business community the use of custom-bonded warehouse, where the importer is allowed to pay tax as and when merchandise is taken out of the bonded warehouse.

Agriculture

Uganda has 16.7 million hectares of cultivable land, which is 86% of the total land area. Of this, only 5.20 million hectares (31.1% of total cultivable land) is currently under cultivation. Cultivable land not utilized is 11.5 million hectares.

Rural Household Economy
No. %

Households engaged in agriculture 3,833,485 74.8

Households mainly depending on
Subsistence farming (smallholders) 3,490,098 68.1

Households engaged in medium 343,387
and large farming enterprises

Households with an informal enterprise 3,841,859 75

Land Utilization Structure:

Stratum	Area (ha)
Plantations hardwoods	18,682
Plantations Softwoods	16,384
Tropical high forests (normal)	650,150
Tropical high forests (degraded)	274,058
Woodlands	3,974,102
Bush lands	1,422,395
Grasslands	5,115,266
Wetlands	484,037
Subsistence Farmlands	8,400,999
Commercial Farmlands	68,446
Built up areas	36,571
Water	3,690,254
Impediments such as rocks, etc.	3,713
Total	24,155,057
*Source: NEMA (2003); NBS (2002)*

Other Activities Related to Agriculture

Agricultural zoning

In order to take advantage of the American, European, Japanese and Chinese markets, we are encouraging farmers to engage in more than one economic activity of high value and which has a regional and international market from which they will earn enough income. The country was mapped into ten (10) agricultural production zones as summarised below.

The purpose of zoning is to link agriculture with processing and the markets. We have started on this project of boona bagagawale by launching agricultural zoning in Luwero where we started with about 1,000 families. We shall soon expand in other areas.

Agricultural Zones:

North Eastern Dry lands – Moroto, Northern Kotido and Eastern Kitgum. (Gum Arabica, Simsim, Apiculture, Goats/Skins, Beef cattle/Hides, Ostriches, Sunflower)
North Eastern Savannah Grasslands – Pader, Kitgum, Eastern Lira, Katakwi, Northern Sironko, Northern Kapchorwa, Nakapiripirit, Southern Kotido (Apiculture, Beef cattle/Hides, Goats/Skins, Simsim, Cassava, Pulses, Sunflower)
North Western Savannah Grasslands - Adjumani, Western Nebbi, Arua, Moyo, Yumbe, Northern Gulu, Northern Apac, Western Lira (Spices, Tobacco, Apiculture, Cotton, Pulses, Simsim, Robusta coffee)
Para Savannahs – Eastern Nebbi, South-Western Gulu, Western Masindi (Spices, Fisheries, Cassava, Apiculture, Beef cattle/Hides, goats/Skins, Cotton)
Kioga Plains – Kayunga, Kamuli, Iganga, Northern Bugiri, Tororo, Northern Busia, Southern Mbale, Pallisa, Kumi, Soroti, Kaberamaido, Southern Lira, Southern Apac (Fisheries, Apiculture, Maize, Pulses, Beef cattle/Hides, Cassava, Goats/Skins)
Lake Victoria Crescent – Kampala, Mukono, Wakiso, Eastern Mpigi, Eastern Masaka, Eastern Rakai, Kalangala, Jinja, Mayuge, Southern Bugiri, Southern Busia (Robusta coffee, Fisheries, Spices, Floriculture, Horticulture, Vanilla, Cocoa, Dairy cattle)
Western Savannah Grasslands – Hoima, Kiboga, Southern Luwero, Mubende, Kibaale, Kyenjojo, Kabarole, Kamwenge, Southern Kasese (Robusta coffee, Tea, Apiculture, Maize, Bananas [Brewing], Beans, Beef cattle/Hides)
Pastoral Rangelands - Eastern Masindi, Nakasongola, Northern Luwero, Central Kiboga, Southern Mubende, Western Mpigi, Western Masaka, Western Rakai, Sembabule, Eastern Mbarara, Southern Ntungamo, Northern Bundibugyo (Beef cattle/Hides, Dairy cattle, Goats, Spices, Apiculture, Citrus, Pineapple)
South Western Farmlands - Western Mbarara, Bushenyi, Northern Ntungamo, Rukungiri, Northern Kanungu (Robusta coffee, Tea, Dairy Cattle/Hides, Fisheries, Bananas [Dessert], Vanilla, Tobacco)
Highland Ranges - Mbale, Southern Sironko, Southern Kapchorwa, Southern Kanungu, Kabale, Kisoro, Northern Kasese, Southern Bundibugyo (Arabica coffee, Passion fruits, Vanilla, Dairy cattle/Hides, Spices, Maize, Irish potatoes).

Promotion of Coffee

Coffee growing has been introduced in non-traditional coffee regions in the Mid-North and Eastern Uganda.

Lowland arabica, Bushenyi arabica, is being introduced in the traditional robusta coffee areas.

Arabica coffee has been introduced in highland areas in the districts of Kisoro, Kabale, Rukungiri and Kanungu.

Medium and large coffee plantations have come up. A case in point is the Kaweri Coffee Plantation in Mubende district, which has nearly 2,000 hectares under coffee. Other such initiatives are in the districts of Masaka, Luweero, Mukono, Bushenyi and Mbarara.

Wet Processing: 16 units of wet processing machines which produce value added coffee at farm level were imported into the country under the Strategic Intervention Programme (SIP) and allocated to progressive farmers and farmer groups on a lease arrangement with DFCU bank. Nine (9) units out of these have been installed to completion. Four additional washing stations (units) were imported into the country by the private sector and 3 old ones have been rehabilitated in the arabica areas of Mt. Elgon. The market has accepted Uganda washed robusta coffee and it fetches a premium of up to $ 300/tonne above the conventional coffee. Production of washed robusta coffee is targeted at 4,500 tonnes/year, an equivalent of US $ 1.35 million in revenue.

Farmers waiting to receive coffee seedlings under the coffee village concept.

Coffee produced for specialty markets

Coffee for specialty markets includes: Organic coffee, shade grown, fair-trade and washed robusta.
Over 20,000 farmers have been certified as organic coffee farmers in the districts of Bushenyi and Luweero for robusta coffee and in Kapchorwa and Nebbi for arabica.
Quantities of organic coffee in the past 4 years averaged 6,500 bags and attracted a price premium of around $ 250/tonne.
A local certification body, UgoCert, was formed to cut down on conversion and certification costs.
Uganda has received recognition as a major organic coffee origin in Africa.

Since 2001, and for the first time in 100 years Uganda coffee has been commercialized, Uganda is involved in value addition to coffee where more than six brands have now been developed for overseas markets through joint ventures.

Establishment of soluble coffee processing plants in Uganda

The governments of Uganda and Libya are jointly setting up a soluble coffee plant in Kampala at the Namanve Industrial Park estimated at a value of US$25 million and TATA group of companies are also setting up another one in Jinja early 2006. Mt Elgon Coffee Ltd is putting up a roasting plant in Tororo for exporting to its sister company in Denmark. The three firms when operational will process only 20% of the coffee produced. Their annual output will be 15,000 tones of instant coffee earning the country about US $ 90 million in exports. These coffee-processing companies will create about 1200 new jobs.

Domestic consumption

In addition to coffee consumed in hotels and restaurants, other specialized coffee shops have grown from one that existed in 2001 to five today. All these coffee shops have developed their local small roasting capacities and brands.

An assortment of Uganda Coffee Brands.

Tea

The following has been achieved in the tea sector:

500 ha of the abandoned 800 ha have been rehabilitated;
300,000 tea cuttings were imported;
Nursery operators were assisted to raise 9 million tea cuttings;
22.6 million tea seedlings were distributed to 9,844 farmers in the tea growing districts;
All the four small holder factories expanded that processing facilities.