Export Diversification and Industrialization- A case for Sector Institutions

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Export Diversification and Industrialization- A
case for Sector InstitutionsImplications for
Policy Makers

• The Uganda Experience
• Florence Kata
• Executive Director
• Uganda Export Promotion Board
• f.kata_at_ugandaexportsonline.com
• florencekata_at_yahoo.com

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Uganda A Synopsis

• 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) US1 Shs 1760
• Source Key Economic Indicators, 59th Issue,
  Uganda Bureau of Statistics

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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
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POST-1986
Economic conditions

• Policy shift from a state-controlled to a market
  led economy (macro-economic recovery and reform
  program early 90s)
• 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 90s 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 SSIs strategically
  selected to oversee the fast growth of the
  diversification sectors

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Uganda Export Diversification Trends
Uganda Exports by Value, US '000 (1997-2005) Uganda Exports by Value, US '000 (1997-2005) Uganda Exports by Value, US '000 (1997-2005) Uganda Exports by Value, US '000 (1997-2005) Uganda Exports by Value, US '000 (1997-2005) Uganda Exports by Value, US '000 (1997-2005) Uganda Exports by Value, US '000 (1997-2005) 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 Bureau of Statistics
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The Argument for Sector Specific Institutions Vs
Economy wide approach

• Our view is affirmative as SSIs 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)

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The Argument for Sector Specific Institutions
(Contd)

• 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 SSIs 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 SSIs
  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.

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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

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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

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• Thank you for your attention
• Ladies and Gentlemen