Gov't Prioritizes Vehicle and Pharmaceutical Industries to Boost 2021/2022 Trade Balance

A policy has also been prepared for Cabinet on the support of the development of Private Industrial Parks.
18 Jan 2021 13:15
The government will continue to enhance the manufacturing capacity to support the production of essential commodities. This is according to the National Budget Framework Paper for 2021/2022.     

In the paper, the Ministry of Finance, Planning and Economic Development has also outlined several interventions where priority will be given to the development of economic free zones and the industrial parks.

A policy has also been prepared for Cabinet on the support of the development of Private Industrial Parks.  

The Government also plans to support local pharmaceutical industries with low-cost credit facilities under the Uganda Development Bank (UDB) and strengthening electronic infrastructure that minimizes human contact and reduces the cost of trading.  

The paper also prioritizes the operationalization of the Kiira Motors Corporation vehicle plant and to set up a comprehensive Automotive Industrial & Technology Park on two square miles to support a wide range of investments in auto parts manufacturing, vehicle testing and automotive technology innovation enterprises.

It also provides for the establishment of export logistics centres and four border markets to be developed to facilitate trade with regional neighbours.  

According to the government, a comprehensive review of the tax code and other laws will be undertaken to ascertain the extent to which they conform to the objective of import substitution and export promotion.  

It will also strengthen the private sector through incentives such as subsidized credit and other measures that attain an optimal balance in private sector investment between the real estate and other productive sectors of the economy. The budget framework paper also notes that Uganda posted a deficit of $217 million in trade in merchandise against the rest East African Community in 2019/2020, after five consecutive years of surplus trading.

Ugandan exports to the region also amounted to $1.050 billion during the period, against imports of 1.267 billion dollars, the highest level of imports in six years, according to figures from the Bank of Uganda. 

The exports revenues were lower over the year compared to those recorded in the 2018/2019 fiscal year, having been affected by the onset of the covid 19 pandemic especially in the second half (April to June).

Uganda closed her international borders to try preventing the spread of Covid 19, but cargo transport was allowed to continue either by road, air, water or rail.

However, still, there was a big decline in export and import trade due to the decline in international flights and cross-border bus services, while cargo truck drivers also had to follow standard operating procedures, which further disrupted the movement of cargo.

The export markets were also disrupted by subdued demand as people reduced on the consumption of certain product during the lockdown, while movement restrictions there also meant reduced demand for most commodities.

Uganda’s exports were also affected by non-tariff barriers constantly imposed especially by Kenya, which notably blocked Uganda’s sugar, milk and some other consumer products.

But also, there were incidents where Tanzania refused to allow in sugar from Uganda. 

Both countries claimed they were not comfortable with the quality of the products from Uganda, while they also tasked Uganda to prove that it was producing, and not importing and re-exporting all the products that were affected.

The closure of the Rwanda-Uganda border also affected Uganda's exports to that country.   

Over the last five years of trading, the 2017/2018 fiscal year recorded the biggest trade surplus of $703 million, boosted by the highest level of exports of 1.514 billion. This surplus, however, dropped sharply to $55 million in 2018/2019.

Last year, the balance of trade with Tanzania was to worst at a deficit of $314 million, followed by Kenya with $214 million.

The country traded at surpluses with the rest of the countries, including with Rwanda where Uganda’s exports exceeded imports by 4 million dollars.

Despite Uganda registering a trade surplus with Rwanda, the value of exports declined by 93% to $12 million in 2019/20 from $173 million in the previous year.