Uganda in deep crisis; needs intensive care attention

Admitting failure is a sign of wisdom and maturity and represents flexibility to look at the situation objectively with a view to identifying the real causes of the problem and provide appropriate solutions. Uganda’s economy had been sick for quite some time but it slipped into a comma in 2011 in part because of the global crisis but more critically as the result of reckless practices during the election campaigns. But the NRM government has refused to accept the obvious hoping presumably that time will correct the situation and return Uganda to normalcy. The author wrote to the president, speaker, prime minister, leader of the opposition and minister of finance advising that Uganda’s economic health was faltering, needing urgent attention. The advice was ignored, not even acknowledged.

To appreciate Uganda’s problems one has to go back to the 1987 decision by NRM government to abandon the ten point program in favor of ‘shock therapy’ structural adjustment program (SAP). The foreign advice NRM received and adopted is similar to what was imposed on Bolivia. During the 1980s and 1990s, Bolivia like Uganda, was a poster child for Washington Consensus market doctrine. Bolivia swallowed shock therapy neo-liberalism whole. Using privatization as an illustration, Bolivia sold off the airline, trains, phone and electric companies, public water system of Cochabamba City and gas and oil fields.

Economic reforms in Bolivia as in Uganda were supposed to drive the country out of poverty towards prosperity. Instead trains stopped running, the airline went bust and gas and oil revenue plummeted. The benefits went to foreign corporations and white elite in Bolivia. In Uganda the privatization exercise was judged a failure overall, conferring benefits to a few people under crony capitalism. Renewed efforts in Bolivia to increase tax on the poor together with galloping water prices and selling off gas and oil reserves at bargain prices triggered a confrontation between grass roots organizations and the government. Similarly, in Uganda increased prices including those of fuel and food starting in 2011 led to a walk to work protest that was confronted by armed forces with serious consequences including shooting to death an innocent two year old child in Masaka and wounding a pregnant woman bystander. The images shocked the world and devalued NRM government. The current efforts to raise energy tariffs and interest rates will likely trigger more dissent and civil resistance, if the government does not recast its plans.

Unlike in Uganda, the new government in Bolivia under President Evo Morales reviewed the unsatisfactory economic and social situation and implemented corrective measures with positive outcomes. Previous contracts such as in the gas and oil sector were renegotiated, leading to an increase in government revenue and the strategic role for the public sector. Increased modest taxes on foreign oil companies did not scare off investors; rather produced enough revenue to pay off budget deficit and generated surplus. Part of the surplus revenue was allocated to the poor through a cash-transfer strategy similar to Brazil’s Family Allowance program.

The cash-transfer strategy focused on children in public schools, pregnant women and the elderly. This strategy has short and long-term benefits. Keeping children at school confers many benefits including avoiding early marriage and starting a family thereby reducing population growth. The Uganda government has rejected calls including a decision by NEPAD to provide school meals with locally produced foodstuffs, resulting in many primary school children dropping out because they are hungry, getting married in their teens and producing children they cannot take care of adequately, hence high child mortality rate.

Morales government also invested in infrastructure (roads), in healthcare through construction of clinics, provided safe drinking water and farm implements (tractors). Thus Bolivia’s “Evonomics” has earned praise even from unlikely sources like the IMF. Morales’ “bail out people scheme” successfully countered the effects of the global economic crisis. Uganda is still trapped in the crisis because of government’s refusal to accept that Uganda’s economy is very sick or that sickness has been caused by external factors beyond government control.

Another critical area where Uganda accepted inappropriate advice is in wholesale economic liberalization. For example, by opening the imports gate widely Uganda has suffered considerable de-industrialization because domestic industries could not compete with cheap imports. Second, by accepting wholesale comparative advantage in production and export of raw materials, Uganda has lost the benefits of value addition, forward and backward linkages. In virtually all countries where manufacturing has thrived, governments protected ‘infant’ industries. Here is how Alexander Hamilton, USA’s first Treasury Secretary argued a case for protecting American ‘infant’ industries. He maintained that a backward country like the United States of America should protect its infant industries from foreign competition through imposition of tariffs and import bans, subsidize them and prohibit export of key raw materials, develop financial and transport infrastructures. This protection contributed to the fastest economic growth in the world. Countries that followed Hamilton’s strategy such as Germany, Sweden, France, Finland, Austria, Japan, Taiwan, Korea, China, India and Brazil have done very well. The World Trade Organization (WTO) rules allow a country to impose barriers against imports in the face of unfair competition. Uganda qualifies to impose tariffs because of unfair competition from cheaper or subsidized imports such as used clothing but has chosen not to act.

Uganda’s economic growth averaging 6 percent per annum according to official figures has fallen far behind the level essential to lift Uganda out of the economic trap. Countries that have done very well taking the period between 1960 and 1995 as an illustration such as Hong Kong, South Korea, Singapore and Taiwan grew at an average annual rate of over 8 percent in real terms. And China’s economy has for some decades now grown at an average of more than 9.5 percent in real terms.

The examples of Bolivia, USA and European and Asian countries have been used to demonstrate how far behind Uganda is in the race to end poverty and transform the economy and society. To assist in addressing the challenges that Uganda is facing, United Democratic Ugandans (UDU) has prepared a National Recovery Plan (NRP) as alternative to the failed NRM policies. The plan is accessible at A copy of the Plan was officially transmitted to the government through the Uganda Mission to the United Nations in New York. In the coming months UDU plans to work with interested parties including the legislative and executive branches and development partners to work out new arrangements and reforms to put Uganda on the right political economy track. NRM government needs to accept its shortcomings and give room to those with the capability to make the necessary changes.

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