16 Oct Re-thinking Uganda’s Approach to Globalisation.
The 1980s saw the Liberalisation of national economies, allowing reduction of government participation and offering the opportunity for economies to compete internationally and generate foreign exchange as modes for raising income (GDP). Liberalisation has led to the contemporary theory on globalisation of economies. It acknowledges that the world is a universal village, and it follows that, for nations to survive and thrive, there needs to be policy that accommodates interdependence with other nations on aspects driven by international trade and investment and technological advancement.
The rationale for globalisation is the concept of comparative advantage advanced by leading Economist David Ricardo. It advances one main precept, that national economies should specialise in production of goods at the least cost in order to facilitate international trade. Between1990-2014 over 2,500 Bilateral Investment Treaties (BITs) have been negotiated between states as reported by the United Nations Conference on Trade and Development (UNCTAD). This points to the interdependence of states on one another a key tenant of globalisation.
Uganda liberalised its economy in the 1987 as part of the Conditionality to receive funds from the World Bank and the International Monetary Fund (IMF). Traversing over the period of 30 (thirty) years it can be submitted that we have benefitted from globalisation on a short term basis. Through Foreign Direct Investments and funding from partner states. Uganda’s Foreign Direct Investments (FDI’s) have consistently contributed 4.2% and 5.2% of the Gross Domestic Product (GDP) during the financial years of 2012-2013 and 2013-2014 respectively. Needless to say our country’s manufacturing and mineral industry exploitation has been largely as a result of international trade which is one of the key tenets of globalisation.
Further, to this concept, Ugandans accessed previously inaccessible commodities. Financial report for the year 2015-2016 indicates that our imports are estimated to be US $5647 Million dollars. On the face of it, the effects of globalisation can be summed to generally help in the progress of our nation.
Be that as it may, there have been negative and largely unintended consequences from globalisation on Uganda’s economy. There are two propositions to support this assertion. Firstly, Uganda has continued to be largely dependent on other economies, this has discouraged production and has tied the country into an excessive unmanageable debt. Secondly, our largely agricultural economy has remained retrogressive and stunted as a result of globalisation.
Uganda’s external debt stands at US $5,382.9 million and our internal debt stands at Shs. 11,319 billion .When added, our national debt is equivalent to 34% of our GDP( (economic output) Concerning Uganda’s production levels, 76% of our population are employed in agriculture and yet the contribution of Agriculture to our GDP is merely 24%. What is rather glaring, is that our returns from the economy’s exports are less than the imports. In the 2015-2016 Financial Year our imports were worth US $5647 Million compared to the export receipts of US $2,699 million. This creates an existent trade imbalance in the country. It means that our market as a country is largely consuming products from other economies that we are indirectly supporting. Yet, currently our manufacturing sector we employ only 5% of our population. Ali Mazrui comments that Africans have adopted more consumptive practices than capitalistic discipline. So one will generally find that our economy is consuming products that support other economies as opposed to our own industries. This discourages production and perpetuates dependency on other economies.
For Uganda to reap from Globalisation on a universal scale, she needs to embark on an aggressively industrious agenda that can help increase our productivity. Freidrich List an Industrialist avers that any nation that is behind others in industry and commerce, navigation …must first of all strengthen its individual powers in order to fit herself to enter into free competition with more advance nations. Otherwise globalisation will continue to be beneficial to the rich economies but detrimental to developing economies like Uganda’s.
Our Government should take a central role in this, by aggressively promoting talent, innovation and infrastructure, cost competitiveness, energy policy, physical infrastructure plus an accommodative legal and regulatory framework which all shall facilitate industrialisation and increase productivity of our country. This should be done by encouraging our domestic industries in key areas textiles, iron and steel manufacturing.
You will know, that our budget for the year 2016-2017 and the National Development Plan 2(two) are based on the theme of enhanced productivity for job creation but there needs to be a more deliberate approach to implementation of policy. There should be a political will to transform our economy to attract investment as opposed to securing more debt and handouts from China whose impact will not transform our economy.
I agree with the benefits that have come with globalisation but sound policy dictates that we pay attention to its effects in entirety. We cannot isolate its results while forgetting that our countries external debt has kept on growing, placing an insatiable burden on our future generations. Let us not forget that instead of supporting our home grown products, our adoption of consumption habits of imports much more than home made products has discouraged production in our economy. Let us set our house in order, by encouraging production and aggressive industrialisation if we are to benefit from globalisation on a larger scale.