Uganda is heavily reliant on regional trade due to its importance as the leading export destination for Ugandan goods and services. 
In line with this, the National Development Plan II identifies the increase of market access for Uganda’s products and services in regional and international markets as key in promoting trade and industrial growth for development. Key priorities are to increase the share of manufactured goods and services in total exports as well as improve private sector competitiveness.
Uganda’s regional trade is centered in the Common Market for Eastern and Southern Africa (COMESA). Data from Bank of Uganda shows that exports to COMESA overtook exports to the European Union (EU) in 2006 and have earned the country more than $1.2billion annually since 2012.
However, Uganda still basically exports raw materials with limited value addition which undermines the gains of trade. The COMESA region is the main customer for the few manufactured products, but to capitalize on this niche, Uganda needs to build on its industrial base as a basis of increasing the share of manufactured goods in exports as prioritized in NDP II.
Competitiveness and manufacturing
Developing the manufacturing sector base of Uganda is crucial in harnessing the opportunities provided for by regional markets. The sector is es-
timated to have registered growth of 6.2 percent in the Commercial Year 2014, a significant improvement from the marginal 0.6 percent growth registered in the CY 2013. This growth was driven by the strong performance in processing and preservation of meat (5 percent), beverages (19 performance), pharmaceutical products (14 percent) and iron and steel products (5 percent). In spite of this progress in manufacturing, the registered growth is not sufficient to drive the country to fully benefit from increasing regional trade.
In order to increase the share of manufactured goods in total exports, the percentage contribution of value added manufacturing to the Gross Domestic Product (GDP) must also increase. Over the last 15 years, this contribution to Uganda’s GDP has remained between 8-10 per cent. Kenya, the most industrialized country in the region, predictably has the highest percentage contribution of value added manufacturing to its GDP.
Building a more competitive Uganda
In order to achieve the trade and competitiveness goals and boost manufacturing, the Ministry of Trade, Industry and Cooperatives and their various partners have enacted and implemented a series of policies and initiatives to enhance the countries trade environment.
If trade on equal terms is to be achieved, it is essential that products or services can freely move in other economies without having to undergo extensive re-testing, re-inspection, re-certification and so on. To this end, Uganda has undertaken standardization policies that will be fundamental to fostering a conducive trade environment; these fall under the development and harmonization of standards and the National Accreditation policy.
The primary aim of these efforts is to ensure international confidence and competitiveness in our goods, while expanding access to international and regional markets. Beyond this primary aim, standardization of Ugandan products is strategically interconnected to the success of the other trade and competitiveness policy initiatives.
The standardization drive has the opportunity to develop strong linkages at the grass roots with the recent Local Government Capacity Enhancement initiative that has seen the District Commercial officers incorporate trade and investment in their respective Districts Development Plans.
Building on this, is the Micro Small and Medium Enterprise (MSMEs) Policy. With a GDP contribution of 18%, MSME’s account for 90% of employment and job creation in Uganda. The MSME policy together with the accreditation policy, seek to promote the countries production to meet international standards and be more competitive on both the national and regional markets. This will further strengthen other strategies like ‘Buy Uganda Build Uganda’.
Implementation Strategy and the Sector Development Plan
From a manufacturing and production stand point, the Leather and Leather Products Policy recently passed by Cabinet aims to maximize value addition in the leather sector and promote
the application of cleaner technologies. The policy targets 0% export of raw hides and skins, together with 25% of semi-finished leather processed into finished leather products for domestic consumption and export.
Another strategy that will be bolstered by the standardization drive is the National Export Development Strategy 2015/16-2019/20, which has recently been developed by The Ministry of Trade, Industry and Cooperatives (MTIC).
The strategy encourages tax incentives to companies adding value to products and emphasizes quality assurance and assisting SMEs in the process of product certification. The Uganda Export Promotion Board has a critical role to play in engaging stakeholders to take advantage of the accreditation and standardization strategies in order to target export markets in line with the National Export Development Strategy objectives.
Promoting cross-border trade is another key undertaking in improving competitiveness and improving regional trade. Markets across the borders can easily be exploited by the growing industries which currently have limited capacity to export outside the region.
To this end MTIC has undertaken a number of initiatives which include; developing One-Stop Border Posts (OSBP) at Mirama Hills, Busia, Malaba and Mutukula; establishing Cross-Border Committees to address challenges of informal cross-border traders; and the operationalization of Electronic Single Window System (ESWS).
The ESWS has been quite effective at facilitating trade by reducing the time it takes to clear goods by an estimated three days or by 46 percent. The Democratic Republic of Congo (DRC) takes a significant share of cross-border trade in Uganda, making it pertinent for the initiatives being under taken by MTIC to involve the DRC.
Looking ahead, addressing Non-Tariff Barriers (NTBs) should remain a major policy objective for Uganda. Even though the East African Community (EAC) is operating under a common market, NTBs still undermine regional trade.
In response, the EAC countries have put particular emphasis on policies and development plans that will reduce the remaining NTBs. Similarly, the Uganda Revenue Authority has established an Electronic Cargo Tracking System which aims to eliminate delays and reduce the costs of escorting transit cargo to the borders.
Uganda’s manufacturing sector is dominated by agro-processing.  One of the main hindrances to the sub-sector has been the poor status of post-harvest handling and regulation of consistent flows.  Partly to handle this problem and implicitly increase competitiveness, Uganda instituted the Uganda Warehouse Receipt System Authority (UWRSA) which started operations in 2015.
UWRSA has pre-inspected 92 storage facilities with the capacity to hold thousands of metric tons of produce.  Over 760 producers participated in sensitization workshops to use the warehouse receipt systems.
In spite of the challenges that include inadequate finance, physical and human resources, milestones have been realised and the Ministry intends to consolidate these to improve Uganda’s regional competitiveness, where the country expects to expand exports.
Efforts to enact laws and pass sector specific policies, improvement in both soft and hard infrastructure coupled with implementation of regional integration policies, are the other important initiatives that need to be applauded.
Source: Business Week

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