../../../175pxls.gif (78 bytes)
 ON THIS PAGE:    Press release    Secretariat summary    Government report
home > trade topics > trade policy reviews > list of reviews > trade policy reviews

Topics handled by WTO committees and agreements
Issues covered by the WTO’s committees and agreements

TRADE POLICY REVIEWS: FIRST PRESS RELEASE, SECRETARIAT AND GOVERNMENT SUMMARIES

PRESS RELEASE
PRESS/TPRB/182
21 December 2001
Uganda: December 2001

The WTO Secretariat report, along with the policy statement by the Government of Uganda, will serve as a basis for the second Trade Policy Review (TPR) of Uganda by the Trade Policy Review Body of the WTO on 19 and 21 of December 2001.

175pxls.gif (835 bytes)

See also:

Second press release
Chairperson’s concluding remarks


Uganda's economic reform attracts foreign investment and contributes to economic growth   Back to top

Uganda has implemented significant economic reform, including a liberalization of the trade regime, over the last decade and a half. This has attracted foreign direct investment, mainly in manufacturing, and contributed to continued economic growth. Indeed, over the past six years, Uganda's real GDP has grown at around 6% per annum on average, and is expected to continue growing at about 7% per year in the medium term. These are some of the observations contained in a WTO report on the trade policies and practices of Uganda.

According to the report, financial discipline has brought the fiscal deficit (including grants) below 3% of GDP and inflation has dropped, improving the economic environment. Uganda's fiscal policy is expected to remain largely unchanged, although there will be a greater focus on expenditures to promote exports of agricultural products, and a need to continue restructuring the Uganda Revenue Authority to increase public revenue.

Agriculture accounts for around 42% of real GDP and 80% of employment; coffee is the main export (over 50% of total merchandise exports in value). As a result of diversification efforts, the share of the industrial sector (including manufacturing, mining and quarrying, public utilities, and construction) in real GDP has increased, from about 17% in 1996 to around 20% in 2000. The share of services in real GDP has remained relatively stable, at around 38% since 1996. Insufficient infrastructure, coupled with Uganda's landlocked status, has impaired the growth of its exports and its economic progress.

Uganda's main imports include machinery and transport equipment, food products, fuels, and chemicals. The European Union is Uganda's main trading partner. As a result of regional integration, Uganda's trade with the other sub-Saharan African countries has increased. Kenya is the largest single supplier, accounting for nearly one fourth of total merchandise imports to Uganda.

Since its last TPR in 1995, Uganda has eliminated all quantitative restrictions; most of the remaining non-tariff restrictions are maintained for moral, health, security or environmental reasons. Tariffs have become Uganda's main trade policy instrument. Uganda has been applying the customs valuation method based on the transaction value since July 2000.

In addition to tariffs, imports may be subject to an import licence commission of 2%, a 4% withholding tax, as well as internal taxes, such as the excise duty of 10%, except on cigarettes (130%), alcoholic beverages (70%) and soft drinks (15%), and a 17% value-added tax (VAT), which apply equally to imports and domestic products. In 1999/2000, 52% of the revenue collected under VAT came from imported goods.

Uganda has substantially simplified the structure of its tariff. The simple average rate of Uganda's applied MFN 2000/01 tariff is 9%. However the import licence commission and the withholding tax increase the average rate to 15%. There is some tariff escalation. In addition, special protection is provided to the sugar and textiles industries.

Moreover, while Uganda has bound other duties and charges on imports at zero, an import licence commission and a withholding tax are imposed, which raises concern about compliance with its tariff bindings. By eliminating the import licence commission and the withholding tax, by increasing the coverage of its binding commitments for both goods and services, and by narrowing the gap between applied and bound rates, Uganda would enhance the transparency and predictability of its trade regime. Such adjustments could contribute to full exploitation by Uganda of its comparative advantages, and attract investment.

Agriculture, dominated by subsistence farmers and food crops, provides the bulk of the raw materials for the largely agri-based industrial sector. Coffee still dominates agriculture; it affects the livelihood of a large portion of the population. Cotton is the second most important cash crop and offers significant potential. The third significant export is fish and fish products. Recent growth in exports of fruit, vegetables and flowers is attributable to agricultural reforms, including diversification of agricultural exports toward non-traditional crops. Since the last Review of Uganda, the Government has continued liberalizing the sector; marketing of inputs and products has been liberalized, export taxes have been eliminated except on coffee, trade barriers have been substantially reduced, and prices are market determined. Strategic reserves are required for certain products for food security purposes.

Manufacturing is characterized by the production of simple basic consumer goods. Capital goods industries are still few in number, while textiles and apparel and agri-processing are seen as promising industries. Services constitute also a promising sector for Uganda. The government is divesting its ownership in financial services where there are currently no nationality-based ownership restrictions. The reforms undertaken in telecommunications services have contributed to growth in the subsector.

As can be seen from the growth rate of the economy over the past six years, the reforms implemented by Uganda have begun to bear fruit. However, the slow mainstreaming of trade into the development framework has limited the impact of economic growth on poverty. Various initiatives, at national and international levels, are currently focusing on this shortcoming.

  
Note to Editors

Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member countries’ trade and related policies are examined and evaluated at regular intervals. Significant developments which may have an impact on the global trading system are also monitored. For each review, two documents are prepared: a policy statement by the government of the member under review, and a detailed report written independently by the WTO Secretariat. These two documents are then discussed by the WTO’s full membership in the Trade Policy Review Body (TPRB). These documents and the proceedings of the TPRB’s meetings are published shortly afterwards. Since 1995, when the WTO came into force, services and trade-related aspects of intellectual property rights have also been covered.

For this review, the WTO’s Secretariat report, together with a policy statement prepared by the Government of Uganda, will be discussed by the Trade Policy Review Body on 19 and 21 December 2001. The Secretariat report covers the development of all aspects of Uganda trade policies since the previous review, including domestic laws and regulations, the institutional framework, trade policies by measure, and developments in selected sectors.

Attached to this press release are the Summary Observations of the Secretariat report and parts of the government policy statement. The Secretariat and the government reports are available under the country name in the full list of trade policy reviews. These two documents and the minutes of the TPRB’s discussion and the Chairman’s summing up, will be published in hardback in due course and will be available from the Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.

Since December 1989, the following reports have been completed: Argentina (1992 and 1999), Australia (1989, 1994 and 1998), Austria (1992), Bahrain (2000) Bangladesh (1992 and 2000), Benin (1997), Bolivia (1993 and 1999), Botswana (1998), Brazil (1992, 1996 and 2000), Brunei Darussalam (2001), Burkina Faso (1998), Cameroon (1995 and 2001), Canada (1990, 1992, 1994, 1996, 1998 and 2000), Chile (1991 and 1997), Colombia (1990 and 1996), Costa Rica (1995 and 2001), Côte d’Ivoire (1995), Cyprus (1997), the Czech Republic (1996 and 2001), the Dominican Republic (1996), Egypt (1992 and 1999), El Salvador (1996), the European Communities (1991, 1993, 1995, 1997 and 2000), Fiji (1997), Finland (1992), Gabon (2001), Ghana (1992 and 2001), Guinea (1999), Hong Kong (1990, 1994 and 1998), Hungary (1991 and 1998), Iceland (1994 and 2000), India (1993 and 1998), Indonesia (1991, 1994 and 1998), Israel (1994 and 1999), Jamaica (1998), Japan (1990, 1992, 1995,1998 and 2000), Kenya (1993 and 2000), Korea, Rep. of (1992, 1996 and 2001), Lesotho (1998), Macao (1994 and 2001), Madagascar (2001), Malaysia (1993, 1997 and 2001), Mali (1998), Mauritius (1995 and 2001), Mexico (1993 and 1997), Morocco (1989 and 1996), Mozambique (2001), New Zealand (1990 and 1996), Namibia (1998), Nicaragua (1999), Nigeria (1991 and 1998), Norway (1991, 1996 and 2000), OECS (2001), Pakistan (1995), Papua New Guinea (1999), Paraguay (1997), Peru (1994 and 2000), the Philippines (1993 and 1999), Poland (1993 and 2000), Romania (1992 and 1999), Senegal (1994), Singapore (1992, 1996 and 2000), Slovak Republic (1995 and 2001), the Solomon Islands (1998), South Africa (1993 and 1998), Sri Lanka (1995), Swaziland (1998), Sweden (1990 and 1994), Switzerland (1991, 1996 and 2000 (jointly with Liechtenstein)), Tanzania (2000), Thailand (1991, 1995 and 1999), Togo (1999), Trinidad and Tobago (1998), Tunisia (1994), Turkey (1994 and 1998), the United States (1989, 1992, 1994, 1996, 1999 and 2001), Uganda (1995 and 2001), Uruguay (1992 and 1998), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).

  
  
The Secretariat’s report: summary  Back to top

TRADE POLICY REVIEW BODY: UGANDA
Report by the Secretariat — Summary Observations

The Economic Environment

Uganda has implemented significant economic reform, including a liberalization of the trade regime, over the last decade and a half. This has attracted foreign direct investment, mainly in manufacturing, and contributed to continued economic growth. Indeed, over the past six years, Uganda's real GDP has grown at around 6% per annum on average, and is expected to continue growing at about 7% per year in the medium term.

Financial discipline has brought the fiscal deficit (including grants) below 3% of GDP and inflation has dropped, improving the economic environment. Uganda's fiscal policy is expected to remain largely unchanged, although there will be a greater focus on expenditures to promote exports of agricultural products, and a need to continue restructuring the Uganda Revenue Authority to increase public revenue. Coupled with the background of heightened economic liberalization efforts, the Bank of Uganda (BOU) has continued to formulate and implement tight monetary policy aimed primarily at price stability.

The Government has committed itself to continuing its efforts to streamline and liberalize its trade regime, with strong emphasis on private sector development as a major engine for economic growth. The Poverty Eradication Action Plan (PEAP), as recently revised, has introduced a social dimension into the reforms. The PEAP is aimed at transforming Uganda into a modern economy by 2017; it addresses the need to integrate export competitiveness and trade liberalization into a broad poverty alleviation effort. Uganda is one of the largest beneficiaries of the IMF/World Bank's Heavily Indebted Poor Countries (HIPC) initiative.

Agriculture accounts for around 42% of real GDP and 80% of employment; coffee is the main export. As a result of diversification efforts, the share of the industrial sector (including manufacturing, mining and quarrying, public utilities, and construction) in real GDP has increased, from about 17% in 1996 to around 20% in 2000. The share of services in real GDP has remained relatively stable, at around 38% since 1996.

Insufficient infrastructure, coupled with Uganda's landlocked status, has impaired the growth of its exports and its economic progress. High production costs are evident across all economic sectors. Non-tariff barriers in Uganda's main export markets, drought, the coffee wilt disease, and security problems in the region (due to war and civil conflict) have also negatively affected Uganda's economy.

Uganda has traditionally run a current account deficit. Declines in world prices of most of Uganda's traditional exports (coffee, cotton, tea and tobacco) over the last few years have contributed to a fall in export earnings, despite the upward trend in the share of non-traditional exports (e.g. floricultural products, fruit, vegetables, fish and fish products) resulting from its diversification efforts. Overall, agriculture still accounts for the bulk of Uganda's exports (around 90% of the value of total merchandise exports), with an increasing share of non-coffee exports.

Uganda's main imports include machinery and transport equipment, food products, fuels, and chemicals. The upward trend in the share of fuels in total merchandise imports reflects the increases in world prices of these products in recent years, while a similar trend in the share of chemicals results partly from increased imports of medicaments.

The European Union is Uganda's main trading partner. As a result of regional integration, Uganda's trade with the other sub-Saharan African countries has increased. Kenya is the largest single supplier, accounting for nearly one fourth of total merchandise imports to Uganda.

  
Institutional Framework

The Ministry of Tourism, Trade and Industry (MTTI) is responsible for trade policy formulation and implementation. Other Ministries, particularly Finance and Agriculture, however, are also involved both in formulation and implementation of trade policy. The Presidential Economic Policy Forum, together with other public institutions, carries out periodic reviews and assessments of trade-related policies within the Government. Sessional committees of the Parliament also review policies, including trade policies; there are opportunities for periodic inputs from the private sector.

Uganda encourages foreign investment. The Uganda Investment Authority (UIA) is intended to be a "one-stop shop" to promote and facilitate investment in Uganda. A commitment to continuing liberalization of the economy and macroeconomic stability are important attributes of the atmosphere that Uganda hopes will attract foreign investors, who may own 100% of investments in companies. Uganda offers various tax incentives, including import-duty concessions and accelerated depreciation for plant and machinery, and VAT deferral. Investment licensing requirements include a minimum capital of US$100,000 for foreigners and US$50,000 for Ugandans.

Uganda views foreign trade as an important stimulus to economic growth, and its trade policies aim to contribute to poverty reduction, promotion of employment, and diversification and promotion of exports, particularly of non-traditional products. These policy objectives have been pursued through continuing liberalization, deregulation, privatization, and participation in regional agreements, particularly the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC).

Uganda is an original Member of the WTO, and grants at least MFN treatment to all its trading partners. Uganda is not a signatory of any of the plurilateral trade agreements. Uganda has benefited from regular WTO technical assistance, under the Joint Integrated Technical Assistance Programme and the Integrated Framework. Several meetings have taken place with donors since 1996 to assess Uganda's trade-related technical assistance needs, which can be classified into two categories: adoption of laws and regulations relating to the WTO and regional trade agreements, and human and institutional capacity-building for effective participation in these arrangements; and the needs relating to supply-side constraints, including poor physical infrastructure, unreliable public utilities, weak export institutional framework, and market access difficulties.

Uganda is slowly mainstreaming trade into its development framework. However, its various institutions dealing with trade policy, including the MTTI, do not have sufficient capacity to manage trade arrangements effectively and to fully implement the necessary reforms. At the same time, at least partially due to the Government's fragmented institutional structure dealing with trade matters, coordination among development partners is less than ideal.

  
Trade Policy Instruments

Since its last Trade Policy Review (TPR) in 1995, Uganda has eliminated all quantitative restrictions; most of the remaining non-tariff restrictions are maintained for moral, health, security or environmental reasons. Tariffs have become Uganda's main trade policy instrument. Uganda has been applying the customs valuation method based on the transaction value since July 2000. The tariff structure has been simplified through the reduction of the number of bands from five in 1995 to three (zero, 7%, and 15%), and the lowering of maximum ad valorem rates from 60% to 15%. All tariffs are ad valorem, except on fuel. Some 16.4% of all tariff lines are duty free, while 39.3% carry the maximum rate of 15%.

In addition to tariffs, imports may be subject to an import licence commission of 2%, a 4% withholding tax, as well as internal taxes, such as the excise duty of 10%, except on cigarettes (130%), alcoholic beverages (70%) and soft drinks (15%), and a 17% value-added tax (VAT), which apply equally to imports and domestic products. In 1999/2000, 52% of the revenue collected under VAT came from imported goods.

The simple average rate of Uganda's applied MFN 2000/01 tariff is 9%. There is some tariff escalation. The import licence commission and the withholding tax increase the average rate to 15%. In addition, special protection is provided to the sugar and textiles industries. Agriculture (Major Division 1 of ISIC Revision 2) is the most protected sector, with an average tariff rate of 11.2%, followed by manufacturing (8.9%), and mining and quarrying (8.8%). Uganda grants preferential tariff treatment to other members of COMESA; the preferential bands are 0%, 4% and 6%.

Customs duties are bound for some 15.4% of Uganda's tariff lines, including all tariff lines for agricultural products (WTO definition) and 2.7% of the lines for non-agricultural products. The bindings are at ceiling tariff rates of 80% on most agricultural products, except for 60 lines with bound rates between 40% and 70%; and between 40% and 80% on non-agricultural products. Other duties and charges on all these products are bound at zero, although the import licence commission of 2% and a withholding tax of 4% apply to all imports. The predictability of Uganda's tariff regime could be enhanced by an increase in the coverage of its tariff bindings and by narrowing the gap between bound and applied rates.

The only export duty is a 1% cess collected by the Uganda Coffee Development Authority on coffee exports. The two main incentive schemes, i.e. the Fixed Duty Drawback Scheme and the Manufacturing Under Bond Scheme, are currently available to export-oriented companies. There are also incentives under which import duties on certain raw materials may be refunded. Exporters are allowed to export all items except those on a negative list and those for which authorization must be obtained from regulatory bodies. The negative list includes timber, charcoal, and whole fresh fish.

In September 2000, Uganda revised its regulations on public procurement for purposes of greater transparency and decentralization; open tendering procedures are generally preferred. Despite the lack of funding for standardization, there has been a noticeable increase in the number of Ugandan standards (253 as of September 2001) since the last TPR of Uganda in 1995.

The ongoing implementation by Uganda of its privatization programme has contributed to divestitures by the State of 108 out of 148 public enterprises. The new owners include both Ugandans and foreigners. Uganda does not yet have legislation on safeguards and competition. It is revising its legislation on anti-dumping, countervailing, sanitary and phytosanitary measures, and on intellectual property, with a view to aligning them on the relevant WTO Agreements.

  
Sectoral Trade Policies

Agriculture, dominated by subsistence farmers and food crops, provides the bulk of the raw materials for the largely agri-based industrial sector. Coffee still dominates agriculture; it affects the livelihood of a large portion of the population. Cotton is the second most important cash crop and offers significant potential. The third significant export is fish and fish products. Recent growth in exports of fruit, vegetables and flowers is attributable to agricultural reforms, including diversification of agricultural exports toward non-traditional crops. Since the last Review of Uganda, the Government has continued liberalizing the sector; marketing of inputs and products has been liberalized, export taxes have been eliminated except on coffee, trade barriers have been substantially reduced, and prices are market determined. Strategic reserves are required for certain products for food security purposes. The Government's 2000 Plan for the Modernisation of Agriculture (PMA), formulated within the PEAP framework, aims to reorient the activities of subsistence farmers to the market. The maximum tariff rate of 15% applies to imports of certain vegetables, fruit and nuts, and specified animal and fishery products.

Manufacturing is characterized by the production of simple basic consumer goods. Capital goods industries are still few in number. The low capacity utilization in most industries hampers the competitiveness of Uganda's manufactured products, already negatively affected by the landlocked position of the country and high price of utilities. Incentive schemes are in place to attract investment into the sector. Textiles and apparel, and agri-processing are seen as promising industries. The maximum tariff rate of 15% applies to imports of, inter alia, beverages, manufactured tobacco, carpets, rugs, and certain wearing apparel and leather products.

The mining and quarrying sector is underdeveloped, but services constitute a promising sector for Uganda. The Government is divesting its ownership in financial services where there are currently no nationality-based ownership restrictions, except for differing minimum capital requirements (between Ugandans and foreigners) for the licensing of insurance companies. The reforms undertaken in telecommunications services, including the sale of 51% of the Uganda Telecom Limited (UTL) to a German-led consortium, have contributed to growth in the subsector. However, fixed telephone services are still under the monopoly of UTL, which sets tariffs subject to approval by, the regulatory body the Uganda Communications Commission. The lack of coordination with neighbouring Kenya and Tanzania, and of a national tourist policy have limited the exploitation of Uganda's considerable potential in tourism. Rail transport services are under the monopoly of the state-owned Uganda Railway Corporation, and the supply of specified air transport services are subject to limitations. The other transport services are mostly liberalized. Uganda has made specific commitments in tourism and travel-related services, and in telecommunications services under the General Agreement on Trade in Services (GATS).

  
Trade Policy and Trading Partners

As can be seen from the growth rate of the economy over the past six years, the reforms implemented by Uganda have begun to bear fruit. However, the slow mainstreaming of trade into the development framework has limited the impact of economic growth on poverty. Various initiatives, at national and international levels, are currently focusing on this shortcoming.

Uganda has substantially simplified the structure of its tariff. However, while Uganda has bound other duties and charges on imports at zero, an import licence commission and a withholding tax are imposed, which raises concern about compliance with its tariff bindings. By eliminating the import licence commission and the withholding tax, by increasing the coverage of its binding commitments for both goods and services, and by narrowing the gap between applied and bound rates, Uganda would enhance the transparency and predictability of its trade regime. Such adjustments could contribute to full exploitation by Uganda of its comparative advantages, and attract investment.

It is critical that Uganda's exports (of non-traditional products in particular) do not meet new non-tariff barriers and that the multilateral system supports its efforts.

  
  
Government report Back to top

TRADE POLICY REVIEW BODY: UGANDA
Report by the Government — Part V

Uganda's trade policy aim to contribute to poverty reduction, promotion of employment, economic growth, and export diversification and promotion (particularly non-traditional exports) and vertical diversification is to be achieved through further processing of primary export products.

Uganda is striving to promote trade through regional integration especially Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC) and multilateral arrangements such as the World Trade Organization (WTO). Government is putting in place means to fully exploit non-reciprocal preferential treatment available to developing countries under U.S. African Growth Opportunity Act (AGOA) and the EU-ACP Cotonou Agreement.

A deregulation programme was launched to dismantle 'unnecessary' and regulatory procedures that may impede trade. Government is undertaking a commercial law reform to bring all trade related laws, regulations and procedures in conformity with WTO requirements.

Efforts are being made to improve government's trade related capacity by mainstreaming trade issues in the overall National Planning Strategy. As such, Government is working through the Integrated Framework and with donor community to benefit from trade-related technical assistance.

Since 1987, the Government has been implementing trade and structural policy reforms, embracing liberalized systems for input and output markets, trade, investments and tax regimes. These reforms included liberalization of domestic and export produce marketing and processing, removal of restrictive tariff and non-tariff barriers and abolition of taxes on exports.

In August 2000, Government released a plan for modernization of agriculture (PMA) (agriculture is a backbone of Uganda's economy) with the main objectives of: increasing incomes and improving the quality of life for poor subsistence farmers and household food security, providing gainful employment, and promoting sustainable use and management of natural resources.

  
Trade Policy Formulation and Implementation

In Uganda, trade policy is primarily aimed at economic growth and development through diversification of the export sector, attracting investment, improving productivity, enhancing export and local trade and is designed within the context of the overall national economic policy objective.

Trade policy formulation is achieved through a consultative process between Government and the private sector. The lead agency for trade policy formulation is the Ministry mandated, the Ministry of Tourism, Trade and Industry.

The implementation of trade policy is the preserve of public bodies depending on the nature of the measure or policy to be implemented.

  
Multilateral, Regional or Preferential Trading Agreements

Uganda's external trade policies are designed to create an enabling environment for international economic integration in order to ensure a sufficiently large market for her commodities as well as the development of her industries. In pursuit of that objective, Uganda has entered into multilateral, regional and preferential trade arrangements i.e. WTO, Common Market for Eastern and Southern Africa (COMESA) East African Community (EAC), Intergovernmental Authority on Development (IGAD), U.S. African Growth Opportunity Act (AGOA) and EU-ACP Cotonou Agreement.

Bilateral Agreements

Uganda has bilateral trading agreements with many countries. Under these agreements, Uganda and the Partners accord each other most favoured nation treatment in all matters relating to their mutual trade relations.