Uganda is keen to leverage its external sector to support economic growth and employment creation through structural transformation. This has become increasingly urgent as commodity prices have levelled off and volumes have stagnated with the global slowdown. Policymakers need to establish a supportive environment within which the private sector can invest in exports. The objective of this project is to identify key measures that donors can support to help bring that vision to fruition.
Ugandan firms typically find it difficult to achieve production at scale. Developing mechanisms that allow firms to reap scale economies is one important policy objective for the government and donors, as it is key to exporting. Many factors come together to make firm-level growth challenging, from the difficulty of contracting for reliable, high-quality input supplies, to problems accessing finance at reasonable rates, to trade and investment policies. Access to electricity is also a notable challenge, but it is hoped that with new generation capacity coming on stream, and possible progress on the East African Power Pool, firms may be able to access more reliable and cost-effective electricity in the foreseeable future. Progress is needed on several fronts, and this project aims to identify the highest priority issues and consider feasible interventions that could support the government’s objectives.
This project undertakes a diagnostic of Uganda’s recent trade performance in comparative context, focusing on volume and price effects and the growth of exports and imports. It also reviews Uganda’s structural transformation over the last 15 years, focusing on trends in diversification and export sophistication. It looks at the trade-investment nexus in Uganda, and considers policy dimensions of barriers to goods trade, regulation of the services sector, and measures affecting the business environment. The analysis relies on firm- and individual-level data, newly merged VAT/customs data, and some global data sets.