31 July 2016

Trade between Uganda, China must be mutually beneficial


Diplomatic relations between Uganda and China date back to 1962 when Uganda and China signed a joint communiqué on their diplomatic relations. Keen to strengthen relations with Uganda, China has continued to invest in and trade with Uganda. Uganda has benefited from China’s investment in form of loans including concessional loans of as low as 2 per cent interest rate. It is through these loans that construction of major infrastructural projects such as Karuma hydro power dam, Isimba hydro power dam and Entebbe express high is underway.


According to the government of Uganda report on public debt for the financial year 2014/15, China was Uganda’s third largest creditor after World Bank and African Development Bank as of February, 2015. However, whether Uganda will be able to meet its loan repayment obligations to China using future oil revenue as planned, remains to be seen.


According to data from the Ministry of Trade, Industry and Cooperatives, total trade between Uganda and China reached about $932.8 million in 2015 with Uganda’s exports to China contributing $57.7 million and China’s exports to Uganda contributing $ 875.1 million. In fact, China ranks second as Uganda’s major source of imports after India.


Unfortunately, majority of Uganda’s exports to China such as grains, hides and skins, coffee, tea and spices are unprocessed and therefore cannot fetch so much in terms of price. On the contrary, the bulk of China’s exports to Uganda is in form of finished high value products such as electrical equipment, machinery, steel and plastics. It is undisputable that trade between Uganda and China is skewed in favour of China, at least for now.


The need to address trade imbalance between Uganda and China was underscored during the State of the Nation Platform meeting on China-Africa Relations which was organised by the Advocates Coalition for Development and Environment (ACODE) recently. The Minister of Trade, Industry and Cooperatives, Amelia Kyambadde urged Ugandans to utilise China’s ready market of 1.35 billion people and export products and services to China. She however cautioned Ugandans to add value to their exports to China if they are to benefit significantly from the Uganda-China trade relations.


During the same meeting, the Ambassador of the People’s Republic of China in Uganda – H.E Zhao Yali emphasised mutual benefit as a key principle of China’s foreign policy. The Ambassador repeatedly emphasised China’s willingness to share its development experience with Uganda and work with Uganda to achieve its development aspirations.


As Uganda-China relations grow stronger, concerns about mutual benefits become more pronounced. To reduce the trade imbalance between Uganda and China, Uganda needs to increase its exports to China. Similarly, the government of Uganda needs to strategically attract Chinese investors who produce consumer goods that are suited to the consumption needs of Ugandans if imports of consumer goods from China such as shoes, clothes and food products are to be checked.


To increase Uganda’s benefits from Chinese and other foreign investments, Uganda should include a requirement in the contracts of foreign investors, at least the larger state owned companies, to prioritise sourcing of locally available goods and services. Uganda should also include, in its investment guidelines, a requirement for foreign investors to recruit specified proportions of Ugandans at managerial and non-managerial levels to work in their firms.


To improve investment practices among Chinese and other foreign investors, the Uganda Investment Authority should improve investment monitoring and deliberately reach out to investors to share relevant information on recommended investment practices and to guide them to invest sustainably. If all the investment projects from China are thoughtfully screened for their benefits, Uganda will surely move in the same direction with China and mutual benefits will be achieved in the Uganda-China relations.


Ms Barungi is a Research Fellow with the Advocates Coalition for Development and Environment.


julian.barungi@acode-u.org




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