Welcoming Remarks By H.E. Mr. Gerald Ssendaula, Minister of Finance, Uganda

Twenty-third Meeting of the Committee of Experts of the Conference of African Ministers of Finance, Planning and Economic Development

Welcoming Remarks

By H.E. Mr. Gerald Ssendaula,
Minister of Finance, Uganda

Kampala, Uganda
18 May 2004

Mr. Chairperson,
The Executive Secretary of the UN Economic Commission for Africa,
Distinguished Delegates,
Ladies and Gentlemen:

I wish on behalf of the Government and People of Uganda and on my own behalf, to warmly welcome you all to the 2004 Annual Meetings of the Economic Commission for Africa (ECA).

It is a great honour and privilege for me to receive you in Uganda, as we gather to deliberate on policy issues critical to the development of our continent. I hope that the discussions you are going to have in the next three days will focus on policies that have a direct impact on the improvement of the lives of all Africans, many of whom are still living under absolute poverty.

Mr. Chairman, distinguished delegates, ladies and gentlemen, the economies of Africa face enormous challenges of development. It is common knowledge that one of the major ways through which countries have developed is trade. I, therefore, welcome this year's theme of the ECA Experts' Meeting on Trade.

In an effort to promote trade, however, African countries are constrained by both inadequate policy and institutional framework, and a variety of protectionist measures. Accordingly, I look forward to your meeting's recommendations on some of the innovative ways of addressing the above mentioned bottlenecks.

Mr. Chairman, distinguished delegates, ladies and gentlemen, let me now focus on some of the external and internal challenges that our continent faces in its quest to integrate into the global economy.

The first challenge on the external front, in my view, is how to cope with trade practices that undermine the demand for Africa's goods and services mainly due to different forms of subsidies and tariff in the developed world.

For instance, agricultural production in OECD countries is currently supported by massive public subsidies. Such market conditions greatly hinder developing countries from exploiting their comparative advantage in agriculture. As a result, food importers in the rest of the world are forced to source agricultural products from high cost but subsidized OECD countries, Such diversion of trade undermines Africa's economic interests.

Mr. Chairman and distinguished delegates, another external threat to our integration into the global economy is the imposition by the developed countries of the so-called "peak" tariffs high value added commodities. Such tariff escalation hinders our effort to boost exports through diversification from primary commodities to processed and manufactured goods.

Given the above constraints, Africa needs to marshal all its efforts to negotiate the removal of such unfair trade practices. To succeed in this effort, there is a need for concerted negotiations with our trading partners in the developed world. The multilateral trading system is one such avenue for a negotiated settlement. The following options are also worth considering.

First, there is a need to generate consensus on the constraints to trade policy that WTO membership entails. Consideration could be made on removing trade-restrictive measures and binding tariff levels. Africa's collective voice will send a strong signal to the developed world and private investors about their commitment to liberal trade polices. The credibility gained serves to increase our bargaining power in trade negotiations.

Furthermore, experience shows that Africa has often been criticized for failure to act as a group and pay attention to detail in global trade negotiations. This means that if Africa is to achieve its desired objective, capacity building in the area of trade negotiations is a must.

Second, the avenue that could help achieve increased global market access international cooperation between regional blocks such as COMESA, SADAC, ECOWAS or East African Community. Such cooperation could lead to reciprocal exchange of commitments to reduce trade barriers at the same time promoting trade among our countries.

As this point, I wish to recognize with appreciation the recent initiatives institutionalized by the developed countries to improve market access. The European Union's "Everything but Arms" (EBA) agreement, and the United States African Growth and Opportunities Act (AGOA) are notable examples. In the same vein, I wish to congratulate all those countries that are already taking advantage of such initiatives and to appeal for a joint effort to learn each other's success under such initiatives because it the way to go.

Having said that, however, it is disheartening to note that Africa's world export share declined from 3.9 percent in 1970 to 1.9 percent in 2001. Not only is this neglible in world trade but is also makes Africa insignificant in many other ways. Such decline further points to internal weaknesses in our economies that have hindered us from adapting to change and taking advantage of emerging opportunities.

Mr. Chairman, distinguished delegates, ladies and gentlemen, I wish to address the internal challenges that Africa faces in as far as trade is concerned. These manifest themselves mainly in form of a poor enabling environment and lack of economic infrastructure.

The countries that opened up their economies to trade and pursued sound macroeconomic policies managed to attract reasonable foreign investment. The experience of these countries, however, shows that liberalization and macroeconomic stability is a necessary but not sufficient condition to building a formidable manufacturing and export sector, if you have poor infrastructure.

Much of Africa's infrastructure is not existent and where it exists it is in a very bad state. This continues to be a major impediment to economic growth. For example, transport costs on the continent are much higher than in many other parts of the world because of the dilapidated condition of the road and rail networks.

Furthermore, there is need to train our people so as to have the skills needed to participate in the economic activities.

Overall, a concerted effort to strengthen supply-side response of African industries is key to a successful trade policy and the decision to mainstream trade policy in our development strategies is an acknowledgement of the existence of weaknesses and the need to address them.

Let me take this opportunity to highlight some of the effort my country has made in mainstreaming trade in its development strategies.

Uganda has substantially liberalized its external trade regime since the beginning of the 1990s. This was done through the removal of quantitative restrictions on imports and then progressively lowering tariff rates. This has stimulated a strong revival of export production, with exports in constant prices increasing by an average of 11% a year over the last four years.

Open trade policies have been complimented by macroeconomic reforms, which have delivered a stable macroeconomic environment that is conducive for private investment. Over the last ten years, the economy grew at an average of 6.7% in real terms, headline inflation was maintained at single digit levels averaging 4.8% and the Central Bank was able to accumulate reserves as a buffer against external shocks to an average of 5.6 months of imports of goods and services.

Another key reform that boosted investment was privatization, which opened up investment to all sectors of the economy including infrastructure and utilities. Private investment in infrastructure and utilities is essential because of the financial constraints faced by governments. In addition, private sector management and technological innovation is required to operate infrastructure and utilities efficiently.

On of the best examples of the benefits of private investment is provided by the telecommunications industry in Uganda. Ever since the telecommunication industry was liberalized in 1997, it has generated real growth of value added in the industry averaging 27% per year, when compared to an average of only 11% in the preceding seven years. Access to telecommunications services, and the quality and reliability of these services has improved enormously since the market was opened up to private investment, and this has brought huge benefits for the rest of the private sector.

Uganda is already attracting private investment and management to transform other utilities, which have a key role to play in supporting economic growth, including electricity generation and distribution, where assets will be leased to private investors.

The good investment climate, coupled with the liberalization of the foreign exchange market have helped us diversify into non-traditional exports such as vegetables, fruits, flowers, hides and skins, vanilla and fish.

Despite the modest gains in trade, the economic growth rates that we have attained are below the 7% level, which is considered necessary to help alleviate mass poverty in the country by 2017.

Finally, Mr. Chairman, there is consensus Uganda that the key to revitalizing the economy is through export-led growth. The 23^rd Session of Experts is, therefore, well timed, since your deliberations will enhance our growth strategy. And more broadly, I hope the deliberations will enhance our mutual understanding of the policies that we, as Africans, need to adopt to allow Africa to capture the 21^st century.

It is now my pleasure and honour to declare the 23^rd Session of the Committee of Experts of the Conference of African Finance, Planning and Economic Development Ministers Open. I wish you fruitful deliberations.

Thank you.