Low Technological Development Base: Part 1 - Underlying
Issues, Government Policies, and, Private Sector Promotion
Compiled by Editor In Chief
:
Technological updates required in general stretch far and wide, and much needs to be done
to redress the situation.
A number of researchers have cited the following.
Underlying Issues
The following presumptions are derived out of analysis of what is on the ground:
- Low exposure to foreign competition in export and local markets have probably
masked technological lags over time, according to a study by UNCTAD[1], undertaken by Lall, S. et al.
- Poor infrastructure and low purchasing power provide considerable
'natural' protection on the local market.
- Collier and Gunning[2] have shown that private investment (PI) in developing countries has been
disappointing, and, Uganda has been no exception. While PI grew from 7.8% of GDP between
'86 and '89 to 12% in '97/'98 and 13.5% in '97/'98, public investment fell from 10% of
GDP in late eighties to 5.9% in '97/'98. Investment in machinery and vehicles was only
4.8% of GDP in 1997/'98.
- By comparison, investment in the fast growing East Asian economies has been of the
order of 30% of GDP for several years.
- Reinikka and Svensson[3] show that investments at firm level have been lower, around 10%, with the
median firm below 1%.
- While Bigsten et al[4] show that Uganda's investment rates are in the vicinity of Africa's average,
the country's average profit rates are only about half of the estimate of the countries
in this study, namely, Kenya, Ghana, Tanzania and Uganda, probably due to lack of
control over many of the input costs that should have been checked during years of
liberalisation and increased competition.
- Reinikka and Svensson[5] attribute major constraints to investment from their survey as the high
price and low quality of utility services. Poor public capital and high transport costs
raise the cost of capital equipment considerably, thereby reducing productive
investment. The survey further demonstrated an annual loss of 89 working days from power
cuts, a colossal 10% versus 30% loss of total productive time on a three versus single
shift basis respectively. The consequence of this is wide ownership of power generators,
whose utilisation is further undermined by their high operational cost. For 1977,
expenditure on this provisional power source represented 16% of total investment and 25%
of value of investment in equipment and machinery! Very much the same results apply to
transport- and import-related costs that, to quote,'double the cost of
imported inputs compared to the cost in the country of origin.'
- From Bank of Uganda and Uganda Revenue Authority statistics, composition of
manufactured exports of low-technology products measured in millions of US dollars stood
at mere 4.7 and 29.4 of total exports amounting to 222.6 and 605.1 for the years 1993
and 1997 respectively. These represent meagre proportions of 2% and close to 5% for the
respective years, although 40% or so of these happen to be
'low-technology' products, as textile yarn and fabric. Medium- and
high-technology happen to be 're-exports' of transport equipment
etc. Despite the prominence of textiles and yarn, there is very little by way of simple
'labour-intensive' manufactures as garments, pointing to textile
exports being primarily resource-based, rather than those with more added value as a
result of 'low wage costs and labour efficiency'!
Government Policies for Technology Development
It has been observed that efforts toward this crucial development are yet to address needs
of the productive sector. Wishes are yet to be transformed into concrete measures.
Government has sought to address shortage of skilled manpower and a weak understanding of
standards and quality needs through creation of the Uganda Industrial Research Institute
(UIRI) and stimulating intra enterprise R&D promotion through tax exemptions,
strengthening departmental units, research organisations and training institutions,
introduction of a training levy and creating a funding environment for R&D. It is
yet time to see these noble objectives come to fruition.
Technology Policy Promotion By Private Sector
Uganda has embarked on full liberalisation, spanning from removal of foreign exchange
controls, elimination of other restrictions to a gradual reduction of import duties, to
levels lowest on the continent, the highest being 15% on consumer goods. Rates for raw
materials and capital goods are 7% and 0% respectively. In return, Uganda was the first
country on the Highly Indebted Poor Country list.
Although the Investment Code (1991) was revised, it is limited with biased control on
foreign direct investments (FDI), according to UNCTAD[6], which in the view of the authors, could deter FDI if implemented to the letter.
UNCTAD however recognises that Uganda has extended more welcome to foreign investors. Key
investment incentives have included provision to deduct 50 - 75% from company's income of
plant and machinery investments, and, 100% for R&D and training costs, vital
incentives for skills and technology upgrade.
Sadly, given the culture of 'near-none investment' in the areas,
these magnanimous offers stand to bear no fruit! It is further observed that, and I quote,
'enterprises are largely unaware of their technological and skills needs and
their training options'.
'There is no funding for innovative activities or even for long - term
investments, with all the three East African states literally sourcing all technology
from abroad, with little effort to master, adapt or improve imported technology.
R&D is totally absent', UNCTAD goes on to argue.
