Why industrialization is more important for Uganda in post-Covid-19 era

Industrialization is key for economic transformation, export revenues, job creation, poverty reduction and sustained prosperity in developing countries like Uganda. All these, in turn, contribute to inclusive growth, resilience, increased living standards and transformation of the economy and society.

In addition to enhanced transformation and resilience, industrialization can also bring the much-needed foreign direct investment and new technologies as well as foster innovation and international competitiveness.

While delivering her speech at Serena Hotel on Tuesday during the launch of the National Industrial Policy, 2020, the Resident Representative United Nation Development Ms. Elsie G. Attafuah said that from a manufacturing and the private sector point of view, industrialization is an important foundation for entrepreneurship, business investment, technological progress, the upgrading of skills, and sustained productivity improvements in Uganda.

Ms Attafuah added that the Asian development experience sets an example that shows that industrialization can produce strategic and long-term benefits to nations. Since Asian manufacturing shifted labour from a low-productivity agricultural sector into a higher-productivity manufacturing sector. Manufacturing contributed to rapid foreign direct investment flows, improved innovation, and created stronger and internationally competitive economies. Manufacturing also contributed to an acceleration of exports, a surplus in external trade and improved balance of payments conditions.

“There are many lessons for Uganda in terms of the strategic shifts the country needs to make through industrialization to realize the national development aspirations. Yes, manufacturing is important and is the way to go, but agro-industry remains strategic for Uganda in the short to medium term. I am glad the national industrial policy strikes a balance in this regard,” she said.

According to Ms Attafuah, before the Covid-19 hit Uganda in March 2020, the economy was on an impressive growth path. Gross Domestic Product (GDP) growth was at 6.5 percent in FY2018/19. And Industry was the main driver of this growth, expanding at 10.8 percent, followed by agriculture 5 percent and services 4.9 percent.

However, when it hit Uganda last year in March, an estimated 1.9 million people fell back into poverty with the first two months of lockdown. The tourism sector grounded to a halt and may potentially lose about the US $ 5 billion in the medium term. Up to 60 percent micro small and medium enterprises are also facing business closure. She said that all these will undermine the progress on the Sustainable Development Goals (SDGs), especially SDG 1 on poverty, SDG 8 on jobs and growth, and SDG 10 on inequalities.

“The Covid-19 has also hit manufacturing in Uganda, especially agro-industries, in terms of jobs and livelihoods. Yet we also know that manufacturing and increased value-addition play a crucial role in recovery from Covid-19. We must therefore make the right strategic choices as we invest in building forward better through greener and more resilient industries.”

Ms Attafuah however said that Covid-19 has exposed certain realities, as a number of countries, particularly developed ones, began to look more internal to themselves focusing on their own recovery and their own national and human security. A clear example is what we are witnessing today on vaccines.

“Therefore, regional markets are likely to become more crucial in the pursuit of export-oriented industrialization in Uganda and many African countries. In this context, increasing intra-African trade through Regional Value Chains will provide Ugandan manufacturing firms with economies of scale by tapping into the 1.2 billion African market whilst concurrently building and linkages to the global value chains,” she noted.

Ms. Attafuah emphasized that the African Continental Free Trade Area is an opportunity Uganda cannot afford to lose because there is a need to harness regional markets.

“Uganda has done well to swiftly finalize and launch this national industrialization policy and implementation plan to seize the rising opportunities in manufacturing and industrialization across a variety of sectors. Likewise, Uganda needs to move quickly to prepare a national implementation strategy for the African Continental Free Trade Area. I am pleased to commit UNDP’s support to the government in this regard.”