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FOREIGN
INVESTMENT BENEFITS UGANDA Excerpt
from a speech by H. E. Yoweri K. Museveni Given
our abundant natural resources, given that we are
establishing law and order, and given that we are
freeing the asphyxiating bureaucratic grip over the
economy, foreign investors, or Ugandan Asian
investors, will come here in their own interest
because they can make money out of their coming to
Uganda. We would worry and think of taking the more
unfavourable option of borrowing in order to
promote business if the other category of investors
was not forthcoming. However, in the case of
Uganda, investors are forthcoming, but they are
being pilloried by the Ugandan middle class,
including political leaders, who have an incomplete
understanding of the dynamics of modern economies.
This is not excusable from the historical point of
view. Arising out of the foregoing discourse, it is
beginning to appear that what is patriotic" and
what coincides with the "national interest" is not
borrowing to support indigenous business but,
rather, attracting private investment, whether
foreign or local. However,
we shall not rest the ghost of uninformed
xenophobia until we have answered the question: "Is
foreign investment beneficial to Uganda?" Before we
answer this question, we should set out the
objectives of investments. Since we cannot cover
the whole spectrum of all investments, let us deal
with investments in only two areas: manufacturing
and transport (i.e. services) sectors. Let us take
the question of a textile factory such as NYTIL,
which is publically owned. It has an installed
capacity of 37 million linear metres. Meanwhile,
the government has borrowed US$23,080,747 on behalf
of the factory. We never make a profit and hence we
never receive dividends. Apart from dividends, what
are the other possible advantages from any
investment, public or private? The other possible
advantages are: 1.
providing a market for the raw materials (in this
case cotton) produced by the peasants; 2.
consumption of our utilities by the factory (water,
electricity and telephones); 3.
hiring of local labour; 4.investors'
utilisation of other local facilities (hotels,
airports, planes, etc.); and 5.taxes
(e.g. corporation tax, excise duty, sales tax,
income tax, ground rent) paid to the State by the
factory or enterprise. Members
should note that the country will get all these
advantages whether the factory is owned by the
government or not, provided the factory is actually
operating. The only difference there is between a
privately owned factory and a publically owned one
is that in the former, no dividends accrue to the
Treasury (government). However, given the fact that
publically owned factories never operate
satisfactorily, we find ourselves unable to receive
any of the above-mentioned advantages, dividends
included. Therefore, non-privatisation is a hundred
times worse, from the national point of view. The
only casualties of privatisation I can see are the
incompetent and pilfering parastatal bureaucrats.
These are precisely the species I would like to see
as near extinction as possible, as far as the
Ugandan economy is concerned. Patriotism demands
the expeditious demise of this breed. With
privatisation, we forego imaginary dividends but
get all the other advantages enumerated above.
Without privatisation, we forego all the advantages
stated, in addition to spending hefty sums to
salvage the incompetent parastatal
bureaucrats. |
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The
problem, however, comes when "encouraging" the
national middle class can only be done through
excessive external borrowing. This increases the
country's indebtedness unnecessarily because GDP
can be enhanced through another very important and
debt-free way, that is foreign investment or, in
the case of Uganda, domestic investment by the
non-African element of the middle class (the
Asians). Especially in the short run, there is no
reason why Uganda should subsidize the impecunious
Ugandan middle class and leave the cheaper options
of attracting foreign and Ugandan Asian capital.
This is clearly one of the areas where the
aspirations of the Ugandan petty and middle class
bourgeoisie do not coincide with the national
interest. A time will come when the Ugandan State
(the State of all: middle-class, peasants, factory
workers, etc) will have a budget surplus. Then the
Ugandan State can facilitate its citizens in
various ways, including subsidies, but without
incurring debt. However, to leave the cheaper
option and go for the debt option, apart from
increasing the debt burden, brings about the
thoroughly unpatriotic side-effect of increasing
our political dependence upon those from whom we
borrow or beg, in order to help our middle class,
among other tasks, to pursue private business.