MOREPRESS RELEASE
EMBARGO:  NOT FOR PUBLICATION UNTIL
1300 GMT 21 DECEMBER 2001
PRESS/TPRB/182
21 December 2001
(01-6401)
 UGANDA'S ECONOMIC REFORM ATTRACTS FOREIGN INVESTMENT AND
CONTRIBUTES TO ECONOMIC GROWTH
Uganda has implemented significant economic reform, including a liberalization of the trade
regime, over the last decade and a half.  This has attracted foreign direct investment, mainly in
manufacturing, and contributed to continued economic growth.  Indeed, over the past six years,
Uganda's real GDP has grown at around 6% per annum on average, and is expected to continuegrowing at about 7% per year in the medium term. These are some of the observations contained in a
WTO report on the trade policies and practices of Uganda.
The WTO Secretariat report, along with the policy statement by the Government of Uganda,
will serve as a basis for the second Trade Policy Review (TPR) of Uganda by the Trade Policy
Review Body of the WTO on 19 and 21 of December 2001.
According to the report, financial discipline ha s brought the fiscal deficit (including grants)
below 3% of GDP and inflation has dropped, improving the economic environment.  Uganda's fiscal
policy is expected to remain largely unchanged, although there will be a greater focus on expenditures
to promote exports of agricultural products, and a need to continue restructuring the Uganda Revenue
Authority to increase public revenue.
Agriculture accounts for around 42% of real GDP and 80% of employment;  coffee is the
main export (over 50% of total merchandise exports in value).  As a result of diversification efforts,
the share of the industrial sector (including manufacturing, mining and quarrying, public utilities, and
construction) in real GDP has increased, from about 17% in 1996 to around 20% in 2000.  The share
of services in real GDP has remained relatively stable, at around 38% since 1996. Insufficientinfrastructure, coupled with Uganda's landlocked status, has impaired the growth of its exports and its
economic progress.PRESS/TPRB/182
Page 2
Uganda's main imports include machinery and tr ansport equipment, food products, fuels, and
chemicals.  The European Union is Uganda's main trading partner.  As a result of regional integration,
Uganda's trade with the other sub-Saharan African countries has increased.  Kenya is the largest
single supplier, accounting for nearly one fourth of total merchandise imports to Uganda.
Since its last TPR in 1995, Uganda has eliminated all quantitative restrictions;  most of the
remaining non-tariff restrictions are maintained for moral, health, security or environmental reasons.
Tariffs have become Uganda's main trade policy instrument.  Uganda has been applying the customs
valuation method based on the transaction value since July 2000.
In addition to tariffs, imports may be subject to an import licence commission of 2%, a 4%
withholding tax, as well as internal taxes, such as the excise duty of 10%, except on cigarettes
(130%), alcoholic beverages (70%) and soft drinks (15%), and a 17% value-added tax (VAT), which
apply equally to imports and domestic products.  In 1999/2000, 52% of the revenue collected under
VAT came from imported goods.
Uganda has substantially simplified the structure of its tariff. The simple average rate of
Uganda's applied MFN 2000/01 tariff is 9%. However the import licence commission and the
withholding tax increase the average rate to 15%.  There is some tariff escalation. In addition, special
protection is provided to the sugar and textiles industries.
Moreover, while Uganda has bound other duties and charges on imports at zero, an import
licence commission and a withholding tax are imposed, which raises concern about compliance with
its tariff bindings.  By eliminating the import licence commission and the withholding tax, by
increasing the coverage of its binding commitments for both goods and services, and by narrowing the
gap between applied and bound rates, Uganda would enhance the transparency and predictability of
its trade regime.  Such adjustments could contribute to full exploitation by Uganda of its comparativeadvantages, and attract investment.
Agriculture, dominated by subsistence farmers and food crops, provides the bulk of the raw
materials for the largely agri-based industrial sector.  Coffee still dominates agriculture;  it affects the
livelihood of a large portion of the population.  Cotton is the second most important cash crop and
offers significant potential.  The third significant e xport is fish and fish products.  Recent growth in
exports of fruit, vegetables and flowers is attributable to agricultural reforms, including diversification
of agricultural exports toward non-traditional crops.  Since the last Review of Uganda, the
Government has continued liberalizing the sector;  marketing of inputs and products has been
liberalized, export taxes have been eliminated except on coffee, trade barriers have been substantially
reduced, and prices are market determined.  Strategic reserves are required for certain products forfood security purposes.
Manufacturing is characterized by the production of simple basic consumer goods. Capital
goods industries are still few in number, while textiles and apparel and agri-processing are seen as
promising industries. Services constitute also a promising sector for Uganda. The government is
divesting its ownership in financial services wher e there are currently no nationality-based ownership
restrictions. The reforms undertaken in telecommunicatio ns services have contributed to growth in the
subsector.
As can be seen from the growth rate of the economy over the past six years, the reforms
implemented by Uganda have begun to bear fruit.  However, the slow mainstreaming of trade into the
development framework has limited the impact of economic growth on poverty.  Various initiatives,
at national and international levels, are currently focusing on this shortcoming.
Note to EditorsPRESS/TPRB/182
Page 3
MORETrade Policy Reviews are an exercise, mandated in the WTO agreements, in which member
countries’ trade and related policies are examined and evaluated at regular intervals. Significant
developments which may have an impact on the global trading system are also monitored. For each
review, two documents are prepared: a policy stat ement by the government of the member under
review, and a detailed report written independently by the WTO Secretariat. These two documents are
then discussed by the WTO’s full membership in the Trade Policy Review Body (TPRB). Thesedocuments and the proceedings of the TPRB’s meet ings are published shortly afterwards. Since 1995,
when the WTO came into force, services and trade- related aspects of intellectual property rights have
also been covered.
For this review, the WTO’s Secretariat report, together with a policy statement prepared by
the Government of Uganda, will be discussed by the Trade Policy Review Body on 19 and 21
December 2001. The Secretariat report covers the development of all aspects of Uganda trade policiessince the previous review, including domestic laws and regulations, the institutional framework, trade
policies by measure, and developments in selected  sectors.
Attached to this press release are the Summary Observations of the Secretariat report and
parts of the government policy statement. The Secretariat and the government reports are availableunder the country name in the full list of trade policy reviews at
http://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm. These two documents and the minutes of the
TPRB’s discussion and the Chairman’s summing up, will be published in hardback in due course and
will be available from the Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva
21.
Since December 1989, the following reports have been completed: Argentina (1992 and
1999), Australia (1989, 1994 and 1998), Austria (19 92), Bahrain (2000) Bangladesh (1992 and 2000),
Benin (1997), Bolivia (1993 and 1999), Botswa na (1998), Brazil (1992, 1996 and 2000), Brunei
Darussalam (2001), Burkina Faso (1998), Cameroon (1995 and 2001), Canada (1990, 1992, 1994,
1996, 1998 and 2000), Chile (1991 and 1997), Colombia (1990 and 1996), Costa Rica (1995 and2001), Côte d’Ivoire (1995), Cyprus (1997), th e Czech Republic (1996 and 2001), the Dominican
Republic (1996), Egypt (1992 and 1999), El Salvador (1996), the European Communities (1991,
1993, 1995, 1997 and 2000), Fiji (1997), Finland (1992), Gabon (2001), Ghana (1992 and 2001),
Guinea (1999), Hong Kong (1990, 1994 and 1998),  Hungary (1991 and 1998), Iceland (1994 and
2000), India (1993 and 1998), Indonesia (1991, 1994 and 1998), Israel (1994 and 1999), Jamaica
(1998), Japan (1990, 1992, 1995,1998 and 2000), Keny a (1993 and 2000), Korea, Rep. of (1992, 1996
and 2001), Lesotho (1998), Macao (1994 and 2001), Madagascar (2001), Malaysia (1993, 1997 and
2001), Mali (1998), Mauritius (1995 and 2001), Mexico (1993 and 1997), Morocco (1989 and 1996),
Mozambique (2001), New Zealand (1990 and 1996) , Namibia (1998), Nicaragua (1999), Nigeria
(1991 and 1998), Norway (1991, 1996 and 2000), OECS  (2001), Pakistan (1995), Papua New Guinea
(1999), Paraguay (1997), Peru (1994 and 2000), the Philippines (1993 and 1999), Poland (1993 and
2000), Romania (1992 and 1999), Senegal (1994), Singapore (1992, 1996 and 2000), Slovak Republic
(1995 and 2001), the Solomon Islands (1998), S outh Africa (1993 and 1998), Sri Lanka (1995),
Swaziland (1998), Sweden (1990 and 1994), Sw itzerland (1991, 1996 and 2000 (jointly with
Liechtenstein)), Tanzania (2000), Thailand (1991, 1995 and 1999), Togo (1999), Trinidad and Tobago
(1998), Tunisia (1994), Turkey (1994 and 1998), the United States (1989, 1992, 1994, 1996, 1999 and
2001), Uganda (1995 and 2001), Uruguay (1992 and 1998), Venezuela (1996), Zambia (1996) and
Zimbabwe (1994).PRESS/TPRB/182
Page 4
TRADE POLICY REVIEW BODY
UGANDA
Report by the Secretariat – Summary Observations
The Economic Environment
Uganda has implemented significant economic reform, including a liberalization of the trade
regime, over the last decade and a half.  This has attracted foreign direct investment, mainly in
manufacturing, and contributed to continued economic growth.  Indeed, over the past six years,
Uganda's real GDP has grown at around 6% per annum on average, and is expected to continuegrowing at about 7% per year in the medium term.
Financial discipline has brought the fiscal deficit (including grants) below 3% of GDP and
inflation has dropped, improving the economic environment.  Uganda's fiscal policy is expected to
remain largely unchanged, although there will be a greater focus on expenditures to promote exportsof agricultural products, and a need to continue restructuring the Uganda Revenue Authority to
increase public revenue.  Coupled with the backgr ound of heightened economic liberalization efforts,
the Bank of Uganda (BOU) has continued to formulate and implement tight monetary policy aimed
primarily at price stability.
The Government has committed itself to continuing its efforts to streamline and liberalize its
trade regime, with strong emphasis on private sector development as a major engine for economic
growth.  The Poverty Eradication Action Plan (PEAP), as recently revised, has introduced a social
dimension into the reforms.  The PEAP is aimed at transforming Uganda into a modern economy by
2017;  it addresses the need to integrate export co mpetitiveness and trade liberalization into a broad
poverty alleviation effort.  Uganda is one of the largest beneficiaries of the IMF/World Bank'sHeavily Indebted Poor Coun tries (HIPC) initiative.
Agriculture accounts for around 42% of real GDP and 80% of employment;  coffee is the
main export.  As a result of diversification efforts, the share of the industrial sector (including
manufacturing, mining and quarrying, public utilities, and construction) in real GDP has increased,
from about 17% in 1996 to around 20% in 2000.  The share of services in real GDP has remainedrelatively stable, at around 38% since 1996.
Insufficient infrastructure, coupled with Uganda's landlocked status, has impaired the growth
of its exports and its economic progress.  High production costs are evident across all economic
sectors.  Non-tariff barriers in Uganda's main export markets, drought, the coffee wilt disease, and
security problems in the region (due to war and civil conflict) have also negatively affected Uganda's
economy.
Uganda has traditionally run a current account deficit.  Declines in world prices of most of
Uganda's traditional exports (coffee, cotton, tea and tobacco) over the last few years have contributed
to a fall in export earnings, despite the upward tr end in the share of non-traditional exports (e.g.
floricultural products, fruit, vegetables, fish and fish products) resulting from its diversification
efforts.  Overall, agriculture still accounts for the bulk of Uganda's exports (around 90% of the value
of total merchandise exports), with an increasing share of non-coffee exports.
Uganda's main imports include machinery and tr ansport equipment, food products, fuels, and
chemicals.  The upward trend in the share of fuels in total merchandise imports reflects the increasesPRESS/TPRB/182
Page 5
MOREin world prices of these products in recent years, while a similar trend in the share of chemicals results
partly from increased imports of medicaments.
The European Union is Uganda's main trading partner.  As a result of regional integration,
Uganda's trade with the other sub-Saharan African countries has increased.  Kenya is the largest
single supplier, accounting for nearly one fourth of total merchandise imports to Uganda.
Institutional Framework
The Ministry of Tourism, Trade and Industry (MTTI) is responsible for trade policy
formulation and implementation.  Other Ministries, particularly Finance and Agriculture, however, are
also involved both in formulation and implementation of trade policy.  The Presidential Economic
Policy Forum, together with other public institutions, carries out periodic reviews and assessments of
trade-related policies within the Government.  Sessional committees of the Parliament also review
policies, including trade policies;  there are opportunities for periodic inputs from the private sector.
Uganda encourages foreign investment.  The Uganda Investment Authority (UIA) is intended
to be a "one-stop shop" to promote and facilitate investment in Uganda.  A commitment to continuing
liberalization of the economy and macroeconomic stability are important attributes of the atmosphere
that Uganda hopes will attract foreign investors,  who may own 100% of investments in companies.
Uganda offers various tax incentives, including import-duty concessions and accelerated depreciation
for plant and machinery, and VAT deferral.  Investment licensing requirements include a minimumcapital of US$100,000 for foreigners and US$50,000 for Ugandans.
Uganda views foreign trade as an important stimulus to economic growth, and its trade
policies aim to contribute to poverty reduction, promotion of employment, and diversification and
promotion of exports, particularly of non-traditional products.  These policy objectives have been
pursued through continuing liberalization, deregulation, privatization, and participation in regionalagreements, particularly the Common Market for Eastern and Southern Africa (COMESA) and the
East African Community (EAC).
Uganda is an original Member of the WTO, and grants at least MFN treatment to all its
trading partners.  Uganda is not a signatory of any of the plurilateral trade agreements.  Uganda has
benefited from regular WTO technical assistance, under the Joint Integrated Technical AssistanceProgramme and the Integrated Framework.  Severa l meetings have taken place with donors since
1996 to assess Uganda's trade-related technical assistance needs, which can be classified into two
categories:  adoption of laws and regulations relating to the WTO and regional trade agreements, and
human and institutional capacity-building for effectiv e participation in these arrangements;  and the
needs relating to supply-side constraints, including poor physical infrastructure, unreliable publicutilities, weak export institutional framework, and market access difficulties.
Uganda is slowly mainstreaming trade into its development framework.  However, its various
institutions dealing with trade policy, including the MTTI, do not have sufficient capacity to manage
trade arrangements effectively and to fully implement the necessary reforms.  At the same time, at
least partially due to the Government's fragmented  institutional structure dealing with trade matters,
coordination among development partners is less than ideal.PRESS/TPRB/182
Page 6
Trade Policy Instruments
Since its last Trade Policy Review (TPR) in 1995, Uganda has eliminated all quantitative
restrictions;  most of the remaining non-tariff restric tions are maintained for moral, health, security or
environmental reasons.  Tariffs have become Uganda's main trade policy instrument.  Uganda hasbeen applying the customs valuation method based on the transaction value since July 2000.  The
tariff structure has been simplified through the reduction of the number of bands from five in 1995 to
three (zero, 7%, and 15%), and the lowering of maximum ad valorem rates from 60% to 15%.  All
tariffs are ad valorem, except on fuel.  Some 16.4% of all tariff lines are duty free, while 39.3% carry
the maximum rate of 15%.
In addition to tariffs, imports may be subject to an import licence commission of 2%, a 4%
withholding tax, as well as internal taxes, such as the excise duty of 10%, except on cigarettes(130%), alcoholic beverages (70%) and soft drinks (15%), and a 17% value-added tax (VAT), which
apply equally to imports and domestic products.  In 1999/2000, 52% of the revenue collected under
VAT came from imported goods.
The simple average rate of Uganda's applied MFN 2000/01 tariff is 9%.  There is some tariff
escalation.  The import licence commission and the w ithholding tax increase the average rate to 15%.
In addition, special protection is provided to the sugar and textiles industries.  Agriculture (Major
Division 1 of ISIC Revision 2) is the most protected sector, with an average tariff rate of 11.2%,
followed by manufacturing (8.9%), and mining and quarrying (8.8%).  Uganda grants preferential
tariff treatment to other members of COMESA;  the preferential bands are 0%, 4% and 6%.
Customs duties are bound for some 15.4% of Uganda's tariff lines, including all tariff lines for
agricultural products (WTO definition) and 2.7% of the lines for non-agricultural products.  The
bindings are at ceiling tariff rates of 80% on most agricultural products, except for 60 lines with
bound rates between 40% and 70%;  and between 40% and 80% on non-agricultural products.  Other
duties and charges on all these products are bound at zero, although the import licence commission of
2% and a withholding tax of 4% apply to all imports.  The predictability of Uganda's tariff regimecould be enhanced by an increase in the coverage of its tariff bindings and by narrowing the gap
between bound and applied rates.
The only export duty is a 1% cess collected by the Uganda Coffee Development Authority on
coffee exports.  The two main incentive schemes, i.e. the Fixed Duty Drawback Scheme and the
Manufacturing Under Bond Scheme, are currently available to export-oriented companies.  There arealso incentives under which import duties on certain raw materials may be refunded.  Exporters are
allowed to export all items except those on a negative list and those for which authorization must be
obtained from regulatory bodies.  The negative list includes timber, charcoal, and whole fresh fish.
In September 2000, Uganda revised its regulations on public procurement for purposes of
greater transparency and decentralization;  open tendering procedures are generally preferred.  Despite
the lack of funding for standardization, there has been a noticeable increase in the number of Ugandan
standards (253 as of September 2001) since the last TPR of Uganda in 1995.
The ongoing implementation by Uganda of its privatization programme has contributed to
divestitures by the State of 108 out of 148 public enterprises.  The new owners include both Ugandans
and foreigners.  Uganda does not yet have legislation on safeguards and competition.  It is revising its
legislation on anti-dumping, countervailing, sanitary and phytosanitary measures, and on intellectual
property, with a view to aligning them on the relevant WTO Agreements.
Sectoral Trade PoliciesPRESS/TPRB/182
Page 7
MOREAgriculture, dominated by subsistence farmers and food crops, provides the bulk of the raw
materials for the largely agri-based industrial sector.  Coffee still dominates agriculture;  it affects the
livelihood of a large portion of the population.  Cotton is the second most important cash crop and
offers significant potential.  The third significant e xport is fish and fish products.  Recent growth in
exports of fruit, vegetables and flowers is attributable to agricultural reforms, including diversificationof agricultural exports toward non-traditional crops.  Since the last Review of Uganda, the
Government has continued liberalizing the sector;  marketing of inputs and products has been
liberalized, export taxes have been eliminated except on coffee, trade barriers have been substantially
reduced, and prices are market determined.  Strategic reserves are required for certain products for
food security purposes.  The Government's 2000 Plan for the Modernisation of Agriculture (PMA),
formulated within the PEAP framework, aims to reorient the activities of subsistence farmers to the
market.  The maximum tariff rate of 15% applies to imports of certain vegetables, fruit and nuts, andspecified animal and fishery products.
Manufacturing is characterized by the production of simple basic consumer goods.  Capital
goods industries are still few in number.  The low capacity utilization in most industries hampers the
competitiveness of Uganda's manufactured products, already negatively affected by the landlocked
position of the country and high price of utilities.  Incentive schemes are in place to attract investmentinto the sector.  Textiles and apparel, and agri-processing are seen as promising industries.  The
maximum tariff rate of 15% applies to imports of, inter alia, beverages, manufactured tobacco,
carpets, rugs, and certain wearing apparel and leather products.
The mining and quarrying sector is underdeveloped, but services constitute a promising sector
for Uganda.  The Government is divesting its ow nership in financial services where there are
currently no nationality-based ownership restri ctions, except for differing minimum capital
requirements (between Ugandans and foreigners) for the licensing of insurance companies.  The
reforms undertaken in telecommunications services, including the sale of 51% of the Uganda Telecom
Limited (UTL) to a German-led consortium, have contributed to growth in the subsector.  However,
fixed telephone services are still under the monopoly of UTL, which sets tariffs subject to approval
by, the regulatory body the Uganda Communications Commission.  The lack of coordination with
neighbouring Kenya and Tanzania, and of a national tourist policy have limited the exploitation of
Uganda's considerable potential in tourism.  Rail transport services are under the monopoly of the
state-owned Uganda Railway Corporation, and the supply of specified air transport services are
subject to limitations.  The other transport services are mostly liberalized.  Uganda has made specificcommitments in tourism and travel-related servic es, and in telecommunications services under the
General Agreement on Trade in Services (GATS).
Trade Policy and Trading Partners
As can be seen from the growth rate of the economy over the past six years, the reforms
implemented by Uganda have begun to bear fruit.  However, the slow mainstreaming of trade into the
development framework has limited the impact of economic growth on poverty.  Various initiatives,
at national and international levels, are currently focusing on this shortcoming.
Uganda has substantially simplified the structure of its tariff.  However, while Uganda has bound
other duties and charges on imports at zero, an import licence commission and a withholding
tax are imposed, which raises concern about compliance with its tariff bindings.  By
eliminating the import licence commission and the withholding tax, by increasing the coverage of its
binding commitments for both goods and services , and by narrowing the gap between applied andPRESS/TPRB/182
Page 8
bound rates, Uganda would enhance the transparency and predictability of its trade regime.  Such
adjustments could contribute to full exploitation by Uganda of its comparative advantages, and attract
investment.
It is critical that Uganda's exports (of non-traditional products in particular) do not meet new
non-tariff barriers and that the multilateral system supports its efforts.PRESS/TPRB/182
Page 9
MORETRADE POLICY REVIEW BODY
UGANDA
Report by the Government of Uganda (Part V)
Uganda's trade policy aim to contribute to  poverty reduction, promotion of employment,
economic growth, and export diversification and promotion (particularly non-traditional exports) and
vertical diversification is to be achieved through further processing of primary export products.
Uganda is striving to promote trade through regional integration especially Common Market
for Eastern and Southern Africa (COMESA), Ea st African Community (EAC) and multilateral
arrangements such as the World Trade Organization (WTO).  Government is putting in place means
to fully exploit non-reciprocal preferential treatment available to developing countries under U.S.African Growth Opportunity Act (AGOA)  and the EU-ACP Cotonou Agreement.
A deregulation programme was launched to dismantle 'unnecessary' and regulatory
procedures that may impede trade.  Government is undertaking a commercial law reform to bring all
trade related laws, regulations and procedures in conformity with WTO requirements.
Efforts are being made to improve government's trade related capacity by mainstreaming
trade issues in the overall National Planning Strategy.  As such, Government is working through the
Integrated Framework and with donor community to benefit from trade-related technical assistance.
Since 1987, the Government has been implementing trade and structural policy reforms,
embracing liberalized systems for input and output  markets, trade, investments and tax regimes.
These reforms included liberalization of domestic and export produce marketing and processing,removal of restrictive tariff and non-tariff barriers and abolition of taxes on exports.
In August 2000, Government released a plan for modernization of agriculture (PMA)
(agriculture is a backbone of Uganda's economy) with the main objectives of:  increasing incomes and
improving the quality of life for poor subsistence farmers and household food security, providing
gainful employment, and promoting sustainable use and management of natural resources.
Trade Policy Formulation and Implementation
In Uganda, trade policy is primarily aimed at economic growth and development through
diversification of the export sector, attracting investment, improving productivity, enhancing export
and local trade and is designed within the context of the overall national economic policy objective.
Trade policy formulation is achieved through a consultative process between Government and
the private sector.  The lead agency for trade policy formulation is the Ministry mandated, the
Ministry of Tourism, Trade and Industry.
The implementation of trade policy is the preserve of public bodies depending on the nature
of the measure or policy to be implemented.
Multilateral, Regional or Preferential Trading Agreements
Uganda's external trade policies are designed to create an enabling environment for
international economic integration in order to ensu re a sufficiently large market for her commoditiesPRESS/TPRB/182
Page 10
as well as the development of her industries.  In pursuit of that objective, Uganda has entered into
multilateral, regional and preferential trade arrangements i.e. WTO, Common Market for Eastern and
Southern Africa (COMESA) East African Comm unity (EAC), Intergovernmental Authority on
Development (IGAD), U.S. African Growth Opportunity Act (AGOA) and EU-ACP Cotonou
Agreement.
Bilateral Agreements
Uganda has bilateral trading agreements with many countries.  Under these agreements,
Uganda and the Partners accord each other most favoured nation treatment in all matters relating to
their mutual trade relations.
END