RESTRICTED
WORLD TRADE WT/TPR/S/4
30June1995
ORGANIZATION(95-1755)
TRADE POLICY REVIEW
UGANDA
Report bytheSecretariat
Thisreport, prepared forthefirstTrade Policy Review ofUganda hasbeendrawn
upbytheWTO Secretariat onitsownresponsibility. TheSecretariat has,asrequired
bytheAgreement establishing theTrade Policy Review Mechanism (Annex 3ofthe
MarrakeshAgreementEstablishingtheWorldTradeOrganization),soughtclarification
from theGovernment ofUganda onitstrade policies andpractices.
Document WT/TPR/G/4 contains thepolicy statement submitted bytheGovernment
ofUganda.
Note: Thisreport issubject torestricted circulation andpress embargo untiltheendofthemeeting
oftheTrade Policy Review Body onUganda.Uganda WT/TPR/S/4
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS xi
(1) TheEconomic Environment xi
(2) Uganda inWorld Trade xi
(3) Legal andInstitutional Framework xii
(4) Trade Policy Features andTrends xii
(i) International obligations xii
(ii) Type andincidence ofpolicy instruments xii
(iii) Sectoral policy patterns xiv
(5) Trade Policies andForeign Trading Partners xiv
I. THE ECONOMIC ENVIRONMENT 1
(1) Major Features oftheUgandan Economy 1
(2) Economic Performance 4
(i) Developments uptothemid-1980s 4
(ii) Reform andrehabilitation since 1987 5
(3) Composition andDirection ofTrade 12
(i) Merchandise trade 12
(ii) Services trade 14
(4) Outlook 14
Annex I.1 15
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 17
(1) General Institutional Framework 17
(2) Structure ofTrade Policy Formulation andImplementation 17WT/TPR/S/4
Page ivTrade Policy Review
Page
(3) Trade Policy Objectives 20
(4) Trade Laws andRegulations 21
(5) Trade Agreements andRegional Co-operation 22
(i) Multilateral framework 22
(ii) Trade agreements among African countries 22
(iii) TheLomé Convention (Lomé IV) 26
(iv) Other agreements andarrangements 27
III. FOREIGN DIRECT INVESTMENT AND TRADE 28
(1) Investment Policies 28
(2) Legal Framework andProcedures 29
(i) Approval process 29
(ii) Investment incentives 30
(3) Investment Patterns andTrends 32
IV. TRADE POLICIES BYMEASURE 35
(1) Overview 35
(2) Measures Directly Affecting Imports 35
(i) Registration anddocumentation 35
(ii) Customs procedures 35
(iii) Tariffs, other levies andcharges 37
(iv) Minimum import prices 44
(v) Import prohibitions andrestrictions 44
(vi) Import licensing 44
(vii) Import surveillance 45
(viii) Trade sanctions 45
(ix) State-trading enterprises 45
(x) Import cartels 45
(xi) Countertrade 45
(xii) Standards andother technical requirements 46
(xiii) Government procurement 47
(xiv) Local content schemes 48
(xv) Rules oforigin 48
(xvi) Anti-dumping andcountervailing measures 49
(xvii) Safeguard measures 49
(xviii) Measures implemented inexporting countries 50Uganda WT/TPR/S/4
Page v
Page
(3) Measures Directly Affecting Exports 50
(i) Registration, documentation 50
(ii) Export taxes, charges andlevies 50
(iii) Minimum export prices 51
(iv) Export prohibitions andrestrictions 51
(v) Export licensing, certification andquality control 51
(vi) State-trading enterprises 51
(vii) Export cartels, voluntary restraints, surveillance andsimilar measures 52
(viii) Export subsidies 52
(ix) Duty andtaxconcessions 52
(x) Export finance, insurance andguarantees 52
(xi) Export promotion andmarketing assistance 52
(xii) Export performance requirements 53
(xiii) Free-trade zones andexport-processing zones 53
(4) Measures Affecting Production andTrade 53
(i) Competition policy 53
(ii) Assistance toindustries 55
(iii) Regional assistance 55
(iv) Protection ofintellectual property 55
V. TRADE POLICIES AND PRACTICES BYSECTOR 59
(1) Overview 59
(2) Agriculture, Fisheries andFood Processing 61
(i) Main features 61
(ii) Policy objectives andinstruments 61
(iii) Policies andindividual sectors 65
(3) Mining 70
(4) Manufacturing 71
(5) Services 73
(i) Main features 73
(ii) Transport 73
(iii) Energy 75
(iv) Telecommunications 77
(v) Financial services 78
(vi) Tourism 80WT/TPR/S/4
Page viTrade Policy Review
Page
VI. TRADE DISPUTES AND CONSULTATIONS 82
(1) Dispute Settlement under GATT/WTO 82
(2) Dispute Settlement under theCOMESA Treaty 82
(3) Other Fora 82
REFERENCES 83
PERIODICALS 87
APPENDIX TABLES 89Uganda WT/TPR/S/4
Page vii
CHARTS
Page
I. THE ECONOMIC AND TRADE ENVIRONMENT
I.1 Trade ingoods andnon-factor services asshares ofGDP, 1970-93 5
I.2 Share ofcentral Government inGDP, 1972-94 7
I.3 Monetary policy indicators, 1981-94 8
I.4 Investment andsaving asshares ofGDP, 1970-93 8
I.5 Balance ofpayments, 1970-93 10
I.6 Real GDP, 1970-93 12
I.7 Composition anddirection oftrade, 1981-92 13
MAP I.1 Geographical location ofUganda 1
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
II.1 Organization oftheMinistry ofTrade andIndustry 19
II.2 Trade withPTA countries bysector, 1993 25
II.3 Trade withtheEUbysector, 1993 27
III. FOREIGN DIRECT INVESTMENT AND TRADE
III.1 Foreign inward investment byorigin, July1991-September 1994 33
IV. TRADE POLICIES BYMEASURE 35
IV.1 Composition ofGovernment revenue, 1985-95 38
IV.2 M.f.n. tariff distribution bytariff range andsector, 1994/95 39
V. TRADE POLICIES AND PRACTICES BYSECTOR
V.1 Average tariffs byISIC classification, 1994/95 60
V.2 Production, exports andproducer prices ofprincipal cashcrops, 1982-93 62
V.3 Distribution ofcultivated land, 1980-89 63
V.4 Production, exports andworld prices ofcoffee, 1982-94 65
V.5 Production andlanduseinthecashcrops andfood crops sectors, 1980-93 69
V.6 Industrial production, 1982-94 82WT/TPR/S/4
Page viiiTrade Policy Review
TABLES
Page
I. THE ECONOMIC AND TRADE ENVIRONMENT
I.1 Main social andeconomic indicators, 1993 2
I.2 Performance ofUganda 'seconomy, 1986-94 3
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
II.1 Main departments andagencies involved intrade policy formulation andimplementation 18
II.2 Basic trade-related legislation inUganda 21
II.3 Main trade-related elements oftheCOMESA Treaty 23
III. FOREIGN DIRECT INVESTMENT AND TRADE
III.1 Treatment offoreign investment under theInvestment Code 32
III.2 Investment commitments bysector, July1991 toNovember 1994 34
IV. TRADE POLICIES BYMEASURE
IV.1 Main features oftheUgandan tariff schedule, 1994/95 40
IV.2 Main taxes andcharges levied onimports ofselected products, 1994/95 41
IV.3 Rates oftheCommercial Transaction Levy (CTL), 1993/94 43
IV.4 Privatization ofpublic enterprises (PEs) 56
V. TRADE POLICIES AND PRACTICES BYSECTOR
V.1 Tariffs onmain food products, 1993-94 64
V.2 TheACPC Coffee Retention Scheme 67
V.3 Composition ofthemanufacturing sector, 1989 72
V.4 Electricity supply, 1984-93 76
V.5 Banks inUganda, 1993-94 79Uganda WT/TPR/S/4
Page ix
APPENDIX TABLES
Page
AI.1 Exports (including re-exports) byselected product categories, 1981-93 91
AI.2 Imports byselected product categories, 1981-92 92
AI.3 Exports (including re-exports) byregion andcountry ofdestination, 1981-93 93
AI.4 Imports byregion andcountry oforigin, 1981-92 94
AIV.1 Tariff escalation andtariff ranges, 1994/95 95
AIV.2 Goods subject toexcise taxes, 1994/95 98
AIV.3 Raw materials eligible forremission ofduties andtaxes, asofDecember 1994 100
AIV.4 Countertrade involving theUgandan Government, 1986-89 103
AV.1 Trade measures applied inUganda byISIC category, 1994/95 104
AV.2 Sectoral structure ofGDP (atfactor cost), 1983-94 109Uganda WT/TPR/S/4
Page xi
SUMMARY OBSERVATIONS
(1) TheEconomic Environment
1. Between the1970s andmid-1980s,
Uganda suffered long periods ofpolitical
turbulence -amounting attimes tocivilwar-
andpooreconomic management. By1986, the
economy layinruins, withremaining operators
discouraged byrampant inflation, rigid price
regulation andahighly overvalued currency.
2. Since therestoration ofpeace and
institutional stability in1986/87, Uganda has
pursued acomprehensive andambitious reform
agenda. With theEconomic Recovery
Programme (ERP) of1987 and the
Rehabilitation andDevelopment Plan(RDP) of
1993, theauthorities have begun again to
capitalize onthecountry 'snatural assets of
fertile soils andamoderate climate andto
rehabilitateitsoncewell-developed
infrastructure. However, despite strong growth
since 1987, atanannual rateofaround
5percent,recorded percapita income remains
among thelowest intheworld andmany
economic andsocial problems persist, notleast
indealing withtheeffects ofAIDS.
3. Progress hasbeen made inmany
policy areas. Public expenditure hasbeen
disciplined andthetaxsystem rationalized; a
numberofStateenterprisesdivestedandstripped
ofmonopoly rights; theexchange ratebrought
intolinewith market realities and, later,
allowed tofloat; andcurrency surrender
requirements abolished. With tightening of
monetary policy, inflation hassubsided andreal
interestrateshaveturnedpositive.Expropriated
assetsarebeingreturnedtopreviousownersand
newinvestorsattractedthroughliberalapproval
practices. Trade liberalization andinternal
deregulation, including thederestriction offarm
prices, arecontributing torestore balance in
theincentive system, andtoinject adegree of
competitionintoUganda'slimitedmanufacturing
andservices industries.4. Informal economic activities, in
particular small-scale crop production and
livestock farming, currently represent about one
third ofGDP. While Uganda 'seconomic
survival during theperiod ofcivilwar,andits
present recovery, owemuch totheresilience of
these activities, theirintegration intheformal
sector could nowhelpmobilize under-utilized
factors ofproduction andbroaden theresource
baseforfuture expansion.
(2) Uganda inWorld Trade
5. Uganda 'sinternational trade is
relatively small andlopsided. Exports are
dominated byagricultural products, withcoffee
contributing overhalfofmerchandise exports
in1993. There hasbeenadegree ofrecovery
inother traditional areas, suchastea,cotton
andtobacco, anddiversification intonon-
traditional products, including cereals andfish.
Thistrend hasbenefited fromthereduction of
policydistortions,movestowardsregionaltrade
integrationand,untilrecently,improvedrelative
terms oftrade duetoadecline inworld coffee
prices. About halfofUganda 'smerchandise
exports aretaken bytheEuropean Union, and
mayqualify forpreferential treatment under the
Lomé Convention; anadditional quarter is
destined forother participants intheCommon
Market forEastern and Southern Africa
(COMESA), inparticular neighbouring Kenya
andTanzania, whose share isgrowing rapidly.
6. Merchandise imports havelargely
exceeded exports, with demand boosted by
foreign donor funding inrecent years;
unrequited transfers represent over10percent
ofUganda 'sGDP. Reflecting therehabilitation
ofinfrastructure andindustry, theimport basket
consists mainly ofmachinery, transport
equipment andother manufactures. The
European Union isbyfarthemostimportant
source; however, imports from Japan have
grown rapidly.WT/TPR/S/4
Page xiiTrade Policy Review
7. Payments fortechnical assistance
andfortravel, educational andmedical services
have translated intosignificant deficits in
services trade. Economic and political
stabilization is,however, helping thetourist
industry, which seeks toregain itsprevious rôle
asUganda 'ssecond largest export earner.
8. Mirroring their importance as
trading partners, theEuropean Union and,
increasingly, COMESA countries areUganda 's
leading foreign investors. Starting fromvery
lowlevels, commitments have picked up,
reflecting confidence inthecountry 'seconomic
management, theabolition ofrestrictive
approval procedures and, possibly, thepull
effects ofincentives. Food processing,
construction andbusiness services arethemain
areas ofnewinvestment.
(3) Legal andInstitutional Framework
9. TheRepublic ofUganda isheaded
byanexecutive President, whochairs aCabinet
ofMinisters appointed byhim. Most members
ofUganda'slegislature,theNationalResistance
Council (NRC), were elected byCounty
Councils; about aquarter werenominated by
thePresident. While theCabinet hasoverall
responsibility fortrade policy formulation and
implementation, theNRCexercises itspowers
mainlythroughthepassingofStatutes,including
annual Finance Statutes specifying tariffs and
taxes. Acomprehensive revision ofthe
Constitution isunderway.
10. Thechange inpolicy direction since
1987 has altered Uganda 'sinstitutional
structure. Various State marketing bodies,
including intheareas ofcoffee andcotton, have
been stripped oftheir monopoly rights and
reorganized exclusively with regulatory
functions. Since 1993, outofover 100
State-ownedenterprises,18havebeenprivatized
and11liquidated,andmanymorearescheduled
foreither privatization orliquidation by1997.11. Recentchangesinbankinglegislation
areintended tostrengthen theBank of
Uganda 'srôle asmonetary authority and
enhance itssupervisory functions overfinancial
institutions. Theoperation oftheUganda
Revenue Authority (URA), setupin1993, is
expected toimprove revenue andtaxcollection.
Under theInvestment Codeof1991, theUganda
Investment Authority (UIA) operates asaone-
stop shop forinvestment approvals and
incentives.
(4) Trade Policy Features andTrends
(i) International obligations
12. Uganda has been aGATT
contracting party since independence in1962.
Itratified theMarrakesh Agreement in
September 1994tobecome afounding member
oftheWorld Trade Organization (WTO).
13. Asaresult oftheUruguay Round,
Uganda 'slevel oftariff bindings increased
significantly tocover aquarter ofalltarifflines
(87percentofagriculturalandfisheryproducts
and15percentofindustrialproducts),although
many bound rates remain higher than the
applied tariffs. NewWTO rulesanddisciplines
mayresult inlegislative changes inareas such
ascustoms valuation, preshipment inspection,
anti-dumping and countervailing actions,
safeguards, and trade-related investment
measures(TRIMs).AccessiontothePlurilateral
AgreementonGovernmentProcurementisunder
study. Inservices, Uganda 'sspecific
commitments governing market access and
national treatment areconfined totourism and
subject tocertain limitations; noexemptions
from m.f.n. treatment havebeennoted inthe
Uruguay Round Schedule.
14. UgandaparticipatesintheCommon
Market forEastern and Southern Africa
(COMESA),which,inDecember1994,replaced
thePreferential Trade Area forEastern and
Southern African States (PTA). TheCOMESA
Treaty, signed byover20African States, lays
down anambitious liberalization agenda,Uganda WT/TPR/S/4
Page xiii
including thecreation ofafree-trade areaby
2000, acustoms union by2004and,eventually,
aneconomicandmonetaryunion.Co-operation
istobereinforced insuchareas ascustoms
procedures, standardization, anti-dumping and
countervailing measures, competition policy,
capitalmovements,andpreventionofsmuggling.
(ii) Type and incidence ofpolicy
instruments
15. Tradeliberalizationhasbeencentral
toUganda 'sreform programme since 1987.
Virtually allquantitative restrictions havegone
since theintroduction in1991 ofautomatic
licensing under anImport Certification System,
which allows certificate holders toimport all
goods notspecifically listed. Thecurrent
"negative list"isconfined tobeer, soda(soft
drinks), carbatteries, used cartyres and
specified typesofcommunications andelectrical
equipment; therestrictions protect local
industries inthefirstfourcategories. Thelifting
ofanimport banoncigarettes in1994 was
made contingent onthebeneficiary company
buying domestic leafforprocessing abroad.
16. Improvements were alsomade in
customs procedures, benefiting from the
introductionofaTaxpayerIdentificationNumber
and review oftheCustoms and Excise
Management Act. TheGovernment hopes to
phase outtheexisting preshipment inspection
(PSI)requirement andplans tochange thebasis
ofcustoms valuation fromthecurrent Brussels
Definition totheWTO Valuation Code.
Continued concern hasbeenexpressed bysome
localmanufacturers,however,aboutinefficiency
incustoms treatment andsmuggling, duemainly
toinsufficient staffing and infrastructural
bottlenecks.
17. Uganda hasnospecific safeguards
law -although theGovernment plans to
introduce suchlegislation based ontheWTO
Safeguards Agreement -andprovisions foranti-
dumping andcountervailing actions havenot
beeninvoked foratleastadecade. There arenoimport deposit orsimilar obligations, and
importers have unlimited access toforeign
exchange atmarket rates.
18. Giventheimportanceof
infrastructure rehabilitation, government
procurementpracticesmayhaveastrongimpact
ontrade flows. Under current procurement
procedures, some 80percent ofcentral
government purchasing isinprinciple subject
toopen tendering. Ugandan suppliers are
generally afforded apreferential margin of15
to20percent over imports. Significant
purchases areeffected viabilateral and
multilateral donors, andaretherefore subject
totheirspecific criteria.
19. Withnon-tariffbarriers
disappearing, Uganda 'scustoms tariff isthe
dominant protective instrument. After
rationalization inrecent years, the1994/95
schedule hasfiveadvalorem ratesbetween zero
and60percent. More than95percentofall
tarifflinesfallbetween 10and30percent,and
thesimple average ratestands at17.1percent.
Preferential rates onintra-COMESA imports,
covering thewhole product range, average
11.7percent. Higher tariffs areconcentrated
insectors ofinterest toUgandan producers such
asfarmproducts, fish,processed food, textiles
andleather. Effective tariff protection islikely
tobereinforced through thewidespread useof
dutyandtaxexemptions onbasic inputs. Tariffs
currently contribute about two fifths of
Government revenue; efforts areunderway to
shifttherevenue base towards indirect and
income taxes. Inthisconnection, value-added
taxisscheduled forintroduction in1996.
20. Mirroring developments onthe
import side,many export-related barriers and
disincentives havedisappeared. In1990export
licensing requirements werereplaced byaless
restrictive export certification system; export
taxes havealsobeenabolished.
21. Coffee remains aspecial case.
Exporters mustberegistered, andshipments are
subject to"indicative" prices andqualityWT/TPR/S/4
Page xivTrade Policy Review
controls. TheGovernment hasreserved the
righttorestrain export volumes "inlinewiththe
demands ofinternational obligations", in
particular theCoffee Retention Scheme agreed
tobymajor producing countries in1993. A
Coffee Stabilization Tax,introduced in1994,
isintended toeaseupward pressure onthe
exchange rate resulting from coffee price
increasesand,thus,improveconditionsforother
exporting orimport-competing sectors.
22. TheInvestmentCodeenactedin1991
reversedlong-standingofficialantipathytowards
foreign investment andintroduced standard
provisions regarding investment incentives (e.g.
taxholidays), profit repatriation andprotection
against expropriation ofassets. These
provisions, together withtherecent wave of
privatizations, arecreating newopportunities
forbothlocal andforeign investors. Afew
constraints remain, however. Foreign
investment issubject toprior, although near
automatic, approval andhigher qualification
levels fortaxincentives apply toforeign
investors thantoUgandans. Moreover, the
régime contains sectoral preferences forforeign
investment indesignated Priority Areas.
(iii) Sectoral policy patterns
23. Small-scale coffee growing and
subsistence farming were among thefew
activities thatemerged largely unscathed from
Uganda 'sslide intopolitical andeconomic
disarray. However, other agricultural
production, particularly oftea,cotton, and
tobacco, has responded swiftly tothe
rehabilitation programme. Toencourage
product diversification and promote food
self-sufficiency, many farmsectors havebeen
granted above-average tariffprotection onfinal
products, combined withfreeentry forinputs
(fertilizers, pesticides, seeds, agricultural
machinery andtools).
24. Pastimport-substitution policies for
manufacturing havelargely -onpaper atleast
-beenabandoned. Uganda 'ssmall industrial
sector accounts forsome 6percentofGDP.Itscurrent mainstays arefarm-based processing
industries suchascoffee, beverages (beer and
soda), textiles andleather. Asinagriculture,
theGovernmenthassoughttoenhanceindustrial
efficiency through deregulation, privatization
andtrade liberalization. Again, however, a
combination of high tariffs and duty
exemptions -or,insome cases, import bans
under thenegative list-isgeared topromoting
selected "infant" industries andmaymaintain
substantial effective protection. Inaddition,
under theInvestment Code, theUIAmaygrant
investment incentives conditional upon theuse
oflocal inputs orexport performance.
25. While theincentive scheme is
intended tobroaden theregional andsectoral
pattern ofproduction, itscontinuing imbalances
maydiscourage activities which could perform
better inamore neutral environment. The
planned reform ofthetaxsystem could provide
scope forfurther, broader-based tariffcutsand
helpreduce suchrisks.
26. Rehabilitationandmodernizationof
theinfrastructure andofbasic business services
havebeengiven toppriority. TheGovernment
hassought, inparticular, tomake thebanking
sector more efficient and deregulate the
transportindustry. Reformsin
telecommunications mayfollow suit; inthis
connection, modernization ofthe basic
telecommunications network andreform ofthe
pricing structure would beofsignificant benefit
toUganda 'seconomy. Thesame applies to
electricity generation anddistribution, whose
reliability seriously suffers from outdated
equipment.
(5) Trade Policies andForeign Trading
Partners
27. Autonomous trade andinvestment
liberalization hasbeen akeytoUganda 's
economic performance since themid-1980s. It
hashelped toattract foreign donors and
investors andcreate theconditions forrapid
economic recovery. Toimprove theresource
baseforcontinued expansion, investment flowsUganda WT/TPR/S/4
Page xv
would needtobecomplemented byenhanced
domestic capital formation. Although the
principalmacroeconomicconditionsareinplace
-fiscal prudence and alow-inflation
environment -private savings have remained
low. However, withconfidence growing in
Uganda 'seconomic andinstitutional stability,
thisislikely tochange.
28. Trade policy and,inparticular, the
creation ofadomestic trading environment in
which anti-export biasisdiminished orabsent
hasanimportant rôletoplayinUganda 'sfuture
development. Enhancedinternational
integration, based oncommitments under WTO
andCOMESA, willhelpensure themomentum
ofreform, spur resource efficiency, provide
market potential foremerging industries, and
encourage long-term development oftrade and
investment. Uganda 'srecent performance
testifies towhat liberalization andeconomic
reforms canachieve rapidly inapoor,
devastated economy; continuation and
consolidation oftheprocess iscrucial inthe
rebuilding oftheeconomic structure.