TRENDS AND IMPACTS OF FOREIGN INVESTMENT IN DEVELOPING COUNTRY AGRICULTURE

BOX 9
Community services provided by selected TNCs in Uganda, 2009
Sector Number of firms Community activities
higher than in the 2006/2007 season (Figure 10).
There are two likely reasons for this occurrence:
first, Uganda’s coffee exports account for a small
share of global coffee trade, only 2.3 percent in
the 2006/07 season (Uganda, UCDA, 2008: 12).
Second, there is increased emphasis on the export
of organic and washed coffees to niche markets.
6.10 Increased competition
The participation of TNCs has increased the
level of competition in the commodity market.
Since the selected sector are export-oriented, the
impact is at the supply level, and not consumer
level. Increased competition has both positive and
negative effects on the industry.
Positive impact: Increased demand leading
to increased farmgate prices
Increased competition for raw materials has
driven up the commodity prices, to the benefit of
farmers. In the coffee industry, exporters compete
for high quality coffee, which leads to increased
prices for the farmers.
The fall in the world coffee price in the
2000/01 and 2001/02 coffee seasons led to a
subsequent fall in the price paid to local farmers.
In February 2002, the price at the local mills
Part 3: Policies for attracting FDI and impacts
on national economic development
Flowers 41* Construction of schools
Construction on water points like boreholes and wells
HIV/AIDS prevention and counselling services
Construction of football pitch
Construction of clinic
Erection of power lines
General medical services, e.g. malaria treatment, family planning
Construction of toilets
Coffee 1 Micro finance services
Sources: Field interviews; “Uganda’s Horticulture Veteran, Wagagai awarded” East African Business Week 25 February to 2 March 2008
* Each flower company is engaged in at least four different community activities
ranged from US$0.22 – US$0.24 per kg. The
following month, the world price was on the
road to recovery, and increased by 30 percent.
The price paid in Uganda, however, increased
appreciably more: by over 60 percent, to
US$0.36 – US$0.39 per kg. This sharp increase
was attributed to increased competition for two
reasons: low supply from farmers and the need
for the coffee exporting companies to fulfil their
contractual obligations with their international
buyers (Sayer, 2002:9).
The data also show that the increased
competition by the coffee sector as a whole has
enhanced the bargaining power of farmers. This
effect, however, was more evident in the period
starting 2001/2002, where there was a strong
positive correlation between the number of coffee
processing factories and the FAQ Price for coffee,
of 0.81. Starting in 2001, three large domestic
companies joined the coffee sector. However,
it was difficult to isolate the contributions of
domestic and foreign-owned companies on the
impacts of the increased bargaining power of
farmers. There was little correlation between
the FAQ Price and quantity exported (correlation
coefficient of 0.27), or the FAQ Price and the
international price for Robusta coffee (correlation
coefficient of 0.16)
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UGANDA