Economic Diversification and Growth

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Contents Acknowledgments The World Bank greatly appreciates the close collaboration with the Government of Uganda (the National CEM Task Force led by the Ministry of Finance, Planning and Economic Development, in particular) in the preparation of this report, requested by senior government officials. The report was prepared by a team led by Jean-Pascal N. Nganou (Senior Country Economist and Lead Author, Macroeconomic and Fiscal Management, MFM). It draws upon a series of background papers commissioned for the study, including: 1. Thorvaldur Gylfason and Jean-Pascal Nganou (2014): Diversification, Dutch Disease, and Economic Growth: Options for Uganda, Chapters 1 and 5. 2. John Matovu and Jean-Pascal Nganou (2014): Fiscal Policy Stance and Oil Revenues, Growth and Social Outcomes for Uganda, Chapter 4. 3. Pierre-Richard Agenor and Jean-Pascal Nganou (2013): Expenditure Allocation and Economic Growth in Uganda: An OLG Framework, Chapter 4. 4. Jean-Pascal N. Nganou, Juste Some, and Guy Tchuente (2014): Growth, Institutions and Foreign Direct Investments in Developing Countries, Chapter 4. 5. Andreas Eberhard, Willy Rwamparagi Kagarura, and Jean-Pascal Nganou (2014): Uganda: Transforming Natural Resources Wealth into Longterm Development-A Wealth Accounting Approach, Chapter 4. 6. Jean-Pascal Nganou, Juste Some, and Guy Tchuente (2014): Government Spending Multipliers in Natural Resource-Rich Developing Countries, Chapter 4. 7. Vincent Belinga, Maximillien Kaffo Melou, and Jean-Pascal Nganou (2014): Analysis of the Oil and non-Oil Government Revenues Nexus: Policy Lessons for Uganda, Chapters 2 and 4. 8. Paulina Aguinaga, Charles Ncho-Oguie, and Jean-Pascal Nganou (2014): Review of Oil-Price Subsidies: Lessons for Uganda, Chapter 2. 9. Alexandre Kopoin, Jean-Pascal Nganou, Fulbert T. Tchana, and Albert G. Zeufack (2014): Public Investment, Natural Resource inflows and Fiscal Responses: A DSGE Analysis with Evidence from Uganda, Chapters 4 and 5. 10. Sam Wills and Rick van der Ploeg (2014): Monetary Union and East Africa’s Resource Wealth, Chapter 7. 11. Rick van der Ploeg and Sam Wills (2014): Genuine Saving in East Africa: Guidelines for exploiting Natural Resource Wealth, Chapter 7. 12. Chandra Vandana, Ying Li, and Rachel Sebudde (2015): Uganda’s Diversification: from farm-to-firm produced exports or farm-to-farm produced exports?, Chapters 1 and 7. 13. Luc Désiré Omgba and Vanessa Mugabe (2015): Natural Resource Charter for an efficient use of oil resources in Uganda: Building a bridge between the government and the population, Chapter 2 and 5. 14. Kenneth Amaeshi and Jean-Pascal Nganou (2014): Sustainable Development of the Oil and Gas Sector in Uganda: The role of Corporate Social Responsibility (CSR), Chapter 6. 15. Youssouf Kiendrebeogo and Jean-Pascal Nganou (2014): Firm’s Export, Productivity and Investment Climate in Uganda: Evidence from the Enterprise Survey, Chapter 6. 16. Rachel Sebudde and Faizal Buyinza (2014): Export, Innovation and Firm level Productivity: Evidence from Manufacturing Firms in Uganda, Chapter 6. 17. Andreas Eberhard, Lawrence Kiiza, and Jean-Pascal Nganou (2014): Prospects of Oil Resources in Uganda: A Macroeconometric Approach, Chapters 2 and 4. Sincere appreciation goes to our peer reviewers Sebastien Dessus (Lead Economist and Program Leader, AFCW1), Dr. Jean-Louis Kasekende (Deputy Governor, Bank of Uganda), Anand Rajaram (Practice Leader, Governance Global Practice), Professors Van der Ploeg (Oxford University), and Thorvaldur Gylfason (University of Iceland and University of Stockholm). The team would like to thank Mr. Lawrence Kiiza (Director of Economic Affairs, Ministry of Finance, Planning and Economic Development) Chairperson of the National CEM Task Force for the helpful advice and Mr. Ernest Rubondo (Director, Petroleum Production and Exploration Department, Ministry of Energy and Mineral Development). More thanks go to the participants who responded to the event organized for the Ugandan Delegation during the 2014 Spring Meetings where experts from within and outside the Bank provided guidance on the overall storyline and the areas for deeper analysis. xii Uganda Country Economic Memorandum: Economic Diversification and Growth in the Era of Oil and Volatility
The core team included Jean-Pascal N. Nganou (Senior Country Economist, Macroeconomic and Fiscal Management Global Practice), Andreas Eberhard (Consultant, Macroeconomic and Fiscal Management Global Practice), Yutaka Yoshino (Senior Economist, Macroeconomic and Fiscal Management Global Practice), Rachel Sebudde (Senior Economist, Macroeconomic and Fiscal Management Global Practice), Clarence Tsimpo (Senior Economist, Poverty Global Practice), Willy Kagarura (Consultant, Macroeconomic and Fiscal Management Global Practice), Hazel Granger (Consultant, Macroeconomic and Fiscal Management Global Practice), Raphael N’Guessan (Consultant, Macroeconomic and Fiscal Management Global Practice), Youssouf Kiendrebeogo (Economist, MENA Chief Economist Office), Adama Traore (Consultant, Macroeconomic and Fiscal Management Global Practice), Paulina Aguinaga (Consultant, Macroeconomic and Fiscal Management Global Practice), Travis Wiggans (Consultant, Macroeconomic and Fiscal Management Global Practice), and Vanessa Mugabe (Consultant, Macroeconomic and Fiscal Management Global Practice). This report benefitted from the outstanding support and very helpful advice of Jacques Morisset (Lead Economist and Program Leader, AFCE1). Helpful comments were provided by: Kevin Carey (Lead Economist, Macroeconomic and Fiscal Management Global Practice), Apurva Sanghi (Lead Economist and Program Leader, AFCE2), Kofi Nouve (Senior Rural Development Specialist, Agriculture Global Practice) and Anton Dobronogov (Senior Economist, Macroeconomic and Fiscal Management Global Practice). The report was prepared under the overall guidance of Albert Zeufack (Practice Manager, Macroeconomic and Fiscal Management Global Practice), Philippe Dongier (Country Director, AFCE1), Diarietou Gaye (Country Director, AFCE2), Christina Malmberg-Calvo (Country Manager, AFMUG), Ahmadou Moustapha Ndiaye (Country Manager, AFMUG), and Sajjad Shah (Country Program Coordinator, AFCE3). The team is also grateful to Andrea Dall’Ollio (Lead Economist, Trade and Competitiveness Global Practice), Chiara Bronchi (Lead Governance Specialist, Governance Global Practice), Valeriya Goffe (Financial Specialist, Finance and Markets Global Practice) and Dan Kasirye (Resident Representative, IFC) for useful insights. Contributions by Marlon Lezama (Senior Coordinator, Technical and Administrative Support Unit (TASU) of the Joint Budget Support Framework (JBSF)), Franklin Mutahakana (Senior Operations Officer, AFMUG), and the AFMUG team are greatly acknowledged. The team is indebted to the useful insights received from the National Task Force composed of Dr. Chris Ndatira Mukiza (Director Macroeconomic Statistics, UBOS), Mr. Samuel Echoku (Head of National Accounts, UBOS), Mr. Timothy Lubanga (Assistant Commissioner for Monitoring and Evaluation, OPM), Mr. Maxwell Paul Ogentho (Director Corporate Services, OAG), Mrs. Peninah Aheebwa (Senior Petroleum Economist, MEMD), Mr. Edward Isabirye (Senior Geologist, MEMD), Mr. George Bamugemereire (Deputy Inspector General of Government, IG), Mr. David Makumbi (Director for Ombudsman Affairs, IG), Dr. John Matovu (Consultant Macro-economics, NPA), Dr. Patrick Birungi (Director Development Planning, NPA), Mr. Moses Ssonko (Senior Economist, Budget and Policy/MFPED), Mr. Moses Kabanda (Senior Economist, Macro Economic Policy/MFPED), Dr. Albert Musisi (Commissioner Macroeconomic Policy, MFPED), Mr. Patrick Ocailap (Deputy Secretary to the Treasury, MFPED), Dr. Francis Runumi (Commissioner Health Services Planning, Ministry of Health), Mr. James Mayoka (Principal Economist, MoES), Mr. Samuel Semanda (Commissioner Agriculture Planning, Ministry of Agriculture), Mr. Fred Mayanja (Assistant Commissioner, Planning/Ministry of Agriculture), Dr. Thomas Bwire (Economist, Bank of Uganda), Mr. Benon Mwebaze Kajuna (Commissioner Policy and Planning, Ministry of Transport and Communication), Mrs. Lucy Iyango (Assistant Commissioner Wetlands, Ministry of Water and Environment), Mr. Mike Nsereko (Director Policy, Planning and Information, National Environment Management Authority), Dr. Lawrence Bategeka (Private Consultant), Mr. Hon. Steven Mukitale (former Chair - National Economy, Parliament of Uganda), Mr. John Bagonza (Director Research, Parliament of Uganda), and Mr. Vincent Tumusiime (Director of Monitoring, Office of the President). Sincere appreciation goes to Xavier De la Renaudiere (Consultant, GMFDR), Priya Susan Thomas (Knowledge Management Officer, WFADC), and Susi Victor (Knowledge Management Analyst, WFADC) for an excellent editing of the report. The dissemination strategy of the report was prepared by Sheila Gashishiri (Communication Associate, AFREC) and Sheila Kulubya (Communication Specialist, AFREC) with helpful comments from Sandya Salgado (Senior External Affairs Officer, External Communications Global Practice). Gladys Alupo (Program Assistant, AFMUG), Damalie Nyanja (Team Assistant, AFMUG), and Lydie Ahodehou (Program Assistant, GMFDR) provided outstanding operational support and formatting of the report. xiii
Page 1: Report No: 97146-UG Economic Divers
Page 4 and 5: Contents Contents List of Acronyms.
Page 6 and 7: Contents Figures Figure 1: Export D
Page 8 and 9: Contents Tables Table 1: Summary of
Page 10 and 11: List of Acronyms ACD AFCE AFMUG AFR
Page 12 and 13: Contents Preface For about ten year
Page 16 and 17: Acknowledgements Credits Regional V
Page 18 and 19: Exuecutive Executive Summary Figure
Page 20 and 21: Uganda’s Executive Economy Summar
Page 22 and 23: Executive Summary longer term as it
Page 24 and 25: Executive Summary Contractors handl
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Page 32 and 33: Executive Summary Value addition to
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Page 36 and 37: Executive Summary Table 1: Summary
Page 39: Part I An Economic Development and
Page 42 and 43: Chapter One 1 Key Messages and Conc
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Page 48 and 49: Chapter One 1 also claim 15-17 perc
Page 50 and 51: Chapter 1 Table 1.6: Savings-Invest
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Page 54 and 55: Chapter 1 Box 1.2: Country Experien
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Page 58 and 59: Chapter 1 Box 1.3: Product Complexi
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Chapter 2 Development of Oil and Ot
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Box 2.1: Three exploration areas in
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the oil price will recover in the m
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Figure 2.7: Uganda’s Real GDP Gro
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Much of Uganda’s oil deposits are
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2.18. The overall impact of the eme
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IV. The Macroeconomic, and Fiscal I
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Containers loaded with crude oil re
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and other financial institutions to
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poor performance of state-owned ent
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48
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Chapter 3 Key Messages and Conclusi
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Chapter 3 can have a negative impac
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Chapter 3 Box 3.2: Financing of Oil
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Chapter 3 are required to notify su
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Chapter 3 Table 3.1: Mapping of Con
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Chapter 3 Figure 3.2: Horizontal Di
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Chapter 3 Table 3.2: Addressing Hor
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Chapter 4 Strategic Implications of
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Figure 4.1: Average Adjusted Saving
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Box 4.2: Angola Case Study When fou
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time, raising investment spending t
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Figure 4.3: Uganda’s Infrastructu
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Figure 4.7: Cumulative Spending on
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Figure 4.11: Overall Fiscal Deficit
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The efficiency of methods of tax co
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nue will need to be accompanied by
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84
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Chapter 5 Key Messages and Conclusi
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Chapter 5 i. Highly skilled technic
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Chapter 5 Table 5.1: Summary Instit
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Chapter 5 Table 5.2: Governance Ind
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Chapter 5 PFM also creates addition
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Chapter 5 not published, creating a
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Chapter 6 Implementation of the Str
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consistent with local needs and org
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earth moving equipment and bitumen.
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Steel wire Seamless iron tubes M
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6.31. The government and Total are
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6.36. Several policy interventions-
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Chapter 7 Implementation of the Str
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Figure 7.2: Share of Intra-EAC Expo
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Table 7.1: Decomposition of Uganda
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Figure 7.8: Transit Traffic t ough
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sures aimed at reducing the time an
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to the Port of Lamu in Kenya. 4 The
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Table 7.7: Labor Migration Policies
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References: 1. Acemoglu, D., S. Joh
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September 2010, 28 (5), 553-571. Wa
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Annexes: Annex 1: Non-hydrocarbon G
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(3) • Consumption basket: composi
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(12) • International commodity pr
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Annex 3: Key Features of the Uganda
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Rural Activities: Exportable and Se
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Level of Prices • General Level:
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Total Expenditures: • Primary: NG
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Annex 4: Key Features of the Uganda
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Recursive dynamics o Following prev
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o where: is total consumption in ad
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Human Capital Formation • Schooli
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• Assuming again full depreciatio
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• Thus, an increase in the saving
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Annex 6: Econometric Results of Fir
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Table A6.3: Probit Estimates of Exp
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Economic Diversification and Growth

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