Economic Diversification and Growth

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Contents Contents List of Acronyms................................................................................................... viii Preface.....................................................................................................................x Acknowledgments.................................................................................................xii Executive Summary..............................................................................................xv Part I - An Economic Development and Diversification Strategy - Main Goals 1 Chapter 1 Uganda’s Economy: Recent Developments, Current Economic Structure, Government Strategy, Opportunities for Economic Diversification3 I. Recent Economic Developments3 II. Salient Features of the Ugandan Economy6 A. The supply-side of the economy7 B. The demand-side of the economy10 C. Trade orientation11 D. Linkages analysis12 III. The Government Strategy14 IV. Economic diversification - A Sound Objective15 V. Lessons for Uganda - How Far Can Uganda Diversify?19 A. Nurturing existing productive capabilities19 B. Expanding export possibilities20 Chapter 2 Development of Oil and Other Extractives: Prospects of Oil and Mining Sector, Macroeconomic and Fiscal Impact27 I. The Development of the Oil Sector 27 II. The Macroeconomic and Fiscal Impact of Oil Production - A Baseline Scenario 32 III. The Development of Uganda’s Mineral Sector 37 IV. The Macroeconomic and Fiscal Impact of the Mineral Sector 39 V. Oil and Competitiveness 40 A. Dutch Disease: a textbook explanation 40 B. Macroeconomic foundations of the resource curse/Dutch Disease 40 C. Other issues 43 Part II - POLICY PRIORITIES AROUND FOUR BUILDING BLOCKS 47 Chapter 3 Strategic Implications of Oil and Mineral Sector Development: Short and Medium- Term Objectives 49 I. Supporting the Growth, Extending the Life of the Oil and Mining Sectors 50 Ii. Maximizing the Economic and Fiscal Benefits to be Derived From Oil And Mining Exploitation 50 A. Transparent exploration and production licensing systems 50 B. Competent contract negotiations 51 C. Mobilizing the largest possible tax take for the government 51 D. Encouraging linkages through realistic Local Content Policies 52 III. Minimizing the Negative Impact Of Oil and Mineral Resources 59 A. Impact of oil and mineral resources on the environment 59 B. Impact of oil and mineral resources on other economic sectors 59 IV. Using Oil Revenue to Reduce Poverty and Inequality 60 ii Uganda Country Economic Memorandum: Economic Diversification and Growth in the Era of Oil and Volatility
Chapter 4 Strategic Implications of Oil and Mineral Sector Development: Long-Term Objective and Sustainability65 I. Measuring the Growth of Long-term Capital - A Wealth Analysis65 II. Size and Pace of Investment - Domestic and External Assets68 III. Sector selection - Infrastructure or Human Capital71 IV. Public Finance Implications of Alternative Strategies73 A. Two alternative scenarios74 B. Clear fiscal rules - Savings and the NONG fiscal deficit76 C. Other issues: mobilization of domestic taxes79 D. Other issues: spending pressures81 Part III - Government Actions Necessary to Address Specific Implementation Issues 83 Chapter 5 Implementation of the Strategy : The Role of Improved Public Sector Management83 I. Strengthening Uganda’s Public Sector Institutions87 II. Improved Governance, Public Finance Management, Public Investment Performance, and Management of Expectations89 A. Governance, corruption and accountability89 B. Public finance management93 C. Public investment management 96 Chapter 6 Implementation of the Strategy: The Role of the Private Sector99 I. The Private Sector as a Development Agent99 II. Current Situation and Prospects of Uganda’s Private Sector101 III. Specific Sectoral Issues103 IV. Priorities for Public Sector Interventions 107 Chapter 7 Implementation of the Strategy: The Impact of Regional Integration 111 I. Uganda Derives Substantial Benefits from Its Participation in the EAC 111 II. Regional Integration also Depends on Improved Regional Infrastructure and Services 116 III New/Increased Production of Oil, Gas and Minerals in Uganda, Tanzania and Kenya Will Influence the Structure and the Benefits of Regional Trade ........................................................................................... 119 IV. The Positive and Negative Impact of a Future Monetary Union ............. 121 References:...................................................................................................... 125 Annexes: Annex 1: Non-hydrocarbon Government Revenue for Resource-rich Countries, 1992–2012....................................................................................... 129 Annex 2: Key Features of the Uganda Dynamic Stochastic General Equilibrium (DSGE) model................................................................................. 130 Annex 3: Key Features of the Uganda Macroeconometric Model (MacMod-UG) 135 Annex 4: Key Features of the Uganda Maquette for MDG Simulations (MAMS) model ............................................................................................. 143 Annex 5: Key Features of the Uganda Overlapping Generations (OLG) model 146 Annex 6: Econometric Results of Firm Productivity and Export Analysis....... 155 Annex 7: Key Drivers of Mineral Development............................................... 158 iii
Page 1: Report No: 97146-UG Economic Divers
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 14 and 15: Contents Acknowledgments The World
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
Page 26 and 27: Executive Summary was mentioned bef
Page 28 and 29: Executive Summary 48. Excessive bor
Page 30 and 31: Executive Summary be met by 2020, w
Page 32 and 33: Executive Summary Value addition to
Page 34 and 35: Executive Summary going through the
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
Page 44 and 45: Chapter One 1 Table 1.1: Poverty Tr
Page 46 and 47: Chapter 1 is viewed as a promising
Page 48 and 49: Chapter One 1 also claim 15-17 perc
Page 50 and 51: Chapter 1 Table 1.6: Savings-Invest
Page 52 and 53: Chapter 1 significantly by other se
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Chapter 1 Box 1.2: Country Experien
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Chapter 1 Table 1.8: Diversific tio
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Chapter 1 Box 1.3: Product Complexi
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Chapter 1 Box 1.4: A Short-term Exp
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Chapter 1 Figure 1.20: Uganda’s P
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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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