Wednesday, October 17, 2012


President Yoweri Museveni speech outlined the goal for the next fifty years – to be a modern high income economy.

Currently the Ugandan economy is about $18b, given a population of about 35 million this comes to a per capita income of about $500. According to the World Bank’s classification we are a low income nation.

To become a middle income nation we need to at least double our per capita GDP and to become a high income nation this figure has to leap to at least $12,000 per person.

The trick is how to do it.

By using the measure of economic output per person --- though a far from perfect measure, it is recognized that the size economy of the economy is nothing if it does not benefit the nation’s people.

So while China has a bigger economy than Canada, Canadians enjoy a better standard of living because of a smaller population and a better job of spreading the wealth around by its government.

That sums up Uganda’s challenge over the next fifty years --- to grow the economy and then ensure the benefits of this growth are spread equitably across the economy.

We have done a better than average job of growing the economy since 1986, quadrupling the size of the economy over the period, though it must be said this was achieved from a low base to begin with and the benefits have been tempered by a doubling of the population over the last 26 years.

In addition given that most of the growth came in services and construction the urban populations have benefitted disprortionately from this world beating advancement. Agriculture which employs as much as four in every five Ugandans has not witnessed a corresponding jump in output, dooming about a third of the population to exist below a dollar a day.

We have learnt over the last two decades that the best way to grow the economy is to unleash the energies of individuals and companies. The privatization of state firms and breakup of old monopolies unleashed an energy that has carried us to this point.

When wealth disparities exist in an economy it is an indictment on the politics of that nation. So while private initiative is supposed to produce wealth, the government’s role is to ensure the environment for this wealth creation is sustained and enhanced and to distribute this wealth by providing public goods like enabling policy,  security, infrastructure and social services.

Government has left the private sector largely to its own devices and it should remain that way except that our political elite and public servants should adjust their attitude towards the private sector. They need to see businesses as partners in development rather than adversaries to hold in check or golden geese to shakedown for bribes every now and then.

This is the challenge. To attain middle income by 2030 which is the stated goal, we have to quadruple the economy again and we might just make it if the population keeps growing at the current 3.6%.

That is the easy part. To make sure this happens while carrying everyone along, we need to not only invest more in infrastructure and social services but also to make sure that we get value for money for these investments.

Government needs to shift away from thinking about inputs – so many health units, schools, road, railways and dams have been built and focus on outputs -- how many people are treated, quality students graduate, market access availed and industries powered. In short stop thinking like a government and more like a business.

And the elephant in the room --- corruption, needs to be tackled with more determination otherwise it will be like trying to fill a bucket with water which has a hole in it.

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