Tuesday, November 26, 2013

LET US NOT BE CONFUSED ABOUT THE WAY FORWARD



The resuscitation of Uganda Airlines, the bailing out of this or the other businessman and the return of government into the business-owning fold are but a few symptoms of growing movement supposedly to address the issue of rising unemployment.

The proponents of this argument point to south-east Asia’s tigers and more recently across the border to Rwanda as an example of how state intervention works. 

The inefficiency of government owned companies across the board measured by profitability (or lack of thereof), their inability to innovate or even create jobs, is well documented.

This has a spill over into the economy’s ability to grow and up lift the welfare of its people. 

Government owned businesses are often favoured, squelching competition and the attendant benefits that come with a vibrant sector.

Thankfully in Uganda we have numerous examples of the companies, which were government parastatals, which have not only increased production, widened the variety of products, grown their workforces exponentially and pay us much more taxes than we were led to believe was possible previously.

One may argue that these companies many of which are foreign owned have some drawbacks when it comes to expatriation of profits and half-hearted long term investments, but that they were sold off due to our own weakness not because they were thriving businesses.

It is absolutely essential that we have a strong entrepreneurial class, if only because the investment decisions of local players can be more long term, take into consideration other issues that are not of a purely economic nature and also because the local investor is the best advert for Foreign Direct Investment (FDI).

Government has a role to play in building this indigenous business class but government re-entering the business fray is not the way to do it. 

Listening to our businessmen both local and foreign, their frustrations with government can be listed as, in no particular order; archaic, disjointed, disenabling policies and regulations, indifferent execution of these policies, a lack of long term strategy for the private sector and a lack of commitment to plugging in gaps that would improve the business environment. 

If these can be fixed the business community is convinced that such incidentals as access to affordable finance would be addressed as a matter of course.

The businessmen actually don’t want government back in business. 

Then who is screaming for government to jump back into the frying pan? It’s not the consumers – who have little faith in government’s ability to deliver service. It’s not the technocrats – who are struggling to meet ever expanding needs without adding a few other fiscal black holes.

So who is calling for government to be more involved in the private sector?

The people calling for government to jump back in are those who are failing to get employed in a competitive private sector, who need other criteria other than merit to get jobs. The people who are calling for government to jump back in are those businessmen who have failed to compete, mismanaged loans or just want free money. The people who are calling for government to jump back belong to the forgotten phenomenon of “air suppliers”, who again can’t supply to private companies but in government see a bottomless pit of free money.

Government does not need to be in business, but government has a responsibility to create an environment in which businesses can thrive.

Government’s role would be in charting out business enabling strategies and policies, providing public goods like security, infrastructure and basic social services, bankrolling research and development among others. 

The country will get a greater return on investment if government concentrated its billions on these areas rather than squandering it on say, trying to re-establish Uganda Airlines.

By the way the proponents of FUBA (Force Uganda Airlines Back Again) have never explained what benefits to the country a government owned airline will bring that is not already being provided by the 19 airlines that fly in and out of the country today.


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