Resolution of Certain Political and Social Issues
Certain political and social factors were identified as constituting draw-backs to the attraction of FDI into Uganda. These include the fragile polity and corruption. These need to be resolved if foreign investments are to increasingly flow into the country.
Democracy needs to be further entrenched in the country through continuous tolerance for the opposition and the conduct of free and fair elections. The tell-tales of corruption in the country must be equally matched with stories of government’s successful efforts to combat the scourge; otherwise, wrong signals will continually be sent to intending foreign investors who are considering Uganda as their possible investment destination, as increasing emphasis is being placed on transparency and ethics in business transactions in the developed world which are also the major sources of FDI.
Removal of Restrictions on Foreign Participation in Agribusiness
Foreign investors should be allowed to invest in all aspect of agriculture if the vast potentials of the sector are to be optimized. Agricultural production in Uganda is mainly done by 2.2 million smallholders, mostly working 2 to 3 hectares of land, using traditional methods of cultivation and family labor. There is no way such method of production can support the country’s rapidly growing population, let alone the desire to earn foreign exchange for the country through the exportation of the produce.
It is, thus, surprising that the Investment Code Act, 1991, excludes foreign investors from a sector as critical to the Ugandan economy as agriculture which contributes about 40 percent of the country’s GDP; except for provision of materials or other assistance to the local farmers; leasing a piece of land for manufacturing and for ensuring a regular supply of raw materials with permission from the Finance Minister upon the recommendation from the UIA through a statutory instrument.
There is therefore the need to modernize agricultural production in Uganda through the importation of new technology and capital; which are likely to come through inward FDI. The government should, therefore, amend the Act to allow foreign investors engage in the business of agriculture in Uganda.
Promotion, Facilitation and Supervision of Foreign Direct Investment (FDI)
It is just not enough for a country to have an abundance of investment opportunities, like Uganda. Indeed, with the advancement in technology and the increasing improvement in the investment climates, most countries are now in good stead to attract foreign investment; thus heightening the competition for foreign direct investment (FDI) among several nations. Conscious efforts must, therefore, be made by countries if they are to become the destinations of choice for FDI.
It is not in doubt that Uganda has the abundance of investment opportunities. It should, however, complement this with deliberate policies to attract, retain and optimize the benefits inherent in foreign direct investment. This will involve the promotion, facilitation and supervision or regulation of FDI. Investment Promotion will sell the country’s huge investment opportunities to the rest of the world; Investment Facilitation will ensure that the foreign investors are retained and increasing shares of their investment wallets obtained by drastically reducing the difficulties they encounter in doing business in the country; while Investment Supervision or Regulation will guarantee that these foreign investments are not solely for the benefits of the foreign investors, but also for the benefit of the local economy.
These underscore the enactment of the Investment Code Act, 1991, and the consequent establishment of the Uganda Investment Authority (UIA).