Enhancing Agricultural Productivity and Trade for Poverty Reduction in Uganda

1. LINKAGES BETWEEN AGRICULTURAL PRODUCTIVITY AND RURAL LIVELIHOODS ON ONE HAND AND TRADE IN AGRICULTURE AND TRADE FACILITATION ON THE OTHER RECCOMENDATIONS FOR POVERTY REDUCTION AND DEVELOPMENT FOR A LANDLOCKED – COUNTRY LIKE UGANDA By Mwambutsya Ndebesa E-mail: ndebesam@yahoo.com

2. INTRODUCTION • Economic, Trade and Social Profile of Agriculture Sector • Trends in the production, exports and imports of major crops/products • Trends in agricultural productivity with a focus on developments in the productivity of main crops in the last ten years • Trends in formal and informal employment in agriculture, rural poverty, nutrition and food security status. • Landlockedness and trade facilitation issues • main physical, infrastructural and institutional constraints • Policy framework with a focus on: • Key features of existing development, trade, agriculture and trade facilitation policies

3. OBJECTIVES OF THE STUDY • To collect information on and analyse the recent trends in agricultural productivity, agriculture trade, livelihoods, and trade facilitation measures; • To examine the complex relationships involved using a holistic framework; • To generate new insights and knowledge that has practical implications; and • To contribute to finding solutions including through coherent policy framework that will assist Uganda in meeting the objectives of NDP and NTP 2007.

4. KEY SUBSTANTIVE ISSUES THAT WERE COVERED • Role of and constraints faced by the agricultural sector with focus on rural livelihoods, productivity, and trade; • Trade facilitation needs and measures with focus on those directly related to landlockedness; • Linkages and relationships among various issues with focus on areas for synergetic action; • Policy frameworks related to agriculture, trade, and trade facilitation; and • Development of coherent thinking and practice in the areas under study to advance poverty reduction and development objectives.

5. From the late 1980s, Uganda registered high growth rates until the 2000s when the growth rates slowed down as shown in the Figures Economic growth raised from Us $ 2 billion in 1980s to Us $12 billion in 2007 GDP GROWTH RATE TRENDS

6. The share of Agric. to GDP in Uganda has been declining since 2001 Between 2000/09, the share fell while that of Industry and services rose The declining share of agriculture in GDP vis-vis other sectors represents positive transformation of a country’s economy CONTRIBUTION OF AGRICULTURE TO GDP

7. PRODUCTIVITY OF THE MAIN AGRICULTURAL CROPS • Agricultural productivity has been on the decline for much of the last decade as shown in the Figures below • Between 1999 and 2006, the major export crops have experienced double digit drops • The major cause of low productivity levels is theorized to be lack of improved inputs application • Uganda’s application of improved inputs is one of the lowest in the region

8. PRODUCTIVITY (cont’d)

9. PRESENT FARM YIELDS AGAINST ATTAINABLE POTENTIAL FOR SELCTED CROPS • According to the Agricultural Sector Investment Plan 2009/10 -2013/14; a comparative analysis of farm level yields and research station yields reveals a huge gap. • As table below illustrates, productivity at the farm is far much lower than the attainable potential

10. FARM YIELDS VS POTENTIAL

11. AGRICULTURAL TRADE PROFILE(EXPORTS)

12. Accelerated growth in imports has resulted in a widening trade deficit standing at 2.5 billion in 2008 TRADE DEFICIT

13. LINKING AGRICULTURE TO LIVELIHOODS • The key variables for livelihood indicators include employment, poverty reduction, and nutrition and food security among others. • Findings indicate that there is an interesting correlation between agricultural productivity and livelihood indicators • For example there is an imbalance in the structure of the economy and labour force employment • The proportion of persons engaged in the agricultural sector has increased from 65.5 percent in 2002/03 to 73.9 percent in 2005/06, the share of agriculture has been declining • Uganda’s total labor force in 2007 stood at about 12.5 million people.

14. LABOUR FORCE

15. GENDER AND EMPLOYMENT Data Source: UNCTAD Statistical Handbook (2008)

16. POVERTY HEADCOUNT TRENDS UBOS Satistica Abstract 2009 & Mellenium Development Goals Country Progres Report 2007 – UNDP

17. TREND OF RURAL AND URBAN INEQUALITY Data Source: UBOS Statistical Abstract 2009

18. TRENDS IN FOOD INSECURITY (1992-2006) Source of Data: Millennium Development Goals Country Progress Report 2007 – UNDP

19. LANDLOCKEDNESS CONSTRAINTS AND THEIR EFFECT ON AGRICULTURAL TRADE • Uganda is critically dependent on its neighbors—Kenya and Tanzania for transportation of her goods and services. • The main routes used for Uganda’s external trade are: -the Northern Corridor • The Central Corridor that comprises similar services, other than pipeline, pertaining to the Port of Dar Es Salaam • An air corridor out of Entebbe International Airport • Road services between Uganda and countries further inland

20. MAIN REGIONAL ROAD AND RAIL ROUTES Source: World bank Trade Integrated Study 2007. The map is not drawn to scale.

21. THE MAIN CONSTRAINTS UNDER TRANSPORT • The share of rail transport to total trafic is only 27 percent • Operations on railway transport are inefficient and poor • Internal transport links are mainly by road where more than 30,000 kms of rural community access roads are unpaved • Most ferries have fallen into disuse • Road service transport is expensive and exceeds rail rates by 38 to 56 • Other trade facilitation constraints include customs operations, clearing and forwarding, insurance, post services and telecommunications.

22. OTHER TRADE FACILITATION CONSTRAINTS • Congestion at Mombasa Port which handles 95% of Uganda’s external trade traffic • High cost of road transport due to high tarrifs on freight vehicles raised from 7 – 25% with the introduction of the Common External Tariff • Physical inspection of exports involving duty drawbacks and VAT refunds

23. NATIONAL DEVELOPMENT PLAN (NDP) 2010/11 – 2014/15 POLICY HIGHLIGHTS • Increasing household incomes and promoting equity • Enhancing the availability and quality of gainful employment • Improving the stock and quality of economic infrastructure • Increasing access to quality social services • Promoting science, technology and innovation • Enhancing human capital development • Strengthening good governance, defense and security • Promoting sustainable population and use of environment and natural resources

24. NEW AGRICULTURAL POLICY HIGHLIGHTS • Support private sector investment in agriculture to encourage market oriented production process • Zonal agricultural strategy will be pursued to encourage regions maximally exploit comparative and competitive advantage within different regions. Effort will focus on supporting value chain development for strategic commodities • Support will be extended to both individual farmers and groups with special attention to gender equity • Government will continue to provide agricultural extension services via a decentralized service delivery structure to ensure that services reach all regions and farmers at the lowest units • Government will ensure that all resources for agriculture including soils and water are sustainably managed to support current and future generations.

25. TRADE POLICY HIGHLIGHTS - NATIONAL TRADE POLICY (NTP, 2007) • Enhancing competitiveness in domestic, regional and international markets • Ensuring that trade practices conform to international laws and regulations • Developing domestic trade as a foundation for improved international trade practices • Securing and maintaining better market access at regional and international levels • Ensuring that the gains from growth in trade are equitably shared • Supporting the country’s vision to industrialize by supporting and complementing the industrial policy.

26. THE IMPACT OFAGRICULTURAL LIBERALISATION POLICY Positive Impact • Increased agricultural production responses to market forces • Access to low cost and competitively priced inputs • Attaining increased market access for her agricultural products • Higher prices for agricultural commodities occasioned by competitive trade practices. • External trade performance has expanded substantially with more commodities exported. This was due to exported oriented policies including emphasis on export diversification

27. THE IMPACT OF AGRICULTURAL LIBERALISATION POLICY (CONT’D) Negative Impact • Agricultural imports outcompete domestic agricultural commodities • Agro-Industries are negatively impacted • Peasant farmers have not gained a fair share of price increases

28. Strengthening institutional capacity • Enhancing safety and reliability of service on the Ugandan section of the railway line to Mombasa • Promotion of regional and international integration • Strengthening institutional capacity • Enhancing safety and reliability of service on the Ugandan section of the railway line to Mombasa • Promotion of regional and international integration ROLE OF DONOR SUPPORT TO AGRICULTURAL PRODUCTIVITY AND CORRIDORS DEVELOPMENT • Sstrengthening institutional capacity • Enhancing safety and reliability of service on the Ugandan section of the railway line to Mombasa • Promotion of regional and international integration • Support for agricultural research • Support for agriculture advisory services • Support for private sector development

29. LINKAGES BETWEEN AGRICULTURAL PRODUCTIVITY AND TRADE IN AGRICULTURE Positive Linkages • Agricultural trade liberalisation has provided price incentives to some farmers over some periods • Liberalisation has attracted investments in no-traditional crop exports especially to the COMESA region • Trading in live animals has positively contributed to increased production in the animal industry sector • Trade in agricultural inputs has contributed to agrucultural productivity

30. LINKAGES (CONT’D) Negative Linkages • Increased exports have not translated into more earnings for the peasants • Increased exports coupled with poor management of natural resources have negatively impacted on land and water productivity especially on fish stocks • There is tendency for productivity to decrease in tandem with international commodity prices • The greatest beneficiaries of increased exports namely the middlemen do not necessarily invest the proceeds in the agricultural sector • Liberalisation of agricultural imports has exposed the Ugandan farmers to the vagaries of international competition

31. LINKAGES BETWEEN TRADE FACILITATION AND LANDLOCKEDNESS Positive Linkages • Government has put in place a well facilitated customs management institution that has widely distributed customs points manned by qualified personnel • Government realizes that ensuring efficiency in customs administration reduces on cost of doing business • There are efforts to link the northern corridor to trunk roads and upgrade them into all weather roads • There are efforts to harmonies trade facilitation processes at the EAC level

32. LINKAGES BETWEEN TRADE FACILITATION AND LANDLOCKEDNESS (CONT’D) Negative Linkages • Documentation requirements are still many and issued by various institutions • A lot of time and resources are wasted in acquiring these documents • The cost of exporting is still high and there are a lot of delays • The majority of feeder and community roads are not-all weather roads • There are still incidents of corruption that lead to delays in clearance of goods

33. SUMMARY OF KEY FINDINGS • There is a mismatch between economic growth, indicators and livelihood indicators. • There is an imbalance in the structures of the economy and labour force employment. • The proportion of persons engaging in the agricultural sector has increased from 65.5 percent in 2002/2003 to 73.9 percent in 2005/2006. • On the other hand the share of agriculture to the total GDP has been increasing. • Majority of the population is employed in the agricultural sector whose share to GDP is declining. • The economy of Uganda has been growing but inequality gap has equally been increasing.

34. SUMMARY (CONT’D) • The economy of Uganda has generally been registering growth since the 1990s • The share of Agriculture to total GDP has been declining since 2001 • Since 2001 agriculture sector growth rate has been declining • Agricultural productivity has been on the decline for much of the last decade • Agricultural exports have been increasing for the last one decade

35. CONT’D • The population growth rate has also been high at an average of 3.2 percent per annum. • Women who feed the families are the least found in formal employment • Food insecurity in rural areas is positively correlated with falling rural earnings • Productivity of main agricultural crops has been declining for the last one decade. • In general terms export earnings have been increasing and poverty reduction has been visible in rural areas producing cash crops. • Merchandise imports have been rising. Between 2001 and 2008 imports rose nearly 400 percent. This has resulted into a widening trade deficit. • The prices for the basic consumer products for the rural poor have been increasing.

36. RECOMENDATIONS • Need for more facilitative Government interventions to increase agricultural productivity • Need to control population growth to match economic growth • Need to invest in rural areas where the majority of the population is employed • Need to incorporate issues of reducing income inequality in development planning • The government needs to integrate income and non-income factors in development planning e.g food security, nutrition and employment.

37. Recommendations (cont’d) • Efforts should be made by government and CSOs to sensitize farmers and other Agricultural stakeholders about issues of national, regional and global trade policies • Government needs to formulate and effectively implement a National Policy and funding sceme for small and Medium Enterprises in Uganda especially those involved in agro-processing and export • Government needs to establish a support mechanism or provide incentives to investors involved in increased agricultural productivity enterprises or ventures

38. RECOMMENDATIONS (CONT’D) • The policy making and planning bodies such as NPA should integrate economic and non-economic factors in their development programmes. • There is need to have synergy between the ministries of Agriculture and Trade on one hand and the welfare and human development ministries such as labour. • Agricultural inputs are imported and are expensive. Therefore government should subsidize farmers to enable them acquire these inputs at low cost. • Government should encourage the development of trade and marketing institutional infrastructure to minimize or cut off many middlemen from the value chain.

39. RECOMMENDATIONS (CONT’D) • There is need for government to put in place a mechanism and policy for target subsidies to increase Agricultural productivity. • Productivity decreases in tandem with international commodity prices. The government should therefore come up with a systematic targeted price stabilization fund for strategic crops or livestock sector. • Researchers and Research Institutes should find out more on the impact of external trade liberalization on agricultural productivity. • Research studies should establish how and to what extent farmers earn far less than other players in the value chain. • Researchers should establish why there is dismal fertilizer use in Uganda and try to demonstrate how fertilizer use makes a difference in productivity. • There is need for further research on Agricultural, land, water and labour productivity in Uganda.

40. RECOMMENDATIONS (CONT’D) • The study recommends that government should balance commercial imperatives of agricultural policy with welfare imperatives such as employment, improved livelihoods, food security and nutrition and gender equality. • Government should pursue Trade and Transit Agreements at regional as well as International levels to ease movement of goods for a landlocked country. • Government should invest in increasing Route Capacity especially the northern corridor as well as pursuing the decongestion of Mombasa port at a diplomatic and EAC levels. • The researchers in Uganda should unravel the paradox of why official statistics show that rural poverty is declining at the same time as the share of Agriculture to GDP is declining and yet this is where the majority of the rural population is employed.

41. RECOMMENDATIONS (CONT’D) • Development partners such as donor countries and multilateral institutions should shift from Aid targeting price incentives to Aid targeting land and labor productivity. • Donors should assist the government of Uganda to set up an Agricultural Bank to offer soft loans to finance Agricultural productivity improvement. • Development partners should allow more preferential treatment for a developing country like Uganda. • The Global development analysis should shift from the existing market orientation towards a mixture of market and livelihood orientation • CSOs should increase their capacity building endeavours in order to sensitize their constituents into the need to link productivity to livelihood indictors.

42. RECOMMENDATIONS (CONT’D) • Farmers associations should aim at cutting out middlemen by building marketing institutions to enable them sale directly to the urban markets. • Farmers associations should link up with research institutions towards improving on Agricultural productivity. They should also sensitize the farmers in the use of improved productivity technologies and use of fertilizers. • With respect to trade facilitation, the private sector should actively participate in trade facilitation infrastructure development under Public-Private Sector Partnership • Again on trade facilitation, together with Government, the private sector should invest in infrastructural interconnections. • It is important that synergies are built among the various relevant institutions to ensure effectiveness of their services and optimization of agriculture support services and resources.