UGANDA

COUNTRY OVERVIEW

LOCATION AND SIZE.

A landlocked state in Eastern Africa, west of Kenya and east of the Democratic Republic of the Congo (former Zaire), Uganda has an area of 236,040 square kilometers (146,675 square miles) and a total land boundary of 2,698 kilometers (1,676 miles). Comparatively, the area occupied by Uganda is slightly smaller than the size of Oregon. Uganda's capital city, Kampala, is located in the country's southeast on the shore of Lake Victoria, Africa's largest lake and the source of the river Nile. Lake Victoria is also bordered by Kenya and Tanzania.

POPULATION.

The population of Uganda was estimated at 22,459,000 in 2000 by the United Nations Economic Commission for Africa, an annual average increase of 2.5 percent from the 1995 population of 19,689,000. In 2000 the birth rate stood at 48.04 per 1,000 while the death rate was at 18.44 per 1,000. With similar annual growth rate, the population is likely to stand at 34,762,000 in 2015 and 66,305,000 by 2050. Although population per square kilometer was only 241 in 1999 (93 per square mile), the above projected population growth could create a future crisis of land and resources.

The Ugandan population is primarily of African descent, consisting of thirteen principal ethnic groups, although there are actually 49 such groups in total. The rest of the population is made up of Asians and Europeans (around 1 percent) and a fluctuation of refugees escaping from crises in neighboring countries—most recently from Sudan, Rwanda, and the Democratic Republic of the Congo. It is important to note that Uganda had a large number of Asian citizens at independence in 1962; however, the majority of them were forcibly expelled under the regime of General Idi Amin (1971-78) in a racist attempt to "Africanize" the country.

Uganda's population is very young, with 51 percent below age 14 and just 2 percent of the population at 65 or older. A majority of Ugandans—86 percent—lived in rural areas in 2000. The urban population was 7 percent of the total population in 1965, rising to 14 percent in 2000 (5 percent of the population is centered in and around Kampala). It should be noted that it is difficult to be precise about population distributions because of frequent fluctuation between urban and rural areas as workers move to find seasonally-based employment.

Uganda is commonly conceived to be the epicenter of the HIV/AIDS epidemic; in fact HIV/AIDS in Uganda is commonly accepted to be a pandemic (the occurrence of a disease over a whole country). It is estimated that 110,000 Ugandans died from AIDS in 1999, and it has been the most common form of death of young adults since the late 1980s. It is important to understand that these deaths resonate beyond their own profound significance due to the socio-economic effects of HIV/AIDS. For example, the drawn-out nature of death from AIDS requires a large amount of care and attention. Therefore, large numbers of, predominantly, women who could be productively employed are spending their time caring for the dying. In addition, by 1999 the cumulative number of orphans created due to AIDS since the pandemic began reached 1,700,000. This raises the problem of the development and guidance of Uganda's children. However, the Ugandan government was one of the first in Africa to promote public education programs and openness about HIV/AIDS. As a result of this proactive policy, Uganda is one of Africa's success stories for reducing HIV/AIDS; for example, 10,235 AIDS cases were reported in 1990 but only 1,406 in 1998.

OVERVIEW OF ECONOMY

Uganda's economy is dominated by the production of agricultural goods, which employs some 82 percent of the workforce. These goods range from crops grown mainly for subsistence purposes such as plantains, maize, beans, and potatoes, and exported cash crops such as coffee, tea, and tobacco. The reliance of the national economy on cash crops for foreign exchange is a legacy of Uganda's colonial period when it was made a British protectorate (1894-1962) during the "scramble for Africa" by the imperialist European powers. In other words, the country's productive structure remains dominated by what the British colonial administration had forcefully demanded Ugandans produce.

At independence in 1962 Uganda was one of Africa's most economically promising states and was widely cited as the "Pearl of Africa." It was self-sufficient in food, its manufacturing sector produced basic inputs and consumer goods, and its transportation infrastructure was one of the best in the continent. Its key exports—coffee and cotton—were in global demand as the world economy was registering substantial growth built on the import demands of the United States, Western Europe, and parts of Northeast Asia. Health services were among the best in Africa, and schools, although in limited supply, were of a generally high quality.

However, from the beginning of President Idi Amin's regime in 1971 to the National Resistance Movement's (NRM) adoption of free market reforms in 1987, the official economy fell deeper and deeper into crisis under the strain of spasmodic civil wars and shortsighted economic programs such as the nationalization of certain industries and the expulsion of the Asian population. In 1960 cotton provided 40 percent of Uganda's export revenue (because cotton is a less volatile crop than coffee, its production had acted as a good counterbalance to foreign exchange reserves earned through exports). However, the harvesting of goods such as cotton and sugar declined considerably during the period 1971-1987 so that even in 2000 they were a minimal part of Uganda's agricultural production. The instability of the economy and the Uganda shilling between 1971-1987 led to the rise of the informal sector. The NRM had inherited an economy that had had the worst growth rate of all African countries between 1962-1987. The country's reliance on coffee production has left the economy highly vulnerable to the continual flux of international coffee prices.

Under the influence of the International Monetary Fund (IMF) and the World Bank, the NRM embraced free market reforms in 1987; these included the privatization of industry and services, the devaluation of the Uganda shilling (USh), and the liberalization of the exchange rate system. Since then Uganda has become one of the most economically liberal countries in the world. Due to a combination of free market reform, the large amount of post-conflict national reconstruction required, and the relative degree of security maintained by the NRM, the economy has enjoyed consistently high rates of GDP growth since the late 1980s. By the late 1990s external donors such as the IMF and European Union (EU) promoted Uganda as one of the key success stories of free market reform in Africa. For instance, evidence suggests that the stabilization of the Uganda shilling has created an economic environment suitable for the growth of the country's manufacturing sector and, more broadly, the diversification of export production into "non-traditional goods" such as fish products and cut flowers.

The reduction of the drain on state revenue since the banking sector was partially denationalized has contributed to the successful balancing of the national current account. The privatization of parastatals and the reduction of state spending by means of downsizing social services and the public sector have, similarly, lessened government spending. Because of the social stability throughout most of Uganda in the 1990s the incidence of tourism is increasing very quickly after having been heavily reduced by the violence permeating the country from 1971 to 1986.

Yet Uganda still suffers from considerable economic difficulties. The economy is dependent on the continued flow of aid from external donors. Total external debt has risen from US__BODY__.689 billion in 1980 to US$3.708 billion in 1997, and the country remains entirely dominated by the unpredictability of the production and international prices of coffee. During the Amin period and the economy's decline, corruption within the government and society as a whole became very common in order to satisfy greed amongst the rich and survival for the poor. In 2000 corruption still saturated the government and the private sector despite efforts to curtail its influence. Similarly, by 2000 the informal sector remained of considerable size. However, the liberalization of the exchange rate system and the subsequent evening out of informal and official prices have sent the informal sector into decline.

POLITICS, GOVERNMENT, AND TAXATION

Like most African countries, the territory known as Uganda was an arbitrary creation of the European colonial powers. The borders cut across and brought together a whole range of ethnic and linguistic groups. Since gaining independence from Britain in 1962, the history of Uganda's politics and government falls into 4 broad periods.

The first period was opened at the country's independence with multi-party elections which brought the Uganda People's Congress (UPC) to power, led by Prime Minister Milton Obote. However, the Obote regime soon opted for a more authoritarian leadership. By using its base of support in the north of the country and the military to discard Uganda's traditional kingdoms and check its historical rivals in the south (who had been the country's elite during the colonial administration), Obote became the self-appointed executive president.

The second period began in 1971 when Obote was ousted from government by one of his key pillars of support, the military, led by Idi Amin. This was a major turning point for Uganda as Amin's 8 years of rule (1971-1979) saw the economy and political process collapse. Amin's regime used fear and racism as central instruments of policy and social control; over 300,000 people were murdered by the regime, and the vast majority of the country's 88,000 Asians were forcibly expelled and their land and other assets divided amongst Amin's followers. Economically, this was a disaster. After this policy had been enacted, the redistributed assets were placed in the hands of people who were inexperienced and lacked established business networks; this led to the decline of the productivity and efficiency of Uganda's business sector. Moreover, as Uganda's citizens became less confident in the stability of the formal economy due to Amin's unpredictable rule, they increasingly began to turn to the informal sector, thereby bypassing the state and its revenue-collecting authorities. In sum, the economy became less productive and more reliant upon the informal sector, both drastically reducing state taxation revenue. As state revenue was so depleted, the government began borrowing from international lenders at such a rate that Uganda became heavily indebted. These factors, in combination with the deteriorating terms of trade for Uganda's products on international markets after the decline of world economy in the 1970s, explain why the Ugandan economy was in dire crisis by the end of Amin's regime.

The third broad period of Uganda's political history began when Amin was finally overthrown in 1979 by a coalition of domestic forces under the banner of the Uganda National Liberation Front (UNLF) and the neighboring Tanzanian army. This led to an 8-year period of crisis and uncertain rule that plagued the country. After Amin's defeat, a string of 3 limited and short-term governments followed, led by the UNLF, President Binaisa, and President Lule, respectively. This period was one in which the economy was devastated further by continued widespread disruption, huge military expenditures, and the effects of the international rise of oil prices in 1979. This quick succession of regimes culminated in the corrupt and widely disputed multiparty elections of 1980 that reinstated Obote as president. Commonly known as Obote II, this period was characterized by 2 central dynamics. First, Obote attempted to address the country's considerable economic woes by approaching the IMF and the World Bank for financial aid. This aid was dependent upon Uganda liberalizing the economy with the hope that free market forces would make it more competitive in the world economy. Second, the social effects of this reform were negative, which in combination with the corrupt and heavy-handed rule of Obote II, culminated in growing popular support for the National Resistance Movement (NRM) led by Yoweri Museveni that was waging a guerrilla war from its support-base in Uganda's south.

The fourth key period of Uganda's political history began when the NRM took state power in 1986; the NRM remained in power in early 2001. With Museveni as president the NRM had seized power on the back of a set of left-progressive, anti-imperialist policies. However, because of the legacy left by Amin and his successors, the country was in a state of severe social, economic, and institutional crisis. Consequently, by 1987 the NRM was forced to go back on its initial left-progressive developmental policies simply because there was insufficient revenue to pursue such an approach. In fact, like Obote II, the NRM applied to the IMF and World Bank for aid that was conditional upon adopting free market reform.

Although Uganda's economy is claimed by many to have been in a relatively good state of health since the opening to free market forces from 1987 onwards, the political situation is somewhat more ambiguous. The country remains a "no party democracy." Museveni stresses that the NRM is not a political party but a national "movement" of a broad coalition of societal and political forces. As a result, while Uganda maintains a high level of press freedom (especially in comparison with most other African countries), political parties are illegal. A referendum in July 2000 saw 90 percent of voters favoring the continuation of the "no party system" which seems to have justified the NRM's political stance.

However, a level of contention remains about this system's legitimacy as the 2 most prominent opposition parties, Uganda People's Congress (UPC) and Democratic Party (DP), boycotted the referendum. Furthermore, the U.S.-based human rights group Human Rights Watch claimed in a 1999 report that, due to the illegal nature of organized opposition, the country has "a restricted political climate." Contemporary indications of discontent in Uganda are clearly illustrated by a series of violent insurgencies by dissident groups such as Joseph Kony's Lord's Resistance Army in the north and the Allied Democratic Forces (ADF) in the southwest. In order to counter these rebellions, the army now has permanent barracks in these volatile areas.

Presidential elections were held at the beginning of March 2001. Museveni won an easy victory with 69.3 percent of the votes compared to the 27.8 percent of his closest competitor, the politically progressive former army colonel, Dr. Kizza Besigye. Although Museveni's victory was tainted by accusations of intimidation, fraud, and violence (an estimated 5-15 percent of votes cast could have been compromised), this margin of potential electoral corruption still gave Museveni a sufficient mandate to hold onto the presidency.

Since 1998 Uganda has been at war in neighboring Democratic Republic of the Congo (DRC) to depose the Kabila regime first led by Laurent Kabila (who was assassinated in January 2001) and then by his son Joseph. This is a very complex war involving Rwanda, which supports a separate but similar anti-Kabila faction, and Angola, Zimbabwe, and Namibia, which all support the DRC government. The war is a considerable drain on the government's already sparse revenue; the Ministry of Defence received 33 percent of all ministerial allocations in the 1999-2000 budget. Yet by March 2001, Uganda was beginning to withdraw some troops from the DRC; however, this conflict has subsided and re-ignited before.

A key reform promoted by the IMF and World Bank was the restructuring of Uganda's taxation regime. One of the intentions was to lower the dependence on trade taxes, which reduced incentives for production, and to rely instead on indirect taxes on goods and services. Indirect taxes provided an average of 79.8 percent of total revenue between 1990-1998. Taxes on income and profits have steadily increased from 9.8 percent of total revenue in 1989 to 15.2 percent in 1998. Yet, of total taxes, about 50 percent still emanates from indirect taxes on only 4 products—petroleum, cigarettes, beer, and soft drinks. In fact, Uganda's tax revenue to GDP ratio is fifty percent below the African average.

The Uganda Revenue Authority (URA) was established to address the priority of improving government tax-collecting abilities. However, it is claimed that almost immediately after the creation of the URA its officials were involved in the major embezzlement of the funds it was set up to collect. In addition, throughout the government departments in 1997-98, US$120 million in tax revenue and government spending was unaccounted for. Due to these high levels of ingrained corruption, low levels of household income, and a small proportion of waged (thus taxable) labor, the majority source of government revenue still emanates from external donors. Of the government's estimated total financial requirement for 2000, US__BODY__.467 billion was expected to come from domestic resources, whereas US$2.255 billion was required in external aid. It is due to regular deficits such as this that Uganda's external debt as a percentage of GNP has risen from 35.5 percent in 1985 to 58.2 percent by 1998.

INFRASTRUCTURE, POWER, AND COMMUNICATIONS

Uganda is a landlocked country served by a network of 27,000 kilometers (16,800 miles) of roads, although only 1,800 kilometers (1,100 miles) are paved and 4,800 kilometers (2,900 miles) of the remainder are suitable for all-weather purposes. This road network supplied Uganda's total 25,900 passenger cars and 42,300 commercial

Communications
Country	Newspapers	Radios	TV Setsa	Cable subscribersa	Mobile Phonesa	Fax Machinesa	Personal Computersa	Internet Hostsb	Internet Usersb
	1996	1997	1998	1998	1998	1998	1998	1999	1999
Uganda	2	128	27	N/A	1	0.1	1.5	0.06	25
United States	215	2,146	847	244.3	256	78.4	458.6	1,508.77	74,100
Dem. Rep. of Congo	3	375	135	N/A	0	N/A	N/A	0.00	1
Kenya	9	104	21	N/A	0	N/A	2.5	0.19	35
aData are from International Telecommunication Union, World Telecommunication Development Report 1999 and are per 1,000 people.
bData are from the Internet Software Consortium (http://www.isc.org) and are per 10,000 people.
SOURCE: World Bank. World Development Indicators 2000.

vehicles in 1995. With funding from a range of external donors, Uganda launched an ongoing road rehabilitation project in 1987 with the principal aims of providing improved access of agricultural products to markets within the country and a regional network to link Rwanda, the east of the Democratic Republic of the Congo, and Uganda with the port of Mombasa in Kenya. A 22-kilometer (13-mile) road linking Uganda to Rwanda was opened in 2000.

The nation's rail system had lacked sufficient investment since decolonization, but the state-owned Uganda Railways Corporation's (URC) 1,241 kilometers (770 miles) of railroad has benefitted from a rejuvenation project since 1995. This includes plans by the government to partially privatize the operation of the network. The URC has US$350 million in assets and a US$20 million annual turnover, and, due to the trebling of freight traffic between 1989 and 1995, the URC network has the potential of becoming highly profitable.

The Entebbe International Airport is Uganda's major airport, which is situated 35 kilometers (22 miles) from Kampala. Although there are another 28 airports throughout the country, the vast majority are unpaved. Uganda's landlocked status makes it dependent upon the port services of neighboring countries, such as Mombasa in Kenya and Dar-es-Salaam in Tanzania. Rail links to the port of Durban in South Africa are growing in importance. The country's situation in the "Great Lakes" region means that it boasts 5 large lakes and 2 major rivers that are frequently used for transportation purposes. The use of waterways has benefitted from an extensive program of government investment and external aid.

The vast and varied waterways in Uganda are also highly beneficial for the production of hydroelectricity. A parastatal, Uganda Electricity Board (UEB), utilizes this natural resource to produce enough power to satisfy the country's needs and also to export 115 million kWh of electricity in 1998. UEB commands assets worth over US$600 million and has an annual turnover in the region of US$70 million. The government intends to grant concessions to the private sector for the operation of parts of UEB upon its disintegration into separate operators maintaining the generation, transmission, and distribution of electricity.

In 2000 there were 2 national telecommunications operations in the country, Uganda Telecomm Limited (UTL) and Mobile Telephone Network Uganda (MTN). A third operator, Celtel Uganda, supplies additional mobile telephone services. Although as many as 12 Internet service providers had been licensed to provide both Internet e-mail and Internet services by early 2001, only 4 are actually in operation.

ECONOMIC SECTORS

Uganda's economic sectors reflect the legacy of colonial structures, the country's position as a land-locked territory, its politically tumultuous past, and the widespread lack of foreign investment in sub-Saharan Africa as a whole. Uganda is highly dependent on agricultural exports in order to provide much-needed foreign currency, and its underdeveloped industry and services necessitate an increasing level of imports. Consequently, in 1997 the government was in 5.7 percent deficit as a percentage of GDP (excluding external aid). In addition, Uganda lacks a significant internal market for domestically produced goods because of low household incomes. In light of these factors it is unlikely that the economy will reduce its primary dependence on the export-based growth strategy of producing goods such as coffee in the medium-term future; nonetheless, it does remain a leader in international coffee markets.

In order to address these geographical, historical, and material problems, the Ugandan government is attempting to diversify its economic sectors to produce more manufactured goods for domestic, regional, and international consumption to reduce the dependence of the economy on foreign aid and imports. With the continued financial support of the IMF, World Bank, EU, and United States for Uganda's free market reforms there is a genuine possibility that the economy's present diversification will contribute to its current growth rate—one of the fastest in the world. Uganda had an average GDP annual growth rate of 7.2 percent over 1990-99, which constitutes a growth rate of agriculture of 3.7 percent, of services at 8.1 percent and industry at 12.7 percent. This consistent growth of various sectors suggests a dynamic economy.

AGRICULTURE

The agricultural sector is dominant in Uganda's economy. Whilst this sector grew at an annual average of only 3.7 percent over 1990-99 compared to the far more impressive growth of the industrial and service sectors, the importance of agriculture in Uganda's economy outweighs all other sectors put together. The agricultural sector employs 82 percent of the workforce, accounts for 90 percent of export earnings, and provided 44 percent of GDP in 1999. Moreover, the farmers in Uganda's 2.5 million smallholdings and scattered large commercial farms provide the majority of their own and the rest of the country's staple food requirements. Uganda is able to rely on agriculture due to the country's excellent access to waterways, fertile soils, and, (relative to many other African nations) its regular rainfall, although it does still suffer from intermittent droughts such as in 1993-94.

Uganda's key agricultural products can be divided into cash crops, food crops, and horticultural produce. The most important cash crops are coffee, tea, cotton, tobacco, and cocoa. Uganda is second only to Kenya as Africa's largest producer of tea, exporting US$17.06 million of tea in 1996 and $39 million by 1998. Unmanufactured tobacco exports provided US$9.5 million in 1998, over 25 percent more than in 1996. The export of cocoa beans hit a recent high in 1996 with US__BODY__.07 million in export receipts, but this had declined to __BODY__.87 million in 1998. The primary food crops, mainly for domestic consumption, include plantains, cassava, maize, millet, and sorghum. Total cereal production was 1.76 million metric tons in 1998, which provided US$17.82 million of exports in 1998. This gain was in part negated as imports of cereals were $30.9 million in the same year. The more recent development of cultivating horticultural produce includes fresh flowers, chilies, vanilla, asparagus, and medicinal plants. At the beginning of 2001 it is unclear how well horticultural production will prosper but it does indicate the economy's potential diversity. The fact that vanilla production is the third largest in Africa, providing US$930,000 in export receipts in 1998, is a success in itself.

The economy of northeast Uganda is dominated by pastoralism (cattle farming). Although agricultural production is apparent in some areas, this is normally a mixture known as "agro-pastoralism" (integrated cattle and crop farming). It should be noted that pastoralism is in decline due to the constant cattle raids by guerrilla groups such as the Lord's Resistance Army based in southern Sudan, as well as government and aid agency intervention which encourages the fencing off of land to discourage the traditional free-roaming of cattle.

COFFEE.

Coffee is by far the most important factor in the nation's entire economy. Uganda is one of the largest producers of coffee in sub-Saharan Africa and exported 197,200 metric tons in 1998, second only to Côte d'Ivoire. This provided US$314 million in export earnings. Although this was a drop in earnings from the 1996 level of $396.2 million, the 1996 harvest had provided 81,511 metric tons more than in 1998. The country's high altitude, relatively high rainfall, and mild climate are suited to the growing of coffee. Robusta coffee is grown in areas near Lake Victoria and in some Western districts. Arabica coffee is grown in the volcanic regions in Mbale and Kapchorwa where the cooler, higher altitude provides the increased rainfall necessary for the growth of this more profitable crop. The dual process of the devaluation of the Ugandan Shilling and its flotation was intended to provide an incentive to producers to take advantage of more competitive exports and thus expand their production of exportable goods. On face value this process was a success as producer prices dramatically increased. For example, coffee farmers received a 182 percent rise in the price paid for their product, and there was an annual average growth of coffee exports of 6.5 percent between 1990-1997.

However, the apparent growth of Uganda's coffee exports does not take account of smuggling into the country from neighboring countries such as the war-torn Democratic Republic of Congo whose farmers often do not receive as good a price for their crops as those in Uganda. Furthermore, increased productivity was based upon an increase in the area cultivated rather than on higher yields. When there is a rise in available cultivated land it acts as an increased drain on the country's environmental resources. The 50 percent projected rise of the population by 2015 more than likely will increase competition, and perhaps conflict, over ever-decreasing land plots.

Regarding improvements to the agricultural sector, farmers simply lack the access to capital ( see Services rubric below) in order to mechanize production and increase agricultural productivity. Productivity per agricultural worker was an average of US$345 per annum over 1996-1998. In consequence, farmers are unable to take full advantage of increased returns for the export of coffee when they do arise, for instance, during the coffee boom of 1994-95 where the price in U.S. cents to a pound of coffee was 126.83. This failure to improve production is based upon a lack of investment and an assumption of the continuation of the usually relatively low levels paid by the volatile world market for primary commodities. For example, in 1999 the price in U.S. cents to a pound of coffee was only 67.65. Considering the long-term maturity of coffee plants, the instability of international markets does not provide much of an incentive for improved efficiency of production. It should also be noted that export crops such as coffee are very susceptible to natural disasters, which further reduces their economic viability. For instance, a hurricane in 2000 pushed Uganda's national harvest back a year.

INDUSTRY

Industry is very limited in Uganda. The most important sectors are the processing of agricultural products (such as coffee curing), the manufacture of light consumer goods and textiles, and the production of beverages, electricity, and cement. The production of beer in Uganda has increased dramatically in recent years, rising from 215,000 hectoliters in 1988 to 896,000 in 1997. Similarly, cement production has expanded from a low of 15,000 metric tons in 1988 to 290,000 in 1997. Of lesser importance is the production of sawn wood, remaining stable at 83,000 cubic meters from 1994 onwards. However, there is little evidence of the sufficient replanting of trees, which may not only affect this level of production but could have adverse environmental effects such as soil erosion and increased landslides. A key block to the development of Uganda's industrial and commercial sector is corruption. Bribes are commonly demanded to acquire even the most basic services such as an electricity supply and telephones.

Due to increased domestic security, market reform, and tax breaks, Uganda's manufacturing sector is growing. Merchandise exports have expanded from US$147 million in 1990 to US$501 million in 1998. However, merchandise imports have also expanded but at an even greater rate, from US$213 million in 1990 to US__BODY__,414 million in 1998. This imbalance indicates a serious problem with Uganda's economy because, in order to continue the present rate of import of manufactured goods, the government is obliged to borrow ever greater amounts of money from foreign donors which makes the country increasingly indebted.

The privatization of industry is a central dynamic in Uganda's contemporary national economy. This is of central importance considering that government subsidies to parastatals were equal to that spent on much needed education between 1994-1998. The Privatization Unit of the Ministry of Finance has plans to open a number of industries to the private sector. For example, the largest dairy processor in the country, the government-owned Dairy Corporation, which has an annual turnover of US$12 million, is undergoing full privatization. Copper mining used to be a mainstay of the economy in the 1960s to mid-1970s with an output of up to 18,000 metric tons per annum. Due to the country's civil unrest and the decline of copper prices on international markets, the 90 percent government-owned Kilembe Mines Ltd. mining activity has been inactive since 1982. The planned privatization of this enterprise should end government subsidies to this company and is hoped to lead to the rein-vigoration of Uganda's copper production.

SERVICES

The export of Uganda's commercial services has grown dramatically from US$21 million in 1990 to US$165 million in 1998. Yet at the same time the import of commercial services has grown from US$195 million in 1990 to US$693 million in 1998. This imbalance, similar to that of manufactured goods, contributes to the deficit of Uganda's balance of payments. Therefore, in order to maintain this level of imports, Uganda is forced to borrow more money from external donors, thus leading to the deepening of the country's public debt and the consequent drain of debt interest payments upon an already limited government revenue.

TOURISM.

Due to the severe insecurity permeating Uganda through the 1970s and most of the 1980s, tourism was a very limited sector. Today, the majority of Uganda is entirely safe for tourists and the country has a lot to offer, such as a number of beautiful reserves and national parks, vast lakes, rare and endangered wildlife, relatively untouched rural communities, and safe cities. By 1995, 159,899 tourists provided receipts of US$188 million; by 1997 receipts from tourism rose to US$227 million. However, it should be noted that internal tourism expenditures drew out almost as much money as was brought in to the country, with US$137 million being spent by Ugandans abroad in 1997.

FINANCIAL SERVICES.

Uganda's banking system had been in disarray throughout the 1970s and 1980s, in part due to an almost full government monopoly of this sector. The 2 most important national banks, the state-owned Bank of Uganda (BOU) and the Cooperative Bank, had received automatic liquidity support from the Uganda Central bank (UCB) up until the early 1990s—that is, the UCB would supply banks with money to prevent their financial collapse even if they had been making irresponsible and irretrievable loans, often to allies of the various political regimes. As a result, the UCB's non-performing loans accounted for 75 percent of its total loan portfolio. Uganda's most important financial mechanism was bankrupted.

In order to make the UCB less of a drain on state revenue, the IMF and World Bank encouraged its privatization, a 48 percent cut in personnel, and a reduction of branches from 190 to 85. The improved stability of the banking sector has encouraged people to save, and a 1995 IMF report claimed that bank deposits grew from 4 percent of GDP in 1989-90 to 5.8 percent in 1993-94. However, due to the economy's severe underdevelopment, low incomes, and low opportunities for lending, there is limited incentive for private-sector banks to operate. Even though the economy has been substantially liberalized, foreign banks have failed to reinvest or to re-establish themselves, or to innovate their practices in Uganda, in part due to the fact that more than half of commercial banks made losses in 1994.

The privatization of the banking system has reduced the availability of basic banking services, in particular for rural farmers. In 1972 there was one branch per 34,000 people; by the mid-1990s this figure was 164,000. This means that the most important sector of the economy, namely agriculture, receives insufficient investment to improve productivity. Primarily due to fraudulent practice by employees, 3 of Uganda's national banks collapsed in 1999, namely the Cooperative Bank, International Credit Bank, and Greenland Bank. This has given foreign-owned banks such as Stanbic, Barclays, Standard Chartered, and Trans Africa Bank increased footing in those areas they deem commercially viable, thus providing greater competition against the remaining national banks.

INTERNATIONAL TRADE

Uganda is becoming increasingly dependent on the import of capital through loans and grants, the import of services, and of manufactured goods. The value of imports was consistently double the value of exports throughout the 1990s, and in 1999 the ratio of imports to exports came close to being 3 times in size. Apart from cash-crops such as tea and coffee ( see Agriculture rubric above), Uganda's principal exports in 1998 were US$39.9 million of fish and fish products, US$47.4 million of iron and steel, and US$47.2 million worth of electrical machinery and supplies. It should be noted that the EU banned the import of fish from Uganda between 1999 and mid-2000 as some supplies were poisonous; although this ban has now been lifted this event seems likely to effect future sales. The main recipient of these exports in 1998 was the EU, which received 50.9 percent of the total; broken down individually, the key countries were the Netherlands, which imported 6.3 percent, Switzerland (6.2 percent), Germany (5 percent), and Belgium (3.7 percent). Other key export-partners are the United States which regularly receives around 25 percent, and Kenya which received 4.6 percent in 1998.

Uganda's imports in 1998 consisted of US$130.3 million of road vehicles, US$111.6 million of petroleum,

Trade (expressed in billions of US$): Uganda
	Exports	Imports
1975	.026	.200
1980	.345	.293
1985	.387	.327
1990	.147	.213
1995	.461	1.058
1998	.512	1.409
SOURCE: International Monetary Fund. International Financial Statistics Yearbook 1999.

US$72.4 million in cereals, and US$53.65 million of medical goods and pharmaceuticals. These imports were predominantly sourced from the EU, which supplied 17.3 percent (the United Kingdom being the main partner, providing 5.6 percent), neighboring Kenya supplied 12.3 percent, Japan 4.5 percent, and India 4.1 percent. The countries of East Africa have been trying to create a meaningful intra-regional trade organization since the 1960s. The signing of the East African Cooperation (EAC) treaty between Uganda, Tanzania, and Kenya in 1999 was a continuation of this historic aim; however, in practice little has been done to reduce tariffs. Uganda is also a member of the Common Market for Eastern and Southern Africa (COMESA), which in 1996 introduced an 80 percent tariff reduction on trade within COMESA countries; by 2001 Uganda was one of the only members to implement this reduction in full.

MONEY

Uganda's monetary and financial sector has gone through dramatic change since the government adapted free market reform from 1987 onwards. Two of the most important reforms were the devaluation of the Uganda shilling (USh) and the liberalization of the exchange rate system. In order to make national exports cheaper and more competitive on world markets the USh was devalued by 77 percent in 1987; after subsequent minor de-valuations, it was again substantially reduced by 41.2 percent in 1989. The liberalization of the exchange rate system was undertaken in a number of stages, culminating in the establishment of a unified inter-bank market for foreign exchange and the commercialization of all foreign exchange transactions, which were to be undertaken by commercial banks and foreign exchange bureaus.

By 1994 the government accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF's Articles of Agreement, which maintained a commitment to a free and open exchange system. The Uganda shilling had become a competitive monetary unit, open to the speculation of international currency markets. This resulted in its depreciation from USh100 per U.S. dollar in 1987, to

Exchange rates: Uganda
Uganda shillings (USh) per US__BODY__
Feb 2001	1,700
2000	1,644.5
1999	1,454.8
1998	1,240.2
1997	1,083.0
1996	1,046.1
SOURCE: CIA World Factbook 2001 [ONLINE].

USh965 in 1994. Although these policies had initial inflationary consequences (as late as 1991-92 annual average inflation was 42 percent), by 1994-95 the USh had stabilized at only 5 percent; considering that inflation had hit 1,000 percent during the Amin era, this is a considerable government success. Uganda's capital markets are based on 2 main organizations: the Uganda Securities Exchange (USE), and its regulator, the Capital Markets Authority (CMA). In June 1997 the USE was licensed to operate as an approved stock exchange and began formal trading operations in January 1998. In 2001 there were only 4 listed securities trading on the exchange: 2 corporate bonds and 2 companies, Uganda Clays Limited and British American Tobacco, Uganda.

POVERTY AND WEALTH

With an average GDP per capita of US$332 in 1998, Uganda is one of the poorest countries in the world. The vast majority of Ugandans are farmers on small plots of land which are used for subsistence agriculture or for the cultivation of cash crops such as coffee and tea. However, most of this land is owned by landlords such as chiefs or government functionaries who seldom reinvest in the productive capacity of the village as they can simply rely on rents. This disparity of the ownership of the means of production is reflected by vast inequalities in the distribution of income. The poorest 20 percent of the country controls only 6.6 percent of the wealth, whereas the richest 20 percent benefit from 46.1 percent. In fact, 69 percent of the population lives on less than US__BODY__ a day and the majority of this limited income (63 percent) is spent on food. As a result, in a country whose government spends only 1.9 percent of its GDP on health, the majority of Ugandan citizens struggle to acquire even the most basic health care. There are only 4 doctors and 28 nurses per 100,000 people. Nonetheless, the government has helped to reduce the infant mortality rate from 110 deaths per 1,000 births in 1970 to 84 by 1998.

Most Ugandans have to work 2 or 3 jobs simply to survive, often even to secure a standard of living below the poverty threshold. Moreover, one or more of these jobs are often within the informal sector which draws taxation

GDP per Capita (US$)
Country	1975	1980	1985	1990	1998
Uganda	N/A	N/A	227	251	332
United States	19,364	21,529	23,200	25,363	29,683
Dem. Rep. of Congo	392	313	293	247	127
Kenya	301	337	320	355	334
SOURCE: United Nations. Human Development Report 2000; Trends in human development and per capita income.

Distribution of Income or Consumption by Percentage Share: Uganda
Lowest 10%	2.6
Lowest 20%	6.6
Second 20%	10.9
Third 20%	15.2
Fourth 20%	21.3
Highest 20%	46.1
Highest 10%	31.2
Survey year: 1992-93
Note: This information refers to expenditure shares by percentiles of the population and is ranked by per capita expenditure.
SOURCE: 2000 World Development Indicators [CD-ROM].

revenue away from the government. With the increased unemployment levels associated with the privatization and reduction of employment opportunities in the public service, the army, and former parastatals, workers have become an increasingly flexible and less expensive factor of production. Consequently, trends after 1991 have been in the direction of increased inequality, both between rural and urban areas but also in intra-urban terms, as wages did not increase anywhere near as fast as the rise of profits.

The labor surplus and the desperate need for employment has meant that employers can offer almost whatever they want for wages as they know that they will fill their vacancies. As Susan Dicklitch observes in her book, The Elusive Promise of NGOs in Africa, even the middle class, the traditional bastion of democracy and agitator for change, like the working class are "often too busy trying to eke out a living" to fulfil their historic political role. However, if Uganda's GDP continues its 7 percent annual growth of recent years, if President Museveni's anti-poverty strategy promoted in March 2000 is effective, and if the country continues to benefit from the proposed US$2.3 to US$2.5 billion in external aid, then there is hope that the standard of living for the majority may improve.

WORKING CONDITIONS

Uganda's labor force is the sixth largest in sub-Saharan Africa, totaling 8.4 million workers in 1993. Yet, as 51 percent of the population is below the age of 14, it is difficult for a government with such limited revenue to provide sufficient education and vocational training for the mass of Uganda's youth. The majority of the nation's workforce is thus unskilled. However, in part by increasing public expenditure on education from 1.5 percent of GDP in 1990 to 2.6 percent in 1997, the government has been successful in attacking illiteracy. The 49 percent of the population over 15 years of age who were illiterate in 1985 had been reduced to 36 percent by 1997—9 percent better than the African average. The problem of an unskilled workforce has been accentuated by the AIDS pandemic. Because it is likely that a trained teacher or doctor will contract HIV, it is necessary to train 2 or even 3 people to ensure the supply of even one skilled employee.

Labor migration is very common in Uganda. Areas of high unemployment (in districts such as Kabale) were forcibly created by the British colonial administration in order to facilitate the movement of cheap labor from these districts to "industrial" districts such as Buganda and Ankole to work in mines, towns, factories, and plantations. While migratory labor had been relatively well paid before 1986 (people could save part of their wages to buy products such as bicycles and other "luxuries"), due to high inflation and the liberalization of the Uganda shilling imports are far more expensive and workers struggle to even feed their families. Workers are unable to return to their respective districts with basic tools to improve or buy their own land. Hence, there is a growing landless peasantry that is subject to a cycle of laboring simply in order to buy food and basic essentials.

Uganda's trade unions were given legal recognition by the British colonial administration in 1952. In 1993 the unionization of public services was legally permitted, which brought the number of trade unions in Uganda to 17. All unions are legally obliged to affiliate with the highly centralized National Organization of Trade Unions (NOTU) which is part of a tripartite negotiating structure involving the Federation of Ugandan Employers (FUE) and the Minister of Labor. Although the government supports workers' rights conventions promoted by the International Labor Organization (ILO), trade unions are ineffective in Uganda. This is in part due to a lack of unity amongst workers as they work 2 or 3 jobs, and are subject to ethnic, regional, and gender divides. Also, trade unions and other workers' movements have had their powers reduced by the government, and individual workers are often tied to large commercial farms by the provision of normally very poor accommodation, a small plot of land for subsistence, and low wages. Though meager, without these limited resources the worker is lost, hence the space for challenging employers is limited. In light of this situation, although the power of trade unions has been historically low in Uganda, it is no surprise that they are now a virtually non-existent lobby group.

COUNTRY HISTORY AND ECONOMIC DEVELOPMENT

c. 1850. Arab traders make first non-African contact within the territory of Uganda and promote Islam.

1862. Explorer John Hanning Speke is the first European to enter Uganda.

1885. Uganda is designated as a British sphere of influence at the Treaty of Berlin.

1890. A small British military force arrives in Uganda.

1894. Britain declares Uganda a protectorate.

1962. Uganda achieves independence from Britain, and Milton Obote becomes prime minister in multi-party elections.

1971. General Idi Amin forcibly seizes power.

1972. The country's Asian population is expelled, and British companies are taken under government control.

1979. Tanzanian army with Ugandan dissidents under the banner of the Uganda National Liberation Front (UNLF) oust Idi Amin.

1980. Corrupt multi-party elections reinstate Milton Obote as president.

1986. National Resistance Army enters Kampala and forms a government as the National Resistance Movement (NRM), led by President Yoweri Kaguta Museveni.

1987. The NRM government adapts free market reform and starts to receive aid from the IMF and World Bank.

1998. Uganda starts its involvement in the war in the Democratic Republic of the Congo.

2000. A flawed national referendum maintains the "no-party" political system.

2001. Presidential elections held in March.

FUTURE TRENDS

At the outset of 2001, Uganda has the potential to diversify its economy, and there are signs that alternatives to the present substantial reliance on the export of coffee are arising. But in the face of continually falling coffee prices on international markets, in order to prosper in the 21st century diversification of the economy is essential. Unless there is a serious unforeseeable crisis Yoweri Museveni will remain as president at least until 2006, and Uganda will continue on its path of free market reform. This reform will continue to be backed-up by substantial aid from the World Bank, the IMF, the EU and other donors.

There will be an intensification of the privatization of parastatals. The revenue freed-up from previously subsidizing parastatals may allow the government to spend a greater proportion of GDP on essential public services such as education and health. Without investment in these areas an unhealthy and poorly educated workforce will constrain improved social and economic development. GDP growth for 1999-2000 was 5.4 percent, a considerable decline from the highs of 7 percent in 1995 and 1996. This is some indication of the economy's growth beginning to stabilize after the essential reconstruction work undertaken from 1987 onwards. In light of this evidence, it is likely that annual GDP growth will remain at around 5 percent or less for the next 5 years. A continued drain on government resources is Uganda's involvement in the ongoing war in the Democratic Republic of the Congo (DRC). At the beginning of 2001 Museveni was faced with a dilemma between withdrawing and allowing the potential for increased destabilizing attacks upon Uganda by forces based in the DRC or to remain involved in an unpopular and expensive war.

DEPENDENCIES

Uganda has no territories or colonies.

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—Liam Campling

CAPITAL:

Kampala

MONETARY UNIT:

Uganda Shilling (USh). The largest Ugandan note in circulation is USh10,000 and the smallest is USh50. Recently introduced coins come in denominations of 50, 100, 200, and 500. There are plans to discontinue all notes in these denominations.

CHIEF EXPORTS:

Coffee, cotton, tobacco, tea.

CHIEF IMPORTS:

Petroleum products, machinery, textiles, metals, transportation equipment.

GROSS DOMESTIC PRODUCT:

US$24.2 billion (purchasing power parity, 1999 est.).

BALANCE OF TRADE:

Exports: US$471 million (f.o.b., 1999). Imports: US__BODY__.1 billion (f.o.b., 1999).