RESTRICTEDWORLD  TRADE
ORGANIZATIONWT/TPR/S/93
21 November 2001
(01-5835)
Trade Policy Review Body
TRADE POLICY REVIEW
UGANDA
Report by the Secretariat
This report, prepared for the second Trade Policy Review of Uganda, has been
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has,
as required by the Agreement establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), sought clarification from the Government of Uganda on its trade
policies and practices.
Any technical questions arising from this report may be addressed to
Mr. J. Degbelo (tel. 739 5583) or Mr. C. Boonekamp (tel. 739 5226).
Document WT/TPR/G/93 contains the policy statement submitted by the
Government of Uganda.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Uganda.Uganda WT/TPR/S/93
Page iii
CONTENTS
Page
SUMMARY OBSERVATIONS vii
(1) T HE ECONOMIC ENVIRONMENT vii
(2) I NSTITUTIONAL FRAMEWORK viii
(3) T RADE POLICY INSTRUMENTS viii
(4) S ECTORAL TRADE POLICIES ix
(5) T RADE POLICY AND TRADING PARTNERS x
I. ECONOMIC ENVIRONMENT 1
(1) I NTRODUCTION 1
(2) R ECENT ECONOMIC DEVELOPMENTS 2
(3) D EVELOPMENT IN TRADE 5
(4) F OREIGN INVESTMENT 11
(5) O UTLOOK 12
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 15
(1) I NSTITUTIONAL FRAMEWORK 15
(2) F ORMULATION AND IMPLEMENTATION OF POLICIES 16
(3) P OLICY OBJECTIVES 16
(4) L AWS AND REGULATIONS 17
(5) T RADE AND INVESTMENT AGREEMENTS AND ARRANGEMENTS 20
(i) Multilateral agreements 20(ii) Trade-related technical assistance 22
(iii) Regional agreements 26
(iv) Bilateral agreements 28(v) Other trade agreements or arrangements 28(vi) Investment agreements or arrangements 29
III. TRADE POLICIES AND PRACTICES BY MEASURE 31
(1) I
NTRODUCTION 31
(2) M EASURES DIRECTLY AFFECTING IMPORTS 31
(i) Procedures 31(ii) Tariffs, other duties, and charges 33(iii) Customs valuation 38(iv) Rules of origin 39
(v) Import prohibitions, restrictions, and licensing 39
(vi) Contingency trade remedies 40(vii) Government procurement 40(viii) Other measures 42WT/TPR/S/93 Trade Policy Review
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Page
(3) M EASURES DIRECTLY AFFECTING EXPORTS 42
(i) Procedures 42(ii) Export taxes, charges, and levies 42(iii) Export prohibitions, restrictions, and licensing 42(iv) Subsidies, duty and tax concessions, and export-performance requirements 43
(v) Export finance, insurance and guarantees 43
(vi) Export promotion and marketing assistance 44
(4) M
EASURES AFFECTING PRODUCTION AND TRADE 45
(i) Incentives 45(ii) Standards and other technical requirements 47
(iii) Intellectual property rights 50
(iv) Role of state-owned enterprises and privatization 52(v) Competition policy and regulatory issues 54
IV. TRADE POLICIES BY SECTOR 56
(1) I
NTRODUCTION 56
(2) A GRICULTURE 56
(i) Overview 56
(ii) Subsectors 58
(3) M INING AND ENERGY 63
(i) Mining 63(ii) Energy 64
(4) M
ANUFACTURING 65
(5) S ERVICES 68
(i) Financial services 68(ii) Telecommunications and other communication services 70(iii) Transport 71(iv) Tourism 74
SELECTED BIBLIOGRAPHY 77
APPENDIX TABLES 83
CHARTS
III. TRADE POLICIES AND PRACTICES BY MEASURE
III.1 Applied MFN tariff distribution, 2000/01 34
III.2 MFN tariff distribution by sector, 2000/01 35
IV. TRADE POLICIES BY SECTOR
IV.1 Average Ugandan tariffs by ISIC classification, 2000/01 67Uganda WT/TPR/S/93
Page v
Page
TABLES
I. ECONOMIC ENVIRONMENT
I.1 Social and economic indicators 1
I.2 Uganda at a glance, 1995-2000 4I.3 Balance of payments, 1994-99 5
I.4 Commodity exports, 1994-99 7
I.5 Commodity imports, 1994-99 8I.6 Imports by origin, 1995-99 9I.7 Exports by destination, 1995-99 10I.8 Net FDI inflows to Uganda, 1986-99 11
I.9 Foreign direct investment by sector, 1991-98 12
I.10 Country of origin of accumulated FDI flows to Uganda, 1991-99 12
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVESII.1 Basic trade-related legislation in Uganda 18
II.2 Steps towards eligibility to operate in Uganda 19II.3 Status of selected notification requirements to the WTO, 1995 to January 2001 21
III. TRADE POLICIES AND PRACTICES BY MEASURE
III.1 MFN tariff escalation by ISIC 2-digit categories, 2000/01 35
III.2 Investment capital allowances, 2001 46III.3 Divestiture programme of remaining public enterprises, July 2001 53
IV. TRADE POLICIES BY SECTOR
IV.1 Coffee exports from Uganda, 1995/96-1999/00 58
IV.2 Cotton production and sales, 1994-00 60
IV.3 Sales of petroleum products by type, 1995-99 64
IV.4 Annual percentage changes in the index of industrial production, 1990-99 65IV.5 Indicators of insurance services, 1996-2000 70
APPENDIX TABLES
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES
AII.1 Technical assistance needs and selected technical assistance provided, 1998-2001 85
III. TRADE POLICIES AND PRACTICES BY MEASUREAIII.1 MFN tariff statistics, by HS 2-digit, 2000/01 89
IV. TRADE POLICIES BY SECTOR
AIV.1 Uganda's tariff by ISIC category, 2000 93Uganda WT/TPR/S/93
Page vii
SUMMARY OBSERVATIONS
(1) THE ECONOMIC ENVIRONMENT
1. Uganda has implemented significant
economic reform, including a liberalization of
the trade regime, over the last decade and ahalf.  This has attracted foreign direct
investment, mainly in manufacturing, and
contributed to continued economic growth.
Indeed, over the past six years, Uganda's real
GDP has grown at around 6% per annum onaverage, and is expected to continue growing
at about 7% per year in the medium term.
2. Financial discipline has brought the
fiscal deficit (including grants) below 3% of
GDP and inflation has dropped, improving theeconomic environment.  Uganda's fiscal policy
is expected to remain largely unchanged,
although there will be a greater focus on
expenditures to promote exports of
agricultural products, and a need to continue
restructuring the Uganda Revenue Authority
to increase public revenue.  Coupled with thebackground of heightened economic
liberalization efforts, the Bank of Uganda
(BOU) has continued to formulate and
implement tight monetary policy aimed
primarily at price stability.
3. The Government has committed itself
to continuing its efforts to streamline and
liberalize its trade regime, with strong
emphasis on private sector development as a
major engine for economic growth.  ThePoverty Eradication Action Plan (PEAP), as
recently revised, has introduced a social
dimension into the reforms.  The PEAP is
aimed at transforming Uganda into a modern
economy by 2017;  it addresses the need tointegrate export competitiveness and trade
liberalization into a broad poverty alleviation
effort.  Uganda is one of the largest
beneficiaries of the IMF/World Bank's Heavily
Indebted Poor Countries (HIPC) initiative.
4. Agriculture accounts for around 42%
of real GDP and 80% of employment;  coffeeis the main export.  As a result of
diversification efforts, the share of theindustrial sector (including manufacturing,
mining and quarrying, public utilities, and
construction) in real GDP has increased, from
about 17% in 1996 to around 20% in 2000.
The share of services in real GDP has
remained relatively stable, at around 38%since 1996.
5. Insufficient infrastructure, coupled
with Uganda's landlocked status, has impaired
the growth of its exports and its economic
progress.  High production costs are evidentacross all economic sectors.  Non-tariff
barriers in Uganda's main export markets,
drought, the coffee wilt disease, and security
problems in the region (due to war and civil
conflict) have also negatively affectedUganda's economy.
6. Uganda has traditionally run a
current account deficit.  Declines in world
prices of most of Uganda's traditional exports
(coffee, cotton, tea and tobacco) over the last
few years have contributed to a fall in export
earnings, despite the upward trend in theshare of non-traditional exports (e.g.
floricultural products, fruit, vegetables, fish
and fish products) resulting from its
diversification efforts.  Overall, agriculture
still accounts for the bulk of Uganda's exports(around 90% of the value of total merchandise
exports), with an increasing share of non-
coffee exports.
7. Uganda's main imports include
machinery and transport equipment, foodproducts, fuels, and chemicals.  The upward
trend in the share of fuels in total merchandise
imports reflects the increases in world prices
of these products in recent years, while a
similar trend in the share of chemicals resultspartly from increased imports of medicaments.
8. The European Union is Uganda's
main trading partner.  As a result of regional
integration, Uganda's trade with the other
sub-Saharan African countries has increased.
Kenya is the largest single supplier,
accounting for nearly one fourth of totalmerchandise imports to Uganda.WT/TPR/S/93 Trade Policy Review
Page viii
(2) INSTITUTIONAL FRAMEWORK
9. The Ministry of Tourism, Trade and
Industry (MTTI) is responsible for trade policy
formulation and implementation.  Other
Ministries, particularly Finance and
Agriculture, however, are also involved bothin formulation and implementation of trade
policy.  The Presidential Economic Policy
Forum, together with other public institutions,
carries out periodic reviews and assessments
of trade-related policies within theGovernment.  Sessional committees of the
Parliament also review policies, including
trade policies;  there are opportunities for
periodic inputs from the private sector.
10. Uganda encourages foreign
investment.  The Uganda Investment Authority
(UIA) is intended to be a "one-stop shop" to
promote and facilitate investment in Uganda.
A commitment to continuing liberalization of
the economy and macroeconomic stability are
important attributes of the atmosphere that
Uganda hopes will attract foreign investors,who may own 100% of investments in
companies.  Uganda offers various tax
incentives, including import-duty concessions
and accelerated depreciation for plant and
machinery, and VAT deferral.  Investmentlicensing requirements include a minimum
capital of US$100,000 for foreigners and
US$50,000 for Ugandans.
11. Uganda views foreign trade as an
important stimulus to economic growth, andits trade policies aim to contribute to poverty
reduction, promotion of employment, and
diversification and promotion of exports,
particularly of non-traditional products.
These policy objectives have been pursuedthrough continuing liberalization,
deregulation, privatization, and participation
in regional agreements, particularly the
Common Market for Eastern and Southern
Africa (COMESA) and the East African
Community (EAC).
12. Uganda is an original Member of the
WTO, and grants at least MFN treatment to all
its trading partners.  Uganda is not asignatory of any of the plurilateral trade
agreements.  Uganda has benefited from
regular WTO technical assistance, under the
Joint Integrated Technical Assistance
Programme and the Integrated Framework.
Several meetings have taken place with donorssince 1996 to assess Uganda's trade-related
technical assistance needs, which can be
classified into two categories:  adoption of
laws and regulations relating to the WTO and
regional trade agreements, and human andinstitutional capacity-building for effective
participation in these arrangements;  and the
needs relating to supply-side constraints,
including poor physical infrastructure,
unreliable public utilities, weak exportinstitutional framework, and market access
difficulties.
13. Uganda is slowly mainstreaming trade
into its development framework.  However, its
various institutions dealing with trade policy,
including the MTTI, do not have sufficient
capacity to manage trade arrangementseffectively and to fully implement the
necessary reforms.  At the same time, at least
partially due to the Government's fragmented
institutional structure dealing with trade
matters, coordination among developmentpartners is less than ideal.
(3) T
RADE POLICY INSTRUMENTS
14. Since its last Trade Policy Review
(TPR) in 1995, Uganda has eliminated all
quantitative restrictions;  most of theremaining non-tariff restrictions are
maintained for moral, health, security or
environmental reasons.  Tariffs have become
Uganda's main trade policy instrument.
Uganda has been applying the customsvaluation method based on the transaction
value since July 2000.  The tariff structure has
been simplified through the reduction of the
number of bands from five in 1995 to three
(zero, 7%, and 15%), and the lowering of
maximum ad valorem rates from 60% to 15%.
All tariffs are ad valorem, except on fuel.Some 16.4% of all tariff lines are duty free,
while 39.3% carry the maximum rate of 15%.Uganda WT/TPR/S/93
Page ix
15. In addition to tariffs, imports may be
subject to an import licence commission of
2%, a 4% withholding tax, as well as internal
taxes, such as the excise duty of 10%, except
on cigarettes (130%), alcoholic beverages
(70%) and soft drinks (15%), and a 17%value-added tax (VAT), which apply equally to
imports and domestic products.  In 1999/2000,
52% of the revenue collected under VAT came
from imported goods.
16. The simple average rate of Uganda's
applied MFN 2000/01 tariff is 9%.  There is
some tariff escalation.  The import licence
commission and the withholding tax increase
the average rate to 15%.  In addition, special
protection is provided to the sugar and textilesindustries.  Agriculture (Major Division 1 of
ISIC Revision 2) is the most protected sector,
with an average tariff rate of 11.2%, followed
by manufacturing (8.9%), and mining and
quarrying (8.8%).  Uganda grants preferential
tariff treatment to other members of
COMESA;  the preferential bands are 0%, 4%and 6%.
17. Customs duties are bound for some
15.4% of Uganda's tariff lines, including all
tariff lines for agricultural products (WTO
definition) and 2.7% of the lines for non-agricultural products.  The bindings are at
ceiling tariff rates of 80% on most agricultural
products, except for 60 lines with bound rates
between 40% and 70%;  and between 40%
and 80% on non-agricultural products.  Otherduties and charges on all these products are
bound at zero, although the import licence
commission of 2% and a withholding tax of
4% apply to all imports.  The predictability of
Uganda's tariff regime could be enhanced byan increase in the coverage of its tariff
bindings and by narrowing the gap between
bound and applied rates.
18. The only export duty is a 1% cess
collected by the Uganda Coffee Development
Authority on coffee exports.  The two main
incentive schemes, i.e. the Fixed DutyDrawback Scheme and the Manufacturing
Under Bond Scheme, are currently available
to export-oriented  companies.  There are alsoincentives under which import duties on
certain raw materials may be refunded.
Exporters are allowed to export all items
except those on a negative list and those for
which authorization must be obtained from
regulatory bodies.  The negative list includestimber, charcoal, and whole fresh fish.
19. In September 2000, Uganda revised
its regulations on public procurement for
purposes of greater transparency and
decentralization;  open tendering proceduresare generally preferred.  Despite the lack of
funding for standardization, there has been a
noticeable increase in the number of Ugandan
standards (253 as of September 2001) since
the last TPR of Uganda in 1995.
20. The ongoing implementation by
Uganda of its privatization programme has
contributed to divestitures by the State of 108
out of 148 public enterprises.  The new owners
include both Ugandans and foreigners.
Uganda does not yet have legislation on
safeguards and competition.  It is revising itslegislation on anti-dumping, countervailing,
sanitary and phytosanitary measures, and on
intellectual property, with a view to aligning
them on the relevant WTO Agreements.
(4) S
ECTORAL TRADE POLICIES
21. Agriculture, dominated by subsistence
farmers and food crops, provides the bulk of
the raw materials for the largely agri-based
industrial sector.  Coffee still dominates
agriculture;  it affects the livelihood of a largeportion of the population.  Cotton is the
second most important cash crop and offers
significant potential.  The third significant
export is fish and fish products.  Recent
growth in exports of fruit, vegetables andflowers is attributable to agricultural reforms,
including diversification of agricultural
exports toward non-traditional crops.  Since
the last Review of Uganda, the Government
has continued liberalizing the sector;
marketing of inputs and products has been
liberalized, export taxes have been eliminatedexcept on coffee, trade barriers have been
substantially reduced, and prices are marketWT/TPR/S/93 Trade Policy Review
Page x
determined.  Strategic reserves are required
for certain products for food security
purposes.  The Government's 2000 Plan for
the Modernisation of Agriculture (PMA),
formulated within the PEAP framework, aims
to reorient the activities of subsistence farmersto the market.  The maximum tariff rate of
15% applies to imports of certain vegetables,
fruit and nuts, and specified animal and
fishery products.
22. Manufacturing is characterized by the
production of simple basic consumer goods.
Capital goods industries are still few in
number.  The low capacity utilization in most
industries hampers the competitiveness of
Uganda's manufactured products, alreadynegatively affected by the landlocked position
of the country and high price of utilities.
Incentive schemes are in place to attract
investment into the sector.  Textiles and
apparel, and agri-processing are seen as
promising industries.  The maximum tariff rate
of 15% applies to imports of, inter alia,beverages, manufactured tobacco, carpets,
rugs, and certain wearing apparel and leather
products.
23. The mining and quarrying sector is
underdeveloped, but services constitute apromising sector for Uganda.  The
Government is divesting its ownership in
financial services where there are currently no
nationality-based ownership restrictions,
except for differing minimum capitalrequirements (between Ugandans and
foreigners) for the licensing of insurance
companies.  The reforms undertaken in
telecommunications services, including the
sale of 51% of the Uganda Telecom Limited(UTL) to a German-led consortium, have
contributed to growth in the subsector.
However, fixed telephone services are still
under the monopoly of UTL, which sets tariffs
subject to approval by, the regulatory body the
Uganda Communications Commission.  The
lack of coordination with neighbouring Kenyaand Tanzania, and of a national tourist policyhave limited the exploitation of Uganda's
considerable potential in tourism.  Rail
transport services are under the monopoly of
the state-owned Uganda Railway Corporation,
and the supply of specified air transport
services are subject to limitations.  The othertransport services are mostly liberalized.
Uganda has made specific commitments in
tourism and travel-related services, and in
telecommunications services under the
General Agreement on Trade in Services(GATS).
(5) T
RADE POLICY AND TRADING
PARTNERS
24. As can be seen from the growth rate of
the economy over the past six years, thereforms implemented by Uganda have begun
to bear fruit.  However, the slow
mainstreaming of trade into the development
framework has limited the impact of economic
growth on poverty.  Various initiatives, at
national and international levels, are currently
focusing on this shortcoming.
25. Uganda has substantially simplified
the structure of its tariff.  However, while
Uganda has bound other duties and charges
on imports at zero, an import licence
commission and a withholding tax areimposed, which raises concern about
compliance with its tariff bindings.  By
eliminating the import licence commission and
the withholding tax, by increasing the
coverage of its binding commitments for bothgoods and services, and by narrowing the gap
between applied and bound rates, Uganda
would enhance the transparency and
predictability of its trade regime.  Such
adjustments could contribute to fullexploitation by Uganda of its comparative
advantages, and attract investment.
26. It is critical that Uganda's exports (of
non-traditional products in particular) do not
meet new non-tariff barriers and that the
multilateral system supports its efforts.