RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/TPR/G/171 
20 September 2006  
 
(06-4343) 
Trade Policy Review Body Original:  English  
   
 
  
 
TRADE POLICY REVIEW 
 
Reports by  
 
THE EAST AFRICAN COMMUNITY  
MEMBERS 
 
  
 
Pursuant to the Agreement Establishi ng the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), the policy statements by the East African Community (EAC) 
members are attached. 
 
 
Note: These reports are subject to restricted circulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Revi ew Body on the East African Community. EAC members WT/TPR/G/171 
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 CONTENTS 
  Page 
REPORT BY KENYA  7 
I. BACKGROUND  7 
II. ECONOMIC PERFORMANCE 7 
(i) M ACROECONOMIC PERFORMANCE  7 
(ii) M ACROECONOMIC OUTLOOK  8 
III. SECTOR SPECIFIC PERFORMANCE 8 
(i) A GRICULTURE  8 
(ii) M ANUFACTURING  8 
(iii) T OURISM  9 
(iv) B UILDING AND CONSTRUCTION INDUSTRY  9 
(v) I NFORMATION AND COMMUNICATION TECHNOLOGY  9 
IV. PUBLIC EXPENDITURE MANAGEMENT 9 
V. DROUGHT SITUATION IN KENYA 10 
(i) R ESPONSE TO THE DROUGHT  10 
VI. INVESTMENT REGIME 10 
(i) FDI  AND ON THE ONGOING LICENCES REFORMS  11 
VII. EXTERNAL TRADE PERFORMANCE 14 
VIII. TRADE POLICY REGIME 15 
IX. REGIONAL AND BILATERAL TRADE AGREEMENTS 15 
(i) C OMMON MARKET FOR EASTERN AND SOUTHERN AFRICA (COMESA) 15 
(ii) E AST AFRICAN COMMUNITY (EAC) 16 
(iii) ESA–EPA  NEGOTIATIONS IN THE CONTEXT OF THE ACP-EU  COTONOU PARTNERSHIP 
AGREEMENT  16 
(iv) M ULTILATERAL NEGOTIATIONS IN THE WTO  UNDER THE DDA 16 
(v) B ILATERAL TRADE AGREEMENTS  16 
X. NATIONAL EXPORT STRATEGY (NES) 17 
XI. PRIVATE SECTOR DEVELOPMENT STRATEGY (PSDS) 17 
REPORT BY TANZANIA 19 
1. INTRODUCTION 19 WT/TPR/G/171 Trade Policy Review 
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   Page 
2. ECONOMIC ENVIRONMENT 19 
3. POLICY OBJECTIVES AND  STRUCTURAL REFORMS 23 
4. TRADE POLICY  29 
5.  CONCLUSION  32 
REPORT BY UGANDA  33 
1.0 INTRODUCTION 33 
2.0  ECONOMIC OUTLOOK 33 
2.1  U GANDAN ECONOMIC PERFORMANCE  33 
2.2 O VERALL GDP  GROWTH  34 
2.3 F OREIGN INVESTMENTS  35 
3.0 PUBLIC FINANCE 36 
3.1  P UBLIC EXPENDITURE  36 
3.2  D OMESTIC REVENUE PERFORMANCE  36 
3.3  E XPENDITURE PERFORMANCE  37 
3.4  E XTERNAL DEBT ISSUES  37 
4.0  SECTORAL PERFORMANCE 37 
4.1  A GRICULTURE  37 
4.2  F ORESTRY  38 
4.3  M ANUFACTURING AND INDUSTRY  39 
4.4  C ONSTRUCTION AND MINING  39 
4.5  S ERVICES  39 
4.5.1  Financial Sector 40 
4.5.2  Wildlife and Tourism 40 4.5.3  Energy 40 
4.5.4  Transport 41 
5.0  UGANDA TRADE REGIME 41 
5.1
  T RADE BALANCE  41 
5.2  E XPORTS  42 
5.3  I MPORT PERFORMANCE  43 
6.0  INVESTMENT POLICY 44 
7.0 TRADE POLICY  44 
7.1  M EMBERSHIP IN TRADE ORGANIZATIONS  45 
7.2  U GANDA AND THE MULTILATERAL TRADING SYSTEM  45 EAC members WT/TPR/G/171 
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   Page 
7.3  R EGIONALISM  45 
 7.3.1  The East African Community 45 
7.3.2  The Common Market for Eastern and Southern Africa 46 7.3.3  The ACP-EU Cotonou Agreement 46 
7.3.4  African Growth Opportunity Act 46 
7.4
  B ILATERAL TRADE INITIATIVES  47 
8.0  IMPLEMENTATION OF  THE WTO AGREEMENTS 47 
8.1 S CHEDULE OF COMMITMENTS  47 
8.2  N OTIFICATIONS  47 
8.3  I MPLEMENTATION PROCESS  47 
 EAC members WT/TPR/G/171 
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 REPORT BY KENYA 
I. BACKGROUND 
1. The Kenya government continues to undertake  comprehensive economic reforms to enhance 
economic performance and good governance aimed at reducing poverty, unemployment, high 
domestic and foreign debt among ot hers. The new reforms being implemented were as a result of a 
new political environment created by the election of a new administration in December 2002.  The 
government's priority is economic recovery, based  on the current policy document entitled “Economic 
Recovery Strategy for Employment and Wealth Creation (ERS)”. 
2. The Investment Programme of the Economic R ecovery Strategy for Wealth and Employment 
Creation (IP-ERS) therefore is Kenya's medium-term strategy to foster ec onomic growth and reduce 
poverty. In order to address the multidimensional as pects of poverty, the government adopted a multi-
faceted strategy to support economic growth, equi ty and poverty reduction and good governance. This 
strategy aimed at revitalizing economic growth, wealth creation and employment based on three 
pillars namely: promoting econom ic growth, reducing poverty, an d promoting good governance. The 
focus is to ensure macroeconomic stability, financ ial sector development, infrastructure development 
through private sector participation and revitali zation of agriculture, trade, tourism and the 
manufacturing sectors.    
3. During the recently concluded AU Summit held in Banjul, Gambia Kenya was reviewed 
30th June 2006. The review was conducted under th e Africa Peer review m echanism (APRM), which 
is the principal arm of the African Union ( AU). The review focused on Kenya's policies and 
accomplishments in the areas of democracy and pol itical governance; management of the economy; 
corporate governance; and social and economic de velopment. H.E. President, Hon Mwai Kibaki 
represented Kenya at the review, where the Country  received high praise for its achievements in 
promoting peace in the region; building democracy and open society with individual freedom at 
home; lowering her dependency on external aid in the government budget; fighting corruption and 
reviving the economy after years of decline. 
II. ECONOMIC PERFORMANCE 
(i) MACROECONOMIC  PERFORMANCE  
4. The Kenyan economy has been on a recovery path  and has registered steady growth rates over 
the past three years, growing by 3.0%, 4.9% and 5.8% in 2003, 2004 and 2005 respectfully. This is attributed to the sound macro economic policies, which have been a key element in creating an 
enabling environment for private sector led growth. In addition, the far reaching structural and sector 
reforms being implemented since the new Government  came to power have enhanced the efficiency 
of resource utilization, which is critical for sustai nable economic growth and the fight against poverty. 
5. During the fiscal year 2004/05, achievements on other macroeconomic targets were somehow 
mixed. Inflation was 5.8 per cent against a target  of 5 per cent and domestic debt/GDP ratio in 
percentage terms was 18.5 per cent against a target  of 22.2 per cent. The target for public sector 
wages/GDP was 7.8 per cent against a target of 8. 14 per cent and the goal fo r revenue expansion was 
21.3 per cent against a target of 21.4 per cent.  WT/TPR/G/171 Trade Policy Review 
Page 8 
 
 
 (ii) MACROECONOMIC OUTLOOK  
6. The government seeks to consolidate and strengt hen the economic recovery to ensure that 
GDP growth can be maintained at above 5% and preferably reach 7% by 2008/09 fiscal year. The 
Government intends to undertake key structural reforms, including public expenditure and financial 
management; privatization of public enterprises; and,  improvements in the operations of the financial 
sector. The Government also seeks to maintain a flex ible but stable real exchange rate to bolster 
external competitiveness and assist in achieving a su stainable external current account position. In 
Addition, the balance of payment will be strengthe ned to facilitate build up of gross international 
reserves to above 3 months of import cover.  
7. The Government has also introduced a polic y shift towards a more predictable budgetary 
process by excluding both bilateral and multilateral suppor t. This is meant to maintain fiscal discipline 
by relying more on predictable domestic resources of  funding to achieve the medium term objectives. 
Notwithstanding this policy shift the government is  keen to continue collaborating with the donor 
institutions and development partners in key sect ors such as education, health, agriculture and 
infrastructure.   
8. The focus of the medium term priorities and fi scal strategy is to further narrow the income 
and regional inequalities and strive to decisively  achieve the Millennium Development Goals. The 
government is therefore putting in place sound macro economic and structural policies, which seeks to shift resources towards the social and economic sectors and fight corruption to ensure sustained 
economic growth to realize the stated objectives. The priority areas that the reforms will target include 
public expenditure and financial management, revenue administration, public enterprises, financial 
intermediation, private sector competitiveness and good governance. 
9. The overall inflation is expected to decline in vi ew of the anticipated decline of food prices 
resulting from favourable weather and the prudent m onetary policy being implemented by the Central 
Bank of Kenya. This is expected to bring down bo th the overall and the underlying inflation rates to 
5% by June 2007. In addition the interest rates are ex pected to remain stable due to the decline in the 
overall inflation and prudent fiscal policy.  
III. SECTOR SPECIFIC PERFORMANCE 
(i) A
GRICULTURE  
10. Agriculture continues to be one of the most important sectors of the economy contributing 
24.20% of the total real GDP in 2005. The sector recorded a remarkable improved growth of 6.9% 
compared to a depressed growth of 1.7% in 200 4. This was mainly due to improved weather 
conditions that contributed to good performance in most sub sectors such as horticulture, dairy and 
cereals production. 
(ii) MANUFACTURING   
11. The manufacturing sector grew by 5% in 2005 co mpared to 4.5% in 2004 on account of stable 
macroeconomic conditions, improved access to credit and increased exports opportunities particularly 
in the EAC and COMESA markets. In the first quarter of 2006, the sector had mixed performance in 
the production of selected manufactured goods. For example beer production and milk processing increased by 9.1% and 1.4% respectively while produc tion of soda ash declined by 5.3% during this 
period. With the gradual reduction in tariffs and Non-tariff measures in the East African Community 
following the adoption of the common external tari ff and the new emerging market in Southern EAC members WT/TPR/G/171 
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 Sudan, the growth momentum in the manufacturing sector is expected to accelerate in the medium 
term. 
(iii) TOURISM   
12. The growth in the tourism sector continued on an upward trend in 2005 with combined 
earnings from international and domestic sub sectors rising from Kshs 39.2 billion to 
Kshs 48.9 billion which is equivalent to a growth rate of 24.7%. The international tourism arrivals 
grew from 1.4 million in 2004 to 1.5 million in 2005 with significant growth observed in first and 
third quarter of the year. The sector remains vi brant and during the period, visitors from Europe 
increased by 15.4% and accounted for 62.4% of th e total tourist arrivals. The Government is 
undertaking concerted marketing campaign thr ough the Kenya Tourist Board while necessary 
measures are being undertaken to improve security in the hotels and tourism sites with a view to 
consolidating the gains made in this sector. 
(iv) BUILDING AND CONSTRUCTION INDUSTRY  
13. The market estimates indicate that the constr uction sector performance improved in 2005 with 
cement consumption increasing by 10.9% from 1,418,300 metric tones in 2004 to 1,572,500 metric 
tones in 2005. The good performance was partly attribut ed to low interest rates, revival of stalled 
projects by the government and increased bu dgetary allocation for road construction and 
rehabilitation.  
(v) INFORMATION AND COMMUNICATION TECHNOLOGY  
14. The Government has put in place a “Framework  for improving ICT” that will create an 
enabling environment for private sector participatio n, through further liberalization of the sector and 
by investing heavily in the e-Government initiative, mainly to boost the current strong growth in the 
sector. Focus will also be on training, ICT research  and development, and promotion of value added 
services such as incubators, telecentres, call centres,  amongst others to encourage rapid growth, and 
create employment opportunities through out sourcing.  All these efforts are ge ared towards ensuring 
Kenya becomes a regional ICT hub. 
IV. PUBLIC EXPENDITURE MANAGEMENT  
15. The Investment Programme of the Economic R ecovery Strategy for Wealth and Employment 
Creation (IP-ERS) highlights the importance of the e fficient use of public resources and sound Public 
Expenditure Management (PEM) in stimulating economic growth and alleviating poverty. The 
government has therefore introduced a number of reforms including the adoption of the Medium 
Term Expenditure Framework (MTEF), establishment of a budget monitoring unit and introduction of 
the Integrated Financial Management Information Systems (IFMIS). This was aimed at linking policy 
making and budgeting, maintaining fiscal discipline,  facilitating expenditure prioritization across 
policies, programs and projects and ensuring optimal use of resources.  
16. However, the government recognizes the slow progress made on implementation of 
Integrated Financial Management and Information System (IFMIS), the lack of momentum on Public 
Expenditure Tracking Survey (PETS) and the effect s of weak budget execution on budget credibility. 
As a result the Government through the 2005/2006 b udget speech outlined the need to: ensure strict 
adherence to the financial regulations including  procurement guidelines; implementation of a cash 
management system to ensure timely release of resources to line ministries; carry out Public Expenditure Tracking Survey to improve utilization of  public resources; roll out Integrated Financial WT/TPR/G/171 Trade Policy Review 
Page 10 
 
 
 Management and Information System to line ministries; and, introduce a risk-based internal audit 
system.  
V. DROUGHT SITUATION IN KENYA 
17. Kenya experiences mild cyclical droughts approximately 3-5 years with severe dry periods on 
a ten-year cycle. These largely affect the Arid and Semi Arid Lands (ASALs) where 12 million people 
live. The recent drought severely affected over 3. 5 million people in 25 districts otherwise known as 
Emergency Operation (EMOP) Districts and another 2.5 people in 20 districts that were partly 
affected by the drought referred to as Non-EMOP Districts. The impact of the drought was felt in almost all sectors including livestock, crops and abov e all people due to lack of water, starvation, poor 
health as well as education.  
(i) R
ESPONSE TO THE DROUGHT  
18. The President made an appeal for internati onal and local support sp ecifically for drought 
assistance in February 2006 in order to avoid mass suffering of both people and livestock. Currently 
several structures have been put in place to deal wi th food security matters and other emergencies in 
the country. These include: National Committee on Disaster Management; Cabinet Sub–Committee 
on Disaster Management; Inter-Ministerial Committee on Disaster Management; Strategic Grain 
Reserve (SGR) Trust Fund; Kenya Food Security Meeting (KFSM); Kenya Food Security Steering Group (KFSSG); District Steering Group (DSG); and Lead Agencies. The Government disbursed about Kshs. 14 billion towards dr ought intervention activities by Ju ne 2006. In addition the Kenya 
Red Cross Society (KRCS), which was mandated by the Government to coordinate donations from 
the local people and companies, received generous  support from both local and International donors. 
In addition the World Food Program has been spearheading food relief activities in Emergence 
Operation (EMOP) districts and had by April ra ised KShs. 7.5 billion food assistance out of the 
expected Kshs. 16 billion. This represented about 46% of total funding requirements. 
VI. INVESTMENT REGIME 
19. There is no one single investment policy documen t. The investment policy is however spread 
across other government policies in some sectors of the economy, for example tourism, infrastructure 
and agriculture. The investment policy is guided by the investment program (revised in 2006) 
emanating from the ERS. The priority areas identifie d include the enactment of an investment code; 
development of an investor road map and co mprehensive review of licensing arrangements. 
20. So far the investment code has been enacted and under the Investment Promotion Act 2004, 
the Kenya Investment Authority has been est ablished as a successor body to the Investment 
Promotion Centre (IPC).  The core functions  of KIA include; Policy Advocacy; Investment 
Promotion; Investment Facilitation; Investor Tracking and After Care Services. The Kenya Investment Authority is also implementing the In vestment Targeting Strategy, which is focusing on 
the services sector such as ICT and financial serv ices; tourism, agribusiness (value addition, leather 
and related products).  
21. Through Acts of parliament, the government h as established various bodies that also deal 
with the promotion of investment. These incl ude Industrial and Commercial Development 
Corporation (ICDC), Kenya Industrial Estates (KIE), Kenya Tourism Development Corporation 
(KTDC), Export Processing Zones Authority (EPZA) and Kenya Investment Authority.  EAC members WT/TPR/G/171 
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 (i) FDI  AND ON THE ONGOING LICENCES REFORMS  
22. The government is reviewing some of the licenses that directly affect trade and investment. In 
line with the 2006/2007 budget forecast the government  will be eliminating a number of licenses 
while others will be simplified through harmonizati on and reduction of fees and charges. Further, a 
Business regulatory reform unit is be ing created in the Ministry of Fi nance to liaise with regulators to 
ensure that all future regulations on licensing conform to international best practices.  It is expected 
that the streamlined business environment will attract  FDI and also lower the cost of doing business 
and encourage the existing business to expand lead ing to increased new domestic investment and 
employment opportunities. The reforms are intended to  transform Kenya into an ideal and competitive 
investment destination. 
23. As a result of these reforms and in particular the enactment of the new Investment Promotion 
Act 2004, the government has witnessed the entry in to the Kenyan Market of major Multi-nationals 
companies such as Nokia, General Electric, Micros oft East Africa and the expansion of Coca Cola 
Company. Erickson is in the process of  setting up its operations in Kenya. 
24. Below is an analysis of investment flows pr ocessed by the Kenya Investment Authority. 
Table 1 presents the number of projects and the cap ital cost processed between 2002 and 2005, table 2 
presents the employment levels generated by the i nvestment in the same period while table 3 presents 
the country of origin and main sectors of investment within the same period.  
INVESTMENT PROJECTS PROCESSED BY THE KENYA INVESTMENT AUTHORITY: 
2002-2005 
Table 1:  
Projects details (number of pr ojects and capital costs) 
Year No. of Foreign 
Projects No. of Local 
Projects Total No. of 
Projects Foreign Capital 
Cost (Kshs) Local Capital 
Cost (Kshs) Total Capital 
Cost (Kshs) 
2002 31 16 47 1.0b 0.433b 1.5b 
2003 56 39 95 5.6b 5.4b 11b 
2004 64 63 127 3.6b 1.7b 5.3b 
2005 52 55 107 6.5b 4.0b 10.5b 
Table 2:  
Employment levels 
Foreign Employment Local Employment Total Employment 
136 3376 3512 
213 7658 7871 
439 13667 13906 
346 9363 9709 
 
 
 
 WT/TPR/G/171 Trade Policy Review 
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 010203040506070
2002 2003 2004 2005
YEARNUMBER OF PROJECTS RECEIVED BETWEEN 2002-2005 No. OF PROJECTS
Foreign
Local
 
01000200030004000500060007000
2002 2003 2004 2005
YEARINVESTMENT CAPITAL BETWEEN 2002-2005AMOUNT IN KSHS THOUSANDSForeign
Local
 EAC members WT/TPR/G/171 
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 02000400060008000100001200014000
2002 2003 2004 2005
YEARForeign
LocalEMPLOYMENT LEVEL BETWEEN 2002-2005No. OF EMPLOYEES
 
Table 3: 
Major country origins and ma in sectors of investment 
Year Number of Foreign Projects Major Source Countries Main Sectors  
2002 31 China = 20%, 
SA = 16%,  
India = 16%,  UK = 10%,  
Others = 36% Manufacturing, 
Services,   
Tourism 
2003 56 China = 17%,  
UK = 15%, 
USA = 7%,  India = 4% ,  
Others = 57% Service,  
Manufacturing,  
Tourism 
2004 64 UK = 14%,  
China = 11%,  
German = 10%,  
USA = 8%, India = 5 %, 
SA = 5% , 
Others = 47% Service,  
Manufacturing,  
Tourism,  
Agriculture 
2005 52 China = 22%,  
UK = 22%,  
India = 10%,  
SA = 6%, USA = 13%, 
Others = 27% Service, 
Manufacturing,  
Tourism,  
Agriculture 
Source:  Kenya Investment Authority. WT/TPR/G/171 Trade Policy Review 
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 VII. EXTERNAL TRADE PERFORMANCE 
25. The total export earnings for the year 2005 incr eased by 13.7% while the total import bill 
grew by 18.2%. However the volume of import trade increased by 16% in 2005 compared to 24.6% in 2004. The strong shilling impacted negatively on export  earnings resulting in a widened trade deficit 
representing a 26% growth in nominal terms.  The steady import growth outstripped the increase in 
exports resulting to the widening of trade deficit to the tune of Khs 186,542 million in 2005 against 
Kshs 149,764 million in 2004. This was mainly attr ibutable to the higher oil prices and the 
appreciation of the Kenyan shilling. However due to large inflows of re mittances from abroad and 
sizable financial inflows the balance of payments wa s fairly stable with the foreign exchange reserves 
with the Central Bank of Kenya increasing to an equi valent of over Kshs 2 billion in 2005 compared 
to Kshs 1 billion in 2004.The key export pro ducts included horticulture, tea and coffee which 
accounted for 49.8% of the total domestic export ear nings. On the other hand import of crude oil and 
petroleum products accounted for 22.7% of the to tal import expenditure. Other principle imports 
included industrial machinery, iron and steel, road motor vehicles and plastics. 
Value of exports (Ksh. Million) 
 Year 2000 Year 2001 Year 2002 Year 2003 Year 2004 Year 2005 
South America 312 484 290 649 1,006  
Asia 22,241 25,395 25,914 27,781 33,038 37,050 
Europe 41,804 42,499 49,478 56,579 60,933 67,175 
Africa 61,935 72,513 83,085 84,653 101,809 120,327 
America 3,588 4,256 4,107 3,880 6,066 6,014 
Source:  Economic Survey, 2006. 
020000400006000080000100000120000
YEAR 2000 YEAR 2001 YEAR 2002 YEAR 2003 YEAR 2004
South America Asia Europe Africa America
 EAC members WT/TPR/G/171 
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 26. As indicated in the above table, the African re gion continues to be a major destination of 
Kenya's exports followed by Europe. The main d estination for Kenyan merchandise exports in the 
year 2005 to February 2006 were Uganda, Un ited Kingdom, Tanzania, the Netherlands, Pakistan, 
Egypt, the Democratic Republic of Congo and the Sudan which accounted for 16%, 9.9%, 8.3%, 
7.8%, 6.1%, 3.9%, 3.3%, and 3.1% of the total expo rt earnings respectively. During the same period 
exports to African countries accounted for 48. 2% of Kenya's total merchandise exports. 
27. During the year 2005 to February 2006, the main source of imports were United Arab 
Emirates (15.2%), United Kingdom (13.4%), South Africa (9.5%), United States of America (9.5%), India (5.7%), Saudi Arabia (5.5%), Japan (5%), Chin a (4.5%), Germany (3.6%) and Singapore(3.0%).  
VIII.  TRADE POLICY REGIME 
28. The Ministry of Trade and Industry is r esponsible for trade policy formulation, 
implementation and coordination in collaboration with  other relevant Ministries.  Currently trade 
policies in Kenya are derived from a number of policy statements contained in official documents such as Acts of Parliament, Sessional papers and development Plans. The major challenge in trade 
promotion has been the absence of a harmonized po licy to guide, stimulate and manage trading 
activities. In this regard and in order to ensure  a clear and predictable trade policy, the National 
Economic & Social Council (NSEC) directed the Mi nistry of Trade and Industry to expedite the 
preparation of a comprehensive national Trade and I ndustrial policy. This work has commenced and it 
is expected to be completed by the end of next year. 
29. This not withstanding, the trade policy framework focus is on trade promotion through 
diversification of products and markets while at th e same time ensuring that  maximum benefits from 
trade are derived at the regional and multilateral le vels. A number of supply si de constraints however 
continue to limit the ability to realize the full potenti al of the trade sector. Some of these constraints 
include poor infrastructure resulting to high business transaction costs, competition from imports, the stringent safety and health standards required to access external markets and other non-tariff barriers. 
30. In view of these challenges the government in itiated the Economic Recovery strategy for 
Wealth and Employment Creation (ERS 2003-2007), a nd various measures have been put in place to 
address the above challenges. Some of them in clude incentive schemes such as Export Processing 
Zones and Manufacturing Under Bond. In addition  the Ministry has developed a National Export 
Development Strategy that has taken into account a ll sectors of export potential. The Strategy is under 
implementation and focuses on export market diversif ication and products thro ugh value addition.  
IX. REGIONAL AND BILATERAL TRADE AGREEMENTS 
31. Kenya is a member of two regional trading bloc ks: COMESA and EAC. It is also involved in 
bilateral arrangements with a number of countri es. These efforts are aimed at boosting trade and 
investment. 
(i) C
OMMON MARKET FOR EASTERN AND SOUTHERN AFRICA  (COMESA) 
32. Kenya is an active member of COMESA and has experienced a marked increase in trade 
volumes, with a share of exports to COMESA increasing by 19.7% accounting for 36.6% of the 
overall exports (including Tanzania). The va lue of imports from COMESA countries in 2005 
increased by 4.9% accounting for 24.9% of the total imports from Africa.  WT/TPR/G/171 Trade Policy Review 
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 (ii) EAST AFRICAN COMMUNITY  (EAC) 
33. EAC is the most important and promising mark et for Kenya's exports. The volume of trade 
has been increasing every year and as such Kenya is looking forward to a deeper integration in this 
sub-region.  Kenya is therefore, firmly committed into realizing this objective. 
(iii) ESA–EPA  NEGOTIATIONS IN THE CONTEXT OF THE ACP-EU  COTONOU PARTNERSHIP 
 A GREEMENT  
34. Kenya as a signatory to the ACP-EU Partners hip Agreement is committed to a successful 
conclusion of a new WTO compatible Economic Part nership Agreement with the EU. The aim is to 
gradually remove barriers to trade between the EU and ACP states and also enhance trade and 
economic cooperation as provided for under Ar t. 36 (1) of the Cotonou Agreement. 
35. Kenya is therefore negotiating EPAs with the EU  under the East and Southern African (ESA) 
configuration, which comprises 16 countries namely:  Burundi, Comoros, Djibouti, Ethiopia, Eritrea, Kenya, Madagascar, Malawi, Mauritius, Rwa nda, Seychelles, Sudan, Uganda, Zambia and 
Zimbabwe. These negotiations are expected to end by December 2007. 
(iv) M
ULTILATERAL NEGOTIATIONS IN THE WTO  UNDER THE DDA 
36. Kenya as an active member of World Trade Or ganization is fully committed to Multilateral 
Trading System and its principles and rules. In addition, Kenya recognizes and is convinced that the WTO and its predecessor, the GATT, have significan tly dismantled the global trade protectionism and 
have facilitated the flow of international trade. 
37. With the current negotiations on dismantling exis ting barriers to trade, the MTS is firmly on 
the road to achieve its intended objective of crea ting an enabling environment for the international 
trade to thrive. 
38. Regarding the on-going DDA negotiations, Kenya  is fully committed to the successful 
conclusion of the Round with subs tantial development content necessary for meeting the challenges of 
Millennium Development Goals of reducing the gl obal poverty by a half by the year 2015. 
(v) B
ILATERAL TRADE AGREEMENTS  
39. Most bilateral agreements which Kenya signed were predominantly with the Eastern Europe 
countries which have been terminated after these countries joined the European Union. Currently 
Kenya has 29 bilateral trade agreements with bot h developed and developi ng countries which serves 
the following interests; 
• Reciprocal participation in Exhibitions and trade fairs as well as respective country week 
promotional events. 
• Exchange of both general and product specifi c trade missions both limited to business 
participation as well as at official delegation level. 
• Exchange of Market intelligence mission s/surveys for market information. EAC members WT/TPR/G/171 
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 • Encouragement of institutional cooperation such  as the Standards institutions, Chambers of 
Commerce and Industry, Customs Organizations, Research Institutions, Trade and Investment 
Promotion agencies among others. 
• Prompt and focused follow up of issues raised during bilateral meetings. 
X. NATIONAL EXPORT STRATEGY (NES) 
40. In 2003 the Ministry of Trade and Industry in collaboration with the private sector, other 
government agencies and the development partners developed the first NES which was subsequently 
approved by the cabinet in 2004. The need to stim ulate export growth was as a result of declining 
export growth in the years preceding the developmen t of the NES which is also emphasized in the 
ERS as key determinant for social economic develo pment. The objective of the NES is to improve 
export performance through improved national compe titiveness, value addition,  improved quality and 
reduction of the cost of production.  
41. The NES has identified ten priority sectors for development in the first phase of 
implementation. These sectors include horticulture , livestock and livestock products, fish and fish 
products, food and beverages, textile and clothing , commercial crafts, information communications 
technology, tourism and transport services. In addition six cross cutting issues including trade 
information, trade facilitation, export packaging, qua lity management, trade, finance and competency 
development have also been prioritized.  
42. During the implementation of this strategy the priv ate sector is expected to play a central role 
through the NES Implementation Action Plan that h as been developed by stakeholders. The Ministry 
is also in the process of implementing the Private Sector Development Strategy (PSDS) which underscores the need to spur economic growth through trade expansion. The PSDS therefore 
recognizes and supports the implementation of th e strategic objectives identified in the NES. 
XI. PRIVATE SECTOR DEVELOPMENT STRATEGY (PSDS) 
43. The government recognizes the important role of the private sector growth in contributing to 
the country's medium term objectives as outlined in  the ERS. Indeed the private sector accounts for 
80% of GDP and provides more than half of wage  employment. There are about 40,000 formal large 
and medium enterprises contributing 60% of the GDP and over 1.7 million micro and small 
enterprises mainly in the informal sector contributing 20% of GDP. 
44. The country offers one of the best favourable destinations for foreign and local investors in 
the region. The government is therefore undert aking measures aimed at further improving the 
business environment for existing and potential inv estors.  In this regard the government has 
developed the Private Sector Development Stra tegy whose objective is to create a conducive 
environment for private sector growth by alleviatin g major constraints and to enhance the growth and 
the competitiveness of the private sector, espec ially the micro-small and medium enterprises 
(MSMEs).  
45. In order to achieve the overall objective of th e PSDS, the following five specific goals have 
been developed:  
 Improving Kenya's business environment to enha nce confidence, long term planning and 
investment by the private sector and globally recognized country-investment rating. WT/TPR/G/171 Trade Policy Review 
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  Accelerate public sector institutional transformation to guarantee more efficient public 
institutions with proven track  record of service delivery. 
 Facilitate growth through greater trade expansi on of at least 20% annual growth in export 
trade by 2007. 
 Improving private sector productivity through research and adoption of modern and 
appropriate technology. 
 Entrepreneurship and indige nous enterprise development. 
46. The implementation framework of the PSDS sets out a coordinated framework for enhanced 
collaboration taking into cognizance the role of diffe rent actors. The private sector is earmarked to 
play an important role in the implementation pr ocess and will be part of both the coordinating and 
technical committees. Other important players in clude the development partners as well as 
collaborating ministries. 
 EAC members WT/TPR/G/171 
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 REPORT BY TANZANIA 
1. INTRODUCTION 
1. The United Republic of Tanzania, hereinafter re ferred to as Tanzania, constitutes of the union 
between the former Tanganyika and Zanzibar.  Ta nganyika gained its independence in 1961 while 
Zanzibar, comprising of the islands of Zanzibar and Pemba, gained independence in 1964, and the 
two nations united to form the union in 1964.  Th e union has a two-Government structure, comprising 
of the Union Government and the Government of  Zanzibar.  The mandate for defence/security, 
foreign and trade policies is explicitly placed under the Union Government. 
2. The economies of the two parts of the union ar e largely dependent on combined subsistence 
and commercial agriculture.  Subsistence agriculture  includes production of food crops that include 
grain staple foods and legumes, livestock herding a nd fisheries. Commercial agriculture is largely 
smallholder confined to production of agricultu ral commodities for the export market.  Economic 
reform initiatives focus on increasing commerciali zation of the food crops and non-traditional 
commodities exports as well as export of value adde d agricultural products and other non-traditional 
exports as well as increasing the contribution of th e services sectors and other natural resource based 
products such as minerals, fish and fish products. 
3. Tanzania is a Least Developed Country (LDC) and as such is obliged to undertake a trade 
policy review at least once every six years.  The first review was undertaken in 2000 and its main 
focus was on unfolding economic and trade policy reforms as part of measures to build a strong market economy and a private sector that will serve as the engine for export-led growth.  The current 
review, taking place under the aegis of the East Afri can Community, is the second one, and it seeks to 
build on the objectives and foundations of the first review.   
4. On the political arena, Tanzania has enjoyed de mocratic elections and change of Government 
over the past 45 years of its existence.  The four th successive change in Government led to the 
inauguration of the fourth phase Government in Jan uary 2006.  The current Government was elected 
on the premises of deepening socio-economic and political reforms with new zeal and vigour, 
reiterating commitment to liberalisation of trade a nd policies affecting business and investment.   
5. This chapter explains in brief the nature and thrust of the unfolding reforms and the envisaged 
impact on the primary goal of poverty reduction.  It outlines commitment to export-led growth with 
the goal of improving the standards of living.  
2. ECONOMIC ENVIRONMENT 
6. The economic diversification initiatives that have  bee implemented over the last two decades 
are beginning to bear fruit as the structure of the economy begins to change.  To get a better insight into the emerging structure and its dynamics, this section presents a brief overview of the overall 
economic performance in the recent past and emerging trends. 
Macro-economic Overview 
7. Persistent commitment to economic reforms is shifting the Tanzanian economy towards a 
steady higher rate of growth crucial for the reali zation of poverty reduction goals. A GDP growth rate 
of 6.7% in real terms was realized in 2004 compar ed to 5.7% in the preceding year.  Agriculture 
remains the backbone of the economy with 80% of  the population depending on the sector for their 
livelihood.   The sector accounts for 46% of GDP, a nd grew by 6% in 2004.  The resultant real per WT/TPR/G/171 Trade Policy Review 
Page 20 
 
 
 capita growth rate was 3.4% in 2004 compared to 3. 8% in 2003.  Policy orientation targets an average 
GDP growth rate of 8% in the medium to long term  as the minimum, necessary for the achievement of 
the goal of reducing poverty by 50% in line w ith the objectives of the Millennium Development 
Goals. 
8. Achievements in economic growth are attributab le to measures that have sustained core 
macro-economic fundamentals for almost 10 year s.  Monetary policy management, based on a 
liberalized exchange regime, is stable and predictabl e with low single-digit inflation rates registered at 
4.4% in 2003 compared to more than 30%, 10 year s ago.  Interest rates have also declined 
considerably from an average rate of almost 40% in the early 1990s to a relatively stable rate of 
approximately 15% in 2005. 
9. Fiscal indicators are improving. The Government  tax revenue ratio increased to 13.3% in 
2004 compared to 11.8% in 2001 due to successful c ontinuing reform of the tax regime based on the 
establishment of the Tanzania Revenue Authority and introduction of Value Added Tax (VAT). Value 
Added Tax has considerably reduced reliance on tari ff based revenue.  The Government is running a 
cash budget and development expe nditure which focuses on poverty reduction following the adoption 
of the National Growth Strategy and Poverty Reduction, NGSPR. 
10. Tanzania qualified for the Highly Indebted Poor  Countries (HIPC) initiative and is benefiting 
from substantial injection of new resources from de bt relief initiatives i.e. US$ 2.5 billion debt 
cancellation.  In addition a number of bilateral don ors, including UK, Bulgaria, India and Kuwait, 
have agreed to reduce debt servicing obligations.   Negotiations with other creditors are continuing 
and a national debt management strategy is under implementation. 
11. The country continued to experience strong political stability.  Measures to entrench good 
governance and tackle corruption are under way.  The investment climate is improving steadily, culminating in substantial increase in investment flows.  For instance, Foreign Direct Investment 
(FDI) increased from US$ 172 million in 1998 to US$ 260 million in 2004.  
12. The export sector has also shown improving pe rformance based on growth of non-traditional 
exports, particularly minerals, fish products a nd manufactured products.  The tourism sector has 
shown considerable improvement  over the past 10 years.  Involvement in regional trading 
arrangements and simplified tariff and customs procedures is leading to increased trade flows.  Exports of merchandise goods experienced a growth of 18% in 2004.  Imports are also increasing in 
line with the demands of rapid growth, especially in the mining and tourism services sectors. 
Sector Performance 
13. The leading economic sectors, in view of cont ribution to current economic performance and 
potential for future growth and employment gene ration are agriculture, livestock and fisheries, 
manufacturing, minerals, transit tr ade, tourism and construction.  
Agriculture, Livestock and Fisheries 
14. Agriculture is the mainstay of the Tanzanian economy, employing 80% of the population.  It 
is becoming increasingly dynamic as evident in a gr owth rate of 6% in 2004, compared to the 
objective of 8% by 2007 based on the implem entation of the agriculture sector development 
programme.  Some products, such as cotton, are gr owing considerably faster. The objective is to 
diversify further the export basket through buildi ng competitive advantages in new dynamic products 
and sectors in which Tanzania already has considerable comparative advantages. EAC members WT/TPR/G/171 
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 15. Evidence of a changing export basket is appare nt in the data on exports.  In 1998 55% of 
exports comprised of traditional crops.  By 2003 th e share of traditional exports had declined to 
21.4% resulting primarily from exports of gold and fi sh products.  There is also tremendous potential 
in the livestock sector which maintained steady grow th at 5% and the fishing sector which grew by 
6.9% in 2004.  
16. Agriculture is important for poverty reduction as most of the poor work in this sector.  
Research1 has shown that the agriculture multiplier in Tan zania is 3.  That is for every unit of extra 
output produced the total contribution to the local economy is 3 units.   
17. The rise of horticulture and floriculture in nor thern Tanzania has had a dramatic effect on the 
economy.  Exports of horticulture and floriculture products have been rising in recent years.  In 2004 
horticulture and floriculture expor ts totalled US$ 14.3m and accounted  for 1% of Tanzania's total 
exports.  Expansion in the production has seen the large estates providing market linkages to the EU for smallholder producers.  The result has been th e development of local internationally competitive 
farms that meet EUREPGAP standards.   
18. The success of the fish industry, based on fresh -water fish resources in Lake Victoria, has 
resulted in significant economic and social bene fits.  Between 1990 and 2003 fish exports rose 
twenty-fold.  Ninety-nine per cent (99%) of fish ca ught are by artisan fishermen (estimated to be 
150,000 people). There is a large potential for replic ating the process in the marine waters along a 
coastline of more than 800 kilometres. 
19. Finally, it is ought to be noted that this success has come from the efforts of the private sector.  
The Tanzanian government has a number of programmes
2 in place to support farmers.  Liberalization 
policies have been  and continue to be vital,  although there is no large scale systematic support 
provided for farmers.  Tanzania can benefit from liber alization of agricultural markets that is likely to 
emerge from successful conclusion of the multilatera l trade negotiations under the Doha Development 
Agenda.   
Manufacturing 
20. The manufacturing sector has shown signs of steady recovery and growth over the recent past.  
The sector grew by a factor of 8.3% in 2003 and 20 04.  During this period, its contribution to GDP 
has also shown a small increasing trend.  Nevert heless, the proportional contribution to GDP has 
remained at the average rate of 8% for more than 20 years, highlighting limited successes in 
industrialization policies.  It is worthy noting that the threat of negative growth and deindustrialization 
experienced in the 1980s has been reversed. 
21. Economic measures in the form of privatizati on and restructuring, implemented through the 
1990s have started bearing fruit as old refurbished in dustries come on stream again and new ones take 
off.  Stabilization of macro-economic variables and the implementation of new programmes designed 
to improve the investment climate, including the en trenchment of property rights, legal and regulatory 
                                                      
1 World Bank DTIS 2005. 
2 The input trust fund has been established and is a ssisting with the provision of fertilizers and to some 
extent machinery, in 2001 the national irrigation master plan was implemented which has rehabilitated irrigation channels and provided farmers with training, In 2003 the participatory agriculture development and 
empowerment project was started and is running small projects in 192 villages, also in 2003 the agriculture 
sector programme support scheme was introduced to assist high living standards for the rural poor.  WT/TPR/G/171 Trade Policy Review 
Page 22 
 
 
 reforms, improvement in commercial justice deliver y are beginning to send a message of a supportive 
investment climate that is critical for the channelling of new investments into agriculture and industry.   
22. Efficiency gains due to economic reforms have  contributed to increased production.  Key 
areas of growth include processed foods, steel, timber and in the construction sector.  The 
implementation of SME Developmen t Policy launched in 2003 has encouraged the establishment of a 
number of small manufacturing firms that ha ve proven a major development instrument. 
Mining and Minerals 
23. The mining sector has shown the most dramatic results of successful transformation and 
contribution to exports and growth over the past ten years.  The sector grew by the high rates of 18% 
in 2003 and 15.6% in 2004.  Its contribution to exports was equally phenomenal at 40% of 
merchandise exports in 2004.  However, its propor tional contribution to GDP remains modest at a 
mere 3% on the basis of data for 2004.  Gold has been central to this  performance with other 
contributions coming from diamonds, gemstones and coal. 
24. Despite this spectacular performance,  the sector has a limited effect on social indicators.  It is 
largely capital intensive, with limited impact on employment generation and income distribution.  The 
gemstone mining sector experiences a substantial proportion of production being traded through 
unofficial channels.  The Government is making c oncerted efforts to curb these leakages to enhance 
earnings inside Tanzania.  
25. For instance, available information shows that  the gemstone mining industry employs more 
than 700,000 people and that these figures could increase dramatically if the trade can be formalized 
and more value adding activities undertaken in the c ountry.  This, however, w ould require substantial 
investment in infrastructure and facilities for devel oping the skills that go into gemmology, gemstone 
cutting and polishing. 
Transit Trade  
26. Tanzania has strong historical bonds with the countries of the Great Lakes:  Burundi, Congo 
DRC, Malawi, Rwanda, Uganda a nd Zambia.  Dar es Salaam port remains the primary gateway for 
these countries.  Port reforms, including the successful restructuring of the Container Terminal 
through a concession, have led more rapid through-pu t of goods on transit. Container dwell-time has 
been reduced tremendously.  Initiatives to improve th e transportation system comprise of manifold 
measures that include the improvement of existing infrastructure and expansion of the road network 
that links highly productive agricultural regions th at have the potential to serve as a regional bread-
basket.   
27. The Ministry of Works is undertaking a system of improvements to key arterial routes in the 
country.  The Southern Highlands and neighbouring countries in this direction i.e. Zambia and 
Malawi are already linked by a high quality cross country all weather highway.  Northern Tanzania 
including the regions of Arusha, Kilimanjaro and Ta nga are also interconnected with the main port in 
Dar es Salaam and the secondary port in Tanga thro ugh an all-weather highway.  Other infrastructure 
development programmes seek to link the North-West ern part, including regions rich in mineral 
deposits, tourism attractions and ag ricultural production with the ma in port in Dar es Salaam.  The 
country has also adopted the Spatial Development In itiative (SDI) with the Central Corridor that links 
the port of Dar es Salaam with Western and Nort h-Western Tanzania as well as Rwanda, Burundi and 
Uganda being accorded top priority.  Other SD I programmes include the TAZARA corridor which EAC members WT/TPR/G/171 
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 links Tanzania with Zambia and Congo DRC., a nd the Mtwara Corridor which brings Mozambique, 
Malawi and Tanzania together.   
28. Twenty per cent (20%) of transit trade is moved through the country by rail.  This is with two 
train operators.  The TRC serves Western and Nort h-Western Tanzania as well as Rwanda, Burundi, 
Uganda and Eastern DRC through the Central Corri dor railway line, while the TAZARA railroad 
serves the Southern regions of Tanzania as we ll as Zambia and Malawi through the TAZARA 
corridor network. It is estimated that more than  50% of the population lives in regions that have 
tremendous unexploited poten tial in agriculture, tourism, mining and the forestry industry and the SDI 
provides an opportunity for tapping these resources as the basis of growth through investment and 
trade. 
Tourism 
29. Tanzania is endowed with a unique heritage of the world's fauna and flora that is preserved in 
a wide range of national parks and game reserve s.  The most spectacular include the Serengeti 
National Park, the Ngorongoro Crater and Mount K ilimanjaro National Park.  Tanzania features the 
only national park that combines beach tourism with  game viewing.  This rich variety of tourism 
attractions include the possibility of climbing Afri ca's tallest mountain and a wide range of activities 
based on coastal and marine tourism. 
30. Major reforms based on unilateral liberalization of the tourism and hosp itality industry, above 
and beyond what has been formally declared under the schedules of specific commitments under the 
WTO's General Agreement on Trade in Services has brought about dramatic growth in the sector.  
The tourism sector has been the fastest growing sector over the past ten years. 
31. The hotel and restaurant sector accounts for 16%  of GDP and is growing at 4% per annum.  
Between 1993 and 2003, tourism acc ounted for 30% of total services and merchandise exports.   The 
sector currently provides about 200,000 jobs.  The rate of growth of direct and indirect job creation in 
this sector stands at the average of 11% per annum. 
32. The National Tourism Policy3 is based on a strategy that ta rgets the low volume high value 
tourism segment, ostensibly to maximize earnings while sustaining the resource base.  The policy also 
provides for benefit sharing through corporate social  responsibility that targets the inclusion of local 
communities in sharing of earnings.  As much as  44% of inputs are currently sourced from the 
domestic economy compared to only 26% for other sect ors.  Tanzania is also implementing a National 
Tourist Development Programme (2006-2015) whic h seeks to encourage a development process 
oriented towards increasing the number of visitors  while preserving the environment, raising job 
creation and contributing to overa ll poverty reduction.  The longer term objective is to double the 
current number of approximately 600,000 visitors per annum over the coming ten years based on 
policies that aim at the improvement and increase in the number and quality of hotel accommodation and ground services including transportation.   
3.  POLICY OBJECTIVES AND STRUCTURAL REFORMS 
33. Tanzania's over-riding policy goal is economic transformation based on a sustainable high 
rate of growth, at least 8% of GDP growth, as the primary instrument for achieving the national 
objective of poverty eradication and building an indu strializing economy by year 2025.  This process 
started with the implementation of the Structural  Adjustment Programmes in 1986.  Since then, 
                                                     
 
3 Initiated in 1991 and reformed in 1999. WT/TPR/G/171 Trade Policy Review 
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 implementation has been extended to include public service reforms and institutional capacity 
building, agricultural sector marketing reforms, dives titure of state owned enterprises, financial sector 
reforms as well as legal sector reforms.  The proces s is now targeting the fundamentals of private 
sector development through the establishment of a su itable investment climate and building the core 
competencies for the competitiveness of the domestic private sector through raising productivity and 
quality.  This section presents a summary of the in itiatives and achievements made in this area since 
the first Trade Policy Review which was undertaken in year 2000. 
Tanzania's Policy Objectives 
34. The primary goal of the policy agenda remains that of transformation and graduation from the 
Least Developed Countries category.  The Nati onal Development Vision 2025 envisions the following 
features or objectives underpinning successful transformation4:  
• High quality livelihood; 
• Peace, stability and unity;  
• Good governance;   
• A well educated and learning society; and  
• A competitive economy capable of producing sustainable growth and shared benefits.  
35. These objectives are similar to but more ambitious than the millennium development goals.  
They emphasize the desire to eliminate abject poverty by 2025, full gender and race equality, primary health care for all, universal primary education, universal reproductive heath care, universal access to 
clean water,  as well as ambitious political, governance a nd economic targets.  It is estimated that to 
achieve this the economy has to grow by  a minimum of 8% of GDP, a target that is already within 
conceptual sight.  
36. Tanzania's economic goals are equally ambiti ous.  The Government has adopted and is 
implementing a Mini-Tiger Plan, based on the Chinese growth model that is seen as the instrument to 
transform Tanzania into a semi-i ndustrialized economy with a GDP per capita of US$ 2,000 by 2025. 
This goal will be achieved by focusing on devel opment of strategic industries, resource-based 
activities such as manufacturing and mining, and en couraging export oriented investment.  The 
primary instruments include the Special Economic Z one and the Export Processing Zone concepts.   
37. In addition, Tanzania is implementing its sec ond Poverty Reduction Strategy cycle, known as 
the National Growth and Poverty Reduction Strategy (NGPRS). The NGPRS targets three areas:  
(i) growth and reduction of income poverty;  
(ii) improved quality of life and social well-being; and (iii) good governance and accountability.    
                                                     
 
4 See http://www.tanzania.go.tz/vision.htm for details. EAC members WT/TPR/G/171 
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 Legal and Regulatory Reforms 
38. Tanzania is implementing fundamental legal sector reforms through two major programmes:  
the Legal Sector Reform Programme (LSRP) and the programme for Business Environment 
Strengthening for Tanzania (BEST).   
39. The main goal of the Legal Sector Reform Pr ogramme is the maintenance of law and order 
through dispensation of justice for all. The LSRP is a long-term programme whose realization will 
take time and considerable resources that are difficu lt to mobilize in the short and medium terms.  To 
address issues of major concern the programme ha s adopted a two-pronged approach involving the 
implementation of a “Quick Win Version” who se implementation is currently under way and the 
design of a Medium Term Programme covering the span of three years.  Reforms are taking place in 
the judiciary, the police, i.e. prosecution system. 
40. The approach to reforms for efficient and expe ditious delivery of Commercial Justice is under 
implementation as a component of the BEST Progr amme, which comprises  five components:  
Achieving Better Regulation;  Improving Commer cial Dispute Resolution;  Strengthening the 
Tanzania Investment Centre;  Ch anging the Culture of Government; and  Empowering Private Sector 
Advocacy.   
41. Priority activities include extending the servi ces of the Commercial Court to other high 
growth regions by establishing branches in Mwan za and Arusha and reforming the Civil Procedure 
Code as an instrument of expediting cases in the ma gistrate courts.  Other measures include increasing 
recourse to alternative dispute resolution mechanis m.  The overall goal is to ensure expeditious 
resolution of commercial conflicts and effective enforcement of contracts. 
42. Primary instruments for the realization of this  goal include the establis hment of a Law School 
to increase the number of qualified advocates to match with the demands of a growing population and expanding economy.  Another objective is the expediti ous delivery of justice as a basic human right 
through a range of instruments that include separati on of the functions of investigation from that of 
prosecution which are currently v ested in the Police Force.   
43. Other priority measures under the Better Regulati on component include:  improvements in the 
areas of business registration including the streamli ning of the Business Registration and Licensing 
Agency (BRELA); land law reforms; commercia l law and justice and labour law reforms. 
Privatisation 
44. The Government of Tanzania embarked on an extensive privatization programme in 1992 as 
part of the Structural Adjustment Programme initia ted in 1986. The objective of privatization was to 
re-orientate the Government's role and economic function away from direct involvement in productive 
and commercial activities and to encourage the grow th and development of the private sector as the 
engine of economic growth.  
45. The divestiture programme has been highl y successful.  Up to March 2006 a total of 
357 SOEs out of 394 had been privatized and most  of them have become more competitive and are 
contributing positively to employment and income gene ration.  Divested firms now employ more than 
45,000 people and are paying taxes.  This compares well with the situation before privatization where 
a good number of them depended on Government subsidy for survival.  The restructuring and divestiture programme is now focusing on a few remaining public enterprises, mostly public utility WT/TPR/G/171 Trade Policy Review 
Page 26 
 
 
 companies in the energy and transport sectors.  This is in line with the Government's solid 
commitment to economic liberalization measures.  
Private Sector Development 
46. Apart from the divestiture of SOEs other measures aiming at private sector development 
include programmes for building initiatives and co re competencies for co mpetitiveness in select 
priority subsectors and/or products based on the con cepts of cluster development.  There are also 
initiatives targeting further improvements in the invest ment climate, and easier access to skills and to 
finance.  A World Bank financed “Micro, Sma ll and Medium Enterprises Development (MSMEs) 
Project, has been launched in response to commi tment to effective implementation of an SME 
Development Policy adopted in 2003.  Tanzania is also implementing the Integrated Framework for 
Trade and the requisite Diagnostic Trade Integration Study has been undertaken in line with initiatives 
to address the concerns of marginalization of L east Developed Countries (LDCs) in the Multilateral 
Trading System.  The DTIS is seen as the ma jor programme for implementing the National Trade 
Policy also adopted in 2003.  Further, the govern ment has enacted the Special Economic Zone Act 
and implementation is under way.  The first special  economic zone is already under construction and 
is expected to come on stream by April 2007.  Th e expectation is that it will create a total of 
20,000 jobs. 
Economic Infrastructure 
47. Modernization and expansion of economic infr astructure is a key factor in raising the 
competitive platform upon which firms can create co mpetitive advantages in the global market.  
Ongoing initiatives focus on improvement of transp ortation and communication systems as well as 
access to reliable water, energy and power supplies at affordable rates. 
Transport 
48. Ocean freight remains the most cost-competitive route for international trade. Tanzania has 
three international ports linking the country with the rest of the world:  Dar es Salaam, Tanga and 
Mtwara.   Alternatives routes include air transportatio n for which there are four international airports 
at Dar es Salaam, Kilimanjaro, Za nzibar and Mwanza.  A fifth one is under construction in Mbeya.  
There are several other small airports and air strips served by regular flights and charter flights. 
49. Nevertheless, seventy five per cent of all cargo is transported by road.  The government has 
substantially increased budgetary allocation for road transportation over the past five years.  For 
instance, the budget for road improvement in 2005/ 6 is US$ 317 million.  Moreover initiatives are 
under way to embark on public private partnerships  in infrastructure development as a tool of 
expediting investment in this area.  As Tanzania forges closer links with SADC and the EAC, regional 
rules on road transport are being harmonised on the basis of regional standards.  
50. Apart from road transport, Tanzania has a fair ly extensive rail network that reaches out to 
14 out of 21 regions in mainland Tanzania. There are three main lines, from Dar es Salaam to Tabora, 
where the line splits and goes on to Kigoma in th e west and Mwanza on Lake Victoria. A second line 
goes down through Mbeya and links with the rail ne twork in Zambia. The third links Dar es Salaam 
with Tanga and Moshi / Arusha to the north. Much of  the transit trade to Burundi and Uganda is by 
rail.  Freight on most lines has remained constant with the exception of the line to Zambia which 
witnessed 47% increase in tones of freight between 1999 and 2003.   EAC members WT/TPR/G/171 
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 51. Movement of persons within the country is f ast and affordable through reliable bus services 
network.  All major destinations can be reached by bus in less than a day.  There are bus services 
linking the three East African partner states. 
Ports and Customs  
52. The Economic Reform Programme incorpor ates measures for the modernization of 
Dar es Salaam port and the other ports.  The concession on the Container Terminal has raised efficiency in container through-put, and dwell-times to  internationally competitive levels in spite of 
rapid expansion of economic activity .  In 2005, the terminal handled more than 300,000 containers.  
Ship turn around time has been reduced from 4.1 days  in year 2000 to 2 days at present, while waiting 
time has been reduced from 0.5 days to 0.2 days over the same duration. Measures for concessioning 
the bulk handling terminal and the grain handling facilities have been initiated. 
53. Tanzania is implementing a major Tax Admini stration Programme that includes extensive 
customs reforms.  The objectives of these reforms include the transformation of customs into a 
modern customer-friendly agency offering fast  and efficient services to promote business 
competitiveness. The reforms have included comput erization of operations.  The UNCTAD supported 
ASYCUDA has been upgraded to  ASYCUDA++.  The underlying strategy comprises an Import 
Facilitation Strategy introducing major reforms in six areas that would transform the Tanzania 
Revenue Authority into an efficient agency. 
i. Shifting from pre-shipment inspection to destination inspection, accomplished in 2005; 
ii. Pre-arrival electronic reporting arrangements, a process that is already under way but is not 
 yet fully operational; 
iii. One-stop pre-arrival checking arrangement s that became operational in early 2006; 
iv. Streamlined examination arrangeme nts became operational in early 2006; 
v. Introduction of Electronic Data Transfer (EDI); and vi. One Stop Payment and Clearance arrangements in place by mid 2006. 
Water and Energy  
54. The Government is implementing a National Wa ter Policy introduced in 2002.  The objective 
of the policy is to attract investments into the wa ter sector.  Measures to rehabilitate and expand city 
and town water supply networks ar e well under way.  Seventy four per cent of urban population now 
have access to clean drinking water.  There is al so significant improvement in sewerage systems.  
Rural water supply is being impr oved through a combination of government investment initiatives in 
collaboration with rural communities and NGOs. 
55. Measures to extend the national electricity grid to the Western geographical regions were 
completed in 2004.   The main sources of electr icity remain a combination of hydro and thermal 
generation.  Generating capacity has been increased  substantially and there are initiatives to lower 
power tariff rates to more competitive levels in th e regional context.  Expansion of supply is being 
accomplished from a variety of national and interna tional sources including:  linkage into the SADC 
power pool through interconnection with the Zamb ian grid and expansion of domestic generation WT/TPR/G/171 Trade Policy Review 
Page 28 
 
 
 capacity through thermal production from natural gas and coal.  Other sources that are increasingly 
becoming popular especially in rural areas include solar and bio-fuel. 
Communication 
56. Tanzania has benefited tremendously from the unfolding communication revolution due to the 
proliferation of mobile phones.  Tanzania has f our companies providing mobile connections.  The 
competition is bringing down prices.  Almost 2 million Tanzanians had mobiles by 2004.  Fast internet connections are found all over the count ry, including in remote urban centres, making 
business and private communication instant.  There is an increasing number of postal services rendered by International delivery firms such as DHL and domestic firms.  The Government has 
established the Tanzania Communication Regulatory Au thority to regulate and coordinate the sector.  
Finance 
57. The first generation of financial sector reform s focused on the restructuring and privatization 
of state owned banks and implementation of measures to raise efficiency as well as establishment of new financial institutions.  Today, there is a tota l of 26 banks in Tanzania.  Success has made it 
possible for the current shift of policy emphasis to focus on financial sector deepening through 
introduction of a wider range of instruments to ensure  access to finance for various interest groups in 
society.  Particular emphasis is on access to finance for Small and Medium enterprises which are excluded from micro-financing schemes and are not speci fically targeted by most of the larger banks. 
58. Success in interest liberalization policies has redu ced the costs of borrowing to an average of 
15% for the average borrower and as little as 11% for va lued customers (reflecting the lower levels of 
risk).  There is a continuing pattern of interest rat es decline.  Given the inflation rate of around 4% the 
real cost of borrowing is reasonable.   
59. The effect of the decline in in terest rates and proliferation of  financial institutions has had a 
positive impact on the private sect or's access to commercial credit.  Financial sector lending to the 
private sector increased by a factor of 36.6% between 2002/03 and 2003/04.  
Property Rights and Security 
60. A good investment climate depends on the entrenchment of property rights as well as a 
peaceful and secure socio-political environment.  The nation is endowed with a unique sense of 
national unity underlying the prevailing political tranquillity, peace and social stability.  The Constitution provides for national elections once ever y five years for an Executive President and a 
Parliamentary system under a democratic multiparty  system.  Multiparty democracy was introduced 
during elections held in 1995  and since then, the incumbent Preside nt can rule for a maximum of only 
two terms of five years each.  In the Transparen cy International survey on corruption published in 
2005 Tanzania faired much better than its neighbours; indeed it had the highest score in East Africa.  
Crime in Tanzania is lower than in many parts of  the region and with normal sensible precautions, can 
usually be avoided.  The Govern ment is also implementing a majo r programme for the formalization 
of property rights based on the Hernando de Soto  model that has been so successful in Peru. 
The Labour Force 
61. Building a pool of trainable manpower and sk illed labour force is critical to initiatives for 
private sector development and growth. The establishm ent of an adequate social infrastructure to EAC members WT/TPR/G/171 
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 ensure a healthy and educated population is critical  to building the skilled labour force that must 
underpin a successful knowledge-based economy. 
62. Primary healthcare to the poorest is free wh ile, the basic policy for access to health-care 
involves cost-sharing. There are a number of ex cellent private healthcare facilities providing 
international standards healthcare.  The health th reat from HIV/AIDS, TB, malaria and other endemic 
tropical diseases is being addressed through a combina tion of preventive measures and sensitization of 
the vulnerable.  
63. With respect to the education sector, the Prim ary Education Development Plan (PEDP) whose 
objective is universal primary education is now in  its third year of implementation.  Primary 
enrolment is already quite high, with a net enro lment ratio averaging 90.5% in 2004 of whom 49.9% 
of those enrolled being girls, providing ampl e evidence of gender balanced policies.   
64. Efforts to raise the number transition ratio fro m primary to secondary schools already show 
evidence of success as 20% of those who complete  primary school today continue to secondary 
school.  The government is committed to increase this ra tio further.  The ratio of enrolment in tertiary 
education, i.e. technical and higher education is al so growing fairly rapidly.  In 2004, a total of 
26,475 students enrolled in government universit ies while the number enrolled in government 
technical training institutions was 2,292 students.  In  addition, there are 14 private tertiary education 
centres.  The impact of rising education levels is yet to bear fruit in terms of higher investment in 
employment creating areas and unemployment levels  are high, particularly amongst the young.   
4. TRADE POLICY 
65. Trade policy in Tanzania is primarily mandated to the Union Government. International trade 
agreements responding to development at the regional level a nd in the Multilateral Trading System 
are, therefore, binding on the Union as well as the Zanzibar governments.  However, Zanzibar has a 
large degree of autonomy in deciding on specific export promotion and development measures that do 
not impinge on trade policy obligations resulting fro m international agreements.  For instance, the 
Zanzibar government has published a policy document that focuses on export development and other 
issues pertaining to trade facilitation.  The following is a review of national trade policy objectives 
and instruments, implementation measures and the status of trade-related assistance. 
The National Trade Policy 
66. The first market oriented National Trade Policy5 was adopted by the Government in 2003. 
The policy document considers all aspects of trade po licies that play a role in the process of trade 
development and growth.  The over-ri ding concern and theme of the policy is to stimulate a process of 
export led growth based on structural transformati on and production as well as market diversification.  
Product development focuses on raising the level of competencies to achieve competitive levels of 
productivity and quality while bearing in mind the importance of inclusiveness of the poor and the 
disadvantaged in mainstream economic activity.  Th e approach adopted is that of strategic trade 
liberalization combined with export developmen t based on implementation of dynamic sectoral 
complimentary policies.  The policy also emphasi zes the importance of proactive engagement in 
multilateral and bilateral trade negotiations. 
                                                      
5 MITM, (2003) National trade Policy: Trade Policy fo r a competitive Economy and export led growth.   WT/TPR/G/171 Trade Policy Review 
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 Export policies 
67. Export development is the primary goal of Tan zania's Trade Policy.  Extensive reforms over 
the past 20 years have focused on the systematic rem oval of restrictions.  The Board of External Trade 
(BET) and the Ministry of Industry, Trade and Ma rketing are the key public institutions spear-heading 
the export-development, promotion and facilitation pr ocess.  The Tanzania Bureau of Standards is 
building capacity for conformity to internati onal standards through accredited laboratories on SPS 
requirements and other quality standards.  BET a dvises and supports exporters in responding to, and 
meeting product and market development issues in line with objectives for economic diversification 
and export expansion. 
68. The goal of export-led economic growth requir es the adoption of dynamic instruments to 
build the culture of exporting amongst emerging SMEs  as well as attracting FDI into export-oriented 
manufacturing sectors.  The Export Processing Zone  (EPZs) and Special Economic Zones are the 
primary policy instruments for the realization of export development objectives. 
69. Key features of the EPZ programme include a corporate tax rate of 0% for 10 years and 
exemptions from withholding taxes,  local taxes as well as exempti on from pre-shipment inspection.  
Sectors where licenses to operate within the EPZ ar e particularly encouraged are: Agro-processing; 
Textiles and Garments; Fish processing; Leather and Leather goods; Lapidary  industry and mineral 
beneficiation; Wood and wood products; Electrical  appliances and electronics; and Information & 
Communication Technology.  
Import policies 
70. As a WTO member, Tanzania has bound many (755) of its tariff lines at 120%.  However, the 
actual applied rates are considerably lower.  Tan zania, together with Kenya and Uganda are founding 
members of the East African Customs Union, whic h entered into force in January 2005 and will 
become fully effective within a time span of five years.  Its primary impact is considerable 
simplification and harmonization of import polici es and tariffs as the community moves steadily 
towards a common external tariff. 
71. The internal tariff structure comprises of three band structure:  0% tariff for raw materials, 
10% for intermediate goods and 25% for finished goods .  All tariffs are ad valorem and do not vary 
by season or by quantity imported.  Each country is however permitted a few products for which their 
tariff rate differs from the East African rates.  The region has selected a few sensitive products for 
which tariff rates are currently higher.   Furthermor e there is provision for asymmetry in application 
over the transition period of five years to take in to account the different le vels of development among 
the three founding partner states.  2006 is year two of  implementation.  Implementation has resulted in 
a further reduction of the average tariff rate in Tanzan ia to just 12.3%.   In addition to the lowering 
and simplification of tariffs, all quantitative rest rictions, suspended duties and minimum dutiable 
values have also been removed.  
Multilateral Trading Arrangements 
72. Tanzania was party to the GATT, is a founding member of the WTO and plays an active role 
in ongoing negotiations and implementing the obligations arising thereof.   EAC members WT/TPR/G/171 
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 The Agreement on Agriculture 
73. As an LDC, Tanzania is exempt from tari ff reduction commitments and is eligible for 
concessions made to this group for capacity build ing necessary for the country to participate 
effectively in the multilateral trading system.  Al l agricultural tariffs are currently bound at 120%.  
Average agricultural tariffs consequent to tariff ha rmonization due to membership in the EAC is an 
average of 22%.  Tanzania provides very little dom estic support and there are no export subsidies and 
has not yet submitted notification of intent to do so.  
Non-Agricultural Market Access 
74. Tanzania, based on the concessions granted to LDCs, has bound 1.5% of her tariff lines and 
initiatives to increase this coverage are under way. This will focus on adding value to agricultural 
produce and natural resources in the forestry and mineral sectors.  The EAC customs union and the 
obligation to implement the common external tariff ha ve the de facto effect of binding tariffs to an 
average of about 10.5%.  In-spite of its LDC status , there is limited use of domestic support measures 
in the form of subsidies.   
Services 
75. Tanzania submitted an initial schedule of commitm ent relating to the tourism services sector.  
A number of requests have been received from major trading partners and there is participation in a joint LDCs request on Mode IV services to trad ing partners.  There are initiatives to expand the 
schedule of commitments in line with national po licy objectives to further open up the economy and 
attract FDI in realization of the potential role of  the services schedules of commitments in this 
context.  It is also the intention to improve the delivery of services that are critical for improved 
competitiveness in the productive sector s as an instrument of raising productivity and reducing costs. 
TRIPS 
76. Much work has been undertaken on TRIPS. A re view of the Intellectual Property legislation 
conducted in 2005 shows Tanzania's patent le gislation has elements exceeding the TRIPS 
requirements or in effect is TRIPS+.  There is a need for concerted efforts in building capacity for 
effective administration and enforcement, including the raising of awareness on patents and the rights 
and obligations of producers based on the patent  system that is supported by the WTO TRIPS 
agreement.  Priority issues include making eff ective use of the TRIPS flexibilities on access to 
affordable essential medicines.  The country also  has the potential of benefiting from negotiations on 
geographical indications should these lead to an agreement. 
Trade Related Assistance 
77. Tanzania is eligible for market access opport unities resulting from multilateral and regional 
trading arrangements as well as the technical and fi nancial support that results from the development 
track of the trade agenda. 
Trade Preferences 
78. The larger proportion of Tanzania's exports  faces no customs duties, either because the 
products exported do not incur tariffs or because of pr eferences.  In 2003, 82.7% of Tanzania's exports 
went to OECD countries, two thirds of which faced no tariffs. WT/TPR/G/171 Trade Policy Review 
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 79. OECD countries provide significant preferences to Tanzania. Key markets are the EU (GSP, 
Cotonou, EBA) USA, (GSP and AGOA) and Japan (G SP).  In 2003 Tanzania exported US$ 465.3m 
duty free to the EU, US$ 13.8m to the US and US $ 92.4m to Japan.  These exports constitute about 
50% of total exports.  For this reason pref erence erosion is a matter of concern. 
80. Virtually, all exports to Japan, were eligible  to preferential treatment  Uptake on EU 
preferences is 78% compared to just 67% in the USA case. For example, Tanzania does not have the 
capacity to produce manufactured goods for export without imported inputs.  The ratio of imported inputs reduces the potential for benefiting from preferen tial markets due to rigorous rules of origin. 
Technical Assistance 
81. Tanzania is the recipient of substantial b ilateral multilateral support for trade development 
initiatives and measures.  Multilateral interventi on measures include those falling under the JITAP 
Programme and the Integrated  Framework.  Bilateral  
82. Programmes include a DANIDA supported Business Sector Programme Support Phase II.  
There are initiatives for the adoption of a sector-w ide approach programming for trade development 
intervention under the umbrella of implementing the recommendations of the Diagnostic Trade 
Integration Study (DTIS) for Tanzania.  The DT IS study was undertaken in 2005 and a validation 
workshop held in November, 2005.  Current effort s focus on initiating implementation.  The DTIS 
provides the core recommendations for programmes to  address supply side constraints that range from 
capacity for the policy process, infrastructure deve lopment as well as measures for stimulating private 
sector development. 
5.  CONCLUSION 
83. Tanzania is a fast growing, politically and ec onomically stable country  with abundant natural 
resources. The strategic movement of all economic a nd social policies is oriented towards deepening 
liberalization reforms subject to putting in place th e optimal regulatory framework.  The private sector 
is being developed as the engine of growth to  take advantage of market access opportunities and 
capacity building initiatives emerging from the interna tional arena.  There is determination to build on 
these opportunities to transform the economy and the lives of the people in line with the goals of 
National Development Vision 2025.  Above all, th is determination translates into a degree of 
diligence and commitment in implementing trade polic y and complimentary policies that are bound to 
lead to success. 
 EAC members WT/TPR/G/171 
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 REPORT BY UGANDA 
1.0 INTRODUCTION 
1. The second Trade Policy Review for Uganda was conducted in 1995 and, since then, Uganda 
has continued to implement its policy of liberalizati on. This is being done w ithin the overall strategic 
framework of enhancing economic growth and struct ural transformation. Within this framework, the 
private sector plays a lead role as the engine of  growth while government supports the process by 
providing an enabling environment. Economic growth  and structural transformation are prerequisites 
for poverty eradication to be achieved through st rategic areas with high growth potential. The 
strategic areas must have demonstrated compar ative advantages or the potential to, through 
diversification of the agriculture sector in particul ar, and the economy in general. Value addition is an 
important factor but must be complemented by increasing market share for manufactured and agro-industrial products. 
2. For more than ten years, Uganda has been regist ering high growth rates. These rates must be 
sustained through continued consis tent economic transformation. In this regard, a number of existing 
weaknesses, many of which have been identifie d under the Medium Term Competitiveness Strategy 
for Private Sector (MTCS), must be addressed.  
3. The MTCS was  approved in 2000 as a five year government policy for developing the 
Private Sector. It outlines strategies for creati ng a favourable environment for increased private 
investment and savings, and for removing constrai nts that impede the competitiveness of Uganda's 
private sector. 
4. Priority actions in the MTCS include: (i) expa nsion of infrastructure and utilities, to address 
the high costs of production, improve access to mark ets and the quality of services; (ii) strengthening 
the financial sector and improving access to financial services; (iii) reforming commercial justice; 
(iv) improving the efficiency and effectiveness of government institu tions and the business 
environment for small and medium enterprises; (v) addressing human capital development; and (vi) emoving impediments to export sector growth. The decline in investment and growth at the end of the 1990s was indicative of a slow down in the real GDP growth rate, partly due to drought and the 
deterioration in terms of trade. This demonstrat es the high level of vulnerability of the economy to 
both internal and external shocks. 
5. Uganda is fully committed to the attainment  of the Millennium Development Goals, in 
particular the poverty reduction target of 10% of th e population by 2017. In order to meet this target, 
our economy must grow at an average rate of 7% or above. Therefore higher rates of both foreign and 
domestic private investments will be needed. 
2.0  ECONOMIC OUTLOOK 
2.1
  U GANDAN ECONOMIC PERFORMANCE  
6. The central objectives of Uganda's macroeconomic  management are to control inflation and 
maintain supportive economic conditions for privat e sector-led growth.  These include a competitive 
and stable exchange rate as well  as low interest rates for exporte rs and private sector investors. 
Government has therefore set out explicit targ ets for macroeconomic management, including the 
maintenance of underlying inflation at less than 6.0% and the reduction of the fiscal deficit to 6.5% by 
fiscal year 2009/10.  WT/TPR/G/171 Trade Policy Review 
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 7. There have been deliberate Government effo rts to develop a sound economy, which have 
registered a number of positive results.  The econom y has expanded from 4.7% in 2002/03, to 5.3 % 
in 2005/06. The growth is largely attributable to  developments in services and industry. Specific 
achievements include real GDP growth rate averag ing 5% per annum, per cap ita GDP growth of 20%, 
underlying inflation contained within an average of 4.0%. In addition, there has been a reduction in 
overall budget deficit by 2% and the  NPV of debt stock-to-exports ratio also reduced by 6% while 
total private sector credit increased to almost 2% of GDP. By the end of June 2005, international reserves stood at 6.5 months of imports of goods and non-factor services. Notwithstanding these 
achievements, the economy experienced challenges in the form of a declining trend in  agricultural 
output, volatile headline inflation and a high population growth  rate of 3.3%. 
2.2 O
VERALL GDP  GROWTH  
8. Growth in real GDP at market prices, improved from 4.7% in 2002/03 to  5.9% in the 2003/04 
fiscal year, but declined marginally to 5.8% in  2004/05 and 5.3% during the 2005/06 fiscal year. The 
decline can largely be attributed to domestic factor s: the prolonged drought conditions in most parts of 
the country, which affected agricultural output and mo re recently the effect of the energy shortages on 
industrial production. Furthermore, world prices of  Uganda's main commodity exports, especially the 
low prices for cotton and coffee among other commodity prices, continue to impact significantly on 
the domestic economy. The energy crisis and the high and volatile oil prices in the world resulted in a 
slow down of industrial production, which grew at only 4.5% in 2005/06 as compared to 10.8% in 2004/05. Growth in agricultural production also slowed to 0.4%, in the same period. This growth trend is reflected in Table 1:  
Table-1  
Annual Real GDP Growth Rates by Sect or and Major Activity (% per FY)  
Real GDP Growth 2001/02 2002/03 2003/04 2004/05 2005/06 
Agriculture 3.9 2.3 0.8 1.5 0.4 
  o/w Food crops (monetary) 5.7 3.7 1.7 1.7 0.9 
  o/w Cash crops 7.4 4.6 0.3 4.2 -7.4 
Industry 8.2 6.7 8.2 10.8 4.5 
  o/w Formal manufacturing 5.4 4.4 4.9 13.5 -3.5 
  o/w Electricity & water 5.3 4.5 6.7 5.9 -1.2 
  o/w Construction (monetary) 13.4 11.6 13.8 11.9 13.7 
Services 8.1 5.7 8.4 8.7 9.2 
  o/w Wholesale and retail trade 6.2 4.7 3.3 9.1 4.2 
  o/w Hotels and restaurants 18.1 7.5 19.1 4.5 21.8 
  o/w Transport & communications 12.3 16.8 21.2 21.4 20.7 
  o/w Community services 7.0 2.6 6.0 5.0 6.2 
GDP at factor cost (basic prices) 6.4 4.5 5.4 6.4 5.1 
Net taxes on products and imports (ind irect taxes) 6.2 7.0 6.4 8.0 6.7 
GDP at market prices 6.4 4.7 5.5 6.6 5.3 
Source: Uganda Bureau of Statistics.  
9. The services sector grew at 9.2% in 2005/06 compared to 8.7% during 2004/05, while the 
industry sector expanded from 8.1% growth rate during 2004/05 to 9.1% in 2005/06. On the other 
hand, agriculture grew by 2.1% in 2004/05 but declined to 1.6% in 2003/04. The average growth 
between 2002/03 and 2004/05 was 5.5% per annum. Th e sector contributions to GDP are reflected 
under Table 2 below. EAC members WT/TPR/G/171 
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 Table-2  
Sector contributions (in %ages) to GDP and GDP Growth (at basic prices) 
Contribution to GDP 2001/02 2002/03 2003/04 2004/05 2005/05 
Agriculture 39.9 39.1 37.4 35.6 34.0 
Industry 18.9 19.3 19.8 20.6 20.5 
Services 41.2 41.7 42.8 43.8 45.5 
Total GDP at factor cost 100 100 100 100 100 
Contribution to GDP growth      
  Agriculture 1.6 0.9 0.3 0.6 0.1 
  Industry 1.5 1.3 1.6 2.1 0.9 
  Services 3.3 2.3 3.5 3.7 4.0 
Total growth in GDP at factor cost 6.4 4.5 5.4 6.4 5.1 
Source: Uganda Bureau of Statistics.  
2.3 F OREIGN INVESTMENTS  
10. Government is aware that investment, especially  Foreign Direct Investments (FDI), can play a 
major role in revamping the economy. FDI creates jobs and in the manufacturing sector, can 
positively impact on both domestic consumption and export capability to improve declining terms of 
trade. FDI is also important for the technology an d skills it brings, and a good strategy for improved 
access to foreign markets. Therefore, Government , through Uganda Investment Authority (UIA) has 
made efforts to promote investments into the count ry. Table 3 below shows the results of these efforts 
in terms of growth of investment into the country . Investment is now targeted to increase by 24.6% in 
2005/06, of which private investment, largely compos ed of foreign investments, is projected to 
increase by over 19.6%.  This trend should encourage investment in various sectors, particularly that 
of natural resources which offers a wide range of investment opportunities. The richness and diversity 
of the natural resources is exemplified in the opportunities within mining (cobalt, limestone, gold), 
agriculture (coffee, tea, fruits), fishing and  hortic ulture and most recently the oil industry. The recent 
economic dynamism has opened up opportun ities in manufacturing and services.  
11. Uganda's strategic central location in the heart of Africa, being endowed with rich and diverse 
natural resources and its favourable tropical climate are some of the key factors that have contributed towards our ability to attract foreign investments. Th is central location is being utilized to transform 
Uganda into a regional hub in terms of supplying  hinterland neighbouring countries and beyond with 
industrial manufactured goods and agro-processed pr oducts. Government is pursuing a policy to 
modernize Entebbe International Airport so as to ma ke it a competitive hub in air transport while the 
Northern Corridor arrangements will link Uganda by  road, rail and inland water ways to southern, 
central, western and northern Africa regions. 
 WT/TPR/G/171 Trade Policy Review 
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 05001,0001,5002,0002,5003,0003,500
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 200505,00010,00015,00020,00025,00030,000
Plant Employment Total InvestmentsTable-3: Growth of Investments in Uganda
In million of US$ No. of Employment
Uganda Investment Authority (2006). Source :
 
3.0 PUBLIC FINANCE  
3.1  P UBLIC EXPENDITURE  
12. Government's policies are subordinated to the obj ective of restricting government expenditure 
to a level that is compatible with fiscal capabilities.  It is Government's policy to control the fiscal 
deficit.   
3.2  D OMESTIC REVENUE PERFORMANCE  
13. Over the period under review, domestic revenue -to-GDP ratio rose from 12.2% in 2002/03 to 
12.6% and 12.7% in 2003/04 and 2004/05 respectiv ely. In line with government's commitment to 
reduce fiscal deficit to 6.5% by 2013/14, the revenue -to-GDP ratio is projected to grow by 0.5% per 
annum over the medium-term.  Nevertheless, the act ual revenue outturn for 20 05/06 is 13.1% against 
estimated 13.2%, translating into 99.2% performance.   
14. The major challenge for revenue performance includes: the narrow tax base as a result of the 
structure of the economy since it is largely ag ricultural and subsistence in nature. Subsistence 
agriculture contributes approximately 70.0% of the GDP while a substantial level of business activity 
in the country is informal and lack proper financ ial records and accounts. Other challenges include: a 
poor tax paying culture; corruption in tax administ ration and pressures to reduce taxes on account of 
investment incentives and social we lfare concerns. Like other countri es in the region, Uganda faces 
pressure to provide tax incentives to investors, whic h poses a threat to the already fragile tax base. EAC members WT/TPR/G/171 
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 Finally, it is expected that with globalization and trade liberalization, earnings from trade taxes, which 
currently contribute about 50% of our tota l revenue, will be progressively eroded.  
3.3  E XPENDITURE PERFORMANCE  
15. Government has undertaken a number of Strate gic Financial Management reforms aimed at 
supporting the goal of poverty eradi cation. Government's Public E xpenditure Reform initiatives seek 
to improve the efficiency and effectiveness of pub lic expenditure management processes, to promote 
accountability and transparency, and thereby enha nce the quality of public service delivery. The 
overall performance has since demonstrated prudent  and effective fiscal management. Nevertheless 
the country experiences a large  budget deficit, finan ced by donor assistance, due to the slow growth 
rate in domestic revenue collecti ons.  Given the undesirable effects of a large fiscal deficit on export 
competitiveness and private sector development, G overnment has adopted, and remains committed to, 
a policy of gradual deficit reduction over the medium-term. 
3.4  E XTERNAL DEBT ISSUES  
16. Total inflow of donor financing (grants and loan s) reduced over the period as a percentage of 
GDP, from 11.3% in 2002/03 to 10.1% in 2004/05. Th is is consistent with Government policy to 
reduce dependence on external aid and th e associated macroeconomic impacts. 
17. The Poverty Reduction Support Credit (PRSC) has been shifted from loan to grant resulting 
in the financing of the fiscal deficit through new external loans. The exte rnal loans portfolio has 
become significantly lower, declining from 4.9% of GDP in 2002/03 to 1.9% in 2004/05. The cornerstone of this debt reduction is the Highly I ndebted Poor Countries (H IPC) initiative from which 
Uganda benefited through debt write  off. In addition, Uganda reach ed further agreements with non-
OECD creditors to increase the proportion of debt coming under the HIPC umbrella. 
4.0  SECTORAL PERFORMANCE 
4.1
  A GRICULTURE  
18. Despite the decline in growth, agriculture1 continues to provide a significant share of the 
GDP, 85% of export earnings, 77% of total employme nt (UBoS, 2005) and the bulk of raw materials 
used by the industrial sector. The current performan ce indicates that the sector continues to make a 
key contribution to the achievement of sustained economic growth and the realization of the PEAP 
objectives.  It could be a reflection of the strong comparative advantage in agricultural production that Uganda has, in spite of its shrinking share in tota l output and contribution to overall growth, remained 
the largest employer and the means from which a majority of the Ugandan population derives its 
livelihood. 
19. The main challenge affecting the growth of th e agricultural sector is its vulnerability to  
weather conditions. Moreover the sector is largely small holder and is heavily  rain-fed and therefore 
the erratic and uneven distribution of rainfall increasingly affects output. In recent years, there has also been an increasing incidence of crop diseases (c offee and banana wilt) as well as animal diseases. 
These are compounded by declining soil fertility, land fragmentation and environmental degradation. 
However, livestock and cash crops have shown the mo st consistent positive GDP growth rates in the 
sector, while the food crops sub-sector has lagged behind. See Table 4.  
                                                     
 
1 Throughout this paper, 'agriculture' is taken to include both crops and lives tock (information on the 
fisheries sub-sector can be found in Section 3.3.3). WT/TPR/G/171 Trade Policy Review 
Page 38 
 
 
 Table-4  
Agricultural sub-sectors' GDP growth rate, 1999/00-2004/05 (%, in real terms)  
 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 
Cash crops 7.0 -4.9 7.4 4.6 0.3 4.8 
Food crops 6.1 6.2 3.2 1.2 1.5 0.7 
Livestock 3.9 4.4 5.0 4.6 1.1 5.3 
Total 5.9 4.6 3.9 2.1 1.3 1.8 
Source:  Poverty Status Report 2006. 
20. Though the agriculture sector has experienced decline in general terms, the slightly improved 
international coffee prices encouraged improved cr op husbandry and partly mitigated the impact of 
the drought. 
4.2  F ORESTRY  
21. Forestry contributes 6% of Uganda's GDP, although this figure excludes the aesthetic and 
environmental values of forests. Forests provide bo th products and services that are key in sustaining 
livelihoods, particularly of the rural poor.  Though fo restry contributes significantly GDP and is vital 
to the livelihood of the rural poor, the trend is toward s accelerated rate of deforestation. See Table 5. 
Through the National Forest Authority, Government  is addressing the challenge of loss of forest 
cover. 
1991 1995 2000 2005 2010 2015 2020 2025
Per Capita (forest area)Table-5: Per Capita Forest Area
Per Capita (Ha)
FAO, 2005 - Annual Forest Resources. Source :0.4
0.3
0.3
0.2
0.2
0.1
0.1
0.0
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 22. Increased deforestation has had a direct im pact on livelihoods in relation to declining 
firewood sources, changing rainfall regime, soil eros ion control and related environmental services. 
To address the crisis, Government through the National Forest Authority has put in place  initiatives for tree planting. The Tree Planting Act is in force and provides a legal framework for the divestiture 
of the Forestry Department, culminating into the establishment of the Forest ry Inspection Division 
(2003), the National Forestry Authority (2004) and the District Forestry Services (2005). 
4.3
  M ANUFACTURING AND INDUSTRY  
23. The industry sector currently remains the smallest, but fast growing sector of the economy. In 
2004/05 the sector grew by 9.1%, and over the period 2002/03 to 2004/05, its growth averaged 8.0% 
per year. Accordingly, the share of industry in total output has increased from 19.3% in 2002/03  to 
20.4% in 2004/05. Industr y is one major sector that government policy is encouraging to speed up 
poverty reduction because prices of industrial product s tend to be more stable compared to those of 
agricultural or un-processed primary products. The in crease in the sector sh are is mainly resulting 
from increased output from the formal manufacturing sub-sectors, which have benefited a lot from the 
stable macro economy and peace in most parts of the country. 
24. Though the Industry sector is growing at a fast rate, the impact of the current energy crisis is 
likely to greatly affect the sector. 
4.4  C ONSTRUCTION AND MINING  
25. Uganda has a variety of mineral deposits occu rring in different parts of the country. These 
include vermiculite, copper, cobalt, gold, beryl, bi smuth, columbite-tantalite, phosphate, tin, wolfram, 
clays, glass-sand, feldspar, limestone and marble. No t much is known about the nature and quantity of 
most of these minerals as they have not been yet mapped and the sector remains largely under-developed.  
26. In order to stimulate investments in this sect or, Government put in place a Mineral Policy in 
2001 and the Mining Act 2003 was passed in Dece mber 2004. The Policy promotes private sector 
participation in mineral development, aims at strengthening local capacity and improving artisan and 
small-scale mining. Due to the improved in regulato ry framework and investment climate in this 
sector, mineral production quantities and value incre ased four-fold. In 2004, the minerals produced 
were worth Ushs 86.4 billions as comp ared Ushs 21.2 billions in 2003.  
4.5
  S ERVICES  
27. Since 2001/02 the services sector has become the la rgest sector of the economy. It contributed 
43.3% of the total output produced in the economy in 2004/05 against a registered growth rate of 
8.1% in the same year. Growth of this sector rema ins robust and it has become the leading driver of 
Uganda's economic growth. In 2004/05 fiscal year, services contributed 3.1% of the overall GDP growth of 5.8%, while industry and agriculture contributed 1.8% and 0.8%, respectively.  On a sub-sectoral level, the hotels and restaurants sub-sector grew strongly, registering a growth of 21.8 percent 
while the communications sub-sector continues to dr ive the services growth as more and more of the 
population subscribe to cellular mobile telephones. Ot her drivers for the growth of the sector include 
transport, wholesale and retail and community services. WT/TPR/G/171 Trade Policy Review 
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 4.5.1  Financial Sector 
28. Private sector led economic growth requires, among others, macroeconomic stability, as well 
as availability of capital for investment.  Provision  of such capital depends on a strong financial 
sector; large and varied to meet the demand for credit,  and disciplined to select good loan risks.  This 
is recognised as a priority in PEAP with an explicit ta rget of increasing the credit to the private sector 
to 10.4% of GDP by 2007/08 and to 17.5% by 2013/14.  
29. Uganda's banking system continues to be stable , sound, and more resilient than in the past 
years. The improvement in the banking system's performance was due to e nhanced supervision of 
banks, consolidation in financial institutions, a nd better service delivery. These have contributed 
towards building up of public confidence in the fi nancial sector.  Deposits held by the commercial 
banks increased by an average of 14% in the three financial years to 2004/05, while activities of credit 
institutions continue to witness growth.      
30. The regulatory framework was strengthened by the Financial Institutions Act (FIA), which 
passed in 2004.  The Act sets out new limits, re gulations, compliance requirements and penalties for 
commercial banks; thus, upgrading Ug anda's financial institution legi slation to international best 
practice as set out in the Basle Core Principles fo r Effective Banking Supervision. Bank of Uganda 
has also undertaken a number of programmes to m odernize and strengthen the financial sector, in 
conjunction with commercial banks.   
4.5.2  Wildlife and Tourism 
31. The promotion of Uganda as a tourist destina tion and the proper management of wildlife and 
cultural resources have potential in bringing additional income into  households, communities and the 
national economy. The number of tourist arrivals  has been increasing from the 205,287 recorded in 
2001 to 512,378 during 2004/052.  The largest number of tourists originates from Africa, followed by 
Europe, America, Asia and other regions. The major challenge facing the sector is the need to expand 
and improve infrastructure, accommodation and tran sport facilities to be able to accommodate the 
tourist inflows and bring down the costs associated with tourism. In order to stimulate growth of the sector and to enhance performance, government h as introduced legal and policy reforms.  The 
Tourism Bill is before parliament and the Uga nda Wildlife Authority has prepared a five-year 
strategic plan. 
4.5.3  Energy 
32. Availability and affordability of Energy is v ital for the socio-economic  and rural development 
of the country. It supports productive activities and f acilitates investments in all the sectors of the 
economy. The Government of Uganda has success fully implemented several reforms aimed at 
removing the monopoly in the power sector and meeting the energy demands of the country as indicated in Table 6. 
33. The main challenge facing the energy sector is  the severe power shortage arising from the 
reduced generation capacity. The prolonged drough t and the increased demand for energy have 
contributed considerably to this shortage. This shortage has severe nega tive consequences on all 
sectors of the economy because energy is a major i nput in the various production processes. It also 
contributes towards the uncompetitiveness of the econom y since it leads to increases in the cost of 
doing business.  In response to this crisis, Governme nt is working with the private sector to develop 
small renewable energy sources like Kakira Co-generation Plant which will produce 14MW from 
                                                     
 
2 Tourism Development Division BFP 2006/07. EAC members WT/TPR/G/171 
 Page 41 
 
 
 sugar waste (baggasse). Government also encour ages initiatives; for example over 3150 solar PV 
systems have been installed since 1998 using priv ate sector delivery mechanisms. There are plans to 
increase generation to meet the current shortfall th rough the development of thermal sources and more 
hydro generation at Bujagali (250MW) and Kuruma (200MW) as well as improvements in the quality 
and efficiency of power distribution. 
Table-6 
Trends in power generation for 2000-2005 
Capacity/Generation (MW)* 
Energy Source 
2000 2001 2002 2003 2004 2005 
Owen Falls 260 260 300 265 220 215 
Thermal 3 3 3 3 3 53 
Total 263 263 303 268 223 265 
* Note:  Generation by private instituti ons and individuals is not included. 
Source:  Ministry of Energy and Mineral Development. 
4.5.4  Transport 
34. The objective of the Government's Medium Te rm Transport Sector Policy is to promote 
efficient and effective transport services that f acilitate the achievement of the PEAP outcomes and 
other priorities. The country's transport infrastructur e comprises of road, rail, water and air transport. 
To strengthen the Road Sector, which provides for over 90% of passenger and cargo traffic, 
Government has committed substantial funds to road  improvement (mainly national roads) under the 
Road Sector Development Programme (RSDP1) c overing the period 1996/97–2005/06 and which has 
been rolled over into the second phase.    
35. In order to revamp the railway sector and to make the railway infrastructure more attractive to 
investors, Government has made joint concessioning of the railway system between Uganda and Kenya. Arrangements are underway to modernize the inland water system; repair  of lake landing sites 
infrastructure, provision of more ferries and improvement in enforcem ent of water transport 
regulations. Finally, Uganda being a landlocked country, air transport plays a vital and strategic role 
in facilitating trade, investment and regional coope ration. Plans have been made to modernize the 
sector.  
5.0  UGANDA TRADE REGIME 
5.1
  T RADE BALANCE  
36. Uganda's overall trade performance over the past th ree financial years is as shown in Table 7. 
Analysis of the data indicates that Uganda has not  made substantial progress towards the elimination 
of its structural trade deficit. 
37. The highest growth recorded in 2005 could be a ttributed to improved coffee and fish prices on 
the world market.  During 2005, the growth in expenditure on imports reduced to 18.9%, from 25.5% 
in 2004. Although the export sector recorded substan tial growth in earnings of 24.1% and a reduction 
in imports bill in 2005, the trade deficit increased by 15.8% in the same period.  
 WT/TPR/G/171 Trade Policy Review 
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 Table-7 
Summary of Uganda's Ext ernal Trade in Million US$ 
Year 2003 2004 2005 
Domestic Exports 467.2 569.4 697.0 
Re-exports 66.9 84.1 113.9 
Total Exports (X) 534.1 653.5 810.9 
Imports (M) 1,375.7 1,726.2 2,054.1 
Total Trade (X+M) 1,909.8 2,379.8 2,865.0 
Trade Balance (X-M) (841.6) (1,072.7) (1,243.2) 
% increase in X 14.2 22.4 24.1 
% increase in M 28.1 25.5 18.9 
Source:   Uganda Bureau of Statistics. 
5.2  E XPORTS  
38. Although Uganda is experiencing a trade de ficit, exports during the year 2005, grew 
substantially by 24.1% to US $810.9 million from US  $653.5 million in 2004.  In 2003 and 2004, 
export earnings increased by 14.2% and 22.4% r espectively as indicated in Table 8 below.  
Table-8 
Domestic Exports Percentages Shares by Region  
Year 2001 2002 2003 2004 2005 
Africa 29.4 32.3 34.0 30.1 30.5 
  COMESA 23.6 20.4 25.4 24.4 26.1 
  Other Africa 5.8 11.9 8.6 5.8 6.6 
Europe 48.9 53.0 46.6 50.2 46.9 
  European Union 30.7 36.0 29.9 30.6 35.8 
  Other Europe 18.3 17.0 16.7 19.6 11.1 
Asia 12.6 9.6 8.5 9.2 8.0 
Middle East 2.3 2.1 3.9 6.2 11.2 
North America 1.9 2.3 3.0 3.2 2.6 
South America 0.3 0.3 0.1 0.1 0.1 
Rest of the World 4.5 0.4 3.9 0.9 0.7 
Total 100 100 100 100 100 
Source:   UBOS, (2004), External Trade Statistics Bulletin Vo lume 3-2004, Entebbe;  UBOS, (2006), External Trade 
 Statistics Bulletin Volume 4-2006, Kampala. 
39. Europe was the major destination for Uganda's  exports with a market share of 46.6% of 
domestic exports in year 2003, 50.2% in year 2004 and 46.9% in the year 2005. The fluctuating 
market prices for coffee and fish, could have led to the drastic reduction in the market share for 
exports destined for Europe from 50.2% in 2004 to 46.9% in 2005.  European Union (EU) alone had a 
market share of total domestic exports worth US $ 139 million during 2003, US$ 174 million in 2004 
and US$ 249 million in the 2005. Among the EU countries, the Netherlands took the largest share of 
Uganda's domestic exports followed by France, Belgium, Germany, the United Kingdom and Spain. 
40. The COMESA region had a market share of do mestic exports of 25.4% during 2003, 24.4% 
in 2004 and 26.1% in year 2005.  However, the CO MESA region registered a substantial increase in 
the market share of about 7% where Kenya was the largest export market for Uganda's products, 
followed by Sudan, DRC and Rwanda.  The Afri can continent ranked second in importance as a 
destination of Uganda's domestic exports after Europe in 2005. Exports to South America and Middle 
East accounted for less than 10% combined from 2003 to 2005, although, there was a slight increase 
in export market share for North American contin ent from 3.0% in 2003 to 3.2% to 2004. Uganda's 
regional export earnings are summarized in Table 9 below.  EAC members WT/TPR/G/171 
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 Table-9 
Domestic Exports by Region ('000 US$)  
Year 2001 2002 2003 2004 2005 
Africa 121,952 139,399 158,774 171,648 212,662 
  COMESA 97,766 88,163 118,523 138,783 181,853 
  Other Africa 24,186 51,236 40,251 32,865 30,809 
Europe 202,886 228,813 217,767 285,800 327,109 
  European Union 127,224 155,608 139,788 174,298 249,708 
  Other Europe 75,662 73,206 77,979 111,502 77,400 
Asia 52,172 41,553 18,334 35,495 77,916 
Middle East 9,650 8,903 14,037 18,320 18,192 
North America 8,021 10,107 39,572 52,426 55,827 
South America 1,138 1,286 342 367 788 
Rest of the World 18,670 1,778, 18,343 5,346 4,531 
Total 414,490  431,839 467,170 569,400 697,025 
Source:   UBOS, (2004), External Trade Statistics Bulletin Volume 3-2004, Entebbe; UBOS, (2006), External Trade 
 Statistics Bulletin Volume 4-2006, Kampala. 
5.3  I MPORT PERFORMANCE  
41. Africa remained the main source of Uganda's  imports, which have  been growing from 
US $490.7 million in the year 2003 to US $742.9 million in the year 2005. Table 10 below summarizes Uganda's imports per region. 
Table-10 
Imports Percentage Shares by Region  
Year 2001 2002 2003 2004 2005 
Africa 37.6 39.4 35.7 34.4 36.2 
  COMESA 29.4 31.5 27.5 25.2 27.5 
  Other Africa 8.2 7.9 8.1 9.3 8.7 
Europe 23.1 19.7 19.5 18.9 19.9 
  European Union (EU) 19.7 17.1 18.6 18.2 18.8 
  Other Europe 3.4 2.6 0.9 0.7 1.1 
Asia 25.8 27.2 27.8 29.0 26.3 
Middle East 6.9 6.9 7.4 6.8 10.1 
North America 3.8 4.0 6.4 7.1 5.1 
South America 0.7 0.2 0.4 1.5 1.5 
Rest of the World 2.0 2.6 2.8 2.3 0.8 
Total 100 100 100 100 100 
Source: UBOS, (2004), External Trade Statistics Bulletin Vo lume 3-2004, Entebbe; UBOS, (2006), External Trade 
 Statistics Bulletin Volume 4-2006, Kampala. 
42. Imports from COMESA region were  US  $378.6 million during the year 2003 and 
US $565.0 million in the year 2005.  The import expenditure share on goods  to COMESA region 
increased from 25.2% in 2004 to 27.5% in 2005. This trend indicates that there is significant intra-
African trade that should be strengthened under th e African Union (AU) initiative. Within COMESA 
region, Kenya was the biggest source of Uganda's  imports followed by Swaziland and Egypt. Outside 
COMESA, the Republic of South Africa was the bi ggest source of imports. The Asian continent was 
the second biggest source of Uganda 's imports with total imports bill growing from US $382.1 million 
in year 2003 to US $540.8 million in the year 2005. The Asian market share reduced marginally by 
about 3% in 2005, as a result of possible increase in Middle East and COMESA' share.  The EU 
followed with total expenditure on imports growing from US $268.3 million in year 2003 to US $408.9 million during the year 2005. The EU ma rket share fluctuated between 18.2 and 18.8% WT/TPR/G/171 Trade Policy Review 
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 throughout the period under review . Table 11 below summarizes Uganda's import performance during 
the period under review. 
Table- 11 
Imports by region/country of origin ('000 US$) 
Year 2001 2002 2003 2004 2005 
Africa 378,150 422,678 490,676 594,323 742,892 
  COMESA 295,695 337,711 378,638 434,177 565,011 
  Other Africa 82,455 84,968 112,038 160,147 177,881 
Europe 232,824 211,494 268,308 325,865 408,861 
  European Union 185,566 198,181 256,098 314,033 387,158 
  Other Europe 34,643 27,921 12,210 11,831 21,703 
Asia 259,761 292,580 382,110 499,957 540,808 
Middle East 69,319 73,904 101,707 118,129 206,879 
North America 38,439 43,149 88,031 122,984 105,723 
South America 7,457 2,175 5,521 26,116 31,550 
Rest of the World 17,349 20,607 38,753 38,864 17,424 
Total 1,006,557 1,073,732 1,375,106 1,726,238 2,054,137 
Source:  UBOS, (2004), External Trade Statis tics Bulletin Volume 3-2004, Entebbe;  UBOS, (2006), External Trade 
 Statistics Bulletin Volume 4-2006, Kampala 
6.0  INVESTMENT POLICY 
43. Investment is the principal mode of deliveri ng goods and services to markets, and the major 
factor in the organisation of production and it infl uences the size, direction and composition of trade. 
In order to  promote local and foreign investment, the GOU has put in place a number of policies which include: (i) an appropriate set of macroec onomic policies including a convertible currency that 
makes manufacturing for export profitable and a corpor ate tax that is reasonable; (ii) a method under 
which firms can import (without duty or bureaucra tic impediments) components and materials for 
export manufacture (iii) an investment authority and law to promote investment; and (iv) an 
investment promotion programme. 
44. In order to implement these policies, the Government created the Uganda Investment 
Authority (UIA) in 1991 to advise the Government on policies conducive to investment and provide 
information to investors. The core function of UIA is to attract FDI and promote investments by 
Ugandans. UIA is a one-stop centre because it handl es all investment issues and services such as 
immigration, customs, land and utilities under one roof.  The Investment Code provides for licensing of investment, certain facilities and incentives for i nvestors, protection of foreign investment, the 
transfer of foreign technology and the externalisation of funds. Under the Code all tax benefits and the 
incentives regime have been harmonized so that eligib le investors enjoy the benefits directly without 
need for a certificate of incentives as long as th ey make investments of a capital nature.  
7.0 TRADE POLICY  
45. The GOU recognizes the role of trade as a tool  of economic growth and development. The 
key objective of Uganda's trade policy is to c ontribute towards poverty reduction, job creation and 
export promotion and diversification. In order to ach ieve this objective, Uganda  is striving to enhance 
trade by promoting trade liberalization through mu ltilateral, regional and bilateral trade initiatives and 
consequently is a member of a number of trade organisations.  
46. In order to implement trade liberalization, G overnment has drafted a consolidated National 
Trade Policy, which contains elements that can respond to the dynamics of globalisation and trade EAC members WT/TPR/G/171 
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 liberalization. It locks in past trade liberaliza tion programmes like the deregulation programme, trade 
and structural policy reforms, the Public Enterp rises Reform and Divestiture (PERD) programme, and 
commercial law reform programme. In particular the draft Trade Policy puts the Private Sector at the 
lead in implementing the various policy initiatives that will drive the economy out of poverty into 
wealth. 
7.1  M EMBERSHIP IN TRADE ORGANIZATIONS  
47. Uganda is a member of, and signatory to, a number of trade and related institutions and 
agreements.  We enjoy trade preferences – with  some reciprocal and others not- through our 
membership in the East African  Community Customs Union, the Common Market for Eastern and 
Southern Africa (COMESA), the African, Caribbean and Pacific-European Union (ACP/EU) Cotonou 
Partnership Agreement and the World Trade Organiza tion (WTO).  Uganda is also a beneficiary of 
non-reciprocal unilateral trade preferences such as ; the Everything But Arms (EBA) Initiative by the 
European Union, the African Growth and Opportuni ty Act (AGOA) by the United States and offers 
by Canada, Japan and China under the Generalized  System of Preferences (GSP).  All these 
arrangements provide Uganda with  varying levels of improved market access opportunities into the 
respective markets. 
7.2  U GANDA AND THE MULTILATERAL TRADING SYSTEM  
48. Uganda was a contracting party to the Genera l Agreement on Tariffs and Trade (GATT) and 
is a founding member of the WTO.  Uganda is therefore bound by all WTO multilateral agreements 
and has made special efforts to establish appropri ate machinery to implement and comply with the 
WTO agreements as well as take advantage of opportunities arising there from. Uganda has 
undertaken reform of its commercial laws to bring th em into conformity with WTO requirements.  A  
WTO Implementation Bill has been drafted to pr ovide the legal basis to domesticate Uganda's 
commitments in the WTO. Uganda upholds all the basic principles of the WTO. 
7.3  R EGIONALISM  
49. One of the major trends in the world today is regionalism. Regional integration a major 
strategy for integrating national economies into the global economy because it facilitates the 
generation of sufficient economic activity, improvement  of efficiency, heightens competition, attracts 
investments, and creates jobs. Globalization requi res closer regional integration if developing 
countries and their firms are to be competitive.  The economic foundations of regionalism include 
efforts to form free-trade areas and the creation of  common markets, which leads to the coordination 
and implementation of joint economic policies. Consequently, Uganda has signed a number of 
Regional Trade Agreements including: the Comm on Market of Eastern and Southern Africa 
(COMESA), the East African Community (EAC), and  the ACP-EU Cotonou Agreement. 
7.3.1  The East African Community 
50. The Treaty establishing the EAC was signed in Arusha on 30 November 1999 and came into 
force on 7 July 2000 after its ratification by the Part ner States. The new EAC aims to be private sector 
driven, internationally competitive and people-cen tred. It has programmes for political, economic, 
social and cultural fields, research and technology, defe nce, security, legal and judicial affairs. On the 
economic front, the EAC will focus on the regional integration of trade and investment policy, 
monetary and fiscal policy, and labour and capital ma rkets. To deepen the integration of the EAC 
States, the Protocol establishing the EAC Custom s Union was signed in March 2004 and came into WT/TPR/G/171 Trade Policy Review 
Page 46 
 
 
 force on 1st January 2005. It is expected that the EAC will eventually evolve into a Common Market, 
a Monetary Union, and ultimately a Political Federation. 
51. The CU seeks to achieve a number of objectiv es, including liberalization of intra-regional 
trade in goods, promotion of efficiency in production, enhancement of cross-border trade and 
investment, promotion of economic development, dive rsification and industrialization.  According to 
Article 75 (1) of the Treaty, the CU covers a number  of areas, including (a) the application of the 
principle of asymmetry, (b) elimination of internal  tariffs and other charges of equivalent effect, 
(c) elimination of non-tariff barriers, (d) establishment of a common external tariff in respect of goods imported into the region from other countries, and (e) rules of origin.  It provides for subsidies and 
countervailing duties, security and other restricti ons to trade, competition, duty drawback and 
remission of duties and taxes, customs coopera tion, re-exportation and harmonization of trade 
documentation and procedures.   
7.3.2  The Common Market for Eastern and Southern Africa  
52. Uganda is a founding member of COMESA , following its transformation from the 
Preferential Trade Area (PTA). Th e regional integration grouping comprises twenty member states, 
with a total population of about 380 million peop le and a combined GDP of US$ 170 billion.  
53. Following the launching of the COMESA FTA , trade between COMESA FTA and non-FTA 
members is conducted on the basis of reciprocity. Me mber states agreed to also gradually establish a 
Common External Tariff (CET) in respect of all goods imported into the Member States from third 
countries, 10 years from entry into force of the treaty. COMESA envisages becoming a Common 
Market in 2014 and an Economic Union in 2025.   Under COMESA, Uganda reduced its tariffs by 
80% in line with the agreed trade liberalizati on agenda.  Uganda has not, however, joined the 
COMESA free trade area (zero tariffs on goods pr oduced in COMESA), given concerns about the 
revenue, industrial and econom ic growth implications.  
7.3.3  The ACP-EU Cotonou Agreement 
54. Uganda is one of the 77 ACP (African Caribbean Pacific) countries that signed the Cotonou 
Agreement with the European Union (EU) in June  2000. The Cotonou Agreement is a comprehensive 
aid and trade agreement that replaces the four successive Lomé Conventions that governed the 
relationship between the EU and ACP States sinc e 1975. The duration of the Cotonou Agreement is 
20 years with a clause for revision every five  years. The Cotonou Agreement extended the non-
reciprocal trade arrangements between EU and AC P group for 8 years up to end of 2007 during which 
period the parties agreed to negotiate new Economi c Partnership Agreements (EPAs) that would be 
WTO compatible.  
7.3.4  African Growth Opportunity Act  
55. AGOA was signed into law on May 18, 2000 as Title  I of The Trade and Development Act of 
2000. The law provides preferential access for impor ts from beneficiary SSA countries by providing 
reforming African countries with the most liberal access to the U.S. market. The potential investment 
in Uganda under the programme include: Manuf acturing sector; Energy sector, which includes 
hydroelectric, geothermal and solar; Forestry sector and forest products; Textiles and apparel, 
Electronics products, Transportation; Minerals and me tals; General machinery; Chemicals and related 
products and Agriculture. EAC members WT/TPR/G/171 
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 7.4  B ILATERAL TRADE INITIATIVES  
56. Uganda has bilateral trading agreements w ith many countries. Under these agreements, 
Uganda and its partners accord each other most fa voured nation treatment in all matters relating to 
their mutual trade relations. Bilateral agreements signed with developing countries include: Egypt, 
The Sudan, Libya, Pakistan, India, Algeria, Nige ria, The Islamic Republic of Iran, The Republic of 
South Africa, The Republic of Rwanda, and Pakistan. Bilateral agreements have also been signed with 
a number of EU countries, China, Japan, Russia and Canada.  
8.0  IMPLEMENTATION OF THE WTO AGREEMENTS 
8.1 S CHEDULE OF COMMITMENTS  
57. Uganda offered the first schedules of commitmen ts in both trade in goods and services that 
include binding agricultural products at 80%, industr ial products at 70% and in services, offers were 
made in tourism and travel related sectors. Late r in 1996, further commitments were made in Basic 
Telecommunications. More offers are to be made onc e the Law Reform Program that will put in place 
a new national legal framework is complete.  
8.2  N OTIFICATIONS  
58. Uganda has made all the basic notifications as required by various agreements of the WTO 
and has made attempts at fulfilling all the notifi cation requirements on the basis of their frequency. 
8.3  I MPLEMENTATION PROCESS  
59. Uganda has formed an Inter-Institutional Committe e together with four Sub-Committees as a 
mechanism for consultation and continuous complia nce with the WTO obligations. Uganda started 
implementing the WTO Customs Valuation Agreement on 1st July 2000 and continues to keenly 
follow the negotiations at the WTO, mainly through its mission in Geneva. From time to time senior 
officials from the capital join the negotiations. This is in the pr ocess of being improved with the 
approval of the formation of a Na tional Trade Negotiations Team.  
60. Uganda is committed to the WTO, the promo tion of multilateralism, free trade and economic 
development. The WTO is a strong framework for progressive trade liberalization and predictable 
rules-based system for governing international trade. Therefore, Uganda will continue to participate in 
the WTO activities as a strategy for integrating into the multilateral trading system. 
 
__________