macroeconomy, creating a cycle of resource led booms and slumps. the export of natural resources and the spending of the revenues thus generated in the domestic economy can also cause real exchange rate appreciation, which damages the competitiveness of the non resource traded goods sectors of the economy, such as agriculture and manufacturing ; this is a phenomenon called “ dutch disease ”. avoiding the pitfalls of natural resource dependency – the so called “ resource curse ” – is only possible with sound economic policies and good economic governance, a subject i will return to shortly. the eac is now implementing the second stage of its regional economic integration project ; the common market which will allow for trade in services within the eac, including the right of establishment of firms in the service sectors, and the free movement of capital and labour. the eac customs union has already yielded major benefits for uganda. uganda ’ s exports to our eac partner states have risen from only $ 68 million in 2001 / 02 to $ 676 million in 2011 / 12. intra - eac exports now comprise 25 percent of uganda ’ s total exports, compared to 14 percent 10 years ago. regional economic integration can help to accelerate uganda ’ s transition to an efficiency driven economy in several ways. first, it will expand the size of the market for domestic firms, allowing them to realise economies of scale and become more efficient. in terms of value, the combined gdp of the eac partner states is the equivalent of nearly $ 90 billion, which is four times the size of the ugandan economy alone. secondly, it will strengthen competitive pressures in the national market, by exposing domestic firms to greater competition from firms from other eac partner states. competition provides the best incentive for firms to increase their productivity. thirdly, regional integration will provide a stepping stone for industries which are not yet competitive globally to begin exporting, and thus stimulate the improvements in productivity which will eventually enable them to compete on global markets. this is likely to be especially important for the domestic food sector, which could produce substantial surpluses for export. in turn, the opportunity to sell on regional export markets will give farmers in uganda incentives to focus on production for the market and to produce higher value bis central bankers ’ speeches products. finally, cooperation at the regional level is necessary to develop the infrastructure to support growth in the region ’ s economies ; for example road and rail links from landlocked countries to the coast. this will be particularly important for the development of the

are still dominated by traditional, informal activities, productivity is stagnant. the global competitiveness index, which is produced by the world economic forum, the african development bank and the world bank, distinguishes three stages of economic development which are related to competitiveness. in the first stage, which characterises most low income countries, economies compete on the basis of their endowments ; unskilled labour and natural resources. the second stage is an efficiency driven stage of development, in which economies compete by continuously raising their productivity. improvements in factor productivity are the main driver of economic growth in this second stage of development. it is on the threshold of the second stage of development that the ugandan economy now stands. in industries such as food processing, construction materials, telecommunications and financial services, modern, high productivity industries have been set up and are bis central bankers ’ speeches expanding, although they still employ only a relatively small share of the workforce. if we can make the transition to an efficiency driven economy successfully, uganda can accelerate the structural transformation of its economy and move towards middle income status. the commercial exploitation of hydrocarbon and mineral deposits offers both opportunities and challenges for uganda. the opportunities arise because oil and minerals will generate substantial increments to public revenue and to foreign exchange earnings ; resources which could be used to invest in the physical and human capital needed to strengthen competitiveness and thus help to create the foundation for productivity driven economic growth. the world bank ’ s doing business indicators report that an inadequate supply of infrastructure is cited by firms as the third most problematic factor for doing business in uganda ( the most problematic factor is corruption and the second most is access to finance ). strengthening the transport and power infrastructure could reduce significantly the costs of doing business in uganda and thereby help to promote private investment in modern, high productivity, industries. better infrastructure is also necessary to enable uganda to export minerals or to process them in the country. productivity growth also requires investment in human capital. uganda has made great progress in making access to primary education virtually universal across the country, but we now need to build on this and expand access to secondary education and to provide the workforce with the vocational skills needed for modern industries. unfortunately, oil and minerals can also impede development, as demonstrated by the experience of many developing countries which are rich in resources. natural resource revenues are often very volatile because of the inherent volatility of global prices and sometimes because production volumes may also be erratic, and this volatility can be transmitted to the