emmanuel tumusiime - mutebile : urban land management as a potential financing mechanism for urban development discussion by mr emmanuel tumusiime - mutebile, governor of the bank of uganda, of prof. paul collier ’ s presentation on urban land management as a potential financing mechanism for urban development, 24 may 2016. * * * the essence of paul collier ’ s argument is that the binding constraint to development in africa is a lack of connectivity in african cities. the lack of connectivity arises from a combination of the low population to land densities and poor transport services which characterise african cities, including kampala. it impedes the functioning of labour and product markets and thereby prevents firms from achieving optimal economies of scale and formal sector status, which in turn depresses labour productivity. consequently the key to development in africa is massive investment in african cities, by three sets of actors ; households investing in residential property, private sector businesses investing in commercial property, including multi - story residential buildings, and the public sector investing in urban infrastructure. most of this investment will entail structures of various types. to mobilise this investment major reforms are needed to create well functioning land markets, long term urban planning and mechanisms to raise finance for the huge volumes of investment that would be needed. paul collier estimates that the average african city will need approximately $ 50 billion of investment in structures – buildings and infrastructure – if its population is to enjoy middle income country standards of living. although there are many useful insights in paul collier ’ s thesis, there are also a number of important aspects which can be questioned. let me elucidate these. african development and structural transformation has undoubtedly been held back by the paucity of private investment in labour intensive industries, such as manufacturing, as a result of which the vast majority of the labour force in the urban areas, including kampala, has to earn its living in very low productivity informal household enterprises. only about 3 percent of the labour force in uganda is employed by a formal sector business. but it is debatable whether the binding constraint to private investment is really the poor connectivity of african cities, rather than other potential constraints such as the poor institutional environment for business, low quality of the workforce or a lack of competitiveness unrelated to urban connectivity, for example because of overvalued real exchange rates. i would like to see empirical evidence to support the contention that the poor urban connectivity, rather than other factors, is the binding constraint to private investment.

new risk - based capital ratios and more - extensive information about credit quality of their portfolios and their risk measurement and management practices. other disclosures include : corporate structure, market risk disclosures for standardized and internal models approaches, disclosure for operational risk measurement, interest rate risk and foreign exchange risk. such disclosures are expected to encourage banks to be more transparent to financial markets which should then promote market discipline. uganda ’ s preparedness the key element that countries should consider before moving on to basel ii is whether a good baseline supervisory system is in place. that is, whether the basel committee ’ s basic core principles, including its preconditions – have been complied with. for uganda, the answer to this is in the affirmative. yes, we have a good baseline supervisory system in place. the major milestone that enabled uganda to move towards full compliance with the basel core principles was the enactment of the new financial institutions act ( fia, 2004 ). in addition bank of uganda fully shifted to the risk based supervision approach since january 2003. the fia, 2004 allows bou to prescribe higher on - going capital requirements for a specific financial institution if the supervisory review process reveals existing risks that warrant such increases which is in line with pillar 2. the fia, 2004 also outlines some disclosures including a prescription for the form and content of the annual accounts which provides a good ground for pillar 3 under the new capital accord. many aspects and possible effects of basel ii have been debated at various levels, including its potential effects on banks ’ costs and on the competitive positions. such costs include : revamping the it systems and or acquisition of new systems, training costs for staff and additional staffing needs, insufficient historical data, time consuming transitions, internal models and risk quantification costs and disclosure overload. as to whether these associated costs will be transferred to the beneficiaries of financial services remains a subject for research and discussion within the sector. thank you!