BOU LECTURE: Is it time for state protection of industries?

Cheers for Chang

Chang’s presentation was music to the ears of the discussants, many of whom have been clamouring for increase in intervention of the state in the economy and support for manufacturing.

Wilbrod Owor, the executive director of the Uganda Bankers Association (UBA) said the state needs to drive and direct the economy for growth but with a caveat.

“Government must be run like a business, it has to be entrepreneurial. The old times of running a government in a typical civil service fashion are gone,” he said.

He said although the economy registered average growth of 7% over many years since liberalisation and privatisation, recent development; including a decline in growth to 3.9% in FY 2016/17 means there is a problem.

“There have been negatives and reversals and we have to deal with them using Dr. Chang’s paper,” he said.

He listed oil production, comparative advantage in agriculture and opportunities in industry. But, he said, these need good governance and well- structured mechanisms that support resident businesses.

Allen Kagina, the executive director of Uganda National Roads Authority (UNRA) said at her previous post as head of the Uganda Revenue Authority, that she often heard the clamour of the private sector for reduced tariffs for manufacturing, exemptions from income tax and more. She said when the state intervened, the productivity of the private sector increased.

“More recently we have seen a decline in growth; why is that? Is it possible that the past high growth was supported by the state intervention polices or it was perhaps supported by the coffee boom?” she said. She said the discussion should be around what the state has done and what the state should do more.

Charles Kwesiga, the executive director, of the Uganda Industrial Research Institute (UIRI) said Uganda, as a private sector driven export economy needs three key pillars to grow; appropriate technology, skilled manpower, and affordable financing.

Sparks fly

Despite the almost all-round applause for Chang’s state interventionist views, some observers said the topic was off the mark. They would have preferred a topic that seeks solutions to the regulation and corporate governance challenges that Bank of Uganda has faced recently. The Deputy Governor, Louis Kasekende, noted this point but defended the choice of topic.

“There could hardly have been a more timely topic for discussion as we debate the development strategies which can accelerate our economy’s transition to middle income status,” he said in reference to the national Vision 2020 and Vision 2040 that envisage attainment of Lower Middle Income Economy status and a transformation from peasantry to modernity.

But two Makerere University dons told The Independent that Uganda needs to fix the state first before unleashing it into the economy.

“If we don’t get the politics right; if we don’t build a clean, responsive and transformative state, we are headed nowhere,” said Julius Kiiza, a lecturer of political economy.

He said the two broad categories of people comprising the state in Uganda; the political elites in office and the bureaucrats, cannot transform the economy.

He said: “Uganda needs new political elites who will rethink the philosophy of private sector-led development to say what we need is state guidance on minimising corruption, using the country’s resources to drive a transformative agenda to be able to drive the country from commodity activities to high value added industrial and knowledge based activities.”

“If you have the same tired faces in the Central Bank, in the Ministry of Finance and other government agencies, it is hard for the state-led agenda to gain traction simply because it is the technocrats who constitute the engine of government,” he said.

Ndebesa Mwambusya, a lecturer of political history and development studies said a topic on public sector governance would have been more appropriate.

“As a Bank they wouldn’t want to choose a topic that puts them on the spot or choose it when they are in crisis,” Mwambusya said.

However, he said Chang’s topic was relevant because the country is gearing towards bringing back public sector.

He added; “The problem in Uganda is not the policy per say; the problem is the public sector governance.”

He said bringing back the state, especially in running enterprises, would meet a big problem given that the nature of the state – led enterprises in Uganda.

“They are administered by state-appointed officials who are loyal to the regime and incompetent,” he said, “this would usher in incompetent and inefficient officials like it was in 1960s.”

He said that countries like Singapore, Malaysia, and South Korea who made it through state intervention had a policy of meritocracy.

He said, instead, the public sector and the private sector must work together with the public sector investing in energy, infrastructure, and industry, while general trading is left to the private sector. He said the state could have large scale commercial farms as models for the private sector.

The lectures were instituted in 1988 by the Bank of Uganda in honour of the late Joseph Mubiru, the first Governor of the Bank from its inception in 1966 to 1971, and who later lost his life in the most brutal fashion at the hands of state agents.