Oil revenue: Uganda may not need aid
| Written by Devapriyo Das / The Observer |
| Sunday, 31 January 2010 17:19
 Uganda's sweet, waxy crude |
| Oil revenue: Uganda may not need aid–
That is the prediction of Standard Chartered Bank in its recent report, ‘A New world Order.’ It says those countries likely to dominate the economic landscape in the year ahead will fall into one of the following categories: those with financial resources and big spending power; those with valuable natural resources such as water, energy and commodities; and those who adapt to the new order by investing in emerging technologies and products. Uganda belongs to the second category. Uganda’s economic model has, over the past 25 years, changed from donor-supported, macro-economic stabilization combined with early successes in agriculture, to changing export trends thanks to massive regional demand in the Great Lakes region. Now, the re-invention is set to continue with the discovery of oil and gas reserves. However, the report cautions that the new growth model’s “immediate outlook is not clear-cut”. Oil production is at least two to three years away, so growth in 2010 will hinge on political, technological and regional factors. The oil-based growth model will depend on “substantial upfront infrastructure costs.” Referring to the potential two billion barrels of Uganda’s oil deposits, the report says either a local refinery or a 1,300 km heated pipeline to Mombasa will be needed to process the local, waxy crude. Mass-transport infrastructure will have to be established. Moreover, as the scramble for resources intensifies across Africa, governments may re-think tax incentives they offered investors in the energy and mining sectors, and might re-negotiate contracts. The report expects President Yoweri Museveni to return to power in the 2011 polls, thanks to a fragmented opposition. It predicts Uganda’s GDP (gross domestic product) growth will rise from 6.3% in 2009 to 6.8% in 2011, and could go as high as 7.5% by 2012, and lauds the benefits of political stability. REGIONAL OUTLOOK For Africa, the global crisis meant falling foreign direct investment, reduced exports, and less aid. However, proactive fiscal and monetary policies, pledges of financial assistance from international financial institutions and rising commodity-prices backed by Chinese demand have aided recovery. Yet, a narrow tax-base could hamper regional integration as Africa’s economies may prefer short-term tax gains by taxing trade, over long-term integration that promotes better economies of scale. However, the report believes that East Africa and its Common Market Protocol could prove otherwise. Kenya’s post-election violence in 2008, the global crisis which disrupted tourist in-flows, and a prolonged drought, have all conspired to diminish agricultural and industrial output. Still, its stimulus package has helped raise consumption but is expected to widen the budget deficit. While much credit growth has been directed towards the public sector, private sector growth is expected to pick up through 2010 as credit standards are lowered. Meanwhile in Tanzania, the projected end of drought conditions coupled with renewed investment in mining, agriculture, tourism and construction, should drive growth in 2010. Hits: 1194
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