Congratulations for successfully completing the year 2008, despite the recent adverse developments in the global economy the economy grew by 8.7% in real terms in the Financial Year 2007/08, slightly lower than the estimate reported in June by 0.2% of GDP, following further validation of economic data by the Bureau of Statistics. This excellent economic performance was because of continued growth in the industry and services sectors.The regional and adverse global developments in calendar year 2008 have tested the strength of the economy. Once again it has been proved that the economic management policy framework put in place by the Government is sound. The economy quickly and fully recovered from the temporary disruption of trade flows last year, on account of the political upheavals.
The Government knew that the only way forward was to rehabilitate the economy and increase production, so the economy was completely liberalised to eliminate bureaucratic red tape that constrained economic activity. Production increased and the shortages of the 1990s were eliminated and since there has been a situation of plenty where the producers have the right incentives to produce. The temporary disruption of flow of trade caused shortages of fuel and other merchandise during 2008, and that led to increased transport costs and a rise in prices of consumer goods. Although normal trade flow was quickly restored and has since stabilised, the prices of consumer goods and inputs used in manufacturing have remained high. This is due to the rising prices in the economies of trading partners and the effect of high oil prices on the international market earlier on in the year.
There is awareness that the on-going global financial crisis has spread in other countries. This has sparked off an economic slowdown in the world economy. This global crisis may somehow affect the economy, given that it is small and peripherally integrated in the wider global economy. That could be through reduced demand for exports, a decline in remittances from those working abroad and sending money home, reduced private foreign direct investments and other financial flows. However, as historical performance has proven, the economy is resilient. Therefore, there should not be concern that the economy will be badly hurt. The economy remains strong and the Government’s economic policy framework is sound.
The banking sector is sound, stable and solvent, mainly due to adequate regulation and vigorous supervision that has minimized risky credit behavior. It is also because banks are well-capitalized and did not have exposures to the sub-prime mortgages that sparked off the global financial crisis.
Therefore, the banking sector is not exposed to the toxic debt that has caused havoc in the American and European financial markets. Domestic banks were not involved in the sub-prime because they have large reserves that have made the financial sector abundantly solvent. On account of this reason, banks had no reason to borrow externally to finance domestic lending and to meet their operational costs. This is not by accident. It is a consequence of the good economic policies of the Government which have created a supportive business environment that has allowed private banks and other businesses to make profit despite the stiff competition.
Investors should therefore be assured that the impact of the spillover effects of the global financial crisis on the financial sector will be minimal, contrary to those pessimists who profess doom.
The economic outlook remains robust, with real economic growth for the financial year 2008/09 estimated in the range of 7% to 7.5% per annum. While this target may seem ambitious given the global financial crisis, it is lower than what achieved in recent years and is in line with average growth rates in the previous five years. The economic growth target of 7% - 7.5% is also based on the strong and sound policy framework that the Government has worked hard to put in place over the last decade. This has led to a diversified economy that is better cushioned against shocks. As an example, as a result of export diversification, export destinations have also been diversified, with a large proportion going to the regional markets.
The restoration of peace and security and the on-going efforts for the economic recovery of the region gives optimism for a brighter economic future in the year ahead. The outlook for the economy is favorable and the country’s economic fundamentals remain strong. The Government beginning in Financial Year 2008/09 has allocated resources for the development and improvement of major trade routes along the Northern corridor. The preparatory work will start in 2009 and the designs for the road projects are going to be completed during the FY 2009/10 to enable future construction works to commence. On the Western route, services will soon be restored, as these transport routes are critical for regional integration and inter-regional trade.
Previously large investment outlays were being provided by donors; but now the Government has demonstrated that it can take full charge of its investment projects/programs. As far as our development partners are concerned, they should feel happy that the Republic is now graduating from dependency on aid.
In the energy sector, the Government, with its own resources, has kick-started the commencement of the 250 Megawatt Hydro-power Project even while private financiers were yet to conclude their financing arrangements. The Hydro-power Project construction is progressing on schedule and will be complete in the estimated time-frame by January 2011. The Government has also decided to commence construction of a larger-sized Hydro-power Project which will create generation capacity of 700 Megawatts. While commencement of this project may occur slightly later than earlier planned owing to further geo-technical and environmental studies, the site will generate over three times the amount of electricity originally envisaged. The Government is committed to also financing this project from resources generated from revenues in the Energy Fund; and will amount to about US$ 200 million by the end of this Financial Year. The Minister of Finance has been directed to ensure that more resources are budgeted so that we have sufficient resources to complete this dam.
The next stage of development in the energy sector that the Government will implement will be the development of the necessary regional and national transmission and distribution systems, including nationwide rural electrification in order to utilize the increased electricity generation. This will also entail development of Regional-wide transmission infrastructure to export power to our neighbors.
The strategic interventions outlined are therefore meant to ensure that the there are no shortages in infrastructure provision that will constrain the growth of the economy in the near future. The implementation of these critical infrastructure developments will enable take-off into a modern and transformed social and economic nation state with guaranteed prosperity for future generations to come.
In the Industry sector, the construction boom that started a few years ago is set to continue in the coming year; and investment in production of cement has increased substantially. Following a revision in the method of calculation of FDI and remittances, FDI increased to $946m in 2007/08, from $695 in 2006/07 and remittances amounted to $476m in 2007/08 compared to $430m in 2006/07.
In the services sector, tourism continues to do well, as arrivals at the airport which are an indicator of tourist visits, increased from 360, 000 arrivals in 2006/07 to 440,000 in Financial Year 2007/08. The boom in the tourism sector is also reflected in the increasing number of hotels, restaurants and other related facilities. Also, there has been a fast growth in the demand for mobile phones because there had been a chronic suppressed need for communication.
While growth in the agricultural sector is lower than in other sectors, the Government is dealing decisively with the matter, including the addition of value to agricultural production and increasing access to markets to achieve the overall objective of increasing household incomes. The Government has restructured a program to ensure focus on provision of researched varieties of plants and better breeds of livestock to farmer groups organized into model, nucleus, lead and other farmers. All categories of farmers must be reached by the program.
These measures will go along way towards resolving the weaknesses in the agriculture sector that make it lag behind the rest of the economy in terms of growth. Together with the infrastructure developments outlined, market access of increased agricultural production will be assured and, consequently, incomes of households will be increased.
The Ministers of Agriculture and of Finance, and all stakeholders in the agricultural sector, should intervene to support increased production forthwith. Savings and Credit Cooperatives (SACCOs) are needed to build the necessary capacity to manage savings and micro-finance that may come from other sources. The Government will provide micro-finance is to increase agricultural production.
There have been calls by some individuals, including Members of Parliament, for the Government to control the prices of some commodities, particularly food and fuel, in response to the high prices. The concerns are shared; but action must be orderly and not in a panicky way; otherwise confusion may be caused which may not be good for business.
Empathies go out to all who have had problems of one kind or another; especially those who have lost their loved ones.
........................End of Message.
This World Bank New Year Message could apply admirably to Armenia, or possibly to Azerbaijan, or even Georgia. But it is in fact excerpts taken from Uganda’s President Yoweri Museveni State of the Nation Address on New Year’s Day, in which he assured a better 2009.
President Yoweri Museveni has been the President of Uganda since 1986, responsible for:1. Crimes Against Humanity
Orchestrating Genocide in Northern Uganda, where he has incarcerated nearly two million people in concentration camps, euphemistically known as “protected villages.” Read a Report by the Govt. of Uganda, WHO, UNICEF and others (pdf version). At the height of the crisis, (circa 2005), more than 1,000 people per week were dying from preventable diseases in these Modern Day Concentration Camps. More people have died from conditions in the camps themselves than at the hands of the LRA (Lord's Resistance Army) or government forces, and over 20,000 children have been abducted.
2. Crimes Against Humanity II
In 2005, Museveni’s government was found guilty by the International Court of Justice for committing grave war crimes in the DRC, including: the invasion and plundering of the natural resources of the Democratic Republic of the Congo and of fomenting ethnic cleansing. Uganda was ordered to pay the DRC $6-$10 billion.
3. Rampant Corruption
Under Museveni, Uganda is one of the most corrupt countries in the world. Yet, donor countries including the US, keep donating money to the regime without holding Museveni accountable for corruption.
4. Lawlessness I
President Museveni has no respect for international laws. He came to power using child soldiers and continues to coerce children into joining his armed forces to sustain his regime (See China Keitetsi’s story).
5. Lawlessness II
Locally, President Museveni does not respect the rule of law: he used soldiers to invade the nation’s High Court twice to intimidate judges, has exhibited complete disrespect for human rights, and bribed Ugandan Parliamentarians to amend the constitution to remove presidential term limits. The removal of term limits places Museveni as a de facto life president. Museveni has also been involved in land grabbing without the consent of the owners.
What future for Armenia, whilst the World Bank continues its politically motivated and highly corrupt agenda?
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