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The Growth Challenge : Can Uganda Cities Get to Work

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The Growth Challenge : Can Uganda Cities Get to Work The Growth Challenge: Can Ugandan Cities get to Work? UGANDA ECONOMIC UPDATE 5TH EDITION Report No. 94622 | Feb 2015 The Growth Challenge: Can Ugandan Cities get to Work? UGANDA ECONOMIC UPDATE 5TH EDITION This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank Group concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank Group encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: [email protected]. Cover photos: Great Lakes Film Production Ltd and Digital Media Network Ltd Cover design : Artfield Graphics Ltd, [email protected] Design and Layout: Artfield Graphics Ltd. Printed in Uganda by Artfield Graphics Ltd Additional material relating to this report can be found on the World Bank Uganda website (www.worldbank.org/uganda). The material includes a fact sheet, documentary video and a number of blogs relating to issues in the report. © 2015 International Bank for Reconstruction and Development / International Development Association or The World Bank Group 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 www.worldbankgroup.org TABLE OF CONTENTS ABBREVIATIONS AND ACRONYMS ......................................................................................iii FOREWORD.....................................................................................................................iv ACKNOWLEDGEMENTS ..................................................................................................... v KEY MESSAGES ................................................................................................................vi PART 1 THE STATE OF UGANDA’S ECONOMY 1. Uganda’s economy today ............................................................................................. 1 1.1 Re-calculating the size of the economy: A smaller population and a larger economy than previously estimated ..................................................................................................................................................................1 1.2. Recent economic developments .........................................................................................................................................6 1.2.1 Disappointing growth, despite the return of stability ......................................................................................................6 1.2.2 A neutral monetary policy stance despite receding inflation ..........................................................................................9 1.2.3 Strong external position, but export of goods underperformed ....................................................................................12 1.2.4 Key public investments postponed again, failing fiscal policy targets ..........................................................................14 2.0 Uganda’s economic outlook ...................................................................................... 20 2.1 The overall economic outlook for Uganda is positive. ......................................................................................................20 2.2 Imminent risks require appropriate management ............................................................................................................23 2.3 Strengthening the sources of growth and jobs to accelerate development ...................................................................28 PART 2 GETTING UGANDAN CITIES TO WORK 3. Urbanization is changing Uganda’s demographic and economic landscape ..................... 33 3.1 Uganda’s rapidly accelerating urbanization process .........................................................................................................33 3.2 The good news - economic activity, jobs and welfare in the cities ....................................................................................40 3.2.1 Urbanization has welfare improving effects ....................................................................................................................40 3.2.2 Urban areas are generating more economic activity and opportunities for jobs .........................................................41 3.3 The not so good news - low productivity, unemployment, congestion, and housing shortages in cities ......................................................................................................................................................................43 3.3.1 Uganda’s cities not yet competitive to produce internationally tradable goods and sufficient productive jobs .........................................................................................................................................................43 3.3.2 Uganda’s cities not coping with fast rising infrastructure and housing needs ..............................................................46 | i 4. Can Uganda reshape its cities to become more competitive, produce more and better jobs and be more livable? ............................................................................................... 49 4.1 Is physical planning supporting an efficient urbanization process in Uganda? ...............................................................50 4.2 How effective are the institutions for urban development? ..............................................................................................52 4.3 How effective are the land markets and how do they affect land use? ............................................................................53 4.4 Is the business environment conducive for high productivity activities in the cities? .....................................................55 4.5 Are the existing transport system ensuring connectivity? .................................................................................................56 4.6. Are urban entities funded sufficiently? ..............................................................................................................................57 4.7. Concluding Remarks ...........................................................................................................................................................58 Statistical Annex .........................................................................................................................................................................59 List of Figures Figure 1: Uganda’s recent growth lower than long term average .............................................................................................7 Figure 2: Uganda’s recent growth performance lower than comparators’ ..............................................................................7 Figure 3: Agriculture and services stagnated, as construction deceleration offset meager improvement in manufacturing during FY 2013/14 ..............................................................................................................................................7 Figure 4: Government investment drove growth as private sector investments lulled ..........................................................7 Figure 5: Lending to agriculture grew almost as much as that for personal and household use ...........................................9 Figure 6: Inflation remained stable even during surges in food crop in the year before ........................................................10 Figure 7: Neutral policy stance attracted nil adjustment in interest rates .............................................................................11 Figure 8: Foreign currency denominated loans gained more share in total domestic private sector credit ........................11 Figure 9: Growth of credit to public sector at the expense of private sector ..........................................................................11 Figure 10: The bulk of merchandise exports find market within the EAC region ....................................................................12 Figure 12: Coffee remains Uganda’s main commodity export earner .....................................................................................12 Figure 11: The bulk of merchandise imports come from Asia..................................................................................................12 Figure 13: Uganda has been one of the largest receivers of Foreign Direct Investment i n the EAC ....................................................................................................................................................................................13 Figure 14: Energy and mineral development sector failed to achieved budget objectives in FY 2013/14
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