Uganda Economy

27 January 2010
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MACROECONOMIC PANEL

In Uganda, agriculture is the most important sector of the economy, and occupies about 80% of the workforce, with coffee as the main item wholesale. Other important crops are those of maize, sorghum and potatoes.

In parallel, the farm has a very important voice in the economy and the national herd is vast.

The fisheries sector is a moderately developed, and practiced especially near Lake Victoria.

The country has many mineral resources, however, there is the presence of tungsten and tin, are concentrated in south-west.

And there is a hydroelectric power station, connected to the Owen Falls Dam. In the area of Lake Albert, north of the country, have been discovered large quantities of oil. Currently, we calculated the presence of 700 million barrels and estimated at a potential 1.5 billion barrels to be extracted.

In recent years, Uganda has become  one of the largest economies in the rate of growth of the entire continent, with an average annual real GDP growth of 7.8% since the beginning of the decade and twenty years of uninterrupted growth that has allowed the macro to switch from a per capita income level of $ 255 in 2000 to $ 455 in 2008, with a rate increase of 18% compared to 2007.

It  has been a marked expansion of the service sector and which has  revealed to be  the main economic driving force, now representing the largest sectoral share, 45%, relative to GDP, thanks to rapid growth in telecommunications, financial services, trade and tourism.

The industry represents about one fifth of GDP but its growth and 'was clipped by the degradation of the country's physical infrastructure, particularly energy.

The product comes mainly from agricultural activities of small scale, followed the herd. The export crops instead of (traditionally coffee, cotton, tea, tobacco and vanilla, flowers and cocoa) representing 10% of total production. Gold is the third most important export item. Finally, the manufacturing sector 'consists primarily of companies for the processing of foodstuffs, beverages and tobacco.

This favorable situation for foreign investors is supported also by the effect the comprehensive program of privatization promoted by the Government. Uganda is one of the first African countries to liberalize the telecommunications sector, which is now operating with several private companies.


COMMERCIAL OPPORTUNITIES FOR ITALIAN COMPANIES
The Uganda presents attractive opportunities primarily for direct investment, which can offer substantial returns over the medium to long term.

In particular, the country is extremely attractive from the standpoint of production plants in the agricultural sector flora and fruit and vegetables.

Also presents good opportunities in organic agriculture, thanks to product types and optimal harvesting schedules, favored by climatic conditions and water availability.

In addition to the agro-industry, significant opportunities are in tourism, given the endowment of natural paradise unique, untapped very limited extent.

Other investment opportunities for Italian players can be found in the tanning industry, manufacturers of leather products, both bovine and ovine and caprine animals.

The growth process of the country, however, requires investment in infrastructure, particularly in energy, transport networks, telecommunications, and the need to develop a local manufacturing sector opens up interesting investment opportunities in light engineering industries (textiles, wood, machinery and spare parts, packaging), construction materials and metallurgical industry, encouraged by relatively competitive labor costs.

Finally, there are opportunities associated with the procurement tenders financed by international financial institutions and bilateral cooperation agencies, donors, strong growth in recent years thanks to increased aid flows and therefore the degree of international confidence to the country.



INDUSTRY
The main industries are light, used in food and textile sectors, often related to agriculture, other important production is that of cement.

The industry is well developed in response to the reform program of the years of internal peace and stability: in 2006 industrial production grew by 5.2%, but to solve the shortage of workers, which prevents industry faster development.



EXTRACTIVE RESOURCES
Ugandan resources in this area are tungsten and tin, concentrated in South Ovest.Esiste a hydroelectric power station, connected to the Owen Falls Dam. There is also the presence of cobalt and limestone.



SECTORS IN EXPANSION
The country's economy is gradually evolving from one form to a purely agricultural and manufacturing services, including cover trade, tourism and transport.

Agriculture, however, remains the dominant sector, which contributes more than 40% of GDP, employing 80% of the workforce.

In recent years, the manufacturing sector, production of electricity, transport and communications, have registered significant growth rates.

Within the manufacturing sector include those for food processing, beverage production, chemicals, soap, bricks, cement, footwear and leather work. According to the annual index of industrial development, the industry suffered an average annual growth of 14.5% since 1990.



INVESTMENT LAW
In Uganda and attention 'directed investment.

Thus in 1991, was issued a code for the investment legislation, promoted by the government.

This code has set up an Authority for Investment in Uganda (UIA), to promote and facilitate investment in the country by providing information and facilities. One of its main functions is to attract direct investment from foreign countries and to promote domestic investment.

It 's just that the UIA to be operational in this area.

The investor must ask this authority, the authorization to invest in business in the country.

The authorization is issued within 5 working days if the application form is properly completed and is valid for more than 5 years after the project investment.

The code allows foreign operators to invest in all activities except those involving national security or the demands of real property. However, these limitations are reduced: in fact, granted the land use of the country for a period not exceeding 99 years and in addition, foreign investors may participate in joint ventures operating leases with agriculture.

Uganda does not impose limits on the property, therefore, a foreign investor can hold 100% stake in a holding territory. At any time, investors, local or foreign, are entitled to make or disinvest its capital.

Investors are encouraged to use local materials available, but there is not a law that limits the use of imported materials.

The government failed to assess the raw materials used by investors, except in the case, their use poses a threat to the environment.

In Uganda, investors must meet environmental standards expected.

The law governing the administration of the environment, is a statute of 1995, which led in January 1996 the establishment of 'national authority for environmental management, National Environment Management Authority (NEMA).

The statute requires all investors to make an environmental impact assessment before implementing the project. Compliance with the requirements of this evaluation is mandatory licensing scheme.

Investors are free to invest anywhere in the country provided they comply with local laws and environmental factors and do not build factories in the protected areas. For those who want to invest in the regions north of the country, is provided as an incentive finanaziemnto 75%.



THE TAX SYSTEM IN UGANDA

In Uganda, the tax system consists of two categories of taxes: direct and indirect.

Direct Taxes
The direct taxes are applied on business income and private income. They are:

Corporate Tax
The tax is levied on profits made by limited liability companies and other institutions such as funds and cooperative societies registered.

The current rate is 30%. The basis for the application fee is given by the gains achieved in net expenditure totals reported in the production of income.

Under the rules governing the taxation of income, introduced in 1997, there are two types of tax deductions on business income: deduction on investment starting (50% or 75% of assets, according to ' location of the project) and the annual depreciation which can apply to all taxable companies, such as deductions for the deterioration of buildings or industrial plants.

The annual rate of depreciation is 40, 35, 30 and 20 in relation to four different identification codes for various categories of machinery and equipment.

The industrial buildings, however, are subject to a deduction equal to the initial rate of 20%, while the annual rate is slightly lower, at 5% of that for the machines.

However, the costs of purchasing fixed assets are subject to the highest percentage of deduction allowed: 20%.

Withholding tax
4% of the contract price, is retained by the entities receiving the services provided by contractors and suppliers of goods and services, such as governmental institutions, local authorities, companies controlled by the government.

Indirect Tax
The main indirect taxes are represented by Customs duties, VAT and consumption taxes.

These fall into two broad categories:
a) Taxes on international trade;

b) Taxes on production and domestic consumption;

The taxation on international trade contributes about 57% of total revenue.

CUSTOMS DUTIES
In Uganda are three basic tariff bands: 0%, 7% and 15%. The zero rate is applied to raw materials and machinery, while 7% is related to intermediate products, including, for example, sugar and chemicals. The percentage of 15%, however, is calculated on finished products.

Where the products listed above are from COMESA countries, then their percentage rates are respectively: 0, 4 and 6%.

VAT
The VAT is payable by individuals or companies, and applied in every phase of production and distribution as a percentage of 17%.

Consumption tax
The consumption tax is levied on consumer goods and services that may be considered luxury, as one of the most common, cars, tobacco and alcohol.



TRADE AGREEMENTS
Uganda is signatory country or member of the following:
• Agency for Multilateral Investment Guarantee Agency (MIGA);

• International Centre for the definition on investment disputes (ICSID);

• Convention on the Recognition and enforcement of foreign arbitration awards;

• Corporation of the United Kingdom for overseas investment insurance;

• Corporation of the United States Overseas Private Investment;

• Convention on the regulation of investment disputes between the U.S. and other countries;

• Assurance Agency for Trade in Africa (ATI);

Furthermore, Uganda has signed with a number of countries, bilateral treaties on investment (BITS) and processed for double taxation (DTTs)

Uganda is a member of the East African Community (EAC) and COMESA Common Market for Eastern and Southern Africa.



TAX EXEMPTIONS AND INCENTIVES
In Uganda, the Ministry of Finance exempts tax from 6 to 3 years and has promoted a new scheme of financial incentives as the replacement tax exemption.

The recent incentive system is specified in the Income Tax, Income Tax Act, introduced in 1997 and takes into account the losses related to the conduct of business. It also includes the withdrawal of investment in the project.

In the event of a loss its extent is related to the following year and is deducted in determining taxable income. The division is also in subsequent years, until the company is unable to make a profit.

The Bank of Uganda, the main bank of the state, administers a number of loan schemes which are also included in the activities of the European Investment Bank, European Investment Bank (EIB), the loan plan aimed at private companies, APEX Private Loan Scheme, the national bank for the refinancing of exports, Bank of Uganda Export Refinance Scheme (ERS) and the loan guarantee program for the export, Export Credit Guarantee Scheme (ECGS).



THE PROPERTY
In the Uganda Constitution of 1995 recognizes the right of land ownership to all citizens of the country.

Foreign nationals residing in Uganda can own land only through their participation in joint ventures, which hold the majority of the shares.

In Uganda there are four different ways to dispose of the land:

Public property: provision by local municipal and district properties for concessions, District Land Commissions. Both local and foreigners may lease public lands. Likewise, municipalities may take advantage of this opportunity, with the exception of those who are from Kampala and Mbale.

Properties for lease: made available by the committee of land in Uganda, Uganda Land Board and other owners.

Lands of private property: ownership available only privately.

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