The birth of economic liberalisation at national level, in
modern times, could in a way, be traced back to the US in 1978 under the
presidency of Jimmy Carter. Commercial Airlines were obliged to fly to
and from various destinations over there. However, most routes were
unprofitable. The carriers were obliged to provide a national good; to
expedite movement of people and goods across that vast country.
According to Wikipedia, “Since 1938, the federal
Civil Aeronautics Board (CAB) had regulated all domestic interstate air
transport routes as a public utility, setting fares, routes, and
schedules. …..”
However, it was not unusual for out and in-bound
flights to land with less than a dozen passengers. Under the then
economic dispensation, the government was bound to compensate airlines
for such glaring losses. And owing to the bail-outs, some airlines cut a
niche; with particular routes solely belonging to them.
President Carter’s government took decisive
action. The Airline Deregulation Act of 1978, which was geared at
expunging government control over fares, routes and market entry (of new
airlines) came into force. “The Civil Aeronautics Board’s powers of
regulation were phased out, eventually allowing passengers to be exposed
to market forces in the airline industry.” This Act basically freed up
the skies. Henceforth, there would be no ring-fencing of routes.
Financial bailouts were expunged.
However, the new law was not devoid of
repercussions. “Exposure to competition led to heavy losses and
conflicts with labour unions for a number of carriers. Between 1978 and
mid-2001, nine major carriers, including: Eastern, Midway, Braniff,
PanAm, Continental, American West Airlines, Northwest Airlines, TWA, and
more than 100 smaller airlines went bankrupt or were
liquidated—including most of the dozens of new airlines founded in
deregulation’s aftermath….” A few, like South West Airlines and Jet
Blue, which adapted to changed times, remained in the sky and
financially buoyant.
Another noteworthy episode of liberalisation and
privatisation occurred in Britain in 1980/81 during the tenure of
Margaret Thatcher. Several large economic units had, since World War II
days, been nationalised by Labour party governments – which derived
immense support from workers and unions. The decision was premised on
the need to keep many citizens gainfully employed, and to stem unrest.
This policy, however, disenfranchised the
Conservative Party during diverse national elections. On the flipside,
it negatively impacted the national coffers. By the time Lady Thatcher,
of the Conservative Party, romped to victory in May 1979, Britain’s
economy was in reverse gear; underpinned by rising unemployment.
Determined to sanitise the economy, she went in headlong for
privatisation of some state enterprises.
Her policies emphasised deregulation, especially
of the financial sector; flexible labour markets; and curtailing the
powers of trade unions. Although she became unpopular, the country’s
economy gradually recovered.
Uganda’s case
Back home, the situation was not very different. Between the late 1950s and 1990s, government was the largest employer of Uganda’s modern labour force; through a myriad of parastatal bodies. However, owing to chapters of political and economic instability – Amin’s Economic War, regime changes, and civil wars – the working ethos of several managers and employees ebbed; especially between the mid-1970s and 1991, leading to virtual collapse of these institutions.
Back home, the situation was not very different. Between the late 1950s and 1990s, government was the largest employer of Uganda’s modern labour force; through a myriad of parastatal bodies. However, owing to chapters of political and economic instability – Amin’s Economic War, regime changes, and civil wars – the working ethos of several managers and employees ebbed; especially between the mid-1970s and 1991, leading to virtual collapse of these institutions.
The plight of these parastatal bodies was
exacerbated by actions of the political kingpins of the day. Ministers
and powerful MPs were wont to order managers to cushion their family and
political expenditures; which often included school fees, weddings,
construction of personal mansions, etc. Often times, these favours had
to be extended to the ministers’ friends and political party supporters.
Interference in the smooth running of these bodies became the norm
rather than the exception.
And, not to be outdone in the apparent free-for-all activity, several parastatal managers threw caution to the wind. They, too, began dipping their fingers in the till. In tandem, junior managers and lower staff lost zeal for honesty and hard work. In the end, many parastatals could neither shoulder running costs nor post profits. Their last resort was constant financial intervention from the government; and yet the government’s recurrent and development expenditure heavily depended on external borrowing!
And, not to be outdone in the apparent free-for-all activity, several parastatal managers threw caution to the wind. They, too, began dipping their fingers in the till. In tandem, junior managers and lower staff lost zeal for honesty and hard work. In the end, many parastatals could neither shoulder running costs nor post profits. Their last resort was constant financial intervention from the government; and yet the government’s recurrent and development expenditure heavily depended on external borrowing!
Fast forward:
A few years down the road, after the NRA/M shot into power, eminent economists in the Finance ministry, in concert with Bretton woods managers, prevailed upon government to swallow the bitter pill and restructure the economy. Among the highlights of the reforms was privatisation and liberalisation of the economy; and downsizing of the civil service and armed forces – albeit with a lot of cursing from thousands that were adversely affected. Many folks who could not retool and seek employment in the changed economic status quo, walloped in poverty.
A few years down the road, after the NRA/M shot into power, eminent economists in the Finance ministry, in concert with Bretton woods managers, prevailed upon government to swallow the bitter pill and restructure the economy. Among the highlights of the reforms was privatisation and liberalisation of the economy; and downsizing of the civil service and armed forces – albeit with a lot of cursing from thousands that were adversely affected. Many folks who could not retool and seek employment in the changed economic status quo, walloped in poverty.
Repatriation law
For purposes of today’s discussion, we shall restrict ourselves to the policy of wooing foreign investors, and lifting the lid off the Capital Account. Under the latter policy, investors were and are still free to plough their money into various sectors of the economy but also free to repatriate their profits; as and when they wish; to either enjoy the fruits of their sweat with their shareholders abroad or re-invest elsewhere.
Privatisation was premised on the need to stem corruption; enhance quality; productivity; and business efficiency which had hitherto taken a back seat over the years alluded to. This imperative, according to government and its external partners would be better understood and implemented to the letter by private sector operators, whose primary interest would be profit. The government, on its part would render a better regulatory framework, security and infrastructure; and above all, allow them to repatriate their profits. A decade after the privatisation exercise, the government had bagged more than Shs400b into its coffers.
For purposes of today’s discussion, we shall restrict ourselves to the policy of wooing foreign investors, and lifting the lid off the Capital Account. Under the latter policy, investors were and are still free to plough their money into various sectors of the economy but also free to repatriate their profits; as and when they wish; to either enjoy the fruits of their sweat with their shareholders abroad or re-invest elsewhere.
Privatisation was premised on the need to stem corruption; enhance quality; productivity; and business efficiency which had hitherto taken a back seat over the years alluded to. This imperative, according to government and its external partners would be better understood and implemented to the letter by private sector operators, whose primary interest would be profit. The government, on its part would render a better regulatory framework, security and infrastructure; and above all, allow them to repatriate their profits. A decade after the privatisation exercise, the government had bagged more than Shs400b into its coffers.
Courtesy of the structural reforms and foreign
investments, economic growth was enhanced. According to various reports,
pro-market reforms and macroeconomic stability resulted in sustained
economic growth. The GDP hovered at an average of six per cent over
several years. Uganda was declassified from the list of failed states
and described as one of the fastest growing economies in the world. The
financial sector was also streamlined and liberalised, leading to entry
more muscled players; as was the case with the telecom industry and
other sectors.
By 10th June 2015, when the National Budget was
read, the GDP stood at Shs75 trillion or $25 billion. Out of Shs23.9
trillion, Uganda could raise Shs11.3 trillion from domestic revenue,
unlike two decades earlier. Part of this money would accrue from taxes
paid by foreign investors. Parliament was told by President Yoweri
Museveni and Finance Minister Matia Kasaija that Uganda’s average growth
rate had stood at 6.6 per cent per annum over the past 29 years.
The writer is a Media Consultant. Email: samobbo@yahoo.co.uk
http://www.monitor.co.ug/Business/Prosper/Has-liberalisation-delivered-Uganda-from-hell--Part-I/-/688616/3215502/-/377mesz/-/index.html
