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The UIA leveraging backward linkages from foreign affiliates to domestic firms to enhance the benefits from FDI.

A key factor determining the benefits host countries can derive from Foreign Direct Investments (FDI) are the linkages that foreign affiliates strike with domestically owned firms.

Whereas the global business environment has greatly been challenged since the Covid19 pandemic started (late 2019 to date), Uganda has continued to address the business concerns through various stimulus packages to Small and Medium Enterprises continuously reforming policies to support more domestic enterprises while putting more effort attracting Foreign Direct Investment (FDIs).

According to the 2021 World Investment report authored by the United Nations Conference on Trade and Development (UNCTAD), because of the prolonged pandemic,  Uganda’s FDI  flows declined by 35 per cent to $823 million (Shs 2.9 trillion), compared to $1.3 billion (Shs 4.6 trillion) received in 2019. The decline is also widely shared across East African countries. For example, FDI to East Africa dropped to $6.5 billion, a 16 per cent decline from 2019.

The Uganda Investment Authority (UIA), our country’s Investment Promotion Agency (IPA), continues to highlight agriculture value addition, mineral value addition, tourism and ICT as the priority sectors in attracting FDI into Uganda. Furthermore, electronics, edible oil production, pharmaceuticals and infrastructure are also listed as sectors that offer opportunities for foreign investors.

Recently, the UIA reformed the Small and Medium Enterprises Division, renaming it the Domestic Investment Division.

The. Authority’s Director-General, Mr. Robert Mukiza notes that domestic investors are central in transforming Uganda and calls upon Ugandan billionaires to manufacture in Uganda and stop importing goods where raw materials are a preserve of Uganda.

The move is part of the re-engineered focus, deliberate and targeted facilitation of domestic investors. The division will curate and midwife joint ventures between local and foreign investors, according to the board chairman Morrison Rwakakamba. This comes barely after the Authority penned down over $1000 billion worth of investment deals in the ongoing Dubai Expo. Some of these will be joint ventures between foreign and our domestic firms. With a more stabilized investment climate, and enhanced ease in business registration and licensing at the One-Stop Centre, on-going works at the industrial parks, several other incentives and support services extended to qualifying domestic and foreign investors, the linkages will deepen further, strengthening the capabilities and competitiveness of our domestic firms.

The presence of technologically modern investments and joint venture partnerships provides us with access to external technological and skill resources, feeding into our own innovative efforts. The direct effect of these linkages on our domestic firms is generally a rise in their output and employment. As a country, we should continue to facilitate and attract avenues that enhance knowledge, promote production efficiency, productivity growth, managerial capabilities and market diversification.

The 2020 Dubai expo has provided us opportunities to showcase and pitch for Uganda’s bankable projects that are at different stages of development and ready for investment. Our domestic firms should take advantage and pitch for partnerships with foreign firms because the benefits and opportunities are huge.

These projects, according to Mr. Mukiza, can be actualised through public-private partnerships, joint ventures, private or public arrangements … some are greenfield, brownfield or expansion projects.

It’s possible for us to leverage backward linkages from foreign affiliates to domestic firms and enhance the benefits from FDI.

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Angarukamu Ronad
The writer is a Textile Engineer and Industry development expert.

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