An Evaluation of the Role of the Investment Code Act, 1991, in Promoting, Facilitating and Supervising Investment in Uganda

ABSTRACT The study investigates the effect of investment promotion, facilitation and regulation on investments in general and banking as a specific sector in Uganda. Since enactment of the Investment Code Act 1991, there has been no recent serious academic inquiry into the effectiveness of these tools that were put in place. The few studies that exist are very old such as those of Obwona (2000) and Kibikyo (2000). The study uses mostly secondary data and interviews on investments in Uganda. Secondary data and some interviews were used in the research. Analysis was qualitative. The findings show that UIA has been promoting investments through trade fairs, missions abroad and investment conferences since 1991. A number of opportunities exist in the entire economy. Those that have been targeted as priority sectors, however, include agriculture, ICT, Energy, health, education, mining and services such as tourism and finance. In terms of countries, UIA has targeted UK, USA, Kenya (EAC), South Africa, India, China, UAE and Singapore. Problems abound, however. UIA neither provided investors important investment information like geological data and mineral targets that could be used, as a basis for attracting serious investors nor extension services, training and mining equipment. Also, although Tour/cm is number three on the fist of the national primary growth areas of the newly released National Development Plan (NDP) Coming after agriculture and forest,~ it got a miserable amount from the budget. Based on the number of firms licensed, therefore, the promotion efforts were effective belween 1991 and 1995, but since then other factors have determined FDI such as the discovery of oil in the Albertine region and the credit crunch of the 2009. With facilitation, while protection of FDI was in place, the problems associated with the licensing of investors as well as the physical infrastructure in the country needed tackling to impact on FDI inflow. As such, facilitation impacted on FDI inflow in a mixed manner. With the exception of protection, including the swift and equitable resolution of Investment disputes, Uganda fared badly as far facilitation was concerned. Ffrst, Unlike Rwanda where an entrepreneur goes through only two procedures in three days to start a business, in Uganda an investor goes through 18 procedures in 25 days. Uganda was ranked 112th out of 183 world economies surveyed on the ease of doing business. While UIA boasts of a one-stop centre by VI’ housing immigration and tax body in the UIA offices, several other offices were excluded. Further, facilitation was a/so problematic because huge transport infrastructure gaps remain among the leading stumbling block to the integration of EAC into the global economy and constrain the inflow of Fore,~’n Direct Investment (FDI) into the region. Third and last, it seems deregulation influenced FDI inflow in the financial sector. There was a curious relationship between Financial Services phenomenal growth matched by an equally increased growth in investment in Uganda in 2005/06 following the lifting of the moratorium on licensing of new commercial banks in the country. The study recommends: 1) the over ten bodies involved in registering investors, including Ministry of Justice and Constitutional Affairs responsible for business registration, UTA, NEMA, MOFPED, URA, the Ministry of Information and National Guidance (MING), which support information communication technology (ICT), Uganda Tourist Board (UTB) for tourism, USSEA for small and medium enterprises (SME5) and Ministry of Education and Sports for human capacity development in the private sector should be housed under one roof to ease delays in investor registration. 2) there was need to lobby governments in the EAC region to improve transport networks in the Region so as to cut transactions costs. 3) future research to establish a relationship between deregulation in banking with FDI inflow in Uganda in 2005/06 following the lifting of the moratorium on the licensing of new commercial banks.