Economists tell government to boost productivity

What you need to know:

  • Grow. Ugandans have also been advised to expand the size of companies.

Kampala.

Economists have told government to increase productivity in the economy if the country is to attain middle income status within the next four years.
Productivity is the efficiency with which a company or economy can transform resources into goods. Increased productivity means greater output from the same amount of input.

Economists say this is a value-added process that can effectively raise living standards through decreasing the required monetary investment in everyday necessities (and luxuries), making consumers wealthier (in a relative sense) and businesses more profitable.

From a broader perspective, increased productivity increases the power of an economy through driving economic growth and satisfying more human needs with the same resources. Increased gross domestic product (GDP) and overall economic outputs will drive economic growth, improving the economy and the participants within the economy.

While speaking at the 7th National Development Policy Forum organized by the National Planning Authority in conjunction with the World Bank held last week at Kampala Serena Hotel, Dr Allen Dennis, a senior economist macroeconomics and fiscal management at the World Bank Kenya country office, said the benefits of increasing productivity are extremely far-reaching, benefiting participants within the system alongside the system itself.

He noted that productivity in Uganda during the period covering 2002 to 2009 was higher than that of Kenya and Ghana but after this period productivity has since declined Uganda.

He said productivity contributed a lot in Uganda’s economy during 2002 to 2009 it grew by 13.7 per cent, adding that in 2002 there were 5 million wealth created out of productivity and in 2009 productivity stood at 13.77 per cent of GDP.

“Productivity in the retail sector in Uganda was 47 per cent in 2005 and in 2009 it was 57 per cent, however, on the other hand productivity in manufacturing was not increasing it stood 6 per cent in 2002 and declined to 5 per cent in 2009,” Dr Dennis said.

He added: “Uganda should increase productivity in tradable sectors to expand exports and lower imports; Uganda government should increase productivity in agriculture first because it where the country has a comparative advantage in the short, medium and long term.”

From a global perspective, Dr Allen said productivity in US is the highest “Productivity of one person in US is equivalent of the productivity of 32 people in Uganda,” he said.

Professor of Economic and director of Institute of Economic Research, Seoul National University, South Korea Keun Lee said south Korea managed to increase productivity by using intensive technical approaches in agriculture and latter in manufacturing.

In an interview with Daily Monitor, Professor Lee said: “There is need for expansion of the size of the companies to produce more manufacture goods and for employment opportunities for the local citizens. Capital goods – machines, technology, improved techniques – are crucial factors in determining productivity.”

Speaking on the behalf of the World Bank country manager Uganda, senior economist Rachael K. Sebudde said Uganda’s economy is still growing positively, but vulnerabilities remain.

The economy has faced tests over the past five years, as growth slowed down to 4.5 per cent on the back of several shocks, key among which the crisis in South Sudan and the global economic volatility, both of which affected the external sector performance, and in particular export performance.

“This notwithstanding, the economy could recover to historical growth rates as long as government’s pro-growth policies realize efficiency and productivity improvements, and oil resources create economic opportunities. However, Uganda’s external position is expected to remain weak, with growth of exports failing to offset fast rising imports, hence leading to an increasing external imbalance or deficits,” she said.

She revealed that by last year, the value of exports stood at 18 per cent of GDP, compared to 16 per cent ten years ago.
“Uganda needs a renewed growth momentum to reduce its vulnerability to external shocks and to boost growth and jobs creation in order to achieve its vision of reaching middle income status soon,” she said.

The director planning National Planning Authority, Dr Patrick Birungi, who presented the paper titled “Unlocking Uganda’s Export potential to facilitate the realisation of the middle income status” said Uganda’s issue is supply sided.

“Prioritising value addition across the various commodities and products, develop and promote Uganda export commodity standards and brands: particularly in coffee and Tea, consolidating and maximizing government financing efforts, establishing an export development funds consolidating the existing ones and re-aligning it with the existing one in the budget can play a key role driving up Uganda’s export,” he said.

Agriculture
Stabilising prices. Dr Allen explained that improving agricultural productivity keeps farmers competitive, helps increase agricultural commodities for export in the international market and helps stabilise food prices in the particular nation and world food prices as well.

He said for low-income countries like Uganda, where most of the population depends directly on farming for their livelihood, raising the productivity of their farms provides a direct pathway out of poverty. It also promotes broader economic development by releasing resources from agriculture to other sectors while keeping food affordable for the growing non-farm population.

However, he said increasing productivity should not be only in agriculture but other sectors as well as the economy expand.