Sunday June 15 2014

Note to ministry of Finance on Budget

By Timothy Kalyegira

Here’s a question: If you were the Ministry of Finance of Sweden in 1979 and your technocrats were drawing up the annual government budget, would you allocate the bulk of the budget to a) the car and truck maker Volvo, b) the agricultural sector, c) building roads, d) the Pop music quartet ABBA, d) education?

Second question: If you were in the Office of the Budget in the United States in 1999 and were planning the financial year, would you focus your dollars on a) the agriculture sector, b) social security ,c) a new technology company called Google, d) renovating the run down inner cities of Boston and New York?

If I were Sweden’s Ministry for Finance in 1979 and in the US Office of the Budget, I would pour money into d) for Sweden and c) for the United States. That is because I would be looking at an unusual source of national growth, so different from traditional industry and sectors like agriculture.

In 1974, the Swedish Pop music band ABBA won the Eurovision song contest and went on to become one of the world’s most successful music acts of all-time, in record sales second in history only to the Beatles from Liverpool in England.

In 1979 at the height of their international success, ABBA earned more for Sweden from the sales of their record albums and singles than even the giant Swedish car and truck maker Volvo.
In 1998, two PhD computer students at the University of Stanford in the western United States, Sergei Brin and Lawrence Paige, dropped out of their studies and founded a new Internet search engine that they called Google with $100,000 in venture capital from a California investor.
They had discovered a way to rank and index the millions of queries that Internet users were entering into the various search engines.

Rather than bring up results at random as search engines like AltaVista, Excite and Lycos had been doing, Brin and Paige developed a mathematical formula called an algorithim by which results for a particular inquiry could be ranked in descending order from most relevant and rich with information to least relevant.

By 2004, Google had become the world’s largest search engine, today is the most visited website of any kind anywhere in the world and its market valuation as of Friday June 13, 2014 was $371 billion, the equivalent of 11 Kenyan economies.

The reason I bring up these two examples of ABBA from Sweden and Google from the United States is because as in nearly everything else, Ugandan society, including its political and policy-making leaders, still does not think in sufficiently creative ways.

The Minister of Finance, Maria Kiwanuka, at a working lunch on June 13, 2013 with major corporation executives whose companies are among the largest taxpayers in Uganda, admitted that the government has the money but its problem is in its inability to get anything done.
President Museveni said as much during his State-of-the Nation Address on June 5, 2014. A BBC World Service Business Daily programme last week also discussed the puzzling fact that most African countries, even when they have the money, can’t seem to know what to do with it.

If I wrote to the Ministry of Finance and requested that instead of giving the Ministry of Works and Transport the proposed Shs2.57 trillion it has been allocated, Shs50 billion should be taken off that Shs2.57 billion or off the proposed Ministry of Agriculture budget of Shs440.7 billion and given to me to help develop an Internet idea, I’m sure I would be dismissed as ridiculous by most “right-thinking members of society”.

In our mindsets, the purpose of government planning and allocation of resources is utilitarianism, in the vein of the British philosophers Jeremey Bentham (1748-1832) and John Stuart Mill (1806-1873).

The philosophy holds the view that the role of government is to bring the greatest happiness and good to the greatest number of people, the belief that resources and the right of way belongs to the majority. This outlook has run through all Ugandan governments since independence: money is more likely to be thrown at general sectors like health and UPE than target a highly-motivated and skilled few.

Fall of Naads
This year, the National Agriculture Advisory Services (Naads) was officially declared a disastrous failure, after so many billions of shillings were sunk into it over the last several years.

And, as residents of Bundibugyo District in western Uganda have discovered, the construction of a new, high-grade tarmac road from Fort Portal to Bundibugyo has not stimulated the economic activity they had expected or been promised.

Naads on paper was a good idea but has ended up neither helping the local subsistence farmers it was intended for, nor earned the government a return on investment.
Who knows what would have happened if I or the Ugandan music industry had been given just a fraction of that money. Ugandan musicians are much more driven, innovative and competitive than peasants in the rural areas. The British music industry, after all, earns more for the country than its agricultural sector.

Blind eye?
Uganda’s Information and Communications Technology (ICT) sector --- the very sector now changing and driving the modern world --- has been budgeted the smallest amount in the 2014/2015 budget, a mere Shs15.4 billion.

To think that Uganda government planners cannot see the meteoric rise of the Internet (Google as of February 2014 overtook the giant oil company ExxonMobil to become the second largest company in the United States by market value), tells us just what a crisis we have in our country.
That’s why my question to the Ministry of Finance planners: in drawing up a budget what should take priority, the largest section of the population or the most productive and promising section of the population?

Are you looking simply to alleviate poverty or to grow the economy and make it competitive?
Who is more likely to impact an economy, a highly skilled, highly motivated, highly organised few or thousands of small-scale, low-skill rural farmers?