Sixty Years of China-Uganda Diplomatic Relations: What are the benefits?

by Admin (Posted on July 5, 2022July 5, 2022)

China and Uganda have a long diplomatic history. Just days after Uganda gained independence, China recognized Uganda as sovereign nation. Consequently, the two countries’ diplomatic journey started. In 1964, China invited and offered leadership training to several Ugandan youth. In the same year, a Ugandan minister Grace Ibingira was also invited to Beijing to discuss how China would support a newly independent country, Uganda.  This visit was followed by Uganda’s Prime Minister, then Milton Obote who held talks with leadership in Beijing that saw China giving Uganda a grant of $3 Million and $12 million loan to help a newly independent Uganda.

Between 1962 and 1985, bilateral relations between the two nations remained steady despite the regime changes in Uganda. Since then, the government of China has continued to provide developmental assistance to Uganda in form of interest-free loans and grants, technical training to Ugandans, supporting Uganda’s health sector and other vital fields of development. To date, one can argue that this kind of assistance between the two is now a tradition.

In a way of reciprocation, during the 26th General Assembly of the United Nations (UN) in 1971, Uganda voted in favor of the resolution on the restoration of China’s lawful seat in the world body.

Bilateral relations between the two countries entered a new stage of development after the National Resistance Movement came to power in 1986, with bilateral co-operation expanding and mutual high-level exchanges increasing. Since then, China’s contribution toward Uganda’s economic and social development has been on rise.

China’s contribution has mainly been directed towards infrastructural development in form of technical assistance, project aid, and business-related services. The sectors that have benefited from this include; transport, agriculture, manufacturing among others.

Today, China is Uganda’s largest source of Foreign Direct Investment (FDI). China’s investment footprint in Uganda became visible as early as 1991 with mostly small-scale restaurants and health clinics. This has transformed significantly over the years with investment now ranging widely from industries in the manufacturing sector to road construction projects.

In developing countries like Uganda, Foreign Direct Investment is a significant source of private finance, accumulation of physical capital and complementing adequate domestic savings. This is key to Economic Development owing to the low private sector capital and investment capacity in a developing country like Uganda. The entry of such investment has played an important role in improving livelihoods of many Ugandans.

China’s investment in Uganda’s industrial sector is also playing a key role in Uganda’s Economic Development. The introduction of several industrial parks such as in Mbale, Kapeeka, Jinja among others present a sample of China’s contribution. It is also estimated that Uganda’s industrial sector has expanded by over 6.2 percent attributed to construction and agro-processing industries and recovery in the mining and quarrying sub-sectors, a role that can be attributed to astute setting up of industries in Uganda by China and its nationals.

China’s contribution to infrastructural development particularly in the areas of transport, energy and Information technology has also facilitated economic development. In transport sector, with funding from Chinese government, Uganda has been able to construct several roads and other important infrastructural projects. For example, the Kampala-Entebbe expressway and Entebbe international airport were constructed with funds from China. Infrastructural development is a major catalyst for economic development.

Furthermore, trade between Uganda and China has also soared which has directly facilitated the economic development of the country. Trade in the form of imports from China widens the tax base of Uganda’s government and is later important in improving the physical quality of life of Ugandans. With further growth in Uganda’s industrial sector bred by China and abilities to trade in finished goods, the market of China also presents opportunities to Uganda and its nationals to achieve even more economic development.

China’s funding of projects in Uganda’s energy sector has addressed the issue of power shortage and high tariffs that initially affected Uganda’s potential and in turn boosted economic development. Key among these Chinese funded projects are the 600 MW Karuma Hydropower plant constructed along the River Nile in Northern Uganda and Isimba hydropower dams. Prior to this ambitious funding, Uganda faced a power crisis whose peak was in 2014 leading the government to resort to using diesel generators to power the country’s economy which raised the cost of power. High cost of power led to increase of prices of commodities which later affected the industrial growth and people in equal measure. Therefore, projects like Karuma and Isimba hydropower dams have been important because industrialization which is earmarked to ensure continued economic development thrives in increased electricity capacities.

It is also important to note that the provision of loans to Uganda to enhance her development is also a way China has contributed to Uganda’s economic development. Although it is often argued that debt cripples an economy, where handled rightly, visible achievements of loans can be enjoyed by a country. Uganda’s relationship with China has facilitated occasional facilities extended through China herself or her financial institutions. A case in point where economic development can be said to have been influenced through loans is a 482.5 million US dollars Isimba Hydroelectricity Power Station project.  The project is now complete thanks to loan from the Export-Import Bank of China which will be repaid over a period of twenty years at a two percent annual interest with a five-year grace period.

It is without a doubt therefore that good diplomatic relations between China and Uganda have not gone to waste. In terms of economic development, Uganda has gained in all aspects. Despite areas that need improvement, the relations between China and Uganda will continue to bear not only economic but also social transformation of Uganda.

Katende Arnold Ricky is a junior research Fellow at Development Watch Centre.

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