The Partnership of Development: Lessons from China-Uganda Relations
The Partnership of Development: Lessons from China-Uganda Relations
By Balongoofu Daniel and Ssemanda Abdurahim
China and Uganda share a rich historical background of diplomacy and economic relations. The two countries established diplomatic relations in 1962 which subsequently paved way for trade and economic relations. Bilateral relations between Uganda and China entered a new stage of development in 1986 with bilateral cooperation expanding and mutual high-level exchanges increasing. In both 1996 and 1997, Uganda backed China at the UN Human rights Commission. In 2000, Uganda also supported the bill put forward by China on the maintaining and observing of the anti-Ballistic Missile treaty in the UN. Early this month, the two brotherly countries marked 60 years of diplomatic relations with Chinese to Uganda, Ambassador Zhang Lizhong explaining that the bilateral relationship between the countries are “at their best in history,”
With the expectation of considerable revenue in the future from the exploitation of the oil reserves in Uganda’s Albertine region, there has been a growing demand for the construction of public infrastructure in Uganda which requires substantial financing. To meet her infrastructural needs, Uganda needs to invest an estimate of USD$1.4 billion annually. China has played a significant role in this sector of improving Uganda’s infrastructure sector.
To maximise tourism revenues and facilitate business travels, Uganda embarked on a dual project to expand Entebbe Airport’s capacity and improve connectivity between Kampala and the airport to keep up with the air traffic. Uganda, as a member of the Chinese Belt and road Initiative, has benefited from the Chinese fair and conducive infrastructural financing agreements to low developed countries. China, through EXIM Bank extended a loan of up to USD 670 million which has seen the completion of the Kampala-Entebbe express highway and the completion of the first phase of the Airport expansion. The road was constructed by China Communications construction Corporation, the same firm which carried out the first phase of the airport expansion. The successful completion of these infrastructural projects eases mobility and facilitates cross-border travels of tourists and transportation of commercial goods which in turn grows the country’s revenues and accelerates economic development.
Furthermore, the Sino-Uganda relationship has equally facilitated expansion of Uganda’s electricity supply in an effort to accelerate the country’s industrialisation. China has been involved in the construction and funding of two large dams at Karuma and Isimba. Some analysts contend that Isimba’s 183 megawatts (MW) of capacity brings Uganda’s national total to 1,167 MW. It further estimated that prices would fall from $0.08 per MW to $0.05. Karuma dam adds a tune of 600MW to Uganda’s power sector. The increased power supply fits within Ugandan government targets that by 2040, industrialisation should contribute 31% of the GDP and employing 26% of labour force and contributing 50% of exports as manufactured goods.
Notwithstanding, China’s very low interest and long-term loans extended to Uganda to boost economic growth through infrastructural development, in terms of industrialisation and Foreign Direct Investment, China is a key player in Uganda’s economic development. In the 2018/19 financial year, Uganda Investment Authority performance report ranked China a top Foreign Direct Investor in 2018 with a total investment worth $607million comprising 45.1 percent of the total investment. During the same period in which China overwhelmingly outnumbered other foreign investors, 75.4% of the jobs created were attributed to foreign owned projects. China is also Uganda’s second largest trading partner with the total exports and imports between the two countries totalling to over $940 million annually. These trade and economic relations have significantly raised domestic revenues for Uganda. Uganda’s domestic revenues now contribute a whopping 76.4% to the national budget.
A report by the United Nations COMTRADE database on international trade that analysed trade between the states with statistics in the year 2020 shows that Uganda exports quiet a number of products to the Chinese market that include oilseed, oleagic fruits, grain seed, fruits, plastic, wood products, gums and so many others that totally amounted to US$39.61million. Therefore, with this important aspect in economic growth, Uganda’s economic growth has been greatly fueled by diverse trade the two countries guided by China’s philosophy of win-win cooperation as Beijing works with other countries to build a community with shared prosperity for mankind as well as common development.
The cooperation and bilateral relationship between Uganda and China have so far yielded amazing results. In 2021, bilateral trade volume amounted to $1.07 billion which is an increase of 28.5% in spite of the hurdles caused by the Covid-19 pandemic. Also in 2021, the two countries signed new engineering contracts amounting to $1.43 billion.
In conclusion, all the above points at China’s contribution towards Uganda’s economic development from infrastructure development, to manufacturing and industrialisation, Agriculture and foreign direct investments among others.
Balongoofu Daniel and Ssemanda Abdurahim are Junior Research Fellows at Development Watch Centre
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