Nuwagaba/GLOBALIZATION.COMPETITIVENESS AND POVERTY REDUCTION 
Globalization and competitiveness: implications for 
poverty reduction in Uganda 
AUGUSTUS NUWAGABA1 
ABSTRACT 
The paper focuses on the interface between globalization and poverty 
reduction in Uganda, beginning with the advances in information 
technology that have transformed the globe into a virtual village. The 
paper presents the macroeconomic framework that has characterized 
the global economy and its distorted benefits to developing countries. 
The exchange parity between exports and imports in both factor and 
product markets has been skewed against poor countries such as 
Uganda, exacerbating rather than reducing poverty. It is argued that 
globalized markets require a competitive capacity that the Ugandan 
economy does not have. It is because of this that most sub Saharan 
countries , including Uganda, have globalized through systemic 
shocks rather than making use of opportunities. Global competitiveness 
is, however, inevitable if the Ugandan economy is to catch up 
with global trends and patterns. Globalization can lead to adverse 
effects if poor countries open their economies without thinking. 
Globalization must be cautiously embraced if development is to be 
sustainable. 
1.0 Background 
A FEW CENTURIES AGO the world seemed infinite. Separated by mammoth 
oceans and seas, communication between peoples of different 
continents was minimal. Historical evidence shows that a recently as 
the year 1900, many nations were not aware of the existence of others. 
All this has changed dramatically mainly as a result of improvements in 
1 Department of Social Work and Social Administration, Makerere 
University, Kampala, Uganda. 
VOL 16 NO 2 JULY 2001 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA 31
technology. With improved and faster means of transport, the more 
advanced communities embarked on exploration, empire-building, 
conquests, evangelization and trade in other territories. In Africa the 
most vivid experience of globalization was through slavery, characterized 
by the exploitation of African labour in the Americas, Europe and Asia. 
A more recent globalization phase brought colonialism to almost the 
whole of the African continent and, indeed, to many other countries. 
The colonial forces also brought ideas and ideologies that have become 
difficult for former colonies to resist. Consequently, while the formations 
of the colonial state have been physically replaced with indigenous 
governments in most developing countries, the ideological inputs have 
remained in place. It is generally recognized that this was the beginning 
of what is currently referred to as globalization. 
The late twentieth century has been characterized by global 
competition ftielled by the explosion in production, information and 
communications technology (Gustaner et al., 1986). The concept of a 
global village refers to the vastly increased interaction among countries. 
This is manifest in the areas of communication, trade, politics, tourism 
and so on. The Internet, e-mail, telephones and rapid air transport, 
coupled with greater cooperation, have reduced the entire globe to 
what is virtually a village. In addition, the end of the Cold War between 
the Western and Eastern blocs has seen a marked improvement in 
interaction amongst these previously-opposed blocs. Liberalization 
policies in numerous countries and the formation of such global bodies 
as the United Nations and its many agencies, the World Trade 
Organization (WTO), the International Monetary Fund (IMF) and the 
World Bank have enhanced collaboration among countries. However, 
globalization has increased competition among individual countries in 
the international market. It is this question and its implications for an 
underdeveloped country like Uganda that this paper attempts to address. 
2.0 Competitiveness 
THIS PAPER FOCUSES on two main aspects of competitiveness, namely; 
competition to attract foreign capital and competition to sell exports in 
32 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA VOL 16 NO 2 JULY 2001
Nuwagaba/GLOBAUZATION.COMPETITIVENESS AND POVERTY REDUCTION 
international markets. For purposes of this paper, the countries of the 
world may be divided into three categories: 
2.1 Industrial first-world countries 
These are characterized by industrial economies with high levels of 
technology; a high per capita income and high standards of living. 
These include, inter alia; countries of the G82 such as the USA, Germany, 
the United Kingdom and Japan. 
2.2 Industrializing countries 
These include countries that are rapidly industrializing; mainly as a 
result of technological transfer from industrialized countries. These 
countries are characterized by an increasing income per capita. They 
include among others, the Asian Tigers; Hong Kong, Taiwan, Singapore 
South Korea, Thailand and part of East Europe such as Czechoslovakia. 
2.3 Developing countries 
These constitute largely agricultural or mining-based economies. Low 
per capita income and pervasive poverty characterize them. They include 
most African countries especially sub Saharan Africa, most of west 
Asia and many countries in Latin America. 
3.0 Globalization: the current trends 
The end of the Cold War and the birth of globalization 
POLITICAL IDEOLOGY, PREVIOUSLY spearheaded by the United States of 
America and the former Union of Soviet Socialist Republics, had created 
a world polarized between the former, capitalist, bloc and the latter, 
socialist one. Political differences were intensified by the different 
economic policies pursued by these countries, together with their 
theories and practice of governance and their sociopolitical institutions. 
International relations followed the ideological divide. While other 
relatively developed countries gained, possibly as a result of economic 
independence, sub Saharan Africa lost out because these countries 
were exploited and political manipulated by the relatively well-developed 
countries. Examples here include the former Zaire, Somalia, Burundi, 
Ethiopia, Angola, Malawi and the Central African Republic. 
2 The former G7 have now incorporated Russia as a member. 
VOL 16 NO 2 JULY 2001 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA 33
Uganda fell prey to this ideological polarization and experienced coups 
d'&at just like many other African countries. In the same way, countries 
like Korea were polarized so that people were forced to denounce their 
blood relatives for the sake of ideology. This dogmatic behaviour is 
increasingly fading due to increased globalization. 
The forces of globalization have shown that the way to progress is 
not to take refiige in ideological slogans but to work toward improving 
relations. It is gratifying to note that North Korea have shown willingness 
to cooperate with the South and that the previous hatred and ideological 
rift in the Peninsula is thawing. Progressive international cooperation 
should be directed at spearheading mutual benefits among the players. 
The current trends of increased globalization have, however, 
provided unequal economic opportunities, resulting into unfavourable 
terms of trade among countries. This refers to the exchange parity 
between exports and imports of different countries in the international 
market. Not only have the terms of trade for the developing world been 
poor but they have been declining over the past three decades (UNDP 
1995). The industrial economies have, on the other hand, become 
increasingly competitive with favourable terms of trade, as will later be 
discussed. The chief reasons behind these trends include: 
Technology 
IMPROVEMENTS IN TECHNOLOGY in industrialized countries have enabled 
them to produce massively and at reduced unit costs. Production takes 
place in hi-tech factories with a decreasing unit cost of inputs. This has 
influenced the terms of trade of industrialized countries favourably in 
international market. 
Synthetics 
THE INDUSTRIALIZED WORLD has now found substitutes for raw materials 
previously exported by developing countries, including substitutes for 
rubber and cotton. The substitutes are supply elastic and have a longer 
shelf life than natural materials. 
Infrastructure and communication 
GOOD INFRASTRUCTURE ENSURES that the costs of production and 
distribution are cheaper. This facilitates mobility and enlarges markets 
and it has opened virtually the entire globe to commerce and business. 
34 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA VOL 16 NO 2 JULY 2001
Nuwagaba/GLOBALIZATION,COMPETITIVENESS AND POVERTY REDUCTION 
Poor utilities ensure poor returns on capital and vice versa. The betteroff 
industrializing world has become a fierce competitor due to its 
improved communication systems, financial services, and utilities such 
as energy and road networks. 
On the side of capital, most of the competition for the developing 
world has come from the fast-industrializing second world. Increasingly, 
bilateral, multilateral and private capital finds its way into the promising 
areas such as Eastern Europe and the Asian Tigers rather than Africa or 
the least developed countries of Asia (World Bank 1996). The lack of 
competitiveness among developing countries has been engendered by 
such factors as: 
• Political instability. Political liberalization has been sine qua non 
of globalization. But much the developing world, particularly sub 
Saharan Africa, has been very volatile politically and our countries 
are characterized by civil strife and turmoil. This has repelled foreign 
capital, which has found its way to countries in Eastern Europe 
where investment is perceived to be relatively secure.3 
• Market size. Developing world local markets are notoriously small, 
despite their huge populations. The people in such countries do 
not demand goods because they are poor and have no purchasing 
power. It is because these markets are so small that some efforts 
have been made to harness regional markets such as the Common 
Market for Eastern and Southern Africa (COMES A), SADC, and the 
Economic Community of West African States but many of these 
economic unions have been bedevilled with political bickering 
among the countries concerned, resulting in break-ups, as in the 
case of the East African Community (EAC) in 1976, or lack of 
commitment by some country members. Investors have therefore 
shunned such countries. 
3 Take, for example, Uganda's case where the military junta under Idi 
Amin unilaterally expelled the whole Asian community from 
Uganda and expropriated their property in 1972. The turmoil in 
Somalia, DRC, in Sierra Leone, Liberia and Chad, scares off wouldbe 
investors. 
VOL 16 NO 2 JULY 2001 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA 35
4.0 Poverty reduction policies in Uganda: the role of MAPs 
UGANDA IS ONE OF THE least developed countries on the globe. With a 
population of about 21 million and a paltry per capita income of USS240 
per annum, the country has been classified as the ninth poorest country 
on the globe (World Bank 1999). Empirical data shows that about 60% 
of the population are found below the poverty line. About 45% are 
illiterate and only 52.3% have access to medical facilities (Ministry of 
Health, Uganda, 1999). There is a shelter deficit of 42,000 units and 
homelessness and destitution are not uncommon (Nuwagaba 1997). 
The country's economy hinges on agriculture, which contributes over 
80% of the exports and 67% of employment and provides a livelihood to 
over 90% of the population (Ministry of Finance, Planning and Economic 
Development, 1997). The main crops include coffee, tea, tobacco and 
cotton. There are also nontraditional exports and food crops like maize, 
fruits, vegetables and beans. The agricultural sector is characterized by 
a rudimentary technology in which the hand hoe is the main tool on 
smallholder farms. About 88% of the population is rural and subsistence 
agriculture is the main activity. 
The current poverty in Uganda cannot be understood without 
describing the sociopolitical upheavals that have bedevilled the country 
over the last three decades. During the 1970s the Ugandan economy 
virtually atrophied. This period was characterized by political turmoil, 
civil strife, intrigue and the collapse of political and economic institutions. 
The decline of institutional structures resulted into the collapse of the 
industrial sector and subsequently mass unemployment and massive 
macroeconomic disequilibria. 
It is against this background that the country adopted the structural 
adjustment programmes (MAPS) in early 1980s. The goal was to make 
the Ugandan economy competitive again on the world stage and the 
programmes were meant to correct the structural bottlenecks and 
economic disequilibria that had arisen due bom to increased importation 
and increased government expenditure against the backdrop of declining 
exports and government revenue. This was a dramatic change from the 
period after independence where the economy was buoyant and 
promising. Then there were healthy foreign reserves, exemplary social 
36 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA VOL 16 NO 2 JULY 2001
Nuwagaba/GLOBALIZATION,COMPETITIVENESS AND POVERTY REDUCTION 
services, especially in health and education, growing industrial and 
commercial sectors, a good standard of living and stable economic 
growth (Jamal 1985). Equally well documented is the economic 
mismanagement, tyranny and decadence of the subsequent period up 
to the mid 1980s (Mamdani 1992). The result of all this was the socioeconomic 
regression that created widespread poverty. 
In 1986 the National Resistance Movement (NRM) came to power. 
In 1987 they initiated stabilization and adjustment programmes under 
the auspices of the Bretton Woods twins; the World Bank and the 
International Monetary Fund (IMF). Such programmes go with 
conditionalities like desubsidization, wage freezes, devaluation, 
deregulation and drastic cuts in government expenditure. They demand 
tight budgetary discipline to promote prudent financial management 
and the subsequent growth of the economy. To date, the measures 
implemented in Uganda include: 
• Devaluation of the currency; 
• Reforms of the civil service; 
• Privatization of public enterprises; 
• Liberalization of trade, including financial markets and commodity 
trade; 
• Cost-sharing in social services, especially education and health. 
The measures are based on the principles of laissez faire economics, 
which, if not carefully handled, cause poverty. Both the proponents 
and the critics of these programmes agree that in the short run, the 
impact of the measures has been the impoverishment of the masses 
(Oxfam 1992). The proponents argue that this is worthwhile in return for 
longer-term improvements while critics maintain that the initial poverty 
is not worthwhile, given that the anticipated long-term benefits may 
take too long to produce gains. The following measures in particular 
have contributed to the escalation of poverty among Ugandans: 
4.1 Civil service reform 
Civil service reform has aimed to improve efficiency among civil servants 
on the assumption that retrenched personnel would be absorbed in 
development anticipated in the private sector. This did not happen, as 
a former employee of Uganda Grain Milling Company asserts: 
VOL 16 NO 2 JULY 2001 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA 37
When they retrenched us, the government assured us that we 
would eventually be absorbed in the private companies but 
this has not worked. We are here unemployed with not even 
money to ensure daily meals for our families. 
Another retrenched person from Lira Hotel in Northern Uganda remarked; 
Our households depend on only one adult breadwinner and 
now my family has no one to depend on. It is like the head of 
the family has died....Our children are very disturbed about 
the way things have changed. 
When people think about the good old days, they feel the current 
policies are wrongly conceived and cannot lead to any better situation. 
The above assertion is reiterated by Mabogunje (1990) who observes; 
Everywhere in sub-Saharan Africa poverty has increased 
despite the macroeconomic policies meant to revitalize the 
economic performance of these economies. 
Currently about 170,000 people have lost their jobs (Ministry of Public 
Service, 1998). The growth of the private sector has been too slow to 
absorb the retrenched civil servants culminating into widespread 
unemployment and retrenchment is a common household experience 
that has contributed to the burgeoning numbers of the urban poor 
(Nuwagaba 1999). 
4.2 Demobilization of soldiers 
From 1990-1997 up to 40,000 soldiers were demobilized (Ministry of 
Finance, Planning and Economic Development 1999). Demobilization 
was implemented to rationalize defense expenditure in conformity with 
trends in other countries. The major safety net of the demobilization 
programme was the Veterans Assistance fund, which provided seed 
capital to demobilized soldiers to help them embark on development 
projects in their home areas. However, studies (Seguya 1999) have shown 
that due to lack of skills and other problems, such as a lack of alternative 
sources of income, most of this seed capital has been diverted into 
basic necessities such as food and shelter. As a result most demobilized 
38 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA VOL 16 NO 2 JULY 2001
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soldiers are roaming the streets of Kampala as journeymen, shoe-shiners 
and wheelbarrow pushers. As indicated by Nuwagaba (1999), these 
soldiers, given their lack of skills, have found it difficult to be absorbed 
in civilian employment. 
4.3 Cost-sharing 
Up to 1993, social services like health and education were free, as their 
provision was the responsibility of the State. Since 1993, user charges 
were introduced in the health and education sectors to cover the 
increasing costs of the services (Nuwagaba and Lucas 1999). This policy 
emanated from the World Bank poverty paper (World Bank 1987), where 
it was stated that poor countries, especially in sub Saharan Africa, 
could no longer provide health and education services for free, when 
other countries, including developed ones, had to provide such services 
under a cost-sharing arrangement. 
The introduction of this cost-sharing policy encountered great 
resistance from the local populace, who questioned the logic of the 
policy since the people were already paying tax. "Won't it amount to 
double charging?" they questioned. Many countries had privatized 
these services to improve quality and efficiency in service care delivery. 
However, such privatized services and the subsequent improvements 
in quality are practicable only in relatively high-income societies where 
the population can afford to pay (Nuwagaba and Lucas 1999). In some 
countries such as Ghana and Kenya, introduction of cost-sharing in 
health has resulted in the decline in utilization of health facilities (Mbugua 
1993). 
4.4 Liberalization 
The most important aspect of liberalization has been the freeing of 
commodity trade. Markets have been opened up to potential importers 
and exporters and previous marketing boards such as the Uganda Coffee 
Marketing Board (CMB) and the Lint Marketing Board (LMB) were 
liberalized. While this has had numerous positive effects like an 
abundance of commodities, it has also led to the marginalization of local 
business due to foreign competitors. This is because young domestic 
industries have found it difficult to compete with imported products 
that are relatively cheap. Similarly, the policy has not helped to improve 
VOL 16 NO 2 JULY 2001 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA 39
the ever-deteriorating price of commodities such as coffee and cotton 
on the world market. 
4.5 Tight fiscal and monetary policies 
The fiscal regime in Uganda has been reformed and fiscal measures 
tightened. High tariffs have been put in place and government has been 
very stringent in its expenditure. It often even fails to pay its local 
suppliers, in the name of controlling the money supply to keep inflation 
low. These have continued to make it difficult to earn disposable income, 
thus reducing effective demand for goods and increasing the economy's 
negative growth rate. The objectives of a tight fiscal policy and wage 
freeze have been to avoid deficit-financing, so that the budget is 
prudently managed. While such interventions may have been wellintentioned, 
the anticipated results have been thwarted by the galloping 
inflation that has persistently eroded the purchasing power of wageearners. 
Real wages have, therefore, been eroded as persistent hikes in 
consumer prices result from inflation. 
5.0 Globalization or impoverishment: the missing link 
THE PROCESS OF GLOBALIZATION appears to be irreversible. Indeed, it is 
almost universally hailed as the receipe for growth. Increasing interaction 
among countries in commerce, politics and even culture is slowly turning 
the world into one big family. This interaction can be divided into two 
phases, namely the semi-global (regional) phase and the actual global 
phase. 
5.1 Regional phase 
This phase is characterized by economic cooperation pacts amongst 
various regional blocs. They include the EEC in Europe, Association of 
South East Asia in Asia, Economic Community of West African States 
in West Africa and Common Market for Eastern and Southern Africa, 
the East African Community and the Southern Africa Development 
Community in Eastern and Southern Africa. The main objectives of 
these regional blocs is to promote trade and economic cooperation 
amongst member countries, together with other objectives such as 
cooperation in defense, culture and education. In the longer term, 
40 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA VOL 16 NO 2 JULY 2001
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political union is often mentioned in the respective charters of these 
associations. 
By their very nature, these associations are formed along 
geographical lines within a particular region. Other considerations 
include historical background, economic aspirations and political 
ideology. However, while political ideology used to play a major part 
during the Cold War, it has now assumed a lesser and lesser position. 
5.2 Global phase 
This is characterized by increased interaction among countries, regions 
and continents regardless of location or distance between each other. 
This interaction has been greatly enhanced by advances in technology. 
It is manifest in the mammoth scale and diversity of international trade, 
bilateral agreements, world tourism, technology transfers and the 
liberalization in the world economy. 
Unlike the regional phase of globalization, this phase is unplanned. 
Indeed, many regional blocs have been formed to help member countries 
survival within an increasingly competitive global environment. They 
are therefore largely a product of globalization itself. However the 
regional blocs have also served as catalysts to accelerated globalization. 
5.3 Poverty implications 
Whether regional or on a worldwide scale, globalization has serious 
implications for the least developed countries like Uganda. These largely 
hinge on the question of the increasing the competitive capacity of 
these countries. We shall here look at the major issues at stake. 
Capital: In an increasingly open world, investment capital tends to be 
attracted to fast-growing countries with developed communication, 
infrastructure and relatively higher demand for goods within the 
population. This retards the investment share in slow-developing 
countries like Uganda with poor infrastructural services and a lowincome 
population. Because of low investment, the Ugandan GNP per 
capita has been declining over the period 1980 to 1994 with only a slight 
improvement between 1994 and 1998. Table 1 shows the trends in growth 
of foreign direct investment and corresponding GNP per capita. 
VOL 16 NO 2 JULY 2001 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA 41
Table 1: Foreign direct Investment and trends 
in GNP per capita: Uganda 
1980 1985 1992 1993 1994 1995 1996 1997 1998 
Foreign direct 
Investment 
(US$ millions) 42 30 2 4 5 - 121 180 
GNP per capita 
(US$) 440 160 260 200 190 240 - 320 320 
SOURCE: THE GLOBAU COALITION FOR AFRICA (1995), THE WORLD BANK (1999) 
As indicated, the growth in foreign investment has declined over the 
period 1980to 1994 with only slight improvements from 1994 to 1998. 
The major reasons seems to be political instability, poor infrastructure 
and lack of effective demand among the population (Jamal 1985). 
Terms of trade: Agricultural and raw-material producing countries, 
which are usually the least-developed, have been facing declining terms 
of trade. With expanded markets and a greater number of substitutes 
that come with globalization, the exchange value per unit of exports4 of 
these countries has been fetching less and less. Table 2 indicates the 
trends in Ugandan terms of trade over the period 1986-1998. 
The declining terms of trade and subsequent poverty have led to 
international social exclusion. Which country in the developing world, 
especially in Africa, may be given the opportunity to stage world events 
such as the World Cup or the Olympic Games? The major reason given 
has always been that poor countries do not have the capacity to hold 
such events. The irony, however, is that events such as the World Cup 
are accompanied by multimillion dollar injections in the local economy. 
4 See, for example, the declining price of Uganda coffee between 
1995 and 1999 from US $0.8 per kg to US$ 0.3 per kg. Most 
raw materials are demand-inelastic and subject to drastic fall in 
prices on the world market. 
42 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA VOL 16 NO 2 JULY 2001
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Table 2: Trends in terms of trade and 
balance of payments 
1992 1991 1990 1986 1993 1998 1996 
609 246 389 333 206 195 199 
1193 582 671 676 446 893 753 
Indicator 
Exports (GNFS) 
US$ million 
Imports (GNFS) 
US$ million 
Current private 
transfers 
US$ million 397 304 101 78 241 136 81 
SOURCE: BANK OF UGANDA, 1995; MINISTRY OF FINANCE AND ECONOMIC PLANNING, 1999. 
NOTES: GNFS DENOTES GOODS AND NONFACTOR SERVICES. THE BALANCE OF PAYMENT REFERS 
TO THE INDEX FOR MEASUREMENT OF TERMS OF TRADE. POSITIVE BALANCE OF PAYMENTS 
VALUES MEANS FAVOURABLE TERMS OF TRADE (MORE EXPORTS THAN IMPORTS) WHILE 
NEGATIVE VALUES MEANS MORE IMPORT RECEIPTS. IFS US$/LC) DENOTES LOCAL 
CURRENCY UNITS. AN INCREASE IN LCU DENOTES APPRECIATION. 
The table indicates unfavourable terms of trade as import invoices have 
far exceeded the export receipts over the whole period 1986 to 1998. The 
current account balance has consequently been negative over the 
period. The country has spent more in imports than it has earned resulting 
into the deficit of balance of payments. It is because of this deficit 
financing that government has reduced public expenditure, increased 
taxes and introduced cost-sharing in social service delivery. All this 
has been done to promote prudent financial management. As a result 
the poor cannot afford to pay for such services as health and education. 
This has affected poverty alleviation efforts since the government is 
constantly deprived of resources. Government does not have the 
capacity to provide essential services as it runs a deficit budget. 
Local industries: Most poor countries can boast of only an infant 
industrial sector. This sector, however infant, is often one of the major 
pillars of poverty eradication. These industries provide employment, 
markets for local raw materials and substitutes for imports. Liberalization 
and globalization often kills these budding industries through 
uncontrolled imports. Relatively cheap imported products fuel the 
VOL 16 NO 2 JULY 2001 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA 43
poverty cycle since they curtail local industries which are unable to 
compete. This results in unemployment and poverty. 
This argument should not be misconstrued as supporting unviable 
classic protectionism—the imposition of high tariffs on imported goods. 
Classical protectionism is likely to hurt the consumer since in this 
formula the consumers have to subsidize local manufacturers. The only 
way forward seems to be to increase exports and control imports. The 
economy ought to develop a reasonable competitiveness. Measures 
such as protective tariffs can only postpone that day when the Ugandan 
economy can stand on its feet. 
Technology: Technological innovations invariably go hand in hand 
with competitiveness. In the quest for profit maximization, foreign 
investment cannot be expected to consider local needs and conditions. 
In poor countries like Uganda where labour is abundant, many of the 
new investment companies employ capital-intensive technologies with 
complete disregard for the availability of labour. The result is 
unprecedented unemployment levels currently estimated at 60% of the 
labour force (Ministry of Finance, Planning and Economic Development 
1999). The influence of unemployment on poverty levels requires no 
emphasis. 
Dependence: Globalization has intensified the dependence of developing 
countries on the more developed economies. Many of the former 
countries survive on loans and grants from the latter.5 
Table 3 shows the trends in growth of external debt over the period 1980 
to 1999. 
The existence of such a large foreign debt means that more money is 
required to service the debt regularly. The table shows the debt service 
ratio between 1991 and 1999 and indicates that a substantial proportion 
of export earnings are spent on debt-servicing, exacerbating the balance 
of payment crisis. 
Uganda has benefited from the Highly-Indebted Poor Countries 
(HIPC) initiative through which debt relief has been extended to it. 
5 Uganda finances 90% of its development budget from grants 
from both bilateral and lateral organizations ( MFEP 1999). 
44 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA VOL 16 NO 2 JULY 2001
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1994 1995 
2488 2284 
371 343 
404 
3375 
26.4 
424 
3170 
45.6 
381 
2682 
69.5 
Table 3: Tiends In growth of external debt and 
debt servicing 1992-1999 
1992 
1775 
1993 
1843 
282 
Multilateral 
Institutions 
Bilateral 
institutions 
(Paris Club) 273 
Bilateral 
institutions 
(non-Paris Club) 378 
2667 
59.7 
TOTAL 
Debt servicing 
as % of 
exports 
However, it should be noted that, while this initiative is a welcome one, 
in the short run it will not stimulate growth and development. If a country 
takes on a loan, then it is obliged to pay it back. No county can survive 
on the savings of another and no country should deceive itself that it 
can leap forward on the basis of relief from another country. The sooner 
this bitter truth is realized by developing economies, the better. As the 
classical theorists have argued, "Development is a process that can 
only be initiated from within, it can only be propelled from outside 
(emphasis supplied). 
Ugandan economic managers may appreciate the efforts of HIPC 
but should accept that this is just a stopgap. The real initiatives for the 
leap forward must be strategic policies that will revamp the economy 
through competitive exports, a regime of suitable governance, efficient 
SOURCE: IMF STAFF ESTIMATES; WORLD BANK 1996, GoU, 1995, GoU, 2000 
NOTES: THE ABOVE DATA MAY NOT CORRESPOND TO THE WORLD BANKS DEBTOR REPORTING 
SYSTEM DUE TO DIFFERENCES IN CLASSIFICATION OF CERTAIN CREDITORS. THE DEBT 
HAS GROWN DUE TO THE NONREPAYMENT OF THE PRINCIPAL AS WELL AS INTEREST 
CHARGED ON ARREARS. 
1998 
2827 
325 
VOL 16 NO 2 JULY 2001 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA 45 
1999 
2783 
1996 1997 
2763 2655 
339 351 288 
362 
3510 
28.9 
462 
3664 
33.7 
457 
3658 
23.2 
401 
3512 
24.1
Table 4: Growth of real per capita income in high 
income and developing countries 
(average annual % change in real per capita GDP) 
1960-1970 1970-1980 1980-1990 1991-2000 1990 1991 
-0.2 -0.2 1.2 
-0.9 -0.2 -1.0 
2.9 
-0.3 
2.1 
5.7 
3.1 
2.2 
1.6 
1.6 
2.1 
4.6 
2.6 
-2.4 
-1.9 
-8.3 
3.0 
0.9 
2.1 
4.6 
1.1 
3.1 
3.1 
5.4 
0.7 
5.6 
1.5 
0.6 
-4.6 
14.2 
2.4 
6.3 
3.1 
-0.5 
-2.5 
0.9 
All developing countries 
Sub Safiaran Africa 
All high Income countries 
East Asia 
Latin America 
Middle East 
North Africa 
Eastern Europe 
3.3 
0.6 
4.1 
3.6 
1.4 
2.5 
6.0 
5.2 
SOURCE: THE WORLD BANK, 1992 
management and instituting an infrastructural capacity capable of 
sustaining the economic sector. As a result of heavy debt-servicing 
few, if any, reserves remain for investment and capital formation. This 
results in the lack of basic services due to the lack of capacity to finance 
the services. It is because of this that the social services have been 
funded through grants. This does not auger well for the poor. 
Macro policy: As already explained, this has been one of the most 
important poverty-related implications of globalization. Full scale 
liberalization, retrenchment, wage freezes, cost-sharing and tight fiscal 
and monetary policies have impoverished a whole cross-section of the 
Ugandan population. These measures are result of globalization—an 
attempt to make Uganda competitive on the world stage, at least in the 
long run. However, at present poverty has reached alarming proportions 
with a decline in real per capita income in developing countries, as 
indicated in Table 4. 
• While real GDP per capita in sub Saharan Africa is in decline there 
has been positive change in real GDP per capita among developed 
countries. The result of declining real per capita income is a 
corresponding decline in standards of living and subsequent poverty, 
46 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA VOL 16 NO 2 JULY 2001
Nuwagaba/GLOBALIZATION.COMPETITIVENESS AND POVERTY REDUCTION 
in Africa in general and Uganda in particular. The causes of this 
decline include: 
• Declining export prices and the falling domestic production of export 
commodities; 
• A crisis of confidence in government and an erosion of institutional 
capacity. 
Most sub Saharan African governments are preoccupied with crisis 
management, short-term solutions and self-preservation at the expense 
of long-term developmental concerns. Democratic institutions that 
provide a strong basis for political stability must be put in place in order 
to attract foreign capital. 
According to the Oxfam Report (1992), the World Bank in its review 
of structural adjustment programmes in sub Saharan Africa conceded 
that adjustment has failed to restore growth and social welfare, and 
even where these programmes have been associated with higher levels 
of growth, as in the case of Ghana and Uganda, there is no evidence 
that they have reduced poverty levels. 
Even in cities acute poverty have swamped the more affluent social 
classes which thought they had escaped its thrall and conditions for 
the masses are becoming increasingly difficult and stressful. What is 
required is policymakers with the foresight to look beyond aid and 
dependence and also able to look beyond the debt overhang. They 
must adopt policies that enable countries to compete effectively, generate 
employment and stimulate growth at both macro and micro levels. 
Free-market competition itself is dangerous to poor countries6 in a 
global village. For a poor country like Uganda to compete with powerful 
and very advanced countries like the USA and Japan can spell nothing 
but trouble for the former. Japan exports high-value automobile products 
6 Even in the past, regional cooperation pacts have crumbled due 
to the uneven distribution of the fruits of cooperation among the 
members. Invariably, the richer and more powerful the member, 
the greater the gains. An example is the old East African 
Community (EAC) where the more advanced Kenya gained 
much more than her neighbours, Uganda and Tanzania. 
VOL 16 NO 2 JULY 2001 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA 47
while Uganda exports coffee that is subject to inelastic demand. This 
has affected our foreign earnings and everything that follows. 
6.0 The way forward 
POVERTY IN UGANDA is complex, cyclical, seasonal and multidimensional. 
Because it is so complex there can be no single-stranded solution for 
poverty reduction. A multifaceted approach is necessary to combine 
complementary sustainable and relevant interventions that are 
geographically-specific, carefully-targeted and mindful of seasonal 
pressures on households (Ministry of Finance and Economic Planning, 
2000). 
6.1 Policy instruments for poverty alleviation in developing countries 
THE COLLAPSE OF COMMUNISM heralded a new era with the break-up of the 
eastern bloc and the end of the Cold War. Subsequent upheavals in the 
Asian Tiger economies and the depthless poverty in the adjusting poor 
countries in Africa and Latin America show that globalization and 
liberalization need to be handled with extreme care. The sustainable 
way forward seems to be a carefully-balanced embrace of the inevitable 
globalization, coupled with built-in policy mechanisms for mitigation 
the worst effects of international economic cooperation. For poverty 
eradication in the face of competitive globalization, poor countries like 
Uganda need a number of mechanisms. 
6.2 Industrialization 
IT HAS ALREADY been noted how industrial products attract more value 
than the raw material and agricultural products of the developing 
countries. Emphasis should therefore be placed on the development of 
a viable industrial sector, preferably using local resources and raw 
materials. Processing agricultural products to add value to them could 
be one way forward. Incentives, at least in the initial stages, should be 
provided to those willing to invest in such ways and would provide 
employment for local people. 
6.3 Diversification 
THE VAGARIES OF WEATHER and the notorious fluctuation of the prices of 
such products often adversely affect agriculturally-based countries like 
Uganda. Other forms of wealth such as oil and other minerals should be 
48 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA VOL 16 NO 2 JULY 2001
Nuwagaba/GLOBALIZATION,COMPETITIVENESS AND POVERTY REDUCTION 
sought. We should not depend on producing a small range of crops or 
minerals but should diversify into products such as flowers, fruits and 
semi-processed products. We also need to develop an appropriate 
infrastructure including roads and telecommunications, to facilitate 
marketing. Initiatives in the agricultural sector that have already been 
made have been impeded by the poor infrastructure. 
6.4 Infant industry protection 
THE WHOLESALE LIBERALIZATION of developing countries is likely to 
damage the growth of local enterprise. While embracing the principles 
of liberalization, it should be implemented selectively and gradually. 
Some infant industries need initial protection against dumping or against 
superior import substitutes. Considerations should include factors like 
employment, markets for local raw materials and national security. 
6.5 Modernization 
ONE MAJOR ADVANTAGE of globalization and the competition that comes 
with it is the promotion of efficiency. Conscious policies in agriculture 
are needed to promote efficiency and productivity. Modernization can 
greatly help: tractors should gradually replace hoes; fertilizers should 
be made use of and better varieties of seeds should be introduced. An 
example, which has already yielded results among peasant farmers, is 
clonal coffee.7 Such innovations should be supported. 
6.6 Infrastructure 
As MENTIONED IN section 6.3, it will be an uphill task to alleviate poverty 
in Uganda without addressing the question of the infrastructure. From 
the roads to railways, telecommunications, water and electricity, the 
infrastructure needs repair. Recent efforts in providing trunk roads and 
telephone lines have started to bear some fruit. There should be more 
emphasis on rural feeder roads to ease the marketing of rural produce. 
Electricity generation would also enable industrial sector growth. 
6.7 Governance 
ONE PILLAR OF good governance is democracy and accountability. The 
former ensures participation and non-exclusion while the latter ensures 
7 Coffee has increased their earnings from the sale of the cash crop 
but the world markets offer fluctuating prices. 
VOL 16 NO 2 JULY 2001 JOURNAL OF SOCIAL DEVELOPMENT IN AFRICA 49
efficient, and effective resource allocation and use. For almost four 
decades poor governance and corruption have bedeviled Ugandan 
government institutions. Structures to enforce accountability collapsed 
in the 1970s and have yet to be put in place. Cases of financial 
mismanagement at various levels of government are not uncommon 
and faint-hearted attempts to fight corruption have yet to bear fruit. It is 
precisely because of corruption, poor management and the lack of 
accountability that parastatals have been privatized. The paradox of 
privatization is that these corporations are run purely on laissez-faire 
principles with minimal, if any, consideration of social responsibilities 
such as the creation of more employment opportunities. It is unlikely, 
therefore, that the private sector will create more employment. 
In 1993 Uganda has decentralized by devolving certain powers to 
the local governments.8 The prime objective was to spread resources 
and incomes to the lowest levels of local government but the success 
of this depends on financing from the centre. In Uganda the centre 
itself is impoverished9 and does not offer adequate support to local 
councils. 
6.8 Vulnerable groups 
As A RESULT MANY Ugandans will find it very difficulty to extricate 
themselves from the clutches of poverty. Groups such as people with 
disabilities and uneducated and unemployed women and unskilled 
youth are at risk. Some well-targeted safety measures need to be 
incorporated in the national development policy. These may include 
support for small-scale enterprises and for local development projects 
initiated by young industries. Other policies could include the crosssubsidization 
of services such as health, education and sanitation. 
8 Since 1993 the government of Uganda has decentralized so that 
administrative, judicial and executive powers have been devolved 
to local government units. 
9 An impoverished population cannot be expected to generate 
revenue to government, because of less economic activity, 
widespread unemployment and subsequently low taxation. 
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Nuwagaba/GLOBALIZATION.COMPETITIVENESS AND POVERTY REDUCTION 
7.0 Conclusion 
Development partnerships or aid? 
FOR DECADES, THERE has been massive flow of aid to support poor 
countries but donor fatigue has set in. Uganda must find its own 
solutions. We have endeavoured to examine the impact of globalization 
and competitiveness on poverty alleviation and concluded that 
globalization is inevitable, given current trends in the development of 
technology. The powerful and invisible forces that have given rise to 
globalization are impossible to resist. However, some poor countries 
like Uganda may embrace globalization wholesale to their detriment. 
Caution is therefore advised to avoid calamitous consequences for 
such countries. 
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