Identifier
Created
Classification
Origin
07KAMPALA1187
2007-07-20 07:16:00
CONFIDENTIAL
Embassy Kampala
Cable title:  

UGANDA: RESPONSE ON FOREIGN ACQUISITION OF NATURAL

Tags:  ECON CH PGOV PREL UG 
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VZCZCXRO7882
RR RUEHRN RUEHROV
DE RUEHKM #1187/01 2010716
ZNY CCCCC ZZH
R 200716Z JUL 07
FM AMEMBASSY KAMPALA
TO RUEHC/SECSTATE WASHDC 9100
INFO RUCNIAD/IGAD COLLECTIVE
RUEHXR/RWANDA COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0048
RUEHKI/AMEMBASSY KINSHASA 0940
C O N F I D E N T I A L SECTION 01 OF 02 KAMPALA 001187 

SIPDIS

SIPDIS

DEPARTMENT FOR OES JMIOTKE AND ACOVINGTON; EAP FOR
JYAMAMOTO; EEB FOR TSAEGER

E.O. 12958: DECL: 06/18/17
TAGS: ECON CH PGOV PREL UG
SUBJECT: UGANDA: RESPONSE ON FOREIGN ACQUISITION OF NATURAL
RESOURCES BY CHINESE ENTITIES

REF: A. STATE 093848

B. KAMPALA 02298

Classified By: Political/Economic Chief Kathleen FitzGibbon
for reasons 1.4 (b) and (d).

C O N F I D E N T I A L SECTION 01 OF 02 KAMPALA 001187

SIPDIS

SIPDIS

DEPARTMENT FOR OES JMIOTKE AND ACOVINGTON; EAP FOR
JYAMAMOTO; EEB FOR TSAEGER

E.O. 12958: DECL: 06/18/17
TAGS: ECON CH PGOV PREL UG
SUBJECT: UGANDA: RESPONSE ON FOREIGN ACQUISITION OF NATURAL
RESOURCES BY CHINESE ENTITIES

REF: A. STATE 093848

B. KAMPALA 02298

Classified By: Political/Economic Chief Kathleen FitzGibbon
for reasons 1.4 (b) and (d).


1. (C) Summary. Chinese interest in Uganda's natural
resources consists largely in importing timber, copper, and
cobalt. Currently, Chinese investment in these sectors is
limited. Ugandan law contains a variety of legal statutes
aimed at protecting biodiversity and natural resources, but
national and local governments are not able and/or willing to
adequately enforce these regulations. President Museveni's
decision to give away parts of protected forest reserves to
foreign investors in early 2007 sparked public and
parliamentary protests, but indicates a willingness on
Museveni's part to sacrifice environmental preservation to
further his plan for economic development. End Summary.

--------------
CHINA'S ROLE
--------------


2. (C) Per Reftel, emboffs met with a range of Ugandan and
foreign government officials on Chinese investment and
government protection for natural resources. Chinese
investment in Uganda's natural resource sector is minimal,
according to Aiming Zhang, the Chinese economic counselor in
Kampala. He said that Chinese investment in Uganda is
nascent, with trade between the two countries increasing to
over USD 120 million in 2006. He noted that Ugandan markets
are complimentary as China primarily imports fishery, cotton,
and timber from Uganda. However, Paul Drichi from the
National Forestry Authority (NFA),which regulates Uganda's
timber trade and oversees central forest reserves, told
emboff on July 18 that Uganda does not export timber to China
as it barely has enough timber to satisfy domestic needs. It
is not clear what timber is exported to China and whether it
is brought in illegally from Democratic Republic of Congo and
exported from Uganda. (Note: From 1990 to 2002, it is
estimated that 80 percent of the timber trade in Uganda was

illegal and a large volume of timber from DRC passed through
Uganda. As of February 2005, the illegal timber trade was
reduced to about 30 percent, due to controls put on the
system by NFA. End Note.)


3. (SBU) Chinese demand for gold and other minerals may be
impacting Uganda's drive to further exploit its mineral
resources, although China is not immediately involved in
these industries. The Daily Monitor newspaper featured an
article on July 17 stating Uganda was searching for an
investor to take over the Kilembe mines - reportedly
containing an estimated USD 4 billion worth of copper ore,
gold, cobalt, and other precious metals. The price of these
metals and minerals have increased driven by Chinese and
Indian demand. Once a leading producer of copper and cobalt,
Uganda's mineral potential remains largely under exploited,
according to an assessment by United Nations Conference on
Trade and Development in 2001.

--------------
WEAK CAPACITY AND POLITICAL WILL
--------------


4. (SBU) The Government of Uganda (GOU) established a legal
framework to mitigate potential environmental harm from trade
and investment but has demonstrated weak capacity and
political will to enforce it. With the highest deforestation
rate in East Africa, Uganda's protected forest reserves are
especially vulnerable, as little timber is available outside
of protected areas. According to the NFA, Uganda's timber
industry is just developing, with significant room for
foreign investment. Uganda's 506 central forest reserves
total just over 840,000 hectares of forest, with about
360,000 hectares designated by NFA as potential production
zones. The remaining reserves are held as nature reserves or
buffer zones.


5. (C) In early 2007, President Museveni decided to allocate
part of the protected Mabira forest to investors to expand
sugar plantations, creating a rift between members of the
public and Parliament, on the one hand, and the Executive, on
the other. National protests turned violent. Although
current Ugandan law prohibits the de-gazetting of forests
without the approval of Parliament, the Mabira incident
indicates Museveni's desire to satisfy investors regardless

KAMPALA 00001187 002 OF 002


of environmental concerns. Museveni has publicly stated that
the exploitation of Uganda's natural resources to the fullest
is required for Uganda to become a developed country.
Philosophical differences between the President and the
National Forest Authority led to the resignation of top NFA
officials in January 2007. (Ref B)

--------------
REGULATORY FRAMEWORK
--------------


6. (U) Uganda signed the International Convention on
Biological Diversity on June 12, 1992 and ratified it on
September 8, 1993, but has yet to obtain Cabinet approval on
a National Biological Diversity Strategy. In 1995, Uganda
established The National Environment Management Authority
(NEMA) to prevent public and private sector projects,
programs, and activities from negatively impacting the
environment. As such, project developers are required to
submit an Environment Impact Assessment (EIA) to NEMA and
receive a certificate of approval prior to developing new
projects. However, according to USAID, some investment
projects fail to adhere to the environmental conditions
outlined by NEMA. Additionally, Uganda's legislative system
provides for certain categories of leaders, such as cabinet
ministers, commissioners, or directors, to issue statutory
instruments to follow up Acts of Parliament and fill any
regulatory loopholes in the existing environmental statutes.
District, sub-county, and village levels are also granted the
ability to pass bylaws to strengthen the regulatory framework
at the local level. Some of the existing legal regulations
include:

-The Environment Statute (1995): Provides for sustainable
management of the environment through promotion of biological
diversity and optimum sustainable yield in the use of natural
resources.

-The National Forestry Plan (2000),Forestry Policy (2001),
and National Forestry and Tree Planting Act (2003): Commit
the government to protect and sustainably manage permanent
forest estates set aside permanently for conservation of
biodiversity and environmental services and sustainable
production of forest produce.

-The Land Act (1998): Recognizes central forest reserves,
prohibits their leasing or alienation, and requires all
landowners to manage and utilize their land in accordance
with the Forests Act and other relevant laws.

-The Water Statute (1996): Establishes a national water
policy to address water source potentials and per-capita
water needs and to guide research in economics of water
supply and conservation technology.

-The Decentralization Statute (1993): Provides for the
establishment of the District Environment Committee (DEC) and
provides for the appointment of a District Forest Officer,
District Environment Officer, and District Wetlands Officer.

--------------
COMMENT
--------------


7. (C) For now, Parliament and the public are the key
institutions to protecting Ugandan forest land. Museveni did
not take the give away of Mabira Forest to Parliament after
the Cabinet advised him of the strong parliamentary
opposition within the majority ruling party. For now,
Museveni backed down from the give-away of the Mabira Forest
land. As the result of the perceived defeat on Mabira and
other issues, Museveni is moving to instill party discipline
to prevent members of Parliament from blocking future
initiatives. This could weaken Parliament's protective
instincts. Our contacts tell us that the Executive's
attempts to give away other forest lands continue.
BROWNING