UGANDA: MARCH ECONOMIC REVIEW

UNCLAS SECTION 01 OF 03 KAMPALA 000457 SIPDIS DEPARTMENT PASS TO USTR FOR BILL JACKSON SIPDIS SENSITIVE E.O. 12958: N/A TAGS: ECON EFIN ETRD KTDB PGOV UG SUBJECT: UGANDA: MARCH ECONOMIC REVIEW REF: A) KAMPALA 0160 B) KAMPALA 0406 ¶1. (SBU) SUMMARY: Uganda's Foreign Minister visited Iran and encouraged closer economic ties between the two countries. The European Union's effort to sign a new Economic Partnership Agreement faced resistance from the government of Uganda. Ugandan cargo flights to the European Union resume after a five month ban over safety concerns. The Libya Africa Portfolio (LAP) has acquired a 51 percent stake in communication firm Uganda Telecom Limited. The U.S. Securities and Exchange Commission (SEC) conducted a securities market oversight training for East African nations in Kampala. Over-fishing and the use of illegal nets threaten Uganda's fishing industry. President Museveni promised not to sell unrefined oil and praised Libya's Gaddaffi for his support to Uganda to add value to exports. The Inspector General of Government criticized the Ministry of Energy for re-awarding a tender for thermal generators to a Norwegian firm which had their bid cancelled in 2006 due to serious flaws. Post furthered Uganda's efforts to protect intellectual property right protection through a training opportunity with the U.S. Patent and Trademark Office. END SUMMARY. -------------- Trade/AGOA -------------- ¶2. (SBU) Uganda's Minister of Foreign Affairs, Sam Kutesa, led a GOU delegation to Iran the first week of March to discuss increased trade. The delegation met with members of the Iranian Chamber of Commerce and Iranian industry leaders. This follows Kutesa's appeal to Iran on February 12, for technical assistance in oil production. Kutesa said that "Uganda can benefit from Iranian technological expertise in the oil sector." Kutesa was a guest of honor at an event to mark the 28th anniversary of the Iranian Islamic Revolution. The Minister of Energy, Daudi Migereko told econoff there were no discussions with Iran regarding a potential partnership in the oil sector. ¶3. (SBU) The European Union's efforts to sign a new Economic Partnership Agreement (EPA) with Uganda faced resistance from Ugandan parliamentarians and international trade experts. The EU hopes to sign new agreements to regulate trade between Africa, Caribbean, and Pacific (ACP) countries by December 31, but Ugandan traders fear the EPA would hinder local producers by flooding the �A;market with European products. Elly Twineyo-Kamugisha, the Executive Director of the African Centre for Trade and Development, told New Vision reporters on March 9, "Ugandan is not an equal partner with European countries." He cited concerns that Ugandan firms would close and jobs would be lost due to cheaper EU imports. As an alternative Mr. Kamugisha advocated a three-year extension of the existing relationship to negotiate the terms of a new EPA. ¶4. (SBU) After being blacklisted by the European Commission for five months, Uganda's DAS Air Cargo and Dairo Air were allowed to resume flights to the EU. The European Commission banned the cargo airlines from EU airspace citing serious safety deficiencies. Air safety experts in the EU reviewing the airlines asserted that all outstanding concerns had been resolved. The loss of cargo flights to the EU hurt Ugandan trade including exports of cut flowers, which were traveling through the EU on their way to U.S. markets under the African Growth and Opportunity Act. The renewed cargo flights also will increase use of the USAID funded cold storage facility at Entebbe airport, which handles 70 percent of all fish and horticulture exports. -------------- Business Development/Investment -------------- ¶5. (SBU) The Libyan government owned firm Libya Africa Portfolio (LAP) acquired a 51 percent stake in Uganda Telecom Limited (UTL). UTL is a major Ugandan communication business providing mobile, data, internet and land line services. The shares were purchased from UCOM, a German, Swiss and Egyptian consortium, for an undisclosed price. The once government-owned UTL was privatized in 2000, and the 51 percent stake was sold to UCOM for USD 33.5 million. The remaining shares are held by the Ugandan government. The Ugandan telecommunications sector boasts three internationally-owned operators, MTN (South Africa),Uganda Telecom Limited (UTL) and Celtel (Kuwait). This is the third major investment by the Libyan government in Uganda in the last year. LAP purchased a 60 percent stake of the textile firm Tri-Star, and was awarded the tender to build the Uganda-Kenya oil pipeline. In 2005, LAP also purchased a majority of shares in the National Housing and Construction Company, a former parastatal. -------------- KAMPALA 00000457 002 OF 003 Capital Markets -------------- ¶6. (SBU) The U.S. Securities and Exchange Commission (SEC) conducted a Securities Market Oversight training workshop from February 26 to March 2 in Uganda. The training focused on strategies for investigating market misconduct such as insider trading, financial fraud and market manipulation. The workshop also covered current issues in harmonizing and integrating markets as Kenya, Tanzania and Uganda look toward more integration under the East African Community (EAC). The training was co-hosted by the East African Securities Regulatory Authorities (EASRA),the capital markets authorities of Uganda, Kenya and Tanzania, and drew participants from 12 countries representing securities authorities, central banks and stock exchanges. The training was also sponsored by the U.S. Agency for International Development (USAID),Financial Services Volunteer Corps and the U.S. Treasury Department's Office of Technical Assistance. -------------- Environment -------------- ¶7. (SBU) Uganda signed an agreement on March 5 with the Government of Southern Sudan to coordinate environmental protection along their common border. The region is home to endangered species like elephants, cheetahs and lions. One of Uganda's key tourism sites, Kidepo Valley National Park, is along the Sudanese border. The two countries also signed a bilateral cooperation agreement on February 8 to promote trade and development, which may result in partnering to extend a railway line from northern Uganda to South Sudan. ¶8. (SBU) The Parliamentary Committee on Agriculture is raising alarms that over-fishing in Lake Victoria could dramatically reduce fish stocks. The Fisheries State Minister, Fred Mukisa told the press on March 9 that illegal fish nets are one of the core causes of over fishing. Many Ugandan families that live around the lake or on its islands rely almost exclusively on fishing for their livelihood. Fish is Uganda's second largest annual export bringing in over USD 150 million. -------------- Energy/Infrastructure -------------- ¶9. (SBU) In a speech on March 2, President Museveni praised Libyan leader Muammar Gaddafi for his struggle for "freedom and equality devoid of hegemony" for Libyan society in an event marking Libya's 30th anniversary of the Declaration of the Establishment of Peoples Authority through the Masses. Museveni took the opportunity to praise the Libyan leader for his resistance against selling oil cheaply in the early 1970s. Museveni said Uganda was working with Libya to stop the hemorrhage of Africa caused by the export of unprocessed materials. Museveni promised that Uganda would not export unrefined oil from its recent oil discoveries, describing the exportation of raw materials as part of slavery in Africa. Minister for Energy Daudi Migereko told econoff on March 5 that Ugandan wells would produce more than double its domestic consumption of 12,000 barrels per day, and Uganda would be looking to export finished petroleum products to its neighbors (reftel b). -------------- -------------- Anti-Corruption/Intellectual Rights Property Protection -------------- -------------- ¶10. (SBU) The Government defied the recommendations of the Inspector General of Government, Faith Mwondha, by awarding a tender for 50 megawatts of thermal generators to Norwegian firm Jacobsen Electro for a second time. The original tender was cancelled following an investigation in July 2006 by the IGG which found several fatal flaws in the Jacobsen proposal. These included Jacobsen's attempt to alter the terms of its proposal after the bids had closed. It was also alleged that the per kilowatt costs of rival bidder Electro Maxx were lower than Jacobsen. After the IGG's cancellation President Museveni stepped in to the process in late August 2006 citing the energy crisis as a threat to national interest and ordered the ministers to conclude a deal with Jacobsen. Museveni said that this decision "does not in any way weaken our resolve of zero tolerance towards corruption and ensuring we strictly adhere to the relevant laws of public procurement." The IGG was supposed to participate in reviewing the tenders a second time before an award was made. The IGG's Mwondha criticized Energy Minister Daudi Migereko in a March 8 interview in the Daily Monitor newspaper, saying the tender was awarded without addressing most of the flaws that were cited by the IGG last year. ¶11. (SBU) Post continues to coordinate with the U.S. Patent and KAMPALA 00000457 003 OF 003 Trade Mark Office (USPTO) to strengthen protection of Intellectual Property Rights (IPR) in Uganda. The USPTO has accepted Post's nomination of the Assistant Commissioner of Enforcement at the Uganda Revenue Authority to participate in the USPTO's April 16-20 training entitled "Recent Trends in Border Enforcement of IPR." This training follows up on the IPR training for Ugandan judges and their judicial staff sponsored by Post in September 2006. BROWNING