UGANDA: APRIL ECONOMIC REVIEW

UNCLAS SECTION 01 OF 02 KAMPALA 000647

SIPDIS

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: ECON EFIN ENRG PGOV UG

SUBJECT: UGANDA: APRIL ECONOMIC REVIEW

REF: A) KAMPALA 0618 B) KAMPALA 0317 C) KAMPALA 0457


1. (SBU) SUMMARY. The government of Uganda (GOU) continues its
efforts to attract foreign investment and exports to the United
States, and protect American goods against counterfeiters. On a
less positive note, a protest to protect a forest from being sold to
investors turned violent as protesters targeted Asian-owned
businesses. A Cabinet White Paper gives the Criminal Investigation
Department six months to further investigate top Health Ministry
officials in the 2005 Global Fund scandal. END SUMMARY.

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Environment/Investment
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2. (SBU) A planned peaceful protest to stop the GOU from allocating
part of Mabira forest to investors of a sugar plantation turned
violent on April 13th resulting in three deaths and multiple
injuries. The Mehta group of Indian investors holds a 49 percent
stake in the plantation, while the GOU owns the remaining 51
percent. Latent xenophobia, coupled with troublemakers seeking to
take advantage of the crowds to loot, resulted in attacks on Asians
traveling in the area and on Asian-owned businesses. Police
responded with tear gas and provided protection for Indians. GOU
officials and the organizers of the march, Save Mabira Crusade,
condemned the anti-Asian messages that emerged in the protest. The
attacks took the GOU by surprise. (Note: Idi Amin expelled Indian
investors in the 1970s and nationalized their businesses. They were
welcomed back by President Museveni in 1986 End Note). A significant
number of large businesses with close ties to the GOU in Uganda are
Indian-owned. Some in the Indian community have asked Mehta group
to withdraw its request for government land. The Indian business
owners remain on the edge, despite GOU assurances of their safety
(reftel A).

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AGOA/TRADE
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3. (SBU) Minister of Trade, Tourism and Industry, Janat Mukwaya,
participated in a forum with U.S. businesses in California and
Washington from April 16-20th. Trade ministers from seven African
countries were invited to the event, which included senior
executives from Starbucks, Boeing, GAP Apparel, and Levi's.
Minister Mukwaya told econoff on April 13 that Uganda was looking to
add value to coffee exports and also expand its apparel exports to
the United States under the African Growth and Opportunity Act
(AGOA). The delegation will also visit the Gates Foundation and the
editorial board of the Seattle Times. The forum was organized by
the U.S. Chamber of Commerce and the Whitaker Group consulting
firm.


4. (SBU) The Daily Monitor newspaper reported on April 12 that Tri
Star Apparels, an AGOA benefiting exporter, will start buying cotton
locally for use in textile products. Previously, Tri-Star imported
fabrics from Asia and performed cutting and sewing operations in
Uganda. Habib Kagimu, Director of The Libyan Africa Portfolio (LAP),
which recently acquired a 60 percent controlling stake in Tri Star,
said that, "following the restructuring of the firm, it would resume
production next month and start purchasing cotton from local
farmers." Managing Director, Kananathan Velluppillai clarified
Kagimu's comments, saying that restructuring would take 15 to 18
months as a new spinning and weaving mill was established, and then
Tri-Star could begin purchasing cotton from local growers. Another
Uganda textile firm, Phenix, recently celebrated its first shipment
of 100 percent Ugandan organic cotton t-shirts to the U.S. market
under AGOA (reftel B).

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Anti-Corruption
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5. (SBU) In March 2007, the Global Fund (GF) denied Uganda USD 16
million in grant funds to fight malaria. The GF program had been
operating under increased scrutiny after all grants were suspended
in August 2005 for four months due to concerns over misuse. A high
profile 2006 judicial inquiry headed by Justice James Ogoola found
three health ministry officials, Health Minister Jim Muhwezi and his
two deputies, Mike Mukula and Alex Kamugisha, responsible for
serious mismanagement. In his report, Justice Ogoola recommended
further criminal investigations and prosecution. Ironically, it was
Muhwezi who stated, "there is zero tolerance for corruption in
Uganda," when the GF scandal first became public. Ugandan President
Yoweri Museveni did not reappoint the three health officials health
in a cabinet reshuffle in June 2006. At the time Museveni responded
to the GF report by saying, "Impunity has gone too far in Uganda and
it must stop."


6. (SBU) The GOU came under heavy donor criticism for not following

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up quickly on Ogoola's inquiry. On April 11, Prime Minister Apollo
Nsibamb, stated that the Criminal investigation Department would be
given six months to investigate the case so the Director of Public
Prosecutions can determine whom to prosecute.

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Intellectual Property Rights
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7. (SBU) The Customs Office of the Ugandan Revenue Authority (URA)
seized two shipments of counterfeit Kiwi shoe polish trying to enter
Uganda. The genuine Kiwi is produced by U.S. firm Sara Lee, while
the counterfeits were made in China. Mr. Enoch Walugembe, the
Assistant Commissioner for Customs Enforcement for the URA, told
econoff on March 22 that the counterfeits were hidden under boxes of
envelopes in one case and under crates of bananas in the other. Mr.
Walugembe added that his officers were seeing smaller shipments of
counterfeit Kiwi shoe polish since it had increased its number of
interdictions in the past two years. Each shipment was valued at
tens of thousands of dollars. A range of counterfeit products,
mostly from China, smuggled into Uganda, deprive the GOU of hundreds
of thousands of dollars in tax revenue every year. Emboffs have
worked with URA and representatives of Sara Lee to help stem the
flow of counterfeit U.S. goods into Uganda.
BROWNING