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. -------------- Environment/Investment -------------- ¶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). -------------- AGOA/TRADE -------------- ¶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). -------------- Anti-Corruption -------------- ¶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 KAMPALA 00000647 002 OF 002 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. -------------- Intellectual Property Rights -------------- ¶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