PRESENTED BY PETER M MALINGA

COMMISSIONER CUSTOMS, UGANDA REVENUE AUTHORITY

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•The importance of looking at informal border trade in Uganda and indeed in the Eastern and Southern African (ESA) Countries, can best be understood if it is placed in the context of formal trade.

• Uganda’s informal border trade became significant in the mid 1970s. In the late 80s Government Took drastic changes in its trade policy by liberalizing its trade environment.

• The ESA countries have made several attempts in enhancing trade in the region. How have these attempts affected informal border trade?

•Little if any can be pinpointed as a deliberate government policy to facilitate informal border trade

INTRODUCTION

DEFINITION OF INFORMAL BORDER TRADE

• Informal or unrecorded border trade is broadly defined to include:

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WHICH SHOULD BE INCLUDED IN THE

NATIONAL INCOME ACCORDING TO

NATIONAL INCOME POLICIES

ALL TRADING ACTIVITIES

BETWEEN ANY TWO COUNTRIES

BUT ARE PRESENTLY

NOT CAPTURED BY

OFFICIAL NATIONAL INCOME

STATISTICS

VIRTUAL PICTURE

Informal/unrecorded border

Trade

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TWO SETS OF ISSUES OF INTEREST IN UGANDA’S INFORMAL BORDER TRADE

WHAT IS ITS SIZE?

WHAT IS ITS NATURE?

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SIZE OF UGANDA’S INFORMAL BORDER TRADE

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THE SIZE ASPECT IS IMPORTANT IN TERMS OF COMMODITIES TRADED, THEIR VOLUME AND VALUE.

THIS WOULD TELL US THE EXTENT TO WHICH TRADE CAN BE FACILITATED AND THE EXTENT TO WHICH GOVERNMENT LOOSES REVENUE

NATURE OF UGANDA’S INFORMAL BORDER TRADE

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IN TERMS OF BOTH ITS TRADE POLICY AND INSTITUTIONAL ASPECTS OF ITS FUNCTIONING

WHAT ARE THE CHARACTERISTICS OF INFORMAL BORDER TRADE?

HOW DOES IT DIFFER FROM FORMAL TRADE

WHAT IMPLICATIONS DOES IT HAVE ON UGANDA AND REGIONAL ARRANGEMENTS?

WHY DOES IT TAKE PLACE?

CHARACTER OF INFORMAL BORDER TRADE

• Looks disorganized with people criss-crossing the border freely

• But has a selling and buying place

• People carrying small quantities of goods/merchandise on their heads, in their hands, on bicycles, on hired carts or in cars

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CHARACTER … cont’d

• Quick cash returns in locally exchanged currencies

• In the majority of cases no documentation

• Relies on good will of persons involved

• Mainly uneducated or semi educated people

• It is normally used as a conduit for smuggling

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INITIATIVES BY UGANDA GOVERNMENT TO FACILITATE TRADE

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IN TWO FORMS SINCE 1986

CREATION OF SPECIFIC

INSTITUTIONS TO HANDLE TRADE

GENERAL TRADE POLICIES

GENERAL GOVERNMENT TRADE REFORMS

• Privatisation of state owned enterprises

• Liberalisation of forex market

• Replacement of Import/Export requirements with certification of origin.

• Reduction of Tax bands waiver/deferral of Taxes on raw materials

• Abolition of Transit Parking Yards

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CREATION OF SPECIFIC INSTITUTIONS TO HANDLE CERTAIN ASPECTS OF TRADE

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THE UGANDA REVENUE

AUTHORITY (URA)

UGANDA INVESTIMENT

AUTHORITY (UIA)

THE UGANDA REVENUE AUTHORITY INITIATIVES TO FACILITATE TRADE

URA restructuring.

Automation (ASYCUDA++) of customs business.

Introduction of risk mgt in all URA operations.

Business process re-engineering (e.g. self mgt of bonds, electronic cancelation of bonds, RADDEX, etc).

Establishment of joint verification service.

Establishment of one-stop clearance office.

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THE UGANDA REVENUE AUTHORITY INITIATIVES TO FACILITATE TRADE

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Creation of Market Place desks.Extension of working hours into the night.Introduction of the URA cash policy to cater for cash payments outside official working hours.Abolition of 24 hour roadblocks.Conducting Tax clinics for traders especially the informal onesAbolition of overtime payments to Customs officialsIntroduction of Medium Tax Office

OTHER INITIATIVES: -REGIONAL ARRANGEMENTS

• Harmonization of charges($3 or equivalent) for certificate of origin within EAC Partner States.

• Introduction of simplified certificates of origin. • Common External Tariff for EAC Partner States.• Elimination of Internal Tariffs• Introduction of Non-tariff barriers monitoring

committees in EAC partners states.• Introduction of EAC passport / Abolition of visa

requirements between partner states citizens.• COMESA, Northern Corridor, etc.• EAC Regional Development Strategy being pursued.• Recognition of JUA KALI Associations.

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OTHER INITIATIVES –(DONOR SUPPORT)

• Introduction of cross border initiatives to promote regional trade amongst 14 participating countries in Eastern and Southern Africa and the Indian Ocean – IMF, EU, EADB, SIDA and USAID.

• The One Stop Border Post (OSBP) co-sponsored by the JICA AND WB.

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EFFECT OF THESE INITIATIVES ON INFORMAL BORDER TRADE

• The revamping of the economy saw a decrease in the amount of ICBT (import) from Kenya to Uganda.

• However informal export of agricultural products from Uganda to Kenya remains high.

• ICBT remains high between Uganda and its neighbours despite the government's trade initiatives.

• The increase in the rate of excise duty on polyethylene bags of less than 30 microns and white spirit has resulted into smuggling.

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CHALLENGES

• Political instability in the region.• Imbalanced Level of development within the

region.• Stakeholder involvement is difficult because it is

difficult to identify real players.• Synthetisation of the people involved is quite

difficult as many of them are illiterate or semi-illiterate.

• Inadequate coordination amongst government agencies on trade matters.

• Corruption by border agencies

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CHALLENGES

•Mistrust among border Agencies is high

•Inter-governmental meetings to discuss ICBT not

there. Only formal trade is discussed at this level.

•Composition of groups in the JUA KALI association

is still erratic & inconsistent to attract tangible &

meaningful support.

•General infrastructure is bad

•Legal requirements to address informal trade are

non-existent

•Cross border tribal establishments are difficult to

break

LESSONS LEARNT• Need to define an initiative after understanding

the nature of ICBT.• Regional political stability is necessary to improve

coordination amongst governments.• Need for improved coordination amongst

government agencies on trade related matters (E.G SUGAR CASE DRC).

• Need for an integrated approach in the regional initiatives that promote cross-border trade.

• Need for balanced regional economic growth policies.

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CONCLUSION

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THERE IS NEED FOR CONCERTED EFFORT FOR ALL GOVERNMENTS IN THE REGION TO PUT TOGETHER

THEIR RESOURCES WITH A VIEW TO ASSESS AND FORMULATE COMMON POLICIES THAT CAN FACILITATE INFORMAL BORDER TRADE. THIS TRADE IS NOT LIKELY

TO DIE AWAY IN THE NEAR FUTURE. THERE IS NO NEED THEREFORE FOR IT TO BE NEGILACTED BY

THEOSE IN AUTHORITY. GOVERNMENTS STAND TO BENEFIT A LOT IF INFORMAL BORDER TRADE IN GIVEN

ADEQUATE ATTENTION AND DIRECTION.

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ASANTE SANA SANA