Uganda: the fastest growing economy by 2025?
Let us reduce the talking, and step up implementation!
There is excitement in town. Researchers at the Center for International Development (CID) at Harvard University released their latest growth projections which indicated that Uganda (jointly with India) will be the fastest growing economy in the world in the next eight years.
In absolute terms, the researchers forecast Uganda’s economy will grow at 7.7% while in per capita terms it will grow at 4.5% annually to 2025.
Understandably these projections, published late last month, have elicited excitement among a cross-section of Ugandans. Why not! By all standards this is good news for our country. We have endured for far too long the bad side of the economy. Therefore, learning about such optimistic prospects is great news.
However, the excitement confirmed to me something else. Laziness could be one of the main weaknesses among Ugandans. I expected some of the people who were thrilled by this publication to be informed about the recent history of CID projections.
Followers of global economic dynamics know that since the start of the “economic complexity growth projections” in 2011, Uganda has been projected to become the fastest growing economy.
Previous forecasts were futile
In their debut ranking in 2011, the CID projected that Uganda, among other African countries such as Kenya, Tanzania, Zimbabwe, Madagascar, Senegal, Malawi, and Zambia, will be the fastest growing economy for the years to 2020,.
They forecasted we would grow at an average annual rate of 6.4% during the period 2009 to 2020. However, in the past five years after the CID published its projections, Uganda’s economy has achieved an average growth rate of 4.3%.
Last year the economy’s growth rate actually reduced further to 3.9% and it is projected, by the IMF and our own economists at Ministry of Finance, that it will reduce further to 3.5% this year.
So what magic will Uganda use in the remaining three years to hit the 6.4% growth rate? Before even this question is answered, the same forecasters upped the annual growth performance to 7.7% by 2025.
The funny thing is that they are attributing Uganda’s growth prospects to rapid population growth, a factor that many economists (yours inclusive) think could be among the contributors to Uganda’s economic stagnation.
Genesis of these forecasts
May be let me start by explaining the genesis of these forecasts for us to be on the same page. In 2012, a young man, Alexander Simoes, wrote a graduate thesis to earn a master’s degree in Media Arts and Sciences at the Massachusetts Institute of Technology (MIT) in the US. Like most of the theses at MIT, Alexander’s dissertation entitled, “The observatory: designing data-driven decision making tools,” elicited a lot of interest.
Consequently, his thesis advisor, Cesar Hidalgo, linked up with Ricardo Hausmann, the CID Director to create what they named “The Atlas of Economic Complexity” using Alexander’s findings.
Since then, a team of researchers at CID has been using this tool to forecast global growth, and rank countries in what they termed Economic Complexity Index (ECI). Uganda has always been among the best performers when it comes to growth prospects.
This year, their thinking is that Uganda has joined countries such as India, Turkey, Indonesia, and Bulgaria in “focusing on expanding the capabilities of their workforce that leaves them well positioned to diversify into new products, and products of increasingly greater complexity.”
We know that economic forecasting remains an integral part of the mainstream economics. Actually the original motto of the Econometric Society reads thus: “Science is Prediction.”
However, we shouldn’t forget that economics, unlike natural sciences, deals with human actions, plans, motivations, preferences, and so on, none of which can be quantified. Even if they could be quantified, business cycles and other changes would make the data almost instantaneously useless to the forecaster.
Therefore, Mr. President, I don’t think when the Harvard researchers were making their forecasts in 2011, they could imagine a number of things that have happened and adversely affected the performance of our economy. From South Sudan and Burundi conflicts to your unprecedented fallout with your ‘best friend’ and political ally, Amama Mbabazi; not to mention the drought that devastated our agriculture.
Secondly, these forecasters ignore important assessments such as Freedom House political rankings, the United Nations Human Development Index, IMF global economic outlook, World Bank reports, World Economic Forum’s index of competitiveness, Moody’s Investors Service, and other ratings which are significant at influencing our economy’s performance.
That said, however, as many people have put it before, few have ever doubted Uganda’s potential to become one of the strongest economies in Sub-Saharan Africa. This is on account of a number of reasons:
First, aided by a highly favourable climate, good soils whose fertility level may easily be enhanced, a rich mineral base, lakes and rivers which provide abundant fresh water and fish, and a rich flora and fauna, young population that is vibrant and highly entrepreneurial, Uganda has all that it takes to spur rapid economic growth.
Second, Uganda has broken both the vicious cycle of poverty and the vicious cycle of political instability. We are also steadily closing the infrastructure gap.
Thirdly, growth theory supports the hypothesis that Uganda’s economy can routinely grow. Economists have long established that poor economies such as Uganda – that are further away from their own ‘steady-state value’ – tend to grow faster, particularly in per capita terms, than rich ones. It would be a scandal for economies such as USA, the UK, Japan, or South Korea, to grow faster than Uganda.
Economies are like human beings or other living things. Young ones must grow faster than older ones. Physicians often warn us about the dangers of anthropometric poverty. If you are a father and your teenage son is shorter than you, then there is something very wrong with your family’s nutritional input. That is what scientists call anthropometric poverty.
To escape anthropometric poverty, a boy should grow faster and get taller than his father. A girl should be taller than her mother. Likewise, ‘young’ economies such as Uganda are expected to grow faster than the industrialised and advanced economies. That is why “economic convergence” happens, when countries such as Singapore, South
Korea, Taiwan, Hong Kong, which were poor recently have accumulated per capita incomes comparable and/or higher than those of advanced economies.
What could spark rapid growth?
Therefore, Uganda is ideally expected to grow very fast given its current depth of poverty and economic stagnation. It only needs a strategic jumpstart. Could be investment in the skills of its young population? Could it investment in infrastructure? Could be transformation of agriculture? Or it the spark could come from oil?
Mr. President, as you were being sworn in for the first time in 1986, Paul Romer, the current Chief Economist of the World Bank, wrote and published an important paper in the Journal of Political Economy. His paper entitled, “Increasing Returns and Long Run Growth” advised that government can generate rapid economic and social transformation by doing one thing: devising a way of raising the private rate of return to investment.
He later explained, “Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable. A useful metaphor for production in an economy comes from the kitchen.
“If economic growth could be achieved only by doing more and more of the same kind of cooking, we would eventually run out of raw materials… History teaches us, however, that economic growth springs from better recipes, not just from more cooking. New recipes generally produce fewer unpleasant side effects and generate more economic value per unit of raw material.”
Step up implementation
Mr. President, before we celebrate the favourable forecasts from Harvard, we need to ask ourselves a few questions: (1) How well are we developing our young population educationally so they can be highly productive? (2) If almost all countries that have rapidly transformed themselves have gained the tacit knowledge (knowledge that cannot be taught in school), what is your government doing in helping industries gain this tacit knowledge?
The third question you need to ask your people in government is: Why has Uganda failed to complete the demographic transition (simultaneous reduction of both population death rate and birth rate)? Is there a country that has ever developed with high birth rate? Has your government made a distinction between a large population and high birth rate?
Finally, Mr. President, when will you and your government stop making speeches of all the right things that need to be done to transform the economy, and concentrate on implementation, thereby leaving the results to do the talking?
When I got the opportunity to address your cabinet last year, I ended my talk thus, “Let us reduce the talking, workshops, and policy design and planning, and step up implementation. Our problems need more execution discipline than definition. To get execution discipline, we need to identify, train and deploy smart people. This country is full of young smart people.” The Harvard researchers too believe this is the bet with the highest payoff for Uganda.