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The 2013/14 Private Sector Post Budget Analysis

Friday June 14, 2013

Outline of Presentation
1. 2. 3. 4. 5. 6. The Macro Environment Private Sector Vs Government Priorities 2013/14 A synthesis of Budget Response to Private Sector Proposals Budget Commentary Some Tax Comparisons across EAC Conclusions

The Macro Environment
 Real GDP Growth: increased from 3.2% to % - 5.1%  Agriculture Sector - annual growth of 4.4%  Resource Envelope - 13,169BN with an 81%; 19% mix  Inflation; peaked at 18.6%%, reduced to 3.6%, May 2013  Exchange rates: volatility subsided now at Ush 2575  Interest rates: remain high, 24% - 30% (crowding out private sector)

EAC Comparisons (%)
Uganda Kenya Tanzania Rwanda

GDP Growth Annual Average Inflation GDP PERCAPITA (PPP) USD

5.1% 3.6%

4.6% 5%

6.9% 8.3%

8% 3.3%

1300

1774

1500

1400

Private Sector Priorities for 2013/14
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Infrastructural Dev’t [Energy, Transport & ICT] Skills, Education and Health for improved Labour Productivity Cost of Biz Finance for SME’s credit to PS Legal & Regulatory FW including Commercial Laws Reform Rural Dev’t & Industrialization Tax Policy Issues SME’s Dev’t Support for Buy/Build Uganda Regional Integration Implementation of Agreed Issues

Budget Priorities 2013/14
• Theme: “ The Journey Continues: Towards Socio-

Economic Transformation for Uganda. ”
 Aggressively continue to invest in infrastructure development particularly in Transport and Energy;  Support Increased Agricultural production and enhancing productivity  Enhance scientific Innovation for Industrialization and Private Sector Competitiveness  Improve the Quality and Access in Social Service Provision in Health Water and Education; and  Enhance Transparency and Accountability to improve Value for Money and fight Corruption vigorously in Public Service Delivery

Budget Response to Private Sector Priorities

Budget Response to Private Sector Priorities
1. Infrastructural Development
P/Sector Proposal
I.
a) b) c)

Budget Response
a) Have Commissioned a number of small renewable hydropower projects of 68.5 MW to the national grid Completed feasibility studies for Hydro Power Projects; Isimba, Ayago To commence construction of Karuma in the next FY Launched the GETFiT East Africa Pilot Project to support construction of 15 mini-HP projects with a total of 125MW More investment in Rural Electrification Scheme
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Energy Infrastructure
Sustain Gov’t’s commitment to Energy fund Implement all interventions required to increase power supply Manage the issues surrounding the delay in the commencement of 600 MW Karuma dam; Minimize energy losses to under 20%; Avoid increasing Energy Costs through Tariff adjustments

b) c) d)

d) e)

e)

Budget Response to Private Sector Priorities
1. Infrastructural Development
P/Sector Proposal
I.
a) b) c) d)

Budget Response
a) Umeme to install pre paid meters and reduce power loses allocated an additional Ushs 25.73bn to the Rural Electrification Programme

Energy Infrastructure
Further step up investment in Rural Electrification PPP approach to develop energy with insurance of bonds Provide incentives to energy producers ready to upload over 500MW to the grid Minimize energy loses to under 20%

b)

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Budget Response to Private Sector Priorities
1. Infrastructural Development cont..
P/Sector Proposal
II. Transport Infrastructure Railways
a) b)

Budget Response

c) d)

a) accelerate efforts to rehabilitate the country’s railway network, Re-acquire and support RVR to increasing b)Fast-tracking the rehabilitation of Tororooperating capacity Packwach and Kampala Kasese railway lines More emphasis to enable c) Commence design of Gulu – Atiak – Nimule – operationalisation of Alternative route thru Juba railway, to be constructed jointly by UG Dar Vs.SS Step up dialogue with the Tanzanian Gov’t d) Complete design of the Standard-Gauge Emphasize and implement Rail way Kampala–Malaba railway line (251km). extension to Western and Northern Uganda
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Budget Response to Private 1. Infrastructure Development cont.. Sector Priorities
P/Sector Proposal
Roads
a) Sustain Gov’t’s commitment to the Road Fund; allocate some to improving city roads, b) Prioritize investment in roads supporting Agric, Oil, Tourism, c) Pave, tarmac roads and develop dual carriage highways d) Revive the Southern route e) Address road infrastructure challenges at the Industrial Park

Budget Response
a) construction and rehabilitation of major strategic national roads b) Construction on Schedule for a total of 327km National roads c) Maintenance of district and community roads; to stimulate Agric, Tourism … d) Design for dualling key roads completed. e) Kampala - Jinja Expressway design in final stages f) Additional Ushs 72.7bn to Road Fund; now totaling to Ushs 352.98bn

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Budget Response to Private Sector Priorities
1. Infrastructure Development cont..
P/Sector Proposal
Water Ways a)Expedite the repair of Vessels on L.Vic. b)Rehabilitate, insure and invest in new ferries

Budget Response
a) improve the quality of water transport on major water bodies b) development of water transport on Lake Vic. c) Revitalization of Lake Vic. by rebuilding port infrastructure d) EAC taking this on to provide all the relevant infrastructure connecting the lake.

Lake Victoria with 30 M Persons a growth center in the EAC. Plan for infrastracture to help tap this potential

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Budget Response to Private Sector Priorities
1. Infrastructure Development cont..
P/Sector Proposal
ICT a) Prioritize laying of Fiber Optic Cable through out the Country b) Support investment in developing ICT park to connect Uganda to the World and Vs. Versa c) Explore use of a PPP approach to achieve the above

Budget Response
a) To implement the 700km third phase of the re-designed National Backbone Infrastructure b) Operationalize Cyber Laws c) setting up Information Technology Parks to host BPOs

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Budget Response to Private Sector Priorities
2. Skills, Edn & Health for Improved Labour Pty
P/Sector Proposal
a) Urgently change the approach to skills dev’t b) to support production in the short run c)Support Internships, industrial training and attachments d) Provide Tax incentives to employers training labour e) Allocate resources and attract Development Parterner’s in Skilling Uganda

Budget Response
a) Budget allocation to education increased from 1,669 BN to 1,801BN b)Address the skills gap btn Edn system and the Job Market c) Re-aligning the curriculum and establishing partnerships between the PS & education institutions d) Accelerate Government investment in vocational and business training e) Supporting the PS to provide the youth with the requisite skills for job creation
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Budget Response to Private Sector Priorities
2. Skills Development cont..
Private Sector Proposal
a) Ensure a sectoral approach in training thru PPP b)VAT Zero rate the Health Sector

Budget Response
a) support skills training of critical tourism sector human resources including the re-construction of the Uganda Hotel and Tourism Training Institute at Jinja;

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Budget Response to Private Sector Priorities
3. Cost of Biz Finance 4 SME’s & Credit to PS
P/Sector Proposal
a) Expand the Agric Credit facility to ensure entire Value chain benefits b) Introduce similar Fund to both Health and Education c) Further recapitalize UDB d) Create Credit under UDB line for Manufacturers e) Venture Capital option could be explored

Budget Response
a) To amend the Finance Act to enable dev’t of new products like Islamic banking b) Increase youth venture fund c) Out side budget Microfinance Support center has announced availability of credit for SME’s. Agriculture value addition, marketing and trade. _______________________ a) Cheaper financing especially for long-term need to be elaborated further

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Budget Response to Private Sector Priorities
4. Legal & Regulatory FW including Commercial Laws Reform
Private Sector Proposal
a) Implement the recommendations of the Ssendaula comprehensive Business Licensing Reform work b) Finalize a legal FW issues related to land access esp. for mining c) Remove all un necessary laws and procedures

Budget Response
a) continue improving the business climate for better PS competitiveness b) Continue further efforts in reforming the licensing regime c) Removal of unnecessary laws and regulations d) Streamline and simplify the business registration & licensing processes e) commenced implementation of business licensing reforms
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Budget Response to Private Sector Priorities
4. Legal & Regulatory FW including Commercial Laws Reform Cont..
Private Sector Proposal Budget Response
a) Fast track enactment of all critical a) Operationalized regulation of enacted commercial laws key commercial laws b) Electronic Land Information system ought to b) Other key enabling legislations before be made to work Parliament including the PPP Bill, Anticounterfeiting bill, etc c) Completed computerization of the land registry

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Budget Response to Private Sector Priorities
5. Rural Dev’t & Industrialization
P/Sector Proposal Budget Response
a) Make targeted interventions to stimulate rural development through a) An additional Ushs 25.73bn to the Rural industrialization. Electrification Programme b) Provide incentives for industries b) A total of 2,322 km of transmission lines were establishing in rural areas and laid under several Rural Electrification schemes. providing ease of access to c) implemented the Rural Financial Services investment land. Programme since 2008 c) white elephants like the Kalangala ice cooling plant, the Olweny Rice Scheme facilities etc require GoU to work with private sector to stimulate production.
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Budget Response to Private Sector Priorities
5. Rural Dev’t & Industrialization Cont..
P/Sector Proposal
a) infrastructure in form of power, water and roads remain a common denominator. _________________________________ a) Remove VAT on agriculture related support services b) Remove VAT on tractor hire services to spur investments in the tractor services as a business

Budget Response
a) Olweny rice scheme to be revitalized.

No Mention in Budget?

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Budget Response to Private Sector Priorities
6. Tax Policy Issues
Private Sector Proposal Budget Response
a) Broaden the Team on Tax –decision a) Proposed amendments to the tax laws to making improve tax administration and enhance b) avoid introduction of new charges and compliance taxes to the Private Sector to create tax b) widening the scope of withholding agents to policy predictability capture non-compliant tax persons engaged in c) Widen the tax base. Stop relying on 30% economic activities and not registered for tax payer to pay almost all taxes -90% income tax purposes. d) CET: Remove some products like the c) Target Small Business through legal FW & work steel sector from the Uganda list and a together with URA/ URSB/ KCCA/ Local few other mentioned separately and Governments which had already been agreed to, but leave others.
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Budget Response to Private Sector Priorities
6. Tax Policy Issues Cont..
Private Sector Proposal
a) Derogate EAC Sensitive list, steel sector, fruit juices from COMESA FTA b) VAT on Edible oil sector be eliminated to create level field especially for products produced locally c) Zero rate VAT in the health sector

Budget Response
Why mainly small? Licenses should not be turned to revenue stream. It shd focus on regulation a) Removed exemption on wheat/ flour b) Working towards removing exemptions of VAT

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Budget Response to Private Sector Priorities
6. Tax Policy Issues Cont..
Private Sector Proposal Budget Response
a) • • • Remove VAT exemptions on: Wheat and Wheat flour Hotel accommodation Water for domestic use

Excise Duty Increase : • Fuel by 50 Shs • Kerosen by 200/= per liter to avoid adulteration • Cigarrets • Spirits at Import Level from 70% to 140%

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Budget Response to Private Sector Priorities
6. Tax Policy Issues Cont..
Private Sector Proposal Budget Response
• 20% of Revenue of Promotional activities • 10% on Fees charged on Mobile Money Transactions • 30,000/= Stamp duty for 3rd party Policy Insurance • Motorcycle and Moto Vehicle registration by 54% and 200,000/= respectively • International Call levy, in ward increased • NTR Rates increased by MDA’s Efficiency of Revenue Collection •Payment through Mobile Money •Uganda List Removed
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Budget Response to Private Sector Priorities
7. SMEs’ Dev’t
Private Sector Proposal
a) Focus on SME’s’ financing; create a revolving fund, and work on Improving access to long term financing b) Focus on quality and standards improvement support c) Focus public procurement to support SME’s d) Streamline institutional support.

Budget Response
a) Financial institutions law amendment to support new products b) NAADS to provide agribusiness support and also confine to extension services c) Law on PPDA amended and regulation in place to support this d) Could be in the sectorial institutional policy papers

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Budget Response to Private Sector Priorities
8. Support for Buy/Build Uganda
P/Sector Proposal
a) Procurement Function of Government should act as an agent of dev’t and wealth creation thru support of the PS b) Ensure transparent and easy procedures c) Establish Administrative Measures providing acceptable preferences for local firms

Budget Response
a) Handled during pre-budget period-

• PPDA amendment act passed and the enabling regulation passed. Await implementation

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Budget Response to Private Sector Priorities
9. Regional Integration
P/Sector Proposal
a) Maintain Uganda list save items separately agreed for other rates (e.g. Steel sector) Concentrate of removing SS constraints Aim to sign the EPA Caution on EAMU give time to pre conditions

Budget Response
a) Removed the Uganda list and details in EAC gazette. b) High lighted in Budget priorities especially infrastructure, skills etc c) Not a budget issue d) Not a budget issue- no response

b) c) d)

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Budget Response to Private Sector Priorities
10. Implementation of Agreed upon Policy Actions
P/Sector Proposal
a) Scale up monitoring and implementation of agreed upon Policy Actions from absorption to actual out puts including the beneficiaries; PS b) Implore methods which can speed up actions using a PPP approach c) Forum like the Prime Ministers Private Sector Forum and the Presidential Economic Committee could partly detail itself on this monitoring

Budget Response
a) PPP Bill in Parliament this FY b) To align sector priorities and allocation of resources across the board towards strategic interventions of the Vision 2040 c) Strengthen the accountability and anti-corruption institutions d) Improve coordination, monitoring, inspection and evaluation of Government programmes at all levels _________________________________________ Users or recipients of the services need to be part of the planning and monitoring of the programs
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Trend of Budget Response to P/Sector Priorities (2005 - 2014)
78.6
80

78.8

77.8

80

72.7

76.9

70

60

54.5

50

40

33

30

20

12.5

10

0 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

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EAC Budget Priorities
Kenya • Implementation of new constitution • Skills and Human resource • Job creation for Youth Uganda • Productive infrastructure • Agricultural Pdn & Productivity • Skills and Human Resource Tanzania • Infrastructure; Energy, Transport, ICT and Irrigation • Agric and Industry • Human Resource and Skills • Tourism Trade, Financial Services • Social Services

EAC Tax Highlights
Kenya • Exemption of duty Items used to facilitate railway transport • Increase CET on welding electoral roads from 10-25 • Mill-storms and grind storms, 0-25 • Plastic tubes for packaging cosmetics & paste 10-25 • Impose Customs Ware house rent for gds remaining at Port exceeding 21days Rwanda • No major tax changes Tanzania • Increase Excise duty for non-utility vehicles aged above 10yrs fm 20-25% • 5% Excise duty on utility vehicles aged more than 10yrs (HSCode 87.01/04) • Increased Tax on diesel by 2Tz Shs per litter frm 215-217 • Petrol increased by 61-400Tshs per Litter • Kerosene, no change

Key Uganda Budget highlights
1. Commitment to resuscitate economy - THEME 2. Emphasis on Vision 2040 Priorities (Agriculture, Tourism, Infrastructure etc) 3. Developing internal markets (Proudly Uganda Campaign) 4. Passion to support local industries – 5. Incentives for Rural industrialization 6. Involvement of the Private Sector in Policy formulation

Budget Challenges
• Planning & Prioritisation • Budgeting and resource mobilisation • Implementation of Budget Policy • Mechanisms to Monitor and Evaluate

Conclusions
• Ensure Implementation of planned activities within the new Financial Year • Ensure Strict Budget Discipline (restrict supplementary budgets) • Strengthen PPP in implementation and strengthen Coordination
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Thank you for a Private Sector Centred Budget

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