Can Uganda build an oil economy?

Why would Uganda be a banana republic and not a boda boda, or better still, an oil economy? First, the use of banana has nothing to do with the cultural food of the Baganda, which is also a source of income for many peasants in Bushenyi. Banana republic is a political science term referring to a country that largely depends on limited products for export such as bananas, with stratified social classes, and an impoverished working class. The political power is controlled by a small number of people who could be distinguished by wealth, patronage, education or military control, among others. Basically, we are talking about a country with very weak or no institutional structures and a vulnerable economy. I leave it to the reader to decide which of the above characteristics are true for Uganda and thereafter conclude if ours is a banana republic.
There is no doubt that Uganda has commercially viable quantities of oil, which is a dirty, slippery liquid that requires proper management at both flow and storage levels. Once out of the ground, oil must flow within established structures of pipes, valves and tanks to keep in the right places. Otherwise, broken valves break the value of the oil in tanks, as it can easily flow military tanks to cause or avoid war.
We are talking about strong institutions that set and implement the rules of the game – something that is already a dirty and slippery area in Uganda. Considering the many cases of theft and loss of value for money across all sectors, there is no doubt that the quality of institutions in Uganda cannot match the minimum requirement for managing oil and building an oil economy. The loss of money in agriculture (Naads), Katosi road, Office of the Prime Minister, standard gauge railway what were the others? These may look like big scandals today but the entry of oil would simply dwarf them into the periphery of very tiny events.
The frequency, magnitude and persistence of scandals in the country casts doubt on hopes that the country has the necessary institutions to build a versatile oil economy. The building of institutions involves establishment of structures, mechanisms, and rules that govern the behavior of individuals in a way that community interests transcend any personal preferences. The natural greed of humans require rigid control through rules set to apply regardless of any individual status or origin. As structures and mechanisms of social order, institutions are a principal ingredients for developing an economy that benefits the current and future populations.
The nature of control of political and economic power in Uganda indicates an urgent need for institutional reforms in order to evolve effective partnerships between the private and public sector. The high profile and long-term nature of agreements between the different actors in the oil industry requires rigid guidelines anchored beyond individuals to offer the necessary prediction and guarantee of fair value for each stakeholder in the business. The citizens deserve better services and more viable opportunities for improving their livelihoods while the private sectors expects an adequate return on investments.
The government is to provide a conducive policy, legal and regulatory environment to enable both citizens and private sector realize their goals. Unfortunately, if you concluded that Uganda is a banana republic, then none of the above can happen. Whether you are an optimist or pessimist, I suggest that you go back to the first paragraph and reconfirm your choice. Only then shall we move to the second best option.
Dr Fred K Muhumuza, is a senior manager at KPMG Uganda working with the Financial Services Inclusion Programme,

SOURCE: Daily Monitor

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