The economy is  the process or system by which goods and services are produced, sold, and bought in a country or region

The structure of the economy refers to the salient (basic) features or characteristics    of the economy.

Salient features of Uganda’s economy

1. It is dominated by the agricultural sector (predominantly subsistence in nature). Majority of Uganda’s  population   is employed   in the agricultural   sector.   It is also the major   source of food and foreign   exchange   earner   for the country.
2. It has small but growing industrial sector. Most   of the   industries    are small   and   mainly concentrated   in urban areas.  The few large industries   are owned by foreigners.   The industrial sector contributes   less than 15% of GDP.
3. It is a mixed economy. There is existence of both public and private ownership  and allocation   of resources.  Investments   which require huge capital are owned and controlled   by the government.
4. It is a dual economy. A dual economy   is one where  there  is co-existence   of two  contradicting sectors  where  one is modem  and desirable  while  the other  is traditional   and undesirable.   Uganda is technologically,   socially, economically   and regionally   dualistic in nature.
5. It is an open economy. Uganda interacts with other countries  in terms of trade.  It exports to and imports from other countries.   Uganda’s   exports are mainly primary   products   while the imports are mainly oil products,   capital and manufactured’ goods.
6. It is mainly a dependent economy. Uganda greatly depends on other countries  in terms of trade and other resources for survival.  It mainly depends on international   trade as a source of imports.
7. It is characterized by unskilled   and semi-skilled   labour force.   Uganda’s     labour    force   is characterized   by high  levels  of illiteracy   due  to low  levels  of  education   and  lack  of  experience for particular  technical  jobs.
8. It is mainly characterized by high population growth rate. This is due to high fertility rates and lack of effective family planning  programs.   This leads to high dependence   burden and pressure on social services especially in urban areas.
9. There is wide spread unemployment and under employment. This is due to limited production, investment   and other employment   creating activities resulting   from the high degree of resource underutilization.
10. It is mainly characterized by poorly developed and inadequate social-economic infrastructure. This is in form of poor roads, poor health and educational   facilities and inadequate   power supply which limit investment   in the country,
11. It is mainly characterized by poor entrepreneurship. Uganda’s    economy   is mainly comprised of   incompetent    entrepreneurs     who   lack   the   required    skills   to   start   and   sustain    business enterprises.   This leads to resource misallocation   and mismanagement.
12. It is characterized by high imports and low exports due to low production
13. It is characterized by excess capacity (underutilization of resources in several sectors)

The structure of the industrial (manufacturing) sector in Uganda

1. Most industries process primary products , a few engage in the manufacturing and assembling parts e.g. Spear motors and BATA shoe firms
2. Most industries are concentrated in urban areas especially, Kampala, Jinja, Mbale, Mbarara etc.
3. The size of the industrial sector in Uganda is small but fast growing at fast rate. The small scale industries are widely spread i.e. urban and rural based e.g. agriculture processing industries like maize mill and sugar juggleries.
4. Most of the industries in Uganda are engaged in the processing of primary products although some participate in finished goods.
5. Most of the small and medium scale industries are privately owned while large scale industries are owned by foreigners and/or government.
6. Most of the industrial products are locally consumed and a few for export
7. They provide employment to few skilled and unskilled manpower because of their small scale production and capital intensive technology.
8. Most of the industries operate at excess capacity due to limited market of the products.
9. Most industries depend on agriculture and mineral products and others such as pharmaceutical industries depend on imported raw materials.
10. Most of small scale industries tend to be labour intensive while large scale industries tend to be capital intensive.
11. It is mainly comprised of small scale industries. Most of the industries operate on a small scale. This is mainly due to limited capital which makes it difficult to expand the production activities. However, there are a few medium and large scale industries.
12. The manufacturing industries mainly use imported raw materials in the production process with the exception of agro based industries which use the local raw materials.
13. The industries are mainly imported substituting.  That is they mainly produce commodities that were formerly imported in the country.

Economic implications (Consequences)   of the nature of Uganda Industrial   Sector  

Positive Implications

8. It creates employment opportunities. This is due to the existence of a number of small scale industries which mainly use labour intensive techniques of production.
9. It promotes the exploitation of the local resources. This increases resource utilization in the economy hence economic growth.
10. 3. It helps to save the scarce foreign exchange.  This is because industries produce formerly imported commodities. This reduces the balance of payment problems.
11. It helps to improve the welfare of the people. This is because industries mainly produce consumer goods which directly contribute to the standards of living.
12. It increases tax government revenue.  This is done by taxing a large number of small scale industries.
13. It promotes inter sectoral linkages in the economy especially with the agricultural sector; this is because most of the industries are agro-based.
14. It promotes self-reliance and independence of the economy. This is due to the existence of agro-based small scale and import substituting industries.
15. It encourages capital inflow and technology transfer. This because  most  of the large  firms  are owned  by foreign  investors  who bring  in capital and efficient  technology.

Negative Implications

1. It leads to rural-urban migration with its undesirable effects. This is because   most of the industries   are concentrated   in urban areas.  The youths   leave rural areas mainly   in search   for employment   opportunities   in urban industries.
2. It encourages capital flight and profit repatriation.  This is because   most   of the large and medium   scale industries    are’ owned   by foreigners.    This   limits   capital   accumulation    in the country.
3. It increases balance of payment problems. This is   because   industries    mainly   depend on imported   raw materials   in form of intermediate    and capital   goods.  In addition,   there are low exports from the industrial sector.
4. It leads to unbalanced regional development. This   is because   most   of the industries    are concentrated   in urban areas.  This promotes regional dualism.
5. It leads to technological unemployment. This  is  due  to  increased   use  of  capital   intensive techniques   of production   especially   in large  scale  industries   where  machines   replace  labour  in the production   process.  For example use of computers.     .
6. There is production of poor quality output hence low standards of living.  This is due to the use of poor techniques of production   by small scale industries.

7. It leads to low foreign exchange earnings. This  is because   most  of the  small  scale  industries mainly  produce  for the local market  with very  little  for export  purposes.
8. It promotes foreign economic dominance.  This is because   the large industries   are owned by foreigners and they can easily influence economic decisions in their favour.
9. It leads to low levels of economic growth. This because   industries   operate  at excess  capacity due  to  use   of  poor   techniques    of  production    hence   underutilization    of  resources    in  the economy.
10. It promotes the dependence of the economy on other economies. This is due to over reliance on the imported raw materials especially for the manufacturing industries.
11. There are limited economies of scale because most of the firms operate on a small scale.
12. It leads to low tax revenue for the government. This  is  due  to  dominance   of  small  scale industries  which  makes  it difficult  for the government   to collect  taxes.
13. It promotes environmental degradation in form of air and water pollution especially   in urban areas.  This is due to localization   of industries in urban centers.

The structure of Uganda’s import and export sector   (foreign   sector)

Exports

1. Uganda mainly exports agricultural (primary) and semi-processed products.
2. Uganda exports a few services (invisible exports) for example   tourism,   electricity,   transport, security etc.
3. It exports minerals products on a very small scale like copper, cobalt, gold etc.
4. Uganda’s exports include traditional and non-traditional cash crops. The traditional cash crops   include   coffee,   cotton,   tobacco,    tea etc.   and   the  non-traditional     cash   crops   include sunflower,   flowers,   simsim,   fruits  like  mangoes   guavas   etc.  Other exports   include;   fish, hides and skins.  This implies that Uganda exports a small range of products.
5. Uganda’s exports are mainly of poor quality with low value addition. This is because they are mainly exported in their raw form. “
6. Uganda exports a few manufactured consumer goods like textiles, plastics, mattresses,   soap, cement etc. especially to the neighboring   countries
7. 7. Uganda’s exports face limited market. They are mainly   exported   to a few countries   like the European Union, COMESA   countries, Middle East and the rest of Africa,
8. The prices of Uganda’s exports are low and they keep on fluctuating in international    markets. This  is because  the prices  of Uganda’s   exports  are externally  determined.

Imports

1. Uganda mainly imports manufactured consumer commodities like textiles,   drugs,  beverages, cosmetics  etc.
2. Uganda imports producer (capital) goods like machinery,  computers,   electric equipment etc.
3. Uganda imports fuel and petroleum products like petrol, kerosene and diesel.
4. Uganda imports skilled manpower in form of expatriates like engineers, doctors etc.
5. Uganda imports military hardware in form of guns, bullets, tear gas etc.
6. Uganda imports agricultural products like rice from Pakistan, apples from South Africa etc.
7. Uganda’s imports are priced expensively and come from countries  like China,   Japan, Italy, Germany etc.

Economic implications of the Uganda’s import-Export   Structure (Foreign Sector)

1. Adverse balance of payments. This is due to increased   import expenditure   and reduced   revenue from exports
2. Unfavorable terms of trade. This is due to high import prices and low export prices.
3. Risk of imported inflation. This is due to heavy   dependence   on expensive   imports   like fuel products.
4. Limited and fluctuations in foreign exchange earnings. This is due to fluctuations  in the price of agricultural   exports.
5. Increased economic dependence of Uganda on other countries. This is in terms of producer goods, petroleum products and other consumer commodities.
6. Poor provision of public goods and services. This is due to low government    revenue   from exports.
7. Increased capital outflow in form of over reliance on expatriates.  This   also   retards    the development   of the skills of local man power.
8. Low levels the economic diversification due to dependence  on a few traditional exports.
9. Importation of inappropriate technology  due  to heavy  dependence   on  imported   capital   goods especially  capital  intensive  technology   which  leads  to technological   unemployment.
10. Limited industrialization due to predominance of agricultural   exports.

Policy Measures to Improve the Import- Export Structure

1. 1. Establishing import substitution industries to produce goods which were formally imported.
2. Setting up export promotion industries to produce manufactured  goods for export as a way of reducing the predominance   of exports of agricultural   products
3. Economic diversification in order to reduce over dependence  on a few agricultural   exports.
4. Establishing training institutions as a comprehensive  policy aimed at training local man power. This helps to reduce over reliance, on expatriates
5. Signing international commodity agreements to stabilize prices of agricultural  exports.
6. Widening the export market by carrying out research  and joining regional   integration   like East African Community   (EAC), Common Market for East and Southern Africa (COMESA)   etc.
7. Encouraging the exportation of non-traditional crops like sunflower,  flowers,   fish, vanilla etc.
8. Improvement  of social and economic infrastructures   to facilitate   production,     distribution, transportation   and marketing   of exports.
9. Putting in place favorable  investment policies that  can  attract  both  local  and  foreign   investors to produce  enough  commodities   for domestic  consumption   and export purposes.
10. Promoting value addition to exports of agricultural  products.   This helps to increase   export prices and export earnings.
11. Expanding the invisible export sector especially the tourism sector so as to increase the foreign exchange earnings.

Dualism in Uganda’s economy

• Dualism is the co-existence    of two contrasting   (contradicting)    social-economic    (phenomenon) situations where one is modem and desirable while the other is backward and undesirable.
• A Dual Economy is a social- economic  system where  there  is co-existence   of two contradicting sectors  where  one is modem  and desirable  while  the other  is backward  and undesirable.

Examples of dualism in Uganda

1. Market (monetary) sector versus subsistence   sector
2. Rural sector versus urban sector
3. Modern culture versus traditional   culture
4. The rich versus the poor
5. The literate versus the illiterate
6. Capital intensive technology   versus labour intensive technology
7. Skilled labour versus unskilled   labour

Forms (Types) of dualism in Uganda

2. Intra-Sectoral Dualism. This refers   to the co- existence   of different   levels   of development within   the same sector.   For example the coexistence of modem   agriculture    and subsistence agriculture within the agricultural   sector
3. Technological dualism.  This   refers   to the co-existence   the two contrasting techniques   of production   in the economy.   For example labour intensive   techniques   of production   co- existing side by side with the large scale capital intensive     techniques   of production.
4. Trade Dualism.  This is the co- existence   of two methods   of exchange   in the economy.   For example the coexistence   of Barter system and monetary   system of exchange

5. Economic (Financial) Dualism.   This   is the co- existence   of two financial   markets    in the economy.  For example the coexistence   of the informal and the formal financial markets
6. Industrial Dualism. This   is the coexistence    of two   contrasting    types   of industries    in the economy.  For example the coexistence   of inefficient   small scale firms and efficient   large scale firms
7. Regional Dualism. This   refers   to the   co-existence    of   two   regions   at different    levels   of development   in the economy.  For example the coexistence   of the rural and urban areas
8. International Dualism. This refers   to the co-existence   of less developed   countries   and more developed countries.
9. Cultural Dualism. This refers to the co- existence of two contradicting beliefs in the economy. For example the modem   western culture coexisting with the traditional culture
10. Social Dualism. This is the co- existence of two contrasting social economic   classes of people in the economy.  For  example  the  rich  coexisting  with  the poor,  the illiterate  coexisting   with  the illiterate  etc.

Causes of dualism in developing countries

1. Unequal income distribution which leads to economic dualism.
2. Unbalanced natural resource endowment hence regional and international  dualism.
3. Importation of inappropriate technology which leads to technological  dualism.
4. Uneven distribution of social-economic infrastructure  between urban and rural areas
5. Political instabilities in different parts of the country.  .
6. Unwillingness to change from traditional cultural practices.
7. High levels of poverty which makes  some  parents  fail to educate  their  children  in good  schools hence  social  dualism

Dangers (problems)  of Dualism

1. It leads to regional imbalances with the rural sector always lagging behind the urban sector.
2. It leads to rural urban migration and its associated negative effects due to concentration of jobs and other benefits in urban areas than in rural areas.
3. It leads to technological unemployment in case capital intensive techniques   are used in areas with abundant cheap labour.
4. It creates difficulties in planning. That is, it becomes   difficult   to decide on which   sector to develop first. For example the case of agriculture and industry.
5. It reduces government tax revenue due to the existence of the poor majority with low taxable capacity and existence of a large subsistence   sector.
6. It discourages production and investment due to low aggregate demand for goods and services as the majority of the people are poor and a few are rich.
7. Social cultural  dualism  breeds  conflicts  in  belief  and  values  and  this  leads  to  social   dis-harmony.

Measures to reduce dualism in developing countries

1. Use of appropriate technology.  That is production   techniques   used should be in line with the social and economic requirements   of the society.
2. Delocalization of industries to reduce on the problems of regional   imbalances   resulting   from concentration   of industries   in urban areas.
3. Implementing rural development programs such as rural   electrification,    rural infrastructural development   etc. to control rural urban migration.
4. Monetization of the economy to reduce on the subsistence sector through   modernization    and commercialization    of agriculture.
5. Providing free education.   For   example    universal    primary    education    (UPE)    and   universal secondary education (USE) to reduce on social – cultural dualism.                           ,
6. Use of progressive taxation to check on income inequalities between the rich and the poor.
7. Land reform policy. For example  land  consolidation,    land  redistribution    etc. aimed  at changing the land tenure  system  to enable  the landless  to have  access  and rights  over  ownership  of land.
8. Economic diversification. This is aimed at producing   a variety of products   for exports to reduce international   dualism.
9. Widening markets through economic integration so as to promote   trade in the economy.
10. Political stability. This is aimed at promoting investments and production   of goods  and  services in  the  country   and  reducing   on  the  expenditure   incurred   in  importing   fire  arms from  foreign countries.

 Economic dependence, inter-dependence and independence

1. Economic dependence. This is where the country relies on specific sectors or other economies in terms of resources and economic decisions for its survival.
2. Economic interdependence. This refers to a situation where two or more countries   rely on each in terms of resources and economic decisions for survival.
3. Economic Independence. This refers to a situation where the economy   is mainly self-sustained in terms of resources and economic decisions for its survival

Ways in which Uganda is economically   dependent

1. Trade dependence. Uganda heavily relies on international trade in terms of imports and exports for her survival.
2. Direct economic dependence. Uganda’s political and economic decisions   are heavily   influenced by foreign institutions   like World Bank and developed countries.
3. External resource dependence. Uganda heavily relies  on foreign  aid in terms  of foreign  capital, grants  and skilled  man power  for her growth  and development.
4. Sectoral dependence. Uganda    heavily    relies    on   the   agricultural     sector    for   growth    and development   as compared to other sectors.
5. Social-Cultural dependence. Uganda is greatly influenced by the western cultures.

 Economic implications   of Dependence of Uganda’s Economy

Positive implications

1. It promotes economic growth and development. Loans, grants and direct  foreign  investments   are used  to produce  goods  and services  hence  economic  growth  and development.
2. There is acquisition of advanced technology under external resource dependency. This leads to production of better quality goods and improvement   in service delivery.
3. Skilled man power imported from   other  countries  helps   to  fill  the  skilled   man   power  gap existing  in developing  countries.
4. Foreign dependence allows specialization among countries with all its advantages. For example, under comparative    advantages,    the country   can acquire   certain   products   cheaply   from abroad than being producing   them locally at a high cost.

Negative implications

1. It leads to capital out flow due to over dependence on foreign private   investments.    Foreign investors   repatriate   profits   back to their home countries leading to capital   accumulation    in the country.
2. It leads to unemployment due to heavy dependence   on foreign   skilled   manpower   and overdependence   on imported inappropriate   technology.
3. It leads to neglect in the use of local resources and exploitation of local entrepreneurial skills. This is due to over dependence   on foreign  resources   and manpower
4. Direct economic dependence leads to development which is not in line with the social economic requirements of   the   country.    This   is because    economic   .and   political    decisions    are   made externally without involving the participation   of the people.
5. It worsens the balance of payment position. This is due to heavy dependence   on imports which leads to increased import expenditure.
6. 6. It leads to imported inflation due to heavy dependence    on imports   especially   the petroleum products.
7. It leads to dumping. This  is due  to  heavy  dependence    on  cheap  imports   and  this  retards   the  development   of the industrial  sector  in the county.
8. It leads to fluctuations in incomes and foreign exchange earnings due to   over dependence   on primary   agriculture   exports.   This is because   they experience   price   fluctuations    on the world markets and they are affected natural conditions like bad weather.
9. It increases the debt burden on the future generation in case the country heavily   depends   on loans from foreign countries.

Ways of reducing Economic dependence in Developing countries

1. Adopting the inward looking development strategy. This is achieved   by setting   up   import substituting industries to reduce heavy dependence   on imports.
2. Economic integration. This is aimed at widening   markets   for the locally produced   goods and promoting economic inter dependence   among the integrated   countries.
3. Export promotion policies. These are aimed   at increasing   the quantity   and quality   of exports through value addition.  This  helps  to increase  on the  foreign  exchange  earnings  which  is used  to import  capital  and consumer goods.                                            ‘                                    ,
4. Constructing and rehabilitating the social and economic infrastructure. This   is aimed   at facilitating the production,   distribution   and marketing   of goods and services in the country.
5. Use of appropriate technology. This helps to create more employment opportunities   and increase production   in the country.
6. Changing the education system. This is aimed  at equipping   man  power  with  the required   skills so as to reduce  over dependence   on foreign  skilled  man power,
7. Economic diversification. This is geared towards   reducing   over dependence   on the agricultural sector and widening the scope of exports.
8. Adopting favourable government policies. For  example   subsidizing   local  investors   and  setting up institutions  like Uganda  Investment   Authority   (UIA)  to stream  line the requirements    from  and the needs  of the investors.
9. Increasing the exploitation of natural resources. This is aimed at reducing on the importation of raw materials from other countries required for production.
10. Political stability. This is aimed at promoting   investments   and production   of goods  and  services in  the  country  and  reducing   on  the  expenditure   incurred   in  importing   fire’ arms  from  foreign countries.

The informal sector

The informal sector consists of activities that have market value but are not formally registered.  The   sector   is mainly   comprised    of self-employed    persons   like Hawkers, carpenters,   street vendors,   shoes shiners,   taxi drivers,   Barbers,   tailors,   small retailers   like canteen holders etc.

Features (characteristics)   of the Informal Sector

1. Business activities are not formally registered by registrar of companies.
2. There is easy entry in business activities. Licenses either do not exist, are cheap or forged in the process of getting them.
3. The sector mainly employs local resources in the production process.
4. It mainly operates on a small scale with low output levels.
5. There is limited or no book keeping in carrying out business activities
6. It mainly employs labour intensive techniques the production.
7. The business activities are mainly operated in semi-urban areas.
8. The sector is dominated   by semi-skilled and unskilled   labour
9. Production is mainly of low quality due to use of poor production   techniques.
10. Business activities are mainly operated in open space and semi-permanent structures.
11. Production of goods and services is mainly for the local market.
12. It mainly operates at excess capacity due to limited capital employed.
13. On job training is common under the informal sector.
14. Businesses are basically organized   on the basis of sole proprietorship employing   a few family members.

 Similarities   between the Informal sector and Small scale industries

1. Both mainly operate on small scale with low out put
2. Both mainly employ limited capital for establishment and maintenance
3. Both mainly use local raw materials
4. Both are mainly located in semi-urban areas.
5. Both mainly produce consumer   goods for domestic consumption
6. Both contribute little to government    revenue
7. Both have low employment capacity
8. Both mainly use labour intensive   techniques    of production
9. Both mainly produce at excess capacity and operate in the private sector
10. Both involve limited or no book keeping.
11. Both are dominated by semi-skilled and unskilled   labour
12. On job training is common   in both the informal sector and the small scale industries
13. Both have a small profit margin.
14. Small scale businesses are small scale businesses but formally registered with registrar of companies.

The Role (Contribution)   of the Informal sector to Development

Positive roles

1. It creates employment opportunities.    This is because   most of its activities   are labour   intensive and are on self-employment    basis.
2. It provides a variety of locally affordable   basic consumer    commodities.    This widens the choice of consumers,   especially   the low income earners hence improving   their standards   of living.
3. It reduces foreign exchange   out flow.   This is because commodities   which could be imported   are domestically   produced   and this helps to reduce on balance of payment problems.
4. It acts a cheap training   ground   for   local entrepreneurs.     This promotes   managerial    capacity building and helps to reduce government   expenditure   on training costs.
5. It facilitates the exploitation    and utilization   of the idle local resources.   This helps to improve on the productive   capacities   in the economy hence growth and development.
6. It promotes the equitable   distribution    of income.   This  is because   the  informal   sector  requires little  capital  to set up and  therefore,  the low income  earners  can easily  be involved   in carrying  out business  activities  to earn income.
7. It is  a  source   of  government     revenue    through    taxation,    The  government    taxes   incomes   of employees   and  business   activities   of  those  involved   in  the  informal   distribution.    The revenue realized is used to construct   social and economic   infrastructure.   Like hospitals,   roads, etc.
8. It promotes commercialization      of the economy.    The informal   sector can later  be  transformed into a modem  monetary   sector.
9. It promotes mobilization    of local savings.     This promotes   capital accumulation   in the economy.
10. It promotes technological development    in the long run through the use of simple tools.  This acts as an avenue for developing   and promoting   appropriate   technology   in the economy.
11. It facilitates modern industrial development.  The   backward    and   forward   linkages    created between   the   modem    and   traditional    sectors   as  well   as  the   agricultural    sector   promote    the establishment   of small  scale industries  which  can later be developed   into large  scale  industries.

Negative contributions

1. It encourages duplication of goods and services. This   leads   to resource   wastage    through wasteful competition.
2. It leads to low government revenue. This is because  it is associated   with  a small  tax  base  and high  levels  of  tax  evasion.   This  makes   it  difficult   for  the  government   to  realize   the planned revenue  required  to provide  the necessary  social  services  to the people.
3. It leads to poor standards of living for the people. This is because   it is associated   with the production of poor quality products.
4. It limits the foreign exchange earnings of the country. This is because it does not encourage production for export purposes.
5. It encourages under employment and disguised unemployment. This because the sector mainly operates at excess capacity and on a small scale.
6. It leads to congestion in semi-urban areas. This increases the cost of living in such areas.
7. It reduces the rate of economic growth and development. This is due to underutilization    of resources and use of poor production techniques hence low output.
8. It leads to environmental degradation and pollution. This is in form of air and water pollution which leads to negative   externalities   to society.
9. It accelerates rural urban migration. The youths move to towns to engage in petty but short run profitable   activities.   This leads to regional   economic   imbalance   and poor accommodation facilities in the sub-urban   areas.
10. It increases the administrative costs by the government especially in terms of prevision of the basic social and economic   infrastructure.    It also makes it difficult for the government   to carry out proper planning   due to uncoordinated   development

Problems facing the informal sector in Uganda

1. Inadequate capital required for business expansion due to low savings and incomes.
2. Poor and inadequate infrastructural facilities. This is reflected   in form poor transport network, lack of permanent   premises   for operation   and poor storage   facilities.   This makes it difficult   to carry out effective production   of goods and services.
3. Low levels of technology. This leads to the production of low output and of poor quality.
4. Limited entrepreneurship skills. This is due to limited   skilled manpower   needed   for business management   and expansion.
5. Limited markets for the products. This is due to low aggregate    demand resulting from high levels of poverty in the country.
6. Limited government support and lack of legal recognition   by government.   This   leads   to constant harassment   by local authorities.   For example city council agencies.
7. Political instability in some parts of the country.   This   discourages    people   from   setting   up meaningful businesses   due to fear of losing life and property.
8. Limited access to credit facilities from formal banks arid microfinance institutions. This is due to lack of collateral securities.
9. Inadequate supply of raw materials required in the production of goods and services.  This  forces some of them to import  hence  increasing  the cost of production.
10. High risks and uncertainties involved with investments in the informal   sector.  This  is  due  to poor  planning   and  lack  of  proper  business   plans  which   leads  to’ high  failure  rates  of  business enterprises.
11. 11. Stiff competition from both imported and locally manufactured      This   makes   it difficult to market the products.

Measures to promote the informal   sector

3. Providing credit facilities by the government.  There is need for the government   to provide credit facilities   to the people   involved   in the informal   sector at subsidized   interest   rates.   This helps people involved to access capital and expand on their businesses.
4. Adopting favourable government policies. This is in form of reducing   taxes on raw materials and  other  inputs  used  by  the  informal   sector  so  as  to reduce  the production   costs.  In addition, there is need for the government   to grant legal recognition    to the informal   sector to protect   it from unnecessary harassment
5. Using appropriate technology. There  is need  for the  government   to encourage   and  promote   the use  of  production    techniques    which   are  cost   effective   and   are  in  line  with   the   social   and economic  requirements    of the  society.  This helps to increase   on the quantity   and quality   of the products.
6. Economic liberalization. There is need  for  the  government   to remove  unnecessary    restrictions from  economic   activities   to allow  people  involved   in the  informal   sector  to carry  out  business freely with limited  interference”
7. Forming cooperatives and associations. Such associations help individual   producers   to secure loans from financial institutions   and marketing of their products.
8. Changing the education system. This  is  aimed   at  equipping   the  local  man   power   with  the required  entrepreneurial   skills necessary  for efficient  management   and allocation  of resources.
9. Protectionism policies. There   is  need  for  the  government    to  restrict  the  importation    of  those products  produced  by the  informal  sector  by imposing   high  tariffs  on them.  This  helps  to protect the  local  producers   in  the  informal   sector  and  reduce   competition    from  high  quality   imported products
10. Construction and rehabilitation of basic social and economic infrastructure. This is in form of transport facilities,   electricity,   water facilities,   storage facilities   etc. This is aimed at facilitating the production, distribution   and marketing of goods and services by the informal sector.
11. Providing demarked work places. There is need for the government to provide land where people involved in the informal sector can carry out their activities.
12. Market expansion. There is need for the government to expand market for the sector   through economic integration, market research, promoting trade exhibitions and encouraging   economic diversification.
13. Using expansionary fiscal policies. There is need for the government to raise wages   for civil servants so as to raise aggregate demand for the goods and services provided by the sector.
14. Political stability. There is need for the government to ensure political   stability.   This helps to create a favourable environment   for the prosperity   of the informal sector.
15. Increasing the exploitation of natural resources. This is aimed   at obtaining    raw materials required for production   of goods and services  by the informal  sector

The subsistence sector

This is a sector where production   of goods and services is meant for the producers’   own consumption needs.

Features (characteristics) of the Subsistence sector

1. There is limited or no specialization and division of labour.
2. There is use of back ward and out dated technology. For example use of hoes in the agriculture sector.
3. Production is carried out on a very small scale with low output levels.
4. The sector is mainly comprised of semi-skilled and unskilled labour in the production process.
5. Production of low quality output due to use of poor production techniques.
6. There is dependency on family labour in the production process.
7. There is low labour productivity due to the use of poor techniques of production.
8. The predominant system of exchange is through barter trade. That is exchange of goods for goods.
9. There is absence of profit motive. Individuals simply produce for basic survival.
10. There is high degree of conservatism. Production activities are greatly influenced by social attitudes and cultural beliefs.
11. Land is the basic factor of production characterized by diminishing returns

Dangers (problems) of a large subsistence sector

1. It leads to low government revenue.  This is because it is associated with a narrow tax base due to limited production activities. This makes it difficult for the government to realize the planned revenue required to provide the social services to the people.
2. It leads to poor standards of living for the people. This is because it is associated with the production of poor quality output. .
3. It leads to low levels foreign exchange earnings for the country.  This is due to lack of production of goods and services for export purposes.
4. It encourages under employment and disguised unemployment. This because the sector mainly operates at excess capacity and on a small scale    with limited production activities.
5. It leads to low levels of economic growth. This is due to the production of limited output due to underutilization of resources. “
6. It discourages hard work and expansion of production due to absence of profit motive.
7. It discourages the monetization of the economy due to use of barter system of exchange. This limits trade in the economy
8. It limits the productivity of labour. This is due to use of backward technology which leads to production of low output.                                                                          .
9. It leads to poor social and economic infrastructure in form of poor roads, limited hospitals, limited financial institutions and other communication facilities. This makes it difficult to carry out trade
10. It promotes conservatism and cultural backwardness. This encourages cultural dualism in the economy.
11. There is lack of specialization under the subsistence sector. This limits production and its associated positive effects like increased efficiency in production.
12. There is existence of higher risks under the subsistence sector due to over dependency on nature. This leads to great losses and fluctuations in the levels of output and consumption.

Structural adjustment programs (saps)

These  were  a  package  of  policy  measures  and  other  institutional  reforms  recommended  by International Monetary Fund (lMF) and World Bank  to governments of developing countries with the aim of improving on the performance  of their economies.

Aims (objectives) of SAPS

1. To stimulate economic growth (GNP)
2. To expand the private sector so as to improve efficiency in production of goods and services.
3. To increase employment opportunities in the economy.
4. To reduce on public (government) expenditure.
5. To promote the development   of vital social and economic infrastructure.
6. To promote domestic savings by strengthening   financial institutions   in the economy.
7. To improve on resource   utilization   and allocation   for sustainable   development.
8. To reduce poverty    and   improve   on welfare   especially    for the vulnerable    groups   like the children, women, and the handicapped.
9. To reduce on foreign economic   dependence   by the economy;
10. To improve agricultural   productivity    through agricultural   modernization.
11. To reduce on the large subsistence sector so as to promote trade in the economy
12. To promote technological   progress   in the economy through inventions   and innovations.
13. To increase government revenue by expanding the tax base.
14. To Improve on balance   of payment    position   of the country
15. 10 ensure equitable distribution of income.
16. To control inflation   so as to stabilize  the Ugandan  shillings  and restore  confidence   in it as a store of wealth  and a reliable  medium  of exchange.

 Policy Instruments   under taken by the Government of Uganda under SAPS

1. 1. Privatization of public enterprises   aimed at strengthening   the private sector.
2. Cost sharing in social service delivery.  For example in schools and hospitals
3. Retrenchment of civil servants   aimed at reducing the size of civil servants
4. Demobilization of soldiers aimed at reducing government   expenditure
5. Economic liberalization    aimed at    efficient   resource   allocation   through   liberalization    of the exchange  rate,  interest  rates,  prices  etc. to allow  market  forces  of demand  and supply  to operate
6. Tax administration reforms   aimed at improving   tax collection   and administration.    This led to the formation of Uganda Revenue Authority in 1987
7. Infrastructural development policy aimed  at rehabilitating   all high  ways,  feeder  roads,  railways, ferries,  airports,  storage  facilities,  financial  institutions   etc.
8. Monetary   policy   reforms   aimed at controlling   money supply, encouraging   deposits, developing security   markets,    strengthening    the   supervisory    role   of  the   central   bank,   encouraging     the establishment   of private  financial  institutions   etc.
9. Export promotion     programs     through   export   diversification,     value   addition   to improve    on quality, periodic devaluation   of the Ugandan shilling etc.
10. Rationalization of investment laws aimed at encouraging   investments   in the country.  This  led to the formation  of Uganda  Investment   Authority  (VIA)  in1991

Uganda as a mixed economy

Uganda   is   a mixed   economy.    Resource    owner   ship,   allocation    and   management     of   business enterprises   are done by both the government   and the private   sector.  The government   makes major economic decisions.   However private the private sector is slowly growing due to the privatization    of most of the parastatals   by the government

The private sector in Uganda

The private   sector   refers to the part of the economy   where economic   activities   are  undertaken   by private  individuals or units

Features of Uganda’s private sector

1. It is small but slowly growing sector.
2. It is still a weak sector due to limited capital.
3. It mainly undertakes enterprises producing consumer goods for the domestic market.
4. Large scale business enterprises are mainly owned by foreign investors.
5. The private sector is profit motivated.
6. There is existence of low prod
7. Business enterprises are mainly concentrated in urban centers due to availability of markets
8. Limited involvement in long term risk ventures by individuals in the private sector.
9. It is dominated by small scale import substituting industries.

Role (Implications)   of the private sector in the development   process

Positive role (Implications)

1. It creates more employment opportunities. This is in form of the production activities    and business enterprises   established.   This increases income for the population.
2. It increases efficiency in resource allocation.   The   major   aim   of   private    firms    is   profit maximization.    Therefore,    they employ   efficient   techniques    of production    which   leads   to the production   of more goods and services hence economic   growth and development.
3. It increases government revenue through taxation. A strong  private  sector  helps  to  widen   the tax  base   in  form   of  employment    and  business    activities    set up  hence   generating    more   tax revenue   to  the  government.    The revenue   realized   is used to construct   social and economic infrastructure   like hospitals, roads, schools etc.
4. It increases capital inflow in the country. The private   sector  helps  to attract  foreign  investments in the economy   especially   in high  risk  ventures  Where private  local  entrepreneurs cannot  invest. This increases   the level of investment in the country.
5. It leads to the development of social and economic infrastructure. The expansion   of the private sector  promotes   the  development   of  the  social  and  economic’  infrastructures    in  form  of  roads, schools,  hospitals,   financial  institutions   etc.
6. It promotes technological   development   in   the   country.   The   private    sector    facilitates technological    progress   through   innovation,   invention    and technology   transfer   due  to  foreign ownership  of some  enterprises.   This leads to the production   of better quality goods and services.
7. 7. It facilitates the exploitation and utilization of the idle local resources. This helps to improve on the productive capacities in the economy hence growth and development.
8. It reduces the balance of payment problems in the country. This is because the private   sector increases   the production    of goods and services   for domestic   market.   This helps   to save   the scarce foreign exchange which would be used for import purposes.
9. It helps to reduce on corruption and embezzlement of funds which   is rampant   in the public sector.  This promotes   accountability   in resource allocation   in the economy.
10. It promotes industrial development.  The   backward    and   forward   linkages    created    in   the economy  promote   the  establishment   of small  scale  industries  which  can later  be developed   into large scale  industries.
11. It promotes competition in business activities. This leads to the production of better   quality goods and services at reduced prices hence better standards of living.
12. It increases the GDP of the country. This is because the private sector  widens  the production    and economic  activities  in the country  which  increases  trade  in the economy.
13. It leads to the production of a variety of consumer commodities. This widens   the choice   of consumers hence improving   their standards of living through utility maximization.
14. It helps to create a class of entrepreneurs in the economy.  The private   sector   provides individuals   with the necessary   practical   skills required   to operate modem   business   enterprises. This promotes   managerial    capacity   building   and helps   to reduce government    expenditure    on training costs.
15. It leads to political stability in the economy. This is because  the private  entrepreneurs    who  have invested  a lot of capital  in their businesses   have  to see it that there is security   and stability  to in the economy  to secure  their lives  and property.

Negative role (implications)   of the private sector

1. It leads to wasteful competition through duplication   of goods and services.  This leads to misallocation of resources in the economy.
2. It leads to emergence of private monopolies. This increases   consumer   exploitation    as private monopolies   restrict output and charge high prices with the aim of maximizing   profits.
3. It promotes regional income inequalities in economy. This is because most of the production and business are concentrated in urban areas neglecting rural areas
4. It leads to profit repatriation. This is due to the dominance of the private sector by Foreign Direct Investment   (FDI’s).  This leads to low capital formation in the economy.
5. The private sector under mines the provision of basic essential goods and services which are nonprofit making. This is because the private individuals   aim at venturing   in activities   in which   they maximize profits.
6. It limits the foreign exchange earnings of the country.   The private   sector mainly   produces goods and services   for domestic   consumption.    This limits the export potential   of the country hence low foreign exchange earnings.
7. It leads to technological unemployment.   This   is due   to increased    use   of   capital   intensive techniques   mainly by the foreign investors and inefficient   firms being pushed out of the production process due to stiff competition.
8. It leads to rural -urban migration.   This   is because   most   of the   business    activities    are concentrated   in urban centers due to poor infrastructures    in rural areas.  This leads to congestion and increased cost of living in urban areas.
9. It leads to low rate of economic growth and development. This is because  the private  sector  has limited  capital  for expansion   especially  the private  local  investors  who  lack  collateral   security  to acquire  loans   from  financial   institutions.    This   leads   to underutilization    of resources    in the economy.
10. It increases economic dependence of the economy. This is true in case most of the private investments    are   owned   by   foreigners.    This   increases    foreign   dominance    and   control   of   the economy through foreign direct investments
11. It leads to divergence between private and society interests. This is because private individuals may   maximize    profits   at the   expense   of   the   society   in terms   of negative    externalities    like environmental        pollution   and over exploitation    of natural   resources.   This leads to failure   of the economy to be self-sustaining   in the long-run.
12. Some key areas like production of fire arms cannot be left in the hands of private individuals. This is because it may cause insecurity in the country.
13. It makes planning by the government difficult. This is because   it makes   it difficult   for the government   to coordinate and carry out proper planning for a large private sector.

Problems facing the private sector in Uganda

8. Inadequate capital. This is mainly  due  to  low  levels  of incomes   and  limited   access  to credit facilities   from   financial    institutions    due   to  lack   of  collateral    securities.      This   limits   the expansion   of business opportunities   in the economy.
9. Low levels of technology. There is use of simple technology   especially   by the local private investors.   This  leads  to the production   of  low  output  and  of poor  quality  hence  low  levels  of economic   growth  and development.         ‘
10. Unfavorable government policies  in  form  of  high  taxes,  low  taxes  on  imports,   high  interest rates on loans  etc. This reduces the profits and kills the initiative by private investors.
11. Economic instabilities.   For   example    inflation,    exchange    rate   fluctuations     etc.   Inflation increases  the costs of production   hence  discouraging   the growth  of the private   sector.
12. Stiff competition from the imported manufactured products. The  imported   goods  are  cheap and  of high  quality  while  the  locally  produced   goods  are  expensive-and     are  of poor  quality. Therefore, they out compete the locally produced   goods by the private sector.
13. Poor and inadequate infrastructural facilities. This is reflected   in form   of poor   transport network,   poor   storage   facilities   and limited   financial   institutions.    This   makes   it difficult   to produce and market the produced goods and services by the private sector.
14. Limited entrepreneurship skills. This is due to limited skilled  manpower needed for business management    and  expansion   which   leads  to  low  profit  margins   and  in many cases   closure   of business  enterprises.
15. Limited markets for the products. This is due to low aggregate   demand   resulting   from high levels of poverty in the country.
16. Political instability in some parts of the country. This discourages   private   individuals    from setting up meaningful businesses due to fear of losing life and property.
17. Inadequate supply of raw materials required in the production of goods and services.  Most of the raw materials   and capital goods are imported   from other countries.   This increases   the costs of production   hence limiting production   in the private sector.

Policies (measures) to promote the private sector in Uganda

1. Economic liberalization. There is need  for  the  government   to remove   unnecessary    restrictions from  economic   activities   to allow  people   involved   in  the  private   sector   to  carry  out  business freely  with limited  interference.
2. Adopting favourable government policies. Such policies include providing economic   incentives like subsidization   of factor inputs and tax holidays to private investors.   This is aimed at reducing the production   costs hence promoting   the private sector.
3. Providing credit facilities by the government. There is need for the government    to provide credit facilities to the people involved in the private sector at subsidized   interest rates.  This helps people involved to access capital and expand on their businesses.
4. Construction and rehabilitation of basic social and economic infrastructure. This is in form of transport facilities,   electricity,   water facilities,   storage facilities etc. This is aimed at facilitating the production,   distribution   and marketing   of goods and services by the private sector.
5. Establishment of organizations to promote private sector investment.   Organizations     like Private     Sector    Foundation     (PSF),     Uganda     Investment     Authority      (UIA)     and    Uganda Manufactures    Association    (UMA)   have been   set up to promote   the activities    of the private sector in the country.
6. Training tile local manpower. This is aimed at equipping the local manpower with the requited entrepreneurial skills necessary for efficient management   and allocation   of resources.
7. Protectionism in form of high import tariffs. There  is need  for  the  government   to  restrict  the importation   of those  products  produced  by  the  private  sector  by imposing   high  tariffs  on them. This helps to protect the local producers   in the private sector and reduce competition   from high quality imported products.
8. Improvement in the level of technology. There  is need  for  the  government    to  encourage   and promote   the use of better  techniques   of production   which  are cost  effective   and are  in line with the  social  and  economic  requirements   of the  society.  This helps to increase   on the quantity   and quality of the products.
9. Market expansion. There is need for the government   to expand market   for the sector through economic integration, market research, promoting trade exhibitions and encouraging economic diversification.
10. 10. Privatization of inefficient parastatals.   There   is need   for the government    to privatize    the inefficient   parastatals to allow the private individuals   get involved   in economic      This enables the growth and development   of the private sector.
11. Political stability. There is need for the government to ensure political   stability.   This helps to create   a favorable environment for the prosperity of the private sector.
12. Increasing the exploitation of natural resources.  This is aimed   at obtaining   raw materials required   for production   of goods and services by the private sector.  For example exploitation   of oil products   in Bunyoro region.

The public sector

The public  sector is that  part  of  the  economy   where  resources   are  owned  and  allocated   by  the government   on behalf of    its citizens.  That is, the government   owns the means of production   and carries out the major economic decision on behalf of the people.

Public Enterprise (Parastatals). This  is an organization   set up by the government   through   the act of parliament   to provide   certain  services  to  the  citizens.   Examples   include; National   Water   and Sewerage   Corporation    (NWSC), Uganda   Revenue   Authority   (URA), National   Social   Security Fund (NSSF) etc.

The Role of the public sector (Parastatals) in economic development

Positive role

1. It provides productive social and economic infrastructure.  This is in form of water   supply, power supply, roads, schools, hospitals,   financial   institutions   etc. This leads to the development of the industrial   and agricultural   sectors.
2. The public sector has the ability to operate risky businesses ventures which require large capital that cannot be raised by private individuals.
3. It promotes proper planning of the economy. Parastatal organizations   make  economic   planning easy because   they  enhance  government   control  of the development  plans and programs unlike the private  sector  which  is outside  the state control.
4. It promotes technological   development   in   the   country.   The   public    sector    spear    heads technological progress   especially   in developing    countries.   This is because   it has the ability to carry out research aimed at inventing and innovation   the existing technology.
5. The public sector helps to redistribute income and wealth in the economy. This   is done by carrying out progressive   taxation and evenly distributing   the social and economic   infrastructure. This helps to ensure balanced regional development   and reduce income inequalities.
6. The public sector is in position to provide basic essential goods and services which are nonprofit making.   Some  business   ventures   are  commercially   unprofitable   and  not  attractive   to  the private  sector  which  is profit  orientated   and yet they may be economically   and socially   desirable. The state comes in to provide such vital services through Parastatal bodies.
7. Parastatals help to create more employment opportunities. This is in form of the production activities   and public enterprises   established   to provide   services   to the people.   This is possible even if the Parastatal   is making losses.
8. Some key areas like production of fire arms cannot be left in the hands of private individuals. This is because it may cause insecurity in the country hence the need for the public sector.
9. Parastatals help to protect consumers from exploitation which is common   under   the private sector.  This is because the government   aims at promoting   the welfare of the people.
10. It helps to improve on the balance of payment position of the country. The government has the ability to   initiate   programs    like   export   promotion    policies,    setting   up   import substitution industries as well as trade restrictions.
11. Political instability in some parts of the country.   This discourages    private   individuals    from setting up meaningful   businesses   due to fear of losing life and property.

Challenges of the public sector in service delivery

• Limited capital to service vital services such as education and health.
• Poor infrastructure such as roods hinder prompt delivery of goods and services
• Slow decision making due to bureaucracy
• Political instability take up resources that would be used for other development services
• Subsidies from the government make them sluggish
• Poor work culture and attitude among workers in public sector lead to low productivity
• Public lack enterprise due to monopoly or lack of competition.
• Inadequate staffing
• Poor supervision and unskilled administration
• Stiff competition from private firms may cause public firms to collapse
• Influence of interest or pressure groups who are able to manipulate politician for their selfish interest may interfere public sector goals
• Political interference: When politicians and civil servants seek to pursuit self-interest, it can lead to incorrect allocation of resources
• Poor motivation due to low and inequitable remuneration discourage workers from performing their roles
• Weak State of Records Management in public sector hinders follow-ups and regular improvements
• Poor working environment hinders service delivery.
• High wastage rates due to inefficiency
• Under Utilization of Capacity: Public enterprise is facing the problems of underutilization of its installed capacity.
• Time and Cost Over-Runs: Most of the public sector projects take the long ester time to complete than was initially envisaged. The cost of the projects also runs upwards due to delay in completion of projects.
• Problems of Audit and Inspection: Although there is a system of audit and inspection in such enterprises, it is not followed in practice

Privatization

This refers to the transfer of ownership   of public enterprises   from government   to private individuals. It is aimed   at building   a strong   private   sector   to promote   efficient   allocation   of resources    and efficient service delivery

Nationalization is the process by which the government   takes over the ownership   and management of privately owned enterprises.

 

Forms of Privatization

1. Divestiture. This refers to the total (outright/complete)     sell of all government    shares   in public enterprises to private individuals.   This enables private individuals   and companies   to have decision making power in these enterprises.
2. Demonopolization (Deregulation/Liberalization). This involves removing unnecessary restrictions from the entry of the private individuals   to certain investment   activities.   The aim is to increase   competitiveness    in the economy.   For example   the Ugandan   government   liberalized   the telecommunication sector, broadcasting   sector, foreign exchange markets etc.
3. Contracting. This is where  the provision   of goods  and  services  is transferred   from  the  public  to the private  sector  but  the  government   has the sole  right  over  the ownership   of the enterprise.   For example   a contractor   can tender   construction       or maintenance    of the road while   ownership remains   to the government.   Therefore   the state still owns the enterprise   but the management    is privatized.
4. Joint ownership (Partial privatization). This is where the government   and the private sector co-own shares in an enterprise.  For example power generation and distribution   in Uganda.
5. Repossession. This involves the government   returning certain enterprises   to their rightful owners. For example in Uganda, due to the privatization   exercise, all properties   under the Departed Asians Custodian   Board (DACE)  were returned  to their rightful  owners.
6. Leasing. This is where the government   rents public enterprises   to private individuals   for a given period of time.   For example renting out public markets, hotels etc.

 

Reasons for Privatization  of public enterprises

1. To create more employment opportunities. Privatization leads to efficient allocation   of resources which leads to the expansion   of production   and business   activities.   This increases    employment opportunities   in the long run
2. To increase efficiency in resource allocation. Privatization promotes   competition   and efficiency in resource use. This leads to the production   of better quality goods and services at reduced prices. This improves the standards of living of the consumers.              .
3. To increase government revenue through taxation. Privatization helps to create a strong private sector  which  helps  to widen  the  tax  base  in  form  of  employment    and business   activities   set  up hence  generating  more  tax revenue  to the government.
4. To increase capital inflow in the country. Privatization helps to attract foreign direct investments in the economy. This increases the    level of investment   in the country.
5. To develop social and economic infrastructure. The  expansion   of  the  private   sector   through privatization   promotes   the  development    of  the social   and  economic   infrastructures    in  form  of roads,  schools,  hospitals,  financial  institutions   etc.
6. To promote technological development in the country. Privatization     facilitates    technological progress through innovation,   invention and technology   transfer due to foreign ownership   of some enterprises.  This leads to the production   of better quality goods and services.
7. To facilitate the exploitation and utilization of the idle local resources. The major aim of private firms under privatization is profit maximization.    Therefore,   they employ   efficient   techniques   of production which leads to the production   of more goods    and services hence economic   growth and development.
8. To reduce the balance of payment problems in the country. Through   privatization,    there is increased production   of goods and services for domestic   market.   This  helps  to save  the  scarce foreign  exchange  which  would  be used  for import  purposes.
9. To reduce bureaucracy, corruption and embezzlement of funds associated    with   the public sector.   This   promotes    accountability     and   transparency    in   management     and   allocation    of resources in the economy.
10. To promote industrial development.   The   backward    and   forward    linkages    created    in   the economy   through  privatization    promote   the  establishment    of  small  scale  industries   which  can later be developed  into large  scale  industries.
11. 11. To increase the GDP of the country. Privatization increases   the contribution    of the private sector to the GDP. This is because it increases output and resource utilization   in the economy.
12. To widen the consumer choice. This is because privatization    encourages    the    production    of a variety of consumer commodities   which leads to improved standards   of living
13. To help in creating  a  class  of  entrepreneurs  ill  the  economy.  Privatization     enables   private individuals   to acquire the necessary   practical   skills required   operate modem   business   enterprises. This promotes   managerial    capacity   building   and helps   to reduce   government     expenditure    on training costs.
14. To ensure political stability in the economy. This is because the private   entrepreneurs    who  have invested  a lot of capital  in their businesses   have  to see it that there  is security   and  stability  to in the economy  to secure  their  lives  and property.
15. To promote better industrial relations and efficiency of labour. This is because there is a direct relationship   between the entrepreneurs   and employees in the private sector.

16. To reduce inflation and create economic stability. This is as result of increased production   of goods and services by the private enterprises.                                                                        .
17. To reduce excessive government    expenditure.   Privatization      enables     the    government     to concentrate   its spending   on the provision   of social services to the society   like medical   services, education and security.                                                             .

 

Disadvantages (Demerits/ Costs) of privatization

1. It encourages wasteful competition through duplication of goods and services.   This leads to misallocation of resources in the economy.
2. It leads to emergence of private monopolies. This increases   consumer   exploitation    as private monopolies   restrict output and charge high prices with the aim of maximizing   profits.
3. It leads to income inequalities in economy. Privatization if not  well  controlled   leads  to income inequalities   whereby    production    enterprises   may  be  concentrated    in  the  hands   of  a  few  .rich individuals.
4. It leads to profit repatriation. Privatizing public enterprises   to foreign investors   leads to capital outflow in form of profit repatriation.   This leads to low capital formation   in the economy.
5. Privatization undermines the provision of basic essential goods and services which are non- profit making. This is because the private individuals   aim at venturing   in activities   in which they maximize profits.
6. It limits the foreign exchange earnings of the country. Privatization   mainly aims at producing goods and services   for domestic   consumption.   This limits the export potential   of the country hence low foreign exchange earnings.
7. It leads to short run unemployment. Unemployment    in the’ short  run  results  from  retrenchment of  workers    and   inefficient    firms   being   pushed   out   of  the  production    process    due   to  stiff competition.
8. It encourages   rural-urban    migration.   This    is   because    privatization     encourages     the concentrated    of business    activities   in urban   centers   due to presence   of market   and   better infrastructures.   This leads to congestion   and increased cost of living in urban areas.
9. It increases foreign control of the economy. This is through foreign direct investments    which are set up in the economy which sometimes   act as agencies of foreign influence.   This undermines the national sovereignty   of the country.
10. It leads to over exploitation of natural resources. This is because   private   individuals    aim at maximizing   profits.  This leads to environmental    degradation   and failure of the economy   to be self-sustaining   in the long-run.
11. It makes planning by the government difficult. This is because privatization puts a large part of the economy outside the direct control of the government.      .
12. There are some areas where privatization cannot be efficient. For example   the production of fire arms if left   to the private sector might cause insecurity.                             ‘

Problems being faced in the process of privatization

1. High levels of corruption within the privatization unit. This leads to misallocation    of resources realized from the privatization   drive.
2. Opposition from the public. This is due to discontent   and the general ignorance   of the public about the benefits of the privatization   exercise.
3. Poor valuation of parastatals.     Parastatals    are   sold   cheaply   hence   making    losses   by   the government.
4. Lack of transparency anti accountability in the privatization exercise. This leads to the sale of the public enterprises to incompetent private individuals   which leads to mismanagement.
5. Poor state of parastatals. This makes it difficult to value and market the public enterprises   hence making losses.
6. Presence of unscrupulous (unserious) buyers.  Such buyers   forged documents    with the aim  of manipulating   the government   for their  own benefit.
7. Presence of under developed capital markets. This makes it difficult   to sell the shares to the public.
8. High levels of poverty among the nationals. This forces the government to sell   the parastatals   to foreigners which increases   economic dependence.
9. High cost of the privatization exercise. This is in terms of the wages and other form of facilitation given to the people employed by the privatization unit.
10. Political sabotage by politicians who oppose the government.    Opposition   politicians   sometimes unfairly   criticize   and  block  the  sale  of  enterprises   aimed  at  frustrating   the  government    and  to advance   their  interests.
11. Political instabilities in some parts of the country. Political   instabilities    discourage    potential investors from buying the public enterprises                                                                           .
12. Small domestic market. This discourages   potential   buyers   due to the limited   market   for the produced goods and services.

 

Revision questions

Section A questions

1 (a)What  is meant  by the term Dualism

(b) Give any three ways of reducing dualism in your country.

2. Give four causes of dualism in your country
3. Give four forms of dualism existing in your country.
4. State any four examples of economic dualism in your country.
5. (a) Distinguish between mixed economy and dual economy

(b) Mention two feature of Uganda’s economy.

6. State any four salient features of Uganda’s economy
7. (a)Differentiate between economic dependence and inter dependence.

(b) Mention two ways in which your country is dependent.

8. (a) distinguish between economic resource dependence and direct economic dependence.

(b) Mention two demerits of direct economic dependence in your country.

9. (a) Define the term informal sector.

(b) Mention three features of informal sector.

10. Give four merits of informal sector.
11. Mention four problems faced by public sector in your country.
12. (a) What is meant by structural adjustment programs.

(b) Mention any three structural adjustment programs that your country  has implemented.

13. State four objectives of stabilization policy?
14. (a) What are public enterprises?

(b) Give any three reasons for privatization of public enterprises.

15. Mention four demerits of nationalization of firms.
16. (a) Define the term divestiture

(b) Mention four costs of divestiture to your country.

17. Outline four demerits of a large subsistence sector in your country.
18. Mention four features of agricultural sector in your country.
19. (a) What is meant by economic liberalization?

(b) Mention two negative consequences and two advantages of economic liberalization in your country.

20. (a) Distinguish between nationalization and privatization of enterprises.

(b) Give any two merits of nationalization of enterprises in an economy.

21. (a) What is meant by Parastatal organization.

(b) State problems faced by public enterprises in your country.

Section B questions

1. (a) Describe the features of economy in your country.

(b) Examine factors responsible for under development in your country.

2. (a) Explain the features of dependency of economy in your country.

(b) What are social-economic implications of the feature in (a) above to the development process in your country.

3. (a) Outline the nature of “dependence” of economy in your country.

(b) Explain the negative consequences of dependence on the economy of your country.

(c) Suggest solutions to reduce external dependence of your country.

4. (a) Describe the structure of the foreign sector of your country.

(b) What measures should be taken to increase the export earnings of your country?

5. (a) Explain the reasons for privatizations of public enterprises in your country

(b) Explain the problems being faced (stagnating factors) in the privatization of public enterprises in your country.

6. (a) Explain the relationship between the informal sector and small scale firms in your country.

(b) Assess the contribution of informal sector to your country

7. (a) Distinguish between private and public sectors.

(b) What are cases for and against a larger private sector in an economy?

8. (a) Explain the problems faced by private sectors in your country.

(b) What policy measures are being taken to increase the size and performance of the private sector in your country?

9. (a) Explain the various forms of privatization in your country.

(b) Discuss the merits and demerits of divestiture in your country.

10. (a) Distinguish between trade liberalization and economic liberalization.

(b) What are the consequences of economic liberalization in your country?

11. (a) What are the major features or characteristics of subsistence economy?

(b) Examine the disadvantages of having a large subsistence sector in an economy.

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