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

Positive Implications

1. 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.
2. It promotes the exploitation of the local resources. This increases resource utilization in the economy hence economic growth.
3. 3. It helps to save the scarce foreign exchange.  This is because industries produce formerly imported commodities. This reduces the balance of payment problems.
4. 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.
5. It increases tax government revenue.  This is done by taxing a large number of small scale industries.
6. It promotes inter sectoral linkages in the economy especially with the agricultural sector; this is because most of the industries are agro-based.
7. It promotes self-reliance and independence of the economy. This is due to the existence of agro-based small scale and import substituting industries.
8. 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.