Focus on global markets – Prof Justin Lin advises

Jun 2, 2017

Professor Justin Lin talks to members of the Cabinet, Government Ministries and agencies as well as private sector representatives during a meeting at the Office of the Prime Minister in Kampala, Uganda. Looking on at the far end is Right Hon. Dr. Ruhakana Rugunda, the Prime Minister of Uganda. (Photo Credit: UNDP Uganda 2017).

Kampala - Professor Justin Yifu Lin – a renowned economist from China has called on Uganda to focus on export oriented industrialisation that targets global markets.

He made this call during his three day visit to the country this week – where he called on Government to focus on industrialisation if it wants to create jobs for its youthful population as well as propel the economy to middle income.

The Professor met with high ranking government officials as well as manufacturers and development partners on the importance of industrialisation and green growth as a path way to economic development.

He was also taken on a guided tour of the Kampala Business Industrial Park (KIBP) in Namanve led by officials from Uganda Investment Authority (UIA). In addition, he gave a public lecture during the World Bank’s Open day.

During these meetings, Prof. Lin emphasised the need for dynamic industrialisation saying that Uganda and most other developing countries are trapped in poverty because they still rely on agriculture.

“The path for prosperity is to diversify from agriculture through industrialisation so as to increase labour productivity and income,” Prof Lin emphasized.

He pointed out that diversification and dynamic industrialisation could be achieved through structural transformation which would not happen spontaneously by the efforts of private sector alone but with support from the Government.

“Industrialisation and diversification requires the government to play a facilitating role to help the private sector to overcome the external pressures and coordination issues,” he said.

While Governments need policies to guide industrialisation, Professor Lin advised that for them to be successful, they should target sectors that conform to the economy’s latent comparative advantage.

The latent comparative advantage refers to an industry that the economy has low factor costs of production but the transaction costs are too high, due to poor infrastructure and business environment, to be competitive in domestic and international markets.

He also pointed out that Governments do need industrial policies to guide industrialisation, however for them to be successful, it should target sectors that confirm to the economy’s latent comparative advantage.

This calls for countries like Uganda to identify with countries with similar comparative advantages which they can take on once their industries grow.

Furthermore, he pointed out that industrial parks were a great way to industrialise because they were a pragmatic way for overcoming the coordination issues in a developing country with poor infrastructure and business environment.

For Uganda to successfully achieve industrialisation, Professor Lin said it would have to do four key things;

  • Target the global market because it was not fragmented and forces local industries to produce high quality products to meet its standards.
  • In addition, use Foreign Direct Investment (FDI) to attract investments that can be taught to the locals who can take them on in future.
  • Ensure that industrial parks have adequate infrastructure, good location and right industrial targeting to enable them be successful.
  • Lastly to ensure that investment has a high level champion who can market the Country’s potential, opportunities and products globally.

He also advised that agriculture should not be forgotten since it can feed the industrialisation process.

“Uganda can grow as dynamically as China and any successful East Asian economies, if the government proactively creates conditions to capture the pending relocation of light manufacturing from China and facilitates private firms to develop those industries for global market,” he advised.

Right Hon. Dr. Ruhakana Rugunda, the Prime Minister of Uganda who initiated the invitation to Professor Lin promised to share his ideas and work out a framework to support Uganda’s industrialisation policy.

Ms. Rosa Malango, the UNDP Resident Representative and UN Resident Coordinator called on the Government to make every effort to ensure that it promotes green industrialisation that protects the environment.

“If we do not ensure that our environment is protected while we industrialise, our development will be curtailed,” she said.

She also reiterated the UN’s commitment to mobilising support for the actions that will arise from Professor Lin’s guidance. This is in addition to the support UNDP is offering the Ministry of Trade Industry and Cooperatives to revise the Industrialisation policy and strategic plan.