Tile Efficacy of the Law and Policy on the Regulation of Foreign Direct Investment: Case Study of Uganda

TABLE OF CONTENTS

DECLARATION.

APPROVAL

DEDICATION

ACKNOWLEDGEMENT iv

LIST OF CASES v

ABBREVIATIONS

ABSTRACT

TABLE OF CONTENTS ix

CHAPTER ONE 1

1.0 General Introduction 1

1.1 Introduction

1.2 Background 3

1.3 General Economy 6

1.4 Statement ofthe Problem 6

1.5 Scope ofthe Problem 7

1.6 Significance ofthe Study 7

1.7 Objectives ofthe Study 7

1.9 Methodology 8

1.10 Literature Review 8

CHAPTER TWO 12

2.0 Analysis ofthe Regulatory and Institutional Frame Work for Foreign Investment 2.1 Introduction 12

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2.2. The FDI Regulatory Framework 12

2.3 Institutional Frameworks 13

2.3.1 Uganda Investment Authority (UIA) 14

2.3.2 Ministry ofTourism, Trade and Industry (MTTI) 15

2.3.3 Ministry ofAgriculture, Animal Industry and Fisheries (MAA1F) 15

2.3.4 Ministry ofWater, Lands and Environment (MWLE) 15

2.3.5 National Environment Management Authority (NEMA) 15

2.3.6 The Uganda Wildlife Authority (UWA) 16

2.3.7 Directorate of Water Development (DWD) 17

2.3.8 National Forest Authority 17

2.3.9 The Uganda Land Commission 17

2.3.10. The District Land Board 18

2.3.11 Town and Country Planning Board 18

2.3.12 Uganda Revenue Authority 18

2.4 Administrative Procedures and Practices 19

2.4.1. The entry process 19

2.4.1 .1 Approvals for foreign investment, technology and expertise 19

2.4.1.2 Other business approvals and services 19

2.4.2. Administrative regulations 20

2.5. Investment license 21

2.5.1 Revocation of license 22

2.6 Investment promotion 22

2.7 Ownership ofproperty 22

2.7.1 Ownership ofproperty by non citizens 23

2.9 Privatization and Transnational Corporations 26

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2.10 Environment Protection and foreign direct investments 26

2.10.1 Environmental Impact Assessment 28

2.10.2 Environmental Impact Statement 29

2.11 Conclusion 30

CHAPTER THREE 31

3.0 Policy and Operational Framework for Foreign Direct Investment 31

3.1. Introduction 31

3.2. Policy framework 31

3.2.1. The permissive framework 31

3.2.2 Specific standards oftreatment 32

3.2.2.1 National treatment 32

3.3 Protection of foreign investors 33

3.3.1 Protection against Expropriation and Compensation 35

3.5 Taxation 38

3.5.1 Taxation offoreign investors 38

3.5.2 Income Tax 39

3.5.3 Value-Added Tax (VAT) 41

3.6 Land and investment 42

3.7 Incentives 43

3.1.1 Certificate of incentives 44

3.7.2 Investment Incentives 45

3.7.3 The Incentive Regime 46

3.7.4 Initial Allowances 48

3.7.5 Deductible Annual Allowances 48

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3.8. How the Investment Policy Has Been Improved 50

3.8.1 Investment Policy Review 50

3.8.2 The 10-Point Action Plan ofthe Blue Book 51

3.9 Implementation ofrecommendations on investment promotion 53

3.9.1. Presidential Investors Round Table 53 3.9.2. Multi-facility economic zones ss

3.9.3 Target sectors 56

3.9.4. Double taxation treaties and bilateral investment treaties 56

3.9.5. Promotion efforts by Uganda embassies 57

3.9.6. Intensify investment promotion efforts and refocus UJA 57

3.9.7. Client charters 58

3.9.8. Vision implementation period 59

3.9 Conclusion 59

CHAPTER FOUR 60

4.0 The Importance ofForeign Direct Investment to Uganda: An Analysis 60

4.1 Introduction 60

4.2 Contribution ofForeign Direct Investment 60

4.3. Tax Base 63

4.4.1. Economic Performance 64

4.42 Industrial situation 64

4.5.1 Challenges facing foreign investors 65

4.6. Challenges faced by local investors due to foreign investment 69

4.7 Conclusion 70

XII

CHAPTER FIVE .71

5.0 General Conclusion and Recommendation 71

5.1. General Conclusion 71

5.2. Recommendation 72

5.2.1 Make Uganda a major air cargo logistics center 72

5.2.2. Put up a website for Uganda In vestment Authority (UIA) 72

5.2.3. Improve domestic actions 73

5.2.4. Supporting existing investors 73

5.2.5. Marketing investment opportunities 74

5.2.6. Diversification ofthe economy 74

5.2.7. Market size 74

5.2.8. Agency of restraint 75

5.2.9. Promoting good governance 75

5.2.10. Infrastructure development 75

5.2.11. Government participation 76

5.2.12. Need to focus more on agriculture 76

BIBILIOGRAPHY 

ABSTRACT

The prevalence of poverty in developing countries demands that these countries should improvise ways of encouraging move revenue generating projects to supplement or significantly reduce dependence on foreign funding. Foreign investment is thus encouraged to get rid of this challenge. This paper examines foreign direct investment as a tool of increasing the contribution of tax revenue to Gross Domestic product and consequently a means of reducing the gap between the rich and the poor. The goal of this paper is to propose ways in which the Uganda Investment Authority (UJA) can make its investment administration more effective. To attain this objective, the paper begins with a detailed discussion on the investment structure; it then highlights the laws that govern investment, the policies, rationale for investment and recommendations for bettering Foreign Direct investment.