Enhancing Local Content in Uganda

Abstract

This chapter analyses policy options to promote local content in Uganda as it transitions to an oil-producing country. It contends that productive linkages between oil and gas exporters and domestic suppliers in a range of ‘connected’ goods and services sectors can be a source of broad-based economic growth. However, the success of policy initiatives or extensive regulatory requirements will ultimately hinge on domestic firm capabilities to overcome barriers to entry into the global industry. The analysis comprises an evaluation of existing local content policies in Uganda, a mapping of the natural resource value chain, and an assessment of domestic firm capabilities to supply the anticipated demand for goods and services from the oil and gas industry.

Extractive industries and structural transformation

“…A possible explanation for this short-lived effect is that a couple of years after local industries increased connectivity with the mining sector, these heightened industrial synergies translate into higher economic activity. Yet, because supply linkages vary substantially over the life cycle of an oil or mine project, these supply linkages (and their economy-wide benefits) cannot be sustained over time: Backward linkages typically peak at the early stages of an extractive project when engineering, procurement, and construction activities are carried out but plateau thereafter (Sen, 2020). All in all, these results underscore the temporary nature of an economic boost brought about by mining prices and/or developing backward linkages.…”