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Cablegate: Uganda: March Economic Review

VZCZCXRO5102
RR RUEHGI RUEHRN RUEHROV
DE RUEHKM #0457/01 0731106
ZNR UUUUU ZZH
R 141106Z MAR 07
FM AMEMBASSY KAMPALA
TO RUEHC/SECSTATE WASHDC 8421
RUCNIAD/IGAD COLLECTIVE
RUEHXR/RWANDA COLLECTIVE

UNCLAS SECTION 01 OF 03 KAMPALA 000457

SIPDIS

DEPARTMENT PASS TO USTR FOR BILL JACKSON

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: ECON EFIN ETRD KTDB PGOV UG

SUBJECT: UGANDA: MARCH ECONOMIC REVIEW

REF: A) KAMPALA 0160 B) KAMPALA 0406

1. (SBU) SUMMARY: Uganda's Foreign Minister visited Iran and
encouraged closer economic ties between the two countries. The
European Union's effort to sign a new Economic Partnership Agreement
faced resistance from the government of Uganda. Ugandan cargo
flights to the European Union resume after a five month ban over
safety concerns. The Libya Africa Portfolio (LAP) has acquired a 51
percent stake in communication firm Uganda Telecom Limited. The
U.S. Securities and Exchange Commission (SEC) conducted a securities
market oversight training for East African nations in Kampala.
Over-fishing and the use of illegal nets threaten Uganda's fishing
industry. President Museveni promised not to sell unrefined oil and
praised Libya's Gaddaffi for his support to Uganda to add value to
exports. The Inspector General of Government criticized the
Ministry of Energy for re-awarding a tender for thermal generators
to a Norwegian firm which had their bid cancelled in 2006 due to
serious flaws. Post furthered Uganda's efforts to protect
intellectual property right protection through a training
opportunity with the U.S. Patent and Trademark Office. END
SUMMARY.

----------
Trade/AGOA
----------

2. (SBU) Uganda's Minister of Foreign Affairs, Sam Kutesa, led a GOU
delegation to Iran the first week of March to discuss increased
trade. The delegation met with members of the Iranian Chamber of
Commerce and Iranian industry leaders. This follows Kutesa's appeal
to Iran on February 12, for technical assistance in oil production.
Kutesa said that "Uganda can benefit from Iranian technological
expertise in the oil sector." Kutesa was a guest of honor at an
event to mark the 28th anniversary of the Iranian Islamic
Revolution. The Minister of Energy, Daudi Migereko told econoff
there were no discussions with Iran regarding a potential
partnership in the oil sector.

3. (SBU) The European Union's efforts to sign a new Economic
Partnership Agreement (EPA) with Uganda faced resistance from
Ugandan parliamentarians and international trade experts. The EU
hopes to sign new agreements to regulate trade between Africa,
Caribbean, and Pacific (ACP) countries by December 31, but Ugandan
traders fear the EPA would hinder local producers by flooding the
market with European products. Elly Twineyo-Kamugisha, the
Executive Director of the African Centre for Trade and Development,
told New Vision reporters on March 9, "Ugandan is not an equal
partner with European countries." He cited concerns that Ugandan
firms would close and jobs would be lost due to cheaper EU imports.
As an alternative Mr. Kamugisha advocated a three-year extension of
the existing relationship to negotiate the terms of a new EPA.

4. (SBU) After being blacklisted by the European Commission for five
months, Uganda's DAS Air Cargo and Dairo Air were allowed to resume
flights to the EU. The European Commission banned the cargo
airlines from EU airspace citing serious safety deficiencies. Air
safety experts in the EU reviewing the airlines asserted that all
outstanding concerns had been resolved. The loss of cargo flights
to the EU hurt Ugandan trade including exports of cut flowers, which
were traveling through the EU on their way to U.S. markets under the
African Growth and Opportunity Act. The renewed cargo flights also
will increase use of the USAID funded cold storage facility at
Entebbe airport, which handles 70 percent of all fish and
horticulture exports.

-------------------------------
Business Development/Investment
-------------------------------

5. (SBU) The Libyan government owned firm Libya Africa Portfolio
(LAP) acquired a 51 percent stake in Uganda Telecom Limited (UTL).
UTL is a major Ugandan communication business providing mobile,
data, internet and land line services. The shares were purchased
from UCOM, a German, Swiss and Egyptian consortium, for an
undisclosed price. The once government-owned UTL was privatized in
2000, and the 51 percent stake was sold to UCOM for USD 33.5
million. The remaining shares are held by the Ugandan government.
The Ugandan telecommunications sector boasts three
internationally-owned operators, MTN (South Africa), Uganda Telecom
Limited (UTL) and Celtel (Kuwait). This is the third major
investment by the Libyan government in Uganda in the last year. LAP
purchased a 60 percent stake of the textile firm Tri-Star, and was
awarded the tender to build the Uganda-Kenya oil pipeline. In 2005,
LAP also purchased a majority of shares in the National Housing and
Construction Company, a former parastatal.

---------------

KAMPALA 00000457 002 OF 003


Capital Markets
---------------

6. (SBU) The U.S. Securities and Exchange Commission (SEC) conducted
a Securities Market Oversight training workshop from February 26 to
March 2 in Uganda. The training focused on strategies for
investigating market misconduct such as insider trading, financial
fraud and market manipulation. The workshop also covered current
issues in harmonizing and integrating markets as Kenya, Tanzania and
Uganda look toward more integration under the East African Community
(EAC). The training was co-hosted by the East African Securities
Regulatory Authorities (EASRA), the capital markets authorities of
Uganda, Kenya and Tanzania, and drew participants from 12 countries
representing securities authorities, central banks and stock
exchanges.
The training was also sponsored by the U.S. Agency for International
Development (USAID), Financial Services Volunteer Corps and the U.S.
Treasury Department's Office of Technical Assistance.

-----------
Environment
-----------

7. (SBU) Uganda signed an agreement on March 5 with the Government
of Southern Sudan to coordinate environmental protection along their
common border. The region is home to endangered species like
elephants, cheetahs and lions. One of Uganda's key tourism sites,
Kidepo Valley National Park, is along the Sudanese border. The two
countries also signed a bilateral cooperation agreement on February
8 to promote trade and development, which may result in partnering
to extend a railway line from northern Uganda to South Sudan.

8. (SBU) The Parliamentary Committee on Agriculture is raising
alarms that over-fishing in Lake Victoria could dramatically reduce
fish stocks. The Fisheries State Minister, Fred Mukisa told the
press on March 9 that illegal fish nets are one of the core causes
of over fishing. Many Ugandan families that live around the lake or
on its islands rely almost exclusively on fishing for their
livelihood. Fish is Uganda's second largest annual export bringing
in over USD 150 million.

---------------------
Energy/Infrastructure
---------------------

9. (SBU) In a speech on March 2, President Museveni praised Libyan
leader Muammar Gaddafi for his struggle for "freedom and equality
devoid of hegemony" for Libyan society in an event marking Libya's
30th anniversary of the Declaration of the Establishment of Peoples
Authority through the Masses. Museveni took the opportunity to
praise the Libyan leader for his resistance against selling oil
cheaply in the early 1970s. Museveni said Uganda was working with
Libya to stop the hemorrhage of Africa caused by the export of
unprocessed materials. Museveni promised that Uganda would not
export unrefined oil from its recent oil discoveries, describing the
exportation of raw materials as part of slavery in Africa. Minister
for Energy Daudi Migereko told econoff on March 5 that Ugandan wells
would produce more than double its domestic consumption of 12,000
barrels per day, and Uganda would be looking to export finished
petroleum products to its neighbors (reftel b).

--------------------------------------------- ----------
Anti-Corruption/Intellectual Rights Property Protection
--------------------------------------------- ----------

10. (SBU) The Government defied the recommendations of the Inspector
General of Government, Faith Mwondha, by awarding a tender for 50
megawatts of thermal generators to Norwegian firm Jacobsen Electro
for a second time. The original tender was cancelled following an
investigation in July 2006 by the IGG which found several fatal
flaws in the Jacobsen proposal. These included Jacobsen's attempt
to alter the terms of its proposal after the bids had closed. It
was also alleged that the per kilowatt costs of rival bidder Electro
Maxx were lower than Jacobsen. After the IGG's cancellation
President Museveni stepped in to the process in late August 2006
citing the energy crisis as a threat to national interest and
ordered the ministers to conclude a deal with Jacobsen. Museveni
said that this decision "does not in any way weaken our resolve of
zero tolerance towards corruption and ensuring we strictly adhere to
the relevant laws of public procurement." The IGG was supposed to
participate in reviewing the tenders a second time before an award
was made. The IGG's Mwondha criticized Energy Minister Daudi
Migereko in a March 8 interview in the Daily Monitor newspaper,
saying the tender was awarded without addressing most of the flaws
that were cited by the IGG last year.

11. (SBU) Post continues to coordinate with the U.S. Patent and

KAMPALA 00000457 003 OF 003


Trade Mark Office (USPTO) to strengthen protection of Intellectual
Property Rights (IPR) in Uganda. The USPTO has accepted Post's
nomination of the Assistant Commissioner of Enforcement at the
Uganda Revenue Authority to participate in the USPTO's April 16-20
training entitled "Recent Trends in Border Enforcement of IPR." This
training follows up on the IPR training for Ugandan judges and their
judicial staff sponsored by Post in September 2006.
BROWNING

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