Economic Comparison: UK, Uganda and France

Uganda versus United Kingdom and France Economies

• Meredith McLamb

Introduction

Africa is a continent filled with third world nations. Many countries there are plagued with poor housing, lack of clean water and sanitation systems, inadequate power sources, unsafe roadways and insufficient government. There is generally not enough financial support to help these nations thrive economically and not an adequate infrastructure to support the nations. If more resources, sources of employment, and financial support could reach these nations they could begin to build up and see economic growth. Uganda is no exception. Located on the eastern part of the continent, Uganda is full of wildlife and beautiful landscapes. Uganda received its independence after being ruled by Britain in 1962, but suffered severe demise under the leader Idi Amin during the 1970s. The vast majority of the Ugandan population lives in the rural areas of the country and they remain one of the poorest and least developed countries in the world.

Uganda Economy/GDP

Uganda, as with many of the countries in Africa, does not have the infrastructure it needs to support adequate economic growth and development. With only 5% of their country’s population connected to their own nation’s power grid, they are lacking in adequate power. Roads are not well maintained and water and sanitation are typically only available in the more urban areas. These urban areas only account for about 15% of the country’s population. The unacceptable state of the country’s infrastructure has hurt the possibility of improving their trade relations and therefore has hindered a lot of potential growth (Research & Markets, 2012).

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Uganda is expected to increase in growth in the year 2014. In the first half of 2013, the gross domestic profit (GDP) data was going as expected with a growth rate of 4.3% to 5.1% (Country Intelligence, 2013). Back in 2010, the GDP was an estimated US $42.15 billion which was $1300 per capita (White, 2011). IHS expects the GDP growth rate to continue to 6.4% in 2014, this coming with investments into the hydropower and oil sectors. There was a decrease in the construction sector of the infrastructure during the beginning of 2013 with the Karuma hydropower project. This project is planned as one of Uganda’s largest infrastructure projects. The progress on this project may be very slow moving, however it is being made and moving forward. The Karuma hydropower project was able to begin after financing for the project was secured from China (Country Intelligence, 2013).

Several different sectors affect the growth and play a role in how well the Ugandan economy does. There have been some risks that have occurred with slow downs in the coffee sector. The coffee sector did previously have a record season in the years 2012 through 2013. There has also been a decrease in the transport sector which is expected to be offset in 2014 and 2015 with increased road and railroad activity. Even though Uganda has dealt with issues of receiving support for their budget, they still maintain needed relationships with important partners like the African Development Bank and World Bank which are key to helping with infrastructure financing (Country Intelligence: Uganda, 2013).

The oil sector is expected to increase the GDP over the next two years in Uganda. Uganda is expected to take a 40% stake in a new refinery that should be built near Hoima. This refinery should help to increase oil production significantly with a beginning production of approximately 20,000 barrels each day in 2015 during phase one. The goal is to reach 150,000 to 200,000 barrels per day in the second and third phases. The initial goal of the production is to primarily serve the domestic and regional market, however eventually they may target overseas markets (Country Intelligence: Uganda, 2013).

Around 25% of the GDP comes from industrial activity which includes mostly manufacturing but mining and quarrying are also a part of this activity. The main products manufactured include sugar, beer, soda, cigarettes, textiles, cement, edible oil, laundry soap detergent and metal products. As of 2011, about 14% of the GDP was contributed from agriculture. Even though only 14% comes from agriculture, it still accounts for the majority of the working force. Fish and fish products are some of Uganda’s exports. Both the Nile River and Lake Victoria, a large freshwater lake in Africa, feed Uganda and are the reasons Uganda is able to export fish and fish products (Country Intelligence: Uganda, 2013).

Continuing with agriculture, Uganda is a leader in Africa in coffee production. Uganda is the second biggest coffee exporter in Africa next to Ethiopia. Coffee is very important to Uganda economically. Not only is it an export good, but it has to be planted and harvested which means it’s a great source of work and income for many individuals. Approximately 3.5 million Ugandans are directly employed by coffee and about 1.5 million indirectly; therefore about 15% of all Ugandans are employed by coffee alone. The coffee sector does face some issues with the smallholders having problems being able to develop large amounts of coffee in a needed period of time and also with consistency and traceability. There is a current project in place working to help the coffee sector remain competitive with other coffee producers and help to keep this export in the Ugandan economy (Naray, 2011).

Uganda Infrastructure

Uganda faces a lot of difficulty when it comes to international trade for many reasons. As previously discussed, Uganda lacks a well maintained, physical infrastructure. Poorly maintained roads, railways, communication centers, etc. make it difficult to make trades. Uganda also lacks in the needed corporate government, does not have the needed skilled workers, is in a difficult geographical location and has a poor macroeconomic environment. If the nation could improve their government and macroeconomic conditions, they could potentially receive the investments they need to improve their conditions that could eventually improve their whole economy. Investments could not only improve the physical problems with the country but could also help with providing education and classes needed to train workers for needed skills. If Uganda could receive some support at all the needed levels to reach the market, the economy could succeed exponentially and they could thrive with the exports they are able to provide. The barriers to success must first be broken and solutions to help meet the needs must be given (Pontius, Rogers, & Bishop, 2011).

Uganda gives a good depiction of the struggles of a third world nation and how critical having a major export or any major project can be to the country in order to help the economy remain stable and have any growth. Now looking at countries that are not third world, a review of what makes these countries thrive and industrialized can be seen along with how their economies are successful and have continued growth.

United Kingdom Economy/GDP

One area of the world that can be addressed as a thriving one is the United Kingdom. Due to recent growth and the country feeling assurance in the residential sector, they have recently had to reevaluate and reanalyze the expected construction forecast growth. The United Kingdom currently has several very large construction projects in place. The airports are hoping to be large projects that investors are interested in. The United Kingdom hopes the the Global Investment Partners (GIP) will see the value of the airports and want to put money into these assets. Upgrading the railway infrastructure and the Hinkley Point nuclear reactor are two more developments the United Kingdom currently has underway. Both of these infrastructures can lead to more growth (United Kingdom Infrastructure Report, 2014).

The United Kingdom is a global leader in public-private partnerships which is important when establishing deals and obtaining financing when needed. The United Kingdom also has an established financing atmosphere that attracts others. The United Kingdom has been able to gain and maintain a strong global reputation which helps them to excel and continue to draw in other partners. Even though the United Kingdom is overall growing and feels confident that their growth will continue, they have had failure in the past and must remain cautious with expecting such high goals of growth. Economic recovery is not guaranteed and government support could end which could devastate the economy. As it currently stands, the United Kingdom is on a good path to increasing their economic growth at a higher than expected pace (United Kingdom Infrastructure Report, 2014).

In the third quarter of 2013, the GDP growth in the United Kingdom increased by 0.8%. The GDP growth forecast for 2014 is expected to increase to 2.5% from 2.4%. Forecasters feel 2013 was ending with more drive than expected and that is the reason for the suspected increase. In the third quarter of 2013, business investments were growing and improving while simultaneously consumer spending was robust. The United Kingdom expects lower inflation in 2014 which would help overall growth and better credit conditions. Exports unfortunately fell in the third quarter leading to negative net trade, however with international growth expected over the next two years, the UK exporting of goods is expected to improve (Country Intelligence: UK, 2013).

United Kingdom Imports/Exports

The United Kingdom is the largest petroleum producer and exporter. The UK also produces natural gas and an important crude oil, the Brent price marker. For many years the United Kingdom only exported natural gas, but now they also import it and expects to eventually import oil. Due to the success of the importing and exporting of the natural gas, the government has taken initiatives to improve the infrastructures to help with continued growth, maintenance and success. The United Kingdom does import coal, however with the improved use of natural gas, the importing of coal has been on the decline (United Kingdom, 2011).

France Economy/GDP

After reviewing the set of nations known as the United Kingdom and the growth of the economy, we can also look at France and how their economy is currently doing. France has experienced negative growth over the past 5 years, however recently has began recovery. Despite the fact that France may appear to be skeptical in it’s growing success, it’s risk to reward infrastructure rating is better than many of the other developed countries on the Business Monitor International (BMI) report (France Infrastructure Report, 2014).

France currently has several key developments in progress that are expected to help with the economic growth of the country. They have received a fund to partially help finance the upgrade of the metro system. The upgrade will include improving the railways, obtaining new trains and equipment, and making the system more modern. By upgrading this transit system, there should be an increase in the amount of passengers the railways can handle and hopefully more people will use the railway system. There is also a plan in place for more wind capacity to be added to the power grid in 2014 and a large roadway bypass, that comes with a 30-year contract, is also in the works (France Infrastructure Report, 2014).

Globally, the French infrastructure business is leading. France has more infrastructure projects coming to market and they also hope to improve their current standing as a leader in atomic energy. France is considered a low-risk business market which is appealing to many infrastructure companies. China is looking into working more with French companies which could open a lot of doors and opportunities for businesses in France (France Infrastructure Report, 2014).

During the second quarter of 2013, the French GDP had a significant increase of 0.5%. Unfortunately, the increase did not continue and a decrease of 0.1% was seen in the third quarter of 2013. A growth of 0.2% was expected during the fourth quarter of 2013, however growth is not expected during 2014. Since inflation is not expected to rise and the labor market is expect to remain fairly stable, consumption may remain the same. With businesses not feeling confident and profits remaining low, they are not likely to increase their spending habits or increase their investments much during 2014. All of these concerns may lead to a difficult or even a higher unemployment rate. France’s budget for 2014 appears to focus on cuts (Country Intelligence: France, 2014). Even though a nation may be developed and industrialized and overall doing well in the economy, they may still have certain periods of struggle where they experience recession, must cut back on spending, utilize their own resources, deal with a difficult labor market, etc. until they are able to recover and regrow their market.

France Imports/Exports

France, as many countries do, deals with many trades. France does a lot of it’s trading with Germany, although they have been on a slow increase of receiving imports from China. Industrial products are the primary source of exports for the French. The beauty of the land and the attractions continue to make France a popular tourist destination which also helps boost the economy. Unfortunately, a high level of unemployment and lack of labor involvement by many of the youth hinders the labor market (Economic Structure and Context, 2012).

As of the fourth quarter of 2012, gas production was low, therefore importation of gas was expected to increase. Crude oil imports are also expected to rise significantly by 2021 (France: Oil & Gas Report, 2012). As the economy changes, leaders change, prices change, supplies change, etc. the forecasts may change.

Education

Education is so important in the entire world. If the nations want their economies to thrive, they need to have skilled workers to meet the needs. Unfortunately, many of the third world nations suffer without a substantial higher education system. More developed nations like the United Kingdom and France have spent more time on determining the best system for their people. The United States has the most establishments with higher education. The United Kingdom has 115 universities and France has 85. Despite the macroeconomic fluctuations, it’s important that nations create a university system in order to remain competitive. There is not a specific system that works best for every nation. Each country is different and must decide which plan works best for them to keep them viable in the market (Cristina, Stefan, & Mihaela, 2013).

Ugandan universities were affected when they became private in 1988 because the focus of funding for education went towards lower level education. Higher education institutions saw a decrease in their funding and the Ugandan government felt it was best if the instituations became private in order for the nation to rebuild itself. Management of the universities through the public sectors was felt to be ineffective by the government. Changing the universities into a private sector was one of the macroeconomic reforms the government chose to do in order to help the country rebuild itself. This has made it more difficult for many students to reach a level of higher education (Bisaso, R, 2010).

Conclusion

In conclusion, the differences of the economies of a third world country, such as Uganda can be seen versus more developed nations like the United Kingdom and France. In Uganda, there are concerns of poor physical infrastructure and the need to improve these conditions in order to help grow the economy. The more developed nations continue to show overall growth, although they may have periods of recession The more developed nations are more reliable, have better communications, are able to handle more trade and obtain financing when needed. Hopefully more of the developed nations will strive to come up with strategic methods to help the underdeveloped third world countries improve their conditions and reach higher economic goals.

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