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Like many African countries, Uganda is experiencing a complex process of economic development. Income per capita has doubled over the past 20 years, but the nation also faces many challenges that could inhibit future economic growth. New research co-authored by Harvard Kennedy School (HKS) Professor Ricardo Hausmann and his colleagues at the Center for International Development lay out a diversification strategy for sustainable growth in Uganda. The authors draw upon a new line of research demonstrating the power of expanding into new industries while, at the same time, increasing productivity in existing sectors.
"Future growth will depend on achieving sufficient export dynamism. In addition, growth faces a number of other challenges: low urbanization rate, rapid rural population growth and high dependency ratios," the authors write. "These challenges combined tell us that future growth in Uganda will require a rapid rate of export growth and economic diversification."
Oil production is one sector in which Uganda is beginning to see significant economic growth, but Hausmann and his co-authors argue that oil alone is not a long-term solution.
"The best strategy is therefore to use the additional oil revenue and accompanying investments to promote a diversification strategy that is sustainable," the authors explain.
In laying out their case for selecting specific sectors for future growth the authors note the need to "balance the desire to increase the diversification and complexity of production, while not over-stretching existing capabilities.
"These include mostly agricultural inputs, such as agrochemicals and food processing. In addition, Uganda should concurrently develop more complex industries, such as construction materials, that are reasonably within reach of current capabilities and will be in great demand in the context of an oil boom," the authors conclude.
The paper, titled "How Should Uganda Grow?," is co-authored by Brad Cunningham, John Matovu, Rosie Osire and Kelly Wyett.
Ricardo Hausmann is director of Harvard's Center for International Development and professor of the practice of economic development at the Kennedy School of Government. Previously, he served as the first chief economist of the Inter-American Development Bank (1994-2000), where he created the research department. He has served as minister of planning of Venezuela (1992-1993) and as a member of the Board of the Central Bank of Venezuela.