Determinants of Uganda’s Export Supply

The aim of this paper is to identify the major factors that determine the supply of exports in Uganda. The Ugandan economy heavily depends on the agricultural sector as a source of its export products. The traditional exports include coffee, cotton, tea and tobacco. There also a variety of non-traditional exports. For the last two decades, the Uganda government has adopted various policy measures geared at improving its export sector. However the economy has continued to experience chronic trade deficit.. The analysis starts with the performance of exports at the macro level, where the determinants of export supply are analysed. This is followed by the firm level analysis. The study uses data from Uganda Bureau of Statistics (UBoS), World Bank (World Development Indicators), and the RPED data by the World Bank. The study reveals that there has been a slow response of exports to the economic reforms adopted in the last decade and macroeconomic stability of the economy. At the macro level, the results indicate that, capacity of the economy to produce output, relative movement of prices at home and abroad, and domestic investment, are major factors determining the level of exports supply in Uganda. While at the firm level, the key factors include; labour productivity, capital, firm size, investment per worker, source of finance, sector, prior experience of the firm manager, capacity of the machines and legal status of the firm. Surprisingly, location was not found to be a significant factor for the export supply. Foreign direct investment was found not to be significant and this may be due to the fact that, whereas major exports are from agriculture, less of FDI is directed to the sector. Thus, in order the Ugandan Economy to improve on its export supply, there is need for improvement in provision of credit facilities at affordable rates, increasing the capacity of the economy to produce more output, encourage FDI in the agricultural sector, enhancing the skills of those in the agricultural sector, and provision of basic inputs at affordable prices.