VZCZCXRO9063
RR RUEHGI RUEHRN RUEHROV
DE RUEHKM #0647/01 1080749
ZNR UUUUU ZZH
R 180749Z APR 07
FM AMEMBASSY KAMPALA
TO RUEHC/SECSTATE WASHDC 8606
INFO RUCNIAD/IGAD COLLECTIVE
RUEHXR/RWANDA COLLECTIVE

UNCLAS SECTION 01 OF 02 KAMPALA 000647 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ENRG PGOV UG
 
SUBJECT: UGANDA: APRIL ECONOMIC REVIEW 
 
REF: A) KAMPALA 0618 B) KAMPALA 0317 C) KAMPALA 0457 
 
¶1. (SBU) SUMMARY.  The government of Uganda (GOU) continues its 
efforts to attract foreign investment and exports to the United 
States, and protect American goods against counterfeiters.  On a 
less positive note, a protest to protect a forest from being sold to 
investors turned violent as protesters targeted Asian-owned 
businesses. A Cabinet White Paper gives the Criminal Investigation 
Department six months to further investigate top Health Ministry 
officials in the 2005 Global Fund scandal.  END SUMMARY. 
 
---------------------- 
Environment/Investment 
---------------------- 
 
¶2. (SBU) A planned peaceful protest to stop the GOU from allocating 
part of Mabira forest to investors of a sugar plantation turned 
violent on April 13th resulting in three deaths and multiple 
injuries.  The Mehta group of Indian investors holds a 49 percent 
stake in the plantation, while the GOU owns the remaining 51 
percent.  Latent xenophobia, coupled with troublemakers seeking to 
take advantage of the crowds to loot, resulted in attacks on Asians 
traveling in the area and on Asian-owned businesses.  Police 
responded with tear gas and provided protection for Indians.  GOU 
officials and the organizers of the march, Save Mabira Crusade, 
condemned the anti-Asian messages that emerged in the protest.  The 
attacks took the GOU by surprise.  (Note: Idi Amin expelled Indian 
investors in the 1970s and nationalized their businesses.  They were 
welcomed back by President Museveni in 1986 End Note). A significant 
number of large businesses with close ties to the GOU in Uganda are 
Indian-owned.  Some in the Indian community have asked Mehta group 
to withdraw its request for government land.  The Indian business 
owners remain on the edge, despite GOU assurances of their safety 
(reftel A). 
 
---------- 
AGOA/TRADE 
---------- 
 
¶3. (SBU) Minister of Trade, Tourism and Industry, Janat Mukwaya, 
participated in a forum with U.S. businesses in California and 
Washington from April 16-20th.  Trade ministers from seven African 
countries were invited to the event, which included senior 
executives from Starbucks, Boeing, GAP Apparel, and Levi's. 
Minister Mukwaya told econoff on April 13 that Uganda was looking to 
add value to coffee exports and also expand its apparel exports to 
the United States under the African Growth and Opportunity Act 
(AGOA).  The delegation will also visit the Gates Foundation and the 
editorial board of the Seattle Times.  The forum was organized by 
the U.S. Chamber of Commerce and the Whitaker Group consulting 
firm. 
 
¶4. (SBU) The Daily Monitor newspaper reported on April 12 that Tri 
Star Apparels, an AGOA benefiting exporter, will start buying cotton 
locally for use in textile products. Previously, Tri-Star imported 
fabrics from Asia and performed cutting and sewing operations in 
Uganda. Habib Kagimu, Director of The Libyan Africa Portfolio (LAP), 
which recently acquired a 60 percent controlling stake in Tri Star, 
said that, "following the restructuring of the firm, it would resume 
production next month and start purchasing cotton from local 
farmers."  Managing Director, Kananathan Velluppillai clarified 
Kagimu's comments, saying that restructuring would take 15 to 18 
months as a new spinning and weaving mill was established, and then 
Tri-Star could begin purchasing cotton from local growers.  Another 
Uganda textile firm, Phenix, recently celebrated its first shipment 
of 100 percent Ugandan organic cotton t-shirts to the U.S. market 
under AGOA (reftel B). 
 
--------------- 
Anti-Corruption 
--------------- 
 
¶5. (SBU) In March 2007, the Global Fund (GF) denied Uganda USD 16 
million in grant funds to fight malaria.  The GF program had been 
operating under increased scrutiny after all grants were suspended 
in August 2005 for four months due to concerns over misuse.  A high 
profile 2006 judicial inquiry headed by Justice James Ogoola found 
three health ministry officials, Health Minister Jim Muhwezi and his 
two deputies, Mike Mukula and Alex Kamugisha, responsible for 
serious mismanagement.  In his report, Justice Ogoola recommended 
further criminal investigations and prosecution.  Ironically, it was 
Muhwezi who stated, "there is zero tolerance for corruption in 
Uganda," when the GF scandal first became public.  Ugandan President 
Yoweri Museveni did not reappoint the three health officials health 
in a cabinet reshuffle in June 2006.  At the time Museveni responded 
to the GF report by saying, "Impunity has gone too far in Uganda and 
it must stop." 
 
¶6. (SBU) The GOU came under heavy donor criticism for not following 
 
KAMPALA 00000647  002 OF 002 
 
 
up quickly on Ogoola's inquiry.  On April 11, Prime Minister Apollo 
Nsibamb, stated that the Criminal investigation Department would be 
given six months to investigate the case so the Director of Public 
Prosecutions can determine whom to prosecute. 
 
---------------------------- 
Intellectual Property Rights 
---------------------------- 
 
¶7. (SBU) The Customs Office of the Ugandan Revenue Authority (URA) 
seized two shipments of counterfeit Kiwi shoe polish trying to enter 
Uganda.  The genuine Kiwi is produced by U.S. firm Sara Lee, while 
the counterfeits were made in China.  Mr. Enoch Walugembe, the 
Assistant Commissioner for Customs Enforcement for the URA, told 
econoff on March 22 that the counterfeits were hidden under boxes of 
envelopes in one case and under crates of bananas in the other.  Mr. 
Walugembe added that his officers were seeing smaller shipments of 
counterfeit Kiwi shoe polish since it had increased its number of 
interdictions in the past two years.  Each shipment was valued at 
tens of thousands of dollars.  A range of counterfeit products, 
mostly from China, smuggled into Uganda, deprive the GOU of hundreds 
of thousands of dollars in tax revenue every year.  Emboffs have 
worked with URA and representatives of Sara Lee to help stem the 
flow of counterfeit U.S. goods into Uganda. 
BROWNING