VZCZCXRO7882
RR RUEHRN RUEHROV
DE RUEHKM #1187/01 2010716
ZNY CCCCC ZZH
R 200716Z JUL 07
FM AMEMBASSY KAMPALA
TO RUEHC/SECSTATE WASHDC 9100
INFO RUCNIAD/IGAD COLLECTIVE
RUEHXR/RWANDA COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0048
RUEHKI/AMEMBASSY KINSHASA 0940

C O N F I D E N T I A L SECTION 01 OF 02 KAMPALA 001187 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR OES JMIOTKE AND ACOVINGTON; EAP FOR 
JYAMAMOTO; EEB FOR TSAEGER 
 
E.O. 12958: DECL: 06/18/17 
TAGS: ECON CH PGOV PREL UG
SUBJECT: UGANDA: RESPONSE ON FOREIGN ACQUISITION OF NATURAL 
RESOURCES BY CHINESE ENTITIES 
 
REF: A. STATE 093848 
     ¶B. KAMPALA 02298 
 
Classified By: Political/Economic Chief Kathleen FitzGibbon 
for reasons  1.4 (b) and (d). 
 
¶1.  (C) Summary.  Chinese interest in Uganda's natural 
resources consists largely in importing timber, copper, and 
cobalt. Currently, Chinese investment in these sectors is 
limited.  Ugandan law contains a variety of legal statutes 
aimed at protecting biodiversity and natural resources, but 
national and local governments are not able and/or willing to 
adequately enforce these regulations.  President Museveni's 
decision to give away parts of protected forest reserves to 
foreign investors in early 2007 sparked public and 
parliamentary protests, but indicates a willingness on 
Museveni's part to sacrifice environmental preservation to 
further his plan for economic development.  End Summary. 
 
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CHINA'S ROLE 
------------- 
 
¶2.  (C) Per Reftel, emboffs met with a range of Ugandan and 
foreign government officials on Chinese investment and 
government protection for natural resources.  Chinese 
investment in Uganda's natural resource sector is minimal, 
according to Aiming Zhang, the Chinese economic counselor in 
Kampala.  He said that Chinese investment in Uganda is 
nascent, with trade between the two countries increasing to 
over USD 120 million in 2006.  He noted that Ugandan markets 
are complimentary as China primarily imports fishery, cotton, 
and timber from Uganda.  However, Paul Drichi from the 
National Forestry Authority (NFA), which regulates Uganda's 
timber trade and oversees central forest reserves, told 
emboff on July 18 that Uganda does not export timber to China 
as it barely has enough timber to satisfy domestic needs.  It 
is not clear what timber is exported to China and whether it 
is brought in illegally from Democratic Republic of Congo and 
exported from Uganda. (Note: From 1990 to 2002, it is 
estimated that 80 percent of the timber trade in Uganda was 
illegal and a large volume of timber from DRC passed through 
Uganda. As of February 2005, the illegal timber trade was 
reduced to about 30 percent, due to controls put on the 
system by NFA. End Note.) 
 
¶3.  (SBU) Chinese demand for gold and other minerals may be 
impacting Uganda's drive to further exploit its mineral 
resources, although China is not immediately involved in 
these industries.  The Daily Monitor newspaper featured an 
article on July 17 stating Uganda was searching for an 
investor to take over the Kilembe mines - reportedly 
containing an estimated USD 4 billion worth of copper ore, 
gold, cobalt, and other precious metals.  The price of these 
metals and minerals have increased driven by Chinese and 
Indian demand.  Once a leading producer of copper and cobalt, 
Uganda's mineral potential remains largely under exploited, 
according to an assessment by United Nations Conference on 
Trade and Development in 2001. 
 
--------------------------------- 
WEAK CAPACITY AND POLITICAL WILL 
--------------------------------- 
 
¶4.  (SBU) The Government of Uganda (GOU) established a legal 
framework to mitigate potential environmental harm from trade 
and investment but has demonstrated weak capacity and 
political will to enforce it.  With the highest deforestation 
rate in East Africa, Uganda's protected forest reserves are 
especially vulnerable, as little timber is available outside 
of protected areas.  According to the NFA, Uganda's timber 
industry is just developing, with significant room for 
foreign investment.  Uganda's 506 central forest reserves 
total just over 840,000 hectares of forest, with about 
360,000 hectares designated by NFA as potential production 
zones.  The remaining reserves are held as nature reserves or 
buffer zones. 
 
¶5.  (C) In early 2007, President Museveni decided to allocate 
part of the protected Mabira forest to investors to expand 
sugar plantations, creating a rift between members of the 
public and Parliament, on the one hand, and the Executive, on 
the other.  National protests turned violent.  Although 
current Ugandan law prohibits the de-gazetting of forests 
without the approval of Parliament, the Mabira incident 
indicates Museveni's desire to satisfy investors regardless 
 
KAMPALA 00001187  002 OF 002 
 
 
of environmental concerns.  Museveni has publicly stated that 
the exploitation of Uganda's natural resources to the fullest 
is required for Uganda to become a developed country. 
Philosophical differences between the President and the 
National Forest Authority led to the resignation of top NFA 
officials in January 2007. (Ref B) 
 
-------------------- 
REGULATORY FRAMEWORK 
-------------------- 
 
¶6.  (U) Uganda signed the International Convention on 
Biological Diversity on June 12, 1992 and ratified it on 
September 8, 1993, but has yet to obtain Cabinet approval on 
a National Biological Diversity Strategy.  In 1995, Uganda 
established The National Environment Management Authority 
(NEMA) to prevent public and private sector projects, 
programs, and activities from negatively impacting the 
environment.  As such, project developers are required to 
submit an Environment Impact Assessment (EIA) to NEMA and 
receive a certificate of approval prior to developing new 
projects.  However, according to USAID, some investment 
projects fail to adhere to the environmental conditions 
outlined by NEMA. Additionally, Uganda's legislative system 
provides for certain categories of leaders, such as cabinet 
ministers, commissioners, or directors, to issue statutory 
instruments to follow up Acts of Parliament and fill any 
regulatory loopholes in the existing environmental statutes. 
District, sub-county, and village levels are also granted the 
ability to pass bylaws to strengthen the regulatory framework 
at the local level.  Some of the existing legal regulations 
include: 
 
-The Environment Statute (1995): Provides for sustainable 
management of the environment through promotion of biological 
diversity and optimum sustainable yield in the use of natural 
resources. 
 
-The National Forestry Plan (2000), Forestry Policy (2001), 
and National Forestry and Tree Planting Act (2003): Commit 
the government to protect and sustainably manage permanent 
forest estates set aside permanently for conservation of 
biodiversity and environmental services and sustainable 
production of forest produce. 
 
-The Land Act (1998): Recognizes central forest reserves, 
prohibits their leasing or alienation, and requires all 
landowners to manage and utilize their land in accordance 
with the Forests Act and other relevant laws. 
 
-The Water Statute (1996): Establishes a national water 
policy to address water source potentials and per-capita 
water needs and to guide research in economics of water 
supply and conservation technology. 
 
-The Decentralization Statute (1993): Provides for the 
establishment of the District Environment Committee (DEC) and 
provides for the appointment of a District Forest Officer, 
District Environment Officer, and District Wetlands Officer. 
 
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COMMENT 
------- 
 
¶7.  (C)  For now, Parliament and the public are the key 
institutions to protecting Ugandan forest land.  Museveni did 
not take the give away of Mabira Forest to Parliament after 
the Cabinet advised him of the strong parliamentary 
opposition within the majority ruling party.  For now, 
Museveni backed down from the give-away of the Mabira Forest 
land.  As the result of the perceived defeat on Mabira and 
other issues, Museveni is moving to instill party discipline 
to prevent members of Parliament from blocking future 
initiatives.  This could weaken Parliament's protective 
instincts.  Our contacts tell us that the Executive's 
attempts to give away other forest lands continue. 
BROWNING