VZCZCXRO7496
RR RUEHGI RUEHRN RUEHROV
DE RUEHKM #0317/01 0570704
ZNR UUUUU ZZH
R 260704Z FEB 07 ZDK
FM AMEMBASSY KAMPALA
TO RUEHC/SECSTATE WASHDC 8296
RUCNIAD/IGAD COLLECTIVE
RUEHXR/RWANDA COLLECTIVE

UNCLAS SECTION 01 OF 02 KAMPALA 000317 
 
SIPDIS 
 
DEPARTMENT PASS TO USTR FOR BILL JACKSON 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD KTDB PGOV UG
 
SUBJECT: UGANDA: FEBRUARY ECONOMIC REVIEW 
 
REF: KAMPALA 000160 
 
KAMPALA 00000317  001.2 OF 002 
 
 
¶1.  Summary: Phenix textiles shipped its first consignment 
of 100 percent Ugandan made organic cotton t-shirts to the 
United States.  Uganda has been designated to lead African 
countries in the next round of World Trade Organization 
(WTO) negotiations.  The Gates Foundation is providing 
over USD 15 million to establish microfinance banks in 
five African countries, including Uganda.  Energy Minister 
Migereko is seeking investors to develop 48 small hydro 
power projects across Uganda to diversify its power 
generation base. The Energy Ministry is also distributing 
800,000 free energy efficient bulbs in an effort to save 
30 megawatts of power.  The IMF reports that Uganda's 
transportation infrastructure is among the worst in Africa 
and hinders future economic growth.  New legislation containing 
whistleblower protections have been drafted and will soon 
be before Parliament in an effort to combat corruption. 
The Millennium Challenge Corporation (MCC) has approved 
funding for a GOU program to fight corruption over the 
next two years.  End Summary. 
 
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Trade/AGOA 
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¶2.  Phenix Logistics, a textile firm, exported to the United 
States its first consignment of 50,000 organic cotton t-shirts. 
The company held a celebration on February 23 attended by 
President Museveni and the U.S. Ambassador.  The clothing 
is the first that is 100 percent Ugandan made to be sold in 
the U.S. market benefiting under the African Growth and 
Opportunity Act (AGOA).  Phenix is anticipating additional 
orders from the purchaser Edun, a socially conscious clothing 
brand owned by U2 rock band lead singer Bono. 
 
¶3.  Uganda was chosen to lead the African countries in the 
next round of World Trade Organization (WTO) negotiations. 
The WTO Director General, Pascal Lammy, announced on February 
3 that Uganda was selected because of political and economic 
stability and its open policy on trade policy.  Uganda will 
be responsible for organizing all African positions in the 
WTO and seeking consensus between African members and the 
WTO for the next round of talks.  The talks are likely to 
focus on removal of domestic farm subsidies and export 
subsidies by developed countries as well as increased access 
to their markets for developing countries. 
 
------------------------------- 
Business Development/Investment 
------------------------------- 
 
¶4.  The Gates Foundation has awarded USD 15.4 million to 
Opportunity International to establish commercial microfinance 
banks in Africa.  The five-year program in the Democratic 
Republic of Congo, Kenya, Rwanda, and Uganda will also expand 
on existing operations in Ghana. The Opportunity bank in 
Uganda hopes to open before the end of 2007. 
 
--------------------- 
Energy/Infrastructure 
--------------------- 
 
¶5.  The Ministry of Energy, Daudi Migereko, has announced a 
tender to develop 48 small hydropower projects around Uganda 
to improve rural electrification.  Some sites already have 
adequate feasibility studies completed and are available for 
competitive bidding.  Hydropower plants with a capacity below 
10 megawatts can be owned by investors in perpetuity. 
The Ministry will work with investors to develop a Purchasing 
Power Agreement and the necessary licenses after water permits 
and environmental assessment studies have been completed. 
Less than 8 percent of Uganda is on the national grid. 
The poor quality of transmission lines causes a significant 
amount of power to be lost. Power bleeds off from lines that 
are too small.  Also lines are frequently vandalized by 
thieves stealing cable for resale.  Uganda is seeking to develop 
smaller regional power generation projects (hydro and thermal 
generators) that would support the surrounding community. 
 
¶6.  In an effort to reduce power demand in peak hours, the 
Ministry of Energy is distributing 800,000 free energy efficient 
bulbs.  The ministry hopes the move will save 30 megawatts of 
power.  According to State Minister for Energy, Simon D'Ujanga, 
the power distribution entity Umeme will be responsible for 
allocating the bulbs.  Umeme will trade its customers three of 
the energy efficient bulbs for three of their regular 
incandescent bulbs.  The incandescent bulbs will then be destroyed. 
In addition, the GOU removed a 25 percent import duty and an 
 
KAMPALA 00000317  002.2 OF 002 
 
 
18 percent value added tax on energy saving bulbs of 20 watts 
and below.  The GOU anticipates lower priced energy efficient 
bulbs will increase their use by consumers. 
 
¶7.  The International Monetary Fund has released a 2007 report 
taking stock of the Ugandan economy.  The report stated that 
Uganda's roads, railroads and other infrastructure are "among 
the worst in Africa" and were insufficient to support future 
economic growth.  The report also states that Uganda needs to 
strengthen its policies to combat corruption as well the 
"government's willingness to take on difficult (corruption) cases." 
 
¶8.  Tower Resources, based in the U.K., has secured a license 
to explore for oil just north of the parcels that yielded oil 
discoveries for Tullow Oil (U.K.) on the shores of Lake Albert. 
Tower recently merged with Neptune Petroleum (U.K.), which holds 
several licenses for oil exploration in Uganda, but has yet to 
make a discovery. Tower also owns two exploration projects in 
Namibia and hopes to begin drilling in Uganda in 2008. 
 
--------------------------------------------- ---------- 
Anti-Corruption/Intellectual Rights Property Protection 
--------------------------------------------- ---------- 
 
¶9.  The Ugandan Cabinet has approved a new draft legislation 
which would provide whistleblower protection to individuals 
who report instances of fraud and corruption.  The legislation 
still has to be approved by the Parliament to become law. 
Uganda will also need to take steps to ensure the law is 
implemented. 
 
¶10.  The Millennium Challenge Corporation (MCC) has approved 
funding for a GOU program to fight corruption.  The USD 10.4 
million Threshold Country Program (TCP) will provide technical 
assistance, training, and equipment to GOU anti-corruption 
agencies and civil society organizations over two years. 
The United States Agency for International Development will 
oversee implementation of Uganda's Threshold Program on 
behalf of the MCC. 
BROWNING