APPENDIX 9

SUSTAINABILITY IMPACT ASSESSMENT OF PROPOSED WTO NEGOTIATIONS: THE FISHERIES SECTOR

COUNTRY CASE STUDY: UGANDA

Draft – not for citation

Boaz B. Keizire

Senior Fisheries Economist Uganda

April 2006

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List of Acronyms ACP Africa Caribbean and Pacific AGOA African Growth and Opportunities Act ASCM Subsidies and Countervailing Measures BMU Beach Management Unit COMESA Common Market for Eastern and Southern Africa DDA Doha Development Agenda DRC Democratic Republic of Congo FAO Food and Agricultural Organisations of the United Nations FSSP Fisheries Sector Strategic Plan GDP Gross Domestic Product GSP Generalised Scheme of Tariff Preference HACCP Hazard Analysis for Critical Control Point IUU Illegal, Unreported, Un recorded LVEMP Lake Victoria Environmental Management Project MAAIF Ministry of Agriculture, Animal Industry and Fisheries MCS Monitoring Control and Surveillance MFN Most Favoured Nations NAMA Non-Agricultural Market Access NRI Natural Resources Institute PEAP Poverty Eradication Action Plan ROO Rules of Origin SIA Sustainability Impact Assessment SPS Sanitary and Phytosanitary Measures TBT Tariff Barriers to Trade TBT Tariff Barrier to Trade UBOS Uganda Bureau of Statistics UFPEA Uganda Fish Processors Association UIA Uganda Investment Authority WTO World Trade Organisation

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Executive Summary The study analyses the implications of WTO’s trade rules on Uganda’s fisheries sector in relation to the possible implementation of various measures being discussed during the Doha Development Round of negotiations currently underway. The trade issues of importance centre on the reduction and/or elimination of subsidies and tariffs as well as issues relating to non-tariff barriers to trade including Sanitary and Phytosanitary (SPS) measures relating to the quality and safety of traded fish and fish products. The results of these WTO trade discussions and negotiations could have significant implications for Uganda’s fisheries sector. The fisheries sector in Uganda is among the key sectors of the economy. The sector contributes approximately 6% of Uganda’s GDP although only 2.8% is captured in the national accounts. Currently, fish exports (predominantly Nile Perch) is competing with coffee for the number one position in foreign exchange earnings and Ugandan export earnings from fisheries have increased significantly from US$ 1.4 million in 1990 to $143 million in 2005. The fisheries sector employs a significant group of women and men who are involved in catching, service provision, artisanal processing, and trade in domestic, regional and international markets. Current (2006) estimates indicate that over 300,000 people are directly employed in the sector and over 1.2 million people derive their livelihoods from fisheries related activities. Fish is considered as a main source of animal protein and Uganda’s per capita fish consumption ranges between 10-15kg per person per annum. The main commercially exploited species are Nile perch, Nile tilapia and sardine like rastreneobola argentae locally known as mukene. Since the 1990s the trade in Nile perch trade has boomed with exports to the EU, USA, Australia and the Middle East. The EU accounts for almost three-quarters of the fish trade to these premium markets. Domestic and regional trade consists mainly of mukene and Nile tilapia, although the latter is being traded into Far East markets. Given that a significant proportion of Uganda’s fish production is exported, changes in trade rules have the potential to have a significant impact on the sector. At the moment, Uganda, as with other ACP countries, benefits from zero tariffs on exports entering the EU. This preferential treatment significantly improves Uganda’s competitive advantage over non-ACP countries facing higher tariffs on competing fish exports to the EU. Tariff reductions are therefore likely to affect the current trade status of Uganda’s fish and fish products. As regards subsidies, Uganda provides indirect subsidies to its fishing industry mainly on support to small scale fisheries management and conservation efforts, including loans and grants to fishermen. In the context of WTO such subsidies do not distort the international fish trade. Another form of subsidy is the tax waivers and tax guarantee schemes that ensure that fish processing plants benefit from zero duties on inputs. With regard to SPS measures, between 1997 and 2000, the EU imposed three export bans on fish from Uganda for a number of reasons. These included the detection of salmonella in imported products; an outbreak of cholera on some landing sites and beaches; and suspected incidences of fish poisoning. According to several studies, the Uganda fish export bans resulted in losses of over US$30 million. For example,

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UNIDO (2003) estimates that the ban of April to August 1999 alone resulted in a loss of US$36.9 million. It further estimated the loss to fishing communities in the form of reduced prices and less fishing activity at US$4.25 million. In addition, an estimated 32,000 people lost their jobs as a result of the ban while others earned less than one third of their average income. It is also estimated that over 300,000 people from families directly depending on fishing as a household activity were affected. During the whole period of the ban (1997-2000), 3 of the 11 processing factories were forced to close while the remaining ones had to operate at less than 20% capacity. As a result factories laid off 60% to 70% of their labour force. Other auxiliary industries such as packing, the fishnet manufactures, the transport industry, the fuel industry and Uganda's economy in general were directly affected and all the people involved suffered the direct consequences of the EU fish export ban Considerable efforts and a variety of measures were made by Uganda to comply with international fish trade requirements; it is estimated to have increased the operating costs of fish processing plants by 50%. In addition, costs were incurred as a result of efforts to streamline the fish inspection services and the capacity of the Department of Fisheries as the ‘Competent Authority’ (e.g. training of inspectors, provision of equipment, and introduction of a fish inspection manual). Thus, the EU Nile perch export bans from Uganda represented major shocks for exports of the sector. In the short-term this led to significant loss of foreign exchange earnings, bankruptcies and unemployment, However, in the medium- to long-term, the sector has recovered well, with a smaller but better equipped processing sector, improved marketing strategy, and strengthened institutions. This example, clearly demonstrates the resilience of developing countries in the face of such measures. Nevertheless, despite the notably “post-ban” recovery, there is little doubt that there are also long-term losers, perhaps through increased polarization, and particularly related to the poor and vulnerable although little information exists on the extent of this problem. The analysis of possible impacts of international trade rules and specifically the Doha round indicates that tariff reduction and implementation of GSP will erode Uganda’s preferential treatment of zero tariffs to the EU. Uganda’s fisheries sector is likely to face the following:

(i). Uganda’s Nile perch exports will become less competitive. (ii). There will be a substantial reduction in profits of Uganda’s fish processing

plants as a result of competitively low prices and low volumes. (iii). The foreign exchange earnings will drop by about 20-30% leading to

greater exchange rate instability. (iv). Increased competition will force fish processing plants to attempt to reduce

costs by laying off workers and therefore leading to unemployment and increased poverty amongst fishing communities.

Subsidy schemes in Uganda are on a small scale and include supporting fisheries management and conservation efforts as well as tax waivers and schemes that ensure fish processing plants benefit from zero taxes on capital inputs. Subsidies to support small scale fishers have a negligible distorting impact on the international fish trade although their removal could cause increased hardship. Removal of the subsidies supporting processing operations would reduce a firm’s ability to compete and could

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have a similar impact to those of reduced tariffs on competitors’ products. However, it is felt that the subsidy support provided in Uganda is unlikely to be ended under the new trade rules, and therefore, unlikely that the subsidy reduction will affect Uganda’s fishing industry. There are several possible prevention, mitigation and enhancement measures that could be undertaken. For example, Ugandan firms could team up with those from neighbouring countries, e.g. Kenya, to operate on a larger scale and benefit from economies of scale. Investments could be made to increase the operational capacity of fish processing firms. Uganda would also need to invest in looking for alternative markets especially in Africa and Asia. Collaborative efforts could be made with other developing countries to negotiate for better terms and conditions for placing fish and fish products on the EU and other markets. Efforts could also be made regarding post-harvest handling to improve both the fish quality and shelf-life in order to obtain premium prices (e.g. improved landing sites and cool chain infrastructure to reduce post-harvest losses). There is also need to undertake efforts to diversify away from the dependence on Nile perch as the dominant export product. In addition, alternative sources of livelihoods need to be developed alongside the capacity building of private sector institutions. Rationalisation of fish processing activities could lead to improved capacity utilisation. Other mitigating measures include improved Monitoring Control and Surveillance and community management to facilitate better resource utilisation. Increasing fish production through intensification of fish farming is another coping mechanism. Uganda also needs to invest in capacity building of relevant institutions both to understand the possible implications of the DDA and to develop the ability of coping with possible changes.

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Table of Contents List of Acronyms ...................................................................................................................... i Executive Summary ................................................................................................................ ii Table of Contents..................................................................................................................... v 1. Introduction....................................................................................................................... 6

1.1 Background....................................................................................................6 1.2 Objectives of study ........................................................................................7 1.3 Sources of data consulted...............................................................................7 1.4 Consultation process with stakeholders .........................................................7

2. Baseline .............................................................................................................................. 9 2.1 Overview of fish production ..........................................................................9 2.2 Overview of trade ........................................................................................10 2.3 Consumption ................................................................................................15 2.4 Employment in the fisheries sector..............................................................16 2.5 Fisheries and poverty ...................................................................................18 2.6 Baseline on fisheries trade projections ........................................................19

2.6.1 National targets ....................................................................................19 2.6.2 Private Sector Impact targets ...............................................................20

3. Changes in trade measures as a result of WTO negotiations...................................... 21 3.1 Non-agricultural market access (NAMA)....................................................21 3.2 Non-tariff measures .....................................................................................22 3.3 Subsidies ......................................................................................................24

4. Initial outcomes of changes in trade measures ............................................................. 27 5. Sustainability Impact Assessment (SIA) of longer-term effects ................................. 31

5.1 Tariff measures ............................................................................................31 5.2 Non-tariff Measures .....................................................................................31 5.3 Subsidies ......................................................................................................32 5.4 Longer-term SIA Implications.....................................................................32

6. Prevention, Mitigation and Enhancement Measures................................................... 35 7. Conclusions...................................................................................................................... 37 References .............................................................................................................................. 40

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1. Introduction

1.1 Background Developments in Uganda’s fishing industry in the recent past can be linked and attributed to a number of factors including the issues that have dominated international debate since the WTO’s debates and decisions by a number of countries in Doha, Qatar in 2001. A number of economic, social and environmental factors, emanating from the Doha Development Agenda (DDA) negotiations, could have effects on fish production and trade. The on-going DDA negotiations are discussing a number of trade measures for regulating international trade in goods and services which could impact on fish and fish products. Key trade measures being discussed and negotiated which could impact fish production and trade include market access issues and subsidies. The fisheries industry in Uganda is largely artisanal, with the largest proportion employed operating on a small-scale at all stages of production – catching, processing and marketing. Also among the population employed in the sector, a considerable number is involved in industrial fish processing and export to international premium markets.

Fisheries, is one of the most important sectors in the economy contributing to a number of economic areas including industry employment, livelihoods, food security and foreign exchange earnings. For instance, as shown in Table 1, fisheries employs over 1.3 million people and earned the country approximately US$143 million in 2005 of foreign exchange. Table 1: Key economic indicators for fisheries in Uganda General Fisheries

Gross Value of Catch US$209 million (2003 est.) Value of Fish exports-premium

markets US$143 million (2005 actual) Employment in the fishery Appr. 300,000 (2003) direct

appr. 1.2 mn (2003) indirect

Food security

Appr.7 million (2003) based on per capita annual protein intake

Sources: UBOS (2005), Keizire (2003), Banks (2003), DFR (2005

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1.2 Objectives of study

The Natural Resources Institute (NRI) of the University of Greenwich, UK, is undertaking a study, funded by the European Commission, on the possible impact of the WTO’s Doha Development Round on the fisheries sector with the title “Sustainability Impact Assessment (SIA) for Fisheries”. The overall objective of the study is to assess the potential economic, social and environmental impacts of trade measures arising from the Doha Development Agenda (DDA) negotiations that have an impact on fisheries production and trade. These trade measures include:

• Market access (i.e. tariff and non-tariff measures) as part of the negotiations on non-agricultural market access (NAMA);

• Subsidies to the fisheries sector in different forms, which are being discussed by the WTO Negotiating Group on Rules; and

• Other trade issues, e.g. eco-labelling and services incidental to the fishery sector (i.e. outcomes of WTO GATS negotiations).

SIA is both a method and a process for assessing the potential or actual impact of trade policy on economic, environmental and social development. It can therefore contribute to the effective mainstreaming of trade into development policy. SIA is a practical policy tool for analysing the contribution that trade makes to sustainable development. The importance of stakeholder consultation and participation has increasingly been recognised as part of the Sustainability Impact Assessment (SIA) methodology. In particular, the importance of undertaking case studies and involving developing country stakeholders are emphasised. Upon initial screening and scoping, Uganda was selected as one of seven countries to be studied as part of the “Sustainability Impact Assessment (SIA) for Fisheries” study. The case study analyses trade measures arising from the Doha Development Agenda negotiations and their potential impacts on Uganda’s fishery industry and trade. In particular, the study focuses on the policy changes relating to tariffs, non-tariff measures, and subsidies.

1.3 Sources of data consulted This study benefited largely from secondary and minimal primary data which was provided by different authorities. The Uganda Bureau of Statistics (UBOS) provided some data on basic statistics on the economy. Other sources of data were from various research studies, office documents and individual discussions. FAO and Fish-base, Globefish and EU’s Eurofish also provided some of the secondary information especially related to international fish trade.

1.4 Consultation process with stakeholders Consultations were mainly undertaken with staff of the Department of Fisheries Resources, officials in the Ministry of Finance Planning and Economic Development (MoFPED) on issues related to trade and tax policies; Uganda Bureau of Statistics, staff of the Ministry of Tourism Trade and Industry on Uganda’s trade position in relation to

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international trade policy and ongoing negotiations, and Uganda Investment Authority on the incentives available for investors in the fishing processing and export industry. Discussions were also made with the COMPETE project which is a USAID funded project aimed at stimulating Uganda’s private sector competitiveness. The Uganda Fish Processors and Exporters Association (UFPEA) secretariat was also key in providing most of the information regarding formal fish exports. Discussions were held with a few owners of fish processing and export plants. These exporters were able to provide information on what they think can support their industry to increase its competitiveness as well as the extent to which the industry can benefit from WTO negotiations specifically on subsidies and tariff reductions. Other discussions were held with fish traders, fishermen associations such as the Beach Management Units (BMUs) especially in understanding the implications of trade measures related to SPS, TBT, tariffs and subsidies.

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2. Baseline

2.1 Overview of fish production The Fisheries sector is comprised of both capture and culture (aquaculture) fisheries with the former contributing most of total production. The capture fishery is basically artisanal1 while aquaculture is increasingly becoming commercialized because of the increased demand for fish and noticeably reduction in catches from capture fisheries. Aquaculture, until recently, has been primarily contributing to household food in some areas. In relation to fish production, available figures indicate that production is currently lower than the Maximum Sustainable Yield (MSY) which was estimated in 1993 at 330,000 metric tons (MAAIF 1999). According to the available records, the highest total catch ever realized was in 1993 at 276,000 metric tons and the current trends indicate that for any extra unit of effort, catches seem to reduce probably indicating that catches have surpassed MSY2. The largest and most economically significant water body in Uganda is Lake Victoria with a surface area of 68,000 km² and is shared with Tanzania (49%) and Kenya (6%) leaving Uganda with the remaining 45%. Other large water bodies include, Lake Albert (5,270 km²), Lake Kyoga (2,700 km²), Lake Edward (2,300 km²), and Lake George (250 km²) along with the River Nile. Available statistics indicate that artisanal fish production reached 229,800 mt in 1999 with Lakes Victoria and Kyoga accounting for 80% of the catches. The Nile perch (Lates niloticus) fishery has dominated Ugandan fish production and trade for over the past two decades accounting for 60% of the catches by volume (MAAIF 2001). Other major species harvested include; sardine-like mukene (Rastrineobola argentea) at 20%; the Nile Tilapia (Oreochromis niloticus) at 10%; and other species (of the genera Bagrus, Clarias, Protopterus, Barbus, Synodontis, Momyrus, Alestes and Labeo) accounting for the remaining 10% (MAAIF 2001). Table 2 shows the recorded catch by water body 1999 to 2003. Table 2: Fish Catch by water Body (‘000 tones) from 1995-2003 Lake/Waterbody YEARS 1995 1996 1997 1998 1999 2000 2001 2002 2003 Lake Victoria 103 106.4 106.6 105.2 104.2 133.4 131.8 136.1 175.3 Lake Albert 16.4 21.9 19.1 19.1 29.1 19.4 19.6 19.4 19.5 Albert Nile 4.7 4.6 3.4 3.5 3.7 .. .. .. .. Lake Kyoga 80.2 80.6 80.1 80.2 81.1 55.9 58.4 55.6 32.9 L.Edward, George & K.Channel

5.2 4.8 6.4 5.6 7.4 5.2 6.4 5.2 5.9

Lake Wamala .. .. .. .. . . . . . Other Waters 3.7 3.7 3.7 3.5 4.3 5.6 4.5 5.6 8.3Total 213.2 222 219.3 217.1 229.8 219.5 220.7 221.9 241.9Source: UBOS (2005) and MAAIF (2004) Facts Book

1 The term artisanal in fisheries may have different connotations in different socio-economic contexts. The definition in this context therefore is the one adopted by FAO (1995) 2 It is possible that the catches are below MSY because of depressed stocks. The trends in catch do not seem to indicate that an increased effort can increase harvests.

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Capture fisheries in Uganda is characterized by plank canoes and to a lesser extent, fiberglass boats. Some dugout canoes are also still being used. The plank canoes are generally 4 to 12 metres in length and dugout canoes average 3.5 metres. Fisheries frame survey (2004) indicates that the total number of fishing vessels on Lake Victoria was 19,766 with about 16% motorized. The fishing vessels on Lake Victoria are approximately 60% of the total fishing vessels/crafts from all Uganda’s water bodies. Artisanal fishermen utilise various gears including gillnets, seines, hooks and lines. In a number of localities, traditional methods including baskets, traps and mosquito nets continue to be used on selected species. In terms of food security, there is a large proportion of Ugandans whose food security comes largely as a result of fishing activities. Capture fisheries for example contributes significantly to food security and incomes of the 35 districts adjacent to the major water bodies, while aquaculture is emerging as a key element both in food security and also a contributor in household income. In terms of GDP and the economy, Uganda’s Poverty Eradication Action Plan (PEAP) states that fisheries contributed 6% of GDP in 2001-2002 although only 2.6% is captured in the national accounts. About 70% of this came from fish sales at landing sites and the remaining 30% from value addition by traders, transporters and processors. Other estimates of fisheries’ contribution to GDP are even higher, especially when other auxiliary services, under-reporting and smuggling are taken into account. For example, Banks (2003) estimates that domestic fisheries, excluding exports, account for 12% of GDP, while Yaron et al (2003) estimates reach 30% of GDP. Most statistics generally indicate that the fisheries sector is a vital part of the national economy. The economic importance of fisheries goes beyond their direct contribution to GDP. Fisheries have links with industry (fish processing, input manufacture), forestry (timber for boat construction, drying racks) and services (transport). There are direct, indirect and induced multiplier effects through expenditures on items like beer, sodas and all these are linked greatly to indirect employment. Current issues in fisheries relate to declining water levels especially in Lake Victoria. The decline in water levels is tremendously eroding away the fish breeding areas and forcing fishermen to fish in the remaining breeding sites. This has a long term effect on the volumes of fish available in the lakes. Although many of the reasons for declining water levels have been based on the water release through the dam at Jinja – Uganda, scientific evidence indicate that climate changes, and global warming which resulted in persistent droughts are responsible for the decline in water levels. Other major concerns on the fisheries industry relate to illegal, unrecorded and unreported fishing and this culminates in over fishing which exacerbates the problems of less fish being available for domestic consumption, processing and export.

2.2 Overview of trade As indicated previously, Uganda’s fishing industry plays an important role in the economy. The sector has assumed an even greater profile with the advent of the Lake Victoria Nile perch (Lates niloticus) fishery. The export of the Nile perch fillets started in

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the late 1980's and since then, trade in Nile perch has increased earnings of fish exports to premium markets from US$46.9 million in 1998 to US$143 million in 2005. Fig.1 illustrates the domestic and international marketing chains for Uganda’s fresh fish. Internal marketing system: All the fish that is landed is tradable and is landed at designated landing sites. Some of these landing sites have access roads to main markets. Fish is landed either in fishing vessels or collection vessels. In most of the landing sites, there are agents of fish processors who load fish in iced and insulated trucks and transport to fish processing establishments. This is mainly Nile perch and Nile tilapia, which is processed for export. Some of the fish which is not taken to fish processing firms is either sold to other waiting traders who transport the fish to markets in the trading centres and other towns. The fish that loses freshness during transportation to landing sites and/or to markets is normally locally processed either by sun-drying, smoking or salting and taken to local fish markets while a significant quantity is transported to neighbouring countries mainly Rwanda, Congo (DRC) and Sudan. Trade in fish and fish products are locally undertake by fish traders who mainly buy from the fishermen at landing sites. The fish traders, who are considered the wealthier group within the marketing chain buy at relatively cheap prices currently (2006) at an average of U.shs3,000 per kg (approx. US$1.8) and sell to factories at an average price of U.shs3600 per kg profiting an average of400-600 U. shs per kg. The people involved in local fish marketing are mainly fish traders. In regard to artisanal fish processors (smoking, salting and sun drying), the business is largely dominated by women who buy the fish from local fish traders for local processing. There are also agents, mainly men, who buy and transport the processed fish to major local markets and also to neighbouring Democratic Republic of Congo, Sudan and Rwanda. The major fish species in the neighbouring include mukene (ratreneobola argenea), smoked Nile tilapia and Nile perch. Moreover, fish is sold at the beaches as well as at urban and semi-urban markets, to rural communities, fishmeal factories, hotels and restaurants within the country. The fish is marketed fresh or processed in line with consumer preferences, storage conditions and supply and demand. The lack of cold storage and marketing facilities makes fresh and frozen fish distribution to the inland population difficult. Therefore, most of the fish is sold fresh, the rest being salted/dried or smoked. Domestic fish distribution has improved with increased channels involving middle agents/boat traders that supply to fish factories, fish traders that supply to rural and urban markets. Fish traders can be grouped into four different categories namely (i) The local trader/processors who sell their fish on local markets not more than a kilometre from the beaches. (ii) The long-distance traders who sell to distant markets/towns away from the beaches; (iii) The regional traders/processors who sell to markets within the region such as Kenya, DRC and Rwanda and (iv) the factory agents who buy for the fish factories.

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Figure 1: Fresh fish marketing chain in Uganda

Source: Keizire (2004) The fish trade has the following characteristics. Some traders walk to the beaches while others use bicycles, boats, pick-ups and trucks. The trade is carried out by both men and women. More men are involved in the trade of fresh fish while more women are involved in the processed (sundried/smoked) fish trade. Some traders deal in more than one species of fish although a majority deals exclusively in one species. Traders do not normally have access to Nile perch of more than one kilogram because most of these are taken away by filleting factories. This has forced them to trade in juveniles and, recently have shifted to by-products of industrial fish processing, namely fish frames, skins, offcuts and swim bladders. Due to high competition, some traders have supply arrangements with fishers such as provision of fishing inputs and credit. This is very common with factory agents. Nile perch is mainly sold in Kilograms while tilapia is sold in bundles or per head. Mukene is sold in trough or tins. Selling is by auction and mutual agreement for Tilapia, although in terms of kilograms it ranges from 500-1000 Ugshs per kg and varies from beach to beach and in different regions of the lake. Nile perch is weighed at racks direct from boats and placed into truck containers, iced and transported to fish processing factories. Nile perch is sold in kilograms using weighing scales and a kilogram ranges from Shs 1,000/- to 2,300/-. The rate of reject due to spoilage, however, has gone down, due to good timings and increased use of ice.

FISHERMEN

TRANSPORT BOAT

OPERATORS

INDEPENDENT ROAD

TRANSPORTERS

PROCESSING FACTORIES

EXPORT AGENTS

LOCAL FISH TRADERS

LOCAL FISH MONGERS

OVERSEAS RETAILERS

export quality

non-export Quality y

LOCAL CONSUMERS

Major flow

Minor flow

DRC & Others

LocalProduction

andM

arketingProcessing and E

xport

Channel I: Export Channel

Channel II: Domestic Consumption

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Overall, there has been an upward surge in the prices for all the major commercial species; Nile perch, tilapia and mukene. However, small fluctuations are often experienced, depending on the market conditions at different times. Regional Fish Trade: Uganda is the main exporter of fish to the Great Lakes Region. Regional fish exports have significantly contributed to Uganda’s economic growth and to the livelihoods of many Ugandans in terms of earnings and employment. While there is substantive information on local and international fish trade on which decisions could be based to appropriately develop the trade, information on regional fish export trade is lacking and where available, and little has been documented. Table 3 provides some guidance to the volume involved. The regional export trade has been in existence for a long time especially among border communities. However, it became more vibrant in the 1970s with the proliferation of “Magendo” – illegal cross boarder trade. Table 3: Fish exports to Rwanda through Katuna Border Post Month Q’ties

Tilapia (tonnes)

Values (‘000Ugshs)

Q’ties Mukene (tonnes)

Values (‘000Ugshs)

2-Oct 15.3 10,232 43.3 10,889 2-Nov 12.7 13,440 30.9 7,120 2-Dec 23 23,400 42.2 11,130 3-Jan 12.1 15,420 19.4 4,850

Source: LVEMP (2005) Traders are organized in formal groups and companies with a few operating as individuals. This is mainly for purposes of collectively meeting costs of transport and licensing, collective responsibility in case of a problem and quality concerns that could easily be tracked, based on groups and companies as opposed to individuals. Most traders make on average one trade trip in a month. The number of trade trips mostly depends on catch and distance to markets. Most traders (about 50% of people who responded to this study questions) bought their fish from fishermen at the beach and they were mostly wholesalers. The fish is distributed both through the recorded and regulated channels and the unrecorded and unregulated channels. The unrecorded and unregulated channels mainly involve immature fish, especially Nile perch and Tilapia. The majority (65%) sell their fish at the Uganda – Rwanda border. They prefer to sell their fish to regional countries mainly due to better prices offered and the presence of ready markets. The most outstanding problem during fish distribution is the presence of many regulatory points for both revenue collection and size/quality assurance. Fish species exported are mainly sundried tilapia, mukene and juvenile Nile perch as well as factory by-products. Other fish species include Bagrus bayad and Alestes from Lake Albert. Industrial processing and international export: Industrial fish processing is dominated by local and international companies of which some are individually owned while others are jointly owned. Currently there are 17 fish processing establishments in Uganda 15 of which are approved for exports. They operate at an average of 44% of the installed capacity (LVEMP, 2005). The fish processing and export establishments are all organized under the umbrella of Uganda Fish processors and Exporters Association (UFPEA) out of the 15, 12 are members of UFPEA.

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The fish processing and export business from Uganda, and indeed from the rest of East African countries, Kenya and Tanzania, is eased by the number of importing agents who mainly transport fish and fish products from Uganda to a number of market destinations. These firms include; Fiorital from Italy, Caladero from Spain, Nieterlof from Holland, Anova from Holland, and Icemark from Belgium. Two of these Anova and Icemark have operations on the ground in Uganda. Most of these markets have different market requirements. The European market, for example, prefers whole fillet sizes of 200 to 500g, while the Japanese, the Middle East and Hong Kong markets accept fillets from larger fish. This size has since changed and the EU markets now require fillet sizes of up to 1 kg. FAO (2004) estimates indicate that global markets for internationally traded fishery products were valued at US$58 billion in 2002, and this brings Uganda’s world market share to approximately 0.2%. The European Union (EU dominates the market for Ugandan fish exports accounting for 73% of the value of fishery product exports in 2004 (see Table 4). In 2004, fishery products were consigned to 29 other destinations, none of which accounted for more than 7% each of the total value. Other sizeable markets for Uganda’s fish include the USA, the United Arab Emirates and Australia. In Table 5, fish exports to premium markets are shown. Table 4: Fish Exports to Premium markets 1995 –2005

Source: Uganda Bureau of Statistics, 2005 Table 5: Fish Exports to Premium markets 1995 –2005

Source: Fisheries Department Records (2006)

Year Qty (tones)

Value (US$)

Price (US$)/kg

1995 12,970,900 25,902,800 2.00 1996 16,396,400 39,780,900 2.43 1997 983,900 2,880,000 2.93 1998 13,805,250 34,920,790 2.53 1999 13,379,980 36,608,300 2.74 2000 15,876,380 34,363,140 2.16 2001 28,672,170 80,398,470 2.80 2002 25,169,140 87,574,360 3.48 2003 25,110,600 86,343,280 3.44 2004 29,830,920 102,914,080 3.45 2005 38,000,000 143,123,111 3.77

Year Qty (tones)

Value (US$)

Price (US$)/kg

1995 12,970,900 25,902,800 2.00 1996 16,396,400 39,780,900 2.43 1997 983,900 2,880,000 2.93 1998 13,805,250 34,920,790 2.53 1999 13,379,980 36,608,300 2.74 2000 15,876,380 34,363,140 2.16 2001 28,672,170 80,398,470 2.80 2002 25,169,140 87,574,360 3.48 2003 25,110,600 86,343,280 3.44 2004 29,830,920 102,914,080 3.45 2005 38,000,000 143,123,111 3.77

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2.3 Consumption Fish has traditionally been the most affordable form of animal protein for local people and there has been concern that increased fish exports might increase fish prices and cause local people to fail to afford the fish, especially the fish dependent poor. The reduced amount of fish available to communities threatens them with malnutrition Table 6 provides estimates of per capital for consumption which suggests relatively stable consumption in recent years, while Table 7 shows the contribution of fish to the provision of animal protein. Fish consumption has the following features. Fish consumers are distinguished between those who engage in fishery activities and those who do not, with the latter mostly found away from the beaches. Fishers usually do not buy the fish they consume (FIRRI, 2003). Both categories commonly consume tilapia, even at beaches where Nile perch is the most landed species. This is attributed to preference or to the fact that Nile perch fetches better prices and is, therefore, put for sale rather than consumption even by Nile perch producers. Most consumers report that the quantities, size of fish and the frequency of consumption have decreased over the last few years. They further report that the prices of fish for consumption had increased over the last few years. Table 6: Uganda per capita fish consumption Table 7: Contribution of fish in animal protein

Source: FAO database

% of fish in animal proteins Year Kenya Uganda Tanzania

1976 – 1978 6.1 38.5 34.4 1979 – 1981 6.3 33.8 31.0 1982 – 1984 9.2 34.8 32.8 1985 – 1987 9.8 36.1 35.6 1988 – 1990 9.9 37.8 38.3 1991 – 1993 10.2 33.6 31.3 1994 - 1997 10.6 29.7 32.6

S o u rc e : L V E M P (2 0 0 5 )

Y e a r P e r c a p ita

c o n s u m p tio n1 9 9 8 1 01 9 9 9 7 2 0 0 0 7 2 0 0 1 1 22 0 0 2 1 02 0 0 3 1 02 0 0 4 1 02 0 0 5 1 0

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2.4 Employment in the fisheries sector One of the key determinants of a growing sector is the level of employment a sector can contain. There is also a close linkage between employment, household income and livelihoods status of individuals. The fisheries sector directly and indirectly employs a considerable part of the total population. In 2003 when Uganda’s Poverty Reduction Paper was being revised, Keizire (2003) attempted to document the number of people employed in the fishing industry. This attempt also disaggregated the level of employment by gender. The analysis was carried out guided by the existing institutional structures governing the management of the fishing industry. These structures include national institutions for delivery of services namely fisheries management, fisheries research and community and civil society organizations. Under this group, the study captured staff employed by the Department of Fisheries Resources (DFR), Fisheries Resources Research Institute, Uganda Fish Processors and Exporters Association (UFPEA), Uganda Fisheries and Fish Conservation Association (UFFCA) and the Uganda Fisheries and Allied Workers Union (UFAWU). The study however did not include people employed by short-term fisheries projects although such people constitute the number of people employed in the sector. The analyses also included people employed at the district especially those staff employed by the local government and local or community level structures. At community level, Beach Management Units (BMUs) have been established in most of the water bodies in Uganda and these BMUs were used to generate data on people employed in fisheries including the fishermen (barias), the boat owners, the fish traders and others such as boat builders who are all captured in the BMU structure. People directly employed by the fisheries sector: Keizire (2003) found out that a total of about 278,826 people are directly employed in fishing either as boat owners, fishermen (barias), fishmongers, artisanal processors and those involved in boat making or net manufactures. It is also discovered that in public agencies, NGOs and the private sector, an estimated 3,232 people are directly employed. Out of these, 72% are male and the remaining 28% are female. In total therefore, the fisheries sector directly employs over 284,058 excluding those involved in fish farming. There is important recognition that many women are involved in fish processing and fish mongering and recently, women are increasingly becoming boat owners. People directly depending on the fisheries sector: The same study also revealed that over 1.2 million people are both employed and directly depend on the fisheries sector as their only source of livelihood. This was computed using the total number of people employed as household heads and considering the average household size of these families by district provided in the population and housing census survey by UBOS (2002). Table 8 shows the number of people employed in fish processing establishments while Table 9 shows the number of people employed in government and non-governmental establishments. Table 10 is a summary of people employed directly and those dependent on the fishing industry. Since this study was done in 2003, it can be deduced that the total number of people employed in both government establishments and private sector may have increased.

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Notably the fish processing plants have increased from 10 to currently 17. The number of people in fish processing factories may have increased by approximately 50%. Table 8: Total number of people employed in fish processing establishments

Source: Keizire (2003) The relevance of these numbers is that any exogenous factor that affects the sector either in terms of trade or production may result in those numbers who depend on the sector loosing out. The other point, probably more important, is that these numbers represent the people whose livelihoods and poverty levels are affected by fisheries. To reduce poverty amongst such groups of individuals would therefore call for a sound fisheries management that would guarantee sustainability of use and sharing of benefits. In the fish processing establishments, there are a number people who are part time traders. These were not captured by the survey and the number of people employed by processing forms could be relatively much more that those captured. Table 9: Number of people employed in the government and non-government

establishments Institution Male Female Total %

male %

female Department of Fisheries Resources 65 15 80 81 19 Local Government Fisheries Staff 256 74 330 78 22 Fish Processing & Export Establishments

1,823 757 2,580 71 29

Fisheries Resources Research Institute - Regular Staff (Jinja & Kajjansi) 55 17 72 76 24 Non-Regular (Jinja and Kajjansi) 63 24 87 72 28 Fisheries Training Institute 41 13 54 76 24 Lake Victoria Fisheries Organisation 8 5 13 62 38 UFFCA 7 3 10 70 30 UFAWU 4 2 6 67 33 Total 2,322 910 3,232 72 28

Source: Keizire (2003) Table 10 provides detailed information on the total number of people employed in the fishery plus the estimated total number of people who directly depend on the fishery. From the table, the total number of people directly employed in the fishery is 278,826

Fish processing Firm Male Female Total % male % female Byansi Co. 150 130 280 54 46 Tropical Fish 100 50 150 67 33 Gomba fishing Co 110 80 190 58 42 Green fields 166 37 203 82 18 HwngSung 254 116 370 69 31 Marine and Agro 377 88 465 81 19 Ngege 160 70 230 70 30 Masese 180 40 220 82 18 Uganda Fish Parkers 224 100 324 69 31

. Uganda marine Products

102 46 148 69 31

Total 1,823 757 2,580 70 30

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and the depending on the fishery is 1,219,724. The categories of people directly employed include the boat owners, the fishermen (barias), the fish mongers, the fish processors and boat builders. Table 10: Number of people directly employed and those that depend on capture

fisheries Water-body/Region No. of people directly

employed in fishing No. of people directly dependant on fisheries

Lake Victoria Region 218,661 914,627 Lake Kyoga Region 38,227 196,171 Lake Albert Region 15,334 76,348 Lake George Region 1,729 9,495 Lake Edward Region 1,255 5,929 Kazinga Channel Area 463 2,317 Minor Lakes & areas around them

3,157 14,838

Total 278,826 1,219,725 Source: Keizire (2003) Note: These data exclude people involved in fish farming.

2.5 Fisheries and poverty There has been no disaggregated data on the poverty trends specifically on fisheries. However, some data can be traced and teased from household surveys that the UBOS has been carrying out. Preliminary estimates of 2003 demographic household survey reveal that poverty overall in the country increased from 34% to 38% in years 1990 and 2003 respectively. These results also reveal that poverty increased in agricultural farm households and slightly reduced in non-agricultural households (see Okidi and Ssewanyana, 2003). It is not clear whether fisheries dependent communities are included in the non-agricultural households whose poverty has not increased. Although the results do not give fisheries specific poverty status, qualitative studies by UPPAP reveal that in most fishing communities’ poverty is still prevalent. The Uganda Participatory Poverty Assessment Processes (UPPAP) has documented qualitative information on poverty and fisheries in Uganda. The processes have concentrated on livelihoods and fisheries in general rather than quantitative trends and incidences in particular. The second Participatory Poverty Assessment process (UPPAP2) indicates that in most fishing communities, boat owners constitute the wealthiest group and these groups are largely (96%) men. In terms of income distribution by gender, it becomes more apparent that the wealthiest group within the poor categories of those depending on the fisheries sector is men. UPPAP2 recommends that involving poor fishermen and women in decision making at landing sites and other fish dependent communities can dispel this income disparity. There are some indicators that there are positive changes in poverty levels amongst fishing communities. UPPAP2 indicates that in most major landing sites (especially on Lakes Victoria and Kyoga), fishermen and boat owners, who sell mainly Nile perch, have invested in shops, video halls, restaurants, and lodges at landing sites and as a result, they have become local leaders and/or opinion leaders.

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UPPAP2 analysed fisheries and poverty from a number of issues. The analysis for example examined the extent to which boat ownership and being a fisherman can influence poverty status of an individual. Similar analysis was also done looking at gender issues and it was discovered that in most fishing communities, few women own boats, almost none go fishing as barias. However, a high number of women were involved in fish processing and marketing and substantial value of money was added to the fish production chain by these fishmongers. UPPAP2 also analysed issues of fisheries infrastructure, processing and marketing on poverty of fishing communities. An attempt was also made to link policy and institutional development to poverty in fishing communities. The underlying question here was how policy development processes are translated into poverty reduction in fisheries or fishing communities. The study, for example, notes that community-based institutions are key appropriate entry points for service delivery in fisheries and such services would reduce incidence of poverty amongst communities.

2.6 Baseline on fisheries trade projections

2.6.1 National targets Table 11: Projections based on current statistics in fish trade 2004 2005 2006 2007 2008 2009 Volume of Catch (000 tonnes) 249 416 721 1,665 1,765 1,871

Domestic Consumption (000 tones) 210 371 655 1,570 1,627 1,671 Regional Exports (000 tones) 8.79 10.98 15.92 23.09 33.48 48.55 International Exports (000 tones) 29.8 34.2 50 72 104 151

Export Volumes (000 metric tones) Regional exports 8.79 10.98 15.92 23.09 33.48 48.55 International exports 30 34 50 72 104 151 Processing ratio (kg raw material/fillet) 2.5:1 2.5:1 2.5:1 2.5:1 2.5:1 2.5:1

Export Price (fob) (US$/kg) Regional exports 1.63 1.71 1.80 1.89 1.98 2.08 International exports 3.416 3.685 3.931 4.177 4.423 4.669

Export earnings (US$million) Regional Exports 14.3 18.8 28.6 43.6 66.3 101.0 Regional exports share international exports

14% 15% 15% 15% 14% 14%

International exports 101.8 126.0 194.9 300.3 461.2 705.9 Source: Fisheries Department Records Table 11 contains key projections on Uganda’s fish production and trade to 2009, and key factors behind the projections are outlined below. Catch volume projections are based on the following key factors that will boost fish production over years:

• Reducing the catch of immature fish which is currently 40% of total catches. • Stopping Illegal, Unregulated and Unrecorded (IUU) fish catches which is 30% of

current catches • Protecting fish breeding areas of which currently, 10% of the catches are lost. • Restocking of valley dams and valley tanks • Restocking minor lakes • Increased fish production from fish cage farms

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Other factors that will enhance/boost medium term growth include; • Maintaining and guaranteeing fish quality assurance and safety for export • Putting in place effective, and strengthening capacity of, fisheries management

institutions such as the upcoming Uganda Fisheries Authority and the recently Beach Management Units

• Strengthening Monitoring Control and Surveillance (MCS) both on water and on land

Key Factors that will constrain Medium Term Growth

• Current ineffective fisheries management institutions • Increase in illegal fishing which will result in decreased fish catches • Insufficient funding that will reduce fish production through lack of effective

Monitoring Control and Surveillance to reduce IUU, fishing in breeding areas and catching of immature fish.

• Deterioration of fish quality and safety • Negative effects likely to come through DDA negotiations and there after like

GSP and erosion of preferential treatment of ACP countries by EU Key policies that need to be adopted include the application of “user pay principle” and recovering costs of fisheries mismanagement from the sector itself rather than relying on central government transfers. Others include the maintenance of indirect subsidies which do not distort international trade.

2.6.2 Private Sector Impact targets National impact targets and projections for Uganda’s fisheries sector were developed under the auspices of private sector competitiveness support projects of Scope, COMPETE and UFPEA. These projections unlike those projected by DFR have employment components in them but the impact targets are largely dependent on the estimated growth in fish processing and export to premium markets of EU, USA, Australia etc. If the impact targets capture landing sites agents, aquaculture and other impact categories not mentioned in the table12 employment and other impact targets will be more than those mentioned. Table 12: National Impact Targets (current 2005 – 2010) Category Current

(2005) 2007

Benchmarks 2010 Targets

Nile perch export volumes 31,808 mt 42,500 mt 57,000mt Nile perch export earnings US$103m US$128m US$159m Jobs created 3,770 5,000 6,800 Aquaculture ponds 20,000 26,000 32,000 Jobs created 42,000 56,000 70,000 Indirect jobs 700,000 850,000 1,000,000 Livelihoods improved (# of people)

3,500,000 4,250,000 5,000,000

Source: Uganda’s Fisheries Competitiveness Plan (July 2005)

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3. Changes in trade measures as a result of WTO negotiations

The WTO agreement on Agriculture does not cover trade in fish and fisheries products which fall in the category of industrial goods. This means that the issues of market access fish and fish products are discussed in the Non-Agricultural Market Access (NAMA).

3.1 Non-agricultural market access (NAMA) As reported by Ponte (2005), fish trade is regulated via a complex overlap of multilateral and bilateral agreements. At the WTO level, during the Uruguay Round, fisheries were left out of the agreement on Agriculture at the insistence of some EU countries (France, Spain and Italy). As a result, fisheries related issues are covered under various agreements. Notably, fisheries subsidies fall under the discipline of Agreement on Subsidies and Countervailing Measures (ASCM). The main areas for negotiation in the Doha round are tariff and non-tariff barrier reductions under the negotiating group of NAMA although, as Ponte (2005) notes, very little movement has taken place on non-tariff barriers and reduction of fisheries subsidies under the ‘Group on Rules’. For the EU, Uganda benefits from the Cotonou Agreement which applies to all the ACP group of countries. This agreement provides tariff-free access to the EU provided that fish exports comply with the specific Rules of Origin (ROO). Under the ongoing negotiations, the EU is seeking to replace the Cotonou Agreement with a series of Economic Partnership Agreements (EPAs), but the negotiation process has been very slow. The outcome of these negotiations is particularly important for ACP countries that are not LDCs. If they fail to reach such agreements by 2008, their tariff preferences may disappear. The Everything-but-Arms (EBA) scheme is a unilateral offer of the EU to all LDCs that is valid for an unspecified length of time. This also means that it can be withdrawn at any time. It allows tariff-free access to the EU, provided that they fulfill the appropriate ROOs. This offer applies to Tanzania and Uganda, but not to Kenya (which is considered not an LDC). With that understanding, fish and fish products from Uganda, will continue benefiting from the zero tariff when entering the EU market if there is compliance with ROO. In terms of impact, this is expected to provide fish and fish products with a competitive advantage over fish products from countries outside the ACP where different levels of tariffs are imposed. Competitiveness of fish and fish products from Uganda is affected by other indirect tariffs other than those understood in the context of the WTO. There is an issue, for example, over increased costs to aviation fuel which increases the air freight charges and thereby reduces the competitive advantage of fish and fish products from Uganda. Fish processors currently estimate the cost of freight for a kilo of processed fish destined for European markets to be in the range of US$1.4-1.5 from Entebbe. This is also exacerbated by the recent increase in costs of fuel production as a result of power cuts. The power cuts have increased the costs of fish processors very significantly especially when they are faced with a challenge of maintaining quality standards. The processors have now resorted to the use of diesel generators whose fuel costs are still

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high. In the context of WTO negotiations, developing countries could push for more preferential treatments citing these unfavourable home trade barriers which stifle competitiveness

3.2 Non-tariff measures The Sanitary and Phytosanitary Measures (SPS) and the Technical Barriers to Trade (TBT) of the WTO are the most common form of non-tariff measure impinging on the trade in fish and fish products especially from developing countries. It is argued that while TBT and SPS measures might aim at regulating the quality of fish and fish products traded, the measures are seen as non-tariff barriers to trade and affect developing countries the most. For example, Delgado (2003) notes that most regulations regarding EU fish imports such as Hazard Analysis for Critical Control Point (HACCP) have been made compulsory. For developing countries like Uganda, such rules and regulations based on HACCP shifts the burden of responsibility to exporting nations’ fish processing and export firms. Such burdens render processing firms less competitive (Henson and Loarder, 2001) and hence a non-tariff barrier to trade. Although Bostock, et al. (2004) notes that such TBT and SPS agreements are intended to ensure that internationally traded goods do not discriminate in favour of domestic producers, Henson, et al.( 2001) notes that SPS measures are potentially a significant barrier to seafood exports from developing countries to developed countries. Ponte (2005) also notes that tariff barriers do not seem to be the main determinant for gaining access to the EU and other markets for fish, particularly with regard to less processed products (e.g. fresh fish and fillets) although tariff escalation does provide disincentives against local industries producing higher-value processed products. The next round of trade negotiations, following the recommendations by FAO studies (see Bostock, et al, 2004) should focus on developing the capacity of developing countries to understand, articulate and negotiate issues of such concerns during trade negotiations. Ponte notes that more relevant than tariffs and subsidies is the fact that the three East African countries have to face tough food safety standards to gain access to developed country markets. This issue is of particular interest in relation to fisheries exports given their susceptibility to spoilage and the need for a cold-chain for many types of products. Much of the discussion on the impact of food safety standards on developing countries focuses on assessing compliance costs and on determining the thin boundary between ‘legitimate’ measures taken to safeguard consumers’ health and the environment, and measures that are taken with that explicit intent, but that willingly or unwillingly protect developed-country industry operators. A look at the story of the ban on fish from Lake Victoria and Uganda in particular becomes interesting for this argument. Looking at the short term implications of fish ban Keizire (2004) reviewed the available literature and analysed the implications of the EU fish export ban on exports from Lake Victoria. In the analysis, it is observed that industrial fish processing and marketing of mainly Nile perch started in 1980's in Kenya and in the1990’s in Uganda processing frozen Nile perch fillets and marketed mainly to the Far East countries, South East Asia especially Japan and Australia. The other main markets for frozen fish came to include China, Malaysia, Japan, Australia, Israel, Singapore EU and USA.

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In the period between 1996 and 2000, the European Union imposed three export bans of fish from Uganda. In 1997, the ban was for detection of salmonella which reduced the quantity of fish that was being exported though this did not significantly affect the overall quantities to the EU market. As a result of cholera outbreaks in late 1997 another ban was triggered which was very significant in terms of quantities and values of fish exported because 95% of the fish exported to EU is in fresh form. Early in 1998, suspected incidences of fish poisoning were reported in Uganda on Lake Victoria. This matter was treated with serious concern and the Uganda government authorities imposed a temporary ban on fish exports and the decision was communicated to the EU. Despite efforts made by Uganda to put in place a monitoring system to ensure that no poisoned fish ended up in the market, the EU decided to impose a ban on imports of fish originating from Lake Victoria. The decision, which took effect from April 1999 (European Union Council Decision 99/253/EC), affected not only Uganda but also Kenya and Tanzania. Owners of fish processing plants reported that this ban came at a time when the fish processing plants were beginning to recover from the previous partial ban imposed by the EU in 1997 due to cholera outbreak. The processing firms were also just beginning to pay back the bank loans that they had taken in 1997 to enable them to restructure the layout of their plants so as to comply with the EU Directive 91/493/EEC. At the time the ban was imposed, about 250-300 metric tonnes of fish valued at about US$1.2 million were being exported to the EU market weekly. After the ban, the export quantities reduced to 50-100 metric tones per week valued at US$100,000-250,000. Prices of fish at the beaches also declined from Ugshs1,000-1,500 per kg to Ugshs500-600 per kg (US$70 cents-1 per kg to US$30-40 cents per kg respectively). In addition, most of the factories reduced their workforce to less than half of the original number. Although a few alternative markets were found especially in the Far East, the prices offered were much lower than those offered in the EU markets The Fish Ban and the Socio-economic Losses Citing many sources Keizire (2004) further notes that the fish export ban resulted into a loss of over US$ 30 million. Some losses were cited in UNIDO (2003) which categorised losses in the form of jobs and also losses of foreign exchange revenues. The estimates were that out of over 100,000 people directly employed in the fisheries sector, 32,000 people lost their jobs as a result of the ban while others earned less that one third of their average income. It is also estimated that over 300,000 people from families directly depending on fishing as a household activity were affected. The April-August 1999 ban is estimated to have resulted into a loss of US$ 36.9 million alone. UNIDO further estimated the loss to the fishing community in the form of reduced fish prices and less fishing activity to a tune of US$ 4.25 million. At the time there were 11 operating fish factories in Uganda and the ban resulted in the closure of 3 of the 11 factories while the remaining ones had to operate at less than 20% capacity. This resulted in factories laying off 60% to 70% of their labour force. Other auxiliary activities such as packing, fishnet manufacture, the transport industry, the fuel industry and Uganda's economy in general were directly affected and all the people involved suffered the direct consequences of the EU fish export ban. The era of the fish export ban was triggered by implementation of one or many of international fish trade laws. Although the EU Council Directive 91/493/EEC is largely the

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most quoted to have triggered the bans, other rules (probably indirectly) had a strong relevancy in influencing these bans. The ban did not only lead to revenue, job and other multiplier losses, but also reduced the competitive capacity of fish processing firms which injected a lot of resources to upgrade to international standards at a time when no or little revenues were being generated from fish exports. Since the time, most fish factories have increased their capacity to respond to the demands of the ‘Competent Authority’ as well as the demands of the importing nations. For example, during the period of the fish export bans Uganda, Kenya and Tanzania had to implement the necessary measures to comply with the EU SPS requirements thus improving quality assurance. Prior to the bans, the EU had been the main export market for fish from the region. During the ban, the countries had to look for alternative export markets including Middle Eastern countries. The development of new markets has been a positive impact because it reduced over dependence on the EU market. Currently, Uganda and other East African countries do not seem to be inclined or able to use the WTO to address perceived discriminatory standards applied in developed countries. But even when these measures are not considered discriminatory or excessive, industries on Lake Victoria still face the task of compliance. The problems faced by these countries are not only at the level of expenditure, paperwork and skills necessary for exporters to assure compliance, but also the legal, personnel and financial requirements placed on their governments to establish regulatory frameworks at the domestic level to support compliance. Thus, the EU Nile perch export bans from Uganda represented major shocks for exports of the sector. In the short-term this led to significant loss of foreign exchange earnings, bankruptcies and unemployment, However, in the medium- to long-term, the sector has recovered well, with a smaller but better equipped processing sector, improved marketing strategy, and strengthened institutions. This example, clearly demonstrates the resilience of developing countries in the face of such measures. Nevertheless, despite the notably “post-ban” recovery, there is little doubt that there are also long-term losers, perhaps through increased polarization, and particularly related to the poor and vulnerable although little information exists on the extent of this problem.

3.3 Subsidies The absence of a clear definition of subsidies, especially as it relates to fisheries, is a key concern to many countries that stand to loose out when their level of competitiveness is affected by those trading partners whose fish trade is highly subsidised. In this analysis, the level of fisheries subsidies in Uganda is looked at from the two dimensions.

• Direct subsidies - by the government to the fisheries sector, expressed in cash or kind, or in the forgiveness of tax, and the easiest form of subsidy to define as such.

• Indirect subsidies to the sector through government (or donor) support to the sector or the communities involved. This might include projects assisting the artisanal fisheries, start-up support for new seafood industries or assistance with marketing.

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Direct subsidies Fisheries management in Uganda is largely supported by government. Up to 100% of the costs of fisheries management is government funded either by direct grants from the treasury or by grants or loans from bilateral and multilateral donors. This support, following the above guideline, can be considered as a subsidy by government to the fisheries industry also it can be considered an indirect subsidy. However, this kind of subsidy does not reduce the costs of a fisherman since the support is not directed to fisherman but to the fisheries managers. Fisheries in Uganda are artisanal but a number of studies have alluded to the fact that Ugandan fisheries have substantial rents. Studies indicate that fisheries rents can be captured to finance costs of fisheries management e.g. Keizire (2001). Where the Ugandan government has continued to finance fisheries management costs, this financing cannot be considered a direct subsidy to the fishing industry. This type of government subsidy does not reduce the costs of small-scale fishing. On one hand, fishermen pay various taxes which, in many cases increase their fishing costs thereby affecting their business competitiveness, contributing to government revenue. The question now is how the WTO Doha round negotiations on fishing subsidies can respond to concerns of small-scale fisheries. It is understood that the discussions and negotiations on subsides were meant to ensure fair trade but considering the small-scale nature of fisheries in Uganda, this level of government subsidies does not influence international trade in fish and fish products. Another form of subsidy is the tax waivers and tax guarantee schemes that ensure that fish processing plants benefit from zero duties on inputs. This is mainly applied to industrial fish processors rather than the small scale fishermen and processors. Until recently, Government of Uganda had upheld a policy of not taxing exports as an export promotion strategy. This incentive framework has been coupled with other subsidy-like tax holidays for fish processing establishments and zero taxes on inputs to fish processing establishments. The aim is to increase the competitiveness of processing of fish and fish products for export. The Uganda government has considered imposing a cess or a levy on fish exports. Such policy approaches are interpreted by the private sector as disincentives to competitiveness. The revenues from a cess or levy, if properly used for management, will reduce subsidisation of the entire fishing industry by government. In the long-run therefore, what would be considered by private industry as an extra cost to business will be later translated into private sector support to increase private sector competitiveness. The challenge remains on how best the resources from levies are utilised based on good and sound management decisions. Indirect subsidies. The government supports small-scale fishermen and fishing communities, through projects, targeting poverty issues rather than supporting trade related programs. This should not be considered as government subsidising fishing industry. On the other had, this kind of support does not help fishermen to acquire more fishing nets, engines and fishing vessels which may lead to overcapitalisation of fishing fleets. Some of the loans and support programs to fishermen are targeting poverty reduction, though on a small scale may lead to increased fishing pressure. Again Ponte (2005) asserts that even if fisheries subsidies are dramatically reduced in OECD countries, there would be no impact on African inland fisheries such as those from Lake Victoria.

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Some of the specific indirect subsidy areas include; the government support in the construction of 31 fish landing sites funded from a US$20 million loan from the African Development Bank (AfDB).The landing sites will improve sanitary standards in the fish sector and ensure that fish exports meet international standards. Government also largely funds research in the management of fisheries. The research conducted by Government is still funded largely at a public cost, through grants and loans to Government managed programmes e.g. the Lake Victoria Environment Management Project (LVEMP) implemented by the 3 East African countries of Kenya, Uganda and Tanzania. The Uganda Investment Authority (UIA) has facilitated acquisition of sites on Lake Victoria for investors interested in aquaculture. UIA also held negotiations on behalf of investors to enable them get good terms on land, from, which to base their aquaculture cages, and premises. The budget for this kind of activity falls within Government’s allocation to the UIA, and Government’s Medium Term Competitiveness Strategy which aims to ease hurdles faced by investors. The cost of fisheries resource management has been largely borne by Government and therefore it is in essence a subsidy for fisheries resource users. However, with the National Fisheries Policy (2004), and the Draft Fisheries Bill (Scheduled to become the Fisheries Act if passed by Parliament), a user fee for fisheries resources has been proposed. This constitutes an access charge of 2% and will to a fair extent reduce the value of the subsidy. However, management of fisheries will still largely rely on Government funding. The Fisheries Sector Strategy Plan (FSSP) provides for training of the people in fishing communities and on how they can re-orient their livelihoods away from relying entirely on fisheries resources. Part of the training involves sustainable management of the fisheries and since the expenditure is not repaid by the fishers it represents a subsidy. In the absence of this support and if industry was to bear the cost of all this, fish processing would be hit by high costs and trade margins would be negative and fish exports would not be realised at all.

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4. Initial outcomes of changes in trade measures The analysis of possible impacts of international trade rules and specifically the Doha round indicates that tariff reduction and implementation of GSP will erode Uganda’s preferential treatment of zero tariffs to the EU. Uganda’s fisheries sector is likely to face the following:

• Uganda’s Nile perch exports will become less competitive. • There will be a substantial reduction in profits of Uganda’s fish processing plants

as a result of competitively low prices and lower volumes. • The foreign exchange earnings will drop by about 20-30% leading to greater

exchange rate instability. • Increased competition will force fish processing plants to attempt to reduce costs

by laying off workers and therefore leading to unemployment and increased poverty amongst fishing communities.

Subsidy schemes in Uganda are on a small scale and include supporting fisheries management and conservation efforts as well as tax waivers and schemes that ensure fish processing plants benefit from zero taxes on capital inputs. Subsidies to support small scale fishers have a negligible distorting impact on the international fish trade although their removal could cause increased hardship. Removal of the subsidies supporting processing operations would reduce a firm’s ability to compete and could have a similar impact to those of reduced tariffs on competitors’ products. However, it is felt that the subsidy support provided in Uganda is unlikely to be ended under the new trade rules, and therefore, unlikely that the subsidy reduction will affect Uganda’s fishing industry. Thus implementation of DDA trade measures is expected to reduce the competitiveness of fish and fisheries products originating from Uganda. The level of Uganda’s competitiveness will need to be improved through such actions as lowering factory level costs of production/processing and reducing air freight costs, as well as post harvest losses. In reviewing the margins within the fish production, transport and processing chain, it can be deduced that there appear to be opportunities to lower margins and improve competitiveness. Table 13 provides details of fish processing factory costs and margins. Already, there is reported strong competition for Nile perch in the EU market. In 2004, Nile perch experienced strong competition from the farmed catfish/ basa especially from Vietnam. Lower price basa species flooded the EU market and prices fell to approximately Euro 3.42/kg - the same prices as during ban of Nile perch (Globefish report). On positive side, more Nile perch is entering the EU market with some 56,000 tonnes imported to the 15-EU countries in 2004, representing a 20% increase on 2003 levels. However, the total value did not change significantly and there was additional pressure placed on Lake Victoria’s Nile perch resource. However, all this has occurred prior to the implementation of DDA trade measures but it does illustrate possible trends when the measures are implemented.

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Table 13: Fish Processing Factory Costs and Margins

Cost Area USh per annum

USh per kg of fillet

US$ per annum

US$ per kg of fillet

% of total costs

Operating costs - variable:

Raw material 8,810,100,00

0 4,500 5,107,304 2.61 76% Packaging 506,580,750 259 293,670 0.15 4% Energy 360,000,000 184 208,696 0.11 3% Direct labour 289,314,600 148 167,719 0.09 2% Fuel 44,201,028 23 25,624 0.01 0%

Sub-total variable costs 10,010,196,3

78 5,113 5,803,012 2.96 86%Operating costs - fixed: Management 276,000,000 141 160,000 0.08 2% Lab expenses 139,200,000 71 80,696 0.04 1% Admin expenses 177,600,000 91 102,957 0.05 2% Fixed asset maintenance 67,200,000 34 38,957 0.02 1% Capital costs (interest & depreciation) 549,600,000 281 318,609 0.16 5%

Sub-total fixed costs 1,232,400,00

0 629 714,435 0.36 11%

Sub-total operating costs 11,242,596,3

78 5,742 6,517,447 3.33 97%Miscellaneous 416,290,873 212 240,865 0.12 3%

Total operating costs 11,636,087,2

51 5,943 6,745,558 3.45 100%

Annual revenue* 12,783,147,4

47 6,529* 7,410,520 3.79*

Profit (loss) before tax 1,147,060,19

6 586 664,962 0.34 Source: PMA NRI Report (2002) In 2004 Tanzania dominated Nile perch exports to the EU but most of the additional quantities entering EU in that year came from Uganda, see Table 14. Table 14: Quantity (tones) and Value (‘000 Euros) of Nile perch fillets exports to

EU by Uganda Kenya and Tanzania Year Uganda Kenya Tanzania

Q'ty Value Av. Price Q'ty Value Av. Price Q'ty Value Av. Price

(tones) (000 Euro) (Euro/kg) (tones)

(000 Euro) (Euro/kg) (tones)

(000 Euro) (Euro/kg)

1997 8621 31892 3.70 7488 26109 3.49 9015 29491 3.27 1998 8894 32544 3.66 2447 6589 2.69 12506 42899 3.43 1999 2731 11305 4.14 1121 4539 4.05 4581 15699 3.43 2000 3451 14649 4.24 30 125 4.17 26857 110667 4.12 2001 14776 62930 4.26 2747 13062 4.76 23063 99170 4.30 2002 12213 60679 4.97 3972 19375 4.88 23119 114235 4.94 2003 13062 51049 3.91 5086 19134 3.76 26965 99701 3.70 2004 18539 69491 3.75 6737 23433 3.48 30813 99510 3.23

Source: compiled from FAO, GLOBEFISH 2005 http://wwwglobefish.org/index.php?id=2612

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Mixed outlook of the EU market for Nile perch As discussed earlier, the EU is the main market for Uganda’s Nile perch (accounting for 73% of total exports) and the market is still growing. Nevertheless, various issues need to be considered particularly with regard to sustainability. The Nile perch resource is under stress, as reported in many scientific papers and seminars. The donor community is assisting several programmes helping to implement control measures on the catch from Lake Victoria. There are other programs looking at the possibility of producing more value added products from the raw material, and also producing new products from processing what is currently considered waste. The new direct air link with Entebbe, the centre of the Ugandan Nile perch industry, to Amsterdam – KLM- might reduce costs of shipment, guarantee a better quality and overcome the well known logistics bottlenecks in Nile perch shipments to Europe. It is already a difficult moment for Nile perch in the European market. The consumer is well acquainted and likes Nile perch fillets, but price considerations, especially in price conscious markets such as Austria and Germany, might turn interest to the cheaper basa catfish from Viet Nam. Possible measures to counteract this include more value addition at the processing plants and promotional campaigns to show the quality and taste advantages of Nile perch when compared to the competitors from aquaculture. The high fat content of Nile perch and its beneficial effects for human health are an additional promotional message which Uganda and the entire East Africa should convey to the EU and other consumers. The projections made on the increase in fish export volumes, revenues and employment largely assumes that the current zero tariff advantage for fish entering the EU market will remain. However, if this tariff preference is eroded by reduced tariffs for non-ACP producers, then this will lead to an increase in EU imports of lower priced competitive products such as catfish from Vietnam, thus further intensifying competition for Nile perch. Nile perch is also perceived as white fish substitute for sea fish particularly North Atlantic cod and also competes with New Zealand Kopi in the European market. This means that Nile perch is currently going into the market directly against cod, which fetches relatively lower prices in the same market. Thus, any distortions of markets through tariff reductions and the erosion of preferential treatment will create market problems for Nile perch. As regards Nile tilapia, Uganda, Kenya and Tanzania are most likely the only exporters to the EU but this too has close substitutes such as the cod. The introduction of GSP therefore can render the fish prices in Europe and other markets to drop to some levels rendering exports uncompetitive. In general, tariff reduction for countries currently not benefiting from zero tariff structures will increase the amount of fish of the same category entering the market. Thus, if developing countries like Uganda lose this preferential treatment it could have a significant impact on all the stakeholders along the entire market chain with resultant negative implications for Uganda’s fish trade. Factories in Uganda, as well as Kenya and Tanzania, are likely to scale down their level of operations to accommodate price reductions leading to job losses estimated in the range of 30-50% of current levels. Lower prices in consumer markets will be translated into lower prices of Nile perch to fishermen, thereby reducing income levels and increasing poverty levels in fishing

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communities. Ugandans involved in the sale of by-products from processing will be affected by reduced scale of production. If production and the landed catch do remain constant, there will be increased fish available for local processing and consumption at relatively lower prices because of less competition from export sales. This could benefit some consumers. The reduced amount of fish exported as a result of plants scaling down production will further reduce the amount of foreign exchange earned and increase exchange rate instability, which in turn will negatively affect macroeconomic stability. Investment in the fisheries sector will be affected. However, the Ugandan government and the private sector are aware of the dependence on Nile perch exports and are planning to collaborate on diversifying fish production and exports away from reliance on Nile perch and to as lesser extend Nile tilapia. The private sector competitive plan lists key targets for increased volumes of fish traded in Uganda, which it is anticipated will facilitate increased competitiveness of the private sector. The targets include: increase the volume of marketed fish through commercialising aquaculture (thereby increasing employment as well); reducing the leakages of fish through Kenya by at least 10% and reducing post-harvest losses from the current 20% of the landed catch to an estimated 5%. Other major plans for expanding fish exports and competitiveness include improvements in the mechanisms and complexities surrounding air transport. There are reduced cargo flights to and from Uganda. Currently five (5) registered cargo carriers are operating from Entebbe but only three – Mike Krugar Airlines (MKA), Das Air Services (DAS) and Avent (SMJ) – take cargo in and out of Entebbe international airport. The other two Martin Air and Air France only deliver cargo. Cargo destinations are also likely to change. There are plans underway for a weekly cargo flight that will run from Nairobi through Entebbe to Miami and Florida in the USA. Availability of such flights could have a major positive impact on the fishing industry especially now that tilapia imports in the USA continue to increase as the market expands. Transport costs will be reduced as inbound cargo flights increase, thus raising demand for outgoing cargo.

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5. Sustainability Impact Assessment (SIA) of longer-term effects

The fishing industry in Uganda employs approximately 300,000 people directly and over 1.2 million people’s livelihoods are derived from fishing and fishing activities. The longer term positive impacts of trade liberalisation should enhance the livelihoods of many Ugandans but the negative impacts will largely erode the livelihoods of these fish dependent groups. This will most likely affect those in the commercially exploited species of Nile perch and Nile tilapia. The likely effects of tariff and non-tariff changes on the sector are discussed below.

5.1 Tariff measures The current fish export values of US$143 million in 2005 with projections of up to US$300 million in 2010 largely assumes that the zero tariff preference will continue to be enjoyed and probably that fish products of many countries outside ACP will continue having no preference to their fish products in the EU and other markets. These assumptions pose a danger for Ugandan fish products since the adoption of DDA tariff reduction proposals could benefit non-ACP countries trading in fish and fish products. Several non-ACP countries producing and exporting fish products would pose stiff competition to Uganda. Thus New Zealand, Vietnam and others could flood the market with catfish, and Kopi putting downward pressure on Nile perch prices. Phillip Borel of Greenfields (U) Ltd exporting fish to the EU and USA indicated that a kilo of Ugandan Nile perch fillet is on average 3-times higher than Kopi c.i.f. USA and 2 times higher c.i.f. EU. With tariff reduction to 10% (proposed under the tariff reduction) fish imports from New Zealand, will more than likely, make Kopi prices even lower than Nile perch. Estimates suggest that this is likely to reduce Ugandan fish exports by about 20% and the resultant reductions in Ugandan jobs, employment, earnings and livelihoods could be even bigger than and as high as 50%. In addition, this will affect the foreign exchange market with resultant macro economic effects.

5.2 Non-tariff Measures Non-tariff measures continue to be a factor in international trade. However as indicated in earlier sections, the EU export bans in the late 1990s led Uganda to embark on strengthening its competitiveness and institutional structures by working on the sanitary and phytosanitary standards. The effects of the ban resulted into Uganda fish processing firms and government building the capacity of its Competent Authority to check and put in place mechanisms for increasing the quality and safety of fish. As a result, Uganda is now able to respond to concerns of the EU and other markets with regard to Uganda’s fish exports meeting SPS and other quality and safety standards. Any possible collapse of this could erode away the potential to maintain or even increase fish exports.

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5.3 Subsidies The Government of Uganda, as a policy, does not support direct subsidies in general, and in the fisheries sector in particular, as this would increase access, promote over exploitation and would run counter to sustainable fisheries objectives of management. An exception was however made for aquaculture. In a few cases where subsidies to the fisheries sector are provided, they are mainly indirect and include extension, advisory and promotional services, regulatory and enforcement support. These nonetheless remain indirect subsidies. Subsidies to support small scale fishers have a negligible distorting impact on the international fish trade although their removal could cause increased hardship. Removal of the subsidies supporting processing operations would reduce a firm’s ability to compete and could have a similar impact to those of reduced tariffs on competitors’ products. However, it is felt that the subsidy support provided in Uganda is unlikely to be ended under the new trade rules, and therefore, unlikely that the subsidy reduction will affect Uganda’s fishing industry. The reduction/elimination of subsidies in developed countries fishing industries could reduce their competitiveness and possibly enable the Ugandan fishing sector to compete more favourably in international markets. If this were the case then incomes of stakeholders in the sector could rise. Increased income in fishing communities could then facilitated investments in such areas as improved water and sanitation facilities, schools and health centres. Industry might also be encouraged to invest in fish farming and diversification of fish production.

5.4 Longer-term SIA Implications Following the discussions of the short and long term implications, Table 15 analyses the longer-term implications of trade liberalization in economic, social and environmental effects. In each case, the analysis is done on core indicators. Economic impacts are assessed with regard to effects on real income, employment and fixed capital formation. The social effects are analysed based on issues of poverty, health, education and equity. The environmental effects are assessed in terms of natural resource stocks, environmental quality and biodiversity. Table 15: Longer-term SIA implications of fisheries trade liberalisation -

subsidies Sustainability dimension

Core indicators

Second tier indicators

Economic

Real income Employment

• A lowering of import tariffs by 10% as a result of WTO trade measures will reduce Nile perch exports because of increased competition from other substitutes. This means the incomes of fish firms as well as fishermen will be reduced, through reduced prices offered by a few operating firms. Poverty is likely to increase

• Fish processing firms will respond to increased competition by lowering production costs through

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Sustainability dimension

Core indicators

Second tier indicators

Fixed capital formation

reduced employment in factories. This is likely to reduce the total people directly dependent on fisheries by approximately 50% thereby leaving approximately 150,000 from 300,000. The 1.2 million people dependent on fisheries for their livelihoods would also be reduced by about 20%.

• A declaration reducing fishing subsidies is unlikely to be effected in Uganda. As indicated, mainly indirect subsidies exist in Uganda. The ending/reduction of subsidies to non-ACP firm’s and EU countries could to some extent reduce these firm’s competitiveness and thus increase the Nile perch’s competitive advantage.

• The impact of tariff reductions and the erosion of subsidies could affect fixed capital formation by reducing a firm’s income and its capital stock.

• If the proposed cess of 2% on the fob value of fish exports proposed by government were adopted, in the short run this could reduce competitiveness and factory owners may resort to scaling down the labour force. The cess could be interpreted as dropping tax waiver subsidies to export companies and ending the government’s support of fisheries management costs. Reduction of export support for fish processing plants would in the short run reduce competitiveness of factory owners but in long run increase the availability of raw Nile perch. Employment would reduce by about 30% on both processing firms and fishing sector.

Social

Poverty Health and education Equity

• The loss of employment for fishermen and factory employees, including women would increase poverty levels and indebtedness.

• Increased fish availability arising from reduced exports could push down local prices to the benefit of consumers and in the short term could improve nutritional security. However, lower incomes for those directly affected could reduce fish consumption and is likely to increase malnutrition as a result of lack of fish protein thus causing human health problems.

• In terms of health and nutrition per capita fish consumption would reduce from the current 15kg per person per year to about 7kg/person/yr.

• Social security nets could be weakened thus reducing the capacity to support the poor in their efforts to cope with and recover from the changes.

Environmental

Natural resource stocks Environmental quality

• The reduction of government support to the fishing industry would have adverse effects on resource stocks. Although the stocks are not currently properly estimated, reduction of support could hamper the determination of existing fish stocks because the costs

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Sustainability dimension

Core indicators

Second tier indicators

Biodiversity

cannot be afforded by fishermen’s revenues. • Reduced markets for fish could assist in the revival of

fish stocks including assisting in the restoration of endangered fish species that have since disappeared from the waters.

Process

Consistency Institutional capacity

• Government’s reduced support to the provision of public support services would reduce the capacity of artisanal fishers to cope with the changes on their own.

• Support will still be required for the Monitoring Control and Surveillance both at sea and on land, in part to enhance fish stocks.

• Similarly support would still be required for the aquaculture sector particularly with regard to small-scale fish farmers.

• The use of charges from the fisheries industry will become important for fisheries management. In part this would erode the notion of government subsidy to the fishing industry.

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6. Prevention, Mitigation and Enhancement Measures There are several possible prevention, mitigation and enhancement measures that could be undertaken.

• Ugandan firms could team up with those from neighbouring countries, e.g. Kenya, to operate on a larger scale and benefit from economies of scale.

• Investments could be made to increase the operational capacity of fish processing

firms. Efforts could be made to reduce production costs in order to offset reduced profit margins. This could necessitate extra capital investment and technological advancement in Uganda’s fish processing, which in the short run will increase costs but in the long term could make companies more competitive internationally.

• Uganda, could team up with other ACP countries that face preference erosion to

negotiate for further preferential treatment and request compensation for the losses resulting from the impact of tariff changes.

• Another strong mitigation measure is the development of alternative markets;

Uganda would need to invest in looking for alternative markets especially in Africa and Asia. Africa’s population is growing at an average of 3-4% per year and is likely to double in the next 20-50 years. This signifies an increased market and calls for reorganisation in the trade arrangements. Existing opportunities for expanding the regional markets such as tapping of the East African market as well as West Africa through East African Community, COMESA, SADAC and ECOWAS countries need to be explored. In addition, collaborative efforts could be made with other developing countries to negotiate for better terms and conditions for placing fish and fish products on the EU and other markets.

• Another interesting option is that of US-Africa trade relations, which works under

the relevant agreement AGOA, which currently covers 37 African countries. AGOA was renewed for the second time (thus, it is presently referred to as AGOA III or ‘AGOA Acceleration Act’) in July 2004. It is supposed to remain in place at least until 2015. In order to qualify for exports to the US under AGOA, Uganda can strengthen and meet specific eligibility requirements. The ROOs for fisheries products in AGOA are not so important in relation to fresh fish and fillet exports, as the Most-Favored- Nation (MFN) tariff rate in the US is zero already in many of these categories. Uganda as well as Kenya, Tanzania and other African countries do not need AGOA to export fishery products with low processing content to the US tariff free. This issue is more relevant for products with higher processing content (such as fish fingers, fish burgers, marinated fillets, etc.), which face higher MFN rates but can be imported tariff free into the US under AGOA.

• Efforts could also be made regarding post-harvest handling to improve both the

fish quality and shelf-life in order to obtain premium prices (e.g. improved

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landing sites and cool chain infrastructure to reduce post-harvest losses). Support to fish landing infrastructure will assist in reducing post harvest losses and thereby increase the availability of fish supplies.

• Development of micro credit schemes and other means of improving access to

credit and finance in fishing communities should be devised in order to reduce poverty levels and increase economic activities.

• There is also need to undertake efforts to diversify away from the dependence on

Nile perch as the dominant export product. In addition, alternative sources of livelihoods need to be developed alongside the capacity building of private sector institutions.

• Rationalisation of fish processing activities could lead to improved capacity

utilisation.

• Improved Monitoring Control and Surveillance and community management to facilitate better resource utilisation.

• Increasing fish production through intensification of fish farming is another

coping mechanism.

• Uganda also needs to invest in capacity building of relevant institutions both to understand the possible implications of the DDA and to develop the ability of coping with possible changes.

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7. Conclusions The importance of the fisheries sector to Uganda cannot be over emphasised. At the same time, it is apparent that the fisheries sector, though artisanal, is likely to be affected by the negotiations and conclusions being reached at the WTO Doha Round. In the interest of fairer trade, the discussions in the area of fisheries have focussed on the elimination of subsidies and tariff reductions. The latter is the issue of most concern to Uganda because its implementation would lead to the erosion of the preferential treatment that fish and fish products from Uganda and other ACP countries enjoy when exporting to the EU. In 2004 73% of Uganda fish exports were to the EU and were predominantly Nile perch. Although trade rules in other markets e.g. USA, Australia and Middle East are coming up, it is the EU’s regulatory requirements that dominate. This means that any expansion of Uganda’s Nile perch and fish trade needs to focus on harmonising Uganda’s fish trading arrangements with EU regulations. Some WTO trade measures, particularly SPS and TBT have already had an impact on Uganda’s fish trade. The EU export bans on fish from Uganda and other countries bordering Lake Victoria had various short and longer term effects. These included job losses, substantial falls in export revenues and adverse effects on the incomes of fish dependent communities. Fish processing firms closed and ceased operations, while others incurred heavy costs on capital investments in order to meet the quality and safety standards required by EU. In the longer term this has enabled fish processing establishments to demonstrate well equipped and well maintained fish quality and sanitary standards as well as the implementation of HACCP and other rules related to fish quality and safety. As a result, Uganda processing firms and other sector stakeholders have benefited from un-interrupted and increasing flows of fish and fish products to the EU and other markets. The long term effects of the fish ban, therefore, have been positive. The coming into effect of the WTO rules especially elimination of subsidies and the potential preferential erosion of ACP producers particularly in the EU market poses a challenge for Uganda’s fish processing and marketing in the new trade era. Nile perch will face further competition from competing products including New Zealand Kopi, Vietnamese cat fish and even Atlantic cod. With tariff reduction, these countries will be able to place their fish products more cheaply on the EU and other markets thus reducing the profits of fish trading and exporting companies in Uganda. The loss of the zero tariff preference could pose major problems for fish processing companies and Uganda’s economy in general. The analysis of possible impacts suggests that Uganda’s fisheries sector is likely to face the following:

• Uganda’s Nile perch exports will become less competitive. • There will be a substantial reduction in profits of Uganda’s fish processing plants

as a result of competitively low prices and low volumes. • The foreign exchange earnings will drop by about 20-30% leading to greater

exchange rate instability.

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• Increased competition will force fish processing plants to attempt to reduce costs by laying off workers and therefore leading to unemployment and increased poverty amongst fishing communities.

As regards the elimination/reduction of subsidies, Ugandan subsidies are not only on a small scale but also are mainly resource enhancement subsidies rather than trade support or distorting subsidies. They include supporting fisheries management and conservation efforts as well as tax waivers and schemes that ensure fish processing plants benefit from zero taxes on capital inputs. Subsidies to support small scale fishers have a negligible distorting impact on the international fish trade although their removal could cause increased hardship. Removal of the subsidies supporting processing operations would reduce a firm’s ability to compete and could have a similar impact to those of reduced tariffs on competitors’ products. However, it is felt that the subsidy support provided in Uganda is unlikely to be ended under the new trade rules, and therefore, unlikely that the subsidy reduction will affect Uganda’s fishing industry. Although WTO regulation aim at increasing and ensuring fairer trade, developing countries stand to loose from some of the outcomes of the trade arrangements while in other cases developing countries stand to gain. Thus, while preference erosion is likely to hurt countries such as Uganda, the elimination of subsidies, particularly in developed countries, could assist firms in developing countries. There are several possible prevention, mitigation and enhancement measures that could be undertaken. For example, Ugandan firms could team up with those from neighbouring countries, e.g. Kenya, to operate on a larger scale and benefit from economies of scale. Investments could be made to increase the operational capacity of fish processing firms. Uganda would also need to invest in looking for alternative markets especially in Africa and Asia. Collaborative efforts could be made with other developing countries to negotiate for better terms and conditions for placing fish and fish products on the EU and other markets. Efforts could also be made regarding post-harvest handling to improve both the fish quality and shelf-life in order to obtain premium prices (e.g. improved landing sites and cool chain infrastructure to reduce post-harvest losses). There is also need to undertake efforts to diversify away from the dependence on Nile perch as the dominant export product. In addition, alternative sources of livelihoods need to be developed alongside the capacity building of private sector institutions. Rationalisation of fish processing activities could lead to improved capacity utilisation. Other mitigating measures include improved Monitoring Control and Surveillance and community management to facilitate better resource utilisation. Increasing fish production through intensification of fish farming is another coping mechanism. Uganda also needs to invest in capacity building of relevant institutions both to understand the possible implications of the DDA and to develop the ability of coping with possible changes. As the WTO trade rules come to effect, Uganda and other African fish trading countries need to look at alternative markets and products. Options include expansion of the regional markets such as trade within the East African countries, within the COMESA region, SADAC and ECOWAS countries as well as the USA through AGOA. Harmonisation of trade rules within these regions should be a priority for these countries to expand and tap the already expanding market. Also this could facilitate an increase in trade in fish and fish products from many African countries to other countries of EU, USA, Australia. Harmonisation of trade arrangements in the region however also calls for

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respecting the WTO rules of elimination of tariffs subsidies. EAC and COMESA have already started working on tariff reduction on certain products originating from, and being sent to, the member countries. This and other such developments need to be scaled up for increased trade in fish and fish products to rest of the world.

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The UNIDO (2003) http://wwwunido.org/userfiles/timminsk/LDC3uganda.pdf downloaded 12/4/04. UBOS (2002 and 2004) Uganda Bureau of Statistics Statistical Abstracts 2001 and 2003, Uganda Government Printers. Uganda Bureau of Statistic (UBOS) (2003): Population and National Housing Census 2002. WAGUDE B. E. A., MBITHI M., (2005). EU SPS Issues in inland fisheries in East and Southern Africa. A paper prepared for fresh water fisheries cluster of the East and Southern Africa Region in preparation for EU-ESA fishery trade negotiations, January 2005. Yaron, G. and Moyini, Y. with Wasike, D., Kabi, M. and Barungi, M. (2003) The role of the environment in increasing growth and reducing poverty in Uganda. GY Associates.