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Ugandan businesses set to tap trade opportunities under India’s duty-free scheme for LDCs

24 February 2015
ITC News

Exporters in Uganda are equipped with the skills to increase trade with India following training on duty-free market access for exports, led by the International Trade Centre (ITC).

Business and government representatives gathered for a meeting on ‘Taking advantage of Trading Preferences to India’, jointly organized by ITC and the Uganda National Chamber of Commerce and Industry (UNCCI) in Kampala on 24 February. The workshop was planned as part of the Supporting Indian Trade and Investment for Africa (SITA) project, funded by the United Kingdom of Great Britain and Northern Ireland’s Department for International Development.

Uganda is a beneficiary of the Government of India’s Duty Free Tariff Preference (DFTP) Scheme. The scheme offers duty-free market access to exports from least developed countries on 98% of Indian tariff lines – including products of direct interest to Ugandan exporters.

Despite a long history of economic relations between the two countries, India remains an insignificant destination for Uganda’s exports, absorbing less than 1% of the country’s total exports in 2012. The Indian DFTP can be a game-changer, offering Ugandan exporters a competitive edge in accessing the Indian market.

During the meeting, participants pinpointed key needs, including raising awareness of the DFTP Scheme, addressing trade obstacles, increasing investment and building supply-side capacity.

Raising exporters’ awareness Martin Okumu, the Head of Communications at UNCCI, said there is little awareness of the DFTP Scheme among Ugandan exporters. Supply-side factors – such as production, storage and transport – also undermine Uganda’s export competitiveness.

Adam Zuku, the Director of Industry Development at the Tanzania Chamber of Commerce, Industry and Agriculture, said his country’s recent efforts to raise awareness in the business community have led to many more exporters using the DFTP and increased trade with India.

Awareness raising of the DFTP Scheme is also needed among India’s private sector, according to Pranav Kumar, the Head of International Policy and Trade at the Confederation of Indian Industry. Kumar also said that Indian private companies need to better understand how to source products from trading partners that are less familiar to them.

Investing in skills, technology With the growing emphasis of the Government of India on manufacturing, the demand for intermediate products by Indian companies is likely to increase. Uganda and other African countries can take this opportunity to connect to Indian manufacturing value chains, particularly in areas supported by investors.

India has emerged as a major investor in Uganda in a variety of sectors, including agriculture, finance and insurance, information and communications technology, and manufacturing.

Stakeholders at the meeting said the recent rise in Indian investment would generate little spillover to the local economy if technology and skills were not transferred. Further technical assistance from the Government of India is required for the scheme to succeed.

Addressing trade obstacles ITC surveys presented at a December meeting in Addis Ababa showed that the SITA East African countries – Ethiopia, Kenya, Rwanda, Uganda and the United Republic of Tanzania – face major problems with non-tariff measures and procedural obstacles, especially when it comes to licensing, permits to export, inspections, certificates and taxes.

Obstacles affecting trade from the Indian side include conformity assessment, rules of origin and pre-shipment inspections.

Participants recommended ways to reduce incidences of procedural and regulatory obstacles to trade: the government and business community should work together to raise awareness and uptake of the DFTP Scheme by exporters; identify key areas of intervention for Uganda to increase exports; and support production capacity, value addition, storage, transport and trade facilitation.

Looking ahead These recommendations are in line with the goal of the SITA project (2014-2020), which is for enterprises to enhance their competitiveness to produce goods that match overseas market requirements in India and beyond, said Andrew Huelin, ITC representative at the meeting.

Indian businesses will partner by providing technology, skills know-how and investment to build the capacity of exporters in the SITA countries for value-added production in priority sectors, such as cotton, coffee and business process outsourcing.