FDC Uganda Budget

Thank you Mr. Speaker and honorable members for the opportunity to address this August House.

Mr. Speaker it has long been settled that the management of the State is a partnership between the ruling party and those not in government like the Forum for Democratic Change (FDC). The duty of parties not in government is therefore, not only to keep government in check but to also to support good government programs and/or offer alternative policies and programs. In the same vein, the ruling party has a duty not only to hear but also to LISTEN and acknowledge the alternative voice of the other political parties.

Sir, it is therefore, FDC's privilege to present the first response to a budget speech under a multi-party dispensation after 25 years.

The theme of the NRM government's budget is "Enhancing Economic Growth and Household Incomes through increased Poduction and Productivity". Mr. Speaker Sir, in responding to the FY2006/07 budget, emphasis will be made on many of the statements of the Minister as a basis of understanding the direction of his budget. Sir, as we shall point out, many of the figures he presents are contradictory.

r Mr. Speaker, the FY 2006/07 budget speech is structured into two parts. The first part reviews the performance of the economy in the FY2005/06 and the second part presents the proposed policies for income and expenditure. My reply to this budget speech will also follow the same structure. I shall start with the review of the FY2005/06 budget performance.

Sir, we find the Minister's review of the FY 2005/06 is limited in both breadth and depth and conceals the bleak state and performance of the economy. It also leaves numerous questions unanswered, which questions we shall put to the Minister and the NRM government as a whole with the hope of having them answered.

Mr. Speaker and honorable members, in performing our constitutional duty to this nation FDC will use FY 2005/06 as the base year for evaluating the performance of the NRM Party in the next five years. We, therefore, note the information provided as the basis of proposing solutions to the numerous failed promises, policies, plans and programs that have compounded household poverty throughout the country. We will then give alternative policies, programs and budget proposals for redirecting development. We invite the NRM to make use of our popular plans that have endeared FDC to the people of Uganda.



Mr. Speaker, agriculture is the bedrock of Uganda's economy, yet it has consistently been under funded and continues to attract very little government investment. The sector's poor and declining performance is a matter of great concern to FDC.

From the information provided by the Minister of Finance, we note that ;

1. FY2005/06 recorded the lowest annual growth rate since FY 1991/92; down from 35.6% of GDP in FY 2004/05 to 34.0% of GDP in FY 2005/06;



2. An annual decline of 60% in cotton production (from 250,000 bales to 100,000 bales) and earnings is recorded in spite of the Shs. 5 billion invested to enhance productivity in the sub-sector to raise production to 300,000 bales;



3. A decline in tobacco production and earnings is mentioned but not quantified despite the act that a good tax structure was availed to manufacturers of cigarettes; and



4. No significant growth (0.4%, less than half a percentage point!) is recorded from monetary and non-monetary food crops, which constitute two thirds of value added agricultural output.

This dismal performance was recorded against a background of financially supported interventions approved by this house in FY 2005/06. These were nine in total.

1. Mobilization and Support of at least 8,980 Farmer Groups, provision of integrated support to 4,000 farmers groups and provision of farm inputs. May we know from the Hon. Minister, how many groups were supported and where? Of the Shs. 7 billion allocated for integrated support to farmers, how much was disbursed?



2. Rural Micro-Finance Services provision. Can the Hon. Minister inform this house, which micro-finance groups received which support, in which amounts and where?



3. Community Information System provision. In which Parishes was the Minister able to establish the Community Information System? Mr. Speaker, may we also know the status of the livestock and crop stocktaking exercise for which UBOS was allocated Shs. 2 billion?



4. Mr. Speaker, enhancing access to domestic, regional and international markets was another of the strategic interventions through which the Minister identified in the FY 2005/06 for improving agricultural earnings. May we know from the Minister, where the new markets were found and what their value is? May we also know to what extent they indeed have improved our terms of trade and balance of payments in the last financial year?



5. The fifth intervention was delivery of agricultural inputs. Which inputs did the Minister provide in what quantities and where?



6. Agricultural Extension. Where and how was this implemented?



7. Agro-Industrial development through enhanced support to research and development. What research was undertaken, what were the outputs and outcome of this intervention;



8. Extension services through the NAADS roll out program received Shs. 5.5 billion. May we know from the Minister, the return on investment of this money?



9. Mr. Speaker, the Minister also undertook to clear the outstanding arrears of Shs. 4.5 billion to Cotton Seed farmers. May we know the status of this intervention?

Mr. Speaker the control of livestock and animal disease remains a daunting challenge to the country. May we know how far the Minister has implemented strategies to ensure that Uganda's beef and other animal products are internationally certified for export?



Mr. Speaker, all statistics presented by the Minister in the Industry Sector point to a national crisis. For the nation to fully appreciate the calamity of the industrial sector, the Hon. Minister must tell this august house what else is wrong with the sector apart from the 'energy crisis'.

Mr. Speaker, in the FY 2005/06, the Minister announced major interventions to bolster the industry sector as the engine of economic growth. May we now know from the Minister, what value addition in coffee, bananas, gum Arabic and cotton was realized with the Shs. 7.25 billion allocated for this purpose?

The Minister also announced that government would capitalize UDB, which would manage the Innovation and Industrial Fund. Mr. Speaker Sir, may we know from the Minister the status of the Innovation and IndustrialFund. May we also know how the Shs. 2.75 billion allocated for industrial research and the Shs. 2 billion for Jua Kalis (artisans) was utilized?

Mr. Speaker, government allocated Shs. 22 billion to develop a modern, well planned and serviced industrial park at Namanve. May we know from the Minister how this money has been utilized and what achievements have been made, if any?

Mr. Speaker as we wait to hear from the Hon. Minister we note that in spite of the above financial allocations;

1. There was a 60% decline in the rate of growth in the industrial sector in a period of one year;



2. The formal manufacturing sector experienced the sharpest decline in growth in the last year, from 13.5% to -3.5%, from double digit growth to negative;



3. The monetary construction sector has stagnated at an annual growth rate of 10% for the last five consecutive financial years! With the imposition of excise duty on cement, a decline in growth and unemployment in this sub-sector is inevitable yet avoidable with good fiscal policy management.

Mr. Speaker, we in FDC urge government to reduce the cost of construction by abandoning the proposal to increase the cost of cement, steel and other construction materials. It is our belief that Uganda's land locked-ness and lack of railway transport are enough constraints to industrial development without additional taxes.

The absence of a clear Industrial Development Policy has left the sector with no direction. The misguided belief that foreigners will develop our industries must be re-examined. Government should also demonstrate that it is building linkages between industry and agriculture and develop local capacity in small and medium scale enterprises.



Mr. Speaker Sir, domestic savings for investment is a national challenge. The Minister confirms in the budget speech that;

1. The rate of domestic savings is low;



2. The bulk of investment is said to be private of which private construction accounts for the entire rise of 15% realized in the FY 2005/06 from 8.8% in the FY2001/02;



3. Foreign Direct Investment in the last year amounted to only $15m i.e. $1.25million per month!

Mr. Speaker, we in FDC recognize the importance of mobilizing domestic and foreign investment, however, we note with great concern the ad hoc nature of channeling national investment and the diminishing role and effectiveness of the Uganda Investment Authority (UIA) in investment promotion. We demand a national to debate by this National Assembly on the worrying trend of Presidential land donations.

Mr. Speaker Sir, the cost of capital remains a huge disincentive to investment and this is largely due to low domestic saving. This budget proposes nothing substantial to increase domestic savings. Instead, government revenue proposals are set to increase the cost of living and consequently reduce household disposable income which will inevitably leave people with nothing to save.

Sir, when UIA was created it was hoped that it would play the same role that Uganda Development Corporation (UDC) played in investments supported by the Uganda Development Bank (UDB). However, over the years, investment in Uganda has taken the character of allocations without the pre-requisite study of bankable development projects being developed, supported and marketed.

Mr. Speaker, we in FDC wish to advise that the best way out of this vicious circle is to reduce cost of capital by government not participating in borrowing from commercial banks using the Treasury Bills. This can only be attained if government reduces its deficit, by cutting down on expenditure. Government should restrict Commercial Banks from buying Government securities.



Mr. Speaker Sir, the Minister has avoided to address a major problem of trade imbalance. We in FDC want to point out the large and growing Trade imbalance for which the Minister provides no proposals for redress.

Mr. Speaker imports in FY 2005/06 were $1.9 billion, while Exports were $0.8 billion. Consequently, a loss in trade of $1.1billion was registered whose impact on the economy is not acknowledged by the Minister.

Sir, Export-led growth has, for a long time, been the ethos of development in Uganda. However, we note that;

1. Agriculture (coffee, cotton, tobacco and fish) remain the major source of export earnings;



2. The export earnings for the whole year were a miserable $800 million or perhaps to make it sound better, the Hon. Minister records it as $0.8 billion;



3. Mr. Speaker, the contribution of remittances of our people in the Diaspora and their contribution to the economy is not mentioned as source of export earnings for the FY 2005/06 yet it is quite significant;

Mr. Speaker Sir, we in FDC shall expound our Trade policy to balance this trade deficit and improve our balance of payments in due course. However, we believe that creating import substitution incentives and developing our local industries through taxation policies are some of the immediate remedies to this import dependence and the attendant economic costs.

Sir, can the Minister inform the country which strategies he intends to enforce to improve the country's export capacity?



Speaker Sir, the Minister reports that "performance under the monetary program was good" for the second year running!

1. Inflation on average is recorded at 5.3%, slightly higher than the 5.0% target;



2. Imported inflation particularly from petroleum products and the CET for East Africa is not recorded;



3. Bank of Uganda (BOU) is mentioned as having had leverage in sterilizing the economy and immunizing the economy against global inflationary vagaries to a deflationary level of 4.4% from 6.4%. However, the impacts of these interventions on the economy are not recorded;



4. Mr. Speaker, the Uganda shilling is recorded to have experienced depression pressures from the US dollar. The shilling depreciated from 1,738 in June 2005 on the open market to 1,857 in October 2005. It is 1,870 as of June 2006;



5. Sir, the Commercial Banks' weighted average lending rates remain high;



6. Credit to the private sector from the banking system is recorded to have increased by 14.6% structured as follows - Trade & other Services 60%, manufacturing18.5% and Agriculture 10.1%. This clearly shows Agriculture is still worse off;



7. Following the enactment of the Micro finance Deposit-Taking Act 2003, three (3) Micro finance Deposit Taking Institutions (MDIs) were licensed, bringing the total to four (4) recording an increase in credit available for lending.



8. Sir, it is not clear from the Budget Speech when government 'adopted the strategy of supporting member-used and member-owned financial institutions, commonly referred toas Savings and Credit Cooperative Organizations (SACCOs)' (Para. 27) to bolster the level of savings mobilization and investment among the poor and a tool for financial service delivery.



9. The need for medium and long term financing is recognized in Para 28 of the Budget Speech. It is recorded that the NRM government now intends to restructure Uganda Development Bank (UDB) and place an Industrial Fund for private sector development under its charge. We propose that the borrowers' repayments of the European Investment Bank APEX I, II, III and IV in BOU be utilized to constitute the initial capital available for long and medium term development to Ugandan investors.



10. Mr. Speaker, the East African Central Banks have adopted "risk-based supervision to strengthen the financial sector and help mobilize and channel resources to productive sectors" in Para 29. FDC shall continue to monitor this with keen interest;



11. The revenue collection out-turn was 39 billion short of the target in the FY2005/ 06 of 2,281 billion. In spite of this short fall, government sets in FY 2006/2007 to collect Shs. 2,567 billion which is a 16% increment;



12. Shs. 2,685 billion was released to finance the FY 2005/06 budget recording a deficit of Shs. 443 billion. This, according to the Minister, is truly "continued prudent and effective fiscal management" NRM style.(Para. 31).



13. Donor support of Shs. 886 billion constituted 24% of the FY 2005/06 budget through the Poverty Action Fund recording the total budget expenditure of Shs. 3,766 billion;

Mr. Speaker Sir, may we know from the Minister whether the Shs. 5.0 billion allocated for the capitalization of UDB has been achieved and whether the Export Guarantee Facility managed by the Central Bank has now been moved to UDB?



Mr. Speaker, the interest rate and bank charges are high and this is a high cost to investors. The average rate of 25% per annum for lending and banking charges are a discouragement to borrowing.

The government should reduce this rate and bank charges. There is an urgent need for a regulatory body to review the costing of banking charges. Currently, Commercial Banks are making super profits as a result of these high charges



Mr. Speaker Sir, Micro-finance Institutions are lending at a rate of 3%- 6% per month, which translates to 36%-72% per annum. This has only compounded poverty as the poor, who are the target of micro finance intervention, have sold their assets to repay loans.

We, in FDC believe the best way to offer a meaningful boost to agriculture is by establishing an Agricultural Bank to provide farming loans with experts to support small, medium and large scale agricultural enterprises.

We have noted that large resources are allocated in the Ministries for Micro-finance. These should be channelled through banks and not through ministries. The Ministries' mandate does not include banking business.

Mr. Speaker, if government gives loans directly this will destroy the already built loan repayment culture in micro finance sector, as it is now known that government money is for political rewards.

Sir, there is a danger of managing micro finance under an NRM Minister. Not only is it Partisan, its constitutionality is questionable as far as managing public funds is concerned. Mr. Speaker, public funds should be accessed by all tax payers, not just NRM supporters.

Mr. Speaker, the Minister states that line ministries and government departments under performed in producing tax revenue. When did ministries become taxpayers? A clear distinction needs to be made between taxpayers and tax collectors. Government is a consumer of the taxes paid and does not pay any tax. Tax collectors are those who collect tax on behalf of government and cannot be called taxpayers. The Minister should instead provide to this August House a schedule of the big taxpayers and tax collectors.



Mr. Speaker Sir, we in FDC recognize that over 80% of our population is engaged in agriculture. As such land and its usage is a basic source of livelihood. We note with great concern the continuing state of landlessness and its attendant inconveniences to the majority of our people especially in districts like Kibaale, Mayuge and Bugiri. Government's duty to provide for land ownership and protection was long recognized in the 1995 Constitution. The Land Act 1998 enacted by Parliament set up a Land Fund

to support affected communities to gain land rights and resolve historical land distortions.

We note the dismal progress made in implementing the 1995 Constitutional directive with only 16,000 hectares of land allegedly purchased to date in respect of resolving the land ownership and land rights matters. Mr. Speaker Sir, may we know from the Minister where the 16,000 hectares of land were purchased, at what price and how many of our people benefited.

Mr. Speaker, we shall, at the appropriation time move that budget re-allocations be made to bolster the Land Fund as one of the measures of ensuring that our people of Kibaale, Mayuge, Bugiri etc. gain land rights.

Uganda's economy is primarily natural resource-based. The environmental and climatic concerns to sustain the natural resource base are a matter of ongoing interest to FDC. As such, the performance of NEMA, NFA, the Forest Inspection Division and the metrological department, their capability and capacity must be enhanced and supported financially. The Minister should demonstrate the urgent need to linkage of the environmental concerns to development by allocating more resources to environmental conservation. rought as the cause of low power generation and productivity must, therefore be addressed. However, government should have addressed the cause of drought not to treat symptoms. The cause of drought is degraded eco systems and investment should be made in reversing the degraded ecosystems. At an appropriate time, we shall move an allocation for this cause.



Mr. Speaker Sir, Uganda's tourism development potential is recognized by the FDC. The targets set out by the NRM party to increase the number of international tourists are unclear. However, the potential of internal tourism is not acknowledged and, or promoted/supported.

Sir, until the outstanding subscription arrears to the World Tourism Organisations are cleared, the expected contribution that Tourism makes to the economy will remain low. The grading of hotels will also help in improving our international hospitality rating and boost the sector.

Mr. Speaker Sir, in the FY2005/06 international tourists had grown to more than 500,000 annually. May we know from the Minister, what Tourism Infrastructure Development took place for which Shs. 2 billion was allocated in the last financial year?



Mr. Speaker Sir, Uganda's mineral wealth is not yet, optimally exploited to support the country's economic growth.

We note, with great optimism, the hope of Uganda joining the Oil Producing and Exporting Countries (OPEC) with the discovery of commercial petroleum quantities in the Lake Albert region.

Mr. Speaker, with the installation of a Geological Information, Documentation and Environmental system, Uganda's geological map will enable government to assess the mineral potential and exploit it. However, can the Minister tellsus how far have they gone in implementing the Mineral Project?



Mr. Speaker Sir, investment in the road infrastructure has been ongoing. Budgetary provisions of Shs. 526 billion in FY2005/06 were made for the completion of the following roads:

1. Kyegegwa-Kyenjojo (by 30/06/05);



2. Karuma-Olwiyo;



3. Olwiyo-Akwach;



4. Fort Portal-Hima;



5. Kagamba-Rukungiri;



6. Busunju-Kiboga-Hoima; and



7. Jinja-Bugiri

Five roads were to be upgraded from murram to tarmac. They are;

1. Soroti-Dokolo-Lira;



2. Kampala-Gayaza-Zirobwa-Wobulenzi;



3. Matugga-Semuto-Kapeka;



4. Kabale-Kisoro-Bunagana/Kyanika; and



5. Busega-Mityana.

87 National bridges were to be repaired and maintained.

Mr. Speaker , may we know from the Minister where extra resources were obtained to do the additional Kikongoro-Katunguru and Equator Road?

Mr. Speaker, does government intend to construct the same roads in the FY2006/07?



Mr. Speaker, the minister has not informed us on the status of the routes which were operated by Uganda Airways and how much revenue has been generated from them. Sir, may we know how much the country is earning from air transport and the fate of the Uganda Cargo transport plane, the C-130?



Following divestiture of the Uganda Railways Corporation, government undertook to create a holding company to manage infrastructure assets that remained under it after concessioning the national railway. May we know from the Minister, the status of this undertaking?

Mr. Speaker, we in FDC recognize railway transport is one of the cheapest forms of transport for a landlocked country like Uganda. Government and NRM Party do not appear to lay the required priority in improving the nation's competitiveness in this budget.



The privatization and utility reform process has been a national disaster where all public goods and services have been privatized with no consideration received by the public in return. Enterprises have been privatized but the Minister does not spell out how much was from the sale of these enterprises, how much was spent and what is the balance on privatization and utility reform account.

Secondly, there are enterprises that have not yet been fully paid for to date. The debtors list, Mr. Speaker has not been provided for our attention.

Mr. Speaker, the workers of some of the privatized enterprises have never been paid. UTC, Uganda Tea Corporation Kibimba rice scheme and others are some of the pending issues. May we know from the Minister, the fate of the workers' benefits?

We, in FDC demand for a public inquiry of the entire privatization program in this mega scandal.



There is serious need to rectify Universal Primary Education (UPE) shortfalls before implementing USE. It is our belief that government would be wasting resources if the shortcomings of UPE are not corrected before embarking on Universal Secondary Education (USE).

The planning and implementation of USE should be phased. What government is proposing is a small contribution towards secondary education. USE requires that government meet the total cost of secondary education.

Mr. Speaker, we must point out the grave problems that UPE has encountered;

1. Lack of adequate classroom infrastructure;



2. Lack of adequate teaching materials;



3. Lack of effective supervision of schools;



4. Lack of teachers;



5. Low motivation to teachers;



6. Lack of food for pupils; and



7. High drop out rate.

Mr. Speaker, when does government plan to achieve quality UPE? How much does government intend to pay for each USE student? Has government already recruited the 4,863 Primary School teachers proposed in the FY 2005/2006?



Mr. Speaker, Government undertook to build Technical colleges and secondary schools in every Sub-County. May we know from the Minister the progress on this policy?



Mr. Speaker, the health budget is Shs. 282.73billions, 9.7% of the total budget. This gives to every Ugandan Shs. 10,472 ($6) per year. Sir, this does not meet the minimum requirement of the Human Development Index of $34 as contained in the Human Development Report by UNDP.

Mr. Speaker, FDC welcomes government's effort to build Health Units up to Parish level. However, many remain un-operational due to lack of the requisite medical staff, equipment and drugs.

Sir, the Level 1V Health Centers have not been constructed in many Constituencies and even where they have, they face the same constraints as the Parish Health Units.

Mr. Speaker, modern medical practice relies heavily on modern equipment for diagnosis and treatment. The District, Regional and National Referral Hospitals lack the equipment and drugs. At an appropriate time we shall make proposals for setting new standards for these referral hospitals.

Sir, we note with regret that the NRM government has failed to recruit the 2,000 health workers proposed in the FY2005/06. The high turn over of medical staff must also be addressed.

1. The remuneration of Medical Staff be increased;



2. All Medical Staff be exempted from PAYE;



3. A Hire Purchase Scheme for tax free cars be established for Medical Doctors;



4. Decent accommodation for Medical staff within the vicinity of Hospitals should be provided.

Sir, as a first hand measure, Kitante Courts should immediately be renovated and returned to Mulago Hospital in order to ease accommodation for Junior Doctors. Mr. Speaker and honorable members, FDC notes with great concern that the NRM government, due to corruption and mismanagement of the health sector has facilitated the increase in HIV/AIDS prevalence from 6.1% to 7.1%. FDC calls upon the NRM government to scale up interventions to reduce the prevalence and also ensure that the process is free of corruption and incompetence.



Mr. Speaker, we note that;

1. National safe water coverage average of 63% is still low and a matter of grave concern to FDC.



2. Safe water coverage in most parts in the districts like Mayuge, Bugiri, Iganga, Sembabule, Yumbe, Kyenjojo, Kalangala, Kotido, Nakasongola and Pader are as low as 25%;

We in FDC propose that a special program to bring the level of underserved areas to the national average of 63% be in place this Financial Year. We shall at an appropriate time move a motion for re-allocation of budgetary resources for the said purpose.



Mr. Speaker and honorable members, the revised revenue and expenditure estimates presented to this August House and the nation on the 15th day of June, 2006 is premised on the NRM Party Manifesto 2006 theme of 'Bona Bagagawale - Prosperity for all'. The resource envelope available is estimated at Shs. 4,255 billion of which 59% will be from internal revenue collections and 41% from donor support.

Mr. Speaker, nine (9) sectors have been pointed out for strategic priority expenditure in their order of priority as follows;

1. Investment in the energy sector;



2. Rural Development and Support to the Urban Poor;



3. Rehabilitation and Reconstruction of Northern Uganda;



4. Industrial Development;



5. Support to Scientists;



6. Development and Maintenance of Transport infrastructure;



7. Defense and National Security;



8. Justice, Law and Order; and



9. Investment in Social Sectors.

Sir, as we all know, a budget is a set of priorities supported by resource allocation. I shall now quickly proceed to look at government's stated priorities and their respective allocations.



Mr. Speaker, the first thing a nation faced with any crisis must do, is to be honest with itself. The Minister has failed to face this challenge squarely. Sir, the energy shortfall is estimated to be 800MW and not 200MW as stated by the Minister.

The Minister has attributed the energy crisis to drought and fast economic growth. For a Minister who has been working for the growth of the economy to turn around and blame the present energy crisis on economic growth is day light admission of failure to plan, to say the least.

Mr. Speaker Sir, if the National Planning Authority (NPA) was allowed and facilitated by the NRM government to provide comprehensive plans for this nation, these glaring failures would have been avoided. We in FDC propose that the Government of Uganda (GOU) should follow a module of a 25-year development plan divided into 5-year plans with targets.

Mr. Speaker and Honorable members, in FY2006/07, the Minister is proposing to allocate Ush. 99 billion to the Energy Fund for dam construction. Mr. Speaker, how can we believe the Minister this time round when in FY2005/06 Shs. 20 billion was allocated to start an Energy Equity Fund for the same purpose and no such Fund was ever created? What is the status of the initial Shs. 20 billion?

Mr. Speaker, in FY2006/07 the Minister is further proposing to allocate Shs. 70 billion to procure 100MW of thermal energy. Sir, in FY2005/06, the Minister procured 50MW of thermal energy at Shs. 22 billion. We know that if the NRM party had the people of Uganda at heart, Ugandans would get at least 160MW of thermal power with Shs. 70 billion. We in FDC challenge the NRM government to deliver 160MW instead of 100MW with Shs 70 billion.

Mr. Speaker Sir, government must not be allowed to defer loan payments by electricity generation, transmission and distribution Companies as the Minister proposes. These companies are collecting revenue and making profits. Instead, this revenue of Shs. 33 billion should be utilized to procure an additional 75MW of thermal power. Ultimately, the financial prudence that FDC is proposing to government within the resource envelop of Shs.103 billion will reduce the energy crisis by 235MW immediately.

Mr. Speaker, in FY2005/06, the Minister allocated Shs. 20 billion for extension of electricity to 16 district headquarters and the completion of rural power projects. May we know the progress of this intervention?



Mr. Speaker, the assertion that 'rural development remains a central tenet of government's socio-economic development strategy' is not supported by the requisite resource allocation to turn round the low production and productivity of rural households.

Sir, how can rural development be a central tenet of socio-economic development when only 0.58% of all local revenue is allocated to Agriculture, 1.0% to Water and Environment, 1.6% to Health while 13% is allocated to Defense and 0.72% is allocated to Internal Security Organization (ISO).

At an appropriate time we shall propose budgetary re-allocations as a measure of channeling more resources to Agriculture, Health, Water and Environment. Sir, as a first step measure to increase household production, productivity and food security the NRM government should implement the FDC plan to provide two hand hoes to every household in this Financial Year.

Mr. Speaker, the Minister is proposing to support approximately 39,000 farmers groups this Financial Year. This, he says, will raise the number of farmers groups supported from 20,000 supported in FY2005/06. Sir, how was he able to support 20,000 farmers groups when his target in FY2005/06 was 8,980? What the Minister is telling this august house is far from the truth.

Mr. Speaker, we wish to point out some serious Administrative and Policy clash, which, if un-resolved will undermine the potential benefits of the cooperative spirit that government intends to promote as a tool for rural development. Sir, instead of supporting the Department of Cooperatives which already has expertise at both national and district levels, the NRM government has chosen to establish a new disbursement mechanism under the Ministry of Finance headed by a State Minister in charge of Micro-Finance. It is a known fact that the function of 'initiating, coordinating, supporting, overseeing, and facilitating implementation of strategies and programs aimed at enhancing the development of cooperatives' is placed under the Ministry of Tourism, Trade, and Industry.

We in FDC propose that the mandate of the Minister of State in charge of Micro Finance be transferred to the Department of Cooperatives under the supervision of a Minister of State in charge of Cooperatives.



Mr. Speaker, Northern Uganda. We note with appreciation the improving security situation in the North and North Eastern parts of Uganda and government's efforts to develop a Northern Uganda Recovery and Development Plan. We are also glad that the NRM government has agreed with FDC, DP, CP, UPC, JEEMA, TFM, NGOs, all religious institutions and indeed the people of Uganda that the Northern Uganda crisis that has lasted for two decades can only be resolved sustainably through peaceful means. We, therefore call upon the NRM as a party in government to involve the other political parties and other stakeholders in healing the nation by establishing a Truth and Reconciliation Commission.

Mr. Speaker, we are greatly concerned about the ad hoc nature of decongesting the Internally Displaced People's camps that government embarked on soon after the election. We urge government to consult widely as they arrange to rehabilitate and reconstruct the lives and livelihoods of the affected people, communities and their leaders.

Sir, effective recovery, reconstruction and development of Northern Uganda would require not less than one trillion shillings over a five-year period or Shs. 200 billion per year. The Shs. 18 billion that government is allocating for settling internally displaced persons, post conflict recovery and development of Northern Uganda is just a drop in the ocean that will have no meaningful impact on the lives of our people in the North and North Eastern Uganda.

We shall at an appropriate time move to cause a re-allocation of resources in order to increase Government of Uganda contribution to the resettlement of internally displaced persons, post-conflict recovery and development of Northern Uganda.



Mr. Speaker, since FY2002/03, government has been promising to establish Export Processing Zones (EPZs). A similar promise in this year's budget is one of those tasteless songs to the ears of anyone interested in the faster industrial development of Uganda.

Mr. Speaker, the proposed Sh. 5 billion for Namanve Industrial Park would yield more value if it were invested in Jinja, Tororo and Mbale, which already have serviced land for industrial use. This would also help to decongest Kampala. Jinja, Tororo and Mbale are already well linked with a railway network and their eastward location and proximity to HEP sources would ensure the competitiveness of Uganda's exports that the Minister emphasizes in his budget speech. FDC, therefore, proposes that the National Industrial Policy fast tracks industrial development in Jinja, Tororo, Mbale, Lira, Arua, Kasese and Gulu for balanced development.

Mr. Speaker, we appreciate the important role that quality assurance and certification play in promoting the growth of the economy and the great contribution the Uganda National Bureau of Standards (UNBS) plays in enhancing standards. However, the FDC notes with great concern that in FY2005/06 no allocation was made to UNBS in spite of the Minister's announcement in the budget speech that he had 'allocated' Shs. 2.3 billion for the same purpose he is stating today i.e. 'to enhance quality assurance, product certification, laboratory testing and consistency with regional and international standards'. May we know from the Minister how and where he spent the Shs. 2.3 billion?



Mr. Speaker and honorable members, the one product where Uganda has a competitive edge is coffee. Therefore, investment in research and development for now should emphasize coffee. FDC, notes with great concern that Shs. 8 billion that the Minister is providing to scientists to undertake research and innovation related to our production processes will be spent on banana development, fruit juice processing and malaria research with nothing to coffee.

Sir, FDC proposes that an additional Shs. 10 billion be made available for product development research particularly for coffee. It is shameful for a country that has grown and exported coffee for a whole century to start processing its instant coffee from a neighboring country.



Mr. Speaker, the slow pace of implementing the Ten Year Road Development Plan leaves FDC doubtful about the NRM government's commitment to developing road infrastructure in this country. We are particularly concerned about the following;

1. The failure to complete the Jinja-Bugiri road which is central to the Northern Transport Corridor;



2. The failure to ensure quality road design and works;



3. The abandonment of the Kabale-Kisoro-Bunagana/Kyanika Road construction; and



4. The continued postponement of constructing the Kampala-Kapeka-Ziroobwe-Wobulenzi Road, Matugga-Ssemuto-Kapeka Road and Soroti-Dokolo-Lira Road.

Sir, we therefore call upon the NRM government to:

1. Resume, without further delay, the construction of the Bugiri-Jinja Road;



2. Strengthen the supervision and quality assurance mechanism and also free public works procurement and implementation of undue political interference which has made the construction costs highest in the East African Region; and



3. Construction of the Kabale-Kisoro-Bunagana/Kyanika Road and Soroti-Dokolo-Lira Road should commence immediately.

Mr. Speaker, we in FDC propose that all revenue generated from Road License Fees, Motor Vehicle Transfer Fees, Driving Permit Fees should be allocated and 'ring fenced' for maintenance of the road network of Kampala City and the eight Municipalities i.e. Entebbe, Fort Portal, Gulu, Jinja, Kabale, Lira, Masaka, Mbale, Mbarara, Moroto, Soroti and Tororo. Mr. Speaker, government should get serious with enforcing traffic regulations in respect of axle weights compliance. This will not only save lives, it will also increase the life of our roads.

Mr. Speaker, the role of rail transport to a land locked country does not need emphasis to any development economist. As you all know, the present railway network started in1896. It is now over 100 years old. Sir, it is regrettable that in the twenty years of the NRM, Ugandans have witnessed the near demise of the entire railway network. Kampala-Kasese Line, Busoga Line and the Mbale-Soroti-Gulu- Pakwach Line were closed and vandalized. No passenger service exists. What remains of Uganda Railways is a mere 5km stretch between Railway Head Office in Kampala and Port Bell.

Mr. Speaker Sir, even under Idi Amin when nothing was ordinarily expected to work, Uganda Railways was working several times better than now. This has left the country with no option but to concession the operations of our railway to a 'foreign' company.

Sir, we note that the concession company is expected to invest $ 18 million in the rehabilitation of the existing railway infrastructure. However, to ensure effective public oversight, the Minister should provide to this National Assembly and Ugandans the agreed Investment Plan.

Mr. Speaker Sir, the FDC government would have embarked on reviving and upgrading the old railway line and linked Uganda to her neighbors from Gulu to Nimule and Arua to Kaya on the Sudan border; from Pakwach-Nebbi-Goli, Pakwach-Arua-Odramacaku and Kasese to Mpondwe on the DR Congo border and from Kasese-Katuna on the Rwanda border..



Mr. Speaker, the lack of commitment in developing the professional capability of the army through increasing its capacity in information technology, acquisition of strategic capability and training is exemplified by the way the Ministry of Defense's budget has been allocated. Out of Shs. 354.21 billion only Shs. 11.6 billion has been allocated for Capital Development. A whooping Shs. 338.72 billion (95%) has been allocated for recurrent expenditure.

It is interesting to note that the wage bill of the Ministry of Defense is 33% more than that of the Ministry of Education. Mr Speaker Sir, do we have more soldiers than teachers in this country?

Sir, we have a lot to say about the Ministry of Defense, but in order not to compromise national security, the FDC shall, during consideration of the Policy Statement of the Ministry of Defense move that the house precedes in closed session.



Mr. Speaker Sir, we appreciate government's efforts to improve the delivery of justice to the citizens through construction of Courts, Prisons, Police Stations and staff accommodation for Police and Prison officials. However, we note that the pace of meeting the infrastructural demand for the Courts, Police and Prisons is too slow. The limited number of Judicial Officials, Police and Prisons Officials does not assist the matter. The poor remuneration of these officials also undermines the efficiency and effectiveness of service delivery under the Justice Law and Order Sector (JLOS).

Sir, in order to further improve the delivery of Justice to Ugandans, we in FDC proposes the following;

1. 3,300 Police Officers and Constables should be recruited this Financial Year;



2. The Salary of Police and Prisons Constables should be increased from Shs. 158,784 to Shs. 232,000;



3. Recruit 1,300 Prisons Constables;



4. Recruit 4 Judges for the Court of Appeal to bring the total to 12, recruit 17 Judges for the High Court and bring the total to 50, recruit 48 Chief Magistrates to bring the total to 77 and recruit 44 Grade 1 Magistrates to bring the total to 150; and



5. The remuneration to all Judicial Officers should be reviewed with a view of increasing.

Mr. Speaker, Parliament as has not received adequate resource allocations to make function effectively as the other arm of government. The Chamber of Parliament and the provision of working space (offices) has not received priority in the Minister's budget. For Parliament to perform the oversight role effectively and efficiently, we propose that government provide a budget line for;

1. Construction of the Chamber to accommodate the growing number of MPs; and



2. Rent offices for MPs.

At an appropriate time, Mr. Speaker, we shall move that a re-allocation be effected for this purpose.

Mr. Speaker, we in FDC appreciates government's efforts to meet the Millennium Development Goals (MDGs) through the provision of Universal Primary Education (UPE) and the proposal to introduce Universal Post Primary Education and Training. At the same time we note with great concern, the low quality of education being provided by our Primary Schools. We are particularly concerned that only 19% of the pupils who complete Primary Seven (P.7) attain the required level of proficiency in literacy and numeracy. The high dropout rate of pupils is of equal concern to us. This house should note that out of the 2.1 million pioneer pupils who enrolled less than 300,000 pupils sat for the Primary Leaving Examination (PLE). Equally worrying is the high turnover of Primary School teachers with the attrition rate, according to the Ministry of public service, of 40%.

Sir, one of the major reasons for the high rate of attrition of Primary School Teachers is poor pay and lack of housing.

Mr. Speaker, the success of Universal Secondary Education will rely heavily on the availability of;

1. Secondary Schools in every Sub-County;



2. A minimum of twelve trained teachers per school; and



3. Availability of a library and three laboratories per school.

FDC, therefore, proposes the following:

1. That government grant aids at least 100 Community Schools to meet the immediate demand;



2. Construct three laboratories in at least 300 Grant aided schools since the government has made Science subjects compulsory;



3. Recruit 12,000 teachers to fill the existing vacancies in Secondary Schools;



4. As a measure of promoting public-private partnership in the delivery of education, government should give tax exemption in form of tax holidays to private schools to reduce the cost of education;



5. Government should also pay the salaries of Mathematics, Physics, Chemistry, Biology and English Teachers in rural private Secondary Schools; and



6. Exempt all teachers from PAYE.

Mr. Speaker, we welcome governments proposal to increase the salaries of Primary School teachers. We urge government to raise the minimum salary for teachers to Shs. 250,000.



Mr. Speaker Sir, we highly appreciate the undertaking by government to improve efficiency and effectiveness of delivering public goods and services to our people. It is our hope that the NRM government will go the extra mile to set ethical standards and internal controls to meet the goal of cutting back waste and replication of expenditure.

We in FDC propose the following;

1. Abolish the position of the Resident District Commissioner (RDC);



2. Streamline and reduce Presidential Advisors;



3. Minimize the cost of Travel Abroad;



4. Cut back on 'Capacity Building', i.e. Seminars, which have become a money generating activity for technocrats. Mr. Speaker, we propose that all government meeting, seminars and workshops should be held in government premises. Mr. Speaker, why would Parliament, for instance hold a Workshop in a hotel leaving the Parliamentary Conference Hall or Parliamentary Gardens?



5. Rationalize the use of government vehicles and ban their use after official hours and non - official work e.g. bars, weddings etc.;



6. Provide loans and Hire Purchase facilities to entitled government officials as a way to save money;



7. Review Medical treatment abroad for government officials and provide the same services in our hospitals; and



8. Ensure that the Office of the Prime Minister (OPM) effectively executes its mandate of coordinating, monitoring and evaluating the performance, effectiveness and efficiency of all government departments.

Mr. Speaker, the cleaning up of the pay roll was long over due. We welcome the proposal of holding Accounting Officers responsible for any anomaly found on their respective pay roll.

Sir, we object to the proposal to reduce the non-wage provisions of a department or Local government where pay roll anomalies have been discovered because such action would undermine the delivery of services to our people. For example Mr. Speaker, why should resources allocated for purchase of drugs for Rubuguri Health Centre be reduced on account of pay roll anomalies occasioned by a Chief Administrative Officer (CAO) of Kisoro or a Sub-County Chief?



Mr. Speaker Sir, I now turn to the salient tax issues for FY 2006/07.

We welcome the proposal to reduce withholding tax on dividends distributed by companies listed on the Stock Exchange. However, we propose that the reduction should be from 15% to 5%. This measure will harmonize the withholding tax rates on dividends with Kenya and Tanzania and also promote savings and investments.

Again Mr. Speaker, the FY 2006/07 budget is proving that the NRM government is a government of the common man only in words, not in actions. It is only the NRM that can propose to exempt Value Added Tax (VAT) on Liquid Petrol Gas (LPG) to increase its affordability as an alternative source of energy and ignore Kerosene, which is largely used by the rural and urban poor.

The FDC, which is truly a party of the common man, is therefore proposing that Kerosene be exempted from tax. Mr. Speaker, at an appropriate time we shall be moving amendments to the Finance Act 2005 to remove this ad volerem tax.

Mr. Speaker Sir, the Minister is proposing the widening of the scope of withholding tax agents to include petroleum, telecommunication, banks, construction, insurance, beer manufacturers and soft drinks bottlers. The cascading effect of this measure will ultimately increase consumer prices of goods and services in an economy already chocking with high prices due to the energy crisis. Secondly, the measure holds up working capital in an economy characterized by prohibitive interest rates.

Sir, FDC strongly objects to the proposed expansion of withholding tax agents and at an appropriate time we shall move to ensure that the Minister's proposal to widen the withholding agents is shelved.

Mr. Speaker, we support the Minister's proposal to introduce withholding tax of 15% on gross interest received from purchases of government securities.

Mr. Speaker, the proposal to increase duty on non-malt beer from 20% to 30% is openly at variance with the theme of this budget of 'Enhancing economic growth and household income through increased production and productivity'. If implemented, demand for beer made out of sorghum, which is locally grown, will fall and consequently demand for sorghum as a raw material for making Senator and Eagle Lager fall. The final outcome of this measure will be a increase in un-employment, a decline in household incomes and an increase in poverty in the sorghum growing areas of Uganda - Kigezi and Teso.

Mr. Speaker, we recognize the Minister's effort to promote a clean environment through fiscal measures. Sir, we welcome the 10% Environmental Levy on vehicles ages 8 years and above but object to the exemption of some vehicles at the discretion of URA officials. This exception will open a window for corruption and undermine the objective of this measure. Mr. Speaker, fiscal measures to discourage the importation and dumping of used vehicles should go hand in hand with measures that encourage the importation of new vehicles. At an appropriate time we shall move that taxes on new vehicles be reduced. Mr. Speaker, from our point of view, corresponding fiscal measures should apply to all new and used appliances.

Mr. Speaker, Traffic Fees and Licenses are already high, encouraging evasion and are causing government loss of revenue. We note that this item has been a target for increment every year and as such, is already over taxed. As a measure of reducing the tax burden and regaining revenue lost because of evasion, FDC proposes that Traffic and License

fees be reduced by 20%. An amnesty to all vehicles in arrears up June 31st 2006 should be granted. This amnesty should be effected within three month of passing of the budget.

Overall, FDC stands for low, fair and equitable taxation, prudent tax administration and efficient monetary and fiscal management.

Mr. Speaker and honorable members, I thank you for your kind attention.







One Uganda, One People,
For God and My Country.





NATHAN NANDALA-MAFABI, MP

Najjanankumbi, Kampala