Ugandan gov't to introduce more flower incentives

In the wake of falling flower exports, the Ugandan government has promised incentives to turn around the worrying trend that has seen some farms close down due to financial constraints, while others relocated to neighboring countries.

Over the last 12 years, the flower sector has grown to 22 farms, boosting foreign exchange earnings to over 35 million U.S. dollars in 2005.

However, the introduction of attractive and sustained investment incentives by other countries like Ethiopia, Kenya and Tanzania has created stiff competition and destabilized Uganda's growers.

Kenya, Tanzania and Ethiopia offered a 10 year corporate and withholding tax holiday, long-term finance, exemption from taxes on all inputs like machinery and raw materials.

Flower growers are also exempted from stamp duty, restrictions on management and technical arrangements that limit expatriate positions to those where local skills are not available, and the firms operate under a single license.

Uganda's growers under the Uganda Flower Exporters Association (UFEA) have petitioned President Yoweri Museveni and the finance ministry to guarantee similar conditions or lose new investments to the neighboring countries.

Earlier this year, the government asked UFEA to develop a suitable and attractive incentive package for existing and new investors.

Uganda only offered 50 percent capital allowances on plant and machinery, 25 percent on start-up costs spread over the first four years and 100 percent on training, scientific and mineral exploration expenditure.

This week, President Museveni told the growers during a meeting at State House in Nakasero that the issue was resolved and the government would grant them full incentives by July.

He said some of the incentives have financial implications so they have to be listed in the budget which would come out around mid-June.

The new package is expected to boost the industry's annual earnings by 80 million dollars in two years.

The sector will expand to 600 hectares from 210 by encouraging new investments and more people to invest in high-altitude rose- growing. It will also employ 20,000 people from the current 6,000.

The finance minister, Ezra Suruma, tabled a memorandum about the growers' concerns to cabinet last month, and recommended that a study be made on the incentives in Kenya, Tanzania and Ethiopia.

"It is important to evaluate whether the neighboring countries are offering more incentives and then a rational decision made as to whether the government should attempt to match them," Suruma said.

"The government's role in aiding the sector's growth is by providing a favorable investment climate with incentives through which long-term sustainability of the sector and continued expansion on equal or better terms," said one UFEA member.

The member said there is great potential for success, but breaking through requires close collaboration with the government in attracting new investments.

Uganda's air freight charges are said to be the highest in the region; 2.20 dollars is charged per kilogram compared to Ethiopia's 1.5 dollars and Kenya's 1.75 dollars.

UFEA also wanted the government to provide investors with land free of squatters like Ethiopia as well as build basic infrastructure like roads and airport cold storage facilities, provide utilities like power and water and avail security for property. Source: Xinhua