The National Environment Management AuthorityEconomic Policy Research Centre

INTRODUCTION - PURPOSE OF STUDY Objectives: contribute to the understanding of the critical inter-

linkages/interdependencies between economic growth, the environment and social development.

 Strengthening the analytical and technical capacity of Uganda’s negotiators (e.g. Ministry of Trade, Tourism and Industry (MTTI), The Inter-Institutional Trade Committee (IITC), Parliamentarians, etc ) to integrate the sustainable management of biodiversity and other natural resources in their negotiation and implementation of the EU-ACP Economic Partnership Agreement;

Enhancing stakeholder engagement in assessment and policy-making processes relating to both CBD implementation and the EU-ACP EPAs;

Enhancing the capacity of government policy-makers and private sector decision-makers, as well as civil society, to develop and implement integrated national responses to the outcomes from the assessments to enhance any positive effects and mitigate any negative effects;

Supporting the implementation of the Convention on Biological Diversity (CBD) and the National Biodiversity Strategy and Action Plan (NBSAP) through increased understanding of factors that lead to a loss in biodiversity and protection of biodiversity associated with trade-related policies;

The EAC-EC EPA- what are the issues?The East African Community (EAC) including Uganda signed

an Interim Economic Partnership Agreement (EPA) with the European Union (EU) in November 2007. The EAC will be signing a Comprehensive EPA with the EU by July 2009. The issues under negotiation are:

Address supply side constraints; & policy and regulatory reforms;

agriculture; & private sector development; EPA adjustment costs; & SPS, NTB and TBT; Private Sector Development; & Trade in services; Trade facilitation in the EAC; & Trade Development; Capacity building; & Financial instruments; Trade related issues;Fisheries; and Natural resources and environment

Why Biodiversity?

• The contribution of Uganda’s biodiversity resources including genetic resources, organisms to the national economy is about US$ 1 billion per year (Emerton & Muramira, 1999). Of the total amount, direct benefits were 41.15%, while indirect benefits constituted the remainder at 58.85% million.

• Common livelihoods enterprises that rely on local biodiversity:

• Agriculture and livestock production (vegetables, cereals, fruits, silk, cut flowers, herbs, cattle, sheep, goats, chicken, and pigs).

• Tourism & eco-tourism (hotels, resorts, guest houses, tour operators, handicrafts, restaurants, bars, campsites).

• Wild products (live animals, bird and fish trade etc.)• Agro-forestry and forestry products (coffee, cocoa,

medicinal plants, timber, spices, fruit and fuel wood)

The Economy and TradeUganda produces 11.1 million tonnes of FFV, the

second largest in South Saharan Africa after Nigeria and among the top 10 in the world.

 The first rose farms in Uganda were planted in 1992 and since then, the countries flower industry has grown gradually. The average exports of flowers increased from 9.72 million US dollars in 1998 to 24.45 million US dollars in 2005.Before declining to 21.Roses represent 70% chrysanthemums 25% and 5% potted plants of Uganda’s flower production. About 95% exported,5% sold on local market or thrown away

UGANDA EXPORTS OF FRESH FRUITS & VEGETABLES (FFV) 2004-2006

Value ( US$ ‘000) Exports to the EU-27

Average2004-2006

Average annual exports 2004-2006

(‘000 US$)

Share of EU-27 in ’s total FFV exports to the world (%)

FFV 11,143 3,067 27.5Vegetables 9,518 2,055 21.6

Beans 5,949 25 0.4Mixtures of Vegetables

1,664 1,596 95.9

Peas 1,181 9 0.1Other vegetables

358 350 97.9

Other 366 82 22.5Fruit 1,625 1,012 62.3

Banana 594 345 58.0Other Fruit 454 370 81.6

EXPORTS OF FLOWERS FROM UGANDA 1998-2005

1998 1999 2000 2001 2002 2003 2004 2005Volume (metric tonnes

Cuttings 224 352 430 641 795 874 1104 1219

Roses 1541 2000 2594 3069 3820 4424 5380 6344

Total value (US$)

9.72 14.46 14.61 15.90 21.13 26.53 31.92 34.45

CONCEPTUAL FRAMEWORK PART I

Main stresses on Biodiversity

Pollution and waste Resource Depletion Habitat Destruction & Transformation

Stress on Biodiversity

CONCEPTUAL FRAMEWORK PART IIPolicy effects of trade on Biodiversity

Policies encouraging development in trade in intensive sectors

Competitiveness Pressure Related to globalisation of trade and investment

Trade rules – based restrictions Obligations under international trade agreements

Policy changes changed domestic policies (especially environmental) with impacts on biodiversity

Biodiversity Impacts From pollution and waste habitat degradation/ transformation, and resource use

METHODOLOGY

Overall framework:

i. identifying the criteria relevant to the main issues identified, developing economic, social and environmental indicators;

ii. determining the baseline of the integrated assessment;

iii. identifying policy options including the most likely scenarios to be reviewed; and

iv. conducting the analysis .

METHODOLOGY

Data collection methods:(i)Literature review;(ii)Stakeholder meetings, consultations and

discussions;(iii)Reviews with the PSC

Analytical Approaches(i)Scenario building approach;(ii)Simple regressions; and(iii)Root cause analyses

INDICATORS USED FOR THE ASSESSMENT

ECONOMIC INDICATORS• Imports from the EU (‘000 US$)• Exports to the EU (‘000 US$)• Trade balance with the EU (‘000 US$)• Flowers exports (‘000 US$)• Fruits and vegetables exports (‘000 US$)

SOCIAL INDICATORS• Number of women in employment

• Number of days absent from work due to occupational health reasons

• Number of children employed• Average wages per annum

Biodiversity & Env IndicatorsBiodiversity IndicatorsRates of biodiversity loss (%)Rate of land conversionEnvironmental IndicatorsVolume of water litres/ tonne of flowers

exported (litres/tonne of flowers exported/day of the season)

Energy use (Kwhs/ tonne of flowers exported)Agrochemicals use (kg/tonne of flowers

exported)

ASSESSMENT: SCENARIOS

Business As Usual scenario – akin of a status quo.

Exponential Trade Growth scenario sets out an exponential growth scenario 39% to 80% to match its competitors by 2025 -the aim is to raise the contribution of trade to GDP from the current levels of 39.9% to 80% by 2025 in line with Uganda’s comparators.

Balancing Trade scenario targets a trade balance with the EU where the value of the exports is equivalent to the imports from the EU, by 2025.

ASSUMPTIONSThe rate of growth of exports is constant for the

projection period of 2008 to 2025.. The price all horticultural products is constant

throughout the projection period, i.e. the real values of the prices remain unchanged in spite of the monetary changes envisaged

 The average rate of growth of exports to the EU is equivalent to the average growth rate of agricultural exports to the EU. Similarly, the rate of growth of Uganda’s flower exports is equivalent to the rate of growth of Uganda’s flower exports to the EU.

  

ASSUMPTIONS-continuedThe rate of biodiversity loss is directly

proportional to the rate of change of land use Flower firms generally use a lot of fertilizers,

herbicides and pesticides and the rate of usage is likely to increase at the same rate as change in land use.

 Investment in the sub-sector was calculated as directly proportional to the trade expansion envisaged in each scenario.

 From the outset of the scenarios, before additional permutations are made, similar input levels are assumed (water, energy etc) per unit of output.

RESULTSProjections on economic and trade indicators

Baseline 08 (‘000 US$)

Rate of change (%) per year Projected 2025 (‘000 US$)

BAU ETG BT BAU ETG BTImports from EU 481.2 27.3 16.4 27.3 29,135 6,391.8 29,135

Exports to the EU 293.8 15.7 20.6 31.9 3,138 6,391.8 29,135

Total Trade 775.0 24 17.9 28.9 32,273 12,783.6 58,270

Trade deficit 217.5 32.5 - 17 - 17 25,997 0 0

Flowers exports 20,987 11.0 20.6 31.9 124,000 506,821 2,324,000

FFV exports 11,140 7.67 20.6 31.9 39,000 269,023 1,223,000

INVESTMENT

flowers (‘000 US$) 45,960 11 20.6 31.9 270,000 1,109,901. 5,088,000

returns net of capital

-146,000 -603,080 -2,764,000

FFV (‘000 US$) 7,998 7.67 20.6 31.9 28,093 193,145 885,406

returns net of capital

10,907 75,878 337,600

Economics & Trade: Best Case Scenario The Best case scenario from an economic

perspective is the Balancing Trade scenario as it generates a lot more export revenue for Uganda exporters than all the other two scenarios.

This scenario encourages more investment in the trade sector by ensuring that Uganda’s export grow to match the current rate of imports.

The Exponential Trade Growth scenario while expanding exports suggests that imports will reduce which may not be realistic

PROJECTIONS ON LAND CONVERSION AND RATE OF BIODIVERSITY LOSS

Land and Biodiversity: Best Case Scenario

The Balancing Trade scenario puts an enormous amount of pressure on the environment and natural resources. The envisaged rate of biodiversity loss is extremely high more than double the current levels.

By increasing the productivity the amount of land used can be reduced from the 10% of the national farmland proposed under the BT scenario to 1.84% of the national farmland proposed by the ETG scenario.

PROJECTIONS ON ENVIRONMENTAL INDICATORS

Resource use – Best Case scenario

In adopting the Balancing Trade scenario, there will be need to consider realigning the production activities so that land use, water use levels, energy use levels and fertiliser use levels are reduced to at best the Business as Usual scenario levels– need data to determine the optimum level

With looming threats to the environment and biodiversity from increased land conversion, the policy could propose a growth of the land area under organic agriculture..

PROJECTIONS ON SOCIAL IMPACTS

Wages, employment and number of women employed in the flower industry over the three assessment scenarios

SOCIAL INDICATORS Baseline (2008)

Rate of change (%) per year

Projected 2025

BAU ETG BTS BAU ETG BTS FLOWER SUB-SECTOR Employment Number of people employed 6,000 11 20.6 31.9 35,371 144,896 664,221 Women employed 5,100 11 20.6 31.9 30,065 123,161 564,588 Overall size of the wage bill a) Area under flowers (‘000 ha) 0.18 6 24 111 1.08 4.3 20.0 Wages and management costs (‘000 US$)

3,240 19,440 77,400 360,000

(Per 10 ha farm US$ 180,000)

Source: adapted from UEPB (2006); Consultations with stakeholders

Social Impacts – Best Case scenarioThe social cycle projections presumes that

additional investment will be available and greater revenues from the ETG and BT scenarios than the BAU scenario. However, if the aspects of resource use efficiency and productivity enhancement are also adopted, companies may not necessarily employ more people but will have additional resources to pay workers better and invest in occupational health for the workers.

Conclusions and Recommendations

Need a harmonised data for FFV – currently they data overlaps with other categories – e.g banana is a stale commodity – and yet is exported as fresh fruits

Water scarcity and water stress are global concerns and are becoming even more serious due to climate change. The flower and horticulture industries should invest in technologies that are efficient in water use. This involves huge costs and is therefore an area that Government and EU could intervene. 

There are certain parts of Uganda with very rich ground water reserves – flower farming could be moved from areas with low ground water potential but these needs to be investigated

The same can be said of energy which is also a big challenge and highly dependent on hydropower---

Research is needed to quantify the cost/benefits of certification; effects of pollution on ecosystems services, species and habitats including research on the impact of flower farms on pollinators.

NEMA should develop and put in place regulations to give effect to the polluter pays principle provided for under the National Environment Act. This will make it possible for business to clean up and restore sections of the environment degraded through their activities.

Conclusions & Recommendations – cont’dGovernment needs to put in place a minimum

wage for the sectorThe flower farms/fruit and vegetable firms need

to put in place health insurance schemes- and health facilities

Economic Instruments such as pollution tax and effluent charges are used in a very limited manner. There is need for a feasibility study on how these instruments can be used in a way that does not hurt exports but protects the environment

Conclusions & RecommendationsThe Private Sector Foundation business assistance

scheme provides assistance with certification However smaller farms may not be able to meet the co-financing requirement. Government should develop and put in place systems/mechanisms for assisting small farmers.

The companies that export flowers should engage in corporate social responsibility around the communities where they operate. More importantly, they should be encouraged to invest in the restoration and maintenance of the ecosystems on which sustains their business.

Conclusions and Recommendations

Climate change is likely to, among other things, exacerbate the loss of biodiversity; increase the risk of floods and droughts; reduce the reliability of hydropower and biomass production in some regions. Such changes will in turn affect agricultural productivity and land use. Capacity building for monitoring the impacts of climate change on biodiversity and implementation of activities to mitigate the adverse impact is needed. This is an area that the EU and other development partners could provide financial and technical assistance.

 Valuation of biodiversity is very important and yet Uganda lacks capacity in this field. This is another critical area that the EU and other development partners need to intervene through training and capacity building.

 

Country Project UpdatesProject launch updateProject steering commitee meetingsConsultative Meetings –

horticulture/floricultureStakeholder workshopsReport revision & finalisation