News Round-up

Effects of Global Crisis on Poor Economies
At the onset of the current global economic crisis, many in developing nations, including Kenya, had viewed the downturn as remote to the western world, where its effects first struck. But many months later, matters have radically changed and the new song has become how to climb out of the numerous threats being posed by the ripple effects of this crisis.

A recent outlook by the World Bank said although many countries in sub-Saharan Africa (SSA) have only weak links to international financial markets and relatively small manufacturing sectors, the financial crisis had immediate consequences for countries in the region. Output and incomes in the region have been negatively affected by falling commodity prices and declining remittances and tourism.

World Bank Warns Govt against Price Controls
World Bank has urged the Kenyan government not to re-introduce price controls, saying such controls would end up hurting the consumers. The controls would distort the market, have a fiscal implication on the economy and discourage consumers from seeking substitutes of the commodities, a process that would create unnecessary shortages.

If passed, the Bill will see the government fix the prices of petrol, diesel, kerosene, sugar, rice, cooking oil, wheat and wheat flour, as well as maize and maize flour. Noting that the current drought and the global financial crisis pose a great challenge to the economy, favourable foundation blocks for economic growth were in place.

Obstacles of Trading in East Africa
Corruption and access to finance are the two biggest challenges to doing business in East Africa, the World Economic Forum Global Competitiveness report 2009-10 indicates. Besides corruption and the challenge of accessing finance in Uganda, poor infrastructure, tax rates and lately a volatile inflation regime rank highly as major bottlenecks for doing business.

The least worry among respondents in Uganda is government instability or the possibility of coups which ranked lowest as a problem. Uganda’s best rank is position 30 (out of 133 countries) scored on the labour market efficiencies which allows for unrestricted labour regulations.

Poor Infrastructure Hampering Regional Trade
Poor infrastructure within the Eastern and Southern Africa (ESA) countries remains the biggest challenge for trade development in the region. President Mwai Kibaki has called on countries within the region to invest more resources in development and maintenance of the region’s infrastructure in order to facilitate trade.

The President noted that since the establishment of the EAC in 1999, regional trade had increased by 30 percent, pointing out that improved infrastructure will facilitate more regional trade. The challenge in most instances concerning road and rail network development in the region has been the tendency to spend long periods in negotiating projects, rather than implementing them.