Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Topic Three: Assessing the Impacts of Structural Adjustment The Social Impacts of Privatization in Uganda with a focus on its implications on women Taina Christiansen Economic Development 213 Professor S. Khan Term Paper, 14th December 2004 2 Privatization has been one of the most crucial components of the structural adjustment programs (SAP) implemented in developing nations. As a result of agreements with the IMF and the World Bank, several conditionalities have been imposed on these countries, privatization in Uganda being one of them. According to Roger Tangi and Andrew Mwenda; “Privatization was embarked upon in an environment lacking a regulatory framework that could ensure probity and fairness in the divestiture exercise.”1 Uganda’s privatization program was initiated in 1992, prompted by the criticism received on behalf of the Bretton Wood Institutions, claiming that public enterprises were economically inefficient and that they incurred large financial losses which served as an obstacle to successful economic growth, poverty reduction and debt repayment. Privatization of State Owned Enterprises (SOE) was thus deemed as the most ideal choice for the government. Privatization was intended to reduce inequalities in the access of goods and services, result in fiscal benefits and equity-enhancing effects through income distribution effects and generate higher levels of employment and reduce the costs of goods and services, there are concerns that privatization has in fact, hurt the socio-economic welfare of the majority. However, there is a general agreement amongst the Ugandan population that the government did not facilitate adequate participation for locals in the process and as a result “there is a general feeling that locals have been robbed of national assets, which were built through accumulation of taxpayers’ contributions”.2 The reasoning behind privatization such as including the promotion of the private sector as an engine of growth and to increase efficiency and productivity in the economy whilst improving Uganda’s dire levels of poverty, is largely over praised has resulted in the contrary. While it is true that privatization in Uganda has led to an “…increased supply of quality goods and services on the market, especially essential commodities that were in short ‘Water, land and labor: The Impacts of Forced Privatization in Vulnerable Communities’ – Halifax Initiative Coalition, pg. 30 2 ‘Uganda Country Report: A synthesis of the Four SAPRI Studies’ – SAPRI, prepared by Kevin Akoyi Makokha, Uganda Technical Team, pg. 16 1 3 supply and a decrease in the monopoly of SOE in production and distribution” as well as having “led to increased industrial capacity utilization, profitability and higher employment levels in the privatized enterprises,” 3 there are several mixed impacts associated with the social sector which have been significantly undermined. Serious problematic issues have arisen that confirms the belief that SAP have served to widen the gap between the rich and the poor instead of the contrary. In Uganda, privatization has increased the difficulties encountered in the gender dimension where privatization has been more costly for women, as they tend to be the ones with little or no specialized skills and, thus formed the highest percentage of those laid off.4 A clear conflict arises between the goals of poverty reduction and the policies implemented due to conditionalities which often “… increase poor women’s domestic workload and to put essential services beyond their reach.” 5 Further negative impacts include the decline in resource allocation and availability through increased costs in for example water and electricity supply, increased corruption, lack of transparency and an increase in unemployment. Ultimately, privatization has not improved the socioeconomic welfare of the majority of the population in Uganda; instead, the main benefits have flowed to a small group of the already privileged. “… As a result, privatization has promoted the creation of a tiny wealthy class, rather than, as was its expressed objective, broadening the basis of ownership’ among the African population.”6 The International Monetary Fund (IMF) and the World Bank (WB) maintain that the privatization of public services such as water will increase the efficiency and quality of service delivered whereas public sector ownership is perceived as too costly and inefficient. According to the WB, “Efficient water resource management requires that water be treated as an economic 3 Ibid, pg. ix “Most of the staff that has been laid off is those in clerical and unskilled jobs where women are concentrated. There is pressure on staff to resign voluntarily. When jobs are threatened, the male breadwinner mentality of managers makes them place women workers first in the firing line.” – (citation below) 5 ‘Interconnection in the Context of HIV/AIDS and Feminized Poverty’ – UNIFEM Roundtable on Economic and Rights – Presentation by Winnie Byanyima MP (Uganda) - 2003 6 ‘Water, land and labor: The Impacts of Forced Privatization in Vulnerable Communities’ – Halifax Initiative Coalition, pg. 30 4 4 good.” 7 As a measure to meet yet another loan-attached conditionality, the government of Uganda took steps in 2003 to prepare the privatization of the National Water and Sanitation Company (NW&SC). Through a full cost-recovery program, the company was to become an attractive business opportunity to private investors. In order to achieve this goal, several actions were taken including increasing the price of water, disconnecting the supply to consumers who had outstanding balances and failed to pay and lastly encouraging a sub-contracting system in poor neighborhoods for selling the water.8 Water is a necessity for survival, hence an invaluable commodity. Consequently, the gap between rich and poor increasing, and an elite water market has emerged where water is treated as a product capable of raising high revenues by selling it to rich consumers and a vital trading source. Water is very attractive to profit seekers; privatization has subsequently caused private monopolies; and Uganda is no exception to this interplay. Due to the fact that the urban water services in Uganda are more profitable, the government cut off the rural sector from the NW&SC water management, which as a result remained under the central government’s water department. As a result, the discrepancy between the urban and rural population is exacerbated even further than it already is. According to the UN Human Development Report (HDR)9, when the HDI (Human Development Index) and the HPI (Human Poverty Index) are disaggregated along the rural-urban divide, they document more progress in human development and less deprivation for people in urban areas than for those in rural areas. The rural-urban divides in Uganda and Swaziland provide good examples of such disparity. In 1996 the HPI-1 in rural Uganda, at 43%, was more than twice that in urban Uganda, at 21% (Table 1). The table shows that more than half of rural people are without access to safe water while in urban areas it is only every third. This significant difference can be the direct result of the privatization of water services in Uganda, or if it was a prior situation, privatization of water will only lead to a further increase in the decrease of people without access to safe water. ‘Interconnection in the Context of HIV/AIDS and Feminized Poverty’ – UNIFEM Roundtable on Economic and Rights – Presentation by Winnie Byanyima MP (Uganda) - 2003 8 Ibid 9 UN Human Development Report, 2000, Human Development Indicators, pg. 14 7 5 However, another thought is that if urban supplies are self supporting, this could in time release government funds for subsidized rural expansion. Table 1: Rural-urban disparities in human poverty in Uganda, 1997 % Rural Urban People born today not expected to survive to age 40 Adult illiteracy rate 38 27 43 16 People without access to safe water People without access health services 57 23 57 5 to Children under five who are malnourished HPI-1 27 15 43 21 Source: UNDP 1998d. In order to minimize consumer resistance during the privatization of water in Uganda, the prices were gradually increased and according to UNIFEM10, the donors praised the government for this. The increase in price raised money for investments, however, the large rural population who were unable to pay the increase in fees, was cut off from its supply. In a Western-oriented world, this approach may be deemed appropriate; however, the direct effect that this has on gender and poverty is not. In the case of Uganda, NWSC was/is responsible for urban supplies in 9-10 towns, not rural supplies as dictated by the government. As a result, ‘… already over-burdened women’ have to devote time to collecting water from a polluted river, or buy water from alternative sources whilst buying less food and reducing the payment of school fees. Water-borne diseases are the common in Uganda, and the resort to polluted water as a source of supply will only serve to aggravate the already extreme fragile health situation of poor urban families. 11 Often the school fees which are cut affect the female members of the family, as opposed to the males, who enjoy a more important status in the Ugandan culture. According to the human development indicators in the 1998 and 2003 HDR, literacy rates between adult and female differ greatly (Table 2). ‘Interconnection in the Context of HIV/AIDS and Feminized Poverty’ – UNIFEM Roundtable on Economic and Rights – Presentation by Winnie Byanyima MP (Uganda) - 2003 11 ‘Interconnection in the Context of HIV/AIDS and Feminized Poverty’ – UNIFEM Roundtable on Economic and Rights – Presentation by Winnie Byanyima MP (Uganda) - 2003 10 6 Table 2: Human Development Indicators (Human Development Reports, 1998 & 2003) HDR: 1998 HDR: 2003 Analysis 1998 = 40.7 1970-75 = 46.3 1995-2000 = 39.6 65.0 45.7 2000-5 = 46.2 Life expectancy today remains the same as it was in the 1970’s. 68.9 54.2 59.2 Literacy rates have increased minimally; however, the discrepancy between genders is still extremely prominent today. 76.1 78.8 Population with sustainable access to an improved water source (%) 2000 Population living below the national poverty line (%) (1999-2001) HIV prevalence (% ages 15-49), 2003 1990 = 45 48 3% change 1987-1997 = 55.0 44 11% change 1997 = 9.51 4.1 (2.9-6.6) Public expenditure on education (% GDP) 1990 = 1.5 1999-2001= 2.5 GDP per capita (US$) 1998 = 332 1990 = 251 1985 = 227 236 Through IMF policies, Uganda is one of the few countries in Africa that has successfully managed to decrease the prevalence of HIV. A 1% increase in education is probably the result of the expenditure reform which many countries under IMF conditionalities had to undergo. The GDP today is less than it was in 1998 and in 1990 and only slightly higher than it was in 1985. Life expectancy at birth (years) - Adult literacy rate (% ages 15+) - Adult female literacy rate (% ages 15+) - Adult male literacy rate (% ages 15+) For example, in 1998 the adult literacy rate between the two sexes had a total difference of 21.9%, in 2003, 19.6%. 12 Water privatization strongly contradicts the priorities of the poor, especially on women and children. This is effectively highlighted in the Uganda Participatory Poverty Assessment Project (UPPAP) report: “Access to clean water and quality of water were a high priority for local people in rural and urban areas respectively. Community members particularly women consistently ranked inaccessibility of safe water for drinking as one of their top ten community priority problems… Local people expect that their water should be provided 12 UN Human Development Report, 1998 & 2003, Human Development Indicators 7 free of charge and expressed that they would have used the money (used to buy water) to buy food, pay treatment costs or to pay school fees.”13 Privatization of SOE has greatly decreased the demand for non-specialized skilled labor. As in most low income countries (LIC), Uganda has a very low percentage of educated skilled laborers. As a result, two things happened: (1) a large number of people formerly employed in low-skilled labor were laid off with small if any compensation payment at all; (2) high-skilled foreign workers were ‘imported’, instead of training and assigning these jobs to local Ugandans. Even though some argue that privatization increased employment, in the affected sectors nonetheless declined across the board, leading to welfare losses. Low-skilled and hard labor has always been an opportunity for the poor to make a living. The process of privatization took away this livelihood availability, increasing the low levels of poverty which the reform set out to help alleviate. The female workforce was even more marginalized than the male counterpart in the process of privatization: “Privatization was more costly to former female workers in SOEs because of their initial positions within the companies in which they were mostly in low or nonspecialized jobs and thus forming the highest proportion of the laid of labor force.” 14 Women already face substantial problems regarding illiteracy, poverty, lack of voice and public security (e.g. war, insurgence, cattle raiding, and banditry). In Uganda, a woman’s claim to family land has traditionally been tenuous at best. Although women make up 80% of the agricultural labor force, only 7% of all women own land.15 The impact of debt burden, specifically the role of privatization, only serves to impair the problems of inequity already present amongst women in society. Structural Adjustment Programs in Uganda are considered as one of the success stories in Sub-Saharan Africa with respect to their economic performance with an average growth rate of UPPAP report ‘Learning from the Poor; A summary of Key Findings and Policy Messages’ – UNIFEM ‘Uganda Country Report: A synthesis of the Four SAPRI Studies’ – SAPRI, prepared by Kevin Akoyi Makokha, Uganda Technical Team, pg. 16 15 Uganda: Exclusion of Women from land Ownership – The “Lost Clause” – www.equalitynow.org 13 14 8 6%.16 This is largely attributed to the positive impact privatization has had on the economy in terms of increased output, income, tax revenue and employment levels17 at the expense of opting out of subsidizing essential social services which ultimately affected the poor. The expected privatization of one part of the power industry, the Power Purchase Agreement (PPA) for Bujagali Dam 18 will undoubtedly result in major price hikes to the Ugandan consumers thus hindering efforts to increase the extremely low levels of access to electricity in Uganda and harming the country’s economy. The Dam project is touted to be of benefit to the local population, planned to be a large export of hydropower, ostensibly to Kenya and Tanzania. Part of the privatization process involves withdrawing any subsidies to the power sector, with all costs passed onto the consumer. Not only will the cost of Bujagali power be three times the charge to large industrial users and more than eleven times the charge to small domestic users, but according to a WB report, no more than 7% of [Uganda’s] population can afford unsubsidized electricity. 19 The truth is that the rest of the population has no choice but to continue using wood fuel and charcoal which is of grave environmental concern. The high cost of power combined with financial poverty has ensured that these energy resources are and will, for a long time, remain the poor man's energy resources. Sadly, this fact is not reflected in Uganda's energy plan; no commitment to fuel wood renewal indicates a lack of concern regarding the need for environmental awareness and lack of appropriate proceedings in order to protect the rural population in the long term. Even though small dams and alternative energy sources have been considered unreasonable in global economic terms, “…locally, at least elsewhere, they have proved more realistic; environmentally friendly (Oweyegha- Afundaduula.1999); and easy to integrate in sound water resource management.”20 Even though 16 Ibid pg. 10 Contested issue 18 ‘Likely Tariff Implications of Bujagali Dam’ – submitted to the World Bank 17/07/01 – by International Rivers Network ‘Linking Human Rights and Environmental Protection’ 19 Ibid 20 ‘Corporate crime and the crazy for huge hydropower development project in Uganda: The alternatives’ - by International Rivers Network ‘Linking Human Rights and Environmental Protection’ 17 9 the Bujagali energy program reflects a poor outcome, one must consider that this is a fiscal burden and that prior to the program, the availability of power is way below the requirements, and massive investments are needed to remedy the current shortfall. Distribution of electricity to the poor for the sake of equal treatment could have led to a complete collapse of the fragile system. Privatization has been discredited in the public eye from the very beginning of its reform. The public have labeled the process of privatization as ‘non-transparent, insider dealing, conflictof-interest and corruption,’ and the World Bank echoed this sentiment. 21 Even though the National Resistance Movement (NRM) voiced concerns regarding the nature that privatization would undertake and end up being dominated by corrupt government officials and business men, and foreign investors, this matter was disregarded in favor of the need for financial support available from the financial institutions. These concerns were inadequately voiced as the domestic population often possesses only limited savings and investable funds, if any at all. The NRM were right, “Therefore the danger of a sell-out of the entire economy exists, which would result in a division of the population between powerful capital holders (often foreigners or ethnic minorities) and destitute wage earners.”22 One of the objectives of privatization was to broaden the ownership amongst Ugandans, however, this could not be achieved due to the lack of capital markets, a stock market and ultimately due to the fact that the average GDP per capita in Uganda is US$ 236 (Table 2).23 Broadening ownership amongst the Ugandan population is a plausible approach; however, should the companies have been acquired by locals at an unrealistic cost at the risk that these locals could not gather the necessary investment and knowledge to make the enterprises profitable? Already the government is criticized for having sold of some companies at below the market cost, even though it was through a bidding process. World Bank: ‘Recommendations for Strengthening the Anti-Corruption Program, Uganda.’ Dec. 1998, referenced in Tangri and Mwenda 22 ‘The Privatization Process and its Impact on Society’ by Uganda National NGO Forum: Structural Adjustment Participatory Review Initiative’ (SAPRIN) July 2001, pg. 1-2 23 UN Human Development Report, 2003, Human Development Indicators 21 10 The benefits of privatization have not yet become apparent to the local Ugandan. As a measure instituted to eradicate the long history of corruption, the process of privatization failed miserably and served only the foreign investors and state officials. For example, in 1996 the president’s brother, Major General Salim Selah bought controlling interest in the Uganda Grain Milling Cooperation with a bid of US$5 million, the second highest bid. Shortly thereafter, the General resold the cooperation to Greenland Investments who had initially placed the lowest bid and made a profit of US$ 400,000 in the process.24 Self interest was advanced through political power and influence and as a consequence, there was no fair competition. Privatization is intended to benefit households, employees, and the economy as a whole. As a widespread custom in Africa, poorer families tend to rely on support from their well-to-do relatives, who are often obligated to cater for their demands. This phenomenon also reflects the inadequate distribution of wealth and living standards between the urban and rural population highlighted in Table 1. Furthermore, the extended family social system obligating better-off families to subsidize their relatives in rural areas has helped to reduce their poverty. Yet, households in urban areas, who are also subject to being laid off, do not have an external support system, yet must continue to support their extended family. Typical effects include the absence of school fees, health care finance as well as daily meal requirements. Even though households in general appreciate the better quality and range of goods available on the market as the result of privatization, the absence of government subsidies has increased the prices on essential goods and thus eliminating the possibility in attaining these goods. A typical disappointment expressed across the households who were laid off due to retrenchment in the privatization process, was that often terminal compensation packages were inadequate, too small and left their future job possibilities and livelihoods insecure. “Layoffs accompanied privatization across the board, and new employment generation did not always compensate for jobs lost. Privatization has fostered discontent among those workers who did not lose their jobs, because workloads have increased, ‘Water, land and labor: The Impacts of Forced Privatization in Vulnerable Communities’ – Halifax Initiative Coalition, pg. 30 24 11 employment has become less secure, and the power to organize and negotiate with employers has been weakened.”25 The primary stated goal of all privatization efforts was to promote the private sector as an engine for growth and to increase efficiency and productivity in the economy. In 1998 Uganda was ranked 158 (COMMA) and in 2002 ranked 148 by the Human Development Index. Uganda has managed to achieve some substantial economic growth and has reduced its direct role in the economy at the expense of the marginalized and of those that the SAPs were intended to help in the first place. The state of the SOEs in Uganda prior to privatization was undoubtedly appalling, yet the lack of an appropriate institutional framework to facilitate the process has possibly resulted in a more distressing condition, especially with respect to the situation of women. For example several SOEs had a substantial amount of money spent on them in order to restructure the enterprise for divestiture, yet the sales were ultimately undervalued and undersold. Participation was greatly lacking during the process, hence “Privatization should therefore be implemented in as egalitarian and equitable way as possible to ensure that every citizen has equal starting opportunities.”26 Opinions amongst the population have been expressed confirming that privatization has triggered high social costs, has worsened the welfare of the poor, and that the government has poorly managed the process. It is clear that the implementation was the main root of all subsequent problems, however there was also a “… a lack of market-friendly policy framework and a relatively well-developed institutional and regulatory capacity to work alongside privatization.”27 With regards to future programs, a country’s culture needs to adapt to a market-friendly framework through integrating the social, political and economic history into the adjustment plans. Instead of adopting privatization as a top-down approach by setting rules and developing programs without substantial input from the workers, a bottom approach to ‘The Economic and Social Impact of Privatization Programs’ – Chapter 5, pg. 108: SAPRI – Uganda. (http://web.forumsyd.se/Arkiv/uploaded/SAPRI_5_Privatization.pdf) 26 ‘The Privatization Process and its Impact on Society’ by Uganda National NGO Forum: Structural Adjustment Participatory Review Initiative’ (SAPRIN) July 2001, pg. 2 27 Ibid pg. 49 25 12 increase participation from the grass roots level is necessary. The economics of Uganda must be conducive to private ownership before one can even think about trying to develop a successful program from privatization (SAPRIN, pg.51). The SAPRIN (Structural Adjustment Review International Network) review concludes that in order for a program to be beneficial, proper timing and sequencing are an essential aspect of the policy. Government commitment needs to be in name of the people, and not a process to self-enrichment. In hindsight one must also acknowledge there was a lack of alternatives that existed prior to privatization. It is not the ‘product’ of privatization that lacks credibility, it is the government dealings with private firms whom are corrupt and ultimately end up distorting the process. Controversial, yet to a certain extent true, it is often the lack of transparency and honesty on behalf of those in charge of these processes that are bad, and not the idea put forward by the IMF and the WB. In the case of water privatization, it is profit motivated thus requires constant investment and overseeing. In several countries throughout Africa the water supply prior to privatization was disastrous and about to collapse due to illegal tapping of pipes which cut off the limited supply to urban areas. Thus, the situation prior to privatization was not better and certainly did not serve the urban poor in a more efficient way. Finally, the causes of the discontent about the process have multifaceted sources beyond the privatization process itself. 13 Bibliography Halifax Initiative Coalition, ‘Water, Land and Labor: The Impacts of Forced Privatization in Vulnerable Communities’ Kevin Akoyi Makokha, ‘Uganda Country Report: A synthesis of the Four SAPRIN Studies’ – SAPRIN, Uganda Technical Team Winnie Byanyima MP, ‘Interconnection in the Context of HIV/AIDS and Feminized Poverty’ – UNIFEM Roundtable on Economic Rights – a presentation United Nations Development Report, 2000, Human Development Indicators United Nations Development Report, 1998 & 2003, Human Development Indicators UPPAP report ‘Learning from the Poor: A Summary of Key Findings and Policy Messages’ – UNIFEM Uganda: Exclusion of Women from Land Ownership – ‘The Lost Clause’ – www.equalitynow.org International Rivers Network: Linking Human Rights and Environmental Protection, ‘Likely Tariff Implications of Bujugali Dam’ – submitted to the World Bank 17/07/01 International Rivers Network: Linking Human Rights and Environmental Protection, ‘Corporate crime and the craze for huge hydropower development project in Uganda: The Alternatives’ SAPRIN, ‘The Privatization Process and its Impacts on Society’ by Uganda National NGO Forum: Structural Adjustment Participatory Review, July 2001 SAPRIN, ‘The Economic and Social Impact of Privatization Programs’ – Uganda (http://web.forumsyd.se/Arkiv/uploaded/SAPRI_5_Privatization.pdf)