Foreign Firms, Technological Capabilities and Economic Performance

Foreign Firms, Technological Capabilities and Economic Performance

Evidence from Africa, Asia and Latin America

Rajah Rasiah

This book employs novel techniques to compare technological capabilities and economic performance in seven countries at varying stages of industrial development: Brazil, Costa Rica, Indonesia, Kenya, Malaysia, South Africa and Uganda. The author uses a methodology drawn from the technology capability framework, but extensively adapts and simplifies it to extract common cross-industry parameters for statistical analysis. He employs the framework to compare the technological, local sourcing and performance dynamics of foreign and local firms in a variety of industries.

Chapter 4: Technology and economic performance in Uganda

Rajah Rasiah

Subjects: business and management, international business, development studies, development economics, economics and finance, development economics, innovation and technology, innovation policy


Rajah Rasiah and Henry Tamale 4.1 INTRODUCTION Uganda is a land-locked country, which has a high comparative cost premium for location of industries for export processing compared to Kenya and Tanzania. Consequently Uganda’s natural manufacturing base is by and large in the processing of its abundant primary raw materials. With a per capita income measured using purchasing power parity (PPP) of US$1167 in 2001, Uganda was one of the most underdeveloped economies in the world. Ugandan manufacturing declined or stagnated during the 1970s, 1980s and the first half of the 1990s owing to poor macroeconomic conditions. Macroeconomic stabilisation from the late 1980s and external developments in the 1990s offered Uganda the opportunity to promote industrialisation aggressively from the mid-1990s. A combination of severe economic failure in Kenya and slow transition in Tanzania, and the adoption of business-friendly policy instruments domestically has helped attract industries that would not normally relocate in Uganda. Hence, manufacturing has grown since 1997. The share of manufacturing value added in GDP rose from 5.7 per cent in 1990 to 8.7 per cent in 1999. Although the share still left Uganda as a typical nonindustrial economy, manufacturing enjoyed its highest contribution of 9.1 per cent to GDP in 2000 (World Bank, 2002). Rapid manufacturing growth has coincided with strong foreign direct investment (FDI) inflows from the second half of the 1990s: FDI shares in gross capital formation (GCF) rose from 0.0 per cent in 1990 to 21.1 per cent in 1999. The rise in FDI...

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