THE INFORMAL CROSS BORDER TRADE SURVEY REPORT 2013
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1 THE INFORMAL CROSS BORDER TRADE SURVEY REPORT 2013 November, 2014
2 FOREWORD The 2013 Informal Cross Border Trade (ICBT) survey was the ninth in a series of surveys conducted since 2005, when ICBT monitoring started. The ICBT survey collects information on cross border trade between Uganda and her neighbours that is otherwise not captured by the Customs Department of the Uganda Revenue Authority (URA). Regional integration is a key strategy for development and intraregional trade in the form of ICBT is expected to produce considerable economic gains for the East African Community (EAC). The EAC Council recommended regular monitoring of ICBT and other informal cross border financial flows. This partly reflects the recognition of the importance of an enabling environment for the harmonious coexistence of ICBT and the formal economy. The EAC partner states aim to collect better information on the goods, values and quantities traded amongst them. Better statistics collected will improve planning, decision making and also help prescribe and develop sector suitable policies. This report presents the estimates of the ICBT survey for 2013, jointly conducted by Bank of Uganda (BOU) and Uganda Bureau of Statistics (UBOS), at all of the main border crossings in the country. It shows the volume of informal trade, major commodities traded and the direction of trade among others. Our sincere gratitude goes to a number of Government agencies and departments which contributed tremendously and in various ways towards the execution of ICBT surveys throughout the year. These include; the Uganda Revenue Authority, the Immigration Department of Ministry of Internal Affairs, Uganda Police, Border security, clearing agents and traders. Prof. Emmanuel TumusiimeMutebile Governor Bank of Uganda Ben Paul Mungyereza Executive Director Uganda Bureau of Statistics i
3 TABLE OF CONTENTS DEFINITIONS... v ACRONYMS... vi EXECUTIVE SUMMARY... vii Chapter 1: INTRODUCTION Introduction Background Survey Objectives Overview of Global and Regional Trade Developments Structure of the Report... 2 Chapter 2: METHODOLOGY Introduction Selection of Monitored Border Posts Trade and Valuation Selection of Weeks for Monitoring Survey Organization Data Collection Techniques Data Collection Instruments Data Processing and Analysis Uprating of Survey Results Data Limitations... 6 CHAPTER 3: SURVEY FINDINGS Introduction Comparison of Informal and Formal Trade flows Formal and Informal Exports Formal and Informal Imports Direction of Informal Trade Informal Exports Informal Imports ii
4 3.3 Trade Flows by Commodity Category Main informal Export Commodities Main Informal Import Commodities Trade Flows by Border Station Informal Exports Informal Imports Trade Flows by Modes of Transport Chapter 4: SUMMARY OF FINDINGS AND CONCLUSION Introduction Summary of findings Conclusion APPENDICES Appendix I: The Uprating Model Appendix II : Leading Informal Exports by Category and Value, Appendix III: Leading Informal Imports by Category and Value, Appendix IV: Informal Trade by Country/Border Station, Appendix IV : ICBT Survey Team Appendix V : Survey Instruments iii
5 LIST OF TABLES Table 1: Border Posts Monitored during Table 2: Formal and Informal Trade Flows, Table 3: Direction of Informal Trade, Table 4: Informal Trade by Commodity Category and Country, Table 5: Main Informal Exports, Table 6: Main Informal Imports, Table 7: Informal Export Trade by Country/Border Station, Table 8: Informal Import Trade by Country/Border Station, LIST OF FIGURES Figure 1: Formal Imports, Exports and Trade Balance, Figure 2: Informal Imports, Exports and Trade Balance, Figure 3: Percentage Share of informal imports by Country of Origin, 2012 and Figure 4: Informal Exports by Mode of Transport, 2010 to Figure 5: Informal imports by Mode of Transport, 2010 to iv
6 DEFINITIONS Balance of Payments Statistics Industrial Products This is a statistical statement that systematically summarizes the economic transactions of an economy with the rest of the world for a given accounting period. Industrial products are all items that have been classified under the International Standard Industrial Classification (ISIC). The category includes processed agricultural commodities and manufactured goods. Agricultural Products These are mainly unprocessed agricultural commodities. Informal CrossBorder Trade Other Products Reexports Trade Balance Refers to trade transactions between residents and nonresidents across the economic boundaries of two or more countries that are not recorded by Customs Authorities. This is a category of goods that are not classified as either industrial or agricultural products. They are comprised of mainly natural resources like sand and soil (murram), crude salt, stones and water under ICBT survey. These are imports that are later exported with little value addition as stipulated by prevailing COMESA Rules of Origin (ROO). The ROO normally specify a certain percentage of value added to a product in order for a good/commodity to qualify as originating from an economic territory, below which an export is considered a reexport. This is the difference between foreign exchange earnings from exports and the expenditures on imported goods. v
7 ACRONYMS BOP BOU CIF COMESA DRC EAC FOB GDP GTS HS ICBT IMF IMTS ISIC MFPED SITC UBOS URA US VAT WTO Balance of Payments Bank of Uganda Cost, Insurance and Freight Common Market for Eastern and Southern Africa Democratic Republic of Congo East African Community Free on board Gross Domestic Product General Trade System Harmonized Commodity Coding and Description System Informal Cross Border Trade International Monetary Fund International Merchant Trade Statistics International Standard for Industrial Classification Ministry of Finance Planning and Economic Development Standard International Trade Classification Uganda Bureau of Statistics Uganda Revenue Authority United States Value Added Tax World Trade Organization vi
8 EXECUTIVE SUMMARY The Informal cross Border Trade (ICBT) Survey is a monthly survey conducted jointly by Bank of Uganda (BOU) and Uganda Bureau of Statistics (UBOS), who provide both technical and financial support towards its execution. This report presents the estimates of informal trade flows based on the findings of the Informal Cross Border Trade Survey conducted during The broad objective of the survey was to establish the volume and value of informal (unrecorded) trade between Uganda and her neighbours. The share of informal exports to total export receipts averaged about 15 percent over the last three years, while informal imports constituted about 1 percent of the total import bill. Formal and Informal Trade in 2013 During 2013, Uganda s formal export earnings slightly increased by 2.1 percent to US $ 2,407.7 million compared to the value of US$2,356.8 million recorded in However, informal exports declined by 7.2 percent to US $421.3 million from US$ million recorded in The combined total of formal and informal exports earnings amounted to US $ 2,829.0 million in 2013 which was a small increase of 0.6 percent when compared to US$2,811.5 million recorded in The share of informal exports to total exports reduced to 14.9 percent in 2013 from 16.1 percent in Formal imports (CIF), on the other hand amounted to US$5,817.5 million in 2013, reflecting a 3.7 percent decline when compared to US$6,042.8 million registered in 2012 while informal imports amounted to US$ 53.7 million, an increase of 1.3 percent when compared to the value of US$ 53.0 million registered in The total formal and informal imports amounted to US$ 5,871.2 million, a decline of 3.7 percent when compared to US$ 6,095.8 million recorded in The share of informal imports in total imports stagnated at 0.9 percent during the last 2 years. The decrease in informal trade flows could to a large extent be attributed to the unrest in the DR Congo in 2013 which disrupted normal business at various border crossings. Direction of Informal Trade Informal exports to all neighboring countries decreased except South Sudan. Informal exports to South Sudan grew by 13.7 percent in 2013 to US $ million from US $ million registered in The same trend was exhibited under formal trade. Kenya retained its status as the leading source of Uganda s informal imports during Informal imports from Kenya increased to US$26.5 million accounting for a 49.4 vii
9 percent share of the total informal imports in 2013, compared to US$24.5 million (46.3 percent of the total) recorded in DR Congo ranked second, with a decline in the informal imports to US $ 17.7 million (33.0 percent share) compared to US$20.3 million (38.3 percent share) registered in Main Commodities Exported and Imported During 2013 Informal exports and imports have been grouped into 3 categorizes; Industrial, Agricultural and Other products to take into account the level of processing of the goods transacted. Industrial products continued to dominate both informal exports and imports. In 2013, industrial exports declined by 5.0 percent to US $ million compared to US$ million recorded in DR Congo was the major destination for most of the industrial exports fetching US $ 94.4 million, representing 37.2 percent of the industrial exports during 2013 when compared to US $ million (41.7 percent) recorded in Agricultural products ranked second with US$166.6 million in 2013 representing 39.5 percent of the total informal exports compared to US$184.9 million recorded in South Sudan was the main destination for agricultural commodities which amounted to US $ 57.7 million, representing 34.7 percent of the agricultural exports. The Other product category comprising of mainly natural resources only accounted for about US $ 2 million for the period under review with a 40.9 percent reduction in the share during Trade Flows by Border Station The Informal Cross Border Trade survey covered 19 border points and 4 bus terminals representing coverage of over 90 percent of the informal trade transactions between Uganda and her neighbours. During 2013, Elegu, Mpondwe, Busia, Mutukula Katuna and Oraba border stations accounted for largest share of the total informal exports (77.9 percent). Elegu alone accounted for the largest share estimated at US$ million (25.2 percent share) of informal exports followed by Mpondwe border post with US$ 95.9 million (or 22.8 percent share) and Busia with US $ 59.7 million (or 14.2 percent share). Overall, most of the border stations reported a decline in their export earnings except for Elegu that registered an increment of 22.6 percent during viii
10 Busia, Mpondwe, Malaba, Elegu and Paidha remained the leading entry points for imports in 2013 accounting for US$ 42.1 million, a 78.4 percent share of the informal imports followed. ix
11 Chapter 1: INTRODUCTION 1.0 Introduction This introductory chapter provides a brief background to the Informal cross border trade survey; discusses the global and regional trade situation during 2013 and outlines the survey objectives. 1.1 Background The 2013 informal cross border surveys marked, the ninth year of ICBT surveys since inception, with the first one having been conducted in The surveys aim at enhancing compilation of external merchandize trade statistics for the balance of payments and national accounts. The ICBT surveys are jointly conducted by Bank of Uganda (BOU) and Uganda Bureau of Statistics (UBOS) who provide both technical and financial support towards their implementation. The surveys have also benefited from support at various border posts from URA, the Immigration Department, Uganda Police and other security organs, the Business Community and the Local Leaders. 1.2 Survey Objectives The broad objective of the 2013 ICBT Survey was to establish the size of unrecorded/informal trade flows between Uganda and her neighbors. Within this broad objective, the specific objectives included; Determining the nature and composition of commodities transacted under informal trade; Establishing the direction of informal cross border trade (i.e. country of destination/origin); Estimating volumes and values of informal trade flows; and Generating monthly, quarterly and annual ICBT estimates for balance of payments and national accounts statistics compilation. 1
12 1.3 Overview of Global and Regional Trade Developments On the global scene, for the second consecutive year, world merchandise trade remained subdued, with growth estimated at 2.2 percent in 2013, which is lower than the 20 year average growth rate of 5.3 percent for the period and the 20 year precrisis average of 6 percent. The sluggish growth in world merchandise trade was driven by a number of factors including the lingering impact of the recession in the European Union, high unemployment in most euro area economies and uncertainty about the timing of the Federal Reserve s winding down of its monetary stimulus in the United States. These factors led to low import demand in developed economies and moderate import growth in developing economies, while exports recorded only small increases in both developed and developing economies. Asia and the Middle East registered the highest merchandise trade growth rates of 4.6 percent and 4.1 percent respectively, followed by North America with a growth rate of 2 percent. Africa and Europe registered growth rates below 1 percent. The merchandise exports from Africa dropped by 2.4 percent, majorly due to lower oil export volumes, while the import bill increased by 4.1 percent in For the EAC region, merchandise trade stagnated in 2013, with exports declining by 1.8 percent while imports rose by 2.3 percent in 2013, thereby yielding an overall growth rate of 0.2 percent. World trade is projected to rebound in 2014, as the global economy picks up momentum. 1.4 Structure of the Report The rest of the report is arranged as follows: Chapter 2 presents the methodology while Chapter 3 highlights the main findings. The conclusion and potential policy implications are provided in Chapter 4. 2
13 Chapter 2: METHODOLOGY 2.0 Introduction The selection criteria of the monitored border posts, survey organization, data collection techniques and instruments, uprating of survey results and limitations of the surveys is discussed in this chapter. 2.1 Selection of Monitored Border Posts The ICBT 2013 Survey covered nineteen gazetted border posts and four bus terminals where merchandise destined to the neighbouring countries is loaded and offloaded. The selection of the monitoring sites was based on the significance of trade flows through the border post; availability of Customs Offices and supporting Government institutions such Immigration; Police and other security organs; and, availability of other necessary infrastructure to support fieldwork. The border posts monitored and the respective neighboring countries are shown in Table 1. Table 1: Border Posts Monitored during 2013 No. Customs Neighbouring Country No. Customs Neighbouring Country 1 Bunagana DR Congo 13 Cyanika Rwanda 2 Goli 14 Katuna 3 Ishasha River 15 Mirama Hills 4 Mpondwe 16 Elegu South Sudan 5 Ntoroko 17 Oraba 6 Odramachaku 18 Kikagati Tanzania 7 Paidha 19 Mutukula 8 Vvura 9 Busia Kenya 10 Lwakhakha 11 Malaba 12 Suam River In addition to the border posts, four bus terminals were monitored covering the following routes; Kampala/Kigali, Kampala/Juba, Kampala/Bujumbura and Kampala/Bukoba/Daressalaam. Transactions through the selected bus terminals were included in the estimates for the respective borders. 3
14 2.2 Trade and Valuation The collection of ICBT data follows the General Trade System (GTS) of compiling International Merchandise Trade Statistics. The GTS requires that, all goods leaving or entering the country are recorded as they cross the customs frontiers. During data collection, the following are recorded: i) All merchandise into/out of the country carried on foot, bicycles, push carts, motorcycles, vehicle, wheel chairs, donkeys and boats both in large and small quantities that is not recorded by customs authorities; ii) Undeclared or under declared merchandise of traders on formal customs declaration documents. The following items are excluded from informal trade recording: i) Goods properly (100 percent) declared and verified by customs officials on declaration documents; ii) Transit goods into and out of the country at any border post being monitored; iii) Goods smuggled into or out of the country (including night time cross border transactions) The valuation of informal exports is based on Free On Board (FOB) basis of valuation, while imports are valued at Cost Insurance and Freight (CIF). All prices used are collected from trading centre s/markets that are close to the border posts where informal trade is monitored. However, for large consignments of goods, whole sale prices are used, while for small quantities retail prices are used. 2.3 Selection of Weeks for Monitoring Ideally, ICBT data should be collected on a daily basis for the entire month. However, due to financial and logistical resource constraints, it is not possible to monitor ICBT activities on a daily basis. Subsequently, monitoring was done for two weeks in each month and estimates were made for the remaining weeks. The weeks chosen for monitoring were supposed to be randomly selected to avoid bias. However, in practice a combination of both random and purposive selection was used to avoid costs escalation. Consequently, two consecutive weeks were selected from each month for continuous monitoring and trade in the remaining two weeks plus 2 or 3 days depending on the month was estimated. 4
15 2.4 Survey Organization The UBOS and BOU Staff coordinated and supervised survey field activities on a monthly basis for quality control purposes and to ensure compliance to set field practices. At every border station, a minimum of two enumerators were engaged to record data during the monitoring weeks. The team of enumerators was composed of trained individuals with adequate knowledge of the local languages at the respective border stations. The training conducted for all enumerators and supervisors focused on generating the competencies in metric system, and tactics of obtaining information from traders. Enumerators were also trained on how to interact with the Immigration and Revenue Officials to gather additional relevant information. 2.5 Data Collection Techniques The recording of informal trade was based on direct observation techniques. However, where necessary, verification was done through inquiries made to traders, clearing agents, revenue officers and security personnel and through weighing to ascertain quantities for some selected items. The methods used are the most costeffective way of gathering data at border posts where conditions are far from ideal. The direct observation technique entails strategic positioning of enumerators at border posts to enable them to record all merchandise into and out of the country. All traded goods that are not recorded by Customs Authorities are captured at the point of crossing the customs frontier in counter books or specially designed forms specifying the item, quantity and mode of transport. 2.6 Data Collection Instruments The instruments used by enumerators during data collection included; counter books, list of units of measure and conversion factors, Summary Forms A used to summarize daily commodity data and a Vehicle form used for capturing trade data of commodities ferried on vehicles especially at Oraba, Bibia and Mpondwe (see Appendix VII). Vehicles are the dominant carriers of traded goods at these border posts and pose a major recording challenge that necessitated the introduction of a specific form tailored to capture more details. Other materials used include calculators, rulers, pens and weighing scales. 2.7 Data Processing and Analysis The data was captured on a monthly basis at UBOS and edited by officials from both institutions to ensure accuracy. The data was also coded to facilitate its transformation to the Harmonized Commodity Coding and Description System (HS) and Standard International Trade Classification (SITC) Nomenclatures. The ICBT data tabulation and 5
16 analysis used, followed a predetermined tabulation scheme approved by the technical working team in line with intended survey objectives. 2.8 Uprating of Survey Results Uprating of survey results was necessary in order to generate monthly estimates from data collected during the two weeks of monitoring. The uprating methodology was based on the key assumption that the different days of each of the two weeks surveyed reflect trade flows for similar days not covered in the same month. In addition, seasonality effects were taken into consideration for agricultural products. (Refer to Appendix I for details on the uprating model). 2.9 Data Limitations (i) (ii) (iii) Some of the border posts left out may have recorded growth during the year leading to some under estimation; Trade occurring at night and beyond the stipulated time of monitoring (7.00a.m to 6.p.m) is not covered 1 ; Difficulty in accurately estimating the quantities of some traded items especially where assorted goods were carried in one package poses some accuracy risks. Other estimation problems arose where items were transported in packages that are not transparent, and those in bulk like sugar canes, fruits etc. 1 Whereas this could constitute some underestimation, this could be minimal. 6
17 CHAPTER 3: SURVEY FINDINGS 3.0 Introduction This chapter presents the survey findings for The indicators derived from the survey data include levels of informal imports and exports, trade balance, direction of trade flows, and the comparative values of formal and informal trade. Further, trade by border station, commodity category, volume and value of major imported and exported commodities is examined. 3.1 Comparison of Informal and Formal Trade flows Formal and Informal Exports During 2013, the combined exports earnings (formal and informal) amounted to US $ 2,829.0 million, of which, formal exports were worth US $ 2,407.7 million, while informal exports accounted for US $ million. The overall export earnings rose by 0.6 percent in 2013, registering a much slower increase compared to that recorded in 2012 of 11.8 percent. Informal exports receipts reduced by 7.2 percent compared to an increase of 27.5 percent registered in The reduction in the informal merchandise exports could largely be attributed to the unrest in the DR Congo during the year. There was a reduction in exports of various commodities like maize grains, wheat flour and potatoes by 16 percent, 43 percent and 100 percent respectively. Some beverage and beer companies started exporting directly to the DR Congo and South Sudan through formal channels. In addition, there were reports of restrictions of beverage exports to both South Sudan and DR Congo to support the nascent beverage industries established in these countries. This led to a decline in exports of soda by 41 percent and alcohol/spirits by 39 percent during the year. Generally, over the last four years from 2010 to 2013, fluctuations in the total exports earning have been mainly influenced by the sharp variations in the value of informal export earnings as indicated in Table 2. 7
18 Table 2: Formal and Informal Trade Flows, (US$ Millions) Year Trade flow Total Exports (FoB) 2, , , ,829.0 Informal Exports Formal Exports 1, , , ,407.7 Total Imports (CIF) 4, , , ,871.2 Informal Imports Formal Imports 4, , , ,817.5 Overall Trade Balance (2,583.9) (3,169.9) (3,284.6) (3,042.1) Percent change (Exports) Percent change (Imports) (3.7) Informal Exports Share Informal Imports Share Source: UBOS & BOU Formal and Informal Imports The imports bill declined by 3.7 percent in 2013 compared to a 7.2 percent increase in 2012 and an increase of 20.2 percent recorded in 2011(see Table 2 above). During 2013 the total import bill stood at US $ 5,871.2 million, with formal imports accounting for US $ 5,817.5 million, and informal imports of US$ 53.7 million. Although formal imports decreased during 2013, informal imports registered a 1.2 percent increase in the same period. The developments in total exports and imports resulted in a narrowing trade deficit which was estimated at US$ 3,042.2 million in 2013, slightly lower than the US$3,284.6 million deficit recorded in 2012 (see table 2). Overall, Uganda remained a net exporter under informal trade during the period under review as shown in Figure 3. 8
19 Figure 1: Formal Imports, Exports and Trade Balance, Figure 2: Informal Imports, Exports and Trade Balance, , U S $ m i l l i o n 6, , , , , ,000.0 (500.0) (1,000.0) (1,500.0) (2,000.0) (2,500.0) (3,000.0) (3,500.0) U S $ m i l l i o n U S $ m i l l i o n (4,000.0) Trade Balance Formal Imports Formal Exports Trade Balance Informal Imports Informal Exports Source: UBOS & BOU 3.2 Direction of Informal Trade Informal Exports DR Congo was the leading informal exports destination during 2013, with exports from Uganda estimated at US$135.0 million representing a 32.0 percent share of total informal exports receipts. South Sudan followed with US$130.8 million (31.1 percent) which was higher than US$ million (25.4 percent) registered in Exports to Kenya amounted to US$69.69 million (or 16.5 percent of the total) compared to US$79.97 million (or 17.6 percent of the total) recorded in Tanzania and Rwanda followed in that order representing 10.2 percent and 6.6 percent of informal exports in 2013 respectively. Details of exports from Uganda are as shown in Table 3. 9
20 Table 3: Direction of Informal Trade, (US$ Millions) EXPORTS Country of Destination Values % Change % Share Burundi DR Congo Kenya Rwanda South Sudan Tanzania Total IMPORTS Country of Origin Values % Change % Share Burundi DR Congo Kenya Rwanda South Sudan Tanzania Total Source: UBOS & BOU Informal exports to most of the neighboring countries decreased significantly during 2013 except for South Sudan which continued to grow at 13.7 percent in 2013, following an increase of 37.4 percent in Rwanda recorded a significant decline of 26.9 percent in 2013 after an 8.6 percent increase in Informal exports to DR Congo declined by 14.5 percent, while informal exports to Kenya and Tanzania declined by 12.9 percent and 9.9 percent respectively Informal Imports Kenya continued to be the leading source of Uganda s informal imports during 2013 (Figure 3). Informal imports from Kenya amounted to US$26.5 million accounting for 49.4 percent of total informal imports in 2013, compared to US$24.5 million which was 46.3 percent of total informal imports recorded in DR Congo ranked second, with import expenditure amounting to US$17.7 million (33.0 percent of the total) compared to US$20.3 million (or 38.3 percent of the total) registered in The other remaining countries Tanzania, Rwanda and South Sudan had a combined import bill of 10
21 US$9.4 million (or 17.6 percent of the total) during 2013, compared to US$ 8.1 million (or 15.3 percent of the total) recorded in It should be noted that Uganda s informal imports from Tanzania, Rwanda and DR Congo have continued to decline for the last two years. However, in 2013 the informal imports from South Sudan and Kenya increased to US$ 5.6 and US$ 26.5 compared to US$ 3.2 and US$ 24.5 reported in 2012 respectively. Figure 3: Percentage Share of informal imports by Country of Origin, 2012 and % P e r c e n t a g e 50% 40% 30% 20% 10% 0% Burundi DR Congo Kenya Rwanda South Sudan Tanzania Source: UBOS & BOU 3.3 Trade Flows by Commodity Category Informal exports are grouped into 3 categorizes; Industrial, Agricultural and Other products 2 to reflect the level of processing for the goods transacted. During 2013, Industrial products continued to dominate both informal exports and imports. From Table 4, industrial exports amounted to US$ million accounting for a 5.0 percent decrease compared to US$ reported in DR Congo had the largest share of Uganda s industrial exports of $ 94.4 million in 2013 compared to $ 41.7 million percent in 2012, followed by Kenya which had a share of $ 32.8 million compared to $ 36.1million in The major industrial products include: shoes, clothes, maize flour, sandals and beverages. The major agricultural products include: maize grains, fish, beans and live animals (cattle and goats). Other products include: firewood, sand and stones. See appendix II for the full list of products. 11
22 Agricultural products ranked second fetching US$166.6 million in 2013 representing 39.5 percent of total informal exports, compared to US$184.9 million recorded in South Sudan was the main destination for agricultural commodities with a share of 34.6 percent, followed by DR Congo and Kenya with a combined share of 46.0 percent. The Other product category comprising of mainly natural resources amounted to about US$1.2 million for the period review under review, registering a 40 percent decrease during the year. Table 4: Informal Trade by Commodity Category and Country, (US$ Million) Agricultural Industrial Other Total Agricultural Industrial Other products Total Exports Burundi DR Congo Kenya Rwanda Sudan Tanzania Agricultural Industrial Other Total Agricultural Industrial Other products Total Imports DR Congo Kenya Rwanda Sudan Tanzania Source: UBOS & BOU On the other hand, the informal imports of industrial products increased from US$ 28.1 million in 2012 to US$ 29.2 million in 2013, accounting for more than half of the total informal imports. Informal imports of agricultural commodities amounted to US$ 24.2 million in 2013 compared to US$24.9 million recorded in 2012, indicating a decline of 2.8 percent. Kenya maintained its position as the main source of industrial commodities accounting for US$ 18.5 million, while DR Congo was the main origin for informal imported agricultural commodities accounting for US$ 13.1 million. 3.4 Main informal Export Commodities The leading informal export commodities during 2013 were; shoes, maize grains, fish, clothes (new and second hand), maize flour, beans, cattle, sandals, bicycle parts, beer, goats, motorcycle parts, human medicine, eggs, wheat flour, bananas, soda, 12
23 tomatoes, fruits, blankets, groundnuts, bed sheets and onions in that respective order. Together, they accounted for US$308.3 million; representing 73.2 percent of the total informal exports. This is however, a decline when compared to US$321.1 million recorded in 2012(see Table 5). Table 5: Main Informal Exports, (US$ Million) Items Value % Change % Share Shoes Maize Grains Fish Clothes (New & Used) Maize Flour Beans Cattle Sandals Bicycle Parts Beer Goats Motorcycle Parts Human Medicine Eggs Wheat Flour Bananas Soda Tomatoes Fruits Blankets Groundnuts Bed Sheets Onions Other Total Source: UBOS and BOU Under the product categories, the main informal agricultural exports were maize grain, fish, beans, cattle and goats, while the main informal industrial exports were shoes, clothes (new and second hand),maize flour, sandals, beer and motorcycle parts. The category of other products had salt, cast iron, sand, fire wood and stones as the leading exports (see details in Appendix ii). From Table 5, significant decreases were noted for most of the main items exported except for clothes (New & Used), maize flour, sandals, goats, human medicine, fruits, 13
24 blankets, bed sheets and onions. Human medicine exports more than doubled during the year. 3.5 Main Informal Import Commodities The main imported commodities under ICBT were rice, coffee, cooking oil, wheat flour, palm oil, beans, bananas, clothes (new and used), milk, soap, basins and groundnuts. Together, the listed commodities accounted for US$35.8 million representing a share of 66.5 percent of the total informal import bill, with rice alone accounting for 15.4 percent. Table 6: Main Informal Imports, (US$ Million) Items Value %Change % Share Rice Coffee Cooking Oil Wheat Flour Palm Oil , Beans Bananas Clothes (New & Used) Milk Soap Basins Groundnuts Sugar Soda Juice Fruits Baking Powder Molasses Cement Spaghetti Other Total Source: UBOS and BOU Imports of beans, bananas, fruits, cement and groundnuts, declined by 41.2 percent, 10.4 percent, 29.9 percent, and 46 percent respectively. However, imports of baking 14
25 powder, sugar, juice and spaghetti, more than doubled in Overall, the total informal import bill increased by 1.3 percent. 3.6 Trade Flows by Border Station Informal Exports During 2013, the leading exit borders for informal exports were Elegu (South Sudan), Mpondwe (DR Congo), Busia (Kenya), and Mutukula (Tanzania) with a combined share of 72.1 percent of the total. Elegu alone accounted for US$ million (25.2 percent) of informal exports representing a 22.6 percent increase when compared to US$86.5 million recorded during 2012 (see Table 7). Mpondwe border post ranked second with informal exports worth US$95.9 million (22.8 percent) compared to US$102.5 million recorded in 2012, indicating a 6.3 percent decrease. Busia followed with total informal exports of US$59.7 million accounting for 14.2 percent of the total. This was a decrease of 12.8 percent when compared to the value of US$68.5 million registered in Exports through Mutukula border grew by 9.9 percent accounting for US$ 41.9 million in Overall, most of the border stations reported a decline in their export earnings. On the other hand, Ishasha River, Goli, Lwakhakha, Elegu, and Mirama hills customs recorded a rise during the year Informal Imports Busia remained the leading entry point for ICBT imports in 2013 accounting for US$18.2 million, a share of 33.9 percent of the informal import bill. Mpondwe ranked second accounting for US$9 million (or 16.8 percent), reflecting a slight decrease of 2.3 percent when compared to US$9.2 million recorded during Malaba and Bibia/Nimule followed with US$5.6 million (19.4 percent) and US$5.2 million (9.7 percent) respectively. Overall, most border stations recorded significant declines in informal imports with the most notable ones being Mirama hills (60.9 percent), Cyanika (59.9 percent), Goli (59.1 percent), Ishasha River (52.1 percent) and Mutukula (49.4 percent) as shown in Table 8. 15
26 Table 7: Informal Export Trade by Country/Border Station, (US$ Millions) Country/Customs Station Value % Change % Share Exports Burundi Katuna DR Congo Bunagana Goli Ishasha River Mpondwe Ntoroko Odramachaku Paidha Vvura Kenya Busia Lwakhakha Malaba Sono Suam River Rwanda Cyanika Katuna Mirama Hills Sudan Elegu Oraba Tanzania Kikagati Mutukula
27 Table 8: Informal Import Trade by Country/Border Station, (US$ Millions) Country/Customs Station Value % Change % Share Imports DR Congo Bunagana Goli Ishasha River Mpondwe Ntoroko Odramachaku Paidha Vvura Kenya Busia Lwakhakha Malaba Sono Suam River Rwanda Cyanika Katuna Mirama Hills Sudan Bibia/Nimule Oraba Tanzania Kikagati Mutukula Source: UBOS and BOU 3.7 Trade Flows by Modes of Transport Figures 3 and 4 below show the shares of the different modes of transport used in the transportation of informal exports and imports during Vehicles continued to transport the biggest share of informal exports accounting for US$ million representing 67 percent of informal exports. The vehicles carrying informally traded goods were mostly through Bibia, Oraba and Mpondwe border posts. Bicycles ranked second, conveying goods worth US$53 million (12.5 percent). Bicycles were mainly used at Busia Border station. Motorcycles followed with a value of US$31million followed by push carts with US$25 Million. Push Carts were mainly used at Mpondwe, Malaba and Busia border posts. Boats/canoes were only used at Ntoroko landing site to transport informal exports to DR Congo. 17
28 Figure 4: Informal Exports by Mode of Transport, 2010 to 2013 (US$ Million) Figure 5: Informal imports by Mode of Transport, 2010 to 2013 (US$ Million) Source: UBOS and BOU For imports, bicycles continued to be the main mode of transport in 2013 accounting for US$20.1 million (37.4 percent) of the informal imports. Vehicles ranked second accounting for US$14.3 million (26.6 percent), followed by Head/hand (13.1 percent), motorcycles (12.3 percent), wheel chairs (8.9 percent,), push carts (1.1 percent) and boats/canoes with 0.1 percent. 18
29 Chapter 4: SUMMARY OF FINDINGS AND CONCLUSION 4.0 Introduction This chapter presents a summary of the survey findings, and highlights the implications of the findings to trade and the economy including some recommendations. 4.1 Summary of findings The main findings of the survey were as follows: (i) (ii) (iii) (iv) (v) (vi) (vii) Combined formal and informal export earnings increased slightly in 2013, to US $ 2,829.0 million from US $ 2,811.2 million in 2012 mainly on account of increased formal export earnings. Informal Cross Border Trade declined in 2013, due to significant decline in export trade with DR Congo, Kenya and Tanzania. Informal exports were estimated at US $ million, representing a decline of 7.2 percent in Informal imports were estimated at US $ 53.7 million, representing an increase of 1.2 percent, in contrast with the decline in the overall imports bill of 3.7 percent, to US$5,871.2 million in 2013 from US $ 6,095.8 million Industrial products continued to dominate both informal exports and imports, followed by agricultural products. The leading informal export commodities during 2013 were; shoes, maize grains, fish, clothes (new and second hand), maize flour, beans, cattle, sandals, bicycle parts, beer, goats, motorcycle parts, human medicine, eggs, wheat flour, bananas, soda, tomatoes, fruits, blankets, groundnuts, bed sheets and onions in that respective order. Informal exports to all neighbouring countries decreased except for South Sudan which registered a 31.1 percent increase in Similarly, Kenya maintained its position as the main source of informal imports accounting for 49.4 percent of the total informal imports in The leading exit borders for informal exports were Elegu, Mpondwe, Busia and Mutukula with a combined share of 72.1 percent of the total. On the other hand, Busia remained the leading entry point for imports in 2013 accounting for US$18.2 million, a share of 33.9 percent of the informal import bill. Vehicles and bicycles were the major mode of transportation accounting for 19
30 US$ million representing 79.5 percent of informal exports. The bulk of the exports were mainly transported on vehicles while most imports were transported on bicycles. 4.2 Conclusion Informal export trade represents a significant share of Uganda s merchandise trade with her neighbouring countries. This trade has continued to support the balance of payment position. As trading partners ICBT has continued to contribute to the foreign exchange earning of the country. The results indicate that there is a great market potential for agricultural products destined mainly to DR Congo and South Sudan. 20
31 APPENDICES Appendix I: The Uprating Model The up rating process is based on the following Assumptions; (a) The supply for industrial and other products from either side of the borders is fairly constant throughout the month while the supply of Agricultural products fluctuate depending on season and on whether a given day is a market day or not. (b) Trade transactions through the other unmonitored crossing points in the neighborhood of the monitored border stations are estimated individually based on qualitative monthly reports that are compiled by supervisors. (c) The average value of flows (imports/exports) for a day of the week, say Tuesday is multiplied by the number of times Tuesday occurs in a month. The procedure is repeated for all the days of the week and a sum of the values estimated to get the monthly estimates. The maximum number a day say Tuesday occurs in a month is 5 times while the least is 4 times. Under assumption (a) above, for industrial and other products with constant trade flows, consider a given month having n days with a daily average value of industrial and other products of µi. The total value of inflows/outflows of industrial and other products in a month are therefore mathematically presented as: Ai= n µi (1) Equation (1) states that to get the monthly value estimates for the months in question/consideration, the average daily values of industrial and other products from survey figures are multiplied by number of days in a given month. Therefore, the aggregate estimated value of inflows/outflows during the survey period is the sum of the estimates of the twelve months monitored. Mathematically, A T 12 i1 n i (2) 21
32 Where i = month monitored and AT are total export/imports flows for industrial and other product categories. Equation (2) represents estimated total value of informal exports/ imports of the industrial and other products traded during the 12 months of border monitoring. These are informal trade flows (exports and imports) of goods in industrial products and other products category that passed through the monitored borders during the full days of twelve months of monitoring. To uprate informal trade flows of agricultural and other agricultural products during the twelve months of the survey, assumption (b) is taken into consideration. The monthly aggregate of agricultural trade flows can be expressed as the sum of product of the number of particular days in a month and the average imports/exports for the day of the week. Let dj represent the number of particular days in a month, say four Mondays in March 2010 and j the daily average value of agricultural exports/imports of a given day computed from the observed trade figures. Then, B = (3) d j j Where B, stands for the monthly total value of trade for a given day, say Monday in a month of agricultural exports/imports (i.e. total of all Mondays). Note that, the maximum number of times a day of the week appears in a month is 5 times. Therefore, the monthly informal agricultural exports/imports aggregates for all days in a month are estimated as; BT= 7 d j1 j j (4) Where j represents day of the week, i.e. Monday, Tuesday Sunday. Adding the monthly totals for 12 months we get the aggregate informal (unrecorded) agricultural flows as; 22
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