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GATS AND E-COMMERCE
Opportunities and Challenges facing Uganda in Realising the Full
Potential of E-commerce under the GATS
FINAL REPORT
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Kampala- December 2006TABLE OF CONTENTS
TABLE OF CONTENTS......................................................................iEXECUTIVE SUMMARY....................................................................ivLIST OF ACRONYMS.........................................................................vi
CHAPTER ONE................................................................................11.0 INTRODUCTION........................................................................11.1 Background...................................................................................11.2 Research Problem and Justification.............................................21.3 Objectives......................................................................................41.4 Methodology..................................................................................4
CHAPTER TWO...............................................................................7
2.0 OVERVIEW OF THE SERVICES SECTOR................................72.1 A Review of the Ugandan ICT Industry and E- Commerce..........72.2 National Policies Related to Trade in Services.............................82.2.1 National Policy on Services and Export Development7
Strategy......................................................................................82.2.2 Ugandas Services Export Development Strategy ....................82.2.3 The East African Community Development Strategy................92.3 Global Service Trends...................................................................11
2 4 Th U d S i S t 12
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3.11 Developments on the on the International Scene.......................393.11.1 Electronic Bill Payments..........................................................39
3.11.2 Digital Signatures.....................................................................393.11.3 Online Banking.........................................................................403.12 Contribution of E-Commerce to Key Sectors..............................403.12.1 International Trade in Goods...................................................403.12.2 International Delivery of Services............................................413.13 E-Commerce and Services Delivery in Uganda.........................423.14 Creation of an E-Commerce Enabling Environment...................47
CHAPTER FOUR.............................................................................514.0 THE GENERAL AGREEMENT ON TRADE AND SERVICES
(GATS).......................................................................................514.1 Definition of GATS........................................................................514.2 History and Nature of GATS.........................................................514.3 Services Covered y GATS............................................................524.4 GATS Modes of Supply.................................................................53
4.5 Components of the GATS.............................................................554.6 Services Schedule by Specific Commitments under the GATS...574.7 Analysis of Ugandas Schedule of Commitments for the
Development of E-Commerce.......................................................594.7.1 Overview of Ugandas Schedule of Commitments....................594.7.2 Tourism and Travel Related Services........................................604.7.3 Telecommunications Services...................................................614.8 Inadequacies and Limitations of Existing GATS Commitments
(M d 1) 71
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6.5.5 Underdeveloped Services Sector..............................................1016.5.6 Internet Security.........................................................................101
6.5.7 Lack of Skills and Capacity........................................................1026.5.8 Shortage and Unreliability of Electricity ....................................1026.5.9 Legal and Regulatory Framework..............................................1026.5.10 Unemployment.........................................................................1035.5.11 Government Barriers................................................................1036.5.12 Loss of Tax Revenue...............................................................1046.5.13 Financial Intermediaries...........................................................105
6.5.14 Logistics and Transport............................................................1056.5.15 Commercial Barriers................................................................1056.5.16 Social Barriers..........................................................................107
CHAPTER SEVEN ..........................................................................1087.0 NEGOTIATIONS FOR TRADE IN SERVICES............................1087.1 E-Commerce and the WTO Multilateral Trade Negotiations .......1087.2 Accomplishments of the GATS Council .......................................109
7.3 Current Services Negotiations......................................................1107.4 Ugandas Negotiating Position at Hong Kong...............................1117.5 Strategies for GATS Negotiations.................................................113
CHAPTER EIGHT.............................................................................1168.0 CONCLUSIONS AND RECOMMENDATIONS...........................1168.1 Conclusions...................................................................................1168.2 Recommendations........................................................................1168 2 1 B ildi N ti l I f t t 116
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EXECUTIVE SUMMARY
The services sector is one of the fastest growing areas of the Ugandan economyalthough it is still in its infancy. Growth in services trade is enhanced by growth inICT. It is believed that liberalisation of trade in services will promote that growth.Ugandas commitment to the GATS is an effort toward further liberalisation and this
is expected to spur the country on to the path of economic growth. This, however,requires an understanding of opportunities and challenges faced by the country inorder to comply with the GATS and realise the full potential of development. It wasagainst this background that this study was undertaken. The overall objective was toinvestigate the implications of Ugandas commitments to the GATS in the context ofe-commerce. The justification for the research was that Uganda did not have a clearunderstanding of the viability and propriety of trade in services through e-commerceunder GATS. The main research issues included:
The implications or relevance of the current GATS commitments to Uganda. The correlation between GATS and e-commerce.
The potential of e-commerce in Ugandas economic development.
Services that can be traded electronically.
Opportunities and challenges for realising the full potential of e-commerceunder GATS.
The appropriate action plan for Uganda.
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provides highlights of the negotiation process for trade in services. These highlightsprovide a basis for understanding the continuing process of trade negotiations which
are crucial for compliance with the GATS.Chapter Eight provides the conclusion and the recommendations. The studyconcludes that, in spite of the many challenges it faces, Uganda has a lot of potentialto exploit the benefits of e-commerce and successfully comply with the GATS. Thechallenges can be overcome if there is commitment on the part of Government. It isevident that the private sector in Uganda has the potential to play its role if only theGovernment can play its role. It is possible, even under inferior IT conditions, to
conduct profitable e-commerce if the environment is conducive.
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LIST OF ACRONYMS
ADR Alternative Dispute Resolution
AISI African Information Society Innitiative
COMESA Common Market for Eastern and Southern Africa
CTD Committee on Trade and Development
ECS Electronic Clearing System
EDI Electronic Date Interchange
EFT Electronic Funds Transfer
EU European Union
GATS General Agreement on Trade in ServicesGATT General Agreement on Tarrifs & Trade
ICT Information Communications Technology
IDRC International Development Research Centre
IMF International Monetary Fund
ISPs Internet Service Providers
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USEA Uganda Services Exporters Association
UNICTRAL United Nations Commission on International Trade Law
UNCST National Council of Science and Technology
UNCTAD United Nations Conference on Trade and Development
UNDP United Nations Development Programme
UTL Uganda Telecom Linited
UWA Uganda Wild life Authority
VOIP Voice Over Internet Protocal
VSAT Very Small Apeture Terminal
WTO World Trade Organisation
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CHAPTER ONE1.0 INTODUCTION
1.1 Background
Trade in services is currently one of the fastest growing business sectors in the
world. Although services had not captured the attention of global business prior to
the mid-1980s, their importance was becoming increasingly prominent. Trade in
services was part of the issues discussed during the Uruguay Round and agreement
to form the General Agreement of Trade in Services (GATS) was reached in 1994.
The inclusion of services in the Uruguay Round negotiations reflected the growing
recognition among developed and developing countries of the important role played
by the service sector in the global and national economies. This was at a time when
information technology was also growing at an unprecedented rate. At that time, the
internet and e-commerce were not major factors in the services trade and
negotiations but with the phenomenal growth of the internet and e-commerce since
the entry into force of the GATS in 1995, many services are now easily traded
l t i ll th ti t i t t WTO b t lib li
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percentages (33.8) compared to transport (28.4), travel (31.3) and insurance &
finance (6.41) (UPTOP, Final Report on Sectoral and Analytical Studies to GuideUganda in the EPA Negotiations-2005). The growth of the service sector in Uganda
is, therefore, likely to be impacted in a fundamental manner by the growth of ICT and
by e-commerce in particular. Uganda has to take care of this reality in its efforts to
promote trade, particularly trade in services, for the development of its economy.
There was need to investigate the viability and propriety of Ugandas commitment tothe GATS in the context of e-commerce.
It was against this background that this study was undertaken to analyse Ugandas
commitments under GATS and assess the opportunities and challenges it is facing in
order to benefit from the GATS. The findings of the study are presented as a
diagnosis of Ugandas commitments under GATS, a comprehensive survey of e-
commerce opportunities in Uganda and a comprehensive regulatory impact
assessment of e-commerce policy and legislation in particular with regard to the
GATS. The findings of the study are intended to inform policy decisions on the
implementation of Ugandas commitments under GATS and render strategies for
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(ii) The trend towards privatisation has resulted in the dismantling of the large
monopolies and state-owned corporations such as communications, posts, energyand banks, giving rise to a host of new services companies. (iii) The direct
consequence of the changes in the economy over the past few years has caused a
need for increased growth in logistical support services such as telecommunications,
financial services and transport as well as business services such as legal advice
and consulting.
As a result of the highlighted changes, services have become an important link in the
economy. For example, the number of telephone lines in use increased from 7,200 in
1996 to 169,820 in 1999 (2001 Statistical Abstract, Uganda Bureau of Statistics)
while the number of tourists to Uganda increased from 149,817 in 1995 to 197,837 in
1997 (Baseline Survey of the Services Sector in Uganda, May June 2002, Uganda
Services Exporters Association, 2002). Given the growing importance of the services
sector, Uganda made commitments to the GATS as one way of strategically
positioning itself to benefit from the global developments. Up to this time, however,
Uganda did not have a clear understanding of the viability and propriety of its
it t i th t t f Th l f U d t
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use to attract foreign investment, know-how as well as technology transfer. On the
other hand, foreign investors from developed countries regard GATS as a tool whichallows them to extend their operations by investing in Uganda and GATS provides a
framework for the stable and predictable development of this trend in services. It was
against this background that this study was undertaken.
1.3 Objectives
The overall objective of the study was to investigate the implications of Ugandas
commitments under GATS to the development and optimal utilisation of ICT and e-
commerce. The specific objective was to undertake a comprehensive study of
opportunities and challenges facing Uganda in realising the full potential of e-
commerce in the context of services liberalisation under GATS.
The highlighted objectives were achieved by carrying out a number of activities.
Primary and secondary data was collected and analysed to evaluate Ugandas
current commitments to the GATS. A survey of the Ugandan service sector was
carried out and a due-diligence / legal audit of the service industry legal framework
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and the nature and accessibility of e-services; GATS and Ugandas obligations under
the GATS; policy framework for e-commerce as well as legal and institutionalframework. The focus of the study was on assessing the viability of e-commerce
under GATS and this was done through addressing various issues related to the
overall study subject.
The main sources of information were the internet and other publications; the media;
Ministries of Tourism, Trade & Industry; Ministry of ICT; Ministry of Works &
Transport; Ministry of Foreign Affairs; Uganda Bureau of Statistics; Uganda
Communications Commission; Internet service providers; private exporters &
importers involved in on-line businesses; financial institutions and tour company
operators.
In order to critically analyse the challenges and opportunities presented by GATS to
effective regulation and development of e-commerce, a comprehensive tool kit that
constituted the methodology was developed. The Tool kit was constituted by a set of
guiding questions (see Appendix 2) aimed at getting information on the critical issues
th t th t d h d t dd Th GATS i l b f i ht bli ti
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Analyse and assess the services industry in the context of services
liberalisation under the GATS discipline: Analyse and assess the synergies between the service industry and the ICT
sector
To assess Ugandas e-commerce readiness, accessibility and nature of e-
services.
To impart knowledge to the public and create awareness of the GATSdiscipline and service liberalisation
To analyse and assess the legal and regulatory framework of the services
industry
To analyse and assess the regulatory framework governing the ICT sector in
Uganda and the manner in which it has continued to develop;
Assessment of the ICT sector in Uganda and its capacity and readiness to
optimally utilise e-commerce;
Assessment of stakeholder institutions; and
Assessment of enforcement of the different obligations.
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CHAPTER TWO
OVERVIEW OF THE SERVICES SECTOR
2.1 A Review of one Example of the Constituents of the Services Sector - the
Ugandan ICT Industry and E-Commerce
Although the ICT industry in Uganda is still in its infancy, it is experiencing a
relatively high growth rate because of its increasing significance to the growth and
development of the economy, particularly the service industry. The Government of
Uganda has formulated and adopted the National ICT policy symbolising Ugandas
commitment to the continued growth and development of a viable ICT industry. A
new ministry has been established to oversee the development of ICT. There are
also initiatives under an agreement with the USAID to develop an ICT
roadmap/national ICT master plan to support e-government and e-business in
Uganda as an immediate goal, to be followed by e-education and e-health.
The Government has also set up the National Information Technology Authority
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2.2 National Policies Related to Trade in Services
2.2.1 National Policy on Services and Export Development Strategy
The government of Uganda does not have a comprehensive national services policy
covering all the services sectors. The Government has only put in place sector
policies, legal framework, regulations and strategies for regulating, harnessing and
promoting the potential of the services industry. It has individual policies and
regulations for individual sectors (Werth, et al 2006).
In the area of tourism there has been the Uganda Integrated Tourism Master Plan
(ITPM) developed for the period 19992-2002. A sequel to this is the National
Tourism Policy, which directs actions to ensure that tourism development is socially,
culturally and environmentally acceptable and a vehicle for poverty alleviation. In the
area of ICT, there is a National ICT Policy propped up by other developmental
initiatives in the sector undertaken by different ministries, other government offices
(Ministry of ICT, Uganda Communications Commission, UIA and the Uganda ICT
Outsourcing Services Association. Also, the Ministry of Gender, Labour and Social
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operationalisation of the Poverty Eradication Action Plan (PEAP), the Medium Term
Competitive Strategy (MTCS). It targets five (5) priority sub-sectors derived from the2002 baseline survey namely higher education, migrant labour, health service
expertise and management of communicable diseases, niche tourism and
information communication technologies (ICT). Some of its key specific objectives
are to:
Increase the visibility and profile of Ugandas service industry in the exportsector
Establish reliable databases of service exporters of Uganda including
Ugandans in the diaspora.
Advocate for pro-active policies that will encourage the growth of the sector
for exports Strengthen market research and dissemination on market opportunities in the
Service sector
Advocate for pro-active policies that will encourage the growth of the sector
for exports
S h k h d di i i k i i i h
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Treaty for the establishment of the East African Community has placed emphasis on
co-operation in services.
Articles 89 to 101 of the Treaty identify the areas of co-operation in infrastructure and
services to include transport (e.g. road, rail, maritime and air transport) and
communication (e.g. postal services and Telecommunication); energy; and other
transport supportive services. Other areas of co-operation comprise education and
training (Article 102); tourism (Article 115); financial services (Articles 85 & 86) and
health (Article 118). Partner States are still at the initial stages of developing the
necessary regulatory framework for their services. These shall continue to be
developed in context of reforms. (EAC development strategy 2005)
As stated in the East African Community Development Strategy of 2005, the EAC
members will take the following steps to promote trade in services:
Select services where competitiveness could be built up at the Community level
and undertake liberalization programmes at the regional level prior to possible
liberalization at multilateral level. Partner States in undertaking liberalization at
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of supply of services, namely cross-border trade, movement of natural persons,
establishment of commercial presence and consumption abroad.
2.3 Global Services Trends
There has been significant growth in services (such as financial services, transport
and shipping services) and many other business services (such as consulting, legal
advice, surveillance, etc.) in recent decades as a direct consequence of the rapid
economic growth and dynamic trade expansion. In the wake of these changes, the
services sector has today become a key link in the strengthening and development
of countries economies. Services are not only important in their own right but also
because they are an input into the effective trade of all commodities. Quality
education and social services such as health, finance, logistics, marketing and
telecommunications services make agricultural and manufacturing producers as well
as service firms more productive and competitive internationally.
Global exports of commercial services and their respective share to total exports
increased tremendously between 1980 and 2001. Over this period, the growth of
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global trade in services which reflects the fact that demand for services tends to be
income elastic: as people become wealthier they spend relatively more on services
mostly tourism, education and health (Riddle, 1986).
While the bulk of this trade accrues to developed countries, developing countries
have been consistently consolidating themselves as services exporters. In the last
decade, exports of services from the developing countries increased by USD 200
billion from USD 147 billion in 1990 to USD 347 billion by 1999. Export of services
comprised the top five sources of foreign exchange for 90 developing countries
worldwide and by 2003 developing countries accounted for 67 percent of services
export markets worldwide (International Trade Centre, et al. 2004).
According to UEPB 2005, trade in services for developing countries covers over 40%
of their total exports. In the next 5 years, this is expected to rise to 70% (ITC, 2005).
There has been tremendous growth in transport services both in value and volume
for increased merchandise trade. Tourism stagnated in developed economies and
increased significantly in developing economies such as East Asia in 2003. The
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and made some tourist attractions inaccessible. A Ministry of Tourism, Trade and
Industry report of 20031 indicates that the country received a total of at least US$
265.35 million as tourist expenditure excluding all expenditures made abroad. The
report reveals that tourism contributed about 4.0% to the countrys GDP and 29.1%
to foreign exchange earnings (excluding all donor financing and remittances of
externalized manpower).
While the sector remains highly dependent on international visitor arrivals with very
limited growth in domestic tourism, it continues to benefit from the governments
recognition and promotion. In 2000, for instance, the tourism industrys share of total
planned investment in Uganda was 30 percent. Investments in tourism have been
directed to expanding capacity to meet the growing tourist influx. Between 1998 and
2000, the sector had 26 investment projects. These included hotels, lodges, tented
camps, service apartments, tour operators, casinos, cinemas, restaurants, and white
water rafting companies with total planned investment of more than US$ 460 million.
Categorising the tourism and travel services sub-sector in Uganda according to the
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ensure that tourism development is socially, culturally and environmentally
acceptable. As a vehicle for poverty alleviation it aims to ensure that tourism
becomes a vehicle for poverty reduction in the future to the extent possible within the
resource base and market limitations.
Education
Education is one of the key service sub-sectors in Uganda and the government
attaches great importance to the improvement of education services.
Education plays a vital role in promoting sustainable development through
improving the populations various skills as well as raising awareness on
various issues of national importance including improving general standards
of living. The Ugandan education system follows a 7-4-2-3 pattern: seven
years of primary education, followed by four years of lower secondary or
Ordinary level, two years of upper secondary or Advanced level, and a
further three to five years of tertiary education.
The introduction of Universal Primary Education (UPE) has caused primary
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good standard of health for all people living in Uganda in order to promote a healthy
and productive life.
In the 1960s and early 1970s Uganda had one of the best health systems in Sub-
Saharan Africa. Makerere University Medical School was one of the outstanding
medical schools in the world producing hundreds of Doctors a year. However
political instability in the country, and massive drain brain and export of trained
medical personnel to foreign countries with better remuneration and working
conditions negatively affected the delivery of health care services in Uganda. Since
1996, the Government has made substantial achievements in strengthening the
health service sector. In 2000, the Health Sector Strategic Plan (HSSP 1) for the
period 2000/1-2004/5 was developed and launched in the framework of the Vision
2025, the Poverty Eradication Action Plan and the National Health Policy. The Health
Sector Strategic Plan (HSSP 2) for the period 2005/6-2009/10 has been developed
by the sector stakeholders to guide sector programmes and activities for the next 5-
year medium term (UEPB 2006). Today Uganda has a number of world-class health
service centers of excellence, which are involved in various research studies at
national and international levels. These include the Joint Clinical Research Centre
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telecommunications liberalization efforts and subsequent licensing of two national
operators and mobile network service providers has contributed to the 2,142%
growth from 1986 to 2004. Most of the increase has taken place during the past five
years.
Overview of Ugandas Services by Mode
According to the General Agreement on Trade in Services (GATS) of the WTO, trade
in services falls under four Modes of supply: cross border trade, consumption
abroad, commercial presence and movement of natural persons.
An analysis of Ugandas services trade shows that cross-border supply of services is
the least developed and utilised mode of trade, considering that the Mode requires
use of advanced technology as part of its delivery mechanism (Werth, et al, 2006).
Owing to the ICT challenges the country faces, this Mode has only been marginally
utilised, largely in the financial services. From the data available, Uganda is a net
importer under this supply Mode. Service inflows in Uganda are broadly from
transportation sector and grew at an annual rate of 18 percent for the period 1993 to
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continued to exceed the inflows and the gap between the two was growing wider
given that the outflows continued growing at a much faster rate than the inflows. This
trend is explained by Ugandas landlockedness which means that for international
access it has to continue spending lots of money on road, air and rail service imports
which constitute the largest portion of service imports under Mode 1. In addition, by
not having an airline of its own, Uganda continues to import substantial air transport
services from other countries, especially the COMESA, EAC and the EU.
In the Mode 2 category (consumption abroad), tourism and travel is the best
example for Uganda of services exports. While Uganda is a net importer of services,
tourism and travel has recorded the biggest recorded source of service inflows for
the country contributing over 60% over the period 1999-2004. This implies that there
should be more efforts aimed at developing the sub-sector further by capitalising on
the positive attributes that tourism in Uganda offers.
Services under the Mode 3 (commercial presence) category have not played any
significant role in the economy. Most Ugandan companies have not been able to
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largest contributor to growth over the 1990/91-2003/04 period accounting for 3% of
the 6.2% GDP growth during that period. They surpassed agriculture as the
dominant productive sector in the economy (Table 1). Much of the growth in the
services sector has been directed to domestic demand rather than exports.
Table 1: Sector Contributions to Economic Growth for Uganda
Sector Shares of GDP (in %) Contribution to Growth Averagegrowthperannum1990/91 2003/04
Average1990/91-2003/04
1990/91-2000/01
2000/01-2003/04
1990/91-2003/04
Agriculture 52.8% 38.5% 44.5% 1.7% 1.5% 1.6% 3.7%
Industry 12.7% 19.4% 16.8% 1.7% 1.3% 1.6% 9.7%
Construction 5.9% 8.1% 7.0% 0.6% 0.8% 0.6% 8.7%
Gas, electricity, water 0.9% 1.4% 1.2% 0.1% 0.1% 0.1% 10.4%
Mining and quarrying 0.3% 0.7% 0.6% 0.1% 0.0% 0.1% 13.5%
Manufacturing 5.6% 9.2% 8.1% 0.9% 0.4% 0.8% 10.4%Services, etc 34.6% 42.0% 38.7% 3.0% 2.8% 3.0% 7.8%
Total GDP 6.4% 5.7% 6.2% 6.2%
Source: Adapted from World Bank calculations based on Uganda Bureau of Statistics.
The services sector accounts for over 70% of formal employment contributing greatly
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Table 2: Uganda Services Account (USD Millions) 1999 2004
Source of inflow 1999/00 2000/01 2001/02 2002/03 2003/04
Tourism and Travel 156.48 165.8 168.96 171.98 200.84Transportation 29.28 33.71 36.14 38.67 47.1Communication 9.14 10.16 9.69 13.38 17.01Construction 0 0 0 0 0Insurance 0 0.93 1.76 0.82 1.34Financial 0 0 0 7.71 22.83Computer & Information 0 0 0 2.88 5.69
Royalties and License 0 0 0 1.38 5.87Other Business Services 0 0 0 12.53 19.16Personal, Cultural & Recreational 0 0 0 0 0Government 8.45 8.45 8.45 9.04 11.51Total Inflows (Credit) 203.34 219.04 225.53 258.39 331.35
Services Net -241.01 -229.54 -316.13 -268.03 -226.67
Source: Adapted from Bank of Uganda
2.7 The Ugandan ICT Industry and E-Commerce
The ICT industry in Uganda is still in its infancy, although it is experiencing a
relatively high growth rate in the COMESA region. The ICT sector is increasingly
becoming critical to the Ugandan economy. Uganda has gone a long way in
liberalizing telecommunications services and telecommunications is part of the
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There is, therefore, an enormous potential to engage in e-commerce and ultimately
expand the services trade in Uganda. The effective development of the ICT sector
will spur growth, efficiency and productivity in the service industry throughout the
country. Nonetheless, the existing policies and regulatory framework are not
considered adequate enough for continued growth of both the service industry and
the ICT sector to propel and transform Uganda into a knowledge-based economy
capable of competing in the global information economy. This was, therefore, the
reason for undertaking a comprehensive study of the opportunities and challenges
facing Uganda in realising the full potential of e-commerce in the context of services
liberalisation under GATS.
Ugandas Services Export Potential
Global service markets are growing and they offer opportunities in business
outsourcing, professional and tourism services. This is due to technological
innovation such as faster, cheaper telecommunications and lower-cost travel, which
makes it easier to market and to reach new customers.
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Uganda could easily be packaged and exported as a Model for HIV/AIDS and
communicable disease-prone and -plagued countries. Ugandas private ICT sub-
sector has made attempts to join the global ICT outsourcing services industry.
Despite limited support from the Government it is reported that Ugandas ICT exports
reached an all time high of US$ 43 million during the fiscal year 2004/5 and several
non-exporting companies are recorded as having a good potential to export ICT-
based services in the next 5 to 10 years. The massive potential in these and other
service sectors could be harnessed and developed for the export market.
These highlights indicate that Uganda has real potential for developing services
export. In order to realise the potential, a number of strategic initiatives need to be
undertaken but care must be exercised to have the priorities right. One of the key
priorities is the development of the physical infrastructure. There is need for
deliberate effort by Government to take the lead in supporting the establishment of
infrastructure particularly in the area of ICT. The Private sector may not take the lead
because private investors are primarily driven by profit and often would be unwilling
to wait if the profit comes in the long term. Investing in the ICT infrastructure should
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CHAPTER THREE
3.0 ELECTRONIC COMMERCE (E-COMMERCE)
3.1 Definition of E-Commerce
The working definition of e-commerce in WTO is the production, distribution,
marketing, sale or delivery of goods by electronic means (WTO,
WT/COM/MID/W/38, March 1998). It can also be looked at as a means of enabling
and supporting the exchange of information, goods and services between companies
and their customers electronically; or commerce that is free of any paper-based
documents and where computer, telecommunication and internet technologies are
used to transact goods, advertise their products and offer services to a global market
(Kiggundu, 2002). These definitions show that e-commerce may be interpreted more
broadly than just trade via computer networks to include trade conducted over
telephones or fax. E-commerce is, however, more prominently seen in internet and
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In terms of the multilateral trading system approach, e-commerce issues were
conceived as a substance generated by an interface with existing WTO agreements
such as GATT, GATS and TRIPs. At the second session of the Ministerial
Conference held in May 1998 in Geneva, Ministers adopted the Declaration on
Global Electronic Commerce4 directing the General Council to establish a
comprehensive work programme to Council for Trade in Services and examine all
trade-related issues relevant to global electronic commerce. It was assigned the
oversight to ensure that all relevant elements and cross-cutting issues are examined
from a broad perspective and that any conflicts of jurisdiction are resolved. 5 The
WTO was requested to examine the treatment of e-commerce in the context of the
GATS legal framework, including the issues of the scope and Modes of supply
(Art.I), MFN (Art. II), transparency (Art. III), developing countries' participation (Art.
IV), domestic regulation standards, and recognition (Art.VI and VII), competition (Art.
VIII, IX), protection of privacy (Art. XIV), market access commitments (Art. XVI),
national treatment (Art. XVII), as well as customs duties and classification issues.
The Council for Trade in Goods was directed to examine the issues relating to
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The abrupt termination of the World Trade Organization ministerial conference in
Seattle left in limbo several electronic commerce initiatives, including the continued
duty-free treatment of e-commerce transactions and a package of further tariff
reductions on hundreds of information technology items6. At the Fourth Ministerial
Conference in Doha in 2001, ministers agreed to continue the work programme as
well as to extend the moratorium on customs duties. They instructed the General
Council,7 to report on further progress to the Fifth Ministerial in Cancn, in 2003.8
After the Doha Ministerial Declaration, the General Council agreed to hold
dedicated discussions on cross-cutting issues, i.e. issues whose potential
relevance may cut across different agreements of the multilateral system. The
issues discussed included: classification of the content of certain electronic
transmissions; development-related issues; fiscal implications of e-commerce;
relationship (and possible substitution effects) between e-commerce and traditional
forms of commerce; imposition of customs duties on electronic transmissions;
competition; jurisdiction and applicable law/other legal issues. The examination of
these issues is still unfinished.9
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organisations, conducted over computer-mediated networks. The goods and
services are ordered over those networks, but the payment and the ultimate delivery
of the good or service may be conducted on or off-line.12 It is comprised of
computer services when a customer sits down at a computer or other access device
and logs
onto internet; advertising services
when the website contains promotional information; distribution services when one
orders for a product and financial services when that product is paid for using the
internet.
Whatever definition is adopted it should always be remembered that e-commerce
involves cross cutting issues as to whether it involves goods or services. The
discussion continues to revolve around whether e-commerce should be considered
as trade in goods or in services, or a combination of the two.13
By defining it as trade in goods, the WTO applies the rules under the General
Agreement on Tariffs and Trade, which automatically lowers all tariffs and barriers to
trade to zero. If e-commerce is defined as trade in services, then the rules of the
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covered under the TRIPS agreement binding for all WTO Members 15. Ecommerce
cuts across a number of WTO agreements the GATT, GATS and TRIPS
In the trade in services, unlike trade in goods, there are no tariffs or fiscal duties
applicable when service products or suppliers enter the territory of another country.
Protection to a domestic service industry is given through domestic regulations. A
country wishing to liberalize has, therefore, to decide which measures to keep in
place and which to modify or remove to bring them in conformity with GATS rules.
The measures on which such decisions have to be made are those affecting the
entry of a service producer or service supplier into its market, and those affecting the
post-establishment activity of service suppliers. Most aspects of e-commerce are
cross- cutting among other WTO Agreements, but GATS covers the major part of it.
This is the reason it is addressed under GATS in this study.
3.3 Benefits of E-commerceThe importance e-commerce plays in Modern business cannot be underestimated. It
is further reflected in the benefits it offers and these include the following:
It saves time in that a buyer need not run all over the town or from country to
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to purchase or sale their goods. Some of the disadvantages associated with e-
commerce include the following:
It is associated with fraud risks and these are increasing
The use of e-commerce increases specific costs, such as shipping and handling
costs (for those dealing in merchandise)
It does not allow the buyer to see or touch the merchandise before buying since
the transactions are done on-line. It is hard to return unwanted goods.
One operating on-line misses business opportunities of those who are not on
line.
3.5 Importance of the ICT Sector and E-commerceThe ICT sector is crucial in the development of a vibrant services export economy
since it plays a backbone for the development of e-commerce and a key role in the
delivery of services using the ICT infrastructure as a platform. E-Commerce is
becoming an essential part of modern economic and business transactions. In
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modems), and scientific instruments. Uganda is not an ITA participant but can at
least benefit from the tariff cuts since the Agreement is undertaken on an MFN basis.
Telecommunications services (basic and value added) and computer services (such
as online information or database retrieval) which in Uganda is part of the ICT sub-
sector provide the infrastructure for the internet and intranets through which e-
commerce is conducted and are themselves a significant and rising share of cross-
border trade in services.17 The GATS is the WTO instrument governing trade in
telecommunications services and computer and related services. In the WTOs work
Programme on e-commerce, an issue was raised as to whether internet access
services should be classified as basic or value-added telecommunications services.
The distinction is important because it determines how internet access services are
affected by the Reference paper and the Annex on Telecommunications. The
Reference Paper applies to internet access services or other internet related
services only if they are basic telecommunications services. If internet access
services are classified as basic telecommunications services, a member who has
adopted the reference paper would have to maintain appropriate measures to ensure
that internet access providers do not act in an anti-competitive manner. Members
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multinational buyers and sellers eventually insist that their trading partners operate
via an internet business-to-business portal. This has already started happening as
revealed through an interview with Cayman, a data processing company based in
Uganda, which experienced difficulties with its partner company in Canada over the
use of Voice Over Internet Protocol (VOIP) because there was no law in Uganda to
allow its use, and there was monopoly over VOIP by UTL and MTN.
3.6 State of the Sectors Development in Uganda
The ICT industry in Uganda is still in its infancy, although it is experiencing a
relatively high growth rate within in the COMESA region. There are about 36 medium
to large-scale investment projects proposed in the ICT sector licensed to a tune of
US $16.5 million, with potential to create about 1,027 skilled jobs for Ugandans.
Ugandas laudable telecommunications liberalization efforts and subsequent
licensing of two national operators and mobile network service providers has
contributed to the 2142% growth from 1986. Most of the increase has taken place
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Business-to-Business (B2B)
This refers to transactions between business conducted electronically over the
various forms of internet and private networks18. Transactions take place between
businesses and the respective supply chain members. This includes on-line-
wholesaling in which businesses sell goods and services to other business on the
web (e.g. when a bank orders stationery from a stationery supplies). This facilitates
the transactions in that it eases the communication processes such as invoicing,
tracking of the order and payment. All these can be performed on line between the 2
parties. This process, however, may become complex if the transactions are of an
international nature and they involve a number of container loads or ship loads. This
will involve greater risks that require more parties to be involved (such as customs
departments, verification bodies and financial institutions). However, where the
parties involved have already developed mutual trust with third parties, B2B internet
portals can reduce the number of parties involved.
In 2005, the global B2B market was estimated to be US$7-US$10 trillion. Currently
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In Uganda, this form of ecommerce is nearly not exploited at all because the national
local market for physical goods and services is much more restricted and confined
essentially to Kampala and other urban centres. Therefore, strategies to exploit this
potential of business could provide a big opportunity for Uganda to develop
ecommerce.
Business-to-Government (B2G)
Here businesses create electronic storefronts that offer information, goods and
services to government. This has not effectively been embraced in Uganda and is
still in its infancy in most countries. It involves an electronic form of interaction
between government and the business or the community. Examples of B2G e-
commerce transactions that can be conducted on-line include the submission of tax
declarations on-line, paying tax, making application for and paying for licences,
passports, or even voting on line. Government-owned institutions such as Customs
Office can provide electronic means of paying customs costs and clearing of goods.
Uganda has installed the UNCTAD ASYCUDA Customs Management S which is
designed to allow businesses and agents to submit Customs declarations
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transacted on-line is expected to increase. For clarity it is important to note that e-
commerce transactions and instruments include the following:
Subscription for online and Internet access.
Subscription to information services / software sales
Consumers retail sales e.g. computer equipment (Internet based shopping
mall) travel services / airline tickets audio /video recordings, books on-line,
auctions. Business-to-business wholesale and retail services and sales
Advertising and marketing services
Financial services and transactions e.g. EFT, ATM/credit cards, online
brokerage, direct investment and stock trading and online banking and bill
payment. Government services and information systems for automatic access to
website, filing documents, obtaining application, licence application and
permits, taxes (payment) and participating in the political process.
Other/Ancillary function contributing to business/commercial activities
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(a) Step 1: Simple Messaging
A mobile phone has a service called the short messaging services (sms). One can
send an sms to ones middleman, customers or even relatives either informing them
that ones produce is ready for collection, thanking them for being loyal to you or
informing them of new happenings within your business at very low cost. This is of
greatest immediate potential because;
it is cheap to use,
covers a wide range of potential customers in one go
Gives a personal touch to your client.
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Services can be accessed by the entrepreneur while away from ones work
station.
(c) Step 3: Web Publishing
In its simplest form this consists of a 3-4 page website giving a basic company
profile, some information about products and services, and contact information
physical and postal address, telephone and fax, and e-mail contact. In a more
advanced form it may include an online catalogue an online version of a
conventional catalogue that can be easily updated.
(d) Step 4: Web Interacting
Web interaction will allow customers more scope to browse through images,
descriptions and specifications relating to your products and services. It may allow
them to submit e-mail enquiry forms, to order online, to use online services or to use
a shopping cart facility and order confirmation that can be paid for and fulfilled offline.
Web interaction can facilitate more effective customer service and to answer
customer queries. It will also be possible to use the Internet to research information.
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Each of the above steps to e-commerce can be owned and controlled directly by the
enterprise or can be accessed via an intermediary through the following ways;
The enterprise owns, develops and uses an e-Commerce application.
The enterprise owns and uses e-Commerce applications, but lets others
develop them.
The enterprise uses e-commerce applications only, but lets others own and
develop them.
From the definition, one ought to have the following in order to engage in e-
commerce and transact electronically:
i) Wire network
This can be of co-axial wires, optic fibre or cable.
ii) Wireless network
This can be satellite or cellular.
On these networks one can operate internet. Internet has resulted in conveyance of
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3.9.1 Physical Products
When trading in goods using e-commerce, a business eventually reverts to physical
order processing. One of the benefits of e-commerce is that it speeds up the
communication and sales cycle leaving the buyer with the impression that delivery of
the goods will also be faster. If the backrooms order processing has not been
designed to deal with the new business model, problems will arise and the buyer will
feel nothing has been gained by buying online. A logistics problem has arisen in B2C
and B2B e-commerce where orders are more regular, orders are smaller, and the
numbers of customers is growing, and are more widely located around the world.
Logistics services providers are still grappling to deal with the new demands of e-
tailing (the equivalent of retailing). For international orders, the delivery process can
become complicated with customs requirements at both ends.
Virtual Products
Trading in virtual products is well suited to e-commerce business. Here the
transaction is completed online; from enquiry, order, payments and delivery all can
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in the world, provided they have Internet connectivity. Once the work is completed
the person sends it back to the company by email. Such services are known as
offline, since the work is done offline. Only when the work is completed does the
person go online to send it back to the customer.
b) On-line teleservices
On-line teleservices can be divided into interactive and non-interactive services.
Interactive on-line services involve real time involvement by the contracted party.
Examples of these types of services include call centres handling, airline
reservations, telemarketing and after-sales support. Low-cost Internet telephony now
allows corporations based in developed countries to outsource call centre work to
low labour-cost countries, provided the call centre, for example, situated in Uganda,
has reliable high bandwidth connections. Online non-interactive services would
include Internet radio stations, or Internet sports sites, which provide downloadable
but recent news on sports events.
3.10 Developments in E-Commerce and Related Activities in Uganda
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investing in the specified areas to apply to the UCC thereby ending the monopoly of
the existing national operators (MTN and UTL) in the specified areas.
Before the telecommunications sector in Uganda was liberalised in 1998, few
enterprises and organisations had access to local Internet Service Providers (ISPs).
After the sector was liberalised, private companies were allowed to establish ISPs.
Following that liberalisation, 3 companies were allowed to register, namely MTN,
CELTEL and UTL.
The liberalisation of the telecommunications sector has led to substantial growth in
the growth of internet and telephone networks. Internet subscribers in Uganda are
estimated at 1.5 million currently (The New Vision, May 26, 2006). The number of
service providers has grown from 1 fixed operator, 1 mobile operator and 2 ISPs in
1996 to 2 fixed operators, 3 mobile operators and 17 ISPs in 2006. Telephone
penetration has grown from a mere 0.26 lines per 100 persons in 1998 to 6.5 lines
per 100 persons in 2006. Of this, the biggest growth has been witnessed in the
mobile cellular telephones. In terms of coverage, telecommunication services are
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These developments have created more employment opportunities for the
population either directly with the service provider, or in other activities related to the
industry such as operation of phone kiosks, internet cafes or provision of various
services to the major telecom, postal and courier companies. Over 5,000 people are
directly employed in the telecommunications companies while about 130,000 people
are indirectly employed in the sector.
Other developments that have taken place in Uganda include projects intended to
improve connectivity for Uganda. These include the underground optic fibre that has
been installed in some parts of Kampala and may be extended to other major town
centres. There are also a growing number of pay phones that have been established
in almost all towns of Uganda and others in village trading centres. These have
helped to provide telephone access to rural populations in a manner that was
unknown prior to the liberalisation of telecommunications in Uganda.
While the telecommunications sector has made substantial growth, internet access is
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Electronic bill (EBP) pay is essentially paying your household bills over the internet.
In most cases, it works like this. The consumer subscribes to an EBP provider,
deposits funds (or you allow them access to your bank account) with them and as
the consumer receives their bills in the mail, they in turn email them to their EBP
provider with the date that they want the invoices paid.
Digital Signatures
These are the latest from the e-commerce world. The system allows consumers to
sign legal documents in different places without being physically there. Prospective
buyers are allowed to sign binding contracts without their physical presence. In the
developed world these are legally binding and they hold the same weight in court as
the signatory were actually present in person.
Digital signatures are the latest from the e-commerce world. This allows consumers
to sign legal documents across the country without being physically there. This
latest trend has really taken off in the housing market. Allowing prospective buyers
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Residents of Uganda may order for goods on line and, upon payment, the goods are
delivered at a warehouse or collecting centre. In order to streamline the payment
system, the traders may operate a credit card system affiliated to banks abroad. The
resident traders open up foreign bank accounts which issue credit cards to the
account holders. The account holders transfer money by TT to their foreign bank
accounts to keep their accounts in credit. The residents use their credit cards to
effect payment on line for commodities purchased or services consumed.
International Delivery of Services
Residents can purchase or sell services on line. Examples of services that can be
sold or purchased on line include telecommunication, education, health, information,
insurance and news services. The system works as follows:
a) Telecommunication
This uses the services of other operators and providers of telecommunication
services. The service providers and operators can have voice and data gateways for
the provision of internet, server hosting and VOIP services. It would also require
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student can do examinations and send back to the foreign tutor online. The marking
can be done and the student receives the marks back on line, one can thus receive a
certificate without ever having to travel abroad or without the tutor ever coming to
Uganda.
d) Financial Services
Ugandans can open and operate bank accounts without having to physically go to
their bankers. A customer can receive bank statement transfer money or make
deposits to the account on line.
e) News and information services
Ugandans can receive news and information on line through subscription to news
and information service providers. This would particularly be helpful in serving
remote areas where news papers cannot reach or where the news papers are too
expensive for the residents
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Ecommerce in services or electronically enabled services trade can be defied as the
use of the internet and other electronic means in the purchase, delivery, supply and
consumption of Services trade internationally. For purposes of electronic commerce,
we can think of service sectors as falling into at least four non overlapping
categories:
(i) The service sectors which help in the development of the infrastructure for
electronic commerce, notably telecommunications and computer and
computer related services;
(ii) The service sectors where the services can actually be delivered
electronically, which include for example business, entertainment and
financial services;
(iii) The service sectors which are complementary to all commerce, including
electronic commerce such as postal, courier and transport services;
(iv) The service sectors which would benefit from electronic flows more
generally, i.e., through lower search costs, faster data transmission,
electronic processing of administrative forms etc.
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The level of IT use in the sector is very high with an indication that 84 percent of all
tour and travel firms own both the Internet and e-mail facilities 19. Ten percent own
only e-mail facilities and 6 percent only Internet facilities with 74 percent using the
Internet and 77 percent using e-mail heavily. Only 10 percent do not use the Internet
and only 3 percent do not use e-mail. This high level of ownership and usage
indicates some export preparedness among Ugandan tour and travel firms.
Although internet facilities are used for hotels, tour and travel agencies, the use of
e-commerce for export of cultural and wildlife tourism is limited. The internet offers
an ideal platform for unique products and unique marketing strategies. For example
video and sound recording systems and technologies can be used to capture
(record) traditional music and video documentaries for sale via Internet to culture
enthusiasts. The Uganda Wildlife Authority (UWA) can create virtual gorilla safaris
that can be sold to the Internet to encourage foreign tourists to come and visit
Ugandas eco-tourism sites.
E-Health (Tele-medicine)
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physicians provide tele-pathology services to hospitals in Bangladesh and Nepal.
Tele-diagnosis services are also provided by hospitals in Chinas coastal provinces
to patients in Macao, Taiwan, and some south-east Asian countries (UNCTAD
1997).
In Uganda, there is only one tele-medicine centre installed by International
Telecommunication Union (ITU) at Mulago Hospital. The facility is connected to only
two links: Mengo and Nakaseke leaving the rest of the country with no connectivity.
Acceleration of tele-medicine in Uganda would reduce on the number of patients
flying abroad for specialist care and provide the local communities with more
affordable specialist care.
E-Learning (E- education)
E-learning, is a field of education that focuses on the use of ICT technology and the
internet to effectively deliver education to students who are not physically "on site" to
receive their education. Instead, teachers and students may communicate
asynchronously (at times of their own choosing) by exchanging printed or electronic
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In many parts of the world, information technology holds promise for reaching
populations that could not be served by traditional education institutions. In Uganda
there are few institutions that have adequate financial resources to subscribe to
international electronic libraries. Neither do they have electronic libraries of their
own. While computing facilities are being developed, capacity is still at a relatively
low level. Locally developed study materials and curriculum remain limited and not
readily accessible electronically.
However given the massive demand for Uganda education in the east African
customs union and the COMESA region the provision of e-learning courses at major
universities and tertiary institutions could tap into a wealth of opportunities for the
export of Ugandas higher education.
ICT and E-commerce
Ugandas Networked Readiness Index (NRI)20 ranking has increased from 80 to 77 in
2004/2005 out of 104 countries, with a score of -0.63. This is an assessment of the
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finance in developing countries is driven by Internet banking, e-payments, and e-
trade finance. A narrow definition of e-finance is: financial services delivered online
through Internet fixed and wireless networks to enterprises and where appropriate,
the areas such as the offline use of electronic devices for payment transactions.21
The financial sector in Uganda has invested substantially in ICT applications, with
banks expanding their network connectivity including ATMs and satellite linkages. An
electronic payment system is still not in place to support authorization and clearance
of credit and debit card payments a significant inhibitor of e-commerce.
Creation of an E-Commerce Enabling Environment
The ability of Ugandan firms to realize the e-commerce potential will depend largely
on the creation of awareness of existing e-services export potential, proper
mainstreaming of services and e-commerce into national export strategies, proactive
cultivation of business opportunities linking various service sectors with the ICT
industry and the creation of the right enabling environment which is an immense
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E-awareness campaigns publicizing the benefits of e-commerce
Training and capacity building in IT and e-commerce both for businesses and
through the formal institutions of learning. Private and public services need to
be mobilized around basic IT training.
Marketing development and market identification skills for businesses.
Developing E-Commerce readiness (solutions) for small businesses.
National level
At the national level in promoting E-commerce, there must also be national policy
strategies that provide an enabling environment for the engagement of e-commerce.
These include:
ICT Infrastructure
Nationally, the government would have to put in place ICT infrastructure as well as
the administrative framework for its management. ICT development is the starting
point of the road to e-commerce success and the growth of e-commerce has been
linked closely with the development and diffusion of new information technologies
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alike. The absence of legal certainty has suppressed potential growth in e-business.
It will also be necessary to harmonize laws regionally and internationally and to
adopt best practices.
Efficient Transport and Delivery Systems
The strategies will also require national transport and delivery systems for a fast and
efficient air freight, express couriers, electronic customs clearance procedures,
warehousing and distribution systems that are e-commerce friendly.
Conducive Financial Services
The development of any meaningful eCommerce activities cannot occur in an
environment that does not enable customers to pay on-line. The financial sector
must also be developed to enable electronic financial transactions, financial systems
for E-payments, electronic banking and credit card access.
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electronic commerce is heavily dependant on several factors, but the most important
of them are the physical infrastructure (telecommunication network), financial and
legal framework, a business and trade environment conducive to e-commerce
regimes, and specific scheduled commitments that promote cross border trade in
services under the GATS. Preconditions for e-commerce development in Uganda
are illustrated in Figure 3.
Figure 3: Illustration of Preconditions for E- Commerce Development in
Uganda
Potential Trade Flow Exports & Imports
Trade in E-services
UGANDA
Wants to penetrate foreign
Country A through E-Commerce
Development of e-commerce
environmentADVANTAGES
Country A
Key Player in Electronicservices trade
Already Developed E-commerce
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CHAPTER FOUR
4.0 THE GENNERAL AGREEMENT ON TRADE IN SERVICES (GATS)
4.1 Definition of GATS
The General Agreement on Trade in Services (GATS) is a collection of legally
binding multilateral rules designed to regulate international trade in services and
gradually liberalise trade in services with a view to promoting the economic growth of
all trading partners. It was brought into force on 1st January 1995 after a process of
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the global and national economies. A group on negotiations for Services, separate
from the Group on Negotiations for Goods, was also established to carry out
discussions on services. The aim was to establish a multilateral framework that
would promote orderly and transparent trade and investment liberalization in
services (Chanda, 2002).
By the end of the Uruguay round in 1993 the member Governments had failed to
agree on a package of market opening commitments. Extended negotiations in 1995
resulted in an interim agreement. The outcome of these negotiations was the
General Agreement on Trade in Services (GATS) which came into force on January
1 1995 with a set of binding rules and disciplines to govern services trade. The
agreement is the first multilateral effort to establish rules governing trade in services
(including financial services) and to provide a framework for multilateral negotiations
(Andlug and Roy, 2005).
Because the very notion of including the services sector in a trade agreement was
so controversial, GATS is structured as a bottom up agreement applying only to
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and other cultural services; sporting and other recreational services; transport
services maritime transport services; internal waterways services transport; air
transport services; space transport; rail transport services; road transport services;
pipeline transport; services auxiliary to all Modes of transport; transport services not
included elsewhere23.
However, the W/120 (which is the official document used by members in making
schedules of specific commitments) divides the service sectors into twelve sub-
sectors. These are:
Business services
Communication services
Construction and related engineering services
Distribution services
Education services
Environmental services
Financial services
Health related and social services
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Mode 2: Consumption abroad, where a service is consumed in the territory
of one WTO member by a national of any other WTO member (e.g.
tourism)
Mode 3: Commercial presence, where a service supplier of one WTO member
crosses the border to establish and provide a service in the territory of
any other WTO member, i.e. establishment of a branch or wholly-
owned subsidiary (e.g. DHL, Standard Chartered Bank).
Mode 4: Movement of natural persons, where a service supplier of one WTO
member stays temporarily in the territory of another WTO member to
supply a service (e.g. Ugandan kyeyos).
The Modes of supply are illustrated in Table 3.
Table 3: The GATS Modes of Supply
Mode Supplier Presence Consumer Presence Example
Mode 1Cross-borderSupply
Service supplier notpresent within theterritory of theMember making the
Service consumer delivered toof the Member making thecommitment, from the territoryof another Member.
A Ugandan softwaredeveloper with aphysical presence inUganda works for a
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Of all these Modes of supply, the ones most relevant to e-commerce are Modes 1
and 2 because of the increasing number of services that can trade electronically
without having to establish a physical presence abroad. The GATS establishes
binding rules covering the treatment of foreign services and service suppliers and
government regulation of services. It includes two kinds of rules; Firstly, The
General Obligations (such as MFN, Transparency) and apply to all service sectors.
Secondly, The Specific Commitments (such as market access and national
treatment) on selected service sectors made by members through negotiations and
recorded in the national schedules and form an integral part of the GATS.24
The GATS' contribution to world services trade rests on two main pillars: (a) ensuring
increased transparency and predictability of relevant rules and regulations, and (b)promoting progressive liberalization through successive rounds of negotiations.
Within the framework of the Agreement, the latter concept is tantamount to improving
market access and extending national treatment to foreign services and service
suppliers across an increasing range of sectors. (Riddle 2003)
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A framework agreement which lays out the general rules and obligations for
trade and investment in services;
Sectoral annexes on specific service sectors (such as financial services, air
transport services, maritime transport services and telecommunications
services)
A schedule of specific commitments pledged by each WTO member and
Lists of exemptions granted to the members under the most favoured nation
(MFN) clause. Much as MFN treatment is a general obligation that applies to
all measures affecting trade in services, it was agreed that particular
measures inconsistent with the MFN obligation can be maintained in
principle for not more than ten years and subject to review after not more than
five years. Such measures must have been specified in a list of MFN
Exemptions submitted by the end of the Uruguay Round of Multilateral Trade
Negotiations or by the conclusion of extended negotiations on certain sectors
for which the delayed submission of related exceptions was expressly
authorized. Subsequently, requests for exemptions from Article II (MFN) can
only be granted under the waiver procedures of the Marrakech Agreement.
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Figure 2: Components of the GATS
GATS
Framework of RulesContains General Obligationsconducive to international
trade in services including:
Most Favoured Nation
Treatment
Transparency
Increasing participation
of developing countries
Economic integration
Domestic Regulation
Recognition
Monopolies & exclusive
National Schedules of
CommitmentsSubmitted by each of the 133
signatory countries. Schedulescontain commitments
regarding restrictions and
limitations to market accessand National Treatment.
Schedules typically comprise:
Cross-industry
commitments
Industry-specific
commitments withrespect to 4 modes of
Annexes and Ministerial
DecisionsProvide information regarding subsequent
negotiations to temporary MFNexemptions:
Annex on MFN exemptions
Annex on movement of naturalpersons supplying services under the
agreement
Annex on air transport services
Annex on financial services
Second Annex on financial services
Annex on negotiations on maritime
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4.6 Services Schedule of Specific Commitments under the GATS
Each WTO Member is required to have a Schedule of Specific Commitments which
identifies the services for which the Member guarantees market access and national
treatment and any limitations that may be attached. The Schedule may also be used
to assume additional commitments regarding, for example, the implementation of
specified standards or regulatory principles. Commitments are undertaken with
respect to each of the four different Modes of service supply. Member States list
specific commitments on service sectors and on activities within those sectors which
they are willing to liberalise. A specific commitment in a services schedule is an
undertaking to provide market access and national treatment for the service activity
in question on the terms and conditions specified in the schedule. These
commitments guarantee access to the countrys market in the listed sector, and they
spell out any limitations on market access and national treatment. In a service sector
where the member has not made any commitments or where a member expressly
limits access, GATS will not apply because the scope of those obligations depends
on the scope of the specific commitments made in the members Schedule. In
circumstances where a Member finds itself committed in sectors it had not
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subsidiary (Mode 3), but will not grant access to its construction market for individual
service providers who come in temporarily to carry out construction work (Mode 4).
Access to the market can also be limited 'horizontally', i.e. so that it applies to all
sectors.
b) Commitments on National Treatment
In addition to market access, most countries also generally grant national treatment
in the same sectors, i.e. treatment equal to that which is granted to their own
services or service providers. Here, too, specific limitations may be listed.
c) Commitments on Domestic Regulations
In those sectors where a country has made specific commitments, it will take steps
to ensure that all of the rules (laws, regulations, administrative decisions, etc.) are
administered in a reasonable, objective and impartial way. The provisions of GATS
on domestic regulations are simply procedural rules and do not govern the content of
rules. The GATS gives members the right to regulate services on their territory
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The ability of businesses providing services involved in electronic commerce
to establish themselves in foreign countries
The temporary entry into foreign countries of providers of services involved in
electronic commerce.
The value of such commitments is in providing and ensuring a secure and
predictable basis for international trade in these services. It is generally accepted
that the GATS Modes of supply of most relevance to the online delivery of services
via electronic networks are Mode 1 (cross-border supply of services without the
physical movement of the service supplier) and Mode 2 (consumption of services
abroad).
This means that the existing Mode 1 commitments listed on each WTO members
GATS schedules would apply to the delivery of services via the internet. This would
provide Foreign Service suppliers a transparent set of rules regarding the specific
level of market access and national treatment to which any given WTO member has
committed itself for the provision of Services. Therefore, a greater number of
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through an internet site accessible through payments, they can still access such
services wherever they are without having to travel to Uganda.
Since there are no limitations on market access through Mode 1 and 2, the provider
of the above services can provide their hotel services to Ugandan through the
internet or physically and tourists (service consumers) can freely come into Uganda
and enjoy the tourism industry. Since Uganda is currently focussed on marketing
herself abroad through Brand Uganda30 tourists can book through the internet for
the service long before they come to Uganda. There will definitely be cheaper costs
of international calling with the liberalization of the industry. For commercial
presence, a foreign service provider is granted access to the Ugandan market upon
government approval in accordance with the Investment Code Act Cap 92 Laws of
Uganda, and the regulations under it. Uganda is not bound under Mode 4 except for
technical personnel subject to the immigration laws. Uganda is bound to follow the
National Treatment principle for Mode 1, 2 and 3 and only technical personnel for
Mode 4.
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carried through networks of the duopoly major licence holders32 and other pre-
existing licence holders33, according to the terms of those licences.34 With the
current opening of cross border supply, Internet consumers in Uganda are expected
to enjoy lower prices.
Regarding market access, there is no limitation to the consumption abroad of those
services (Mode 2). This implies that any foreigner can use these services while in
Uganda without limitation. It also creates opportunities to attract foreign direct
investment (FDI) when there is infrastructure in the form of an efficient
communication sector. This mean that services like banking or architectural services
transmitted via telecommunications or mail from WTO Member country into Uganda
can only be allowed if they flow into the country without going through existing
license holders.
There is a limitation on Mode 3 (Commercial Presence), which means that a service
supplier from one WTO Member can establish territorial presence, say through
ownership or lease of premises, in Uganda to provide a service (e.g. domestic
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and temporary stay of Foreign service suppliers is subject to compliance with laws,
regulations and guidelines in force in Uganda37. This means that a foreign company
or service provider is not allowed to bring its staff to work for it in Uganda unless they
are technical staff and no Ugandans are available or can become available to give
that service.
Regarding national treatment commitments, there is no limitation for Mode 1, 2 and
3. This implies that Uganda is not allowed to operate discriminatory measures
benefiting domestic services or service suppliers as compared to the treatment it
gives to foreign service providers. Uganda is expected not to modify, in law or in fact,
the conditions of competition in favour of her domestic or own service industry. For
Mode 4 (movement of natural persons), it is not bound to treat them like Ugandans
except for the technical personnel stipulated under market access.
Another sector in which Uganda has made commitment is the mobile cellular voice
and data38. For crossborder supply of mobile cellular voice and data, roaming is
allowed but cross-border access permitted only via network of duopoly major licence
operators.39 There is no market access limitation on consumption abroad of the
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For Data services TCP/IP (Internet)41, market access is available for cross-border
supply now since the limitation of international voice over Internet, not permitted
during the five-year exclusivity period of the duopoly major licence holders has
ended. There is no limitation on consumption abroad and commercial presence;
only that the latter requires companies to be registered in Uganda. Market access
limitation on Mode 4 is the same as for the above sub-sectors. Uganda is bound
under national treatment for Modes 1, 2 &3. National treatment limitations are inrespect of technical personnel as far as Mode 4 is concerned.
Global mobile personal communications by satellite operations services are also
listed under the Communications sector. Market access for cross-border supply is
only permitted only under agreement with one or both of the duopoly operators as
well asarrangements under GMPCS-MoU42, to which Uganda is a signatory. Under
the MoU, signatories have an arrangement of cooperation through the sharing of
information. Modes 2, 3, and 4 are similar as for internet service providers. There
are no national treatment limitations except for Mode 4 under which limitations exist
(other than for technical personnel).
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result in innovative communications technology being transferred into the country by
all sorts of IT investors. There is no limitation in respect to Mode 3 and Mode 2. This
means that it is simple for local ICT companies to now manage their own VSAT
(Very Small Aperture Terminal) links where they can transmit data directly.45 It also
means that a service provider can come in Uganda and establish a paging service
business without hindrance if all domestic investment regulations are followed. In
respect to National Treatment, there is no limitation for Mode 1, 2 & 3 and Uganda is
not bound on Mode 4. Foreign suppliers can provide paging services without going
through the major duopoly licence holders.
International basic voice telephony traffic, except cross-border access alternative for
is allowed but cross-border access for roaming and paging services must be carried
out through the networks of the duopoly major licence holders and other pre-existinglicence holders, according to the terms of those licences. Global mobile, personal
communications by satellite operations are permitted only with agreement with one
or more duopoly operators as well as arrangements under GMPCS-MoU, to which
Uganda is a signatory. Similarly Data services TCP/IP (Internet) were scheduled as
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including: engaging in anti-competitive cross-subsidization; using information
obtained from competitors with anti-competitive results; and not making available to
other services suppliers