TRALAC - Trade Law Centre

Uganda: AGOA Factory Closes

Friday, 20 October 2006

Source: The Monitor (Kampala)

After limping for about six years, the Tri-Star Apparels plant in Bugolobi, popularly known as Agoa has finally wound up .

Information available to Daily Monitor indicates that the plant's management has suspended operations and sent workers home without any explanation.

The Company's Managing Director, Mr Vellupilai Kanathan ,told Daily Monitor by telephone yesterday that the plant would resume operations in a month's time even as he admitted that "logistical hurdles" had hinted normal progress.

He did not elaborate on the nature of the obstacles the company was facing, but hinted that they were related to "importation of raw materials."

The project established to tap the United States' Africa Growth Opportunity Act (Agoa), was meant to bring hope to thousands of unemployed Ugandans and earn the government a lot of taxes. Agoa is an arrangement whereby African countries can export goods to the US market tax-free. Tri Star imports fabric from Asia and turns it into finished clothes.

President Museveni's two advisers on Agoa: Ms Susan Muhwezi and Mr Onegi Obel couldn't be reached for comment yesterday. The plant, which was heavily subsidised by the government amid intense acrimony, was set up by Sri Lankans and extolled by the government then as a beacon of the country's efforts to effectively gain from Agoa.

It was something of a pet project for the President who demonstrated unusual passion during its establishment and personally took time to explain to the nation how Tri Star would offer instant jobs to thousands of people who had never dreamt of the prospect of a regular income. It would also nurture a rich and stable market for Uganda's struggling cotton farmers, he contended.

Kananathan said yesterday that only a few workers remained at the plant, which in effect means that all the "Agoa girls" are currently at home. Apparently that appears a cruel contrast to the soaring optimism and pomp that characterised the time when one thousand girls were brought to Kampala for training in textile craft, which was to open before them a path to employment and progress.

To prop it up, the government of Uganda guaranteed Tri-Star a loan of $5 million from the Uganda Development Bank, UDB, waived taxes on all its equipment imports, offered free premises and contributed a substantial subsidy towards training of workers.

The Shadow Finance Minister, Mr Nandala Mafabi, estimated the cumulative figure of the incentives lavished on Tri Star in hundreds of billions of Shillings.

He viewed the precipitous collapse of the project as part of the entrenched economic mismanagement of the NRM administration and said the development would expose the continuing large-scale waste of public resources. "How do you get a serious project like that and put it under the management of a man like Kananathan?" he asked.

He alleged that Kananathan was not ploughing back profits into the company. Kananathan vehemently denies this claim. It's unclear though whether the company has ever made a profit since its inception.

A thoughtful observation of Tri Star's implosion somewhat illuminates a frustrating and perilous journey that seemed destined for no better ending.

In June this year, the Office of the US Trade Representative published a list of success stories of Agoa, countries that were making encouragingly deep inroads in US's Agoa market in all the eligible products. But Uganda's featuring on that list was cold and sobering: it was only in regard to its cooperation with the US in pest control training.

According to Agoa 2006 Assessment Report released in May this year, Uganda only exported goods worth $4.5 million in 2005 compared to Kenya which exported goods worth $278 million.

Another telltale that Tri Star was hurtling to a bust was its notorious labour relations record.

Allegations of worker maltreatment lingered even after management said it would improve their conditions after the first workers strike on October 21st 2003 that resulted in dismissal of hundreds.

Far from spurring growth in Uganda's cotton sector, the plant at Bugolobi has never bought a single bale of local cotton. And next year, Uganda will still be unable to produce its own fabric, which might automatically disqualify its apparels for eligibility for the Agoa market.

Starting around mid next year, the US wants all countries exporting textiles under Agoa to use local raw materials.



“ Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Uganda’s bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.


Other regularly updated trade statistics on AGOA.info include: (click each link to view)

  • AGOA-Beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.