MINDSET ORIENTATION AND IMPORT SUBSTITUTION: A CASE STUDY OF MINISTRY OF ENERGY AND MINERAL DEVELOPMENT

1.1 Introduction

Mindsets are at the heart of social change efforts. Studying mindsets helps one to understand how people make meaning of their experiences and arrive at particular beliefs or judgments. Mindset shifts result in changes in behaviour, policy, and even social institutions and structures. In other words, changing mindsets is part of changing society.

The study will examine the role of mindset orientation in petroleum import substitution in Uganda. It intends to focus on collecting views about the import substitution of government stakeholders in charge of the petroleum industry. Mindset orientation is assumed as an independent variable (IV) while import substitution is assumed as the dependent variable (DV). Mindset orientation will be measured in terms of transformation, engagement, and innovation. On the other hand, import substitution will be measured in terms of how much local goods and services have been able to replace foreign commodities.

1.2 Background to the Study

This section is presented in four perspectives; historical, theoretical, conceptual and contextual.

1.2.2 Historical perspective

Import substitution (IS) begun (when) in Europe as a policy that eliminates the importation of the commodity and allows for production in the domestic market (c). This policy was adopted in the early industrialisation struggle of most advanced economies as a form of protectionist approach aimed at bringing about structural changes in the economy through industrialization ( c). According to Jackson and Jabbie (2020), almost all of today’s rich countries used tariff protection and subsidies to develop their industries in the early stage of their development. The countries that are considered to have reached the summit of the world economy through free-market, free-trade policies such as Britain and the USA, most aggressively used protection and subsidies to develop (Chang, 2012). The IS policy was later adopted by many Countries inform of Import substitution Industrialization (ISI) which is an industrial development program to protect local infant industries through protective tariffs, import quotas, exchange rate controls, special preferential licensing for capital goods imports, subsidized loans to local infant industries, etc. (Ogujiuba, Nwogwugwu, and Kike, 2011).

Today, China’s economy is rapidly developing with unprecedented levels of industrialisation and poverty alleviation. Li and Vinten (1997) suggest that the current economic prowess of China is premised on the country’s unique macroeconomic policy initiative that was adopted between 1950 and 1995. The policy initiatives were hinged on a balanced juxtaposition of two development models i.e., Mao’s closed economy (ISI) and Deng Xiao Ping’s economic liberalisation approach (Export-Oriented Industrialisation-EOI). Mao’s regime fully embraced a centralised planned economy, characterized by a series of land reforms, fiscal control mechanisms, compulsory purchase of domestic produce, tight market controls, centrally planned wage/income determination and price control (Ka & Selden, 1986).  Russia is the latest country to implement an import substitution policy, particularly in the oil and gas sector. This was after Western countries imposed financial and economic sanctions on Russia (N E Lebedeva, 2020). Since 2015, the Russian government set goals to manufacture enough products to cover 70-80% of the domestic demand for oil and gas equipment. As a result, import share in oil and gas equipment purchases significantly decreased by 50% throughout 2015-2020 (N E Lebedeva, 2020)

According to (Jackson and Jabbie (2020), the ISI policy was introduced in Latin America and some parts of Asia and Africa from the 1930s through into the 1960s as a notion that was meant to incorporate three stages; domestic production of previously imported non-durable consumer goods, the extension of production to a wide range of consumer durables and complex manufactured items and finally, exporting of manufactured goods, with the vision of diversifying to multiple ranges of items. Soon after independence, countries of Sub-Saharan Africa identified themselves ideologically with ISI strategy and began to implement it in the subsequent years.  Countries such as Tanzania, Zambia, and Nigeria began to implement the import substitution industry on a large scale.  Nigeria went ahead to attempt to replace all petroleum imports through building oil refineries, a move that never came to materialize up to now (Toledano and Maennling, 2017). According to Mendes, Mário, Bertella and Teixeira (2014), the African import substitution process was not successful because the industrial policy occurred amidst economic policies adopted by Governments that neither planned their actions, nor foresaw the consequences of their actions. Bruton (1998) points out that the measures taken for implementation of the import substitution industry in African countries lacked economic rationality, and were much more ad hoc than in any other part of the world. Vitta (1990) states that the development of the African industry depended on results left to chance, the direct consequence of steps taken without any concern over cause and effect.

The ISI in Uganda was re-energized by the introduction of the Buy Uganda Build Uganda (BUBU) policy in 2014. The BUBU policy was designed as a guiding tool to policymakers to ensure that the promotion of the consumption of locally produced goods is integrated into their policies and procedures and aimed at giving prominence to locally produced goods. The third National Development Plan (NDP III) from 2020/21 to 2024/25 includes ‘import replacement/promotion of local manufacturing’ as one key development strategy, focused on assembly of motor vehicles and/or electronic products; manufactures of metals e.g. simple spare parts; iron and steel; textile yarn, fabrics, made-up articles; paper, paperboard, and related articles; prefabricated buildings e.g. sanitary, plumbing, fixtures and fittings; furniture and parts thereof; beddings and mattresses; pharmaceuticals; starch; and manufacture of ceramics.

Uganda’s import substitution strategy is aimed at attainment of the country’s development goals, self-sufficiency, increasing forward and backward linkages, improving balance of trade and complementing export promotion in the medium to long term, improving competitiveness and strengthening the private sector; and providing learning ground for nurturing companies to build capacity for export.  Ggoobi (2020), suggests a number of factors led to failure in the implementation of ISI in the past, such as wars, non-prioritization of industrialization after independence, non-budgeting of ISI, under-development of human resource and embracing of neo-liberal policies that weakened institutions such as UDC.  As result Uganda has attained an average value added of 8.8 percent since 1960 and imports more twice than it exports (Ggoobi, 2020).  It is evident as Adewale (2017) puts it that industrialisation can only be achieved by developing local capacity that is capable of substituting imports in order to reduce or possibly eliminate economic leakages

1.2.2 Theoretical perspective

Human intelligence can either be altered or they are largely fixed from the moment of birth and difficult to change (Jegathesan, M., Vitberg, Y.M., & Pusic, M.V. (2016)).  Beliefs in the malleability of intelligence have their roots dating back to 1988, when Dweck and Leggett published an article about implicit theories of intelligence. In the study, Dweck and Leggett looked at how children, often with equal abilities, responded very differently to setbacks. Some children experienced setbacks as interesting learning opportunities, while others experienced them as negative and demotivating failures (Diener & Dweck, 1978; Dweck & Reppucci, 1973; Elliott & Dweck, 1988).

Dweck and Leggett theorized that believing intelligence was fixed, could lead to a helpless response, while the opposite belief might lead to a mastery response. Today, the belief that intelligence can grow, or having a so called growth mindset, has been associated with transformation, engagement, and innovation (Derler, Cardero, Simpson, Grant, Slaughter, Baer, and Celi, 2018),  a reduction in the negative effects of poverty (Claro, Paunesku, & Dweck, 2016; Sisk, Burgoyne, Sun, Butler, & Macnamara, 2018), setting favorable goals (Robins & Pals, 2002), improvements in motivation, diligence and concentration (Ommundsen, Haugen, & Lund, 2005), a reduction in the stereotype threat effect (Aronson, Fried, & Good, 2002).

1.2.3 Conceptual perspective

The Independent Variable (IV) is the Mindset Orientation which is measured in terms of Engagement, Innovation and transformation (c).  According to Keating and Heslin (2015), mindsets potentially influence peoples’ engagement in several ways particularly through their enthusiasm for development, construal of effort, focus of attention, interpretation of setbacks, and interpersonal interactions. Alwi, Jaaffar and Baker (2017) assert that people with a growth mindset are more willing to try new things or take thoughtful risks that can lead to innovation. Transformation is achieved when people accept and embrace the need to adapt quickly to changes and opportunities leading to motivation and proactivity (Caniëls, Semeijn, and Renders, 2018).

The Dependent Variable (DV) is the Import substitution Industrialization (ISI). This is an industrial development program to protect local infant industries through protective tariffs, import quotas, exchange rate controls, special preferential licensing for capital goods imports, subsidized loans to local infant industries etc, and measure in terms of how much foreign commodities have been replaced by local goods. The implementation of such a policy requires work-force mental attitude that is more engaging, transformative and innovative to influence responses and interpretations (Soltani, Syed, Liao and Iqbal, 2015).

1.2.4 Contextual perspective

Uganda’s journey to import substitution was energized in 2014 with the introduction of BUBU policy following the discovery of recoverable petroleum resources in 2006. This was followed by the National content policy for Petroleum, 2018 and now the local content Act of 2020. The legal framework is aimed at building capacity of local enterprises and fostering job creation through industrialization. Uganda has attained an average value addition of 8.8 percent since 1960, imports twice more than it exports (Ggoobi, 2020) and the current petroleum import bill stands at 15% of the total import bill and expected to increase since the capital-intensive development stage is about the commence (Ministry of Energy and Mineral Development, MEMD, 2021). It is clear that ISI in Uganda is not faced with the lack of ideas, strategies or policies, but the readiness and ability to shift mindsets. Mindset change could be the missing link to Uganda’s transformation.

1.3 Statement of the Problem

Uganda has low levels of industrialization with an average value addition of 8.8 percent since 1960, imports twice more than it exports (Ggoobi, 2020) and the current petroleum import bill stands at 15% of the total import bill (MEMD, 2021). The measures taken for implementation of the import substitution in the industry such as establishing policies and strategic plans have been left to chance with limited stakeholders’ transformation, engagement and innovation, similar to many other failed policies.

1.4 Objectives of the study

1.4.1 General Objective

The main objective of the study is to establish the relationship between mindset orientation and import substitution at the Ministry of Energy and Mineral Development (MEMD)

1.4.2 Specific Objectives

The study focused on three specific objectives that were deemed critical:

1. To determine the relationship between engagement and Petroleum import substitution at MEMD
2. To determine the relationship between transformation and Petroleum import substitution at MEMD

• To determine the relationship between innovation and Petroleum import substitution at MEMD

1.5 Research questions

Three research questions will guide the research process:

1. How is engagement related to Petroleum import substitution at MEMD
2. What is the relationship btn

• How is transformation related to Petroleum import substitution at MEMD

1. How is innovation related to Petroleum import substitution at MEMD

1.6 Research Hypotheses

The tentative answers to the research questions are:

1. There is a significant relationship between engagement and Petroleum import substitution at MEMD
2. There is a significant relationship between transformation and Petroleum import substitution at MEMD

• There is a significant relationship between innovation and Petroleum import substitution at MEMD

1.7 Conceptual Framework

Mindset orientation considered as an IV and underpinned by engagement, transformation and innovation (Figure 1). It is assumed that with oriented mindset, the substitution of imports with local commodities will be achieved.

Figure 1: Conceptual framework relating mindset orientation to petroleum import substitution

1.8 Justification of the Study

The import substitution of petroleum products in Africa has had challenges dating back to the early discoveries up to recent ones and in Uganda the petroleum import bill stands 15%. The challenges are attributed mainly to fixed mindsets of Africans, making engagement, transformation and innovation efforts had to achieve. It is therefore considered justifiable to engage in a systematic study to orient the mindsets behind the nascent petroleum industry in Uganda towards fostering growth through import substitution industrialization

1.9 Significancy of the Study

Ministry of Energy and mineral Development shall use the findings for national guidance and goal-setting towards realization of import substitution benefits.

1.10 Scope of the Study

The study will address content, geographical and time scopes

1.10.1 Content scope

The study will be focused on mindset orientation (with engagement, transformation and self-development as indicators of oriented mindset) as independent variables. Petroleum import substitution (DV) was measured in terms of petroleum import bill of petroleum products.

1.10.2 Geographic scope

The study will be conducted at the Ministry of Energy and Mineral Development (MEMD) Kampala. The MEMD has many departments and Agencies but Petroleum and related matters are handled by the Directorate of Petroleum, Petroleum Authority of Uganda and Uganda National Oil Company Limited.

1.10.3 Time scope

The study will be focused on the period of 2021-2023 which is a prime time when critical decisions will be made prior to and during development of key infrastructure necessary for production of discovered oil resources.

Limitations

1.11 Definition of key terms

Import substitution industrialization (ISI) is an industrial development program based on the protection of local infant industries through protective tariffs, import quotas, exchange rate controls, special preferential licensing for capital goods imports, subsidized loans to local infant industries, etc. (Ogujiuba, Nwogwugwu and Kike, 2011).

Fixed-ability mindset. A dimension of academic mindsets, also referred to as an “entity” theory of intelligence. The belief that intelligence and academic ability are fixed qualities that students either do or do not possess and that they cannot be changed through effort (Dweck, Walton, & Cohen, 2011).

Growth mindset. A dimension of academic mindsets. The belief that intelligence and academic ability are not fixed but are malleable and can be increased through effort and learning (Dweck, Walton, & Cohen, 2011).

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