Uganda has started its journey intourbanization and economic development. The pace ofurbanization is picking up currently at 4.5 percent peryear, and likely to accelerate with rising incomes. Theeconomic benefits from urban growth will come fromexploiting economies of scale and agglomeration and byincreasing fluidity in factor markets that enablesubstitution between land and non land inputs. Uganda'surban transformation is occurring in a period of particularflux a changing climate is likely to adversely influencerain fed agriculture, which will have bearing on theprospects of small towns that serve as interlocutors withthe rural economy. At the other end, closer economicintegration in East Africa will increase the reach of thecountry's largest metropolis, but place it in directcompetition with other metropolises in the region. As pricesof tradable converge in an open economy, considerablethought and effort will be needed to reduce the prices ofnon tradable services that can help maintain economiccompetitiveness. Policymakers both at the national and locallevels need to see themselves as change managers whoencourage flexibility in how Uganda's towns and citiesrespond to emerging needs of business and households.Planning ahead is important, but not locking settlementsinto today's market needs becomes even more important.What are policy priorities to harness economic and socialaims from urbanization? This policy note is organized inthree sections to answer this question. The first sectionprovides stylized facts on the pace, form and efficiency ofUganda's urban transformation. Section two identifieshow land policies, urban planning and transport constraints,and housing shortages are choking urbanization and theeconomy. Section three lays out a framework for prioritizingand sequencing urbanization policies. A statistical annex isalso provided at the end.
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