KAMPALA, May 26 (Xinhua) -- Uganda is to introduce a 10-year tax holiday for flower sector in the next financial budget aimed at boosting the ailing sector amid fierce competitions from neighboring countries.

    "The ten-year tax holiday is a done deal. This is a written directive from the president and this coming financial year is going to be effected," Ssemakula Kiwanuka, the state minister for investment was quoted by Daily Monitor on Monday as saying.

    The announcement came at a time when the flower sector is facing difficulties with some investors threatening to exit the sector as high production costs and high freight charges continue to eat into their profits. Uganda has the highest freight charges. As of April, freight charges were at 2.30 U.S. dollars per kilogram compared to Kenya's 1.75 dollars.

    Juliet Musoke, the Executive Director of the Uganda Flower Exporters Association (UFEA), said the 10-year tax holiday is an incentive which is going to attract investors into the industry and also retain the existing investors.

    With the tax holiday, UFEA will be able to fulfill its strategy to boost production to 400 hectares up from the current 202 hectares by the year 2010 and increase export volumes to 20,000 tons up from 7,500 tons, which will fetch the country close to 80 million dollars compared to the current 26 million dollars.

    UEFA projects that the resurgent sector will be able to employ about 15,000 Ugandans up from the current 6,000. "Expansion of the industry will bring into the country more cargo plane, which will bring down the cost of freight charges because of competition," said Stanley Mulumba, the owner of Uga Rose Flowers.

    Investors also called on the government to improve poor roads to flower farms.

    Although the government was commended for tax waivers on 100 KVA diesel generators, the increasing cost of diesel has since dampened the benefits of the incentive. The cost of diesel increased 35 percent in the last three years. A liter of diesel now costs about 1.6 dollars up from one dollar and there seems to be no stability thus making it more expensive to operate on diesel.