Edward Ojulu
8 July 2002
Uganda could rejoin the Comesa Free Trade Area (FTA) after a donor funded study revealed that the country would have little to lose in terms of revenue if it waived tariffs on imports from the region.
Presenting the budget proposals to parliament for the year 2002/3 in June, Finance Minister Gerald Sendawula reduced duty on Comesa products by 80 per cent, but Comesa Secretary General Erastus J.O. Mwencha told The EastAfrican last week that he expects Uganda to announce zero tariffs by December this year.
The issue was raised in Swaziland in April during the fifth meeting of Comesa finance ministers. A strong appeal was made to member-states such as Uganda, which are not yet members of FTA, to speed up the process of joining it.
The ministers said full participation of all member-states in FTA would help enlarge the market, ensure efficient exploitation of economies of scale and expand the industrial base of the Comesa region, among other benefits.
This would offer better investment opportunities and create jobs for the people of the region, Mr Mwencha said.
Comesa has a rich mineral potential, with 300 billion tonnes of phosphates, 105 billion tonnes of iron ore, 200 billion tonnes of petroleum and large quantities of uranium, nickel, copper and cobalt, all of which can be instrumental in stimulating industrial growth.
With funding from the World Bank, International Monetary Fund and the African Development Bank, the Comesa secretariat commissioned a study on the revenue implications of zero-rated tariffs for member-countries.
Uganda had feared that it would lose about 1.9 per cent in total revenue and 11.7 per cent in Customs duty if it joined FTA.
There were also fears among local investors that the introduction of zero tariffs would disadvantage local industries by exposing them to competition from cheaper imports from other Comesa countries. They cited Kenyan products, which they said would drive them out business if allowed in tax-free.
In pushing for all members to embrace FTA, the founders hope to forge a huge market from a combined population of 380 million people and a gross domestic product of $180 billion, which would make it easier to attract big foreign investors.
However, the refusal by Tanzania to join means that the FTA will miss out on the 32 million Tanzanian consumers.
Tanzania opted out of Comesa for the broader Southern Africa Development Community, which is dominated by goods from South Africa.
Officials in the Ministry of Finance said last week that Uganda was committed to joining FTA by December this year after it was established that the "benefits far outweighed the losses."
In May, Rwanda too announced that it would join FTA before December this year, to pave the way for free movement of goods and services from the region.
However, Kenya last month slapped "reciprocal duty" on goods from the other two East African Community states of Uganda and Tanzania, a move that was initially feared would undermine the Community.
Last week, sources at the Ministry of Trade and Industry however said that the issue would be handled both at "ministerial and bilateral levels."
Copyright 2002, Nation Media Group Ltd. All rights reserved.
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