Francis Ayieko
6 July 2009
Nairobi — Even as East Africa gears up to host the 8th Africa Growth Opportunities Act Forum in Kenya, the private sector in the region says it is yet to fully benefit from trade between itself and the United States under the arrangement.
According to the East African Business Council executive director, Charles Mbogori, East African businesses have traditionally focused on European and Asian markets and are still not well informed about the US market, its nature and its business environment.
Speaking at the just concluded East African Community Preparatory Meeting for the 8th Sub-Saharan Agoa Forum, Mr Mbogori said the situation has been further worsened by the distance between US and EAC and the high cost of doing business in the region.
"The East African region has some of the highest energy, and transport costs in the world," he said. "This makes it difficult for firms in East Africa to compete with those in Asia and Latin America."
The preparatory meeting, which took place in Kigali, Rwanda, is a precursor to the 8th Agoa Forum scheduled to take place on August 4-6 in Nairobi.
Passed by the US Congress in 2000, the African Growth and Opportunity Act provides trade preferences for quota and duty-free entry by sub-Saharan African countries into the United States for certain goods, expanding the benefits under the Generalised System of Preferences (GSP) programme.
Notably, it has helped expand market access for textile and apparel goods into the United States for eligible countries.
Information on trade under Agoa in sub-Saharan Africa shows that Mauritius, Botswana, Swaziland, Namibia, Nigeria and Kenya are just a few of the countries that have utilised Agoa better while Tanzania, Uganda, Rwanda and Burundi have performed poorly in comparison.
Mr Mbogori suggested that for East Africa to leverage itself as a region in the US, companies should stop competing against each other but instead start complementing each other especially in the area of specialisation and division of labour.
"Each country should concentrate on the area that gives them the most comparative advantage and regional competitive advantage," he said.
"Industries that produce their products in smaller quantities can be merged into regional industries that can meet the demands of big external market."
He cited the example of East African Breweries that has been able to merge country subsidiaries to create a company that can meet the growing demand in the region.
"Establishing collaborative partnerships with competitors, supporting industries or producers of complementary goods increases capital, market share and spreads the risk and encourages sustainability of a larger market," he said.
He added that activities and sectors such as development and improvement of ports and other infrastructure are better handled at regional level and should be developed at regional level rather than country specific.
The primary objective of deeper trade integration should therefore be improving competitiveness in the EAC region as a useful stepping-stone on the way to greater integration in the world economy," he said.
Mr Mbogori further said that Aid for Trade should be implemented as quickly as possible so that the EAC countries can improve their productive capacity and expand exports to the US market while the AGOA preferences last.
"The EAC member states cannot take full advantage of the trade opportunities created by the AGOA unless their productive capacities are improved and diversified so that they are capable of producing goods and services competitively and addressing the needs of their external markets," he said.
He added: "Elimination of supply-side constraints and the adjustment costs need to be financed."
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