4 July 2009
Arusha — The East African private sector is yet to fully benefit from trade with United States under the Africa Growth Opportunities Act more than a decade after the US Congress endorsed the initiative.
A press statement from the just concluded East African Community Preparatory Meeting for the 8th Sub-Saharan AGOA Forum, quoted the Executive Director of East African Business Council (EABC), Mr Charles Mbogori who said East African businesses have traditionally focused on Europe and Asian markets and are still not well informed of US market, its nature, and its business environment.
The situation is further worsened by the distance between US and EAC and the high cost of doing business in the region. "East Africa 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 between August, 4th and 6th, 2009 in Nairobi, Kenya.
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 utilized 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 specialization and division of labor.
"Each country should concentrate on the area that gives them the most comparative advantage and regional competitive advantage," he said. "Industries that produce at smaller quantities can be merged into regional industries that can meet the demands of big external market."
He cited an 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 much 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 Aid for Trade should be implemented as quickly as possible so that the EAC countries 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. "Elimination of supply-side constraints- and the adjustment costs need to be financed."
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