10 November 2012

East Africa: State Dithers on Customs Territory

Kigali — The deadline to have a fully functional Single Customs Territory (SCT) long passed in 2010 and a new one has never been set.

States are still debating the full impact of such a development on their national economies as was the case recently when Rwanda organized a debate on the impact of the destination model of SCT.

Since 2004 when the idea of an EAC Customs Union was launched, its deadline to deliver the much awaited Single Customs Territory (SCT) was surpassed two years ago and still, 'we don't have a new deadline,' says Amb. George William Kayonga, the PS at Rwanda's Ministry of East African Affairs (MINEAC).

Seven years later, the concept of a SCT for the EAC region remains a subject of contest in partner states as was the case recently when Minister Monica Mukaruliza, convened a debate on the implications of the Destination Model (DM) of SCT on Rwandan Economy.

This was during Rwanda's annual EAC week aimed at sensitising Rwandans on the progress of the integration project.

Note that on April 28 this year the summit of heads of state adopted in principle the DM of SCT where assessment and collection of revenue is made at the point of entry and revenues are remitted to the destination partner states.

According to Amb Kayonga, under the destination model, Rwanda's customs operations' offices and officers would have to move to the Mombasa and Dar Es-Salaam ports, the entry points accounting for 99 per cent of Rwandan total imports.

That would mean all goods destined for Rwanda would be assessed for taxation, clear the required duty before heading for Kigali and the same would be done for the other port less states, Uganda and Burundi.

The end is not in sight

Apparently, the biggest achievement on the SCT talk is that at least, the heads of the partner states have decided, albeit in principle, which model of single customs they want to use.

They have chosen the destination model over pooling of revenues option but even then, it seems the choice was made under a state of indecision because there remains key areas of contest that Rwanda for instance is worried may make the model fail to work for all.

John M Kasanga, a Zambian Consultant hired by the EAC to advise them on the development of the SCT said the DM of SCT to work, the port owners, Kenya and Tanzania must regionalise their jealously guarded ports to create terminals for all five partner states.

The major worry is how ready or willing the two port owners are to actually cede powers over their ports, a natural endowment that makes the difference between them and their land locked partners.

All this depends on whether the partner states really want the same things. Amb Kayonga says while in principle the member states share mutual interests, there's a tendency to differ when they want those interests and how they are to achieve them.

The issue of regionalising the ports is bigger as port owners will obviously lose some income and ongoing negotiations should focus on how they are to be compensated, how much and by whom.

The second issue which Minister Mukaruliza raised would come in; the capacity of the current ports to accommodate three other terminals.

Kasanga questioned the rational of investing over US$60million on the OSBP at Rusumo while using the same resources to develop and expand ports would be much more important under the SCT approach.

The debate also showed that Rwanda is not willing to entirely lose its internal borders for fear of the impact of free in-flow of goods .

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