13 January 2013

East Africa: EAC Standing in Way of Regional Trade

Arusha — East African Community (EAC) Secretary General Amb. Dr. Richard Sezibera predicted continued regional economic growth.

This however will not be achieved unless the regional traders start to fully benefit from the Customs Union and the Common Market protocols that up till now, are still shelves.

The five partner states must review, amend and harmonize all laws relating to the implementation of the two protocols since it is through improved regional trade that the predicted regional economic growth can be achieved.

Tanzanian President Jakaya Kikwete while addressing the East African Legislative Assembly (EALA) in Arusha recently acknowledged that all the partner states are behind schedule on these protocols.

Among the most important protocol that has not been ratified by Kenya, Uganda, Tanzania, Burundi is the agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

According to a report of the council of ministers, it is only Rwanda that has informed the EAC Secretary General Amb. Dr. Richard Sezibera on the procedure's taken pursuant to Article of the agreement to bring it into force.

Otherwise all the four were directed to complete procedures necessary to bring into force the agreement and notify the Secretary General by 31st December 2012.

The ministers also directed Tanzania to ratify and deposit instruments of ratification with the Secretary General on Protocols on environment and natural resources, establishment of the East African Kiswahili Commission and the establishment of the East African Health Research Commission.

Kenya and Burundi were directed to submit the progress reports on the implementation of the EAC Common Market Protocol and all partner states to henceforth submit bi-annual progress reports on the implementation of the protocol to the secretariat by December and June;

They also directed the secretariat to convene a dedicated session of the sectoral council of ministers responsible for EAC affairs and planning and co-opted stakeholders to deliberate on the status of implementation, challenges and various interventions to expedite the implementation of the Common Market Protocol;

Although some of the provisions have been implemented but the pace at which the EAC partner states are implementing the remaining provisions continues to be slow, it has raised the cost of doing business in EA.

The high cost of doing business has resulted into un-competitiveness in the private sector due to high costs of power, lack of skilled manpower and the problem of skills-mismatch that has affected some of the partner states employment levels according to the Unite Nations Economic Commission for Africa (UNECA) economic outlook report for 2012.

The regional poor infrastructure in terms of semi or un-operational railways, roads, information communication technology leads to high costs of transport and lack of quality standards among others.

"I don't want to see the private sector advocating for policy change but drive policy aimed at improving and increasing our intra-regional trade," says the East African Business Council (EABC) executive director Andrew Luzze.

He said that the volumes of intra-trade and cross border investments are still low because the partner states produce almost similar products, they thus need to diversify and attention must be put on micro, medium and small scale entrepreneurs (MSME) in the region who employ 70% of the region's population.

"In order to facilitate them, we are establishing an MSME desk to address their challenges. In our membership, the largest category of members of the council is composed corporate but most small firms are not participating and in order to attract them we are introducing an affordable fee to enable them participate in regional activities," he told East African Business Week in an interview in Arusha, Tanzania last week.

We have to recruit and retain members, enhance financial sustainability. The other challenge is to bring together all the partner states' business organizations to agree to take a single position.

But there is good will from the policy makers, for example we are observers at the EAC but need more support from policy organs for effective representation of private sector interests.

Our strategic plan for the next five years includes improving the technical capacity and strengthening institutional capacity of the secretariat in terms of financial sustainability; acquire more skilled personnel, good governance, advocacy and research.

He further explained that the EABC board has already approved the process of acquisition of land for construction of the council's headquarters and are working with the government of Tanzania.

Under policy advocacy we want to see full implementation of the Customs Union and Common Market protocols. He said the council is to start providing information to the members on trade and investment opportunities in the region, financial markets and foreign exchange rates as part of the value added services.

"We want to strengthen partnerships with the partner states, EAC organs and institutions, civil society and non-governmental organizations and the private sector in the region and EABC is coming up with a communication strategy aimed at increasing visibility," he said.

However apart from the already existing barriers, recent media reports have indicated that instead of removing all as the partner states had committed themselves that by December 2012 all would have been eliminated, more have emerged as we begin the year 2013 therefore giving a negative perception of trade within the region.

However, according to reports Kenya and Uganda are concerned that Tanzania has re-imposed visa charge of between $200-$250 on Kenyan and Ugandan business people.

Although the fee had been abolished for the EAC citizens, Tanzania defended it saying it was for a pass issued to persons entering the country on temporary assignment and shot term business activities.

The report added that although Kenya Revenue Authority (KRA) claimed to have cancelled the cash bond in September last year but traders sais that bond is still on.

Uganda also complained that the requirement by KRA that tea from Uganda desatined for Mombasa auction market should be stored at the customs bonded warehouse is raising costs of transactions due to additional expenses uincurred and delays experienced in deliveries.

The report also said that Tanzania complained that Kenya is still imposing a levy of Ksh2 per kilograme for agricultural products imported from Tanzania and that Kenya is still restricting cut flowers from Tanzania for re-export to Europe.

However Mr. Luzze advises that partner states need to review and amend laws related to the Customs Union and Common Market protocol.

He said that among those that are pending include harmonization of work permit fees as Kenya and Rwanda waived but Uganda, Tanzania and Burundi have not. They are still charging high fees in dollars, recognition of academic qualifications, financial inclusion, convertibility related costs among others.

Luzze added that the EABC is committed to improving the business environment through the annual Business Climate Index (BCI) report which is compiled from research that includes interviewing the business people in the areas of general business climate, non-tariff barriers.

These include customs, technical standards, sanitary and phytosanitary (SPS) weighbridges and immigration procedures and administrative requirements, police checks procedures at roadblocks, business registration and licencing procedures that are submitted to the EAC Sectoral council on trade for further action.

He said that as a result some non-tariff barriers have been eliminated by the partner states but what has been found out is that not all barriers are created by governments as some of them like corruption are created by the private sector. EA needs to review and amend laws relating to implementation of the Customs Union and the Common Market protocols.

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