15 January 2014

Rwanda: Customs Union Promises Boost to Regional Trade

The customs union, which is the first pillar of East African economic integration, is set to become operational this year in Rwanda, Uganda and Kenya, a landmark in achieving full EAC integration.

With the introduction of a single customs territory (SCT), joint infrastructure ventures and the plan to remove non-tariff barriers (NTB's), inter-EAC trade is expected to grow in 2014. Non-tariff barriers such as roadblocks and weighbridges are set to be removed or reduced in a bid to reduce the costs of transportation along the Northern Corridor. All roadblocks along the Mombasa-Kigali route have been removed and between Mombasa and Malaba the number has been reduced from seven to two. Uganda is also set to follow suit by having one weighbridge along its roads.

As a result, the number of days for transaction of goods along the northern corridor is expected to be reduced from 21 to 8 for goods moving from Mombasa to Kigali.

A crucial aspect of the SCT are the one-stop border posts (OSBP) aimed at making customs officials from two neighboring countries share the same office and cargo scanner in order to avoid unnecessary costs and delays. This is expected to improve services provided by standards bodies, revenue authorities and other agencies at the border posts.

The OSBP bill envisages 15 common border posts, among which the Taveta-Holili border and the Naman ga border (Kenya-Tanzania), Busia and Malaba borders (Kenya-Uganda) and the Kanyaru-Akanyaru border (Burundi-Rwanda). Others are Mutukula (Tanzania-Ugan da), Gasenyi-Nemba (Burundi-Rwanda), Lungalunga-Horohoro (Kenya-Tanzania), Gatuna and Katuna (Rwanda-Uganda) and Rusumo OSBP between Rwanda and Tanzania.

So far, the system has been operating on some border points based on bilateral agreements between EAC member states, for instance at Gatuna where a 24-hour one-stop border post and simplified trade regime have been in force since 2010.

Infrastructure agreements

The past year saw the signing of infrastructure agreements (Rwanda, Uganda and Kenya in particular) that are set to boost trade within the region.

In a further bid to improve efficiency of goods in transit a special Car Port was created in Mombasa to specifically handle the import of vehicles destined for Rwanda and Uganda. This was part of the expansion of the Mombasa port berth by 240 meters thus expanding the Mombasa container terminal to 840 meters. This will enable the port to handle 800,000 twenty-foot equivalent units per year from 600,000 containers, thus reducing the time taken for goods clearing.

Rwanda, Uganda and Kenya also agreed to construct a railway line linking Mombasa to Kigali and an oil pipeline connection Eldoret-Kampala- Kigali.

The $13.5 billion project that is expected to be funded by China is aimed at reducing on the number of trucks plying the route as they tend wear out the road infrastructure. The railway is set to be complete by 2018 and will be designed for freight (speed of 50 mph) but will later be open to passenger travel.

The Mombasa-Kigali line project consists of a 736-mile rail from Mombasa through Nairobi to Malaba and branching to Kisumu (Kenya), an 870-mile rail from Malaba to Kampala linking four Ugandan towns before connecting to the main line to Rwanda at Mirama Hills, a 125-mile from Mirama Hills to Kigali and extra 93-mile rail to other towns in Rwanda.

The oil-pipeline for the transportation of refined petroleum products is expected to be complete by 2017.

A single tax system, linking the revenue systems of the three nations, came into effect in October that has seen the clearance of more than 50 fuel trucks from Mombasa destined for Kigali and Kampala. The new system is expected to reduce business costs by almost $45 million annually on top of remote declaration of tax returns, faster clearance, and better tax compliance among the signatory member states.

Add to that the signing of the monetary union agreement in Kampala, the third pillar of regional integration by all five heads of state that will enable east African countries to trade in one currency by 2015, and it seems that finally EAC member states have started to walk the talk.

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