The East African Community (EAC) witnessed strong growth in regional intra-trade over the last two years following the launch of the common market protocol. Yet stakeholders want more from the policy makers, in terms of fast-tracking and translating commitments made into tangible gains to fuel even more growth.
The journey travelled by the EAC in the last two years is one marked with triumphs even though some daunting challenges still remain to be sorted out. While policy makers talk about recent gains, other stakeholders suggest that policy makers need to urgently speed up the realisation of more gains.
It is worthwhile to closely look at what has transpired since the EAC member states envisioned a single market with free movement of goods, capital and labour. Especially, that there are still bumps along the way in ensuring seamless trade across member states in the region.
Stakeholders among them business operators and donors say that some of the agreements remain on paper, with just a handful being implemented.
Such observations are being made even as policy makers are talking about the recent achievements such as developing strong institutions, legal frameworks and operational modalities in the promotion of a viable, vibrant and integrated trade bloc.
“We have established a customs union and common market into which we are currently investing every effort and energy to ensure that these programmes would work, and work well, for the people in delivering and demonstrating the benefits of regional integration”, Dr Richard Sezibera EAC Secretary General(SG) said recently.
Sezibera says that the EAC secretariat is putting in place comprehensive programme of regional infrastructure to help further the integration agenda. He adds; “On the whole, we have transformed the East African narrative from that of lethargy, stagnation, dependence and underdevelopment to that of forward looking dynamic progress.”
Regional integration authorities point to growing intra-regional trade coupled with growth of public revenues contrary to earlier fears. The bloc, they say has become more attractive as an investment destination.
While presenting the latest EAC budget Musa Sirma, the Chairperson of the EAC Council of Ministers and Kenyan Minister for East African Community said that bloc’s Gross Domestic Product (GDP) expanded by 5.9 per cent last year. Intra-EAC trade expanded to US$4 billion from $2 billion in 2005, he said.
“The intra-EAC trade to total EAC trade has grown from 7.5 per cent in 2005 to 11.5 per cent last year. This means that the intensity of trade among member states is growing at a modest pace. The region has also started witnessing member states which were net intra-EAC importers start to become intra-EAC exporters.”
However, experts say that intra-EAC trade remains relatively low being at just above 10 per cent of the total trade volume. They point to the poor comparison with other regional trade arrangements such as the European Union and the North America Free Trade Agreement, where intraregional trade accounts, respectively, for 60 per cent and 48 per cent of total trade portfolios.
Experts further point out that aspirations of growing intra-trade volumes beyond, say, 50 per cent will be one way of creating regional self-reliance that will create more jobs through increased production and investment flows.
One way of doing that is to promote comparative advantages of various member states. Kenya for instance, has a competitive advantage on industrial commodities, while Tanzania can focus on agricultural produces. Rwanda can supply IT expertise. Since Uganda started producing oil other EAC members should import the resource from there.
One sure way of growing intra trade volumes is the need to eliminate non-tariff barriers—factors that hinder smooth trade other than the border tariffs. They include graft, dilapidated infrastructure, prolonged licensing requirements, weighbridges and roadblocks including import and export bans that are existent along transit routes in the EAC partner states.
Roger Nkubito, Commercial and Business Development Manager for SDV Transami Rwanda says; “Rwanda is fully engaged in addressing NTBs and our national monitoring committee (NMC) is on the right track. The idea is to bring down costs in order to further spur the growth of our businesses that has been increasing in the last two years.”
Rwanda is currently adopting terms of reference for its NMC sub committee on transport, standards and customs procedures with a range of measures. The committee is also set to adopt an SMS based system to track progress.
A national strategy document for fighting NTBs in Rwanda says that evidence from various studies conducted in the last two years shows that the cost of NTBs for EAC countries runs into tens of millions of dollars and that landlocked countries such as Rwanda bear the greatest cost burden.
The report states that the cost to import one container in Rwanda is more than 3.5 times higher than the cost in Tanzania and 2.5 times higher than the cost in Kenya. The consequence of such costs for doing business is very high. “Such external factors mean that, although Rwanda is one of the countries with the highest improvement in overall ranking in the 2011 World Bank’s “doing business” survey, in terms of the trading across borders component, ranks only 159th”, Rwanda’s strategy document on fighting NTBs reads in part.
Rwanda seeks to engage in fighting NTBs through a new robust strategy that includes improved registration and tracking of NTBs as well as development of the NTB prioritisation mechanisms.
Measured being mooted includes development of a NTB Elimination Index that would provide measuring the NTB reduction for each EAC country, as well as comparison and ranking of the progress in five countries according to their relative contributions relative to the overall removal of NTBs.
While policy makers are upbeat that the issue of dismantling NTBs is being sorted out, other stakeholders among them the donor community say that EAC seems to be actually losing the battle against NTBs due to what they say is the current weak enforcement mechanisms. Such stakeholders are even urging the regional bloc to adopt tougher, enforceable measures against the barriers.
The EAC identified NTBs in 2008 and came up with monitoring committees in each of the partner states to encourage their elimination. However, various studies done over time point out that such committees are essentially non functional.
“The established reporting mechanisms and monitoring committees for NTBs have so far been ineffective,” an extract from one of the latest reports prepared by the World Bank on the subject says.
The first report was compiled in 2008 and identified 33 such barriers. In 2010, 47 barriers were identified. Most of them, the World Bank says, have not been dismantled within the agreed time frame.
The World Bank points out that fifty per cent of the NTBs identified in 2008 were eliminated while only 30 per cent of those identified in 2011 were scrapped. The latest report adds that member states are now becoming increasingly reluctant to give themselves shorter deadlines for the elimination of the barriers.
To further point out the weaknesses in fighting NTBs in the EAC, experts say that lack of effectiveness in fighting the barriers can be seen by merely looking at the current composition of national enforcement teams that are staffed mostly by junior officers who it are said “lack the teeth to bite”, meaning that very little in terms of change can come out of such teams.
The World Bank has urged the bloc to develop monitoring systems that carry the weight of sanctions for non-compliance in line with best practice done elsewhere. The lender says that EAC should borrow from the World Trade Organisation (WTO) and the European Union (EU), where legally-binding mechanisms have been established.
While responding to such claims, the EAC secretariat says that the study on the development of a legally binding mechanism on the elimination of identified NTBs has commenced, adding that the ultimate goal of the study is to prepare a draft bill on a legally binding enforcement mechanism.
When the bill is enacted into law, the secretariat says, it is expected to strengthen the EAC mechanism on elimination of non-tariff barriers in the region.