Kampala, UGANDA: Uganda’s Daily Monitor reports that the East African country is set to enjoy a 50% increase in export revenues after Cabinet yesterday approved a recommendation by the minister of trade for Uganda to join the COMESA free trade area (FTA).
The decision effectively makes Uganda the 15th COMESA FTA member and opens up the opportunity for increased trade competitiveness mainly through increased earnings from exports.
Trade minister Amelia Kyambadde last week said that with the ascension to the 19 member trade bloc FTA, exports are expected to grow by an average of 50% annually.
“In the COMESA region, DRC is Uganda’s second largest market after southern Sudan at over $350m larger than Kenya (about $250m) and they are working on their assention (which means if DRC joins, more trade for Uganda)," said Silver Ojakol, commissioner for external trade in the ministry of trade, industry and cooperatives.
Uganda had delayed to join the FTA because of revenue considerations like taxes levied on imports but experts said the benefits from the accessing a free trade area under COMESA are huge.
“Besides we are now moving towards consolidating domestic taxes,” said a senior trade official.
The 15 COMESA FTA states are Uganda, Libya, Egypt, Sudan, Kenya, Rwanda, Burundi, Mauritius, Comoros, Zimbabwe, Zambia, Djibouti, Madagascar, Mauritius and Malawi.
Joining the FTA means the tariff imposed on majority of imports and exports between Uganda and other COMESA states will drop to 0% from 2% compared to what is levied (10%) on goods from states like China.
"If we don't join, the competitiveness of our goods will reduce, imports from other COMESA countries will also be at zero tariffs but this is not for everything," said
Silver Ojakol, the commissioner for external trade in ministry of trade, industry and cooperatives. Ojakol explained that there remains a separate list of "sensitive goods" like sugar, rice and agriculture products which Uganda will not completely open up to.
Joining the FTA will open up several benefits especially for value added agriculture products.
"We have the lowest cost of production in agriculture, we are also closer to these people (DRC, Rwanda, Burundi, South Sudan than a manufacturer say from Kenya and this lead time gives us an advantage," said Ojakol.
It will also allow local industries import some industrial imports cheaply as is the case with countries like Kenya who have always sourced industrial inputs under COMESA cheaply, affording them a more competitive edge.
Under the FTA, each country will then apply the rule of reciprocity where it charges anything from 2%, 4% or 6% upwards on imports for mainly intermediate goods-goods used as inputs in the production of other goods.
The bonus to joining the FTA comes alongside side regional trade figures that indicate that Uganda's total exports to COMESA have almost tripled rising from $248.6m in 2005 to $712.9m in 2010.