‘Single customs union hard without financial integration’

Dr. Richard Sezibera is the Secretary General of the East African Community (EAC). He talked to Business Times’ Peterson Tumwebaze about fast-tracking the integration process and other challenges facing the process, including the issue of illegal immigrants.It is now 10 years since we started the process of integration without headway; what is the problem?The integration process involves different stages, which feed into each other. For example, during the negotiation of a single customs union, we discussed micro-economic convergence criteria, which normally should be for the monetary union. However, you can’t have a customs union without some financial integration. These phases feed into one other. The Common Market Protocol will be fully functional in 2015, but that does not prevent the implementation of a monetary union at the same time.There are allegations that the implementation of a single customs union is being hampered by partner states’ unwillingness to cede some of their national rights?We need to give accredit to partner states because they have pooled a lot of their sovereignty, though there are still other areas in which they will be asked to do more. These include areas which rotate around a common market protocol. I know for sure that to have a common market and monetary union, countries have to be willing to pool together their sovereignty and let go some of their national prerogatives.The issue of non-tariff barriers (NTBs) has still not been fully dealt with, even when a single customs union is set to be implemented later this month. Why has it become difficult to fully eliminate these trade barriers?Over the last one year, I have seen a lot of movement on some of the things I thought were difficult to achieve, including non-tariff barriers. We, for example, now have agreements on vehicle weight control and a Bill on NTBs.Yes, NTBs are still there, but a lot has been achieved. For example, there has been dramatic turnaround in our ports, especially at Mombasa but also Dar es Salaam, I must say I am happy with the progress we have made.Let us not forget that it now takes 36 hours to move cargo from Mombasa to Kigali; this is something we only dreamt of.So NTBs are being eliminated, but like I said, it’s a marathon. I also know that once in a while some new barriers emerge and we have to make sure that we deal with them because that’s the nature of integration. I am also looking forward this year to an agreement on legally-biding measures on some of these NTBs, which has been under discussion for a long time. The business community has complained about double taxation for long. How is the issue being handled? Why has it taken long to have this issue solved?This is one of the agreements that have had minimal progress. Although it was signed by all partner states, only one country has ratified it. Perhaps it is better to ask each of the partner states to explain why they have delayed ratifying the agreement. Double taxation is a very big problem threatening single customs progress, so countries need to prioritise and have it ratified. It does not make sense that up to now countries have not endorsed the deal to resolve the issue. Domestic tax harmonisation will be on the agenda during 2014-2015. This was difficult to do during the period when the external common tariff had challenges with many items still on the list. But now we are at the stage where we must move forward to have it achieved, especially as we move towards a single customs territory.Which taxes are you going to harmonise?These include value added tax (VAT) and excise duty. However, we will not harmonise the rates… the rates are okay since they are within the band; when you look at 16 per cent in Kenya and 18 per cent in Rwanda there is no much disparity. We don’t want to have a wide band, the same will apply to the excise duty, the issue of refunding VAT, and the process of doing it is so different from Rwanda and Kenya. Where do you pay your exercise duty? These are some of the issues we shall be looking forward to address.Do we need 10 years before the region can have a single currency? There are a number of issues we need to address before we can talk about a single currency. These include a monetary union, an EAC central bank and a common fiscal policy, among others.The Council of Ministers adopted the Common Market Protocol and we expect it to be approved next month. The protocol has a detailed roadmap that will take us towards the single currency. This could take up to 10 years before its ratified. Tanzania recently evicted what it called illegal immigrants from its territory; isn’t this action against what the Common Market Protocol stipulates: free movement of labour, goods and services? The issue of repatriation of illegal foreigners from the United Republic of Tanzania was discussed extensively at the Sectoral Council of Ministers and two decisions were taken, which we are trying to implement. One was that Rwanda and Tanzania urgently meet and look at mechanisms on how this can be done in a manner that protects the rights of those termed as illegal immigrants. But also look at the requirements of legalising the status of those still in Tanzania.The meeting will also have the other partner states, especially Burundi and Uganda. We shall hold a meeting soon and discuss all these things.The other decision was to find ways through which we can address the matter of illegal immigrants who are East Africans in the long-run.The sectoral council on the interstate security will meet later this month to discuss this issue. We cannot build an East African family unless we deal with these pertinent issues.

Insight

‘Single customs union hard without financial integration’