Rwanda has once again been declared the best country to invest in, retaining its top position as an ideal host for businesses in the in the East African Community (EAC).
Another news item earlier in the week that may not have attracted much attention was that EAC Partner States will be forming a single customs authority.
The news can only bode well for investors seeking to set up manufacturing businesses in the country. The formation of the customs authority will lay the foundation to operationalise the EAC Common Market protocol on the free movement of goods.
Significantly, the new authority is not only expected to collect revenues on behalf of member countries at borders in a harmonised manner under one roof, but also eliminate non-tariff barriers.
Non-tariff barriers appear in the form of rules, regulations and laws that have a negative impact to trade. Other than rules regulating collection of revenues, barriers may range from cumbersome customs and migrations procedures, police road blocks and duplicated functions of agencies, amoth others.
Despite having only joined the EAC in 2007, Rwanda has already taken the lead and eliminated some non-tariff barriers with business registration and licensing which takes only a day. Rwanda is also the only state in the EAC to have electronically readable ID cards, which all the Partner States have agreed to comply with in order to implement free movement of workers.
While these accomplishments are trendsetters in the region, investors aiming to manufacture goods in Rwanda would do well to appreciate the existing challenges as the EAC Common Market comes to its own.
The Fourth EAC Regional Forum meeting on Non-Tariff Barriers in December 2010 expressed various concerns while deliberating on the barriers curtailing regional trade.
One of the issues to emerge at the Forum was the implementation of the Rules of Origin, which require Partner States to apply common procedures in determining the eligibility of products to EAC.
Though goods traded and originating from within the EAC now attract duty at 0 per cent, the Forum report noted that perceived “misapplication of the Rules of Origin criteria are frustrating trade in the region.”
An example of this is the much quoted case of Kenya having expressed concerns that Tanzania did not recognise the Rules of Origin for plastics manufactured by Kenyan companies, while Tanzania complained that Kenya turned back wheat consignments without reason.
It is expected that the new customs authority will amicably address such issues. On its part, Rwanda has just finalised on regularising the Rules of Origin procedures which are currently being implemented.
Other challenges include not only effectively facilitating the free movement of goods and services, but addressing existing disparities in labour skills, employment and immigration laws that will enable the EAC’s citizens free movement.
While an East African citizen has an automatic pass to stay in any Partner State for six months, one still has to apply for a work permit.
There are those who would argue that viewed against the principle of free movement of labour predicated in the Common Market protocol, the fact that one has to apply for a work permit, even if provided free, may seem to defeat the purpose with the existing disparities in labour skills. Some job seekers may find the requirement a hurdle.
Rwanda has gained the lead in some important respects, and deserves the many investors who keep flocking in to set up shop in the country.
Mr. Mwaura is a Kenyan author and freelance journalist