The East African Community Customs Union is boosting trade and investments among partner states, according to a study.
The study commissioned by the East African Community Secretariat was to find out the effectiveness of the EAC Customs Union.
Since its launch, in 2005, goods have been moving freely among the members. Companies are also expanding, meaning the CU has boosted business in the region.
The volume of trade within EAC, now with a population of approximately 120 million people has steadily increased—from $1483.9m in 2003 to $1854.34m in 2006.
This reflects an overall increase in the volume of intra-EAC trade by $370.44m (or 24.96 per cent) between 2003 and 2006.
Kenya’s exports to the region have remained evenly distributed in Uganda, Tanzania and Rwanda estimated at 26 per cent of the total.
Tanzania’s exports to Kenya are are estimated at 44 per cent. Tanzania exports 28 per cent to Uganda.
Uganda’s main export destination is Rwanda, importing almost 36 per cent, followed by Tanzania at 25 per cent and Burundi at 21 per cent.
Tanzania’s exports to Rwanda and Burundi are 14 per cent, in each country.
According to a report, the domestic markets of the individual member states are the primary source of investment capital with the exception of Uganda with 80 per cent, 71 per cent, 75 per cent and 77 per cent of total investment capital in Burundi, Kenya, Rwanda and Tanzania respectively, sourced locally.
The aim of the CU is to accelerate and encourage a greater volume of trade among partner states by eliminating customs tariffs on imports and exports to and from the partner states.
The CU Common External Tariff (CET) on imports from third countries includes three bands – 0 per cent on raw materials, 10 per cent on intermediate products and 25 per cent on finished imports.
The highest CET is planned to be reduced from 25 per cent to 20 per cent in 2010.
For 59 sensitive products, CET on third country imports is above the maximum CET band of 25 per cent, reaching 100 per cent for some products.
The CU was the first step towards creating a full-blown East African common market, a monetary union and ultimately a political federation by 2015.
Total taxes derived from trade in the EAC region have also increased in all the EAC countries, allaying earlier fears that partner states will experience lower tax revenues following the adoption of the Customs Union.
Doing business reforms
In a bid to boost regional trade, Rwanda Revenue Authority (RRA) announced that customs offices to work 16 hours.
On the other hand the Kenyan President Mwai Kibaki made a directive that cargo delivery from Mombasa Port and all entry points to the land locked countries be done in 24 hours, seven days a week to speed up cargo movement on the northern corridor route.
He also directed that weighbridges that have been hampering free movement of goods on the lucrative sea route be reduced from 47 to 17.
The northern corridor is crucial for supplying goods to Rwanda, Burundi, eastern Democratic Republic of Congo, Uganda and Southern Sudan.