Improving customs efficiency can boost trade volumes and reduce the cost of doing business in the region, the Doing Business in the East Africa Community 2013 survey has indicated.
The study conducted by World Bank (WB) and the International Finance Corporation showed that a one day reduction in inland travel times could lead to a 7 per cent increase in exports. The report also noted that easing access to finance, improving infrastructure and empowering the private sector are key in the region’s integration process.
“Transport efficiency and a favourable business environment have a greater marginal effect on exports as they boss access to foreign markets, especially in low income economies,” it indicated.
“Improving logistical performance and facilitating trade may have a larger effect on regional trade, especially on exports, than tariff reduction.”
Also, economies with efficient business registration, fair tax policies and efficient transport have a higher entry rate of new firms and greater business density, meaning that they are essential to ensure strong firm productivity and macro-economic performance.
According to the report, lowering costs for business registration improves formal job opportunities as more new firms hire skilled workers.
“This strengthens other sectors, including the education sector and legal systems,” said Chantal Umuraza, the director of Chamber of Industries.
“Economies that rank high on the ease of doing business tend to combine efficient regulatory processes with strong legal institutions that protect property and investor rights,” she added.
According to the report, financial market infrastructure, including courts, creditor and insolvency laws, as well as credit and collateral registries, improves access to credit and boosts trade.
It also noted that entrepreneurs in EAC face weak legal institutions and complex regulatory processes compared with global averages and those of the developed economies.
Despite instituting some reforms, the survey found that East African Community businesses still faced huge obstacles, while economies in other regions had improved business regulations.
“As a result, EAC member states’ rating in this area has stagnated at around 117 over the past four years,” the report showed.
According to the report, it requires only eight procedures and 20 days on average to start a business in the East African region.
EAC economies accounted for two of the 11 regulatory reforms implemented in sub-Saharan Africa to make it easier for entrepreneurs to start businesses, the survey said.
Rwanda still has the most efficient process in the EAC to start a business and 8th globally out of 185 countries surveyed. It is followed by Burundi at 28th position, Tanzania at 113, Kenya at 126 and Uganda trails at 144.
In general, 3 of 5 EAC economies rank well below the regional average in all areas measured by the survey.
Burundi eliminated four requirements to have company documents notarised, to register the new company with the commercial court and the department of taxation. As a result, it moved up 80 places in the global ranking on the ease of starting a business, from 108 to 28.
On the whole, the report indicated, the region’ fares better than other regional trading blocs on the continent on the ease of starting a business.
It was ranked 84th, way above 104th position for the Southern African Development Community (SADC). The Common Market for Eastern and Southern Africa (Comesa) is at 110th position while the Economic Community of West African States (Ecowas) ranks 127th.