THE formal entry of Rwanda and Burundi into the East African Community this week will strengthen the regional economy by making it a more attractive investment destination, analysts say.
THE formal entry of Rwanda and Burundi into the East African Community this week will strengthen the regional economy by making it a more attractive investment destination, analysts say. The entrance of the two western neighbours will increase the blockâ€™s population to 110 million.
Rwanda had applied in 1996 to join the EAC and Burundi in 1998. However, the applications were deferred because the three founding partners were yet to establish the Customs Union, which came into force on January 1, 2005.
â€œIt is still early days but the addition of a few million people to this regional block will make it a bit more attractive as an investment destination,â€ a senior economist has said.
â€œBut for this to work there has to be a sense of urgency in lowering the boundaries of inter regional trade, investment and labour movement.â€
EAC secretary general Juma Mwapachu said recently after the two countriesâ€™ accession, the regionâ€™s base for investments and trade would be widened, making it attractive for investments in agriculture, tourism and mining.
Last year, the press reports said during negotiations, the two countries wanted to delay joining the EA Customs Union by about three years, which was rejected.
The new entrants then agreed to join not only the Customs Union, but also the envisaged EA Common Market planned for 2008, which is the second stage of the regional integration.
The common market will allow free movement of people, labour and capital.
By accepting to join the community, Rwanda and Burundi will have to adopt a Common External Tariff and lower the tariff barriers against certain goods regardless of the effect on their local industries.
Rwanda and Burundi still reeling from the after effects of civil war are still trying to rebuild their economies a process that could be largely helped by success in breaking into regional markets.
â€œWith a removal of trade barriers, economies will be forced to become more efficient, producing only what they have, a regional competitive advantage in producing â€¦ there is no point in Rwanda trying to compete with Kenya in manufacturing. they would be better off importing and concentrate on other things like tourism.â€
In addition, bringing the two economies in will make inter regional infrastructure investments more attractive.
â€œWith the existing community the joint concession of the Uganda and Kenya railways is a useful case study, which hopefully will be successful but there is potential in road, electric generation and capital market projects,â€ the economist said. Both countries have agreed on the third EAC Development Strategy (2006-2010), investment incentives and joint marketing.
Under the agreements, the two countries also endorsed the three-band Common External Tariff and the gradual elimination of the all internal tariffs by 2010 as agreed by the founding partners â€“ Kenya, Uganda and Tanzania.
The negotiations meeting was informed that Burundi has free trade arrangements with Kenya, but has preferential tariff treatment at 80% reduction with Uganda in accordance with Comesa rules. Goods from Tanzania attract duty rate in accordance with the Burundi Tariff Act.
Burundi promised to phase out internal tariffs once formally admitted to the bloc.
The two countries, which have experienced many years of civil war, have agreed to conform with the EAC strategy on cross-border crime, refugees, interstate defence and security and prevention and control of small arms and light weapons.
They have signed on to the EACâ€™s position on combating terrorism, inter-parliamentary mode and fora for joint co-operation, including the envisaged political federation, the ultimate objective of the regional bloc.
Rwanda and Burundiâ€™s entries follow fact-finding visits by the EACâ€™s special verification committee to Kigali and Bujumbura recently.
After the admission, Burundi and Rwanda will be allowed to use the East African passports.
Rwanda has been pushing the development of high end tourism and its unique Arabica coffee. Burundi is also known for its high quality Arabica coffee.
Rwanda, Burundi to strengthen EAC