Ten years later, EAC roars ‘one people, one destiny’
TEN years ago, in 1999, the East African Community (EAC) was re-born. The EAC had collapsed in 1977 over what many have said were political and ideological disagreements between the political leadership of the partner states.
By Fred Opolot
TEN years ago, in 1999, the East African Community (EAC) was re-born. The EAC had collapsed in 1977 over what many have said were political and ideological disagreements between the political leadership of the partner states.
For fear of repeating past mistakes, the community was re-established under a treaty. Ten years later, it boasts a customs union and the signing of a protocol on the establishment of the EAC common market.
In addition, the community, whose re-birth started with the three old partner states (Uganda, Kenya and Tanzania), is now composed of five countries with the 2006 accession of Rwanda and Burundi.
These are great achievements considering the skepticism that reigned in 1999. Ten years later, the theme of the 10th anniversary is aptly: “Ten years of integration, one people, one destinyâ€. This theme comes with the challenge of continued efforts to achieve even more for the ultimate political federation of the community.
Achievements
At the re-birth of the community, the partner states committed themselves to concluding a protocol establishing a customs union within four years. The protocol was signed on March 2, 2004.
To demonstrate the strategic importance, the community’s leadership attached integration objectives. The customs union became effective on January 1, 2005. It is not uncommon for countries to sign protocols and let them linger on shelves after immense input of time and resources.
The implementation of the customs union has been progressive in the first five years through the gradual removal of tariffs imposed on intra-EAC trade. On January 1, 2010, a complete customs union will come into effect.
This tariff-dismantling has also been coupled with harmonisation and the uniform application of common customs laws and the adoption of a common external tariff regime.
The accession of Rwanda and Burundi to the community in July 2007 and their accession to the customs union from July 1 this year have created an expanded market of over 130 million people and more investment opportunities.
In spite of earlier fears that the customs union would negatively affect the economies of some partner states in terms of revenue erosion and competitiveness, there have been benefits in terms of increased trade and customs revenue.
The community registered a positive growth in trade among the member states since the start of the customs union. In 2008, total intra-EAC trade increased by 37% compared to the previous year. The increase in regional trade increased from $1.8m (sh3b) in 2005 to $ 2.7m (sh5b) in 2008, marking an increase of 49%.
The total export of the community to the rest of the world also grew by 26% during 2008 compared to the previous year. These trade performances are a clear indication of the positive trends in trade.
The EAC has equally registered positive results in the area of investments. Total inflows of foreign direct investment into the region have almost tripled in five years, from $1.7m (sh3b) in 2002 to $692m (sh14b) in 2007.
Challenges
But a lot of challenges remain. There is a need to be more creative in promoting new financial instruments, including floating regional sovereign bonds which are guaranteed by all the governments of the EAC.
There is enough proof to show that there are adequate domestic resources available in our region which can be mobilised if incentives are offered to investors.
The customs union, too, still faces challenges. There are several challenges in non-tariff barriers. These are in the form of bureaucracy at border posts, corruption by some public officials, unnecessary lengthy customs procedures, Police road blocks and the rather too many weigh bridges on the transit routes.
A typical container may cost about $3,000 (sh6m) to be transported by land from Mombasa to Kigali, twice the cost of shipping it from Singapore or Malaysia to Mombasa. It takes an average four days for a truck to get through the northern corridor, and six through the central corridor. And sometimes it takes much longer.
Each day’s delay costs the owner about $400 (sh800,000), and each day’s delay for a ship berthed in the port costs its owner $25,000 (sh50m). We all pay the price for these delays.
The high cost of importing goods and materials substantially raises the cost of doing business in the East African Community and makes it difficult for business to produce goods or provide services that can compete on world markets. These conditions present significant obstacles to investment.
The current momentum is a positive indicator of a determined movement towards EAC economic integration. And needless to say, this ties in with President Museveni’s dream of the EAC political federation, one that can be judged by the operationalisation of the customs union.
The writer is the head of the Uganda Media Centre
TEN years ago, in 1999, the East African Community (EAC) was re-born. The EAC had collapsed in 1977 over what many have said were political and ideological disagreements between the political leadership of the partner states.
For fear of repeating past mistakes, the community was re-established under a treaty. Ten years later, it boasts a customs union and the signing of a protocol on the establishment of the EAC common market.
In addition, the community, whose re-birth started with the three old partner states (Uganda, Kenya and Tanzania), is now composed of five countries with the 2006 accession of Rwanda and Burundi.
These are great achievements considering the skepticism that reigned in 1999. Ten years later, the theme of the 10th anniversary is aptly: “Ten years of integration, one people, one destinyâ€. This theme comes with the challenge of continued efforts to achieve even more for the ultimate political federation of the community.
Achievements
At the re-birth of the community, the partner states committed themselves to concluding a protocol establishing a customs union within four years. The protocol was signed on March 2, 2004.
To demonstrate the strategic importance, the community’s leadership attached integration objectives. The customs union became effective on January 1, 2005. It is not uncommon for countries to sign protocols and let them linger on shelves after immense input of time and resources.
The implementation of the customs union has been progressive in the first five years through the gradual removal of tariffs imposed on intra-EAC trade. On January 1, 2010, a complete customs union will come into effect.
This tariff-dismantling has also been coupled with harmonisation and the uniform application of common customs laws and the adoption of a common external tariff regime.
The accession of Rwanda and Burundi to the community in July 2007 and their accession to the customs union from July 1 this year have created an expanded market of over 130 million people and more investment opportunities.
In spite of earlier fears that the customs union would negatively affect the economies of some partner states in terms of revenue erosion and competitiveness, there have been benefits in terms of increased trade and customs revenue.
The community registered a positive growth in trade among the member states since the start of the customs union. In 2008, total intra-EAC trade increased by 37% compared to the previous year. The increase in regional trade increased from $1.8m (sh3b) in 2005 to $ 2.7m (sh5b) in 2008, marking an increase of 49%.
The total export of the community to the rest of the world also grew by 26% during 2008 compared to the previous year. These trade performances are a clear indication of the positive trends in trade.
The EAC has equally registered positive results in the area of investments. Total inflows of foreign direct investment into the region have almost tripled in five years, from $1.7m (sh3b) in 2002 to $692m (sh14b) in 2007.
Challenges
But a lot of challenges remain. There is a need to be more creative in promoting new financial instruments, including floating regional sovereign bonds which are guaranteed by all the governments of the EAC.
There is enough proof to show that there are adequate domestic resources available in our region which can be mobilised if incentives are offered to investors.
The customs union, too, still faces challenges. There are several challenges in non-tariff barriers. These are in the form of bureaucracy at border posts, corruption by some public officials, unnecessary lengthy customs procedures, Police road blocks and the rather too many weigh bridges on the transit routes.
A typical container may cost about $3,000 (sh6m) to be transported by land from Mombasa to Kigali, twice the cost of shipping it from Singapore or Malaysia to Mombasa. It takes an average four days for a truck to get through the northern corridor, and six through the central corridor. And sometimes it takes much longer.
Each day’s delay costs the owner about $400 (sh800,000), and each day’s delay for a ship berthed in the port costs its owner $25,000 (sh50m). We all pay the price for these delays.
The high cost of importing goods and materials substantially raises the cost of doing business in the East African Community and makes it difficult for business to produce goods or provide services that can compete on world markets. These conditions present significant obstacles to investment.
The current momentum is a positive indicator of a determined movement towards EAC economic integration. And needless to say, this ties in with President Museveni’s dream of the EAC political federation, one that can be judged by the operationalisation of the customs union.
The writer is the head of the Uganda Media Centre