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Thursday,November 26,2020 18:34 PM

Will the Common Market benefit Uganda?

By Vision Reporter

Added 5th March 2009 03:00 AM

EXECUTIVE TALK

The East African Community (EAC) integration is an opportunity of an expanded market from 30 million Ugandans to 120 million East Africans. Sounds exciting! But wait, isn’t this the same EAC that disintegrated at 10:42am on July

EXECUTIVE TALK

The East African Community (EAC) integration is an opportunity of an expanded market from 30 million Ugandans to 120 million East Africans. Sounds exciting! But wait, isn’t this the same EAC that disintegrated at 10:42am on July

EXECUTIVE TALK

By John Ssempebwa

The East African Community (EAC) integration is an opportunity of an expanded market from 30 million Ugandans to 120 million East Africans. Sounds exciting! But wait, isn’t this the same EAC that disintegrated at 10:42am on July 1, 1977?

Have the causes of the 1977 disintegration been addressed?

Largely, yes, thanks to two principles in the 1999 EAC Treaty namely, the “principle of asymmetry”, which recognises that Kenya is more developed than the other partner states, which have to boost their competitiveness and the “principle of variable geometry” that allows for progression in implementation.

That is, the low developed countries (LDCs) in the EAC may implement agreed provisions slower than Kenya because of their restricted capacities.

In 2005, the partner states signed the Customs Union Protocol and invoked the two principles by removing import taxes on goods from Tanzania and Uganda into Kenya, while goods from Kenya into Uganda and Tanzania were taxed.

Uganda was also allowed to import certain raw materials duty-free, although Kenya was paying duty on the same goods.

It also phased down taxes on goods from Kenya into Uganda, from 10% in 2005 to 0% in 2010.

This principle has enabled the EAC to stay afloat inspite of the failure to remove non-tariff barriers, Uganda’s failure to make the laws required for the Export Processing Zones and its wretched energy situation.

The 2008 political mayhem in Kenya and the escalating trade deficits for the LDCs in the EAC have also not derailed the effort.

This year, the partner states are expected to sign another agreement, the Common Market Protocol, to allow free movement of services.

This protocol is more imperative than the Customs Union Protocol because trade in services is already contributing more to our gross national product (GNP) than agriculture and manufacturing combined.

Tourism and export of labour (Nkuba Kyeyos) are the top foreign exchange earners.

The new protocol is to allow professionals to move freely and sell services without discrimination or harrassment in the region.

Unlike services, trade in services is sophisticated as it involves no containers crossing borders with accompanying documents, or professionals like customs officials giving documents such as certificates of origin or conformity to standards.

Trade in goods is intangible and is of four different modes.

Mode one is cross-border supply where services are delivered from one country into the territory of another, say a marketing plan designed in Uganda and sent to Rwanda by e-mail through the internet.

Mode two is consumption abroad where services are delivered to a consumer who travels from another state; for example, a patient travelling abroad for treatment or to enroll in an education programme.

Mode three is commercial presence where a service is delivered from within the territory of another state for example, Barclays, StanChart, AIG, while mode four, which requires movement of supplying persons into the consumer country to supply the service. for example, Uganda’s mechanics in Kigali.

From these examples, it is clear that a government may place weapons of mass destruction (WMD) along the Kenya border to scare away smugglers of goods, but cannot scare away import or export of services with WMD.

Trade in services, therefore, requires not more vigilant anti-smuggling forces, roadblocks, faster customs officials, tougher officials from Uganda National Bureau of Standards (UNBS) or mean looking sniffer dogs, but a robust regulatory regime to ensure that consumers get the best service.

Whereas the UNBS and the Uganda Revenue Authority can stop imports of sub-standard pens, they cannot stop a quack engineer from coming into Uganda to set up a firm that constructs collapsing buildings.

We don’t have to wait for a VIP to die from such unregulated scenarios to realise that regulation of services is critical before opening up sectors.

Imagine if the Bank of Uganda wasn’t regulating banks or if the Uganda Communications Commission wasn’t regulating telecoms! What would happen if lawyers were not regulated?

Sadly, there are many service sectors in Uganda without adequate laws.

For example, Uganda lacks adequate laws and institutions in the transport, construction and re-insurance service areas.

We have no competition laws! It does not require Einstein to know what would happen if non-regulated firms compete with regulated and inexperienced firms.

Let’s use the opportunity presented by the protocol to request for the application of the principles of variable geometry and asymmetry to derogate (postpone) the opening up of sensitive sectors such as transport, education, tourism, construction and re-insurance, to put in place the required legal and institutional frameworks to regulate these service sectors, boost the capacity of the commercial courts, set up the EPZ laws and build UNBS’s capacity to curb counterfeits.

The common market is an opportunity for Uganda to prevent fake firms and unqualified people from putting up collapsing buildings or the loss of sh120b, which is paid to foreign insurance firms to re-insure our insurance firms.

It gives us the chance to form the effective National Tourism Master Plan required to market Uganda’s extra-special bio-diversity to domestic, regional and global tourists, while boosting capacity of tour guides, hotels and tour firms.

Derogation is permitted by the EAC treaty using the two principles explained in this article.

In the European Union, Britain legally sought and acquired the right to use the pound and not the euro and the right for Oxford University not to offer the same degrees with a university elsewhere.

it will be absurd if our negotiators don’t ask for this legal derogation, a right given to all LDCs in the 1999 EAC Treaty.

The writer is a policy analyst at PSFU observing the EAC Common Market negotiations in Bujumbura, Burundi

Those who disregard the President’s call for patriotism will argue that Uganda is already open and therefore can not ask for derogations. these pessimists are confusing two things; the fact that a foreigner gets into Uganda as a visitor, worker, professional or tourist, but not an investor and after some time sets up a corner shop or any other business in an unregulated sector, knowing well the country lacks laws to ensure that the corner shop for example, does not stock expired goods. This does not mean the sector is open, it means the sector is unregulated.

Opening a sector requires a process called commitment, which is normally undertaken at the World Trade Organization where Uganda has only committed selected telecommunication and tourism services, meaning that whereas another MTN, Warid, Zain or UTL may establish in Uganda, Uganda retains policy space to refuse another Uchumi or Game or Nakumatt. So, will Uganda exploit the principle of asymmetry in the common market or will the negotiating team frustrate the President’s vision of transformation by shying away from asking for derogations?

John Ssempebwa
Observing the EAC Common Market negotiations in Bujumbura, Burundi

Will the Common Market benefit Uganda?

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