East African Common Market
By Sarah McGregor - Bloomberg
The five-nation East African Community will declare a common market today, leading to the creation of a free trade zone over the next few years and ultimately enabling them to forge a political federation.
Kenya, Tanzania, Uganda, Rwanda and Burundi, now in a customs union, will probably take as many as five years to enact the legislation and regulations required to put the common market protocols into effect, said Amos Kimunya, Kenya’s trade minister, in a speech broadcast on Nairobi-based NTV today.
“What is happening on the first of July is official recognition,” he said. “I believe by 2015 all the barriers will be collapsed and East Africans will be able to move freely.”
The common market protocol, signed on Nov. 20 by all EAC heads of state, will expand the bloc’s five-year-old customs union to enable the free movement of people, capital and services and abolish import duties. The EAC encompasses 126.6 million people with a combined gross domestic product of $73 billion and aims to adopt a shared currency by 2012.
The bloc was founded by Kenya, Uganda and Tanzania in 1999, to boost regional trade after a previous decade-long free trade effort failed in 1977. Rwanda and Burundi joined in 2007.
Mixed Success
A customs union that began Jan. 1, 2005, was the EAC’s first concrete step to strengthen trade ties. It established a common external tariff, an identical tax applied to a list of imports from outside the bloc, and allowed duty-free regional trade with the exception of Kenya, the largest economy.
The accord’s success has been mixed. Intra-regional trade, as a proportion of the bloc’s total trade, fell to 8.4 percent in 2008 from 11 percent in 2005, according to data compiled by the Kenya Association of Manufacturers.
The region’s poor roads, cumbersome customs procedures and unreliable energy supplies are impediments to cross-border trade that can’t be solved overnight, Christopher Onyango, a trade analyst with the Kenya Institute for Public Policy Research and Analysis, said by e-mail.
There has also been disagreement over adjustments to the common external tariff to protect nascent industry, Onyango said. “The concern is that such benefits appear to have triggered an increasing trend by partner states to abuse the provisions,” he said. “This is likely to distort fair trade.”
July 1 is the day that the “serious work” starts, EAC Secretary General Juma Mwapachu said, according to an e-mailed statement on June 24. Remaining tasks include the five nations agreeing to remove restrictions in the aviation industry and the elimination of work permits for job-seekers within the bloc, he said.
Tanzania must also relax foreign exchange rules to allow citizens to invest in the capital markets of partner countries.
“Come July the hard part begins,” Peter Kiuluku, Executive Director of the Arusha, Tanzania-based Trade Policy Training Centre in Africa, said in an e-mailed response to questions. “There are no short cuts to fast track a complex process. Expect pace setters and laggards.”
Kenya, Tanzania, Uganda, Rwanda and Burundi, now in a customs union, will probably take as many as five years to enact the legislation and regulations required to put the common market protocols into effect, said Amos Kimunya, Kenya’s trade minister, in a speech broadcast on Nairobi-based NTV today.
“What is happening on the first of July is official recognition,” he said. “I believe by 2015 all the barriers will be collapsed and East Africans will be able to move freely.”
The common market protocol, signed on Nov. 20 by all EAC heads of state, will expand the bloc’s five-year-old customs union to enable the free movement of people, capital and services and abolish import duties. The EAC encompasses 126.6 million people with a combined gross domestic product of $73 billion and aims to adopt a shared currency by 2012.
The bloc was founded by Kenya, Uganda and Tanzania in 1999, to boost regional trade after a previous decade-long free trade effort failed in 1977. Rwanda and Burundi joined in 2007.
Mixed Success
A customs union that began Jan. 1, 2005, was the EAC’s first concrete step to strengthen trade ties. It established a common external tariff, an identical tax applied to a list of imports from outside the bloc, and allowed duty-free regional trade with the exception of Kenya, the largest economy.
The accord’s success has been mixed. Intra-regional trade, as a proportion of the bloc’s total trade, fell to 8.4 percent in 2008 from 11 percent in 2005, according to data compiled by the Kenya Association of Manufacturers.
The region’s poor roads, cumbersome customs procedures and unreliable energy supplies are impediments to cross-border trade that can’t be solved overnight, Christopher Onyango, a trade analyst with the Kenya Institute for Public Policy Research and Analysis, said by e-mail.
There has also been disagreement over adjustments to the common external tariff to protect nascent industry, Onyango said. “The concern is that such benefits appear to have triggered an increasing trend by partner states to abuse the provisions,” he said. “This is likely to distort fair trade.”
July 1 is the day that the “serious work” starts, EAC Secretary General Juma Mwapachu said, according to an e-mailed statement on June 24. Remaining tasks include the five nations agreeing to remove restrictions in the aviation industry and the elimination of work permits for job-seekers within the bloc, he said.
Tanzania must also relax foreign exchange rules to allow citizens to invest in the capital markets of partner countries.
“Come July the hard part begins,” Peter Kiuluku, Executive Director of the Arusha, Tanzania-based Trade Policy Training Centre in Africa, said in an e-mailed response to questions. “There are no short cuts to fast track a complex process. Expect pace setters and laggards.”
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