News Column

EAC States Holding Back Trade - World Bank Report

July 3, 2014

Lola Okulo

SLOW harmonisation of national laws and regulations in line with the Common Market Protocol has hampered has held back the full benefits expected under the deal four years after its implementation, according to a World Bank report.

A status report published by the bank indicates that progress to eliminate restrictions has been slow while some partner states have introduced new measures despite their obligations under the EAC common market protocol.

"Since the Protocol came into force in 2010, Rwanda, Tanzania, and Uganda have introduced at least 10 restrictions on the movement of capital," states the report.

The implementation of the Common Market Protocol was supposed to introduce for new freedoms across the EAC regions namely free movement of goods, services, people and capital.

"In services, several new restrictions have been introduced or carried over from older laws since the Protocol was signed. And in goods, where obligations started earlier at the enactment of the Customs Union Protocol, 51 non-tariff barriers arising from regulatory measures by governments were identified between 2008 and June 2013," the report said.

Kenya Association of Manufacturers blame the continued existence of non tarrifff barriers on disparities in economic development among partners states which has led to suspicion and mistrust.

KAM cites sluggish harmonisation of tax and production standards as one of the biggest challenges manufacturers in the region continue to face.

Regional risk consultancy firm Liaison Group said the Common Market Protocol faces political, social and economic risks, adding that at present the most pressing risk being public support as there is still low acceptance of the deal in some member states which has affected implementation.

"There is psychological fear among the citizenship across East Africa. People still fear whether the Common Market will actually benefit them or will be a disadvantage for citizens per country," said Liaison's managing director Tom Mulwa.

On free movement of capital, the World Bank survey report states that all EAC Partner States have restrictions that affect inward investment

from other partner economies though Kenya was found to be more lenient regardless of few barriers.

"Kenya's laws and regulations make it easiest to move capital across the EAC. Tanzania and Burundi make it hardest," said the report.

Movement of services on the other hand is being hampered by 63 laws across the EAC member states which clash with the Common Market requirement.

Latest data show Kenya's exports to EAC states has not faired well. Between January and May, the country's exports to Uganda dropped by 15.4 per cent to a value of Sh19.8 billion from Sh23.4 billion over same period in 2013 while exports to Tanzania remained almost same at a value of Sh14.6 billion from Sh14.56 billion previously.

Kenya's exports to the EAC dropped consecutively two years after implementation of the Protocol. In 2012, exports to the EAC fell to Sh134 billion, down from Sh137 billion exported to the region in 2011.

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Source: AllAfrica

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