Future of EAC lies in presidents’ hands

Tuesday November 21 2017

Presidents John Magufuli and Yoweri Museveni emerge from a bilateral meeting at the Arusha state lodge in Tanzania on February 30, 2016.

Presidents John Magufuli and Yoweri Museveni emerge from a bilateral meeting at the Arusha state lodge in Tanzania on February 30, 2016. PHOTO FILE | NATION 

By DICTA ASIIMWE
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The active participation of Tanzania in some integration projects under President John Mugafuli’s tenure is expected to deepen trade within the East Africa Community.

Formed 18 years ago, the Community has moved from a free trade area to a Customs Union and Common Market but progress towards a monetary union and political federation is proving tricky.  

Dr Isaac Shinyekwa, head of the Trade and Regional Integration Department at the Economic Policy Research Centre, attributes the developments to political will, especially in Tanzania since President John Magufuli took office two years ago.

“Uganda, for example has done well, even if Tanzania has tried to slow down the process,” Dr Shinyekwa said.

Since President John Magufuli took over, the country has invested in its main port at Dar es Salaam and trade logistics, making operational the Single Customs Territory that was implemented by Kenya, Uganda and Rwanda in 2014.

President Mugufuli is also promising elimination of non-tariff barriers for countries using the Dar port, and has announced reconstruction of roads, as a way to reduce the cost of using the Central Corridor. One such road starts in Masaka in Uganda to Kumunazi in Tanzania.

Cost of doing business

During President Magufuli’s recent visit to Uganda the road was identified as important for reducing the cost of doing business.

President Magufuli and his Uganda’s counterpart Yoweri Museveni directed technocrats to commence works on this project, alongside another one connecting Omukakorongo in Tanzania to Mbarara in Western Uganda.

The EAC Secretariat announced it had secured Ush5.5 billion ($1.5 million) from the African Development Bank to start preparatory work for the 252.5km stretch connecting Kumunazi to Masaka, through Mutukula. 

When the first regional bloc collapsed in 1977, one of the contributing factors was that the integration had been dependent on the whims of the Presidents in Uganda, Kenya and Tanzania.

To guard against this, a clause stipulating that EAC integration become people-centred and business-led was included in the new Treaty signed in 1999.

However, this is not the case where projects are dependent on the will of partner states’ presidents. As a result all significant milestones by the EAC have been achieved when there is the support of heads of state.

Political will from the presidents of Kenya, Rwanda and Uganda sitting over a period of three years led to implementation of a single visa for tourists and removal of passport requirement for travelling within the region.

Single Customs Territory

The three heads of state also introduced the use of identity cards for travellers across their borders, kickstarted construction of the standard gauge railway and created a Single Customs Territory.

While implementation of the Single Customs Territory had failed over a nine-year period, Presidents Museveni, Paul Kagame of Rwanda and Uhuru Kenyatta of Kenya had it implemented within a year of their Northern Corridor meetings.

The three presidents also aligned fees for university students from their respective countries and created a One Network Area, significantly reducing the cost of making calls around East Africa.

Initiatives implemented by the Northern Corridor states were later picked up by the EAC Secretariat and through diplomatic means when persuaded Tanzania and Burundi to join.

In 2016, Tanzania even promised to follow the lead provided by the leaders of Kenya, Rwanda and Uganda and implement a One Network Area, which would ease the cost of doing business in the region, but the idea has since been abandoned. Currently, it can cost as much as Ush2100 (50 US cents) for a Ugandan on roaming in Tanzania to text a Tanzanian mobile phone user.

Non-tariff barriers and the region’s failure to allow local goods to be traded at zero duty, as had been promised under the Customs Union, have persisted.

East Africans crossing with goods are required to pay excise and value added taxes.

While Dr Shinyekwa insists this is okay, as long as the region Common External Tariff has been removed, the Customs Union Protocol had intended to have zero duty imposed.

Dicksons Kateshumbwa, the Commissioner for Customs at the Uganda Revenue Authority, said the EAC partner states are unlikely to agree no the elimination of taxes like excise duty, as this would lead to loss of revenue.

“We can only agree to elimination of internal taxes after political federation of the EAC,” he says.

Political federation

Since the EAC has resolved to have a political confederation instead of a political federation, it is unlikely that the region will fully implement the Customs Union.

The Common Market, whose implementation started in 2010, has also stalled, as all countries still require work permits.

Uganda, Kenya and Rwanda removed the work permit fees. But Dr Shinyekwa says that since countries face problems of high unemployment among youth, technocrats in Kenya, Rwanda and Uganda have the option of introducing regulations to block access to work permits.

In their last Heads of State Summit meeting, presidents from EAC partner states noted with concern the decline in intra-regional trade. This threatens implementation of the monetary union, which is the third pillar of the EAC integration.

According to the Monetary Union Protocol, intra-regional trade has to be higher for a common currency to function.

The Common Market Protocol and the Customs Union have to have been fully implemented. None of the parameters set by the Monetary Union Protocol have been met.

Explaining the case of the monetary union institute which should have been established by 2015 for example, Chris Magoba, Uganda’s EAC Affairs Ministry spokesperson said negotiations are still on-going.