East African economies are seeking closer trade ties with countries outside the bloc as the volume of trade between the five-member states diminishes.
A trade report by the EAC Secretariat seen by The EastAfrican highlights a cocktail of factors stifling intra-EAC trade while undermining regional integration process.
Non-tariff barriers (NTBs), poor infrastructure at the ports and on the main transport corridors, low value addition in the EAC region and lack of a common position on the implementation of duty exemption regimes by the member states have been identified as key factors that distort the Common External Tariff (CET).
The other impediment is the lack of a comprehensive investment plan to promote EAC countries as a single investment destination.
“In spite of the growth in trade and investment, the period 2015 exhibited continued sluggish performance that was witnessed in 2014. Trade in goods volumes as well as investment inflows remained flat or declined as a result of a number of challenges,” reads the report.
The report dated August 2016 shows that trade among the EAC partner states is falling as member countries look beyond the borders for other trading partners.
Intra-EAC trade fell by 13 per cent in three years, with total value dipping from $5.8 billion in 2013 to $5.06 billion in 2015.
Between 2014 and 2015, intra-EAC trade shrank by 10 per cent, from $ 5.6 billion to $5.1 billion.
The bulk of EAC exports were destined to Common Market for Eastern and Southern Africa (Comesa) and the European Union (EU), amounting to 14.6 and 15 per cent respectively while intra-EAC exports amounted to 19.6 per cent of total exports.
While Uganda and Burundi recorded an increase in their shares of total intra-EAC trade, Kenya, Tanzania and Rwanda radically cut their share of the regional trade by 8.3 per cent, 20 per cent per cent and 27.5 per cent respectively.
During the year, the level of intra-regional imports to Uganda decreased by eight per cent to $630.2 million from $684.6 million in 2014.
Tanzania’s imports from Kenya fell by 63 per cent due to the closure of Uchumi Supermarkets operations in Tanzania, according to the report, largely financed by TradeMark East Africa.
The major intra-EAC imports consisted of industrial products such as cement, petroleum products, sugar, confectionery, vegetable fats and oils, iron and steel, paper, plastics, pharmaceutical products, inorganic chemical compounds, fertilisers, and agricultural products such as cereals.
To mitigate this unfavourable trade position in the EAC, the report recommends steps to be taken towards reducing the cost of doing business in order to boost exports and investments and development of a coherent approach to attract investment through development of policies that support investment promotion.
Others are enhancing value addition to EAC export products and fast-tracking conclusion of trade and investments agreements with key trading partners.
According to the report EAC countries are seeking to foster ties with their main trading partners outside the five member bloc.
These are the EU, Comesa, Southern African Development Community (SADC), United States of America, United Arab Emirates, India and China.