Barriers curb trade in East Africa common market


Border delays and the absence of enforceable means to settle disputes and promote integration are hindering the opening up of trade in east Africa a year after inception of a common market.

The five-nation East African Community (EAC) regional bloc made up of regional economic giant Kenya, Rwanda, Burundi, Tanzania and Uganda, formed a common market last July to increase trade through free movement of goods, services, capital and people across borders.
“If you look at our borders, the movement is still fairly restricted. People don’t see the change one year on,” said Oduor Ong’wen, country manager for Kenya at the Southern and Eastern Africa Trade Institute, Reuters reports.

Citizens complain that they cannot move to neighbouring states and seek employment or start a business freely, while exporters complain of duplicate checks at border points as well as disparate quality and safety standards in different states.

But there has been some progress in places like Kenya whose exports to the region have surpassed those to the European Union which was traditionally the largest market for its exports.

Exports to EAC rose 12 percent to 101.3 billion shillings ($1.12 billion) in 2010, the Kenyan ministry for the EAC said.

Exports to the region are mainly finished goods like vehicles and food while raw produce like tea, fruits, vegetables and flowers, is sold to the EU.
“This demonstrates the shift of Kenyan exports,” said David Nalo, Permanent Secretary at the ministry.

Vimal Shah, managing director at Bidco Group, a Kenyan edible oil and soap manufacturer, is one of the beneficiaries of the growth of exports to the region.

He said his firm doubled sales to the region after the common market kicked in, without giving details of the amounts sold. But he says there are challenges to free trade.
“Some countries start rejecting goods from other countries saying, ‘they don’t meet our standards’. That is a non-tariff barrier that can delay the entry of goods,” Shah said.

Issa Sekito, spokesperson for the Kampala City Traders Association in Uganda, said Shah’s assessment was accurate.
“The Uganda National Bureau of Standards certifies our goods here which means they should be safe to enter all the markets in the EAC but Tanzania continues to block entry of Ugandan goods on the pretext that they must be certified by their standards agency,” Sekito said.
“There is so much fear of competition among the EAC countries that removing all the existing barriers to free trade and movement of goods and service and labour is a goal we are unlikely to achieve soon.”

Samuel Sitta, Tanzania’s minister for EAC affairs blamed the slow pace of progress on fears that faster economic integration could benefit some states at the expense of others.
“It is taking longer than expected. There is still fear that the disparities in the economies can slow down certain things for some nations,” he told Reuters.

Shah said there was need for faster political action in Arusha, Tanzania, where the community has its headquarters.
“We need faster decision making and a faster dispute resolution mechanism. The EAC secretariat doesn’t have any teeth yet to solve the issues between the five countries,” he said.
“The dispute resolution mechanisms is supposed to be dialogue in Arusha, which is painfully slow.”

Others blamed the pact establishing the common market for failing to lay out a legally binding process of ensuring states stay true to the goal of closer economic integration.
“Some partner states are moving faster than others. There is no legally binding mechanism. There are no penalties for non-tariff barriers, it is like a gentleman’s club,” said Adrian Njau, a trade economist at the East African Business Council, an Arusha-based lobby group representing businesses from the five EAC members.

Big firms with operations around the region say they have already started to reap the benefits of the common market, through the increased ease of moving their staff.
“There is recognition that we are all part of the same family,” said Martin Oduor-Otieno, chief executive of Kenya Commercial Bank (KCB.NR: Quote), which has branches around the region.

Trade experts said the common market should also help small traders who cross national borders to sell items like farm produce, fish and handicrafts, because they form the bulk of regional trade.
“They (small traders) think this common market is for big firms. At the local level they get a lot of barriers including police harassment,” Ong’wen said, citing a recent study by Southern and Eastern Africa Trade Institute.

Both officials and trade experts said governments should eliminate numerous police roadblocks on highways which slow down movement of goods and create avenues for corruption.