EAC businesses free to open in any partner State but Common Market debate shelved

By Bob Roberts Katende

The private sector won some major concessions at the recent Second Round of the EA negotiations but gloom and pessimism over the planned Common Market reigned.

Agreement on the planned free movement of goods, services, capital and persons under a planned Common Market remained elusive despite a tight December 2008 deadline for the current round of talks.

The negotiation, dubbed the `Nairobi Round’ was attended by the High Level Task Forces (HLTF) from all member countries; Burundi, Kenya, Rwanda, Tanzania, and Uganda. The HLTF from each country comprises nine civil servants and two private sector representatives.

They were to consider comments from Tanzania on the last report of the HLTF before considering the items that were not discussed during the Kigali Summit including the right of establishment and residence, transport and free movement of labour, capital and service. It was also expected to discuss preparatory activities in the run-up to a Monetary Union.

It emerged, however, that whereas the member states agreed to fast track efforts to the implementation of the Common Market by January 2010; poor implementation of the Customs Union has left the Common Market on shaky ground.

The members were informed that EAC secretariat was to undertake a study to evaluate the impact of the customs union as demanded by the private sectors of Uganda and Tanzania. However, the terms of reference for the study had not been drafted and circulated to member states at the time of the meeting. It came as a surprise to members that the secretariat wants the common market negotiations complete without a full report of the evaluation of the customs union.

Despite Kenyan President Mwai Kibaki’s recent announcement of a 24-hour operations day at the Kenya Port at Mombasa and a reduction in road blocks from 45 to 15 in Kenya, non-tariff barriers (NTBs) remain a major concern for the private sector.

Businessmen have applauded the 24 hour service operation but technocrats are saying that is not enough because Kenyan actions are a deviation from the total elimination as agreed upon by the members.

Poor road network, extortion, delays by border officials and restrictions on importation and exportation of goods are the major non-tariff barriers in more than 75% of border towns in the EAC.

According to one report, a truck driver transporting goods from Mombasa to Kigali, for example, encounters more than 20 barriers set up by police, despite an NTB Monitoring Mechanism developed jointly by the East African Business Council (EABC) and EAC and adopted by the Council of Ministers in August 2006.

It emerged that a Ugandan team was tasked to oversee the implementation of the elimination of NTBs but the team has never met to report on the progress of the elimination of the NTBs. Forms were supposed to be issued to drivers who use Mombasa high way up to Burundi and tick any hindrances faced and report to the monitoring team who would in turn report to the High level task force, but that was not effected.

The situation was salvaged by Gagawala Wambuzi, Uganda’s minister of state for Trade, who has instituted a bilateral committee of Uganda and Kenya to check on the immediate implementation.

The inaction over NTBs to some extent shows the discrepancy between signing protocols and implementation. A slow implementation process of the elimination of NTBs, puts Uganda at a disadvantage since there will be reduction in the entry of goods into Uganda which uses Kenyan route as the main entry point of raw materials for her industries.

A major gain for the private sector was an agreement to increase the HLTF membership from 11 to15, with more slots for representatives from the private sector.

On the right of Establishment, which gives a person from an EAC the right to install oneself and ‘set up shop’ in another partner state permanently or semi-permanently for the purpose of performing a particular economic activity, partner states agreed to grant companies from the EAC region, the unrestricted rights of establishment, only subject to security and health. It will no longer be a requirement for companies to have citizens of a host country hold shares in the company before it’s allowed to operate. This will be effected within one year into the Common Market. A special program will be put in place to oversee the complete elimination of barriers to establishment of businesses in member states.

Under discussions on the movement of workers, persons and labor, members agreed to harmonise social security laws to ease movement of workers. Though Tanzania agreed on this principle, it remains skeptical as it fears its citizenry being exposed to competition for jobs from Kenyans and Ugandans who boost of higher elite classes of people. The free movement of persons remains a challenge since all other member states have national identity cards save for Uganda and Tanzania. Uganda needs 50 million US dollars to embark on the process.

Perhaps the most important aspect to Uganda, that was agreed upon was to amend Article 156(2) in the next round of talks in Bujumbura, to make it compensatory. The article establishes a development fund kitty that shall be a compensatory in nature. This shall be governed by a council. “It will address a trade deficit between Least Developed countries (LDC) in the integration and non-LDCs,” said Ssempebwa John, director of trade, private sector foundation “”Uganda. “Producers from LDCs will apply to the council that shall manage the fund to start producing goods that they were formerly importing and the imbalance will be corrected in the long run,” he added. Kenya is the only country in the integration that is not in the LDC category.

Uganda’s negotiating team is praying that at the next negotiations companies dealing in services like reinsurance and construction should remain protected for at least ten years so as to “place adequate regulatory frameworks in these sectors, and to enable the players in the sectors build their capacity under a regulated environment.”This will be a call to the implementation of the principle of Variable geometry which recognizes that some countries are poorer than others and therefore unable to do certain things immediately and must be given sometime to do so.

During the talks, the members did not agree on whether citizens and companies of member states were free to acquire land in other member states.

Members referred matters relating to the right of residence to the next round of trade talks in Bujumbura.

Amid the protests over slow implementation of protocols, some observers are saying the integration should be slowly and carefully implemented to cover all gaps that led to the collapse of the community in 1977. They call for evaluation of every stage of the integration.