RATIN

Free trade dream eludes EA: report

Posted on March, 6, 2017 at 10:00 am


Dar es Salaam. The East African Community (EAC) is dragging its feet on removing restrictions on movement of goods, services and capital, a year since it became a full-fledged common market, a new study has established.

The East African Common Market Scorecard 2016 (CMS 2016) unveiled on Wednesday here revealed that although some significant progress has been made, a lot remains to be done to make the common market a truly free trade area.

A survey found out that all five member states still have some restrictions in the movement of capital, including the failure to amend local laws that treat EAC citizens as foreigners.

The CMS 2016, which is a database that serves as a tool to help EAC states track their progress in integration, found out that Burundi had
the most restrictions on movement of capital followed by Tanzania, Uganda, Rwanda and Kenya.

But Tanzania made the most reforms in opening up its capital account after lagging far behind the others for a long time, the CMS 2016, prepared by the World Bank experts indicates. The CMS 2016 is the second of its kind since the common market protocol came into force in May 2010. As far as the free movement of services Tanzania was found to have the largest number of non-performance in the freedom of movement of services,.

Tanzania and Kenya were found to have introduced the largest number of non-tariff trade barriers, the CMS 2016, which covered progress reached by December 2015, notes. The CMS 2014 was the first Scorecard released.

However, a World Bank lead private sector specialist for Tanzania, Steven Dimitriyev, commended the EAC for a significant progress in integration but urged partner states to do more to deepen it.

“According to the Regional Integration Index 2016 prepared by the African Development Bank, the EAC is the top performing regional
economic community in terms of trade integration, exporting nearly 20 percent of its goods to EAC, and the overall degree of regional
integration in Africa,” Mr Dimitriyev, who represented the Practice Manager for East Africa Trade & Competitiveness Global Practice of the World Bank Group, said.

Mr Dimitriyev added that numerous barriers remain in the areas of capital, services, free movement of people, and goods.

“More worrying is the fact that a number of new measures have been introduced that hinder regional trade and investment, thereby contradicting earlier progress. Attracting investment requires an open and competitive investment climate, active trade facilitation and regional efforts to strengthen logistics and connectivity,” he noted.

He revealed that plans were underway to transform the Scorecard from a mere integration tracking tool into a more “practical, implementation-support tool, modelled around capturing the real issues faced by business people on the ground, and identifying the real obstacles that cause investors to turn away from EAC in favor of investing elsewhere.”

CMS 2016 further reveals that under the freedom of movement of capital partner states committed to liberalising 20 capital market operations. But at the end of December 2015 only two of these 20 operations were free in all partner states. Much progress has been made in the securities (which enable government and companies to borrow from the public through bonds) where 11 reforms were made since the CMS 2014 was published. The two operations that are free in all partner states are external borrowing by residents and repatriation of proceeds from sale of assets.

“In terms of credit operations, Kenya, Rwanda and Uganda continue to be open to both borrowing and lending abroad by residents. Burundi and Tanzania both restricted lending abroad by residents in 2014,” the Scorecard, whose analysis is based on a review of laws and regulations relevant to the common market protocol, says.

The Scorecard further reveals that all partner states have maintained restrictions that affect inward investment from other EAC economies. “This remains an impediment to attracting region-wide foreign direct investment and to the region’s ability to fully participate in global value chains. To fully comply with the common market protocol, partner states need to repeal provisions in at least 27 laws and regulations,”  the CMS 2016, which looks at status of compliance as at December 31 2015 when all obligations in the EAC common market protocol were expected to be implemented, reads in part.

The Scorecard recommended capacity building to personnel in relevant line ministries to quicken the pace of reforms. The CMS 2016 has also called upon member states to improve transparency and information sharing with the private sector to enable them utilise better the
opportunities present. “There is a strong need to engage and inform the private sector on the implications of reforms on their day-to-day operations across the region and to develop private sector reform champions who could help monitor and follow-up implementation,” the Scorecard says.

 

Source: The Citizen