How the EAC bloc can leverage its market

By Phyllis Wakiaga,

This year, reports and news articles have been awash with stories of a dysfunctional EAC bloc stagnated and in near-crumbling state. While many countries and regional economic blocs in the world are continuously making efforts to remove barriers within their relative geographical areas, the EAC partner states seem to be heading in the opposite direction. This has hindered the movement of people and goods, which is an essential element for the economic prosperity in any country.

The World Bank Group has stated that countries, which open themselves up to international trade, tend to grow faster, innovate more, improve productivity and provide higher income and much more opportunities for their people. The European Union (EU), for instance, lifted 45 obstacles in 2017, twice as many from 2016, as recorded by a 2018 European Commission Annual Report on Trade and Investment Barriers. Furthermore, the EU companies exported an additional €4.8 billion in 2017 due to barriers removed between 2014 and 2016.

The EAC has in place an Industrialization Strategy that aims to expand trade in manufacturing, by increasing trade among the EAC Partner States for manufactured products to at least 25% and increasing exports of manufactured goods to countries outside the EAC to at least 60% by 2032. Whilst the Strategy seeks to expand trade, it is unfortunate that our regional exports, which are mainly on raw materials, are decreasing.

The EAC global exports decreased by 9.3 percent to USD 14.7 billion in 2017 from USD 16.2 billion in 2016; whilst the main regional export commodities included gold, coffee and tea. Whereas the EAC intra-regional exports increased from USD 2.7 billion in 2016 to USD 2.9 billion in 2017, Kenya, South Sudan and Burundi recorded a decline by 7.4 percent, 24.2 percent and 6.0 percent respectively, according to the 2017 EAC Trade Investment Report. This is a clear indication that it is time the Partner States work together in driving the competitiveness of industry to realize the Economic goals of the EAC Bloc.

It is therefore critical that the Partner States work in sync to address the myriad of Non-Trade Barriers (NTBs) that continue to impede the expansion of Intra-EAC trade. If these NTBs are resolved, the region will also see the realization of the EAC Trade Integration Agenda.

The Kenyan government has played a critical role in addressing NTBs through its engagements with the EAC partner states. As a result, their engagements with the Partner States have seen printed labels, motor vehicles, Kenya leaf spring, lubricants and energy drinks accorded again preferential treatment in Tanzania, confectionary and sugar based products and paper sacks in Uganda, Natural juice and steel and steel products in Rwanda and Burundi respectively.

In spite of these efforts, some of our products still face challenges in accessing the regional market. For instance, Tanzania is yet to accord preferential treatment to confectionary and sugar based products, despite the verification study done in June 2018 confirming that the products qualify, and tobacco products from Kenya.

For any industry, the predictability in policy and regulatory environment plays a central role in driving competitiveness. Such trade disruptions result in losses, reduced export volume and ultimately, lowers foreign exchange earning. On the other hand, this can result in unfair practices such as smuggling among other forms of illicit trade, which puts the lives of many at risk. Additionally, companies end up underutilizing their operational capacity resulting in poor economies of scale and deterioration of unemployment rate.

Investing in Intra-EAC trade will not only decrease the imports of raw materials and finished goods into the region, but it will also drive innovation, specialization and technological advancement. At the same time, it gives SMEs a platform to grow and expand.

Kenya Association of Manufacturers has been working closely with the government to identify and address NTBs within the EAC. The Sector Deep-Dive Report released in October, this year, by the Association and Kenya Business Guide highlights the NTBs that local industries encounter and recommendations that will encourage intra-EAC trade. This, however, will only be achieved if the EAC reinforces its market access strategy, prioritizes the removal of non-trade barriers and improves communication and awareness raising for sustained trade and economic development.

The EAC has developed legal frameworks to address NTBs, which include the East African Community (EAC) Elimination of Non-Tariff Barriers Act, 2017 and Draft Regulation on the same. However, the review of the Act and development of Regulations is underway to strengthen the structures that address NTBs and enforcement mechanisms in the EAC.

It is also critical that EAC Partner States sustain resolutions arrived on reported NTBs and enforce the decisions of the EAC Secretariat.

The writer is the CEO of Kenya Association of Manufacturers and the UN Global Compact Network Representative for Kenya. She can be reached at ceo@kam.co.ke.