The EAC is yet to make meaningful gains, says IMF

President Uhuru Kenyatta with other EAC Heads of State at a past event. Trade volumes among member countries are still low despite implementation of a customs union and a common market protocol. [PHOTO: FILE/STANDARD]

The East African Community (EAC) is yet to make any meaningful gains since it became active some 20 years ago, a new report shows.

According to the International Monetary Fund report, implementation of the customs union and the common market have not led to “a major increase in economic and financial integration”, with the trade bloc’s member countries still looking far and wide for their imports.

The report, titled Integrating Markets for Goods, Labour and Capital in the East African Community, identified inhibitive laws and regulations by member countries as the main detriments to integration.

The region, the report says, still imports goods such as industrial supplies, fuel and lubricants, transport equipment parts and accessories, processed foods and beverages from outside the region. Some of these goods are available in the region.

“The share of intra-EAC imports in total imports has not increased in the past 15 years and most imports continue to come from outside sub-Saharan Africa,” says the report, which found that more than 85 per cent of total imports into the region come from outside the EAC.

It is mostly small landlocked countries of Rwanda, Burundi and Uganda that have higher ratios of GDP of imports from the EAC. For Kenya and Tanzania, says the report, the “ratios are very small”.

Indeed, goods that the landlocked countries import from Tanzania and Kenya are mostly imports sourced from outside the region.

However, this arrangement is bound to change with some countries such as Uganda opting to fly their imports directly to Entebbe rather than using the port of Mombasa, a fact that has seen Kampala’s share of imports from the region drop significantly, according to the IMF report.

LEGISLATIVE RESTRICTIONS

“However, while intra-EAC trade has grown substantially in nominal terms, the share of intra-EAC imports in total imports has not increased since the implementation of the customs union and remains low (single digit),” said the report.

In other words, member countries still import more from non-EAC countries than within the community, defeating the very purpose for which the custom union protocol was established. Exports among the member countries as at last year were doing relatively well at 20 per cent of the total exports.

For example, Kenya’s largest export destination is Uganda, and Uganda’s is Kenya.

Intra-EAC trade has, however, not been good compared to other regions. “The intensity of bilateral trade within the EAC lags behind that within Asia, America, and Europe even after controlling for size, level of development, culture and distance,” says the report.

But it is not all gloom and doom, with intra-EAC trade said to be more intensive than in any other region in sub-Saharan African, except for the West African Economic and Monetary Union.

The report also cites stagnation in financial integration and labour mobility where there “still exist many legislative restrictions on the free movement of capital within the EAC.

Movement of workers to other countries within the region has also not improved much, according to IMF.

There are still laws and regulations among some member countries which still present barriers to increased cross-border trade and foreign direct investment into the region.