Uphold 25 per cent common external tarrif on cars imported in EAC region

Lilian Awinja, CEO East African Business Council (L) during a past meeting (PHOTO: FILE)

ARUSHA, TANZANIA: The EAC Partner States namely, Tanzania, Kenya, Uganda, and Rwanda jointly unveiled their budgets for the fiscal year 2018/2019 on 14th June 2018.

In the budget proposals, the EAC Partner States pose various measures to protect local manufacturers in the region through high import duty on ranges of products including crude palm oil, palm stearin, edible oils, nails, tacks, drawing pins, corrugated nails staples, safety matches, potatoes, mineral water, edible offal, sausages, textiles, footwear, and Iron & Steel Products.

“It is praiseworthy to see that the EAC Partner States governments are keen to offer appropriate protection, incentive structures and support for the growth of domestic nascent industries in the region, “said Ms. Lilian Awinja, CEO East African Business Council..

However, the proposals in relation to the motor vehicle and motor cycle industry are bitter sweet. In the budget proposals, Rwanda grants stay of application of EAC-CET and apply a duty rate of 10 percent instead of 25 per cent on road tractors for semi-trailers, motor vehicles for transport goods with gross weight exceeding 20 tons and buses for transportation of 50 persons and above.

While, Uganda grants stay of application on EAC-CET and apply a duty rate of 0 per cent instead of 10 per cent on road tractors for semitrailers. Uganda proposes to reduce import duty from 25 per cent to 0 per cent on Motor vehicles exceed 20 tons; reduction of import duty from 25 per cent to 10 per cent per centon buses for transportation of more than 25 persons.

“Uganda’s proposed ban on importation of motor vehicle of 15 years and above from the year of manufacture, is commendable as it paves the way for the region to embark on harmonization of age limits of imported vehicles, to boost the motor vehicle industry,” said Awinja.

“It is also admirable to see that in the budget proposals, the EAC Partner States agree to grant a duty remission on importation of completely knocked down (CKD) kits at a rate of 10 per cent for a period of one year, this encourages local manufacturing and assembly of motorcycles,” she said.

The motor vehicle manufacturing and assembly is a volume driven industry due to high cost of plant investment. The capacity of motor vehicle assembly plants in the region is grossly under-utilized and is confronted by intense competition from imported second had vehicles mainly from Japan and United Arab Emirates. This hiders the development of local content supply base, which is dependent on high volume of production. 

“The propose of the stay of application on EAC-CET on motor vehicles for transportation of goods and passengers is likely to frustrate efforts of local motor vehicle assemblers in the region, who will face stiff competition from similar imported vehicles under lower duty rate than agreed EAC- CET,” she added.

The EAC Partner States need to maintain 25 per centCommon External Tariff on both new and used fully build motor vehicles imported in the EAC, to boost productivity of local motor vehicle and motor cycle assembly plants. Surely, industry has potential to contribute significantly to the attainment of an industrialized EAC economy by 2032.