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We must kickstart EAC’s rise into a powerhouse

FINANCIAL STANDARD
By Mbatau wa Ngai | January 24th 2017
By Mbatau wa Ngai | January 24th 2017
FINANCIAL STANDARD

East African Community (EAC) leaders should be concerned that the economic bloc has yet to unlock the region’s potential as envisaged more than two decades ago.

At inception, the EAC was expected to avoid the pitfalls that had led to the collapse of its predecessor. Regrettably, the then regional leaders chose to gloss over their differences instead of going to the core of the problems and uprooting them once and for all.

The result is that the intensity of bilateral trade within the EAC – according to an International Monetary Fund (IMF) report – lags behind that within Asia, America and Europe.

These regions are the gold standard towards which the EAC, and indeed Africa, should aspire. But to get there from where it is today, regional leaders have to redefine their goals and agree on policies that will get them there.

For starters, the leaders need to hold open dialogue with their manufacturers and traders to find out the reasons behind the latter’s importation of goods from Asia when the same are produced in neighbouring countries.

The importation of processed foods and beverages is especially perplexing considering that the region is awash with industries producing these. The issue of price should not be a key determinant because this can be remedied by agreeing to levy a specific tariff to keep the business within the region.

Perhaps a case could be made for going back to the original agreements reached in the 1960s after Kenya, Uganda and the then Tanganyika gained independence. These agreements allotted each country the industries it could start to serve the entire region.

The fact that those agreements collapsed was due more to the political differences between the then presidents than anything else. The reality that regional leaders are pursuing similar political and economic policies, and the bogeyman (China) at the height of the Cold War has become a common financier and competitor, makes it easier to believe that a revised agreement would work this time round.

SHARING OUT

The sharing out of industries would best be based on each country’s competitive advantage in each sector. This would give regional industries the clout they require to venture further afield into the southern, western and northern regions that have until now been closed to EAC goods, while flooding its markets with their own.

The practice of deriving satisfaction from being a gateway to goods manufactured elsewhere may also require a second look because it not only undermines the ability of existing manufacturers but also deters others from getting into the sector.

The firms that left the region for North Africa and the Middle East, from where they export their manufactured products, may require a special audit.

After all, the region is busy addressing many of the factors they cited as reasons for leaving. These include unreliable power supply and high costs. All EAC countries are undertaking projects that would increase power supply while reducing costs.

Equally noteworthy are the regional governments’ determined efforts to reduce the costs of doing business.

The audits may suggest the route the countries can follow to bring back these firms’ manufacturing bases, failure to which the leaders may consider imposing tariffs that would make manufacturing elsewhere unprofitable.

The drive to develop and implement an industrialisation policy from the top is borne out of the realisation that the plan will face opposition from special interest groups that are benefitting from the status quo.

Countries that have primed their entire economies as export powerhouses can also be expected to put up stiff resistance, even though most of it would be underground.

Regional leaders’ failure to act decisively would mean financiers, both multilateral and bilateral, are not only getting repaid the monies they loaned, but are the major users of the infrastructure developments that will cost taxpayers billions of shillings every year.

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