EAC has considerable unexploited potential in trade, but intra-regional trade is far below its potential.
The Chairman of the EAC Council of Ministers Dr Richard Sezibera says that intra-regional trade within the East African Community is currently very low standing at just less than 20%.
It is extremely low compared to the Southern African Development Community (SADC) where intra-regional trade levels stand at 46% and the EU at approximately 67%.
“As we talk about trade integration in East Africa, it is important to ask ourselves hard questions: To what extent have we exploited the potential we have as EAC Countries? To what extent have we seriously created synergy to realize regional development?,” poses Dr Sezibera.
He says the EAC has a lot of potential in the informal cross-border trade which is estimated to be as high as 50 per cent of formal trade in Africa.
Informal cross-border trade Sezibera says is a diverse source of livelihood for millions of people but a number of barriers are hindering it.
These include tariff and non-tariff barriers, excessive regulation and ease of infrastructure in Border towns.
He proposes solutions like the need to address aspects related to trade costs, harassment and corruption, infrastructure deficiency, excessive regulation, and excessive requirements at borders; and to formalize the informal sector as important policy directions required to support informal cross-border trade and enhance regional integration.
The Chairman says the recent discovery of natural resources – natural gas and oil in Kenya, Tanzania, and Uganda and existing oil exploitation in South Sudan lacks concerted regional effort to ensure their optimal exploitation for the benefit of member states.
He says a regional approach would greatly help to optimize the potential benefits of the natural resources.
On transportation, Dr Sezibera says the region’s surface transportation costs associated with logistics in East Africa are higher than in any other region in the world.
Despite the huge investment in the road and rail infrastructure by the governments of EAC countries, he observes that EAC has not fully exploited the potential in this area including the utilization of waterways particularly on Lake Victoria and Lake Tanganyika which is very poor.
The region according to the Chairman has not enhanced creating value chains in its production processes.
“Adopting a regional approach to address capability gaps is crucial to developing inclusive regional value chains in which local producers are linked and adequately compensated through integration in supply chains of emerging regional firms.
“These efforts should include regional integration plans making use of domestic and regional competitive advantages and trade institutions. The resulting productivity gains can help raise incomes and make value chains truly global by increasing FDI and attracting international demand,” says Dr Sezibera.
“It is an open secret that we want to industrialize, but again, how have we fared on with this important goal? In some cases, Partner States depend on a few manufactured products for export.
This may not be sustainable and indeed exposes such economies to shock, if things change in the global markets. The manufacturing sector has weak links with other sectors in terms of forward and backward linkages.
The EAC capacity to export manufactured products is just above a half of its capacity to produce such products, implying that most of its production caters for its own markets.
The way forward for the bloc to realize this goal of becoming a manufacturing hub and a gateway to investing not only in EAC but also in Africa. Industrial policies should promote structural change – from agriculture to labour-intensive or resource based-manufacturing at an early stage of industrialization” he opines on industrialization.
BY ALEXANDER MWANGI