East African states see both hopes, new challenges at dawn of Common MarketChina View - 2009-11-19 14:27:31 - By Dan Ran
NAIROBI, Nov. 19 (Xinhua) -- Heads of East African Community (EAC) member states will wrap up their 18-month-long negotiations and ink a protocol this Friday to establish the EAC Common Market, another crucial step forward in East Africa's integration process after the establishment of the Customs Union in 2005. The EAC consists of five member states: Kenya, Tanzania, Uganda, Rwanda and Burundi, with a development strategy of growing up from a Customs Union, a Common Market to a Monetary Union and eventually a Political Federation.
Under the Common Market, borders between member states will be opened to allow free flow of goods, services, capital and persons. The five East African countries will form a single market with a population of more than 120 million and a combined GDP of some 60 billion U.S. dollars, creating fresh opportunities for regional development while at the same time bringing new challenges for each of the five.
FUNCTIONING COMMON MARKET DUE IN SIX MONTHS
According to David Nalo, permanent secretary of Kenya's Ministry of EAC Affairs, the Common Market protocol will be signed and then submitted to governments of member states for approval before coming into effect. Starting from January 2010, governments will have six months to go through the ratification process under their respective legislations, making July 2010 the earliest time for the Common Market to take actual effect.
However, as each country has a different ratification procedure, it remains unclear when the Common Market will start bearing fruit, Nalo said. Even though the Common Market protocol will be signed soon, the issues of withholding tax, travel documents, land ownership, the right of residence, adoption of Common External Tariff (CET) and the regulation of rules of origin remain in dispute. Therefore, the six-month ratification will provide a crucial period of time during which member states could adjust policies, settle disputes and get better prepared for the Common Market, analysts say. It will also provide preparation time for Rwanda and Burundi, which just joined the bloc in 2007 and adopted the Customs Union in July this year, to avoid hasty participation and fully gear up for the integration.
FRESH OPPORTUNITIES FOR EAST AFRICA
It is widely considered that the implementation of the Common Market will bring the region into a new stage of development, with increased regional trade, more foreign investment and better regional economic competitiveness. Under the Common Market, a series of measures will be taken to integrate the regional market, including achieving a full-fledged Customs Union, eliminating tariff barriers, non-tariff trade barriers and technical trade barriers, allowing the free flow of goods, services, capital and persons, adopting CET, introducing harmonized product standards, as well as harmonizing finance, trade, monetary, education, employment and labor policies. Upon implementation, citizens of the five nations will be free to have cross-border travel without visas, enabling a free movement of labor. This is expected to optimize the distribution of human resources within the bloc and boost economic development, analysts say. According to the protocol, companies and firms in one member states will receive equal treatment in other member states, creating a new wave of opportunities for business expansion. Moreover, establishment of the Common Market is expected to speed up integration and inject new energy for the economic development of landlocked countries such as Rwanda and Burundi.
As a landlocked country, Rwanda needs to export and import, and thus needs "good net work of roads, railways and ports that operate effectively," Peter Andrew Guy Sinon, executive director of African Development Bank representing Eritrea, Ethiopia, Rwanda, Seychelles, Tanzania and Uganda, said during an interview with Rwanda's Business Times.
"This is why regional integration is very important so that even as a landlocked country, you can have a say on what happens at Mombasa Port," he said.
Despite the upcoming breakthrough, observers warn that it is not all about optimism. In the first place, the free movement of labor will inevitably bring stiff competition for local employees. Uganda's Minister of Information and Communication Technology Aggrey Awori was quoted by The Independent as saying that the influx of foreigners is likely to increase with the Common Market. "For any federation to be meaningful, member governments should not put restrictions on movement of labor but enact laws on how investors should employ locals," the paper quoted him as saying. Meanwhile, analysts worry that with the market widely open, the inflow of foreign products may take a heavy toll on unprepared manufacturers, causing the fall of local enterprises and unemployment of workers, which may in turn spark trade frictions.
It should also be noted that the inconsistent integration pace among member states, the lack of an effective benefit sharing mechanism among stakeholders and the laggard infrastructure development are all obstacles for the regional integration, analysts say.