East African nations to enter free trade era in Jan

Nairobi, December 19

Kenya, Uganda and Tanzania are set to enter a new trade era on January 1, when a treaty designed to free up their trade and harmonise tariffs on goods entering the East African Community (EAC), comes into force.

Presidents Mwai Kibaki of Kenya, Yoweri Museveni of Uganda and Benjamin Mkapa of Tanzania signed the protocol on the EAC Customs Union in the Tanzanian town of Arusha last March.

On Thursday, the bloc's assembly passed the protocol bill, giving it legal teeth.

Kenyan economist Robert Shaw said the new treaty would go a long way to improve regional trade, only if all modalities are faithfully implemented and Kenya, a regional economic powerhouse, addresses trade imbalance with its partners, which is a major obstacle.

"Anything that improves the level of trade within the region is good ... but we need to move from politics into implementation of modalities to make the treaty work," Shaw said.

"Kenya must find ways how to import goods and services from Uganda and Tanzania to bridge the trade imbalances," Shaw insisted.

The customs union lays a firm foundation, not only to boost trade, but in the "fast tracking of the East African integration process," the main target of the bloc, said Tanzanian Foreign Minister Jakaya Kikwete, who also chairs the EAC Council of Ministers.

"But we hope that this can be balanced in the bigger market and the economies of scale, with Ugandan businessmen getting the opportunity to invest in other countries of the region," Ugandan Trade Minister Edward Rugumayo said. He added that landlocked Uganda would depend heavily on Kenya's Mombasa port.

"If rules are followed to the letter, then we shall see big growth in all the countries, especially when a common currency and bank is introduced," a Kenyan Trade Ministry economist said. A common currency and bank are due to be installed before 2010.

The deal, which took four years to negotiate, calls for the elimination of duties on goods within the EAC, which is home to some 90 million people with an estimated annual market of some 90 billion dollars.

Concretely, Kenya will not levy duties on goods imported from Tanzania and Uganda, while duties on certain goods heading from Kenya to its two partners will fall from 10 per cent to zero over five years.

On goods entering the EAC from outside, three tariff bands will be imposed -- zero, 10 and 25 per cent, depending on the nature of the shipment.

Next year, due to that tax harmonisation, Kenya will lose about 80 million dollars and Uganda 45 million, official statistics showed. But in the long term, rewards would come in form of increased regional trade and investment, according to officials.

"We want to move the community from the conference rooms into the corporate boardrooms, the streets of our urban centres and the market centres in our rural areas," Kibaki said when the treaty was signed.

Mkapa spoke of increased "competitiveness with the globalised world" while Museveni said the treaty would "accelerate harmony in relations" between member states.

The EAC was originally established in 1967 but collapsed 10 years later due to ideological disputes among the three partners. It was officially relaunched in 2000.

Rwanda and Burundi have also applied to join the community, which aspires to create all institutions, essential to transform itself into a political federation modelled along the European Union.

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