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East African Federation set to increase trade and investment
2007-03-04 09:22:50
By John I. Hungu
The East African region, incorporating the countries of Kenya, Tanzania and Uganda, offers an excellent opportunity for increased trade and investment under the relaunched East African Cooperation.
The region covers an area of 1.8 million square kilometers with a combined population of about 80 million people.
It has vast potential in mineral water, energy, foresty and wildlife resources as well as in agriculture, livestock, industry and tourism development.
The people of this region have from time immemorial, shared a common history, language, culture and infrastructure providing development with a unique framework for partnership.
Indeed, the 1993 Agreement establishing the permanent tripartite commission for East African Cooperation on March 14, 1996 in Arusha, Tanzania was culmination of the unrelenting efforts of the three states to rekindle the spirit of East African Cooperation.
This follows the collapse of the East African Community in 1997.
Past regional integration arrangements included the East African High Commission (1948-1961), the East African Common Services Organisation (1961-1967) and the East African Community (1967-1977).
These agreement managed to put the East African countries in an advantagead position to draw lessons from the successes or failures of their past integration arrangements to evolve a more viable and sustainable system of regional integration and cooperation.
Rationale.
The rationale for formation of East African Cooperation is the need to bring about faster economic development and also maintenance of peace and security in the region.
Regional cooperation and integration in East Africa is expected to achieve this through the following:
i) By enabling the Member States to overcome the constraints of small national markets and above all, providing dynamism within the economies.
Firms will be able to exploit economies of scale, thereby improving productivity.
This in turn, will make the region internally and internationally competitive.
ii) Regional integration will provide the critical mass necessary for attracting local and foreign investments, particularly in the manufacturing sector.
iii) Efficiency gains will result from tariff and tax rationalisation.
iv) Through well guided and coordinated regional policies, regional integration will facilitate effective pooling of resources which will lead to attainment of high synthesis of sectoral mix, thereby reducing unit costs.
For example, the integration of physical infrastructure of the region, includes key areas such as transport and communication, energy and environmental protection which are essential for efficient performance of the productive and services sectors, to reduce operating costs for firms.
v) By increasing hte bargaining power of the Member States internationally through negotiating as one block, the region is likely to get better deals thatn would be the case if Member States negotiated individually.
vi) Intra-regional trade will provide an essential vehicle for the promotion of diversification of regional production base and establishment of linkages between production units in different Member States.
This is expected to promote great competition among East African products and provide the basis for the region`s effective participation in hte evolving global linkages and interdependence of production units.
vii) Coordination of the Member States national security and defence policies will lead to reduced conflicts and enhancement of peace and security in the region.
New approach.
The mandate of the new East AFrican Cooperation is broad and covers regional cooperation in political, economic, social, cultural security and legal affairs.
Priority is now on economic cooperation, which is expected to provide a basis for political cooperation.
The creation of the new regional integration body is timely.
As some previous problems have been resolved and there exists now, or considerable convergence of the three member States perceptions and policies relating to regional integration.
The East African Cooperation`s predecessor, the defunct East African Community, collapsed in 1977 due to among other reasons, the divergence of economic policies then pursued by the member States; the continued perception of disproportinate sharing of benefits accruing from economic integration and lack of adequate compensation mechanisms to address the situation and the exclusion of civil seciety and the private sector from participation in the cooperation activities was also contributing factor.
The new set up has tried to address the shortcomings inherent in the past cooperation initiatives.
First, regional co-operation is being reactivated at a time when the three Member States are restructuring their economies and giving market mechanisms a larger role in the allocation of resources.
All the three member states now ascribe to economic policies which are promarket, pro-private sector and proliberalization.
In the social area, the three countries are also encouraging participation of the people in decision making.
This commonality of both economic and social policies of the member states has been supportive of regional coopeation.
A perception of disproportionate sharing of benefits has been addressed through the decision of the Member States to follow market based integrationr ather than integration through joint ownership and management of common services as was the case before.
Any imbalances that may arise, in the course of regional trading will be addressed through appropriate policies and mechanisms that are of will be put in place.
The East AFrican Co-opeation is also encouraging the formation of regional level civil society, professional, women and private sector organisations with a view to encouraging them to network and participate in co-operation activities.
Already, the East AFrican Co-operation has facilitated the formation of the East AFrican Co-operation has facilitated the formation of the East AFrican Business Council (EABC) comprising apex bodies of private sector organisations in the three promotion of cross-border trade and investments and in lobbying for business friendly policies in the member States.
The EABC has already been granted observer status during the Summit Meetings and meetings of the Permanent Tripartite Commission for East AFrican Co-opeation and its subsidiary bodies.
Similarly, the East AFrican trade Union Council (EATUC) has been granted observer status in the deliberative and policy making organs of the Co-operation.
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