Private Sector priorities ahead a fully fledged Customs Union

Arusha, Tanzania, November 11; As East African Community prepares for a fully fledged Customs Union in January 2010, the private sector in East Africa under the umbrella organisation East African Business Council has outlined its priorities.

For the private sector, the critical issue is the challenges facing its smooth implementation and those that hinder the fulfilment of the ultimate goal of deepening integration through increased trade among the EAC countries and increased competitiveness of private sector, both regionally and internationally.

For the five year transitional period, the implementation of customs union instruments has been progressing well though there are some challenges encountered when implementing some instruments. The challenges if not addressed could hamper the achievements of the objectives of the Customs Union.

The EAC Customs Union started on 1st January 2005 with three EAC Partner States; Tanzania, Uganda and Kenya. Burundi and Rwanda joined EAC in 2007 but started implementing the Customs union in July 2009.

The EAC Customs Union initially set a 5-year transition starting in January 2005 and ending in December 2009 before it becomes a fully Fledged Customs Union in January 2010 with free movement of goods within the region.

As EAC moves towards fully fledged customs union, the following are EAC private sector perspectives on Customs Union instruments:

EAC Common External Tariff (CET)
The application of the CET as an external policy of the EAC Customs Union has generally been satisfactory despite some challenges. The review of the CET including pre-budget consultations of the Ministers of Finance should be more consultative, transparent and actively involve the private sector.

Programme of Elimination of Internal Tariff
The private sector view is that the internal tariff elimination should be carried out as scheduled. However, as private sector tries to address issues of competitiveness at firm level, EAC Partner States should be committed to addressing issues of competitiveness which are beyond firm levels such as energy, infrastructure, telecommunications transport and cost of and access to finance.

EAC Rules of Origin
Administration of EAC Rules of Origin has so far been executed fairly well in the region. The existence of simplified certificate of rules of origin for low value transaction is highly commendable by private sector as it has facilitated intra- trade in the region.

It is view of the private sector that EAC Partner States should work on how best to remove the usage of rules of origin in the fully fledged customs union taking into consideration the issue of multiple membership in SADC and COMESA and porous borders.

Elimination of Non Tariff Barriers (NTBs)
Though a mechanism for identification, monitoring and elimination of Non Tariff Barriers has been developed and agreed by EAC Partner States still NTBs to trade are major challenges to the intra-EAC trade and increasingly erode the benefits that would accrue from EAC integration process. NTBs are viewed to be most severe in the following clusters: police road blocks, weighbridges, mutual recognition of standard marks/export certification, business registration and licensing and immigration procedures. The Partner States should be committed to the elimination of NTBs by making the mechanism more effective in eliminating the NTBs as opposed to the current scenario whereby the region is busy recording NTBs instead of eliminating them.

EAC Standard, Quality, Assurance Metrology and Testing (SQMT) plus Mutual Recognition of Quality Marks by EAC Bureau of Standards.

EAC Partner States should expedite the process of harmonising all EAC standards. In addition, the EAC bureaux of standards should honour each other’s mark of quality through the mutual recognition principle. Other regulatory agencies in the region should also honour quality marks and avoid unnecessary duplication. As matter of urgency the EAC Partner States should expedite the implementation of SQMT Act in the region.

Even though the implementation of the various instruments of Customs Union faced various challenges during the transitional 5 year period the region has realised tangible benefits in term of increased revenue, intra EAC trade, and new investments.

The private sector wishes to see consolidation of those achievements and a very clear time-bound plan of Transforming Customs from National to Regional level in a fully fledged Customs Union.

The plan should address the following:

•EAC Partner State should expedite the process of harmonising the EAC Customs enforcement regulations

•EAC Partner States should harmonise tax and investment incentive regimes
•To ease free circulation of goods in the EAC Custom Union, customs duties and charges of equivalent effect will be collected once at first point of entry into region and remitted to the respective Partner State Revenue Authority.

•In the view to facilitate trade, there is need to centralise customs Management.

•Reduction of the Costs of Doing Business

Private Sector needs urgent action on the following items with the view to lowering costs of doing business in East Africa:
Road and rail transport
•Air Transport; consider regional travel to be domestic.
•Energy
•Telecommunications
•Single Tourist VISA
•Involvement of the Private Sector in the integration process

The institutionalisation of the Private Sector participation in the EAC Committees, including the Committee on Investment and Private Sector Development .

The private sector in the EAC region is fully committed and supports the implementation of a Fully Fledged Customs Union and calls for the urgent measures to address the challenges identified.

Presented by:
Mr. Keli Kiilu,
Vice Chairman
East African Business Council