EAC traders lobby to block foreign firms from tenders

As the East African countries push to forge a common market by mid this year, a scramble for multi-billion shilling government contracts is shaping up with local traders calling for a protective wall against multinational corporations.

While the international partners have been pushing for the implementation of the World Trade Organisation rules that favour a completely liberalised tendering system as a way of weeding out corruption and encouraging the private sector’s participation in government funded projects, strong resistance at national levels has kept the matter pending over the last five years.

The World Bank, one of the organisations said to be providing technical and financial support to the harmonisation of the East African Community (EAC) public procurement system last week appeared to be reading from another script.

“The EAC Secretariat currently has procurement rules stipulating provision of goods and services from EAC members but at the national level government systems prevail and there has been little discussion about regional harmonisation,” the bank’s regional spokesperson, Mr Peter Warutere, said.

On the ground, local traders are piling pressure on governments for a harmonised procurement system that favours them, saying it is only through an affirmative action in government projects that they will be able to enjoy the fruits of a bigger market.

But even with the EAC where negotiators already in agreement on a skewed system in favour of local traders, sharp differences have emerged in the definition of “locals” with a section proposing that a specific portion be reserved for the nationals footing the bill.

According to a source who did not want to be named discussing the issues beforehand, the national governments prefer to retain strict control of internally funded projects but leaving only the jointly funded projects for open competition among the region’s citizens while international bidders are restricted to donor funded projects.

“Governments in the region need to harmonise national public procurement laws and regulations such that any preferences offered to local companies at national level is automatically extended to regional companies as well,” argues Mr Adrian Njau, a trade economist at the East African Business Council

In an interview with the Business Daily on Friday, EAC secretariat officials said they were ready to defy the international pressure to favour a system that ring fences the region’s lucrative government projects from foreign firms but maintained the harmonised system must fit within the provision of the founding treaty that bars discrimination against citizens of the region on grounds of nationality

“There is a lot of national interest in this matter because governments are the biggest trading partner that any firm would wish to do business with and that’s why any affirmative action agreed to must be available to all east Africans,” said Mr Peter Kiguta, the EAC director general in charge of customs and trade.

The immediate areas for lucrative tenders according to secretariat are food supplies, farm inputs, construction, medicine and insurance services — the essential items that the regional governments are expected to start ordering in bulk to gain from economies of scale.

In the common market era, the region is also expected to pool all the custom taxes for funding joint projects such as transnational highways, regional ports, pipelines, railway lines and cross-border power lines.

Experts say harmonisation of the region’s procurement rules must be fast tracked in time to allow for proper implementation of all the projects with regional importance.

“While a regional project that transcends national borders will be considered as one, there should be no justification for its different pace of implementation, quality and standards...,” said Mr Njau.

Local traders

Opening up of the public tendering system is one of the issues that the European Union has been demanding in the ongoing EC– EAC economic partnership agreements negotiations.

“While we expect to borrow a lot from World Bank’s model which roots for an open tendering system, we will insist that tenders for items which can easily be procured from within the region be left to local traders,” said Mr Kiguta.

FACT BOX

The Kenyan Law (Public Procurement and Disposal Act) gives “(a) exclusive preference (in awarding publicly funded projects) to citizens of Kenya where – (i) the funding is 100 per cent from the Government of Kenya or a Kenyan body; and (ii) the amounts are below the prescribed threshold.”

Kenya is particularly under pressure to adopt a more open system that meet the international standards as other EAC members currently fall within the Least Developed Countries category which have been bargaining to protect their public tendering system from outsiders.