The East African Community has launched a Sh240 billion ($300 million) infrastructure and border management project that seeks to cut the cost of doing business in the region by 40 per cent.
The project, run by Nairobi-based TradeMark East Africa (TIMEA), involves automating ports, weighbridges, customs department and all other national agencies that manage the region’s key transport corridors and border points, increasing efficiency of transactions.
The project is expected to raise exports to non-member countries.
It will also establish common road networks linking markets in the region to those in the Common Market for East and Southern Africa (Comesa) and Southern Africa Development Community (SADC) countries, promoting trade within the free trade area (FTA) that the three trading blocs intend to launch this year.
“Sixty per cent of this budget will be invested in improving infrastructure to help the region realise its quest for a bigger market of more than 130 million with flourishing trade and reduced poverty,” said TMEA’s CEO Frank Matsaert.
Improved efficiency at ports and transport corridors is expected to reduce cost of intra-regional transactions by 30 per cent and raise exports to non-EAC markets by 10 per cent in the next four years, officials said.
The initiative comes at a time that administrative barriers are slowing trade in the region with statistics showing that intra-EAC trade grew from $1.6 billion in 2004 to only $3.5 billion at the beginning of 2010 in spite of launching both the custom union and common market.
Prime Minister Raila Odinga linked slow trade growth to inefficiency at weighbridges, roadblocks and lengthy inspection procedures which together with poor state of roads, railways and energy supply reduce the region’s productivity by 40 per cent.
“Despite the high level of economic integration, we are witnessing resurgence of non tariff barriers in virtually all member states,” said Mr Odinga.
The high cost relating of lengthy administrative procedures has particularly been felt by landlocked countries which have to rely on Kenya’s and Tanzania’s ports for imports and exports.
Last year, Rwanda and Burundi successfully lobbied the regional council of ministers for duty-free importation intermediate building and construction materials citing rising cost in the sector.
“We will ensure the project’s full implementation because it is always the economies of landlocked members that are hurt most by inefficiencies at ports and transport corridors,” Burundi’s President Pierre Nkurunzinza, said in Nairobi yesterday at the official launch of TMEA.
Mr Nkurunzinza, who is the current chairman EAC’s heads of state summit, said trucks transporting raw materials and other imports to Burundi and Rwanda face unnecessary paperwork and other barriers erected by national institutions.
The TMEA project has attracted funding from the UK, Denmark, Belgium, Sweden and the Netherlands.
Its full implementation is expected to unlock more donor funds in support of other EAC projects, EU officials said.
Among the projects that are on hold due to low funding is the negotiation of Economic Partnership Agreement with European Commission – an instrument which holds the key for duty-free and quota free exports from Kenya to European countries.
Stephen O’Brien, UK’s Development minister said a more efficient EAC will raise the region’s competitiveness internationally and accelerate employment through expanded opportunities.
“A functioning common market is of interest to foreign investors especially those from EU who are currently shunning away from costs that are more than 70 per cent of what they pay to do business in EU,” said Mr O’Brien
The campaign to lower cost of doing business in the region has raised the confidence of the private sector that has been hesitant to take advantage of the common market protocol to move their factors of production across national borders.
Nik Nesbitt, CEO of Kencall, Kenya-based outsourcing company said clearing the non tariff barriers give private firms the opportunity to spread their operations easily across the national borders, employing more citizens of the region.
“With lower transaction costs, only the sky can be the limit as companies begin to expand aggressively, hiring and increasing mobility of people and other factors of production,” Mr Nesbitt said on Tuesday.
On Tuesday, EAC Secretariat officials said TMEA is also providing technical assistance for the establishment of one-border-stop posts in the region.
The organisation is also setting video conferring facilities linking the five EAC Affairs ministries in the region but officials said the level of awareness is likely to erode gains.
“This is an initiative that will allow ordinary EAC citizens to create wealth but the major challenge is to get them to believe in opportunities in integration,” said EAC Secretary General Juma Mwapachu.