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46 REGIONAL INTEGRATION EXPERIENCE IN Experience Integration Regional nEast in the EastAfricanCommunity (EAC)in already madesignificantprogress torevive , andUganda—have of scale.ThreeEastAfricancountries— moting intra-regionaltradeandeconomies nomic growthanddevelopmentbypro- kets, regionalcooperationmayspureco- By combiningfragmenteddomesticmar- ende andNg’eno,2000;Mullei,2002). investments ofmutualbenefit(Kasek- investment andpoolingresourcesfor competitiveness, attractingforeigndirect nomic policy, increasingmarketsizeand common challenges—improvingeco- ings provideopportunitiesforaddressing in sub-SaharanAfrica.Regionalgroup- REGIONALISM HASGAINED African Communitythatstartswithacustomsunionbutcoversmanyotherdomains— and recommendationsforhowitcangetthere,arediscussedbyNjugunaS.Ndung’u Kenya, Tanzania andUgandahaveexperiencedhalfacenturyofregionalintegration efforts, goingbacktocolonialtimes.Since1991,theyhavebeenbuildinganEast economic, environmental,socialandpolitical.Wherethiscooperationisheaded, of theAfricanEconomicResearchConsortiuminNairobi. momentum BY N JUGUNA .N S. can betracedtothecolonial period, The integrationprocessinEast Africa HISTORICAL BACKGROUND regional economicintegration. industrialization andgeneratebenefitsof the 1990s.Itishopedthatthiswillsupport lenges andconstraintsnowbeingfaced. highlights theopportunities,likelychal- ble andviabledevelopmentstrategy gration isagainbeingconsideredafeasi- decade helpsexplainwhyregionalinte- attempts toreviveEACoverthelast its break-upin1977.Asurveyofrecent problems andconstraintsthatledto helpstoidentifythe the colonialperiod A T DUNG racing thehistoryofEACsince ’ U frica COOPERATION SOUTH REGIONAL INTEGRATION EXPERIENCE IN EAST AFRICA 47 By 1963, established by a British Council order to order British Council by a established coopera- basis for regional provide a legal African High Commission tion: the East of consisting of the Governors (EAHC), and the East Kenya, Tanzania, Assembly. Legislature African Central were enforce- Laws issued by the EAHC This made it able in the three territories. inter-territorial much easier to establish for areas of com- departments responsible communica- mon interest like transport, The East industry. tions, customs and Services (EACSO) African Common London conference was established at the in 1961. states had attained their independence, but establishing a political federation proved problematic. The main disagree- ment centred on fears that Kenya would gain from a federation, to the detriment of vices Organization vices r ouncil of the British Government Se its assets and liabilities C Common and the East African High Commission Commission African High African High 1: BETWEEN KENYA,TANZANIA OF COOPERATION HISTORY riod Developments ABLE Source: (2000) EAC from Compiled 19771984 Community of East African Collapse division of for mediation agreement Community East African 1961–19661967–1977 Services Common East African Organization the East African incorporating Community East African T AND UGANDA Pe 1947–1961 Orders-in by constituted High Commission East African Ever since colonial times, Kenya and Ever since colonial (table 1). However, it was not until 1967 it was not (table 1). However, for- East African countries that the three through integration process malized the of EAC. the establishment their eco- Uganda have co-coordinated policies. This started nomic activities and such as the services, with inter-territorial African the East Kenya/Uganda railway, the Postal Union. Currency Board and African Income Tax In 1940, a Joint East Council were Board and a Joint Economic African was established. The East set at parity with the British pound and later operated as a peg in the currency board. The external tariff was low and there were no trade restrictions, exchange controls or any regional licensing require- ments. In 1948, two institutions were when the colonial government consti- government the colonial when tuted the East 2003 K6114.46.61_East Africa article 11.2.2004 11:27 Page 47 Page 11:27 11.2.2004 article Africa K6114.46.61_East K6114.46.61_East Africaarticle11.2.200411:27Page48

48 REGIONAL INTEGRATION EXPERIENCE IN EAST AFRICA not recognizethenewregime inKam- nized policyandruleoflaw. Tanzania did and challengedthefoundationofharmo- ment cametopowerinUganda1971 union. Inaddition,amilitarygovern- anyhopeforamonetary destroyed of threeseparatecentralbanks.This down, leadingtotheestablishment the EastAfricanCurrencyBoardbroke fer taxwithintheregion. was nointernaltariff,exceptforatrans- inEastAfrica.There were alsoproduced third-party countrieswhensuchgoods nation. Third,tocontrolimportsfrom tothecountryofdesti- transit goods tries, withremissionofdutiesleviedon betweenthethreecoun- transit goods Second, toallowunrestrictedfreedomof among therespectiveFinanceMinisters. ations forparticularitemswhenagreed mon externaltariff,whileallowingdevi- three objectives.First,toestablishacom- Cooperation Treaty, 1967). and communications,soon”(EAC tourism, balanceofpayments,transport manpower, energyandpower, industry, areas suchasagriculture,educationand other relationshipsofthepartnerstatein and regulateindustrial,commercial Its mainobjectiveswereto“strengthen East AfricanCommunity, beganin1967. East AfricanCooperation,knownasthe The PermanentTripartite Commissionfor agreement insteadofapoliticalfederation. countries movedtowardsaregionaltrade her smallerneighbours.Asaresult,the Unfortunately, withinthefirstyear, The EACCooperationTreaty setout There wereregulationsto encourage try withwhichithadatrade deficit. imposing atariffonimportsfromcoun- developed memberswereprotectedby tax transfersystem,industriesofless Bank’s effectonredistribution.Undera planning inEACfurtherlimitedthe distributive institution. Thisgreatlylimiteditsroleasare- period. Kenya, especiallyduringthe1971-1973 ‘viable’ projects,mostofwhichwerein clause initsstatutes,itcouldonlyfinance Kenya. However, underarisk-adverse investments, against22.5percentin Uganda eachgot38.75percentofits required toensurethatTanzania and tributing equallytoitscapitalbase,was trial developmentwiththestatescon- ment Bank,whichwastopromoteindus- For example,theEastAfricanDevelop- wanted (KasekendeandNg’eno,2000). theresultsUgandaandTanzaniaproduce from thecommonmarket,butfailedto sures weretestedtoredistributethegains the benefitsofintegration.Various mea- was receivingadisproportionateshareof collapse ofEACin1977wasthatKenya border withKenya. the communityandTanzania closedits member statesfailedtopaytheirdues East AfricanCommunitycollapsedwhen different economicsystems.Finally, the shocks ofthe1970sandcontinuedtohave tries reacteddifferentlytotheeconomic the EAC pala andconsidereditsparticipationin The absenceofcoordinatedindustrial One ofthereasonsadvancedfor illegal. Furthermore,thecoun- COOPERATION SOUTH REGIONAL INTEGRATION EXPERIENCE IN EAST AFRICA 49 pensation mechanisms acceptable to acceptable mechanisms pensation with- be designed. Third, members should to speed up movements out infrastructure of goods costs, full people and lower and a dream. will only remain integration domestic compatible system of Fourth, a management is policies and economic in key (macroe- critical for convergence conomic) prices. DOMESTIC DEVELOPMENTS 1980S THE LATE SINCE in East Africa is the A key development of the domi- almost universal acceptance in resource alloca- nance of market forces tion. Unlike the ‘booming’ years of 1960s and 1970, the region has performed poorly on basic socio-economic indicators. Com- pared to 1960s and 1970s, domestic pro- duction has stagnated and poverty has relatively dominant increased. Kenya’s position has been weakened following years of continuous economic decline, while the other EAC member states con- tinued to achieve relatively high growth a notable feature is that as rates. However, intra-area trade has increased, Kenya has reinforced its dominance as a source of and Uganda, imports for both Tanzania which in turn export only minimal amounts to Kenya. Last but not least, there has been a proliferation of regional cooperation blocs which provide alterna- tive arrangements. tariffs in de facto olitical will is key to success of economic integration. of economic success to is key will olitical P infrastructure. There are no The formal dissolution of EAC was the Even now with the revival of EAC, Even now with the the form of transfer taxes between coun- tries. The collapse of EAC provides useful lessons: First, political will is key to success of economic integration. Second, com- major differences in GDP growth rates, per capita incomes (table 2), debt or even if a disease burden. Moreover, compensation mechanism were to be designed, it may have to keep on chang- ing since losers and winners keep on changing over time. culmination of various failures or inade- quacies. Some argue that it was never truly integrated. Currency convertibility did not last long. Movements of goods and services were subject to industries in Uganda and Tanzania, but Tanzania, and in Uganda industries investors kept pulling location advantages transfer In the end, the tax to Kenya. to replaced with mechanisms system was mem- common services among distribute ber states. mechanisms the issue of compensation A recent study cau- is still unresolved. of asymmetry tions that the principle within EAC should be applied carefully The states’ key (Bheenick et al., 2003). are virtually socio-economic indicators on weather- identical: high dependence agriculture,determined primary pro- ducers and exporters of raw materials, and poor 2003 K6114.46.61_East Africa article 11.2.2004 11:27 Page 49 Page 11:27 11.2.2004 article Africa K6114.46.61_East K6114.46.61_East Africaarticle11.2.200411:27Page50

50 REGIONAL INTEGRATION EXPERIENCE IN EAST AFRICA gna10141519333834-30-20250 260 360 - 350 310 - 298 - - 385 324 - 300 - 308 302 303 10.1 273 199 (2002) IMF dataprofile, Bank website country 305 -4.4 10.9 2003andBheenick(2003),World 1998-99, 175 World BankAfrican Development Indicators, IMF (2002); - Source: 174 144 11.2 285 Uganda 180 10.7 -3.1 304 T 9.3 Kenya 338 12.3 -2.3 GDP percapita(USdollars) - - Uganda 2.0 T -0.5 4.6 -0.6 Kenya 5.8 6.3 -1.8 Domestic savings toGDPratio -1.2 - -1.9 -0.2 -1.9 Uganda -2.9 5.5 - T -1.3 - -3.8 10.4 Kenya 9.6 -0.6 -3.2 64.9 5.4 -3.6 8.3 60 -7.3 F 6.6 - -7.9 6.3 10.8 -3.4 58.9 10.6 -7.0 111.8 4.9 1.6 Uganda -4.4 67.7 1.2 5.1 111.5 -4.4 T 66.2 28.8 108.9 4.0 1.1 54.5 106.9 Kenya -5.1 64.8 46.0 8.1 -0.2 27.7 105.3 F 65.9 20.9 113.4 29.9 1.3 4.7 117.8 14.4 61 113.1 Uganda 1.6 14.1 5.1 50.4 87.2 T 2.1 8.6 102.5 49.2 Kenya 11.9 4.1 - Inflation rate (%) - 6.4 4.4 - Uganda - 8.3 2.7 T 3.4 0.4 Kenya 5.6 ex 0.8 Real effective 6.5 1.4 Uganda 4.2 T Kenya GDP growth nai 7 8 5 3 6 9 1 5 3 4 280 - - 246 230 - 252 217 194 16.5 160 6.9 134 157 15.4 184 3.0 anzania 172 14.3 7.3 - 10.5 anzania 0.2 5.2 2.1 6.0 -2.1 7.8 -3.9 anzania 9.1 -2.0 16.1 -5.3 21.1 - 0.9 27.7 5.8 121.8 0.4 35 120.6 5.1 25.3 anzania -0.5 135.5 135.5 23.1 5.1 125.6 22.2 118.3 3.5 97.7 - 3.7 93.6 anzania 3.5 94 4.5 86.8 3.6 - 1.6 anzania - 1.2 0.6 4.5 5.4 anzania iscal deficit(%ofrevenue) grants)% GDP iscal deficit(inc. (BASIC INDICATORS 1990-2001) T change rate index (1990=100) ABLE :ECONOMIC STRUCTUREOFEAC COUNTRIES 2: 9019 9219 9419 9619 9819 0020 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 9920 0020 0120 2002/2003 2001/2002 2000/2001 1999/2000 COOPERATION SOUTH REGIONAL INTEGRATION EXPERIENCE IN EAST AFRICA 51 As for gross private investment as a private investment As for gross Another feature of the three economies anzania, Uganda has achieved a sustained anzania, Uganda has of GDP and even in surplus for Tanzania. in surplus and even of GDP because the expectation This is surprising the most been that Uganda, would have shown a would have reformer, successful position than Tanzania. stronger fiscal (table 3), Tanzania percentage of GDP largest shares while and Uganda have the in the most recent Kenya has the lowest percentage has Tanzania’s years. However, 20.72 and 24.17 per been declining, from to 14.1 per in cent in 1987 and 1991, in 2001. Unlike 2000 and 13.1 per cent T private investments increase in the share of perhaps because Uganda was in GDP, among the first few African countries to adopt economic reforms aimed at promot- ing private sector led growth. is the predominance of agriculture, while manufacturing contributes minimally to 9 per cent GDP: 8 per cent in Tanzania, in Uganda, and 10 per cent for Kenya. The figures for manufactured exports are 3: GROSS PRIVATE INVESTMENT RATES 1984-2001 (% OF GDP) 3: INVESTMENT RATES GROSS PRIVATE ABLE T Most macroeconomic variables have Most macroeconomic ear 1997 1998 1999 2000 2001 ear 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 anzania 11.8 10.3 12.3 14.1 13.1 anzania - - - 20.72 13.46 13.51 19.21 24.17 17.8 17.4 18.5 16.2 14.13 onomic structureonomic and Source:World Bank: Indicators, Economic African 1996, 1998-99, 2003 Uganda 5.33 - Y 5.22Kenya 5.37T 8.15 5.24Uganda 8.03 5.69 11.7 6.47 9.3 11.0 13.7 7.76 8.5 13.1 8.52 13.3 8.1 8.49 9.15 10.2 11.3 Y KenyaT 7.43 7.11 7.88 9.05 7.23 7.49 6.75 7.67 6.21 8.89 7.5 7.51 9.65 Ec convergence economic performance in sub-Saharan Economic since the been disappointing Africa has and growth was persistently early 1980s, for East 1994. The picture negative until different because Africa has been slightly generally positive, growth has remained to reduce although at rates insufficient growth Kenya’s poverty (table 2). Only over time, reaching has been declining rate in 2000. the all-time low of a negative common values been converging towards 2). For example, across the EAC (table the real effective exchange rate index (1990 as the base period) and was 102.5 respectively. 86.8 for Kenya and Tanzania In 2001, the index is very close for Kenya 111.8 and 121.8 respec- at and Tanzania One interesting feature concerning tively. these countries is that they have moved from low to high inflation in the early 1990s, before returning back to low infla- tion. Fiscal deficits are all below 1 per cent 2003 K6114.46.61_East Africa article 11.2.2004 11:27 Page 51 Page 11:27 11.2.2004 article Africa K6114.46.61_East K6114.46.61_East Africaarticle11.2.200411:27Page52

52 REGIONAL INTEGRATION EXPERIENCE IN EAST AFRICA cent oftheirimports,respectively. nia, supplying11.4percentand12.6 gle tradingpartnerforKenyaandTanza- South Africahasbecomethelargestsin- petitive (Gituetal.,2003).Furthermore, ities arecomplementaryratherthancom- increasing itareslimbecauseexportactiv- relatively limited,andthechancesof and Fukasaku,2001).Intra-EACtradeis remains akeypolicypriority(Bonaglia Reinforcing thecapacitytotradethus been asswiftandpositivepredicted. However, thesupplyresponsehasnot than duringtheEACdaysof1970s. have recordedsluggishgrowth. equally minimal.Non-traditionalexports with multiplemembership.In Eastern a proliferationofvariety groupings sary tomakeitwork,vestedinterests,and gration, thelackofpoliticalwillneces- a clearconsensusonthebenefitsofinte- tradictions stemmingfromtheabsenceof the continenthasbeenbesetwithcon- nations involved.Regionalintegrationin tion willhaveapositiveimpactonthe the questioniswhetherregionalintegra- ing blocstocatchupwithglobaltrends, As Africancountriesjoinregionaltrad- re New African regionalism and -launching EAC T rade regimesarefarmoreopennow increasing it are slim, because export activities are complementary arecomplementary activities because export increasing itareslim, nr-A rd srltvl iie,andthechances of Intra-EAC trade isrelatively limited, r ather thancompetitive. products. Thus,theycompete inthird products. mostlyunprocessedagricultural modities, dent onasmallnumberofexportcom- sons: First,thecontinentishighlydepen- very successfulinAfricaforvariousrea- one wayoranother: ments witheconomiccooperationin seven regionalcooperationarrange- and SouthernAfricaalone,thereare ■ ■ ■ ■ ■ ■ ■ Economic integrationhasnotbeen including Tanzania Community (SADC):12members Southern AfricaDevelopment Southern Africa(COMESA) Common MarketforEasternand , Sudan,Uganda Djibouti, ,Kenya, on Development(IGAD): Intergovernmental Authority Zambia, Zimbabwe ,Malawi,, IOC, Cross BorderInitiative:EAC, Seychelles Comoros, Madagascar, Mauritius, Indian OceanCommission(IOC): (IOR-ARC) ation forRegionalCooperation of theIndianOceanRims-Associ- EAC (Tanzania isalsoamember Namibia, SouthAfrica,Swaziland (SACU): Botswana,Lesotho, South AfricanCustomsUnion COOPERATION SOUTH REGIONAL INTEGRATION EXPERIENCE IN EAST AFRICA 53 These concerns may partly explain may partly These concerns partnership The new East African and control over domestic policy formu- domestic over and control 2002). lation (Mullei, the reluctance to move EAC and other to move EAC the reluctance to higher in Africa regional groupings and Gun- Collier levels of integration. that strict commit- ning (1995) observe with exter- ments, thanks to agreements EU, may provide nal actors such as the checks. Appropri- the necessary political tie the hands of ate mechanisms could the effects of politicians and minimize policy slippage. 1986 with the forma- started in earnest in tion of a tri-partite working group to work out modalities of renewed cooperation. 1:THE EAST IN AREAS OF REGIONAL COOPERATION riculture and food security and food riculture litics and law (security,litics and law defense, immigration, peace, regional ivate sector development and export and sector development ivate promotion ee movement of people,ee movement goods and services ade energy, meteorology) human rights, democracy, legal training, of judgements) standardization ourism and wildlife management ourism and wildlife Human resources, and technology science Fr Monetary and financial (currency convertibility, banking law, capital market) Ag Industry resources and natural Environment Infrastructure (road, rail, air, maritime, post and telecommunications, relations Regional and international activitiesSocial and cultural Po Pr Health and animal disease control T Tr BOX AFRICAN COMMUNITY markets rather than complementing each complementing rather than markets corporations multinational Second, other. base for countries as an export use certain con- each subregion, thereby the rest of of costs uneven distribution tributing to there of regional trade. Third, and benefits taxes and this on trade is over-dependence reluctant to open up makes governments pacts. Other as required by the integration the integra- factors that may undermine are not necessarily tion process and that lack of appro- limited to Africa include: mechanisms, uncer- priate compensation likely impacts to tainties about the government, producersand consumers, concerns about the damage to non- members, and likely loss of sovereignty 2003 K6114.46.61_East Africa article 11.2.2004 11:27 Page 53 Page 11:27 11.2.2004 article Africa K6114.46.61_East K6114.46.61_East Africaarticle11.2.200411:27Page54

54 REGIONAL INTEGRATION EXPERIENCE IN EAST AFRICA increase inwelfareandpovertyreduction. of scaleandintheprocessleadtogeneral toenjoyeconomies ties forlocalproducers open upinvestmentandtradeopportuni- hoped thatcooperationintheseareaswill ation invirtuallyallareas(seebox1).Itis arrangement providesforregionalcooper- achieve apoliticalunion,thecurrent The latterwaslaunchedin1996. cials, andasmallsecretariatinArusha. the Co-ordinationCommitteeofOffi- a subsidiaryseniorofficialsorgancalled isterial Forumheadsthecommission,with icy- tion wasestablishedtobecomethepol- Commission forEastAfricanCoopera- November 1993,aPermanentTripartite spheres ofcommoneconomicinterest.In tee ofexpertswasformedtoidentify The followingyear, atri-partitecommit- framework forreactivatedcooperation. gramme andappropriateinstitutional ministers offoreignaffairstodeviseapro- when theheadsofstatedirectedtheir But therewasnoprogressuntil1991, the processofphasingoutinternal tar- made hasbeeninreachingagreement on in 1999,themainsubstantiveprogress signing oftheTreaty establishingEAC union asthestartingpoint.Since are beingundertakenwithacustoms results. Thecurrentintegrationefforts tion andisachievingsomeinteresting in anumberofareasmutualcoopera- Since itsre-launch,EAChassettargets AN ASSESSMENT Since theobjectiveiseventuallyto making organofthegrouping.AMin- gration havebeenagreedupon,including: 2004. Manyissuescriticaltocustomsinte- endorsement byheadsofstateinearly expected tobereadyinlegalformfor union protocolhasbeenfinalizedandis zania stillkeepvariousformsofcontrol. its capitalaccount,butUgandaandTan- present, Kenyahascompletelyliberalized achieve fullcurrencyconvertibility. At by 1998.Furthermore,countriesseekto reduction ofbudgetdeficitsto5percent agreements ondoubletaxation—andthe post-budget consultationsandtripartite mechanisms —inparticular, pre-and policy objectivesincludeinstitutional market-determined, exchangerates.Fiscal medium term,andmaintenanceofstable, ings ratesof20percentGDPinthe inflation bytheyear2000,nationalsav- growth rateof6percent,single-digit management, indicatorsincluderealGDP ment. Forinstance,onmacroeconomic lines foreconomicandsocialdevelop- vide moreprecisemedium-termguide- Development Strategy2001–2005pro- egy 1997-2000andthesecondEAC African CooperationDevelopmentStrat- nal tariff. iffs, rulesoforiginandacommonexter- ■ ■ ■ ■ Customs union. Development strategy. vailing measures, dumping, subsidiesandcounter- Regulations onsafeguards,anti- description, Harmonized commodity Rules oforigin, tation, Harmonized customsdocumen- COOPERATION SOUTH A draftcustoms The firstEast REGIONAL INTEGRATION EXPERIENCE IN EAST AFRICA 55 EAC already Regional institutions. has institutions to deal with and guide various aspects of East African integra- tion. These include: the summit, council of ministers, the secretariat, coordinat- ing committee, sectoral committees, court of justice and legislative assembly. The council of ministers comprises the ministers in charge of regional integra- tion and makes major decisions on inte- gration. The court of justice is supposed the secre- to implement the EAC treaty, tariat executes all EAC programmes, and the legislative assembly ensures major issues are democratically debated and agreed upon. The coordinating commit- tee, made up of the permanent secre- taries responsible for regional coopera- tion, coordinates the work of sectoral was not easy given concerns about loss of about loss concerns easy given was not deficits, the risk of trade tariff revenue, to infant of protection and the removal cent CET For Uganda, 25 per industries. mem- to non-EAC implies protectionism its it had already reduced bers, since per cent as part of external tariff to 15 In the case of Kenya, trade policy reform. will imply more the 25 per cent CET trade compared openness to international tariff of 35 per to the current external propose to use a cent. The countries with a middle three-band tariff structure the coun- However, CET of 10 per cent. a methodologytries have to agree on to classify and categorize various imports in each of the three tariff band rates, in addi- tion to negotiating on imports where the CET may not apply. Some agreements have been Some agreements have Regulations on dispute settlement, Regulations on dispute and trade and Provisions on transit transit facilities. Regulations on export processing on Regulations manufacturing under zones and bond, for duty drawback, Regulations schemes, remission duty and VAT and remission of duties and refund and taxes, ariffs. The countries have agreed on a com- T ■ ■ ■ ■ anzania. To safeguard the less competi- safeguard anzania. To reached on eliminating tariffs, non-tariff reached on eliminating measures. Member barriers and non-tariff identified those countries have already import goods whose tariffs will immedi- ately be reduced to zero and those that qualify for phased tariff reduction. It has been agreed that, when the customs union protocol comes into force, Kenya should fully liberalize its trade with Uganda and T tive producers in Uganda and Tanzania from Kenyan exports, member states require that a certain category of Kenya exports to the other members be subjected to a tariff based on the application of the The tariffs applied principle of asymmetry. to selected Kenya exports would finally come to zero in five years (by the year and Uganda plan to 2009). Tanzania reach the required level of zero internal tariffs in phases over a period of six years. mon external tariff (CET) level of 25 per cent and a minimum of 0 per cent, but the sequencing of implementation and exceptions still needs a lot of work. This 2003 K6114.46.61_East Africa article 11.2.2004 11:27 Page 55 Page 11:27 11.2.2004 article Africa K6114.46.61_East K6114.46.61_East Africaarticle11.2.200411:27Page56

56 REGIONAL INTEGRATION EXPERIENCE IN EAST AFRICA implementation ofEACprogrammes. committees thatdesignandmonitor tion anddistribution. plans toinvestjointlyinenergyproduc- secure suppliesandimports,butthereare try hasdevelopeditsownstrategyto common occurrences.Sofar, eachcoun- uled powercutsandrationinghavebeen Entebbe. Inallthreecountries,sched- the highwaybetweenKampalaand from theKenyanbordertoKabaleand to improvetheprimaryEast-West road by road.Considerableeffortisunderway bura viaLakeTanganyika andtoRwanda Central Corridor, connectingtoBujum- Salaam-Kigoma railwaymakesupthe Bujumbura. The1,254kilometreDar-es- Kampala toRwandathroughKigaliand way andaroadnetworkgoingfrom running alongtheKampala/Kaseserail- connect thecountriesincludearoad Uganda railwayline.Otherfacilitiesthat largest portatMombasaandtheKenya- because oftheinefficiencyregion’s so farhavenotbeenveryencouraging links andestablishnewones.Results cations policiessoastoimproveexisting and harmonizetransportcommuni- investments. EACintendstocoordinate of reduces profitabilityandproductivity increases transactioncostsandthus of infrastructureinEastAfrica,which aimed atovercomingtheverypoorstate identified neededjointinvestments the harmonizationofcapitalmarket laws Understanding hasbeensigned covering Infrastructure. Financial system. The countrieshave A Memorandumof attractive tooutsideinvestors. Itisalso may riseastheregionbecomes more harmonization, foreigndirectinvestment mutual benefit.Inaddition,withpolicy identify andinvestinjointprojectsfor nally andexternallypoolthemto countries couldmobilizeresourcesinter- welfare ofpeopleintheregion.Thethree that couldbeharnessedtoimprovethe economy. EACprovidesopportunities states arecurrentlyallbasedonamarket ing theintegrationprocess,EAC ological differencescontributedtoderail- Unlike inthe1960sand1970s,whenide- RECOMMENDATIONS C Authorities hasalsobeenformed. the EastAfricanSecuritiesRegulatory An apexregionalbusinessorganization, ing ondevelopingregionalproducts. of cross-borderlistingandarenowfocus- exchanges haveagreedontheprinciples and regulations.Therespectivestock within thepartnership. T among thecitizensofKenya,Ugandaand developed tocreateasenseofidentity relations andmarketingplanhasbeen ernment budgetsisbeingdone.Apublic Simultaneous presentationofannualgov- proliferation ofsmallarmsintheregion. rity committeehasbeensetuptocurbthe ment oflabourwithintheregion.Asecu- no stepshavebeentakenonfreemove- inMarch1997,but tional, wasintroduced T ravel Document,thoughstillnotopera- anzania andbuildtrustgoodwill ONCLUSIONS AND Other initiatives. COOPERATION SOUTH The EastAfrican REGIONAL INTEGRATION EXPERIENCE IN EAST AFRICA 57 Policy co-ordination is crucial to cushion against the vagaries of the world economy and to build on existing strengths. For example, EAC member states will have to deal with the challenges of global- ization, new membership, declin- ing import tariffs revenue and imbalances that may arise as the integration process intensifies. They must also tackle problems that could arise because of over- lapping membership in regional bodies rules of ori- with different gin and lists of exceptions. Some of the main recommended steps ■ ■ the benefits and costs of integration 1998). (Aryeetey, are as follows: and to maintain the essential political the essential maintain and to there In addition, will for integration. should be specific steps that are some certain of these aim to avoid taken; some of regional integration pitfalls typical East general and of earlier attempts in particular; others African schemes in by controlling seek to build momentum factors, and take or eliminating negative factors, that affect advantage of positive success of inte- the speed, spread and here is that gration. The key guideline just focus on poten- countries should not must assess both tial benefits, but rather of peace in the region. of peace Integration will be good for social cohesion and promotion will be good for social cohesion Integration Perhaps the broadest and most signif- The road to economic integration is The road to economic the way. East African integration may the way. fail due to dependency on agricultural exports, small and inefficient industrial bases, vulnerability to fluctuations in world markets, lack of compensation mechanisms, failure to involve all peo- ple and lack of information to the gen- eral public on opportunities from inte- (2000), gration. According to Venables when countries with these characteristics integrate, income levels tend to diverge. Other fundamental factors that could undermine EAC integration attempts in government debt, East Africa are poverty, and donor dependency. icant challenges are to achieve some degree of macroeconomic convergence, to build and sustain genuine democracy, expected that the regional institutions of institutions regional that the expected Develop- as the East African EAC, such of a will take advantage ment Bank, social and lead to greater larger market Moreover, cooperation. and economic will be goodthe integration for social promotion of peace cohesion and hence the EAC experiment in the region. Once succeeds, the with the customs union further into more countries could move integration. advanced levels of regional and there are a naturally not assured, and obstacles on number of challenges 2003 K6114.46.61_East Africa article 11.2.2004 11:27 Page 57 Page 11:27 11.2.2004 article Africa K6114.46.61_East K6114.46.61_East Africaarticle11.2.200411:27Page58

58 REGIONAL INTEGRATION EXPERIENCE IN EAST AFRICA ■ ■ ■ ■ C willing tointegratemorequickly, If oneortwomembercountries are automatically. non-tariff barriersarelowered liberalization, sothattariffand automaticity intheschedulefor Countries musthavebuilt-in to achieve. ibility, eventhoughitisdifficult and toachievecurrencyconvert- fiscal andexchangeratepolicies, the harmonizationofmonetary, cess, itisimportanttospeedup To financing infrastructureprojects. nanced toplayaleadingrolein should bere-structuredandrefi- East AfricanDevelopmentBank ogy shouldbeharmonized,andthe networks, andinformationtechnol- on infrastructure,communication be addressed.Inparticular, policies insufficient skillsandredtapemust infrastructure, costlytransport, Supply-side constraintssuchasweak andfood. industrial products resources, andUgandainagro- T wide rangeoftradableservices, — Kenyaintheprovisionofa relative comparativeadvantages izing inareaswheretheyenjoy countries couldbenefitbyspecial- utissol o utfcso oeta eeis butrather must ountries shouldnotjustfocusonpotentialbenefits, anzania initsvastnatural

strengthen theintegrationpro- assess boththebenefitsandcosts of integration. ■ ■ ■ border joint production. border jointproduction. investment toencouragecross- mon policytowardsforeigndirect members shouldestablishacom- accompany economicintegration, To be promotedintheregion. greater labourmobilityshould on factormobilityand,infact, There shouldbenorestrictions people ofEastAfrica. involvement andsupportofthe ultimately dependsonthe since thesuccessofprocess opportunities arisingfromEAC, devoted topublicawarenessofthe Finally, resourceswillhavetobe compensating losersarenecessary. time, acceptablemechanismsfor by theslowestmember. Atthesame avoid havingregionalismdictated they shouldnotbedeterredsoasto

ensure thatefficiencygains COOPERATION SOUTH REGIONAL INTEGRATION EXPERIENCE IN EAST AFRICA 59 ation. rmanent Tripartite rmanent Tripartite Commission Pe

ordination, Arusha acinth vitalization of Inter-University Council for East Africa, for Council vitalization of Inter-University irst and Second EAC Council of Ministers, Council irst and Second EAC and Arusha Nairobi co by development in Lake Victoria Basin in Lake development and Clerk, Assembly Legislative East African cooper Arusha the Fourth Summit,the Fourth Arusha re 1997-2000 Develop- with the East African Telecommunications mission Bank Investment ment Bank and European hy · Second Ministerial seminar on control of water hyacinth of water · Second Ministerial seminar on control during Heads of State by establishing EAC Treaty Signing of · · EAC Memorandum of Understanding on foreign policy Memorandumof Understanding on foreign · EAC Treaty, Ministerial discuss draft EAC seminar to Arusha · First media workshop, EAC · First Arusha · 13th extraordinary held EAC establish meeting on plans to · Launch of Lake Victoria Unit Development · Launch of Lake Strategy: Development · Second EAC 2001-2005 of sustainable on promotion Agreement · Partnership · Appointment of new secretary general · Agreed to establish East African Business Council establish East African to · Agreed Strategy Development Cooperation East African First · · Appointment of Registrar, Court African East of Justice, · 15th meeting of Permanent Tripartite Commission approves Commission Tripartite · 15th meeting of Permanent · Conference on East African Road Network, Road East African on · Conference Arusha Unit, Liaison Defence · Established EAC Arusha Victoria Ministerial meeting on Lake East African First · OR DEVELOPMENTS AFTER RELAUNCH OF EAC AFTER RELAUNCH OR DEVELOPMENTS :MAJ riod Event/Developments 1999 Summits, and Fourth Third of State · Heads Arusha April 24, 2001 · Second Summit of Heads of State, Arusha 19941996 · Established Secretariat of PTC Secretariat in Arusha · Established EAC ANNEX Pe 30,November 1993 Summit Heads of State · First 2001 · F 2000 7 July 2000 force into enters Treaty · EAC 19971998Trans- Digital East African for Signed financing agreement · Memorandum · Signed of Understanding on defense 2003 K6114.46.61_East Africa article 11.2.2004 11:27 Page 59 Page 11:27 11.2.2004 article Africa K6114.46.61_East K6114.46.61_East Africaarticle11.2.200411:27Page60

60 REGIONAL INTEGRATION EXPERIENCE IN EAST AFRICA ■ ■ REFERENCES of theprincipleasymmetry.’ Draftreport Bheenick, R.M.etal.2003.‘Theapplication and M.S.Khan(eds.), rience withregionalintegration’inZ.Iqbal Aryeety, E.1988.‘Sub-SaharanAfricanexpe- Fund, Washington, D.C. Regional Integration, ue2 03·Scn xrodnr ed fSaeSmi,Nairobi directs HeadsofStateSecond · extraordinary Summit, 2003 20 June A uy1-3 01· Leading scientistsandresearchers from EAC members 2001 July 12-13, Pe ANNEX su uut20;ECwbie EAC (2000) EAC website; Issue 7August 2001; compiled from (EAC 2001)EACNEWS Newsletter oftheEastAfrican oftheSecretariat Community Source: Oc S · ofPermanentMeeting responsible Secretaries for trade, April 10-112003 pebr2–·EAC HighLevel Task Force on1)possible transitional fund eptember 29– gs -,20 ·Inter-Parliamentary Committee for EastAfrica recommends 2001 ugust 2-3, idEvent/Developments riod to e 2 03frayiblne rsn rmitgain and2)legal, for any imbalances arisingfrom integration, 2003 ber 02, : c ontinued International Monetary T rade Reformand · Second summitofHeadsState· Second 15 January Arusha, · Formal launchofEAC, · First SummitofEAC control of · Signedrulesfor admissionofnewmembers, Arusha · EAC Council ofMinisters, finalization of draft protocolfinalization ofdraft to besignedNovember 2003 · Inauguration ofEastAfrican ofAppeal Assembly andCourt etn fTae Communication andInvestment Commit-· of Meeting Trade, nuty finance andregional integration. industry, and Technology re union protocol t t metrology andtesting assurance, quality and standardization, drug traffic, beyond EastAfricause ofEastAfrican passport union. institutional andadministrative ofEAC structure customs esting, quality andoperationalization ofEAC quality customs esting, ee ofEastAfrican Legislative Assembly onstandardization, c ommend formation ofEastAfrican Council for Science ■ ■ Arusha, Tanzania. 30 September–02October2003,AICC, presented duringEACHighlevelTask Force, policy andregionalintegration:Implications Collier, P. andJ.W. Gunning.1995.‘Trade Africa,’ OECDDevelopmentCentre,mimeo. economiesin from commodity-dependent capacity buildinginpoorcountries:lessons Bonaglia, F. andK.Fukasaku.2001.‘Trade- COOPERATION SOUTH REGIONAL INTEGRATION EXPERIENCE IN EAST AFRICA 61 rld Wo CEPR Macmillan l. 18. OECD Development Vo The new regionalism in reaty for the Establishment of reaty for the Establishment No. 2528. East African Co-operation East African T Regional integration experience in Regional integration experience IMF, Washington D.C. Washington IMF, The World Economy, The World enables, A. 2000, ‘Winners and losers from enables, A. 2000, ‘Winners V regional integration agreements,’ Press Ltd, London. Mullei A. K. 2002. ‘Costs and benefits of trade integration,’ paper presented at EAC Permanent Secretaries and High Commission- ers Retreat, Mweya Safari Lodge, Uganda, April 13-15. Discussion Paper Kasekende, L. and N.K. Ng’eno. 2000. ‘Regional integration and economic integra- tion in Eastern and Southern Africa’ in A. (eds.), Collier, Oyejide, I. El Badawi and P. Liberalisation in Regional Integration and Trade I, Framework, Issues Sub-Saharan Africa, Vol. and Methodological Perspectives, Goldstein, A. 2002. Sub-Saharan Africa: More than meets the eye? OECD Development Centre Policy Brief No. 20, Paris. International Monetary Fund. 2002. the East African Community. the Eastern African region, Paris, 2001. Paper No. 171, Centre Technical Economic Outlook April 2002: Recessions and Recoveries, ——————. ——————. Development Strategy (1997-2000). ——————. 1997. ‘Regional integra- Fine, G. and S. Yeo. Dead end or fresh tion in sub-Saharan Africa: Njuguna S. start?’ in A. Goldstein and Ndung’u. (eds.) for the relations between Europe and Africa’ Europe relations between for the in years). Co-operation. (Various East African Commission Permanent Tripartite Report of the Co-operation. for East African ■ ■ ■ ■ ■ ■ ■ ■ ■ 2003 K6114.46.61_East Africa article 11.2.2004 11:27 Page 61 Page 11:27 11.2.2004 article Africa K6114.46.61_East