Public Disclosure Authorized EAST AFRICAN COMMON Public Disclosure Authorized MARKET SCORECARD 2014 Public Disclosure Authorized Tracking EAC compliance in the movement of Capital, Services and Goods EAST AFRICAN COMMUNITY Public Disclosure Authorized ©2014 The World Bank / East African Community Secretariat 1818 H Street NW Washington, DC 20433 Internet: www.worldbank.org EAC Close PO Box 1096 Arusha, Tanzania Internet: www.eac.int Some rights reserved. A co-publication of The World Bank, International Finance Corporation and the East African Community Secretariat. This work is a product of the staff of The World Bank, East African Community Secretariat and other external contributions. Note that The World Bank and the East African Community Secretariat does not necessarily own each component of the content included in the work. 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Design and Layout: 5ive Limited 2009 · 2010 · 2011 · ·GOODS · · ·GOODS · 2011 · 2010 2009 CAPITAL · SERVICES · GOODS · CAPITAL · SERVICES CAPITAL · SERVICES · GOODS · EAST AFRICAN COMMON 2014 MARKET SCORECARD 2014 · Tracking EAC compliance in the movement of Capital, Services and Goods For enquiries on the East African Common Market Scorecard 2014, please contact: ALFRED OMBUDO K’OMBUDO Lead Author [email protected] v TABLE OF CONTENTS FOREWORD....................................................................................................vii METHODOLOGY..............................................................................................33 EXECUTIVE SUMMARY....................................................................................2 COUNTRY TABLES...........................................................................................41 CAPITAL..........................................................................................................7 LIST OF LAWS & REGULATIONS.......................................................................89 SERVICES......................................................................................................17 BIBLIOGRAPHY...............................................................................................99 GOODS........................................................................................................25 ACKNOWLEDGMENTS.................................................................................104 EAST AFRICAN COMMON MARKET SCORECARD 2014 “The Council of Ministers shall establish a framework for monitoring and evaluation” : Article 50, EAC Common Market Protocol vii FOREWORD The rationale for the East African Community Common Market and recommends reform measures. is compelling - it has the potential to build economies of scale, accelerate competitiveness, and bring the region closer to This scorecard, the first of its kind in EAC, covers capital, achieving its dream of a single investment destination. The services and goods - the key foundations for a functioning Common Market can expand opportunities for the private Common Market. sector and uplift the living standards of its citizens in a way We expect that the scorecard will contribute to better Dr. Richard Sezibera that no Partner State can do on its own. compliance of commitments under the Protocol, through Ambassador fostering peer learning and facilitating adoption of best Secretary General Full implementation of the Common Market is a challenging East African Community task. It calls for strong implementation by all parties, practice in the EAC region. particularly the Partner States, so as to deliver the rights and East Africans look forward to a better - not just larger - market freedoms enshrined in the EAC Common Market Protocol. This that will achieve global competitiveness. requires a robust implementation cycle: including planning, implementation and monitoring of progress. This publication is an important part of that journey and we are pleased to be associated with the East African Common Cheikh Oumar Seydi The East African Common Market Scorecard contributes to Market Scorecard 2014. Director, East & Southern Africa monitoring the implementation of the Common Market by International Finance Corporation tracking progress of Partner States in fulfilling their commitments as provided in the Protocol. The scorecard examines selected commitments made by the Partner States, outlines progress in removing legislative and regulatory restrictions to the Protocol, EAST AFRICAN COMMON MARKET SCORECARD 2014 “The Council shall review commitments and programs to ensure adherence to the protocol” : Article 50, EAC Common Market Protocol 2 EXECUTIVE SUMMARY The EAC Common Market Scorecard 2014 assesses progress toward regional integration. For capital, neither securities nor direct investment fees for transactions and government services, ceilings on the value of the development of a common market in capital, services, and goods across operations—except repatriation of proceeds from sale of assets—are free transactions, limits on the type and length of projects for service providers, the Partner States of the East African Community (EAC)—Burundi, Kenya, of legal restrictions across the bloc. For services, 67% of identified measures and higher taxes for foreign firms. Some barriers, such as restrictions on Rwanda, Tanzania, and Uganda. negatively affect foreign direct investment. Barriers to the movement of personal capital transactions and on the transfer of shares in firms, affect goods also affect investment: many investors start as traders, then gain even firms seeking to exit a particular economy. The EAC Common Market Protocol is one of the more ambitious confidence in a country’s markets and move production there. But without regional integration agreements globally. The Protocol covers several such confidence, such investment will not happen. A lenient attitude toward exemptions is slowing the development commitments. To enable free movement of capital, 20 operations related of the common market. Exemptions are legal mechanisms among to securities, direct investments, credit operations, and personal capital Progress to eliminate restrictions has been slow, and some Partner Partner States to exclude individual Partner States from specific obligations operations are required to be free of restrictions. For free movement of States have introduced new measures despite their obligations to the common market. But when not closely regulated, exemptions can services, the Partner States have concluded negotiations to liberalize 7 of 12 under the EAC Common Market Protocol. Since the Protocol came undermine the achievement of a common market. For example: sectors currently covered by WTO’s General Agreement on Trade in Services into force in 2010, Rwanda, Tanzania, and Uganda have introduced at (GATS). They have also committed not to introduce new restrictions, and to least 10 restrictions on the movement of capital. In services, several new • Apart from their membership in the EAC, all Partner States are also eliminate existing ones. For goods, all Partner States are required to remove restrictions have been introduced or carried over from older laws since the members of other regional integration schemes, making it very difficult internal tariffs, implement a common external