EABC Newsflash
MARCH 2005
In this issue:
- EABC to Launch Business Climate Index Report end of April 2005
- Take Advantage of the Emerging Opportunities: EABC Chairman Urges Business Community
- East African Investment Guide on the Way
- EAC Heads of State Summit Postponed
- Forge Alliances: EAC Director General in Charge of Customs and Trade Urges EA Businessmen
- Depletion of Lake Victoria : Stakeholders want EAC Secretariat to Take a Decisive Stance
- A Team of 12 to Fine Tune EAC Customs Union Implementation Process
- Debate on EAC Competition Bill Adjourned
EABC TO LAUNCH BUSINESS CLIMATE INDEX (BCI) REPORT END OF APRIL
The report of EABC Business Climate Index survey is to be launched at the end of April.
which at the EABC level assumed the dimension of a Working Group on Non-Tariff Barriers, sought to identify the nature and extent of NTBs, analyse and monitor their prevalence and impact on trade and other business transactions over time in East Africa .
The methodology involved soliciting sizeable participation of businesses which are active in cross border trade with a view to unearthing the reality on the ground about NTBs and ultimately monitoring and removing them in an effort improve the business climate in the region. But the exercise would not stop there: There are plans that as a follow up, the EABC will assist the East African Community (EAC) and national governments to eliminate NTB's through a set of clearly defined actions that would have to be monitored closely.
The survey was carried out in October 2004 by Daima Associates Ltd. The Team Leader was Professor Sam Wangwe.
The report of the findings will be launched sequentially in the three capitals of EAC Partner States, starting with Nairobi . The ministers responsible for trade will be invited to attend.
The launch of the report would be quite opportune coming at a time when the business community in the region is grappling with the teething problems associated with the implementation of the nascent EAC Customs Union. Incidentally most of the problems that have been reported by the business community constitute Non Tariff Barriers.
This is the first time such a survey is being conducted in the region. It involved 584 companies and 62 government agencies across the three EAC partner states.
The report brings out detailed information on Non-tariff barriers experienced at cross border trade and in so doing simplifies the perceptions of the general business climate as told by the business people themselves. It lists the identified NTB's in a general manner, by country and by sector.
It breaks down the perceptions of the private sector on the gravity of business climate factors and reveals the perceptions of the business community on the ability of governments to resolve problems, both past and those anticipated in the future.
The perceptions of the private sector have deliberately been matched with perceptions and experience of the governments in the three East African countries to bring out the overall picture of what needs to be done.
The EAC Secretariat has requested EABC to assist in the establishment of a monitoring mechanism to eliminate the barriers.
TAKE ADVANTAGE OF THE EMERGING OPPORTUNITIES: EABC CHAIRMAN URGES BUSINESS COMMUNITY
The Chairman of EABC Mr. Hirji Shah wants the business community in the region to seize the emerging opportunities, now that the EAC Customs Union is firmly in place.
In a speech delivered during the East Africa Petroleum Conference held in Entebbe , Uganda from March 2-4, 2005 , Mr. Shah said the new regime had opened a world of opportunities in terms of bigger market, stable and predictable policies, improved security, reduced corruption, reduced costs of production, efficient utilization of resource.
Politically, he said all the three Partner States had embraced democratic governance, and the market place was now more predictable, while e conomically, he said all the three economies have been liberalised.
He cited opportunities in: -
-Mining, including petroleum, a sub-sector he said spawned various un-prospected minerals, while those mined were being sold unprocessed
- Agriculture, where fertile soils in region could be exploited for commercial farming particularly high volume and low value crops, plantations, animal husbandry, fruits, floriculture
- Trade, Industry and Investment where 493 standards have been harmonized and adopted as East African Standards to facilitate intra-EAC trade. In addition, he said, EAC was in the process of developing an EAC model investment code in order to promote investment in the region to facilitate promotion of EAC as a single investment area
- Infrastructure where he said major roads were currently undergoing rehabilitation and construction through funding from the EAC Partner States and Development Partners. Besides, he said, concessioning of the Kenya and Uganda Railways is ongoing and is expected to be complete by end of July 2005
- Tourism where hotels are being established, safari development, Eco- Tourism, white water rafting
- Services where he enumerated state of the art medical facilities, training institutions, ICT centers, call centers and back-office support, specialized consultancies in various fields.
EAST AFRICAN INVESTMENT GUIDE ON THE WAY
United Nations Conference on Trade and Development jointly with EAC and EABC has planned a series of one-day workshops in Arusha, Dar es Salaam, Kampala and Nairobi, in the first week of May to receive views from the private and the public sector on East Africa investment guide, currently in its draft form.
A release from Mr. Vishwas Govitrikar, the Project Coordinator in Charge of LDC investment Guides, says that the workshop will have a half day session on the draft East African Investment Guide, and another half-day session on a related activity called “Blue Books ”for the three EAC partner states.
The 'Blue Books' is a new initiative in the EAC countries. Its centerpiece is to identify a small number of measures (6-8) to improve the investment climate that the participating governments would reasonably commit themselves to implementing in a 12-month period. The initiative is supported by the Japan Bank for International Co-operation (JBIC).
A tentative programme put out by UNCTAD shows that Arusha will host hold the first workshop on May 2, 2005 and it will be followed by Dar es Salaam on May 4, 2005 . The group will then move to Kampala on May 6, 2005 before winding up in Nairobi on May 9, 2005 .
EAC HEADS OF STATE SUMMIT POSTPONED
The third Extra Ordinary Summit of EAC Heads of State that had earlier on been scheduled to take place on April 2, 2005 has been postponed to the second part of May. The exact date is yet to be fixed.
The decision follows a request by the Chairman of the Summit of Heads of State, Tanzania's president Benjamin Mkapa, to the Heads of State of the other two EAC partner states, a statement from the EAC Secretariat says. Top on the agenda will be the presentation and consideration of the report of the Committee on Fast Tracking East African Federation.
The 11th Extraordinary Meeting of the Council, earlier planned for March 29th-31st 2005 , has also been postponed and will now be held in April 20th-23rd, 2005 . The meeting will be preceded by that of the Finance and Administration Committee on April 18th-20th, 2005 .
FORCE ALLIANCES: EAC DIRECTOR GENERAL IN CHARGE OF CUSTOMS AND TRADE URGES EA BUSINESSMEN
East Africa Community Director General in charge of Customs and Trade, Mr. Peter Kiguta reassured businessmen in Arusha of the staying power of the EAC Treaty, but urged them to forge strategic alliances if they are to benefit from opportunities engendered by the customs union, now on its third month.
“The customs union has undoubtedly enlarged the market for the business people eager to take advantage of a single market of over 90 million people,” he told a gathering of business people who attended the East African Business Club – Arusha Chapter Luncheon at the Mt. Meru Hotel, Arusha on March 23, 2005 . “Instead of trying to outdo each other, it would be more beneficial for you to form strategic alliances with a view to forming a forma front to defeat outside competition.”
He said the Customs Union presented the region's business community with the opportunity to work together, reassess their production processes and see how they could make themselves more competitive in the wake of increased globalisation. “Most firms the world over are now focusing more on core business and outsourcing whatever is not core. This is the only way they have been able to remain competitive.”
Present during the function was EABC Executive Director, Mr. Elly Manjale and Mr. Anup Modha, General Manager of Chemi-Cotex Ltd and Chairman of Confederation of Tanzania Industries (CTI), Arusha-Moshi. About a dozen businessmen drawn from Moshi-Arusha region attended. It was organized jointly by EABC and CTI Arusha-Moshi Outreach.
Mr. Manjale said the implications of the new customs regime are likely to be felt for along time by the region's business community.
The coming into force of the EAC Customs Union, on January 1, 2005 , though riddled with hitches, has spawned a plethora of opportunities. Among them are access to cheaper raw materials which can now be obtained through local sourcing, reduced cost of doing business as a result of the elimination of unnecessary delays at the border points, predictable policy environment, protection from outside competition and a better bargaining power by the three EAC partners internationally.
Even then, it has also brought with it increased competition among firms in the region. Besides, several new challenges have also emerged and are increasingly threatening the very fabric of the integration. They include, application of laws such as VAT, and Excise legislations which are critical to the private sector yet they are not harmonized, multiple membership of EAC partner-states in other regional trading blocs, which make it difficult to enforce the rules of origin, compliance with EAC management law which has put the partner states under pressure.
Mr. Kiguta implored the partner states to give dialogue a chance before taking unilateral decisions on issues that have regional dimension. “There have been outcries from the business community in some partners states regarding duties on certain commodities like second hand clothes,” said Mr. Kiguta. “Whereas the host governments have found themselves in difficult circumstances to juggle the needs of the people and those of the treaty, it would be important to call Council meeting to find solutions to these problem since continued disregard for the EAC Management Law may open a pandora's box.”
He said the EAC Secretariat in collaboration with Customs Authorities in the three states would hold training workshops for customs agents starting April, to educate them on the customs management Act. There will also be a publicity campaign targeting the business people to create awareness on the opportuniti es brought about by the EAC Customs Union.
DEPLETION OF LAKE VICTORIA : STAKEHOLDERS WANT EAC TO TAKE A DECISIVE STANCE
CONCERNED that Lake Victoria resource and fish stocks are in danger of irreparable damage as a result of unchecked siltation, pollution, loading and unsustainable fishing practices, stakeholders of Lake Victoria now want East African Community to take stern measures that will lead to reduction of nutrient loads and pollutant input into the lake.
At the end of the Regional Stakeholders Conference on the Status of the Fisheries Resources of Lake Victoria and their Management: Concerns, Challenges and Opportunities held in Entebbe on February 24-25 th , 2005; the group declared that EAC should spearhead accelerated packaging and implementation and harmonization of fisheries and environmental policies, laws, regulations and management options to address concerns at local, national, regional and international level for sustainable management.
They said that although they were aware that the FAO Code of Conduct for Responsible Fisheries and the associated technical guidelines placed responsibility on Governments and all stakeholders to ensure responsible and sustainable fisheries in respective areas of operations and that the Lake Victoria Council of Ministers had adopted a Regional Plan of Action (RPOA) to prevent, deter and eliminate Illegal unregulated and unreported (IUU) fishing in Lake Victoria, as an integrated part of the international code of conduct for responsible fishing, there was need for the three EAC partners to strengthen national and regional institutions for fisheries management including human resources capacity and broaden participation to include resource users in the management of fishing and their habitat and continue with management measures already agreed on by the Council of Ministers of the LVFO including slot size and protection of breeding and nursery areas.
Other issues they said they would want EAC to look into are: -
- Management of factors that influence rainfall pattern such as maintenance of forest cover around the lake to maintain historical high rainfall regimes around the lake and the overall water level;
- Manage the lake as a single eco-system with multiple harmonized jurisdiction and controlled access in order to avoid tragedy of the commons;
- Mainstream environment and natural resources management, HIV/AIDS and other water related diseases such as Bilharzias, cholera in the fisheries sector in synergy with health sector;
- Implement further control and monitoring of fish production conditions in the region and measures to reduce post harvest losses, improvement of fish handling infrastructure, production of value added products and up-grading of health conditions in the distribution and marketing of fish and fishery products;
- Strengthen the institution of Beach Management Units and facilitate creation of new ones to support sustainable management of the resources;
- Harmonize- and improve on law enforcement to protect the resource from abusive harvest and destruction extraction.
A TEAM OF 12 TO FINE-TUNE CUSTOMS UNION IMPLEMENTATION PROCESS
A team comprising of two Customs and two Tax Policy experts from each of the three EAC Partner States is to be constituted by the end of April to review the inconsistencies that are still dogging the implementation of the EAC Customs Union. An extraordinary Council meeting will then be expected to convene to address all the inconsistencies identified in the implementation of the customs union to help put a stop to the emerging practice of partner states taking unilateral decisions, that run counter to the spirit of the EAC Treaty, a report of the EAC joint meeting of directorate of customs and trade, commissioner generals and commissioners of customs of revenue authorities has recommended.
The report cites the following cases as areas in need of an urgent revision.
- Sensitive list – The commissioners felt that the inclusion of the duty rates on sensitive goods in the EAC-CET has changed the structure to more than a three bands and this could cause problems to the on notification to WTO and other International bodies. They also felt that the duty rates on rice and specific duty on worn articles did not take into consideration the existing tariff rates in the Partner States and have been found to be unrealistic during implementation.
As a remedy, they suggested that the sensitive list should be a separate schedule to the tariff, the duty rates on rice be reviewed taking into consideration pre EAC-CET rates and the specific rates on worn articles be aligned with the advalorem rates.
- Inconsistencies in the EAC-CET – Here they said that duty of 10% on human and veterinary drugs is unrealistic and inconsistent in relation to;
- Its social impact in particular the HIV/AIDS drugs and other life saving drugs;
- Other items in the same category but of less importance to health e.g. vitamins and pro-vitamins under tariff item 29.36 which are free of duty;
- Mosquito nets which are duty free yet malaria drugs are dutiable.
- Cost implication on Veterinary drugs.
As a way out of the problem they recommended that the rate of 10% should be reviewed to 0% in order to address the inconsistency and the implications on the Health and Veterinary Sectors.
They also raised issue with duty on computer software which they said was at 25% when the hardware is at 0% and suggested that the duty level should be brought down to 0 per cent.
They also said that the importation of unassembled/disassembled motor vehicles of could be abused by ungazzeted assemblers and suggested that the tariff lines of disassembled/unassembled vehicles under Chapter 87 be removed and covered under the Duty remission scheme.
Other areas of inconsistencies in the CET were:-
The unit of measure on textiles in the EAC-CET under Chapters 54 & 55 is in kilograms while the Partner States use square meters.
The national tariff on Excise and VAT structures are not aligned with the EAC CET and this makes it difficult to apply the Excise and VAT duty rates.
The description for tyres of buses and lorries under tariff no. 4011.20.00 does not differentiate between those of minibuses, buses and lorries., which they said risked being abused since the tyres of minibuses can be used on other vehicles.
- Certificates of Origin – Here they said that
- Specimen of Certificates of Origin sent to the Partner States do not have explanatory notes at the back to guide the users.
- Printing of security mark as directed by Council is expensive, unsustainable and does not necessarily prevent forgery.
- Small consignments under cross-border trade are not catered for by the EAC Certificate of Origin.
Among the recommendations were:
- The Secretariat should add the explanatory notes onto the EAC Certificate of Origin.
- The security mark can be in form of the specimen signatures circulated to Partner States and an EAC Customs Union seal.
- A simplified certificate of origin should be developed for cross border trade based on a criteria under the regulations
- The Partner States be mandated to print the certificates of origin in accordance with the specifications.
- In the meantime the COMESA Certificates of Origin should remain in use and the Secretariat should communicate this decision to the Partner States immediately.
- The Council mandates Customs to be the issuing authority of the EAC Certificates of Origin.
- Draft Regulations – Here the commissioners accused the Partner States of not having submitted comments as requested by the Secretariat. The Partner States undertook to submit by 19 th March 2005 .
- Training of trainers – Here they said training of trainers in EAC Customs mattersis a priority area which should be undertaken using the available funds. Secretariat was to consult with Partner States on identification of trainers and trainees and draw up a training programme immediately. The commissioners advised that the EAC Secretariat should immediately expedite the consultation process with Customs and carry out the training of trainers in the Partner States in May 2005.
- EAC Customs Publications – Here they felt that the EAC Customs publications are insufficient. As a solution they suggested that the Partner States be allowed to print and distribute the copies to users.
The meeting was also informed that the project of interconnectivity of Customs systems, transit tracking system and joint border controls should be under the East African Community framework to make it viable.
In this regard, the Commissioners urge Commissioners Generals to recommend to Council to regularise the forum of Commissioners General and the Commissioners of Customs as the Committee.
The meeting was held between March 9 – 10 , 2005 in Kampala and was attended by Mr. Francis Thuranira Commissioner of Customs and Excise
Kenya Revenue Authority, Mr. George Lauwo, Commissioner of Customs and Excise, TanzaniaRevenue Authority and Mr. Peter Malinga, Commissioner of Customs and Excise, Uganda Revenue Authority
DEBATE ON EAC COMPETITION BILL ADJOURNED
DEBATE on the crucial East African Community Competition Bill, 2004, was abruptly adjourned on Tuesday March 8, 2005 , after it became apparent that there were numerous gaping holes in the bill whose ultimate goal is to enhance the welfare of the people of East Africa through guaranteeing equal opportunities to all market participants in a level playing field.
The decision means the bill will now be sent back to the Council of Ministers for direction and further consultations before it eventually comes back to EALA again for debate, probably in May. Yet it is also likely to downgrade the gains being made in the operationalisation of the EAC Customs Union since among other things the bill seeks to promote fair trade practices and competition within the framework of EAC Customs Union.
Discussions on the bill, which had just gone through the second reading, had been slated for February 28 to March 11, 2005, after the EAC Committee on Trade and Investment drew the curtains on presentations by stakeholders, among them East African Business Council and East African Law Society.
According to the chairman of Committee on Trade and Investment Mr. George Nangale, “the committee did not receive sufficient input as it would have wished.”
“We only managed to receive comments from EABC although the East Africa Law Society later sent us a written submission,” said Mr. Nangale. “It is the considered opinion of the Committee that for practical reasons, in future, if EALA Committee will require views of stakeholders, it will be necessary for the Committee to make arrangements to go where the stakeholders are and not the vice versa.”
Among the critical issues that the bill failed to address conclusively, and most of which were raised by the EABC, were:
- Dismantling of barriers – contrary to the general principle of the customs union where all barriers are to be eliminated, the bill had sought the removal of only new barriers.
- Creation of environment conducive to FDI in the Community – This proposal was short down on the premise that FDI flows to the region have been on a steady decline over the years. It was therefore suggested that the law should seek to create a general environment, which is conducive to both local and foreign investment and not one, which is discriminatory to local investments.
- On the issue of the application of the Act (Competition Act), the Committee sought a clarification since the bill gives legal powers to Partners States and not the Community organs.
- The bill was also faulted for not going far enough in addressing the issue of goods subsidized from their country of origin (the EU for example), or goods produced cheaply elsewhere (China for instance) without the subsidy or alternative goods like second hand clothes which also injure local industry. The law, said Mr. Nangale, could instead encourage dumping within the Community.
- On protection of consumers from exploitation and the cushioning of SMEs from competition, the Committee sought a definition of the term “residence” in matters pertaining to consumption and sully and SME in matters pertaining to production.
- The committee also faulted a clause which seeks to compel a person intending to execute a merger or an acquisition to notify the committee of such a merger and recommended that notification of the merger or acquisition should be made by both parties, if the transaction is carried out without notification, it should not only be considered void, but it should be considered an offence and that a separate and comprehensive law to regulate mergers should be enacted.
- On the issue of subsidies within the Community the Committee suggested that rather than allow Partner States to extend subsidies and exemptions and at the same time require them to guarantee equal opportunities in the community to all market participants, a decision should be made as to whether Partner States should be given lee way to offer incentives or to leave the issue of incentives and subsidies to relevant institutions of the Community.
- The Committee also felt that the proposed three member EAC Competition Committee whose term of office would be four years would be too weak and suggested one that was adequately staffed and financed. They said the Authority should be an organ of the Community, with a separate budget and capable of undertaking competition advocacy through promotion of public awareness and understanding of competition in EAC.
Mr. Nangale said that whereas certain amendments of policy nature needed to be made in order to improve the bill, other amendments would seek to make particular provisions clearer or to create consistency with the law.
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Elly Manjale
Executive Director
East African Business Council,
Arusha International Conference Centre,
Room 517, 5th Floor, Ngorongoro Wing
P.O Box 2617 Arusha, Tanzania
Tel: +255 27 250 9997
Fax: +255 27 250 9997
E-mail: info@eabc-online.com
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