African Unification Front
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Back to Trade Policy
EAST AFRICAN COMMUNITY
The East African region covers an area of 1.8 million square kilometers and has vast potential in mineral, water, energy, forestry and wildlife resources as well as in agriculture, livestock, industry and tourism development.
Although the EAC was dissolved in 1977 there have been ongoing efforts to revive it since 1979, following the overthrow of Idi Amin. The 1993 agreement establishing the Permanent Tripartite Commission for East African Co-operation and the launching of the EAC Secretariat on 14 March 1996 in Arusha, Tanzania, was the culmination of efforts of the three states to rekindle the spirit of East African co-operation.
Past regional integration arrangements, including the East African High Commission (1948-1961), the East African Common Services Organization (1961-1967) and the East African Community (1967-1977),put the East African countries in an advantaged position to draw lessons from their past integration arrangements, in order to evolve to a more viable and sustainable system of regional integration.
The mandate of the new EAC is broad and covers regional co-operation in political, economic, social, cultural, security and legal matters. Priority is accorded to economic integration, which is expected to provide a basis for political co-operation.
The EAC has a population of 80 million, and efforts to revive the EAC are focusing on speeding-up economic growth, improving the average standard of living (from the current 200US Dollars per capita per year), and improve prosperity for the region.
The EAC accounts for only 3.5 per cent of the sub-Saharan Africa's manufacturing production, which is same as that of Zimbabwe's with a population of 11 million people.
Francis Muthaura is the Secretary general of the new EAC. He attributes the difficulties encountered in the revival of the EAC to the fact that the member states were restructuring their economies to give market mechanisms a larger role in the allocation of resources.
Apparently now that three states ascribe to economic policies that are pro-market, pro-private sector and pro-liberalization, regional integration should be easier this time around. With regard to the perception of disproportionate distribution of wealth and opportunity, member states have decided to follow market based integration rather than integration through joint ownership and management of common services, as was the case before the collapse of the Community.
The focus of the new EAC is preeminently to establish a single market and investment where business, investment and tourism are the most important stimulants for faster development. The single market, according to a senior economist Dr. Nyamajeje Weggoro, is expected to work in the interest of both investors and consumers in the region, 'It capitalizes on the economies of scale and engenders competition as an instrument for efficiency and growth."
There has already been signs of success since the three EA presidents signed the Treaty in November 1999. For example, the convertibility of the three East African currencies.
Other achievements include synchronization of the Budget Day of the three member states and holding of pre-budget consultations by Ministers responsible for finance. The establishment of a Monetary Affairs Committee of the three countries' central banks will foster price and exchange stability in the region and avoid double taxation.
Other positive steps taken are: The easing of cross border movements, removal of unnecessary police road blocks on designated East African routes (except for temporary security purposes), approval of issuance of East African passports and harmonization of traffic laws.
The East African flag has been launched to show the EAC's determination to eventually create a political federation.
The new EAC is certainly bound to provide new opportunities of investment and development in the region, and is going to make it easier for investors to put their resources into the region rather than individual countries.
The co-operation will hopefully minimize financial risks and provide new solutions to the nightmares of unemployment and poverty. It is also expected to make it easy for EAC to market itself elsewhere as a region, to seek donor support and investment.
Amidst this optimism, it is clear that the three countries of EAC are still paying the price of past mistakes. Kenya has deteriorating infrastructure and Uganda, for all its rapid development, the economy is roughly half of what it was before the disastrous era of dictator Idi Amin. In Tanzania, listless bureaucracy and high taxes impair progress.
The most worrying in the new arrangement is the issue of trade imbalances between the three countries. However, a free market will generate enough competition to offer cross-border investments. Free movement of capital, goods and labor, will erase the imbalances in the long-term.
OVERVIEW OF ECA ECONOMIC PERFORMANCE
The economies of Kenya, Uganda and Tanzania registered mixed performance in 1999. The Kenyan economy witnessed further decline in real GDP growth from 1.8 per cent in 1998 to 1.4 per cent in 1999, while the Ugandan economy recorded a fall in the GDP growth from 7.4 per cent in fiscal year 1998/99 to 5.1 per cent in 1999/00. However, the Tanzanian economy grew at a higher rate of 4.8 per cent last year, compared to 4.0 per cent in 1998.
On the average, the regional economy recorded a fall in the GDP growth, from 4.4 per cent in 1998 to 3.8 per cent last year.
The declining trend is expected to continue this year due to prolonged drought in the region, deteriorating prices of the region's major exports, the ban on fish exports imposed by the European Union and the surge in world petroleum prices.
However, the regional economy is expected to benefit next year from an external debt waiver granted to Tanzania and Uganda under the Heavily Indebted Poor Countries(HIPC) program and the resumption of donor funding for Kenya.
Nevertheless, economic performance will largely depend on the reliability of rain and improvement in the external terms of trade.
ECONOMIC STASTICS
TANZANIA I997 I998 1999 Real GDP 4.0% 4.0% 4.8%
Population 30m...30.9m..31.8m Ext. Debt US Dollar 7,847m 7,973m...7,268m
Major exports Coffee, Cotton, Cashewnuts, Minerals, Tobacco and Tea
KENYA Real GDP 2.4% 1.8% 1.4% Population 27.3m 28m 28.7m
Ext. Debt US Dollar..5,108m 5,389.6m.5,549.2m
Major exports Tea, Horticulture, Petroleum products, Iron and Steel,
Coffee, Fish & Fish products
UGANDA Real GDP 5.3% 7.5% 5.0% Population......20.4m...21m 21.6m
Ext. Debt US. Dollar 3,606m 3479m 3556m
Major exports...Coffee, Maize, Tea, Gold and Gold products, Fish and Fish products
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