EAC countries join hands in investment promotion
Rwanda is preparing to host the first ever East African investment conference. The idea is to market the East African community as a block, rather than individual countries separately promoting their assets.
Monique Mukaruliza, the Minister in charge of the East African community, says that the conference, which is to be held in June, will be an important forum from which the EAC members expect major results.
“The conference will be aiming at identifying opportunities within the region that could attract both foreign investors and those within the region,” Mukaruliza says, adding that the EAC is engaging foreign investors by removing border barriers and the creation of more incentives for both local and foreign investors.
It seems indeed a great idea to market the entire East African block, with a market size of 120 million people, while the five countries that make up the East African community share similar investment opportunities.
“During the Commonwealth business forum, it was noted that most of the East African countries shared the same investment incentives; hence the idea to market the EAC as a block,” Francis Gatare the director general of the Rwanda investment and export promotion agency (RIEPA), explains.
The Minister of state in charge of investment promotion, Vincent Karega, thinks it is imperative for EAC member states to work together to promote investment within the region, which he says would bring about economic competitiveness.
He says that the region is rich in culture, mineral resources and has a large market. “We need to position ourselves to be able to market the East African community to foreign investors as well as the local investors,” Karega says.
However, as the EAC enjoys a combined gross domestic product (GDP) of US$ 44 billion, showcasing the community as a single investment block might not be so simple.
For instance, 60% of the 120-million-people market is still living below the poverty line, a factor that may undermine the incentives being put in place to attract investors.
“There is need to come up with policies that favor market development, which would ensure investor confidence,” says Frederick O. Owiti, the chief economist in charge of investment and private sector promotion at the EAC secretariat.
He says that although the East African countries are rated by the World Bank as the fastest reforming economies, there are challenges associated with infrastructure which need to be addressed so as to facilitate the investment promotion.
He adds that the EAC micro convergence rate is at 5% and that to make an impact on poverty, the rate has to grow to about 7%, according to the African Union.
Furthermore, for the investment promotion plans to take root, stability within the region is required, especially considering the aftermath of the Kenyan post-election crisis. “Last year Kenya had managed to achieve a 7% GDP growth, but since the post-election crisis, it has reduced significantly,” Owiti notes.
Customs union issues should also be addressed quickly to facilitate the investment arrangements. According to the Frederick O. Owiti, joining the East African customs union will depend on the sovereignty of member states to join at the time they feel it will not jeopardize their national priorities.
He says that the work of the EAC secretariat has been to harmonize the investment codes of member states and ensuring smooth integration, which he should be based on the people.
“It should be a bottoms-up approach for the integration to be done smoothly,” he says, adding that the failure of the first EAC was due to the fact that integration began at the top before it reached the people. “The people have a say when it comes to integration,” Owiti points out.
Rwanda is expected to join the East African customs union by 2009. This delay is due to the Rwandan budget cycle which is not aligned with the budgets of Kenya, Uganda and Tanzania.
Minister Mukaruliza explains that Rwandan budget usually runs from January 1 to December 31, while the EAC budget begins in June.
“We will have to set up a six-month budget to cater for the first half of 2009, and again prepare a year’s budget that aligns with the EAC budget cycle, which begins in June,” Minister Mukaruliza says.
Once Rwanda has joined the customs union, it will be enjoy elimination of all internal tariffs and adhere to a common external tariff of 25%.
Yet the superior manufacturing capacity of a country such as Kenya could lead to an influx of their products into other member states, at the expense of local manufacturers who can not compete against their Kenyan colleagues.
But according to Frederick O. Owiti, the EAC will ensure the distribution of benefits to all member states. He adds that there will be compensation in monetary terms to protect the local manufacturers.