Policy discord big obstacle to EAC trade, says new report
Even after recent attempts to improve cross-border trade yielded some progress, a recent World Bank report says weak cross-border infrastructure remains a major bottleneck to movement of goods across East African Community borders.
In the third edition of Rwanda Economic Update subtitled titled: Leveraging Regional Integration, the World Bank says that there is a persistent general lack of policy harmony in the region that “holds back infrastructure in promoting intraregional trade.”
Such disharmony is evident in regulations on vehicle dimensions, axle-load limits, transit charges on the roads and highway codes. “cross-border infrastructure helps to promote intraregional trade only when supported by harmonized regulatory framework—still a work in process in East Africa,” the report says.
This means that initiatives such as the 24-hour border operation and installation of modern equipment at borders have had little impact in accelerating the pace at which goods cross borders in the region.
Recently, the Japanese International Cooperation Agency (JICA) donated equipment to revenue collectors of Rwanda and Uganda.
However, without harmonizing policies, such equipment, worth $180, 000 and comprised pick-up trucks, motorcycles and communication gadgets will achieve little in improve information sharing and make movement of goods faster.
Yet even with several bottlenecks, business across the Rwanda-Uganda border continues to flourish with an estimated 2,000 people, 200 trucks and 40 buses crossing border posts between the two countries everyday.
With Katuna/Gatuna border accounting for revenue of about Frw360 million per month, it means that the potential to boost tax revenue is till high if policy disharmony is sorted out.
Many traders complain of demands for varying and excessive documents from one country to another, insufficient use of information communication technologies as well as lack of coordination between customs bodies and other government agencies, the report says. “Many border crossings have antiquated infrastructure, inadequate coordination between the [concerned] two countries and congestion,” the report adds.
Others problems cited include “frequent unwarranted roadblocks and check-points.” There are not less than 25 police check points, 15 roadblocks and 13 weighbridges along the northern corridor route (from Mombasa to the hinterland)—with seven of them between Mombasa and Malaba alone.
In many instances, according to the report, there is general lack of procedure when inspecting goods on transit with officials often “deviating from agreed inspection procedures and subject drivers to administrative harassment and extortion.”
Rwanda and Uganda own no ports, this means that their traders incur a lot of costs in transporting goods.
Quoting from the East African Community Business Climate Index of 2008, the World Bank report says that as a result of these impediments, the business community loses about 172,236 hours per year. At the same time, businesses also pay about $9.6 million per year to some corrupt officials in customs offices, police roadblocks and weighbridges.
The Bank calls for effective joint transit management by EAC partner states to boost trade. This is particularly critical for landlocked countries in the region such as Rwanda, Uganda and Burundi.
The Japanese Envoy to Rwanda, Kunio Hatanaka recently echoed similar suggestions while handing over assorted border surveillance equipment to Rwanda and Uganda revenue authorities.
“Rwanda and Uganda own no ports, this means that their traders incur a lot of costs in transporting goods. If the issue of trade facilitation can therefore be addressed, then trade would be easier,” he said.
Japan has extended $30 million support to Uganda and Rwanda aimed at developing infrastructure for a one-stop border post at Rusomo border to ease trade facilitation. If completed by March, 2014, it will hopefully reduce on the almost eight stop points traders currently have to contend with.
The report calls for faster harmonization of policies in the region aimed at eliminating persistent non-tariff and address challenges associated with the regions underdeveloped infrastructure.
“Regionalizing infrastructure should include two strategic pillars: (i) eliminating cross-border bottlenecks; and (ii) promoting regional policy harmonization alongside institutional capacity building,” the report suggests.
The Bank however warns that getting all the five EAC-member countries to agree common policy and regulation might be difficult due to the different levels of commitment towards reform.
The report however suggests that in order to get around this, regionalization can initially focus on promoting regional regulatory cooperation. “At the start, regional regulatory entities in roads, rail and energy could be established to facilitate information exchange and offer non-binding advice on technical matters. Consensus for regional regulatory agencies could then increase as more countries reform…” the report concludes.