SlideShare une entreprise Scribd logo
1  sur  17
Regional Integration
   Lecturer : Dr. Christiane Hardenberg


       Report on group exercise
Preparation of Group Presentation on:
     East African Community




      Volkan Emre        0534436




           Berlin, January 2012

                    i
TABLE OF CONTENTS




                                                Page




1.Introduction                                                                04


2.Background of the EAC                                                       05


3.Main drivers for integration                                                06
4.1 Economic drivers                                                          07
4.2 Political drivers                                                         07
4.3 Social drivers                                                            08


4.Achievements in main integration areas                                      08
4.1 Achievements in GDP & GDP per capita                                      08
4.2 Achievements in trade & trade patterns & intra-regional trade             09
4.3 Achievements in doing business                                            11
4.4. Achievements in tariff reduction & common external tariff                12
4.5 Achievements in capital movements                                         13
4.6 Achievements in Common Markets – Labor                                    13
4.7 Achievements in the attempts towards East African Monetary Union (EAMU)   13
4.8 Achievements in political / defense pact                                  14




5.Current integration debates                                                 15




6. Main challenges                                                            15
4.1 Trade related challenges                                                  16
4.2 Non trade related challenges                                              16




7. Opportunities                                                              17

                                                  ii
LIST OF TABLES & CHARTS


Table 1          Time Table and Progress of the EAC towards Political Federation          01


Table 2.1        EAC Members in Figures, 2010                                             06


Table 2.2        EAC, EU and US in Figures, 2010                                          06


Table 4.1.1      Changes in GDP                                                           08


Table 4.1.2      EAC in Figures, 2010                                                     09


Table 4.2.1      Growth of the Intra-Regional Trade in the EAC Countries                  11


Table 4.2.2      Shares of EAC members in intra-regional trade, 2009                      11


Table 4.4.1      Tariff Reductions in the EAC between 2005 and 2010                       12


Table 4.7        Achievements in OCA criteria                                             14


Chart 4.2.1      Trade Volume (Exports+Imports) of EAC Countries between 2003 and 2008    09


Chart 4.2.2      Trade Balance (Exports-Imports) of EAC Countries between 2003 and 2008   10




                                  ABBREVIATIONS / ACRONYMS


          EAC           East African Community


          EAMU          East African Monetary Union


          EU            European Union


          ECOWAS        Economic Community of West African State


          SADC          Southern African Development Community


          OCA           Optimum Currency Area

                                                   iii
1.INTRODUCTION

The East African Community can be classified in line with the south- south integration concepts.
What makes EAC more interesting than other south – south integration examples is that the member
countries of the EAC could have establish a common market and almost achieved their aim to have a
monetary union on their way to the political federation. There is a remarkable commitment backed
with a strong ambition behind the current integration in the East African Region.

The Treaty establishing the East African Community (EAC) was signed on 30 November 1999 and
entered into force 7 July 2000. Its original members were Kenya, Tanzania and Uganda. Burundi and
Rwanda became members in 2007. The goal of the EAC is to ‘widen and deepen economic, political,
social and cultural integration in order to improve the quality of life of the people of East Africa
through increased competitiveness, value added production, trade and investment 1. The EAC Treaty
aims to establish an export-oriented economy that will enable the ‘free movement of goods, persons,
labor, services, capital [and] information technology’, as an important objective2.
The establishment treaty aimed to follow four different steps of the regional integration among its East
African members. Those steps are respectively: customs union, common market, monetary union and
political federation. Planned time frames of the different integration steps which are set in the treaty
and their actual introduction dates are shown on the table below.

           Table 1 : Time Table and Progress of the EAC towards Political Federation

                                             Timetable
                EAC Customs Union                                   EAC Common Market
· Operationalised on 1st July 2005 as agreed in         · The protocol on the establishment of the
the treatment                                           EAC common market was being
                                                        negotiated as of 18 June 2009
                                                        · Operationalised on 1st July 2010
              EAC Monetary Union                                 EAC Political Federation


· No time frame set in the treaty                       · No time frame set in the treaty
· Scheduled to 1st June 2012                            · Unofficially aimed to be reached by 2015




1
 EAC Development Strategy 2006- 2010, Executive Summary, available at http://www.eac.int/index.php
2 Treaty Establishing the East African Community, Art. 7(c), available at www.eac.int.

                                                    4
Headquarters of the EAC is located in Arusha, Tanzania, which has been an important international
diplomatic hub in the past for East Africa and the continent. Arusha’s strategical location allows the
EAC member to have easy access to the city for all member countries.

Organizational structure of the EAC is quite complex as expected. The core organs can be stated as
follows: The summit, the council of ministers, the co-coordinating committee, sectoral committees, the
EAC court of justice, the EAC legislative assembly and the secretariat.

2.Background of the EAC

History of the EAC goes back to the early 20th century. Construction of the Mombassa – Kasese
Railway between 1897 and 1901 and the significant increase in the economic activities in the region
led Kenya and Uganda to establish a customs union in 1917. Tanzania joined the customs union in
1927. Both parties established the East African High Commission in 1948 which was replaced by East
African Common Services Organization in 1966. Finally the first East African Community was
founded in 1967 by Uganda, Kenya and Tanzania. But it could last only for ten years and collapsed in
1977. The main reason behind the collapse of the first EAC was political rather than economic. Cause
of that collapse was mainly depending on Kenya’s demand on having more seats than the other
participants.

In year 1993, old EAC members came together again in Arusha and signed the Treaty for East
African Co-operation which might be considered as the basis of the new community. East African Co-
operation was replaced by the new East African Community Treaty which was signed in 1999 again
by Kenya, Uganda and Tanzania. In 2007 the EAC had its final shape by adding Brundi and Rwanda
as new partner states to the community.

Both Sudan and South Sudan made their interest public in joining to the EAC. Since the geographical
proximity is one of the admission requirements to join to the EAC, Sudan’s candidacy is still not
possible. In addition to that, Tanzania, Uganda and Kenya are strongly opposed to Sudan’s entry to the
community because of Sudan’s racist actions towards non –Muslim black Africans. On the other hand
South Sudan has been warming up to the idea of joining to the EAC in the short term future. South
Sudan is a candidate country since July 2011 and has been working hard to be the 5th member of the
EAC.

Some figures might give better insights about the member states of the EAC in order to understand
the regions balances. Looking at the Table 2.1 , one can easily find out that Kenya is the leading
country of the region with the highest GDP and GDP per capita numbers. On the other hand Burundi
is slightly lacking behind all of the EAC member countries which might bring the question to the
front: Is EAC really a south – south integration from Burundi’s point of view?




                                                  5
Table 2.1 : EAC Members in Figures, 2010

                                      Population                     GDP                GDP per capita
                                                                     ( US$
                                 ( Millions of people)              Billions)           (PPP Current $)
                Kenya                    40,5                         66,2                    1635
                Tanzania                 44,8                        62,23                    1423
                Uganda                   33,4                        42,21                    1263
                Rwanda                   10,6                        12,27                    1155
                 Burundi                 8,4                          3,4                      405

                    Source: World Bank Development Indicators, 2011, Own calculations

In order to answer such a question we should also look at EAC’s position in comparison with the other
major regional integration blocs. Considering the figures which can be captured on the Table 2.2.
below, we can argue that EAC is significantly lacking behind EU and US in terms of GDP and GDP
per capita. The picture is pretty much clear that any integration attempt under the EAC can be
classified as south – south integration. However we think that looking from Burundi’s perspective it
might be indeed a North –South integration in a south – south context. Some additional information
and data on the regional disparities within EAC can be in the upcoming sections which can put more
light on our question and answer.



                             Table 2.2 : EAC, EU and US in Figures, 2010

                                                   EAC                       EU                  US
                  Population (2010)        138 million people        309 million people 502 million people
                  Surface Area             1.82 million sq.km        4.32 million sq.km   9.83 million sq.km

                  GDP (Current)                $ 78.7 billion          $16.2 trillion       $14.6 trillion
                  -2010

                  GDP per capita                  $ 1176                  $ 31,676            $ 47,182
                  (Current,PPP)
                  -2010

                  GINI (%)                        43.2 %                     30%                41%


   Source: WTO, World Trade Report 2010, EAC, EAC Facts & Figures Report 2011,World Bank
               Developmet Indicators , Central Intelligence Agency, own calculations



3.Main Drivers for Integration

Every member state has its own political, economic and social dimensions behind regional integration
attempts within the EAC. But there are also common main drivers for integration which can be


                                                                6
evaluated in three different dimensions. Those dimensions are respectively: Economic, political and
social drivers for integration

3.1 Economic drivers for integration

Changes in world trading regime heavily influenced by WTO rules is playing important role in the
regional integration attempts in the world and as well as in East Africa. Therefore the changing nature
of the worlds trade is a dominant driver behind the integration attempts to have a better access to the
world markets. Additionally, limited and weak intra-regional trade does not allow the EAC members
to strengthen their weak domestic markets. The nature of the regional integration offers to the EAC
members to change that picture in their domestic markets just the other way around by liberalization of
the intra regional trade.

In addition to the trade side we should look at the production side too. EAC member states are also
expecting to benefit from the economies of scale and attract more FDI in a more integrated economic
environment. Mobility of the cheap labor within the region is expected to decrease the production
costs.

Establishing well framed intra-sectoral linkages among member states is an another economic driver
for integration. Enlargement of the markets and intra-sectoral linkages within the EAC take place
through regionalism due to their political economic background.



3.2 Political drivers for integration

Political drivers for integration can be evaluated in two groups. First group is the external political
influence which is mostly from the EU, that is openly supporting regional integration communities in
Africa with Cotonou Partnership Agreement. Besides the EU ,the biggest trade blocs and WTO are
encouraging regional integration attempts in Africa with their special trade preferences.

Second group of political drivers behind integration is domestic ones. Almost all of the EAC member
countries do have the historical ambition to increase the regional representation of the East Africa on
the old continents political platform. Other integration blocs within Africa like ECOWAS and
COMESA are generally seen as rivals in getting the benefits of the opportunities abroad.

Security concerns also do play role in the integration attempts. The EAC Treaty openly includes
cooperation in defiance, regional peace and security3

Additionally, the aim of promotion of the good governance which is set by EAC Treaty might be also
evaluated under political drivers for integration.



3
    EAC Treaty, Chapter 23 , Article 123, 124 ,125

                                                     7
Yet again, We can claim that the political drivers influence the integration process in line with the
regionalism concept.

3.3 Social drivers for integration

Social drivers are very much related to the social interactions of the region’s population and
immigration. Those issues are heavily linked with the regional disparities within the EAC.
Immigration is from poor (e.g Burundi, Rwanda) to relatively rich regions/ countries (e.g Kenya,
Tanzania). EAC aims to change that flows with the increasing amount of intra-regional trade and FDIs
with the regional integration.

Inequality in the income distribution among different social classes and as well as among member
countries (e.g Kenya vs. Burundi) gives an another motivation to the regional integration process as a
challenge.

Additionally, the aim to enhance the role of woman and increase their participation in the social and
economic life, can be classified as an another social driver which is also set as a goal by the EAC in
the Establishment Treaty. But off course implementations and achievements can be questioned.

4.Achievements in Main Integration Areas

In order to analyze the achievements in main integration areas, we will look at the following
dimensions below. As it is already mentioned above the EAC Community introduced ‘Customs
Union’ in 2005 and that integration stage has been in implementation up to now. In the following
analysis, we will take the year 2005 as a benchmark and question the before and after effects of the
introduction of the customs union in line with the possible expectations of that particular regional
integration type.

4.1 Achievements in GDP & GDP per capita

Looking at GDP figures which are shown on the Table 4.1 below, one can easily observe that GDP
growth increased among the member states in the last decade. However it is hard to ascertain the
contribution of Customs Union on this fact.

                                     Table 4.1.1 : Changes in GDP

                                                      GDP Growth
                                      2001-2004       2005-2010         2001-2010
                    Burundi               15               35                63
                    Tanzania              32               54               126
                    Uganda                32               63               136
                    Rwanda                30               59               133
                    Kenya                 16               38                76

                     Source: World Bank Development Indicators, 2011, Own calculations



                                                  8
We can see a very similar picture if we look at the per capita figures. Changes in GDP per capita
growth after the introduction of the customs union in 2005 are quite remarkable but yet again these
variables had shown attendance to grow even before the implementation of customs union in 2005.
Though their growth was seem higher in relation to the previous growth before the implementation of
the customs union. As stated



                                       Table 4.1.2 : EAC in Figures, 2010

                                           GDP per capita Growth Rate
                                      2001-2004 2005-2010 2001-2010
                         Burundi            7             18            26
                         Tanzania           22            44            75
                         Uganda             20            49            77
                         Rwanda             22            51            86
                         Kenya              7             25            39

                    Source: World Bank Development Indicators, 2011, Own calculations



4.2 Achievements in trade & trade patterns & intra-regional trade

Trade patterns are one of the most visible indicators to analyze before and after periods of the customs
unions introduction in 2005. We analyzed the trade volume and trade balance of the EAC within the
observation period between 2003 and 2008.

    Chart 4.2.1: Trade Volume (Exports+Imports) of EAC Countries between 2003 and 2008




      Source: WTO,World Trade Report 2010, EAC,EAC Trade Report 2009, own calculations



During that particular time period, both export and import volumes continued to increase after customs
union. One remarkable finding that we came across was that EAC’s total trade volume was increasing
more than before. Positive differences in percentage growth were observed between 4 to 6 percents.

                                                   9
This increase can be partly explained by the positive effect of the market liberalization through the
introduction of the customs union for the selected time period, however the world trade patterns’
positive cyclical movements might have played a role behind EAC’s trade volumes’ expansion.

    Chart 4.2.2 : Trade Balance(Exports-Imports) of EAC Countries between 2003 and 2008




      Source: WTO, World Trade Report 2010, EAC,EAC Trade Report 2009, own calculations



During our analysis on the customs unions’ effects on the trade patterns we found out that the
optimistic picture in the total trade volume has been slightly changing in total trade balance of the
EAC. Because EAC’s trade balance has been continuing to grow in deficit, especially after 2005. The
main reason behind that fact is the composition of the trade. Share of import are slightly more than
share of imports. And value of imports grew relatively higher than exports, especially after the
customs union. If we look to the sources of that distortion in the trade balance on Table 4.2.2 above,
we can easily capture that trade with the rest of the world had risen significantly and expansion of the
imports created the trade deficit in the EAC. Yet again we can include the worlds business cycle’s
upward movement in the analysis.

One of te most interesting findings of our research on EAC’s trade patterns between 2003 and 2008
was on intra-regional trade. As already mentioned in the economic drivers section of the paper, intra
regional trade is very important for EAC members to strengthen their weak domestic markets and
introduction of the customs union was a definitively an opportunity for change.




                                                  10
Table 4.2.1 : Growth of the Intra-Regional Trade in the EAC Countries between 2003 and 2008




      Source: WTO, World Trade Report 2010, EAC,EAC Trade Report 2009, own calculations

According to Table 4.2, the volume of the intra-regional trade decreased for one period and then
steadily increased after customs union till 2009. However, in reality the share of the intra-regional
trade to total trade instead decreased after customs union (Table 4.2.1) which is not an expected
situation for regional integration agenda of the EAC in the field of trade

If we have a closer look at the intra-regional trade we can easily capture Kenya’s dominance with its
almost 40 percent share in the overall intra-regional trade (Table 4.2.2). Rankings of the member
states are very much in line with their GDP and GDP per capita rankings as well. In that regard
Burundi is in the last place with its less than 5 percent share in the overall intra-regional trade.



                 Table 4.2.2 : Shares of EAC members in intra-regional trade, 2009

                                         Intra-regional trade in EAC
                                       Amount (million US$) Share (%)
                              Kenya            1329               37
                              Uganda            946               27
                              Tanzania          640               18
                              Rwanda            497               14
                              Burundi           136               4

                           Source: EAC Trade Report 2009, own calculations



4.3 Achievements in doing business

Our analysis depends on the data extraction from World Bank Development Indicators between 2003
and 2010. First indicator is ‘’Progress in terms of time to start a business’’. The most remarkable
improvement was observed in Rwanda ( from 18 to 3 days) on the other hand the other fresh member
Burundi did perform badly. Starting business takes 24.6 days on average in the EAC. That average
used to be 37.2 in 2003.


                                                     11
Second indicator is start up procedures to register a business as numbers. The average number of
procedures in the EAC was observed as 10.8 days which were 12.6 days in 2003. If we compare two
periods, we can argue that there haven’t been a remarkable increase in that field. Rwanda is again the
most liberal member while Uganda being the worst performer of all the EAC members.

Improvements in time to export and imports in terms of days were the last indicators. There have been
very important improvements, especially after customs union in 2005 and addition of new members in
2007 (Rwanda and Burundi). Time to exports has decreased from 45.4 to 33.9 days on the other hand
time to imports decreased from 68.6 to 38.8 days. Rwanda is again the champion (from 92 to 34
days). No changes was observed in Burundi.

Depending on the observations and findings which were briefly listed above, we can argue that the
liberalization attempts could slightly increase the ease of doing business within the EAC. Of all the
EAC members, Rwanda showed the biggest commitment in liberalizing its markets. On the other hand
Burundi showed a bad performance compared with others.

4.4 Achievements in tariff reduction & common external tariff & non tariff barriers

Tariff reduction is a major determinant for the EAC’s ambitions towards to a better integrated
community. The EAC declared a ‘Five Year Phase out Plan’ to reduce internal tariff rates to zero
percent before entering to the Customs Union in 2005. Therefore we wanted to analyze the internal
tariff reductions after 2005.

                 Table 4.4.1 : Tariff Reductions in the EAC between 2005 and 2010,(%)
                                               2005 2006 2007 2008 2009 2010
                             Burundi             20      16      14    13   9     10
                            Tanzania             13      13      13    12   12    13
                             Uganda              12      12      12    12   12    12
                             Rwanda              19      19      19    19   10    10
                              Kenya              12      12      12    12   12    12

                          Source: World Bank, World Bank Development Indicators



According to the Table 4.4.1 which is constructed on the data that we obtained form world bank,
current tariff rates are around 10% . It is obvious that The ‘Five Year Phase out Plan’ which aimed to
reduce all internal tariff rates to 0 % have not been fully harmonized

We should also say some words on common external tariff structure. East African Customs Union
Protocol says: The Protocol establishes a three-band common external tariff: a minimum rate of 0%, a
middle rate of 10% and a maximum rate of 25% in respect of all products imported into the region4.


4
    East African Customs Union Protocol, Part B, Article 12 (1),p 15

                                                        12
Non-tariff barriers are still in existence in the EAC. Numerous institutions in order to test goods which
are subject to the trade and several roadblocks along northern and central corridors are just two general
and simple examples. Uganda’s ban on beef and beef products from Kenta might be a specific
example.

4.5 Achievements in capital movements

Capital movements are evaluated in two main groups. First group is inward direct investments.
Barriers in inward direct investments have fully lifted and currently no EAC member state has
restrictions in that. But the picture is different in outward direct investments. Outward direct
investments are not allowed in Tanzania. Additionally, outward investments in Rwanda and Burundi
are depended on the approval of the national central banks. But both of the new members that joined
to the EAC in 2007 are going to gradually eliminate that barriers.

Foreign direct investments in the region are in transportation, communication, tourism and energy. We
can obviously see that the FDI composition is matching well with the developing country context,
since the poor infrastructure is a major obstacle to the economic activities. Major investors in the
region are respectively: China, United Kingdom, Japan, India, Italy and the U.S.

Intra regional FDIs are not playing major roles in the EAC. It is share is less than 1% of total FDIs in
the region. A very remarkable finding that we extract from EAC Trade Report 2009 is that Kenya is
the dominant source of FDIs with its more than 90% share. The second surprising finding is almost all
of the Kenya’s FDI is shared by Uganda (66%) and Tanzania(31%), on the other hand new members
Burundi and Rwanda receive almost no intra-regional FDI.



4.6 Achievements in Common Markets - Labor

EAC established its common market in July 2010. Reflections fn the common market implementation
on Labor markets could not be eaisly captured so far. But all the members state, except Tanzania are
acting in line with the common market protocol in allowing the labor force to flow between members.
Tanzania on the other has a progressive implementation which will continue till 2015. According to
the EAC common market regulation annex all of the member states are allowing the flow of the high
skilled labor force in the region.



4.7 Achievements in the attempts towards East African Monetary Union (EAMU)

EAMU is aimed to be introduced on 1st June 2012. Monetary union is one of the intermediate mile
stones to the East African Political Federation. Besides the political motivation in further integration ,
there are other reasons too.


                                                   13
Members want to facilitate weak intra-regional trade through harmonized payment systems and
strengthen the local characteristics of the trade patterns. Additionally, capital and financial asset
accumulation through investment flows is an important expectation. Defensive motives such as
monetary stability and resilience to external shocks can be also discussed as the other motives.

There are several requirements for the monetary integration which are listed under the OCA (Optimum
Currency Area) criteria We analyzed three major requirement in order to measure the current
achievements.



                                        Table 4.7 Achievements in OCA criteria



                                                    Burundi        Rwanda   Uganda     Tanzania     Kenya

                  Annual Growth (2010)- %              4             8          5          7          5

                 Inflation (2010)- %                   6             2          4          6          4

                 Inflation (October 2011)- %         13,3           7,8       30,5       16,8       18,9

                 Budget Deficit to GDP
                                                      15,6          13,7       7,9        11,2       8,8
                 Excluding Grants (2010)- %

                 Budget Deficit to GDP
                                                      2,6           1,6        4,8        6,2        5,3
                 Including Grants (2010)- %


Source: WTO, World      Trade Report 2010, EAC, EAC Facts & Figures Report 2011,World Bank Development Indicators , Central
Intelligence Agency, own calculations




First requirement is inflation rate which has a upper threshold of 5%. According to the Table.4.7, there
is a tremendous increase in the inflation rates between 2010 and 2011 which is a very bad sign for the
inflation requirement.

Second requirement is growth rate which has a lower threshold of a 7%. This requirement also could
not be achieved by the EAC member states.

Budget deficits of 5% of the total GDP is the last requirement for the monetary integration. EAC
member states are only able to fulfill that requirement if they include grants to their calculations.

All in all, the requirements could not be fulfilled on the way to the monetary union which is aimed to
be established next. summer.

4.8 Achievements in political / defense pact

One of the political drivers behind the regional integration attempts in East Africa is defense pact. The
region has unstable power dynamics and disputes. EAC members are openly seeking a regional
stabilty and security.


                                                              14
EAC community has been very active in the diplomatic relations with that particular issue. The
Nairobi Protocol for the Prevention, Control and Reduction of Small Arms and Light Weapons in the
Great Lakes Region, the Horn of Africa and Bordering States was signed in 2004 and has been
updated up to now. Additionally, the tripartite framework between EAC, COMESA and SADC covers
regional security issues in detail.

Finally, the ECA-EU trading relationship’s political dimension strongly supports moves towards
mutual defense pact in the East African Region.

5. Current debates

EAC has a very dynamic political nature. Current debates are on three main areas. One is about the
competition of having the determining role within the community. Big brothers Kenya and Tanzania
are involved. The second hot topic is the admission of Southern Sudan. It is highly likely that sooner
or later South Sudan will be the 5th member state of the community. In that case the candidacy of
Sudan seems to be on the table, despite the security concerns. The last ongoing debate is about the
direction of the regional integration. Monetary Union is aimed to established just in months and there
are big still big concerns among the members.

6. Main challenges & Constraints

There are several challenges and constraints to the regional integration process in East Africa. We can
classify that challenges in two main groups. First groups is trade related challenges and the second one
is non trade related challenges.

6. 1 Trade related challenges

Poor infrastructure is an obstacle to the regional trade because of the lack of required facilities. A good
example would be the road blocks in the main trade destinations of the region.

Although ECA countries reached to the common market level in the regional integration, they have
failed to remove tariff barriers. Additionally the non –tariff barriers are still existing. At that point, we
can also talk about the lack of political will towards lowering the tariff rates and it also seem that there
is lack of clear guidelines regarding the implementation of trade liberalization. Lastly lack of
compatibility with the WTO rules is also a result all of the mentioned tariff harmonization processes.

The composition of the trade and the dominant share of the imports in the trade balance is an obstacle
to the opportunities for intra-regional trade. EAC imports almost twice as much as it exports. Again
the components of the export goods are very simple. EAC exports mainly primary and non processed
goods and imports finished consumer goods.

Another trade related structural problem is lack of diversification in the production and its negative
effects on the intra-regional trade.


                                                     15
6. 2 Non-trade related challenges

Production patterns in the EAC are very simple an dependent. Lack of economic diversification and
entrepreneurship are not allowing to build up intra-sectoral linkages in manufacturing and benefit from
the regional integration.

Resources could not get mobilized by large amounts as it is expected in the regional integration
context. Again we can stress on the infrastructural problems . Low level of capital availability in the
regional banking systems , except Kenya might be a major reason behind that challenge.

High inflation rates in all of the member states might become to a very big challenge for the upcoming
monetary union. Therefore it is vital for the EAC to wait till every country fulfill that particular
requirement related with inflation rate.

Irregular migration, especially from poor to reach regions might be an important threat for the
developing EAC countries. Under the large informal sector conditions, majority of the immigrants are
potential candidates for the black market employment opportunities and cause socio-economic
problems.

Finally, overlapping memberships in different regional integration blocs is making the coordination
and regional cooperation harder for the EAC member countries.



7. Opportunities

With its more than 100 year old historical background, current achievements and ambition towards
political federation, EAC might overcome the challenges in the long run and enjoy the benefits of free
movement of persons, capital labor goods and services.




                                                  16
References


   East African Community, 2011, Facts and Figures Report, available at:
    http://www.eac.int


   EAC Development Strategy 2006- 2010. Executive Summary, available at:
    http://www.eac.int/index.php


   Treaty Establishing the East African Community, Art. 7(c), available at:
    http://www.eac.int.


   Worl Bank Development Indicators,2011, available at:
    http://data.worldbank.org/indicator


   Gathii, James Thuo ,2011, African Regional Trade Agreements as Legal Regimes,
    Cambridge University Press, New York




                                             17

Contenu connexe

Tendances

Evolution of international trade
Evolution of international tradeEvolution of international trade
Evolution of international tradeAyan Bandyopadhyay
 
WORLD TRADE ORGANIZATION
WORLD TRADE ORGANIZATIONWORLD TRADE ORGANIZATION
WORLD TRADE ORGANIZATIONMansi Tyagi
 
Indian Pharma Industry- Government of India’s initiatives
Indian Pharma Industry- Government of India’s initiativesIndian Pharma Industry- Government of India’s initiatives
Indian Pharma Industry- Government of India’s initiativespharmacampus
 
Asia Pacific Economic Cooperation (APEC) Role in Pharmaceutical Regulation
Asia Pacific Economic Cooperation (APEC) Role in Pharmaceutical RegulationAsia Pacific Economic Cooperation (APEC) Role in Pharmaceutical Regulation
Asia Pacific Economic Cooperation (APEC) Role in Pharmaceutical RegulationTarif Hussian
 
TRADE POLICY OF PAKISTAN
TRADE POLICY OF PAKISTANTRADE POLICY OF PAKISTAN
TRADE POLICY OF PAKISTANNeelam Asad
 
Gulf Cooperation Council
Gulf Cooperation CouncilGulf Cooperation Council
Gulf Cooperation CouncilShravya Reddy
 
Presention on nafta & asean
Presention on nafta & aseanPresention on nafta & asean
Presention on nafta & aseanshweta7892
 
Association of south-east Asian Nations: ASEAN
Association of south-east Asian Nations: ASEANAssociation of south-east Asian Nations: ASEAN
Association of south-east Asian Nations: ASEANVikas Sinhmar
 
APEC(Asia Pacific Economic Co-operation)
APEC(Asia Pacific Economic Co-operation)APEC(Asia Pacific Economic Co-operation)
APEC(Asia Pacific Economic Co-operation)Col Mukteshwar Prasad
 
ASEAN Economic Community Blueprint
ASEAN Economic Community BlueprintASEAN Economic Community Blueprint
ASEAN Economic Community BlueprintDadang Solihin
 

Tendances (20)

Evolution of international trade
Evolution of international tradeEvolution of international trade
Evolution of international trade
 
WORLD TRADE ORGANIZATION
WORLD TRADE ORGANIZATIONWORLD TRADE ORGANIZATION
WORLD TRADE ORGANIZATION
 
Indian Pharma Industry- Government of India’s initiatives
Indian Pharma Industry- Government of India’s initiativesIndian Pharma Industry- Government of India’s initiatives
Indian Pharma Industry- Government of India’s initiatives
 
Asia Pacific Economic Cooperation (APEC) Role in Pharmaceutical Regulation
Asia Pacific Economic Cooperation (APEC) Role in Pharmaceutical RegulationAsia Pacific Economic Cooperation (APEC) Role in Pharmaceutical Regulation
Asia Pacific Economic Cooperation (APEC) Role in Pharmaceutical Regulation
 
TRADE POLICY OF PAKISTAN
TRADE POLICY OF PAKISTANTRADE POLICY OF PAKISTAN
TRADE POLICY OF PAKISTAN
 
Gulf Cooperation Council
Gulf Cooperation CouncilGulf Cooperation Council
Gulf Cooperation Council
 
Sadc
SadcSadc
Sadc
 
WTO
WTOWTO
WTO
 
ASEAN
ASEANASEAN
ASEAN
 
Presention on nafta & asean
Presention on nafta & aseanPresention on nafta & asean
Presention on nafta & asean
 
WTO GATT
WTO GATTWTO GATT
WTO GATT
 
Regional economic integration in Africa
Regional economic integration in AfricaRegional economic integration in Africa
Regional economic integration in Africa
 
Association of south-east Asian Nations: ASEAN
Association of south-east Asian Nations: ASEANAssociation of south-east Asian Nations: ASEAN
Association of south-east Asian Nations: ASEAN
 
APEC(Asia Pacific Economic Co-operation)
APEC(Asia Pacific Economic Co-operation)APEC(Asia Pacific Economic Co-operation)
APEC(Asia Pacific Economic Co-operation)
 
WTO
WTOWTO
WTO
 
Presentation on Mercusor
 Presentation on Mercusor  Presentation on Mercusor
Presentation on Mercusor
 
Asean
AseanAsean
Asean
 
ASEAN Economic Community Blueprint
ASEAN Economic Community BlueprintASEAN Economic Community Blueprint
ASEAN Economic Community Blueprint
 
Apec
Apec Apec
Apec
 
EAC ppt.ppt.ppt
EAC ppt.ppt.pptEAC ppt.ppt.ppt
EAC ppt.ppt.ppt
 

En vedette

MENA Economic Development Outlook 2008, World Bank Report
MENA Economic Development Outlook 2008, World Bank ReportMENA Economic Development Outlook 2008, World Bank Report
MENA Economic Development Outlook 2008, World Bank ReportPARIS
 
Eac presentation final
Eac presentation finalEac presentation final
Eac presentation finalAdam Hoeksema
 
European Monetary Union
European Monetary Union European Monetary Union
European Monetary Union Ece Dincaslan
 
European Monetary Union
European Monetary Union European Monetary Union
European Monetary Union Leunita Luzha
 
EAC PowerPoint - Presented 11 04 2014
EAC PowerPoint - Presented 11 04 2014EAC PowerPoint - Presented 11 04 2014
EAC PowerPoint - Presented 11 04 2014David Rushing
 
Mku virtual campus presentation
Mku virtual campus presentationMku virtual campus presentation
Mku virtual campus presentationsalesiokiura
 
Course 2 week 6 lesson 10
Course 2 week 6 lesson 10Course 2 week 6 lesson 10
Course 2 week 6 lesson 10Joe Mellin
 
Argentina morewww.Tripmart.com
Argentina   morewww.Tripmart.comArgentina   morewww.Tripmart.com
Argentina morewww.Tripmart.comtripmart
 
Innovation and Risk - July 2014
Innovation and Risk - July 2014Innovation and Risk - July 2014
Innovation and Risk - July 2014Paul Iddon
 
Europe with switzerlandwww. Tripmart.com
Europe with switzerlandwww. Tripmart.comEurope with switzerlandwww. Tripmart.com
Europe with switzerlandwww. Tripmart.comtripmart
 
Formulario clientes (1)
Formulario clientes (1)Formulario clientes (1)
Formulario clientes (1)angiedaiana
 
Escalem l´everest
Escalem l´everestEscalem l´everest
Escalem l´everestcarmeo
 

En vedette (20)

MENA Economic Development Outlook 2008, World Bank Report
MENA Economic Development Outlook 2008, World Bank ReportMENA Economic Development Outlook 2008, World Bank Report
MENA Economic Development Outlook 2008, World Bank Report
 
Eac presentation final
Eac presentation finalEac presentation final
Eac presentation final
 
EAC STAR Presentation
EAC STAR PresentationEAC STAR Presentation
EAC STAR Presentation
 
Tax Harmonisation in the East African Community
Tax Harmonisation in the East African CommunityTax Harmonisation in the East African Community
Tax Harmonisation in the East African Community
 
European Monetary Union
European Monetary Union European Monetary Union
European Monetary Union
 
European Monetary Union
European Monetary Union European Monetary Union
European Monetary Union
 
Earned Value Management
Earned Value ManagementEarned Value Management
Earned Value Management
 
EAC PowerPoint - Presented 11 04 2014
EAC PowerPoint - Presented 11 04 2014EAC PowerPoint - Presented 11 04 2014
EAC PowerPoint - Presented 11 04 2014
 
Mku virtual campus presentation
Mku virtual campus presentationMku virtual campus presentation
Mku virtual campus presentation
 
Course 2 week 6 lesson 10
Course 2 week 6 lesson 10Course 2 week 6 lesson 10
Course 2 week 6 lesson 10
 
Argentina morewww.Tripmart.com
Argentina   morewww.Tripmart.comArgentina   morewww.Tripmart.com
Argentina morewww.Tripmart.com
 
Innovation and Risk - July 2014
Innovation and Risk - July 2014Innovation and Risk - July 2014
Innovation and Risk - July 2014
 
Europe with switzerlandwww. Tripmart.com
Europe with switzerlandwww. Tripmart.comEurope with switzerlandwww. Tripmart.com
Europe with switzerlandwww. Tripmart.com
 
Formulario clientes (1)
Formulario clientes (1)Formulario clientes (1)
Formulario clientes (1)
 
Escalem l´everest
Escalem l´everestEscalem l´everest
Escalem l´everest
 
Curriculum Vitae
Curriculum VitaeCurriculum Vitae
Curriculum Vitae
 
Clientes2
Clientes2Clientes2
Clientes2
 
Gruppo 8 tirapelle_sean
Gruppo 8 tirapelle_seanGruppo 8 tirapelle_sean
Gruppo 8 tirapelle_sean
 
Code Contracts
Code ContractsCode Contracts
Code Contracts
 
As media studies
As media studiesAs media studies
As media studies
 

Similaire à East African Community Emre Kugonza Asfaha 12.11

SADC, COMESA AND THE EAC: Conflicting regional and trade agendas
SADC, COMESA AND THE EAC: Conflicting regional and trade agendasSADC, COMESA AND THE EAC: Conflicting regional and trade agendas
SADC, COMESA AND THE EAC: Conflicting regional and trade agendasDr Lendy Spires
 
Implementation of APRM programme of action on Benin interim report
Implementation of APRM programme of action on Benin interim reportImplementation of APRM programme of action on Benin interim report
Implementation of APRM programme of action on Benin interim reportDr Lendy Spires
 
Memorandum dac peer review
Memorandum dac peer review Memorandum dac peer review
Memorandum dac peer review Dr Lendy Spires
 
Presentation bieac final-regional_conference_by_victor_ogalo
Presentation bieac final-regional_conference_by_victor_ogaloPresentation bieac final-regional_conference_by_victor_ogalo
Presentation bieac final-regional_conference_by_victor_ogaloJulien Grollier
 
Issues Paper on the FTA Tripartite
Issues Paper on the FTA TripartiteIssues Paper on the FTA Tripartite
Issues Paper on the FTA TripartiteEvarist Mugisa
 
East africacommunity guide for investors
East africacommunity guide for investorsEast africacommunity guide for investors
East africacommunity guide for investorsWilly Mutenza
 
Mulatu PhD Thesis Oral presentation
Mulatu PhD Thesis Oral presentationMulatu PhD Thesis Oral presentation
Mulatu PhD Thesis Oral presentationMulatu Fekadu
 
OECD COUNTRIES AND CONTEMPORARY ISSUES emerging economies’ perspective
OECD COUNTRIES AND CONTEMPORARY ISSUES emerging economies’ perspectiveOECD COUNTRIES AND CONTEMPORARY ISSUES emerging economies’ perspective
OECD COUNTRIES AND CONTEMPORARY ISSUES emerging economies’ perspectiveWIRETOL whoisreadytolisten
 
Africanldcsynthesisreporten
AfricanldcsynthesisreportenAfricanldcsynthesisreporten
AfricanldcsynthesisreportenDr Lendy Spires
 
080 E Comesa Newsletter 219
080 E Comesa Newsletter 219080 E Comesa Newsletter 219
080 E Comesa Newsletter 219AFRIKASOURCES
 

Similaire à East African Community Emre Kugonza Asfaha 12.11 (20)

SADC, COMESA AND THE EAC: Conflicting regional and trade agendas
SADC, COMESA AND THE EAC: Conflicting regional and trade agendasSADC, COMESA AND THE EAC: Conflicting regional and trade agendas
SADC, COMESA AND THE EAC: Conflicting regional and trade agendas
 
Implementation of APRM programme of action on Benin interim report
Implementation of APRM programme of action on Benin interim reportImplementation of APRM programme of action on Benin interim report
Implementation of APRM programme of action on Benin interim report
 
Memorandum dac peer review
Memorandum dac peer review Memorandum dac peer review
Memorandum dac peer review
 
Presentation bieac final-regional_conference_by_victor_ogalo
Presentation bieac final-regional_conference_by_victor_ogaloPresentation bieac final-regional_conference_by_victor_ogalo
Presentation bieac final-regional_conference_by_victor_ogalo
 
The au and ecowas
The au and ecowasThe au and ecowas
The au and ecowas
 
SEA 2020 FINAL
SEA 2020 FINALSEA 2020 FINAL
SEA 2020 FINAL
 
Issues Paper on the FTA Tripartite
Issues Paper on the FTA TripartiteIssues Paper on the FTA Tripartite
Issues Paper on the FTA Tripartite
 
East africacommunity guide for investors
East africacommunity guide for investorsEast africacommunity guide for investors
East africacommunity guide for investors
 
Local partnerships in Rural development eastern europe and the meditteranean,...
Local partnerships in Rural development eastern europe and the meditteranean,...Local partnerships in Rural development eastern europe and the meditteranean,...
Local partnerships in Rural development eastern europe and the meditteranean,...
 
EU PTAs as as a foreign policy tool: Promoting Regional Integration and Susta...
EU PTAs as as a foreign policy tool: Promoting Regional Integration and Susta...EU PTAs as as a foreign policy tool: Promoting Regional Integration and Susta...
EU PTAs as as a foreign policy tool: Promoting Regional Integration and Susta...
 
Mulatu PhD Thesis Oral presentation
Mulatu PhD Thesis Oral presentationMulatu PhD Thesis Oral presentation
Mulatu PhD Thesis Oral presentation
 
FAQs - OECS Integration
FAQs - OECS IntegrationFAQs - OECS Integration
FAQs - OECS Integration
 
Final outcomes document forum trade ministers meeting-2012
Final outcomes document   forum trade ministers meeting-2012Final outcomes document   forum trade ministers meeting-2012
Final outcomes document forum trade ministers meeting-2012
 
OECD COUNTRIES AND CONTEMPORARY ISSUES emerging economies’ perspective
OECD COUNTRIES AND CONTEMPORARY ISSUES emerging economies’ perspectiveOECD COUNTRIES AND CONTEMPORARY ISSUES emerging economies’ perspective
OECD COUNTRIES AND CONTEMPORARY ISSUES emerging economies’ perspective
 
Africanldcsynthesisreporten
AfricanldcsynthesisreportenAfricanldcsynthesisreporten
Africanldcsynthesisreporten
 
BIMSTEC
BIMSTECBIMSTEC
BIMSTEC
 
Growth Week 2011: Country Session 5 - Tanzania
Growth Week 2011: Country Session 5 - TanzaniaGrowth Week 2011: Country Session 5 - Tanzania
Growth Week 2011: Country Session 5 - Tanzania
 
080 E Comesa Newsletter 219
080 E Comesa Newsletter 219080 E Comesa Newsletter 219
080 E Comesa Newsletter 219
 
Annualreport2012
Annualreport2012Annualreport2012
Annualreport2012
 
Annualreport2012(1)
Annualreport2012(1)Annualreport2012(1)
Annualreport2012(1)
 

Plus de Volkan Emre

Volkan Emre Thesis 2012
Volkan Emre Thesis 2012Volkan Emre Thesis 2012
Volkan Emre Thesis 2012Volkan Emre
 
Eac volkan emre-0534436-last
Eac volkan emre-0534436-lastEac volkan emre-0534436-last
Eac volkan emre-0534436-lastVolkan Emre
 
Volkan emre financial system development in ld cs
Volkan emre  financial system development in ld csVolkan emre  financial system development in ld cs
Volkan emre financial system development in ld csVolkan Emre
 
A comparative analysis of eu an us gsp policies in egypt volkan emre [compati...
A comparative analysis of eu an us gsp policies in egypt volkan emre [compati...A comparative analysis of eu an us gsp policies in egypt volkan emre [compati...
A comparative analysis of eu an us gsp policies in egypt volkan emre [compati...Volkan Emre
 
Volkan emre 106621009 msc_project_2011
Volkan emre 106621009 msc_project_2011Volkan emre 106621009 msc_project_2011
Volkan emre 106621009 msc_project_2011Volkan Emre
 
Debt Problem & Development 26.10.2011 Kugonza & Emre
Debt Problem & Development   26.10.2011   Kugonza & EmreDebt Problem & Development   26.10.2011   Kugonza & Emre
Debt Problem & Development 26.10.2011 Kugonza & EmreVolkan Emre
 
Project Proposal On Improving River Water Quality In Tegucigalpa, Honduras
Project Proposal On Improving River Water Quality In Tegucigalpa, HondurasProject Proposal On Improving River Water Quality In Tegucigalpa, Honduras
Project Proposal On Improving River Water Quality In Tegucigalpa, HondurasVolkan Emre
 
Re Interventionism In Russia,China And Brazil Under Question Emre&Edwards...
Re Interventionism In Russia,China And Brazil Under Question Emre&Edwards...Re Interventionism In Russia,China And Brazil Under Question Emre&Edwards...
Re Interventionism In Russia,China And Brazil Under Question Emre&Edwards...Volkan Emre
 

Plus de Volkan Emre (8)

Volkan Emre Thesis 2012
Volkan Emre Thesis 2012Volkan Emre Thesis 2012
Volkan Emre Thesis 2012
 
Eac volkan emre-0534436-last
Eac volkan emre-0534436-lastEac volkan emre-0534436-last
Eac volkan emre-0534436-last
 
Volkan emre financial system development in ld cs
Volkan emre  financial system development in ld csVolkan emre  financial system development in ld cs
Volkan emre financial system development in ld cs
 
A comparative analysis of eu an us gsp policies in egypt volkan emre [compati...
A comparative analysis of eu an us gsp policies in egypt volkan emre [compati...A comparative analysis of eu an us gsp policies in egypt volkan emre [compati...
A comparative analysis of eu an us gsp policies in egypt volkan emre [compati...
 
Volkan emre 106621009 msc_project_2011
Volkan emre 106621009 msc_project_2011Volkan emre 106621009 msc_project_2011
Volkan emre 106621009 msc_project_2011
 
Debt Problem & Development 26.10.2011 Kugonza & Emre
Debt Problem & Development   26.10.2011   Kugonza & EmreDebt Problem & Development   26.10.2011   Kugonza & Emre
Debt Problem & Development 26.10.2011 Kugonza & Emre
 
Project Proposal On Improving River Water Quality In Tegucigalpa, Honduras
Project Proposal On Improving River Water Quality In Tegucigalpa, HondurasProject Proposal On Improving River Water Quality In Tegucigalpa, Honduras
Project Proposal On Improving River Water Quality In Tegucigalpa, Honduras
 
Re Interventionism In Russia,China And Brazil Under Question Emre&Edwards...
Re Interventionism In Russia,China And Brazil Under Question Emre&Edwards...Re Interventionism In Russia,China And Brazil Under Question Emre&Edwards...
Re Interventionism In Russia,China And Brazil Under Question Emre&Edwards...
 

East African Community Emre Kugonza Asfaha 12.11

  • 1. Regional Integration Lecturer : Dr. Christiane Hardenberg Report on group exercise Preparation of Group Presentation on: East African Community  Volkan Emre 0534436 Berlin, January 2012 i
  • 2. TABLE OF CONTENTS Page 1.Introduction 04 2.Background of the EAC 05 3.Main drivers for integration 06 4.1 Economic drivers 07 4.2 Political drivers 07 4.3 Social drivers 08 4.Achievements in main integration areas 08 4.1 Achievements in GDP & GDP per capita 08 4.2 Achievements in trade & trade patterns & intra-regional trade 09 4.3 Achievements in doing business 11 4.4. Achievements in tariff reduction & common external tariff 12 4.5 Achievements in capital movements 13 4.6 Achievements in Common Markets – Labor 13 4.7 Achievements in the attempts towards East African Monetary Union (EAMU) 13 4.8 Achievements in political / defense pact 14 5.Current integration debates 15 6. Main challenges 15 4.1 Trade related challenges 16 4.2 Non trade related challenges 16 7. Opportunities 17 ii
  • 3. LIST OF TABLES & CHARTS Table 1 Time Table and Progress of the EAC towards Political Federation 01 Table 2.1 EAC Members in Figures, 2010 06 Table 2.2 EAC, EU and US in Figures, 2010 06 Table 4.1.1 Changes in GDP 08 Table 4.1.2 EAC in Figures, 2010 09 Table 4.2.1 Growth of the Intra-Regional Trade in the EAC Countries 11 Table 4.2.2 Shares of EAC members in intra-regional trade, 2009 11 Table 4.4.1 Tariff Reductions in the EAC between 2005 and 2010 12 Table 4.7 Achievements in OCA criteria 14 Chart 4.2.1 Trade Volume (Exports+Imports) of EAC Countries between 2003 and 2008 09 Chart 4.2.2 Trade Balance (Exports-Imports) of EAC Countries between 2003 and 2008 10 ABBREVIATIONS / ACRONYMS EAC East African Community EAMU East African Monetary Union EU European Union ECOWAS Economic Community of West African State SADC Southern African Development Community OCA Optimum Currency Area iii
  • 4. 1.INTRODUCTION The East African Community can be classified in line with the south- south integration concepts. What makes EAC more interesting than other south – south integration examples is that the member countries of the EAC could have establish a common market and almost achieved their aim to have a monetary union on their way to the political federation. There is a remarkable commitment backed with a strong ambition behind the current integration in the East African Region. The Treaty establishing the East African Community (EAC) was signed on 30 November 1999 and entered into force 7 July 2000. Its original members were Kenya, Tanzania and Uganda. Burundi and Rwanda became members in 2007. The goal of the EAC is to ‘widen and deepen economic, political, social and cultural integration in order to improve the quality of life of the people of East Africa through increased competitiveness, value added production, trade and investment 1. The EAC Treaty aims to establish an export-oriented economy that will enable the ‘free movement of goods, persons, labor, services, capital [and] information technology’, as an important objective2. The establishment treaty aimed to follow four different steps of the regional integration among its East African members. Those steps are respectively: customs union, common market, monetary union and political federation. Planned time frames of the different integration steps which are set in the treaty and their actual introduction dates are shown on the table below. Table 1 : Time Table and Progress of the EAC towards Political Federation Timetable EAC Customs Union EAC Common Market · Operationalised on 1st July 2005 as agreed in · The protocol on the establishment of the the treatment EAC common market was being negotiated as of 18 June 2009 · Operationalised on 1st July 2010 EAC Monetary Union EAC Political Federation · No time frame set in the treaty · No time frame set in the treaty · Scheduled to 1st June 2012 · Unofficially aimed to be reached by 2015 1 EAC Development Strategy 2006- 2010, Executive Summary, available at http://www.eac.int/index.php 2 Treaty Establishing the East African Community, Art. 7(c), available at www.eac.int. 4
  • 5. Headquarters of the EAC is located in Arusha, Tanzania, which has been an important international diplomatic hub in the past for East Africa and the continent. Arusha’s strategical location allows the EAC member to have easy access to the city for all member countries. Organizational structure of the EAC is quite complex as expected. The core organs can be stated as follows: The summit, the council of ministers, the co-coordinating committee, sectoral committees, the EAC court of justice, the EAC legislative assembly and the secretariat. 2.Background of the EAC History of the EAC goes back to the early 20th century. Construction of the Mombassa – Kasese Railway between 1897 and 1901 and the significant increase in the economic activities in the region led Kenya and Uganda to establish a customs union in 1917. Tanzania joined the customs union in 1927. Both parties established the East African High Commission in 1948 which was replaced by East African Common Services Organization in 1966. Finally the first East African Community was founded in 1967 by Uganda, Kenya and Tanzania. But it could last only for ten years and collapsed in 1977. The main reason behind the collapse of the first EAC was political rather than economic. Cause of that collapse was mainly depending on Kenya’s demand on having more seats than the other participants. In year 1993, old EAC members came together again in Arusha and signed the Treaty for East African Co-operation which might be considered as the basis of the new community. East African Co- operation was replaced by the new East African Community Treaty which was signed in 1999 again by Kenya, Uganda and Tanzania. In 2007 the EAC had its final shape by adding Brundi and Rwanda as new partner states to the community. Both Sudan and South Sudan made their interest public in joining to the EAC. Since the geographical proximity is one of the admission requirements to join to the EAC, Sudan’s candidacy is still not possible. In addition to that, Tanzania, Uganda and Kenya are strongly opposed to Sudan’s entry to the community because of Sudan’s racist actions towards non –Muslim black Africans. On the other hand South Sudan has been warming up to the idea of joining to the EAC in the short term future. South Sudan is a candidate country since July 2011 and has been working hard to be the 5th member of the EAC. Some figures might give better insights about the member states of the EAC in order to understand the regions balances. Looking at the Table 2.1 , one can easily find out that Kenya is the leading country of the region with the highest GDP and GDP per capita numbers. On the other hand Burundi is slightly lacking behind all of the EAC member countries which might bring the question to the front: Is EAC really a south – south integration from Burundi’s point of view? 5
  • 6. Table 2.1 : EAC Members in Figures, 2010 Population GDP GDP per capita ( US$ ( Millions of people) Billions) (PPP Current $) Kenya 40,5 66,2 1635 Tanzania 44,8 62,23 1423 Uganda 33,4 42,21 1263 Rwanda 10,6 12,27 1155 Burundi 8,4 3,4 405 Source: World Bank Development Indicators, 2011, Own calculations In order to answer such a question we should also look at EAC’s position in comparison with the other major regional integration blocs. Considering the figures which can be captured on the Table 2.2. below, we can argue that EAC is significantly lacking behind EU and US in terms of GDP and GDP per capita. The picture is pretty much clear that any integration attempt under the EAC can be classified as south – south integration. However we think that looking from Burundi’s perspective it might be indeed a North –South integration in a south – south context. Some additional information and data on the regional disparities within EAC can be in the upcoming sections which can put more light on our question and answer. Table 2.2 : EAC, EU and US in Figures, 2010 EAC EU US Population (2010) 138 million people 309 million people 502 million people Surface Area 1.82 million sq.km 4.32 million sq.km 9.83 million sq.km GDP (Current) $ 78.7 billion $16.2 trillion $14.6 trillion -2010 GDP per capita $ 1176 $ 31,676 $ 47,182 (Current,PPP) -2010 GINI (%) 43.2 % 30% 41% Source: WTO, World Trade Report 2010, EAC, EAC Facts & Figures Report 2011,World Bank Developmet Indicators , Central Intelligence Agency, own calculations 3.Main Drivers for Integration Every member state has its own political, economic and social dimensions behind regional integration attempts within the EAC. But there are also common main drivers for integration which can be 6
  • 7. evaluated in three different dimensions. Those dimensions are respectively: Economic, political and social drivers for integration 3.1 Economic drivers for integration Changes in world trading regime heavily influenced by WTO rules is playing important role in the regional integration attempts in the world and as well as in East Africa. Therefore the changing nature of the worlds trade is a dominant driver behind the integration attempts to have a better access to the world markets. Additionally, limited and weak intra-regional trade does not allow the EAC members to strengthen their weak domestic markets. The nature of the regional integration offers to the EAC members to change that picture in their domestic markets just the other way around by liberalization of the intra regional trade. In addition to the trade side we should look at the production side too. EAC member states are also expecting to benefit from the economies of scale and attract more FDI in a more integrated economic environment. Mobility of the cheap labor within the region is expected to decrease the production costs. Establishing well framed intra-sectoral linkages among member states is an another economic driver for integration. Enlargement of the markets and intra-sectoral linkages within the EAC take place through regionalism due to their political economic background. 3.2 Political drivers for integration Political drivers for integration can be evaluated in two groups. First group is the external political influence which is mostly from the EU, that is openly supporting regional integration communities in Africa with Cotonou Partnership Agreement. Besides the EU ,the biggest trade blocs and WTO are encouraging regional integration attempts in Africa with their special trade preferences. Second group of political drivers behind integration is domestic ones. Almost all of the EAC member countries do have the historical ambition to increase the regional representation of the East Africa on the old continents political platform. Other integration blocs within Africa like ECOWAS and COMESA are generally seen as rivals in getting the benefits of the opportunities abroad. Security concerns also do play role in the integration attempts. The EAC Treaty openly includes cooperation in defiance, regional peace and security3 Additionally, the aim of promotion of the good governance which is set by EAC Treaty might be also evaluated under political drivers for integration. 3 EAC Treaty, Chapter 23 , Article 123, 124 ,125 7
  • 8. Yet again, We can claim that the political drivers influence the integration process in line with the regionalism concept. 3.3 Social drivers for integration Social drivers are very much related to the social interactions of the region’s population and immigration. Those issues are heavily linked with the regional disparities within the EAC. Immigration is from poor (e.g Burundi, Rwanda) to relatively rich regions/ countries (e.g Kenya, Tanzania). EAC aims to change that flows with the increasing amount of intra-regional trade and FDIs with the regional integration. Inequality in the income distribution among different social classes and as well as among member countries (e.g Kenya vs. Burundi) gives an another motivation to the regional integration process as a challenge. Additionally, the aim to enhance the role of woman and increase their participation in the social and economic life, can be classified as an another social driver which is also set as a goal by the EAC in the Establishment Treaty. But off course implementations and achievements can be questioned. 4.Achievements in Main Integration Areas In order to analyze the achievements in main integration areas, we will look at the following dimensions below. As it is already mentioned above the EAC Community introduced ‘Customs Union’ in 2005 and that integration stage has been in implementation up to now. In the following analysis, we will take the year 2005 as a benchmark and question the before and after effects of the introduction of the customs union in line with the possible expectations of that particular regional integration type. 4.1 Achievements in GDP & GDP per capita Looking at GDP figures which are shown on the Table 4.1 below, one can easily observe that GDP growth increased among the member states in the last decade. However it is hard to ascertain the contribution of Customs Union on this fact. Table 4.1.1 : Changes in GDP GDP Growth 2001-2004 2005-2010 2001-2010 Burundi 15 35 63 Tanzania 32 54 126 Uganda 32 63 136 Rwanda 30 59 133 Kenya 16 38 76 Source: World Bank Development Indicators, 2011, Own calculations 8
  • 9. We can see a very similar picture if we look at the per capita figures. Changes in GDP per capita growth after the introduction of the customs union in 2005 are quite remarkable but yet again these variables had shown attendance to grow even before the implementation of customs union in 2005. Though their growth was seem higher in relation to the previous growth before the implementation of the customs union. As stated Table 4.1.2 : EAC in Figures, 2010 GDP per capita Growth Rate 2001-2004 2005-2010 2001-2010 Burundi 7 18 26 Tanzania 22 44 75 Uganda 20 49 77 Rwanda 22 51 86 Kenya 7 25 39 Source: World Bank Development Indicators, 2011, Own calculations 4.2 Achievements in trade & trade patterns & intra-regional trade Trade patterns are one of the most visible indicators to analyze before and after periods of the customs unions introduction in 2005. We analyzed the trade volume and trade balance of the EAC within the observation period between 2003 and 2008. Chart 4.2.1: Trade Volume (Exports+Imports) of EAC Countries between 2003 and 2008 Source: WTO,World Trade Report 2010, EAC,EAC Trade Report 2009, own calculations During that particular time period, both export and import volumes continued to increase after customs union. One remarkable finding that we came across was that EAC’s total trade volume was increasing more than before. Positive differences in percentage growth were observed between 4 to 6 percents. 9
  • 10. This increase can be partly explained by the positive effect of the market liberalization through the introduction of the customs union for the selected time period, however the world trade patterns’ positive cyclical movements might have played a role behind EAC’s trade volumes’ expansion. Chart 4.2.2 : Trade Balance(Exports-Imports) of EAC Countries between 2003 and 2008 Source: WTO, World Trade Report 2010, EAC,EAC Trade Report 2009, own calculations During our analysis on the customs unions’ effects on the trade patterns we found out that the optimistic picture in the total trade volume has been slightly changing in total trade balance of the EAC. Because EAC’s trade balance has been continuing to grow in deficit, especially after 2005. The main reason behind that fact is the composition of the trade. Share of import are slightly more than share of imports. And value of imports grew relatively higher than exports, especially after the customs union. If we look to the sources of that distortion in the trade balance on Table 4.2.2 above, we can easily capture that trade with the rest of the world had risen significantly and expansion of the imports created the trade deficit in the EAC. Yet again we can include the worlds business cycle’s upward movement in the analysis. One of te most interesting findings of our research on EAC’s trade patterns between 2003 and 2008 was on intra-regional trade. As already mentioned in the economic drivers section of the paper, intra regional trade is very important for EAC members to strengthen their weak domestic markets and introduction of the customs union was a definitively an opportunity for change. 10
  • 11. Table 4.2.1 : Growth of the Intra-Regional Trade in the EAC Countries between 2003 and 2008 Source: WTO, World Trade Report 2010, EAC,EAC Trade Report 2009, own calculations According to Table 4.2, the volume of the intra-regional trade decreased for one period and then steadily increased after customs union till 2009. However, in reality the share of the intra-regional trade to total trade instead decreased after customs union (Table 4.2.1) which is not an expected situation for regional integration agenda of the EAC in the field of trade If we have a closer look at the intra-regional trade we can easily capture Kenya’s dominance with its almost 40 percent share in the overall intra-regional trade (Table 4.2.2). Rankings of the member states are very much in line with their GDP and GDP per capita rankings as well. In that regard Burundi is in the last place with its less than 5 percent share in the overall intra-regional trade. Table 4.2.2 : Shares of EAC members in intra-regional trade, 2009 Intra-regional trade in EAC Amount (million US$) Share (%) Kenya 1329 37 Uganda 946 27 Tanzania 640 18 Rwanda 497 14 Burundi 136 4 Source: EAC Trade Report 2009, own calculations 4.3 Achievements in doing business Our analysis depends on the data extraction from World Bank Development Indicators between 2003 and 2010. First indicator is ‘’Progress in terms of time to start a business’’. The most remarkable improvement was observed in Rwanda ( from 18 to 3 days) on the other hand the other fresh member Burundi did perform badly. Starting business takes 24.6 days on average in the EAC. That average used to be 37.2 in 2003. 11
  • 12. Second indicator is start up procedures to register a business as numbers. The average number of procedures in the EAC was observed as 10.8 days which were 12.6 days in 2003. If we compare two periods, we can argue that there haven’t been a remarkable increase in that field. Rwanda is again the most liberal member while Uganda being the worst performer of all the EAC members. Improvements in time to export and imports in terms of days were the last indicators. There have been very important improvements, especially after customs union in 2005 and addition of new members in 2007 (Rwanda and Burundi). Time to exports has decreased from 45.4 to 33.9 days on the other hand time to imports decreased from 68.6 to 38.8 days. Rwanda is again the champion (from 92 to 34 days). No changes was observed in Burundi. Depending on the observations and findings which were briefly listed above, we can argue that the liberalization attempts could slightly increase the ease of doing business within the EAC. Of all the EAC members, Rwanda showed the biggest commitment in liberalizing its markets. On the other hand Burundi showed a bad performance compared with others. 4.4 Achievements in tariff reduction & common external tariff & non tariff barriers Tariff reduction is a major determinant for the EAC’s ambitions towards to a better integrated community. The EAC declared a ‘Five Year Phase out Plan’ to reduce internal tariff rates to zero percent before entering to the Customs Union in 2005. Therefore we wanted to analyze the internal tariff reductions after 2005. Table 4.4.1 : Tariff Reductions in the EAC between 2005 and 2010,(%) 2005 2006 2007 2008 2009 2010 Burundi 20 16 14 13 9 10 Tanzania 13 13 13 12 12 13 Uganda 12 12 12 12 12 12 Rwanda 19 19 19 19 10 10 Kenya 12 12 12 12 12 12 Source: World Bank, World Bank Development Indicators According to the Table 4.4.1 which is constructed on the data that we obtained form world bank, current tariff rates are around 10% . It is obvious that The ‘Five Year Phase out Plan’ which aimed to reduce all internal tariff rates to 0 % have not been fully harmonized We should also say some words on common external tariff structure. East African Customs Union Protocol says: The Protocol establishes a three-band common external tariff: a minimum rate of 0%, a middle rate of 10% and a maximum rate of 25% in respect of all products imported into the region4. 4 East African Customs Union Protocol, Part B, Article 12 (1),p 15 12
  • 13. Non-tariff barriers are still in existence in the EAC. Numerous institutions in order to test goods which are subject to the trade and several roadblocks along northern and central corridors are just two general and simple examples. Uganda’s ban on beef and beef products from Kenta might be a specific example. 4.5 Achievements in capital movements Capital movements are evaluated in two main groups. First group is inward direct investments. Barriers in inward direct investments have fully lifted and currently no EAC member state has restrictions in that. But the picture is different in outward direct investments. Outward direct investments are not allowed in Tanzania. Additionally, outward investments in Rwanda and Burundi are depended on the approval of the national central banks. But both of the new members that joined to the EAC in 2007 are going to gradually eliminate that barriers. Foreign direct investments in the region are in transportation, communication, tourism and energy. We can obviously see that the FDI composition is matching well with the developing country context, since the poor infrastructure is a major obstacle to the economic activities. Major investors in the region are respectively: China, United Kingdom, Japan, India, Italy and the U.S. Intra regional FDIs are not playing major roles in the EAC. It is share is less than 1% of total FDIs in the region. A very remarkable finding that we extract from EAC Trade Report 2009 is that Kenya is the dominant source of FDIs with its more than 90% share. The second surprising finding is almost all of the Kenya’s FDI is shared by Uganda (66%) and Tanzania(31%), on the other hand new members Burundi and Rwanda receive almost no intra-regional FDI. 4.6 Achievements in Common Markets - Labor EAC established its common market in July 2010. Reflections fn the common market implementation on Labor markets could not be eaisly captured so far. But all the members state, except Tanzania are acting in line with the common market protocol in allowing the labor force to flow between members. Tanzania on the other has a progressive implementation which will continue till 2015. According to the EAC common market regulation annex all of the member states are allowing the flow of the high skilled labor force in the region. 4.7 Achievements in the attempts towards East African Monetary Union (EAMU) EAMU is aimed to be introduced on 1st June 2012. Monetary union is one of the intermediate mile stones to the East African Political Federation. Besides the political motivation in further integration , there are other reasons too. 13
  • 14. Members want to facilitate weak intra-regional trade through harmonized payment systems and strengthen the local characteristics of the trade patterns. Additionally, capital and financial asset accumulation through investment flows is an important expectation. Defensive motives such as monetary stability and resilience to external shocks can be also discussed as the other motives. There are several requirements for the monetary integration which are listed under the OCA (Optimum Currency Area) criteria We analyzed three major requirement in order to measure the current achievements. Table 4.7 Achievements in OCA criteria Burundi Rwanda Uganda Tanzania Kenya Annual Growth (2010)- % 4 8 5 7 5 Inflation (2010)- % 6 2 4 6 4 Inflation (October 2011)- % 13,3 7,8 30,5 16,8 18,9 Budget Deficit to GDP 15,6 13,7 7,9 11,2 8,8 Excluding Grants (2010)- % Budget Deficit to GDP 2,6 1,6 4,8 6,2 5,3 Including Grants (2010)- % Source: WTO, World Trade Report 2010, EAC, EAC Facts & Figures Report 2011,World Bank Development Indicators , Central Intelligence Agency, own calculations First requirement is inflation rate which has a upper threshold of 5%. According to the Table.4.7, there is a tremendous increase in the inflation rates between 2010 and 2011 which is a very bad sign for the inflation requirement. Second requirement is growth rate which has a lower threshold of a 7%. This requirement also could not be achieved by the EAC member states. Budget deficits of 5% of the total GDP is the last requirement for the monetary integration. EAC member states are only able to fulfill that requirement if they include grants to their calculations. All in all, the requirements could not be fulfilled on the way to the monetary union which is aimed to be established next. summer. 4.8 Achievements in political / defense pact One of the political drivers behind the regional integration attempts in East Africa is defense pact. The region has unstable power dynamics and disputes. EAC members are openly seeking a regional stabilty and security. 14
  • 15. EAC community has been very active in the diplomatic relations with that particular issue. The Nairobi Protocol for the Prevention, Control and Reduction of Small Arms and Light Weapons in the Great Lakes Region, the Horn of Africa and Bordering States was signed in 2004 and has been updated up to now. Additionally, the tripartite framework between EAC, COMESA and SADC covers regional security issues in detail. Finally, the ECA-EU trading relationship’s political dimension strongly supports moves towards mutual defense pact in the East African Region. 5. Current debates EAC has a very dynamic political nature. Current debates are on three main areas. One is about the competition of having the determining role within the community. Big brothers Kenya and Tanzania are involved. The second hot topic is the admission of Southern Sudan. It is highly likely that sooner or later South Sudan will be the 5th member state of the community. In that case the candidacy of Sudan seems to be on the table, despite the security concerns. The last ongoing debate is about the direction of the regional integration. Monetary Union is aimed to established just in months and there are big still big concerns among the members. 6. Main challenges & Constraints There are several challenges and constraints to the regional integration process in East Africa. We can classify that challenges in two main groups. First groups is trade related challenges and the second one is non trade related challenges. 6. 1 Trade related challenges Poor infrastructure is an obstacle to the regional trade because of the lack of required facilities. A good example would be the road blocks in the main trade destinations of the region. Although ECA countries reached to the common market level in the regional integration, they have failed to remove tariff barriers. Additionally the non –tariff barriers are still existing. At that point, we can also talk about the lack of political will towards lowering the tariff rates and it also seem that there is lack of clear guidelines regarding the implementation of trade liberalization. Lastly lack of compatibility with the WTO rules is also a result all of the mentioned tariff harmonization processes. The composition of the trade and the dominant share of the imports in the trade balance is an obstacle to the opportunities for intra-regional trade. EAC imports almost twice as much as it exports. Again the components of the export goods are very simple. EAC exports mainly primary and non processed goods and imports finished consumer goods. Another trade related structural problem is lack of diversification in the production and its negative effects on the intra-regional trade. 15
  • 16. 6. 2 Non-trade related challenges Production patterns in the EAC are very simple an dependent. Lack of economic diversification and entrepreneurship are not allowing to build up intra-sectoral linkages in manufacturing and benefit from the regional integration. Resources could not get mobilized by large amounts as it is expected in the regional integration context. Again we can stress on the infrastructural problems . Low level of capital availability in the regional banking systems , except Kenya might be a major reason behind that challenge. High inflation rates in all of the member states might become to a very big challenge for the upcoming monetary union. Therefore it is vital for the EAC to wait till every country fulfill that particular requirement related with inflation rate. Irregular migration, especially from poor to reach regions might be an important threat for the developing EAC countries. Under the large informal sector conditions, majority of the immigrants are potential candidates for the black market employment opportunities and cause socio-economic problems. Finally, overlapping memberships in different regional integration blocs is making the coordination and regional cooperation harder for the EAC member countries. 7. Opportunities With its more than 100 year old historical background, current achievements and ambition towards political federation, EAC might overcome the challenges in the long run and enjoy the benefits of free movement of persons, capital labor goods and services. 16
  • 17. References  East African Community, 2011, Facts and Figures Report, available at: http://www.eac.int  EAC Development Strategy 2006- 2010. Executive Summary, available at: http://www.eac.int/index.php  Treaty Establishing the East African Community, Art. 7(c), available at: http://www.eac.int.  Worl Bank Development Indicators,2011, available at: http://data.worldbank.org/indicator  Gathii, James Thuo ,2011, African Regional Trade Agreements as Legal Regimes, Cambridge University Press, New York 17