Over the last two decades, Kenya has actively participated in regional integration through various regional trading arrangements including the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA), and the Inter-Governmental Authority on Development (IGAD) and lately the Tripartite Free Trade Area (TFTA) and the African Continental Free Trade Area (AfCFTA). Kenya is also a member of bilateral trade arrangements with a number of countries including EU and USA.
The EAC is a major market for Kenya’s products, creates opportunities for cross-border investment as well as platform for creation of a unified voice in the international arena.
In 2017, for example, Kenya’s exports to EAC recorded Ksh. 131.58 billion as compared to Ksh. 138.03 in 2016. while imports of various products from the Partner States recorded Ksh. 60.97 billion in 2017 as compared to Ksh. 32.94 in 2016. This shows a declining trend on exports compared to imports which is on an upward trend.
The EAC Integration process is anchored on four pillars namely Customs Union, Common Market, Monetary Union and Political Federation. Several milestones have been realized under the EAC Pillars.
The Customs Union Protocol
The Customs Union Protocol is the first Pillar under the EAC Integration. It was established in 2005. The objectives of the Customs Union under Article 3 include:
- To promote efficiency in production within the Community
- To enhance domestic, cross border and foreign investment in the Community
- To promote economic development and diversification in industrialization in the Community.
The EAC Customs Union Protocol provides for elimination of internal tariffs and a Common external tariff structure of 0% for raw materials, 10% for intermediate goods and 25% for finished goods. Under the Customs Union, the following have been attained.
- Removal of Non-Tariff Barriers (NTBs)
The prevalence of NTBs has been frustrating trade within the Community. Such NTBs manifest themselves in form of prolonged clearance procedures, delays at the ports of entry/exit, delays at weighbridges and numerous road blocks; delays in ferrying of cargo by transit vehicles; non-recognition of EAC Certificates of Origin; non – recognition of quality marks issued by EAC Bureaux of Standards; retesting of products among others.
To address NTBs, the Community has put in place mechanisms, including;
- National and regional committees to identify and monitor their elimination.
- EAC Elimination of NTBs Act, 2017 was assented to by all EAC Partner States’ Heads of State in April, 2017 and is in the process of being operationalized.
2. Establishment of the EAC Single Customs Territory
A Single Customs Territory (SCT) has been established in EAC to facilitate faster clearance and movement of cargo from the port of entry to the destination.
Benefits of the Single Customs Territory (SCT):
- All intra-regional traded goods between Kenya, Uganda, Rwanda and Tanzania are cleared under SCT scheme.
- Customs officers from Uganda, Rwanda and Burundi were deployed and are operating in Kenya and Tanzania. Likewise, Tanzania has officers deployed in Nairobi and Mombasa. The flexibility in deployment of Customs Officers has further eased clearance of goods such that goods move directly from points of dispatch in a Partner State to the owner’s premises in another partner State without going through further customs checks.
- A Single declaration under SCT is made electronically, processed and released by the authorities from the country of destination prior to loading of goods and release from the Port. This has reduced documentation currently used to release goods up to destination by 80%, hence reducing paper and simplifying the administrative burden.
- Real time sharing of customs information upon arrival of goods at the port has lessened internal border controls.
- Turnaround time of trucks from Mombasa to Kampala has reduced from 18 days to 4 days and to Kigali has reduced from 21 days to 6 days.
- Tax Harmonization
Tax harmonization is provided for in Article 83(C) of the Treaty. It provides that Partner States agree to “harmonize their tax policies with a view to removing tax distortions in order to bring about a more efficient allocation of resources within the Community”.
Achievements realized so far are:
- Two Policy frameworks for harmonization of domestic taxes were developed and were the basis for the preparation of the draft EAC policy on harmonization of domestic taxes. The two policy frameworks are:
- “Policy for Harmonization of Income Taxes within the East African Community”
- “Policy for harmonization of VAT & Excise duties”
- EAC Tax Treaty Policy was finalized and adopted by the Sectoral Council on Finance and Economic Affairs. The policy sets out policy positions that should be adopted in future and in current tax treaties when negotiating the tax treaties with 3rd parties.
- EAC Model Tax Treaty was developed, adopted and is under implementation. It will guide negotiations of Tax treaties with the 3rd parties.
- Council Directive (CD) on harmonized tax procedures was developed and adopted by the Council in September, 2014.
- An EAC framework on harmonization of domestic taxes has been finalized and is currently being used as an input to the on-going process of developing EAC Tax Policy on harmonization of domestic taxes.
4. Harmonization of Standards
EAC has harmonized a total 1,428 Standards of which five hundred and seven (507) are indigenous, designated as East African Standards and the Nine hundred and twenty-one (921) are international standards agreed upon and endorsed for adoption by the Partner States. Kenya as at June 2017 had adopted 1,062 out of the total harmonized EAC standards.
5. One Stop Border Posts (OSBPs)
The EAC Treaty under Chapter Fifteen provides Cooperation in Infrastructure and Services. Lack of coordination among agencies operating at the border posts in EAC was identified as one of the main challenges facing the integration process.
The implementation of OSBP is aimed at facilitating cross-border movements through reduction of the time taken in clearance procedures. Along the Kenya borders, Malaba, Busia, Isebania, Namanga, Taveta and LungaLunga border posts were selected for this concept.
The six OSBPs have been completed and among them Taveta and Namanga, Busia and Malaba are operational. To facilitate the operations of the OSBP, an EAC OSBP Act 2016 has been formulated. The Act grants officers from adjourning Partner State right to implement their national laws while operating across the border.
The Protocol for establishment of the EAC Common Market was signed in November, 2009 and came into force on 1st July, 2010 upon ratification by the Partner States. This Pillar provides for free movement of goods, persons, labour, services and capital, and rights of establishment and residence. The following has been achieved
Free movement of persons and labour
- Reciprocal opening of border post for 24 hours
- Harmonized entry/ exit forms
- Harmonization of procedures for issuance of work permits
- Student pass issued gratis
- Kenya, Uganda and Rwanda have waived work permit fees
- Joint promotion of Tourism
The East African Monetary Union is the third stage in the EAC integration process. The Protocol was signed on 30th November, 2013 by all EAC Partner States. The following are the notable achievements.
- Fiscal Transparency Evaluations (FTEs) have been undertaken in Kenya, Tanzania and Uganda. The rest of EAC Partner States are yet to develop their FTEs.
- Kenya and Uganda have anchored regional fiscal surveillance in their Public Finance Management (PFM) laws though at different levels. PFM Act Kenya has fiscal rules on debt and deficit, while Uganda’s Fiscal Responsibility Charter has fiscal rules consistent with EAMU convergence criteria.
- Work on development of Bills for establishment of East African Surveillance, Compliance and Enforcement Commission and East African Financial Services Commission is ongoing.
Performance Information on Various Programs
- Sustainable development of Lake Victoria Basin as envisaged in the Protocol for Sustainable Development of Lake Victoria Basin through the following programmes:
- Water supply and sanitation for Keroka and Isebania towns under Lake Victoria Water and Sanitation project
- Installation of Aids to navigation equipment at nine (9) sites on the Kenyan side of the lake.
- Financial support to community Driven Development (CDDs) groups that undertook individual project that included tree planting, beekeeping and other income generating projects.
- Rehabilitation of Regional State of the Art Water Quality Laboratory in Kisumu.
- Expansion of Kisumu sewerage treatment plant.
- Procurement of a mechanical water hyacinth Harvester.
- Joint interventions for food security in the country and the region as follows:
- Operationalized the EAC Industrialization Policy and Strategy for value addition in agricultural products
- Developed and operationalized the EAC climate change policy and strategy that provides for mitigating negative effects of climate change on agriculture and food security.
- Coordinated efforts to control and abate Aflatoxin contamination.
- Developed the EAC Food and Nutrition Policy.
- Coordinated the harmonization of the registration of immunological and use of veterinary products in the region through Mutual Recognition Agreements (MRAs) to ease access to veterinary services and animal disease control in the region.
- Joint Developments of regional Infrastructure The regional infrastructure projects are cross cutting within the EAC integration pillars and the achievements are as follows:
- Construction of Athi River – Namanga – Arusha road
- Construction of the Voi – Taveta –Arusha road
- Design work complete for Malindi – Lunga Lunga – Tanga road
- Formulation of the EAC Vehicle load control Act 2016. The Act harmonizes Gross Vehicle weights to 56 tones under seven axles, and also fees charged on offenders of over loaded vehicles.The Region is implementing EAC Broad Band Infrastructure Network Project to enhance the connectivity of the region.Under the One-Network Area the region has established a one-network area with lower calling rates of US$0.10 cents. Kenya, Uganda and Rwanda have embraced the concept with lower roaming rates for voice with no receiving charges. United Republic of Tanzania have undertaken to come on board by December, 2018 and Burundi is expected to follow suit.Cross Border electrification is ongoing and has been completed at Namanga and Lungalunga borders.
Benefits of the EAC Integration
- A wider market with a combined population of over 160million people and GDP of about US$170billion.
- Freedoms under Common Market
- Safeguarding the region from international economic shocks.
- A Common External Tariff in place to protect the community’s domestic industries.
- Improved early warning and conflict resolution mechanisms.
- Construction and operationalization of One Stop Border Posts (OSBPs) where border agencies are housed under one roof for good clearance. (Namanga, Isebania, Lungalunga, Busia, Malaba, Taveta).
- Regional infrastructural development (Athi River – Namanga road, Voi – Taveta and One Network Area)
- Harmonization of Education Standards, and mutual recognition of agreements (Engineers, Accountants, Architects, and Veterinarians).
- Joint Promotion of the EAC as a Single Tourist destination.