Presidents Paul Kagame and Uhuru Kenyatta at the commissioning of Berth 19 in Mombasa. PHOTO | FILE
NATION MEDIA GROUP
By JEFF OTIENO
In Summary
Challenges
- Though the member states have signed the Monetary Union Protocol, they will first have to harmonise monetary and fiscal policies and establish a common central bank.
- Equally crucial, each country must also implement the relevant laws and regulations to increase intra-regional trade.
- Already, the region boasts a Common Market and a Customs Union.
East African Community leaders picked up from
where they left off the previous year, making 2014 a busy year in terms
of efforts to strengthen regional integration.
One of the major milestones was the signing of a
protocol that laid the groundwork for Monetary Union within the next 10
years. This was in addition to the establishment of the Common Market in
July 2010 and a Customs Union earlier in July 2009.
“The promise of economic development and
prosperity hinges on our integration. Businesses will find more freedom
to trade and invest more widely, and foreign investors will find
additional, irresistible reasons to pitch tent in our region,” President
Uhuru Kenyatta said during the signing of the protocol last November in
Kampala.
Economists welcomed the decision by the heads of
state, saying the monetary union would bring about efficiency in the
region’s economy, estimated to be worth more than $70 billion in
combined gross domestic product.
“A monetary union will be a positive move as the
lack of currency risk will give investors more incentive to invest and
trade,” said economist John Chege, who has an interest in East African
affairs.
However, EAC will first have to harmonise monetary
and fiscal policies and establish a common central bank. According to
the African Development Bank, EAC’s intra-regional trade, as a share of
total trade, is still low at 12 per cent. This figure is, however,
expected to increase to 16 per cent in 2016.
“The EAC countries must ensure that each country
meets targets as far as implementation of the laws and regulations are
concerned to help increase intra-regional trade,” Mr Chege said.
EAC is one of the trade blocs the African Union is
counting on to help increase intra-African trade. In nominal terms, for
example, the level of intra-African trade was $32 billion in 2000 and
$130 billion in 2011, according to the United Nations Conference on
Trade and Development (Unctad).
Unctad said most of the increase in the value of
intra-African trade in the past decade was driven by price increases. In
other words, while the value of intra-African trade rose by a factor of
4.1 from 2000 to 2011, in volume terms, it rose by only a factor of 1.7
As a share of the value of Africa’s world trade,
intra-African trade rose steadily from 19.3 per cent in 1995, to a peak
of 22.4 per cent in 1997 but fell to 11.3 per cent in 2011, partly
because of increased trade between the countries and the rest of the
world.
Intra-African trade as a share of a country’s
world trade has been higher among non-fuel exporters, like the EAC
member countries, than among fuel exporters. This is because major fuel
exporters in Africa tend to be highly dependent on extra regional
markets, consequently, their intra-African share is very low.
However, despite the positives, some of the
protocols signed by the heads of state have faced challenges because
member states are yet to change national laws and regulations to bring
them into line with the agreements.
“For the Customs Union to be fully operational,
for example, EAC member states must ensure the Single Customs Territory,
which is still at the pilot stage, is fully implemented in 2015,” said
Mr Chege.
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