Protectionism delaying EAC Common Market regime

Flags of the East African Community members. PHOTO | FILE |  NATION MEDIA GROUP

By BERNARD BUSUULWA

Signs of protectionism in East Africa since the commencement of the bloc’s Common Market regime have frustrated free movement of people and services. Integration efforts have been hampered by
work permits required by some countries and delays in ratification of mutual recognition agreements for various professionals.

Protectionist tendencies exhibited by some member states are mainly driven by the desire to shield certain sectors from foreign rivals. Whereas tariffs charged against foreign firms and professionals entering certain markets offer attractive revenue collection streams for countries, the overall share of tariff revenues in the East African Community has dropped to around 1.5 per cent of GDP since the Common Market was launched in July 2010, according to Mario Mansur, a tax expert based at the International Monetary Fund.

“The application of such fees is driven by a traditional desire to collect more tax revenues needed to fund national programmes. But protectionism also plays a big role in countries seeking to protect local enterprises from aggressive foreign competitors,” said Adam Mugume, executive director for research at the Bank of Uganda.

Hurdles

Whereas Tanzania recently announced reductions in work permit fees and professional service fees levied on foreign workers and businesses operating in the country, continued enforcement of these fees still poses hurdles to free movement of labour and services, contrary to provisions of the Common Market Treaty.

Work permit fees have been slashed from $2,000 per year to $500 per year for every individual while professional service fees have been reduced from $3,000 to $1,500 per year.

In contrast, Rwanda and Kenya jointly waived work permit fees in 2014 for professionals operating in the two countries in an effort to facilitate smooth access to specialised services and widen job opportunities for their citizens.

“These barriers are deeply historical and motivated by a thirst for tax revenues. This mentality is reflected in various local licence fees,” said Richard Kamajugo, a senior director at TradeMark EastAfrica.

Though various professional bodies in the region have negotiated mutual recognition agreements with each over regulation of members that practice across borders, these agreements are yet to be ratified by their governments.