This is the First Edition of the East African Business Council (EABC) Business Agenda, themed on the critical role of private and public sectors in deepening the ongoing East African Community (EAC) integration and development.

The first of an annual and strategically-integrated policy advocacy programme, this corporate book publishing project will be rolled out under varying themes critical to the deeper participation of the corporate sector in the EAC development agenda.

Various overarching and reinforcing motivations underpin this edition. Specifically, this first edition will endeavour to:

• Critically analyze EAC integration; celebrate the significant milestones so far realized; and showcase the Private Sector’s increasing significance as the primary engine of growth and socio-economic development in the region;

• Highlight the critical role of the EABC, and our strategic partners against our establishment objectives; outline our organization’s strategies towards addressing emerging issues in the regional integration agenda; and showcase our ongoing policy advocacy programmes, which are critical in the achievement of reforms that are necessary in propelling the EAC to greater socio-economic growth and enhancing its overall competitiveness;

• Extensively detail how the EAC Partner States’, National Focal Points, and sector associations are seeking to further promote Public-Private sector engagements through policy framing mechanisms that address strategic and cross-cutting issues aimed at improving the Partner States’ economies and the region’s business environments; and,

• Ultimately, sensitize, inform and empower the people of East Africa to make informed decisions so as to have a more meaningful participation in EAC integration and cooperation.

In order to sufficiently address these multi-pronged book publishing objectives, we have strategically leveraged on the direct collaboration and shared experiences of stakeholders from diverse sectors across the region, including policy framers, business leaders and industry experts through in-depth interviews, thought-provoking opinions, and exclusive case studies.

While we remain fully aware that matters integration cannot be covered exhaustively in a single publishing project of this nature, it has, nonetheless, remained our utmost ambition to stimulate, inspire, enthuse and motivate our readers and the general populace in the region and beyond, towards a greater understanding of our individual, corporate and ultimately, collective responsibilities in the ongoing EAC integration and sociodevelopment agenda.

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Marking 16 years of integration: The achievements and tasks ahead

Last year, Uganda once again joined the other four Partner States of the East African Community to celebrate 16 years of integration and mark the EAC Day. This day has a rich history. It goes back to that memorable Thursday, on 30^th November 1999, at Sheikh Amri Abeid Memorial Stadium in Arusha, when the three Heads of State of Uganda, Kenya and Tanzania, put pen to paper to ink the Treaty re-establishing the East African Community. Rwanda and Burundi would accede to the Treaty in 2007.

It is also for this reason that, in commending the successful celebrations of the 10th anniversary of the signing of the Treaty, the 20th EAC Council of Ministers meeting held in March 2010, underscored the need to reinforce the spirit of East African unity as well as to galvanize a passionate and visionary participation of the citizenry in the integration plan under the clarion call of, “One People, One Destiny”. The Council not only directed the EAC Secretariat at Arusha to plan in advance for future commemorative events, but also urged Partner States to hold EAC Weeks annually.

More recently, the East African Legislative Assembly passed the East African Community Holidays Bill 2013. The Bill, which was passed in August 2013, was meant to further promote the spirit of East Africanism through the annual celebration of the East African Community Day, on 30th November. However, owing to other engagements, in Uganda, the day was marked on 4th December 2015.

These activities are not only aimed at raising awareness on the benefits and opportunities of EAC integration, but also to reflect on the vision and progress made as well as the opportunities arising from integration.

The EAC journey has been an illustrious one, with a lot of achievements that we should take pride in as East Africans, the challenges notwithstanding.

The community is now at a crucial stage of social and economic integration, following the establishment of a Customs Union in 2005, a Common Market in 2010, and the signing of the Monetary Union Protocol in 2013, which has since been ratified by all the Partner States.

Regional economic groupings such as the EAC common goal of economic transformation and development, which implicitly includes the eradication of poverty. This means that economic integration should not be seen as an end in itself, but rather as a means towards sustainable economic development.

Today, the EAC has, indeed, realized remarkable economic integration as evidenced by the continued growth in intraregional trade among the Partner States.

By creating a single large market that spans an area of 1.82 million square kilometres, with a population of over 145 million, the EAC has and will continue to be an attractive destination for foreign direct investment, which will, in turn, spur greater economic growth and the development of the Partner States. The establishment of the Customs Union has, for instance, led to an increase in intra-regional trade.

According to recent figures, Uganda’s volume of trade with its fellow EAC Partner States increased since the establishment of the Customs Union in 2005, from US$670.7 million to US$1539.9 million in the 2014/15 financial year.

But, in addition to celebrating the achievements of the EAC, it is vital to evaluate whether the circumstances leading to the challenges of the original EAC of 1967-1977 have been adequately addressed and what measures have been put in place to prevent a recurrence.

Whereas the political will continues to present a serious challenge for many regional integration arrangements, this has, by and large, not been a serious problem for the EAC. It is, indeed, unprecedented that the EAC is the only regional bloc whose establishment clearly brings out a political federation as its ultimate objective. Federating will not only fortify the EAC as a bloc, but it will also empower the region to play a meaningful role in the era of globalization and enhance our bargaining strength in bilateral as well as multilateral negotiations.

Regional arrangements face challenges along the way to integration. It should, therefore, not surprise anyone that the EAC still has a lot to do, as was aptly encapsulated in the theme for last year’s celebrations: 16 Years of EAC Integration: So Much Done, So Much to Do.

For our economies to become vibrant and successful, there is a need to implement adequate tax and social security reforms as well as policies that will contribute to the expansion of the private sector, create jobs and increase productivity. We have to deal with the scourge of corruption and strengthen regional as well as national institutions to promote the rule of law.

We also have to address the infrastructure deficits, including those that deliver basic essentials such as access to clean water and sanitation. Good health is a premium and so is education, which needs to be galvanized at the primary, secondary and university levels through adequate funding, staffing and facilities. Energy and durable transportation networks need to be built whilst tourism, a potentially huge foreign exchange earner, should be aggressively promoted.

As a community, we need steadfastness to adopt harmonized economic policies that enhance a collective approach in tackling problems. Indeed, for integration to succeed, regional policies must take eminence over domestic policies and programmes.

Report by Ms Edith Mwanje, Permanent Secretary, Ministry of EAC Affairs, Republic of Uganda

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The EAC Trade Report 2013

In 2013, the process of East African Community integration gained momentum when an agreement was reached on the policy and institutional framework for the Single Customs Territory. As a result, a number of non-value adding processes of transporting goods from Mombasa to Kigali through Kampala will be removed and, therefore, the number of days taken to move cargo from Mombasa to Kampala and finally to Kigali will be reduced.

Further, the year 2013 saw the signing of the Monetary Union Protocol, which is very important for the integration of financial systems within the region. These developments are expected to ease doing business in the East African Community, making the region one of the major investment destinations in the world.

The developments within the community require regular monitoring and evaluation as we move towards a Monetary Union and subsequently a Political Federation. The 2013 EAC Trade Report presents detailed analysis of trade flows within the community and between the EAC and other regional blocs and is a tool which will enable the improvement of trade policy within the region and with other regions. It is important to note that current negotiations for a Free Trade Area between the EAC, and other regional blocs like SADC are guided by the information provided in this and similar trade and investment reports.

The 2013 Trade Report provides trends in the intra-EAC trade. It is clear that intra-EAC trade continued to exhibit a positive trend by posting a 6.1 per cent growth. Burundi posted the highest intra-trade growth rate of 91.5 per cent, which is an indication of improvement of its participation in regional trade.

The EAC's total trade with the rest of the world maintained an upward trend by posting a growth rate of 8.3 per cent in 2013. On the investment front, the Foreign Direct Investment (FDI) in the EAC increased by 6.6 per cent to US$3.7 billion in 2013, an improvement over 2012. This increase was mainly driven by developments in the oil and sectors in Kenya, Tanzania and Uganda.

Executive Summary

In the community, GDP growth remained strong, averaging 5.1 per cent, but Tanzania recorded the highest economic growth rate of 7.1 per cent. Inflation remained within a single digit range with Rwanda registering the lowest rate of 4.2 per cent, while both Tanzania and Burundi have the highest rates of 7.9 per cent each.

World trade remained sluggish after recording a growth rate of 2.1 per cent in 2013. Trade between developing countries, especially in the Asian region, was much stronger than what it was with the developed countries. Africa’s exports declined by 3.4 per cent during 2013, which can be explained by the 2012 recession in the European Union zone that extended to 2013. The European Union remains the major trading partner of the African countries and, therefore, any volatility in the EU affects African trade.

The total EAC trade with the rest of the world declined by 0.8 per cent due to a 6.7 per cent reduction in exports. Most export markets such as the European Union suffered a recession while South Sudan and Democratic Republic of Congo faced political instability. The value of EAC imports increased by 1.8 per cent, but was lower than the 8.1 per cent growth recorded in 2012. The Intra-EAC trade growth slowed down to 6.4 per cent in 2013 from 21.9 per cent in 2012.

The value of goods imported under the exemption and remission regime declined in all the Partner States except Tanzania. Over the years, the value of goods imported under the exemption and remission regime has been growing, resulting in much revenue foregone (34.9 per cent of total trade taxes). Most imports under the exemption and remission regime included goods for investment projects, funded projects, charitable organizations and embassies and consulates. The value of sensitive goods imported by EAC Partner States declined by 20 per cent to US$2,941.8 million in 2013.

The value of sensitive goods imported within the EAC Partner States was US$285.7 million, which was 9.7 per cent of the total value of imported sensitive goods in 2013. Customs revenue from all Partner States increased by 6.9 per cent to US$6,993.2 million in 2013 from US$6,544.8 million recorded. VAT on imports remained the major source of Customs revenue, which is explained by the destination principle design of the VAT system. In all the Partner States, the share of Customs revenue to total tax revenue is declining. This is largely explained by improvements in domestic tax collections as economic integration continues to deepen.

The political stability, improving economic environment and expanding market in the community continue to be the major drivers of investment. The FDI inflows to the community increased by 6.6 per cent to US$3.7 billion in 2013. Uganda and Tanzania recorded relatively high inflows due to developments in the oil and gas sector. On the Intra-EAC investment flows side, the total value increased by 9.8 per cent to US$236.6 million in 2013 from US$215.4 million in 2012. Kenya was the main source of intra-EAC investment, while Uganda was the major destination. In line with the increase in the value of investment flows, the number of projects increased to 70 in 2013 from 53 in 2012.

The number of jobs created through licensed FDI projects increased by 24.9 per cent to 131,967 jobs in 2013 from the 105,618 jobs recorded in 2012. New investment opportunities are emerging in the region, especially in the oil and gas sector. Whereas FDI inflows to the region continued to grow, infrastructural bottlenecks, especially in the transport and energy sectors, and limited skills base have remained major challenges to investment promotion. Further, lack of a harmonized investment regime has perpetuated uncoordinated promotion of investments in the region.

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