The East African Community (EAC), in partnership with the United Nations Industrial Development Organization (UNIDO) and the Government of Korea, on Friday launched the EAC Industrial Competitiveness Report 2017 (ICR 2017) in Dar es Salaam, Tanzania.

Themed ‘Harnessing the EAC Market to Drive Industrial Competitiveness and Growth,’ the report assesses EAC’s industrial performance vis-à-vis other regions and role models in Asia and Africa and sheds light on strategic short- and long-term industrialization paths that the EAC should pursue.

ICR 2017 provides a compass to policy-makers, the private sector (in particular manufacturing firms and associations), and a wide range of stakeholders on the broader direction of the industrial development trajectory of the EAC and of the internal competitiveness dynamics among Partner States.

Speaking at the event, Uganda’s Minister of State for EAC Affairs, Hon. Julius Muganda, said that Industrialization in the context of the EAC region will depend on how the region strategically leverages itself to maximize on the opportunities created by the Common Market Protocol as a stimulus for demand, while simultaneously capitalising on other emerging markets for manufacturers.

“The realisation of a fully functioning Common Market and the deepening of regional integration through a monetary union are crucial for providing the much-needed impetus for industrialisation in the region,” said Hon. Muganda, who represented the Chairperson of the EAC Council of Ministers, Hon. Kirunda Kivejinja, Uganda’s Deputy Prime Minister and Minister for EAC Affairs.

Hon. Muganda further emphasized on the need for leaders and technocrats to think of a collective regional strategy to respond to unemployment including expanding the manufacturing sector capacity and promoting micro, small and medium enterprises (MSMEs) and youth entrepreneurs.

In his remarks, the Director of Trade at the EAC Secretariat, Mr. Alhaj Rashid Kibowa, contribution of the manufacturing sector remains at paltry 10 percent, adding that the sector has been on a decline in the recent past.

“It is against this background and in recognition of the existing challenges that the region embarked on the programme “Strengthening Capacities for Industrial Formulation and Implementation in the East African Community,” said Alhaj Kibowa.

Alhaj Kibowa noted that the implementation of the programme had enhanced the region’s capacity for industrial policy design, monitoring and evaluation, culminating into the development of the ICR 2017.

“Consistent with the EAC Industrialization Policy and Strategy, the ICR 2017 has enhanced the region’s capacity to: design, manage and implement an industrial policy and collect industrial statistics and data. Further to this, it has strengthened the institutional capacity of the EAC Secretariat, Governments of all EAC Partner States and key private sector stakeholders,” said Alhaj Kibowa.

Also present at the launch of the report was South Korean Ambassador to the United Republic of Tanzania, H.E. Geum-Young Song who reaffirmed his country’s commitment to continue supporting the EAC in realizing its goal of industrialization.

Dr. Stephen Kargbo, UNIDO representative to Tanzania, Mauritius and EAC speaking at the ICR 2017 launch expressed hope that the EAC would use the findings of the report to revitalize the industrial sector in East Africa.

“While we conclude successfully the implementation of the current regional project, we are also exploring with our main counterpart, the EAC Secretariat, options for a phase II that would ensure produced diagnostics translate into concrete industrial policy processes, instruments and action plans creating significant positive impact for the industrial development in the region,” said Dr. Kargbo.

He also assured stakeholders that whereas UNIDO will continue to play its role, supporting relevant institutions in capacity building activities for strengthening industrial policy making capacities, it was the responsibility of Partner States’ governments and other stakeholders to transform the initiative into meaningful strategies for the attainment of sustainable and inclusive economic development in EAC.

Prof. Elisante Ole Gabriel, the Permanent Secretary in Tanzania’s Ministry of Industry, Trade and Investment, urged EAC Partner States to foster close cooperation in order to realize sustainable competitive advantage on the global market.

Closing the one-day event, the EAC Deputy Secretary General in charge of Planning and Infrastructure, Eng. Steven Mlote, said that East Africa was on the way to becoming a regional hub for manufacturing and a gateway to investment in Africa.

“To be successful in this venture, our industrial policies should seek to promote structural changes,” said Eng. Mlote.

Implementation of phase two of the project will switch from diagnostics to industrial policy processes and instruments. This means that the focus will be on the establishing a regional industrial intelligence and policy advisory support, enhancing capacity for competitiveness analysis of the Industrial sector, putting in place a regional competitiveness framework to facilitate benchmarking and establishing an e-Industrial information Resource Centre.

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Policy recommendations

The findings from the report call for increased efforts to boost industrial development in the region, particularly through the design and implementation of well-ground strategies and action plans, in order to achieve, or come close to, the EAC’s industrialisation objectives at both regional and Partner State level.

The report presents a wealth of evidence on the development of the manufacturing sector since the turn of the century. The key findings and relevant and concrete policy recommendations are summarised in four groups:

1. Exploiting the opportunities in the dynamic EAC market

The EAC has a significantly larger capacity to produce manufactured goods than to export them (69 USD per capita and 38 USD per capita in 2015/2014 respectively). At the same time, the EAC provides a very dynamic market where demand for manufactured goods is growing annually at 16 %, and at double digits for all the 20 most demanded manufactured products of the region. The report explains that a fast-growing market increases the possibility of enlarging production scale. Currently, the EAC Partner States are together losing market share of manufactured goods from over 9% in 2010 to below 6% in 2014. Some of the products for which EAC provides plenty of opportunities given their dynamic demand trends are: fixed vegetable oils, medicaments and pharmaceuticals, iron and steel products, fertilisers, cement, cotton apparel, leather footwear and heavy petroleum. Other attractive product groups to export to the region should be identified and all examined in more detail.

The region is also an important market for medium and high tech products, providing a better playing field for EAC firms to export this high-value added type of products compared to other markets (the analysis in Chapter C has shown that four of the five EAC Partner States export a higher share of MHT products to the EAC than elsewhere). Moreover, the fast growth in demand for a number of MHT products suggests firms’ efforts to do so are indeed worthwhile. More analysis on the market for products of interest should be undertaken to learn about current opportunities.

1. Further measures to ease intra-regional trade would benefit exporters and potential future exporters: A number of interventions have already been put in place to reduce trade barriers across the EAC, such as the implementation of the Common Market Protocol, transport corridors, implementation of one-stop border posts, monitoring of NTBs, harmonisation of standards, single customs territory, a harmonised Export Promotion Platforms, common external tariffs, authorised economic operator and an e-single window for monitoring trade. Nonetheless, more can still be done, such as further reducing these TBTs and NTBs, improving road and rail infrastructure, cutting red tape and harmonising procedures, in order to incentivise firms to increase exports, or start exporting within the region. Currently some of the more specific recommendations for the EAC are the following, though these are by no means exclusive:

   1. To ensure better coordination of policy instruments across the region in order to enhance intra-regional trade (including in regard to CET).

   2. To improve business environment instruments for the identified key sectors, including but not limited to, serviced industrial land (as in Vietnam or South Africa), investment promotion tools, phasing out of second-hand clothes trade.

   3. To produce a further study for an EAC market recapturing strategy, which goes into significantly more in-depth analysis than the work undertaken in Chapter C and D of this report.

2. Provide market information highlighting demand trends and opportunities: Publishing regular information on demand trends across the region, together with updates on measures undertaken to further ease trade will ensure firms are aware of the opportunities to find end markets and/or link up with other enterprises in the region, thus increasing intra-regional trade in manufactured goods, developing regional value chains and strengthening the EAC manufacturing base.

2. Diversifying and upgrading through realistic, well-defined and comprehensive strategies

3. Strengthening of forward and backward linkages to boost industrial and overall economic growth

4. Supporting the development of key industrial drivers to boost industrial production and exports

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Background

The EAC Secretariat in collaboration with UNIDO is implementing a programme on “Strengthening Capacities for Industrial Policy Formulation and Implementation in the East African Community” which was approved by the Sectoral Council on Trade, Industry, Finance and Investment during its meeting held on 22nd May, 2015.

Through the Programme, specific trainings have been delivered at both national and regional levels to create, among other things, capacity for industrial competitiveness analysis as envisaged in the EAC industrialization policy and Strategy. As a result, the programme has greatly contributed to enhancement of capacity for industrial policy, analysis, design, monitoring and evaluation at Partner States and the Secretariat levels.

To ensure sustainability and full use of knowledge acquired in the trainings, the Secretariat in collaboration with UNIDO and a team of experts from Partner States took the initiative of preparing the EAC Industrial Competitiveness Report, 2017.