Promises and perils of a common market

The question remains how Ugandan farmers will adapt to competition from member states
The question remains how Ugandan farmers will adapt to competition from member states

“Following the completion of the ratification of the Protocol on the Common Market, the complex and long march towards transforming the EAC region into a Common or Single Market begins with resolve and fervour.”

This statement was released by the Secretary General of the East Africa Community upon the opening of the East Africa Common Market (the EACM) on July 1.

Over the past few years, the EACM has been signed and ratified by all the members of the EAC (Uganda, Kenya, Tanzania, Rwanda and Burundi) and has finally come into force. The goal of the EACM is to open up the region to the free flow of goods and services and eventually to the free flow of workers for the region’s 126 million people.

With a GDP of 75.2 billion USD, the EACM is projected to increase trade, drive up productivity and create an industrial and agricultural powerhouse that can compete in the global marketplace and will attract foreign investment. The next step is to create a monetary union with a common currency for the region.

All of these projections sound promising but the true outcome of the common market for the regions and for Uganda is far from clear. And with the upcoming election in many of the EA countries, many analysts doubt that true change in national trade policies is possible in the near future.

“There is nothing we can do. The East African CommonMarket is now a reality. All we can do is resolve to work harder and we will definitely get something out of it.”

That was Mr. James Mulwana’s response to how prepared Uganda was for the cutthroat competition that will come with the opening of the East Africa Common Market (EACM).

Mulwana is the renowned Ugandan businessman who for fourteen years was the chairman of the Uganda Manufacturers Association. He also runs Jesa Diary and manufactures plastic products under the Nice brand.

He observed that the state of Uganda’s infrastructure, especially roads and electricity, put it in an awkward position. While it is true that Uganda has an unrivalled agricultural potential in the region, the sector has been neglected to detrimental levels.

Action Aid’s Report: Invest in Small Holder Farmers- launched on June 11 2010, showed that there is decline in agricultural output from 7.9% in 2000 to 2.2% in 2008.

“Uganda, given its great weather and 45 percent of its land being arable, has a competitive advantage over other member states. We must get hold of this opportunity and utilize it to the maximum,” he added.

Andrew Luzze Kaggwa is Policy Officer at Uganda Manufacturers Association (UMA). He argues that while the EA Common Market offers a lifeline to the manufacturer constrained by the lack of a skilled labour force, there is still a lot that needs to be cleared up.

“Who is a Ugandan? How will you allow people to move?” he asked.

Luzze goes on to say that there is urgent need to harmonize VAT, excise, income and corporate taxes across the region.

“An investor will look at a country where he will benefit most. If Uganda drags its feet then it will become a warehouse economy,” he said referring to the term given to a country which stores and sells good but does not manufacture them.

“There is a road map but it is very far from materializing. We need to quicken the process of harmonizing the protocol,” Luzze said, adding that the lack of mutual recognition of certificates and qualification remains a big hurdle to free movement of labour.

“A single law to change in Uganda can take five years. This protocol impacts on a lot of issues. And many issues remain outstanding,” he said.

Rashid Kibowa, Commissioner of Economic Affairs in the Ministry of East African Affairs allays such fears noting that in the Common Market Protocol there are areas where Uganda is operating at a better competitive status.

“In a marriage you do not have to be at the same footing. All you need is consensus,” he said.

Juma Walusimbi, Director of Communications at Bank Of Uganda, told KD that they resolved to license many commercial banks so as to increase competition in the sector, introduce the credit reference bureau and support the improvement of arbitration at commercial courts, as measures to address the cost of capital.

“Banks operate on the basis of making profit and this affects their rates. The problem in Uganda is that the repayment culture is almost non-existent,” he said.

A journalist working with one of the government owned media houses who asked not to be named told KD that what is going on is mere cosmetic, predicting that what befell the community in 1972 after General Idi Amin Dada overthrew Milton Obote is bound to happen again due to mutual suspicion among member states.

“The leaders are simply applying double standards. There are ulterior motives. They are selfish. This is a threat towards achieving a common stand among the five member states,” he said.

The journalist goes on to say that failure by some member states to practice democracy must be a big point of concern in predictable countries like Tanzania.

“I am sure that this marriage will not stand the test of time. What happened in Kenya after the flawed elections in 2008, coupled with the political situation in Uganda cannot be signs of unity but of communities falling apart? Look at the land grabbing going on in Uganda. How do you convince other states that with the free movement and residence of people these bad manners will be left behind?” he asked.

Pic by Neil Palmer (CIAT)

By Valerian Kkonde