Implementation of the Tripartite FTA Agreement by EAC

The Project at A Glance

According to the Africa Regional Integration Index (ARII) Report 2016, the East African Community (EAC) obtained the highest among the 8 Regional Economic Communities (RECs) in terms of trade integration. In order to further increase exports from the region, the EAC States are engaged in numerous export promotion policies and strategies. The EAC Secretariat has equally provided support through the EAC Export Promotion Strategy (EPS), value chain studies and other forms of promotion initiatives.
International Economics, in Consortium with Cardno Emerging Markets Belgium, provided support for the integration of the East African Community (EAC) States into the world economy, thereby contributing to sustainable development and poverty reduction in these states. The project aimed to develop a Framework for the elimination of Non-Tariff Barriers (NTBs) and improve monitoring of the implementation of the framework, as well as foster trade development and expansion under the Tripartite FTA. Under the second component of the project, the Team would develop an EAC Export Promotion Strategy (2017-2030) and create awareness of the trading opportunities, in particular for women and youth entrepreneurs

What We Found

The real GDP growth rate of the countries in the EAC region was estimated at 6% in 2016. The EAC region was thus the second fastest-rising economy throughout the African continent. One of the principal drivers of economic growth and transformation can be attributed to export-led strategies and policies which have led to the creation of jobs and advanced the region’s productive capacity.
However, EAC States have very distinct trade profiles and export performances. The exports of goods and services remain relatively low in Burundi, Rwanda, and Uganda while it is much higher in Kenya and Tanzania. An assessment of exports from the region reveals that there is an overall upward trend with short-run fluctuations linked mainly to the volatility in commodities exports. From 2010 to 2015, the region’s trade deficit as a percentage of GDP fluctuated between 12.9% to 15.3%, whilst total EAC exports fluctuated from 30% growth in value terms in 2014, contracting by 17.5% in 2015 and 6.8% in 2016. These figures lag in contrast to the targets set for the region.
The EAC encounters several ‘behind the border’ trade-related challenges which impact businesses’ capacity to produce and export high-value-added products. Some of the barriers impacting export competitiveness include macroeconomic policies which distort efficient market entry and competition, sub-optimal factor conditions (cost and skill of labour, cost of capital), limited infrastructure and backbone services, and transport and logistics inefficiencies that raise production and trade costs. Information asymmetry and coordination failures, limited access to trade finance, and limited capacity to comply with quality and standards requirements also impact export readiness.

Our Strategy and Impact

The EAC Export Promotion Strategy was designed in the context of evolving export trends and opportunities. The overarching aim of the EAC Vision 2050 is for the region to attain upper middle-income status by 2050. Thus, the EAC region will have to attain and maintain annual growth rates of, at least, 8.5 % yearly. EAC countries will also need to maintain low levels of inflation and low budget deficits; deepen financial sectors to mobilize domestic savings; develop stable institutions and a conducive business climate that promotes private sector participation and public-private partnerships. Taking these into consideration, some of the strategic recommendations made include:

Stimulating exports through improved market intelligence for enterprises and improved visibility on international markets
Improving market access conditions for EAC exports
Strengthening export competitiveness through improved access to finance and technology for enterprises, in particular SMEs
Strengthening business and trade support services for exporters through improved skills and competencies

Our Core Solutions

At International Economics Consulting, we build tailor-made strategies for both import and export-oriented business solutions. We carry out sensitivity analysis and prepare detailed resource scheduling and standard performance dashboards to track the implementation process and financial ratio performance of your products and services. We help investors assess the opportunities in different markets, determine the feasibility and viability of projects, and benchmark the wider ecosystem to support business growth. We also assist clients in building economic indicators to analyse the trade flows and identify patterns, trends, and trade complementarity in value chains of goods and services between member countries.