Freer trade in East Africa

In 2005, the idea of an East African Customs Union (ECU) was formally announced. Five years on, the East African nations of Kenya, Tanzania, Uganda, Rwanda, and Burundi are beginning to eliminate regional tariffs, with a target of total elimination set for July 1, 2010.

The East African Customs Union is set to evolve in three stages:

1. Common economic market (July 1, 2010)
2. Monetary Union (2012)
3. Political Federation (2015)

The East African estimates that intra-regional trade will increase by 14 percent this year. Trade between the five nations has already grown by 12 percent since the Union was announced in 2005.

The Economist speculates on who's set to gain and lose:

Kenya, which has the region’s strongest manufacturers, retailers and banks, is sure to gain most. But for the EAC to succeed, others must win too. Rwanda and Burundi should benefit from cheaper and quicker transport of goods to and from the ports of Mombasa and Dar es Salaam. Uganda is well placed to expand its agriculture for export.

Tanzania is less certain to gain. It wants to keep some taxes on goods from Kenya. And it is wary of the free movement of labour, fearing that, in many professions, pushier and better-educated Kenyans will come and snatch plum jobs.

Kenya trades more with the five countries within the ECU than it does with the outside world. No wonder president Mwai Kibaki has set up a program to educate Kenyans on the benefits of the common market, which he announced in his New Year's message:

Kenyans must now start thinking as citizens of East Africa and that is why the ministry concerned must start educating people to prepare to reap from the market’s benefits.

Meanwhile, the five-nation region has scored high within the Sub-Saharan Africa region of the World Bank's rankings of the ease of doing business. Four countries (Rwanda, Tanzania, Kenya and Uganda) are in the top 15, with Rwanda being last year's top reformer.

Freer trade and an improving regulatory climate. Perhaps we are seeing the signs of an emerging East African Tiger?