By ADAM IHUCHA--
The borders between East African countries are starting to
fall, thanks to the partner states for creating a Single Customs Territory
(SCT) to spur trade.
On 1st January 2014, the five countries that make
up the EAC enforced SCT, a new economic rule to create a common tax one-stop
shop to reduce cost of doing business.
The law is anticipated to boost cross-border trade,
investment and employment among Rwanda, Burundi, Kenya, Tanzania and Uganda.
The steps are part of a plan to integrate the five economies into a single market with a single currency similar to the EU.
The steps are part of a plan to integrate the five economies into a single market with a single currency similar to the EU.
Under the new trading system each of the five countries will
have customs officials stationed at all points of entry into the community to
collect duty.
Business community greeted the onset of the new deal and
said it would reduce cost of doing business in the EAC trading bloc by between
15 per cent and 30 per cent.
Kenya Revenue Authority (KRA) confirmed the process kicked
off well in all stations where the regional countries had deployed customs
officials.
Kenya Shippers’ Council Chief executive Gilbert Langat noted
that the approach would enhance trade within the region.
“We expect the five countries to aggressively participate in
the implementation of the SCT,” he said, stressing that “Doing so will assist
in professionalizing trade in the region and help us get rid of brokers who
contribute to the high cost of doing business”.
Langat said a return journey transporting cargo from Mombasa
to Kigali would take less than 10 days compared to the 20 days trucks currently
take, adding that there would also be fewer checks along the route.
The January 1, 2014 commencement date of the SCT was agreed
upon during a summit in November 2013 that brought together presidents from the
five EACpartner States.
East African Business Council (EABC) Chairman Vimal Shah welcomed
the new initiative and noted that it would graduate the region into a one-stop
shop and thus promote trade.
“This is a sound approach in terms of trade facilitation in
the region.
However, it is early for the countries to celebrate as a lot
of commitment by the governments, trade players among other actors to ensure
full implementation,” said Shah.
Senior deputy commissioner Beatrice Memo confirmed that the
process kicked off well at Mombasa oil installations in Western Kenya.
She said that already two countries had deployed their
customs officials at Mombasa port as part of the implementation of the new
trading initiative.
“So far, there are customs officials from Uganda and Rwanda
deployed at Mombasa and oil installations in Western Kenya–Nakuru, Kisumu, and
Eldoret,” said Memo.
She added that the customs authorities have up to June this
year to ensure all the operational requirements are in place as was directed by
the summit last November.
The planned EAC-single customs territory will see the
partner states adopt a destination model of clearance of goods where assessment
and collection of revenue is to be done at the first point of entry.
Again, the EAC-SCT would enable all foreign goods, once the import duties are paid at Mombasa and Dar es Salaam harbors, the major sea entries to the EAC, to freely circulate among the five member countries in the same way as the goods produced in the region.
Again, the EAC-SCT would enable all foreign goods, once the import duties are paid at Mombasa and Dar es Salaam harbors, the major sea entries to the EAC, to freely circulate among the five member countries in the same way as the goods produced in the region.
Also the move would bring a stiff competition and force the
struggling EAC Manufacturing industry to increase competitiveness and adapt to
higher production standards in order to survive in the market.
The landlocked countries’ private sectors players thus fear that the EAC-SCT, which would eliminate internal borders, so that foreign goods move freely as no other taxes would be levied on them, could severely hurt their fragile manufacturing industry and also result in losses of imported taxes to their governments.
Mr John Bosco from Rwanda’s private sector federation say landlocked countries of Rwanda, Burundi and Uganda with the least diversified production, would be vulnerable to external competition.
“Landlocked countries are facing a unique challenges mainly due to limited access to sea ports, with the introduction of EAC-SCT, we are worried that this move might hurt our feeble manufacturing sector” says Mr. Bosco said during the East African Business Council and Trade Mark East African joint workshop on proposed EAC-SCT in Arusha recently.
Rwandan clearing and forwarding agents also are also in a constant fear, saying they are living in a quagmire not knowing if will move to the entry points of Mombasa and Dar-es-Salaam and become incorporated their companies and operate as locals, or not.
Fred Seka, a Kigali based clearing agent, said they have been in talks with their Tanzanian counterparts for joint ventures to register companies but complained that they are forced to cede 61 per cent of the shares to Tanzanians.
“We suggest that we open up branches at the entry points of Dar es Salaam and Mombasa with the Kigali office as the headquarters,” Mr Seka said.
Available records show that on average Rwanda is a home to nearly122 firms registered as clearing and forwarding companies, which employ roughly 1,000 workers.
“Imagine, half of the workforces may end up losing their jobs upon relocation of the offices” Mr Seka.
Confederation of Tanzania Industries (CTI) Director of Policy and Research, Mr Hussein Kamote differed with the landlocked speakers, saying introduction of a fully-fledged single customs territory would spur trade and investments instead.
“Private sector we need to understand that the EAC-SCT will promote efficiency in custom clearance and reduce time and cost of doing business across the region” Mr Kamote explains.
He was of the view that private sector needs to conduct studies that would be used as the basis to alley fears among the EAC partner states over revenue loss and employments.
“Most of our governments fear the EAC-SCT on ground that the system may lead to loss of domestic revenues and rob their people employments…so its our onus to clear their doubts” Mr Kamote said.
The landlocked countries’ private sectors players thus fear that the EAC-SCT, which would eliminate internal borders, so that foreign goods move freely as no other taxes would be levied on them, could severely hurt their fragile manufacturing industry and also result in losses of imported taxes to their governments.
Mr John Bosco from Rwanda’s private sector federation say landlocked countries of Rwanda, Burundi and Uganda with the least diversified production, would be vulnerable to external competition.
“Landlocked countries are facing a unique challenges mainly due to limited access to sea ports, with the introduction of EAC-SCT, we are worried that this move might hurt our feeble manufacturing sector” says Mr. Bosco said during the East African Business Council and Trade Mark East African joint workshop on proposed EAC-SCT in Arusha recently.
Rwandan clearing and forwarding agents also are also in a constant fear, saying they are living in a quagmire not knowing if will move to the entry points of Mombasa and Dar-es-Salaam and become incorporated their companies and operate as locals, or not.
Fred Seka, a Kigali based clearing agent, said they have been in talks with their Tanzanian counterparts for joint ventures to register companies but complained that they are forced to cede 61 per cent of the shares to Tanzanians.
“We suggest that we open up branches at the entry points of Dar es Salaam and Mombasa with the Kigali office as the headquarters,” Mr Seka said.
Available records show that on average Rwanda is a home to nearly122 firms registered as clearing and forwarding companies, which employ roughly 1,000 workers.
“Imagine, half of the workforces may end up losing their jobs upon relocation of the offices” Mr Seka.
Confederation of Tanzania Industries (CTI) Director of Policy and Research, Mr Hussein Kamote differed with the landlocked speakers, saying introduction of a fully-fledged single customs territory would spur trade and investments instead.
“Private sector we need to understand that the EAC-SCT will promote efficiency in custom clearance and reduce time and cost of doing business across the region” Mr Kamote explains.
He was of the view that private sector needs to conduct studies that would be used as the basis to alley fears among the EAC partner states over revenue loss and employments.
“Most of our governments fear the EAC-SCT on ground that the system may lead to loss of domestic revenues and rob their people employments…so its our onus to clear their doubts” Mr Kamote said.
Presenting the EAC Single Customs Territory Paper, Dan Ameyo
somehow concurred with the landlocked concerns, saying there would difficulty in collection of domestic taxes on cross border trade since it will require better exchange of information between the exporting and importing Partner States in order to follow up on the traders tax obligations.
“The EA-SCT would encourage dumping and other unfair trade practices because goods may be declared to be consumed at the destination but end up being introduced to the domestic markets of other countries” he said.
Free circulation of goods could also overload capacities of the EAC Partner States with sea ports as they would be required to clear the bulk of goods entering the Customs Union; and, lead to the loss of import revenues for a number of Partner States that are highly dependent on the direct contributions of import taxes.
“But, its high time we think as a region and not as a country as a prerequisite for the attainment of a single customs territory” Mr Ameyo stressed.
On advantages, the consultant said that the EAC-SCT would further strengthen integration, facilitate trade and investment both among the Customs Union countries and with third countries.
Elimination of internal customs borders and harmonization of legislation of the Customs Union members would be creating additional benefits for the trading partners by insuring free circulation of goods between the Customs Union countries and thus, providing traders and investors with bigger economic space and more attractive market for potential investors.
Kenneth Bagamuhunda, Director of Customs at the EAC secretariat says this will crystallize the gains of integration characterized by minimal internal border controls and a more efficient institutional mechanism in clearing goods”.
“The EA-SCT would encourage dumping and other unfair trade practices because goods may be declared to be consumed at the destination but end up being introduced to the domestic markets of other countries” he said.
Free circulation of goods could also overload capacities of the EAC Partner States with sea ports as they would be required to clear the bulk of goods entering the Customs Union; and, lead to the loss of import revenues for a number of Partner States that are highly dependent on the direct contributions of import taxes.
“But, its high time we think as a region and not as a country as a prerequisite for the attainment of a single customs territory” Mr Ameyo stressed.
On advantages, the consultant said that the EAC-SCT would further strengthen integration, facilitate trade and investment both among the Customs Union countries and with third countries.
Elimination of internal customs borders and harmonization of legislation of the Customs Union members would be creating additional benefits for the trading partners by insuring free circulation of goods between the Customs Union countries and thus, providing traders and investors with bigger economic space and more attractive market for potential investors.
Kenneth Bagamuhunda, Director of Customs at the EAC secretariat says this will crystallize the gains of integration characterized by minimal internal border controls and a more efficient institutional mechanism in clearing goods”.
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