By ADAM IHUCHA--A proposed ‘pay as you
import’ as an alternative mechanism to source funds for the East African
Community has split the partner states into two rival factions, leaving the
secretariat in dilemma.
The EAC secretariat proposed a
one percent levy on imports value for each member state to finance its
operations as a way to reduce overreliance on donors to bankroll the trading
bloc’s budget.
Experts say that at the moment, donors
fund the EAC budget up to 70 percent, whereas the partner states and other
sources foot only 30 percent.
However, during the discussions of
‘Modalities of Sustainable Financing Mechanism of the EAC Integration’ in
Arusha, Rwanda, Burundi and Uganda have supported the model, but Kenya and
Tanzania, on the other hand, were not in favor of the idea.
Source privy to the negotiations says
that Kenya and Tanzania snubbed the deal due to the fact that the mechanism
will see the two shouldering the lion’s share of the EAC budget.
Taking for example of the 2011 imports
data, Kenya would have paid to EAC $145.11 million, Tanzania $108.06 million
whereas Uganda would have contributed $49.10 million, Rwanda $8.15 million and
Burundi $4.33 million.
Permanent secretary for Tanzania’s
Ministry of EAC cooperation, Ms Joyce Mapunjo says that if Kenya and Tanzania
were to pay more than others, then the deal should be accompanied with some
benefits.
The two partner states, among others,
demanded a lion share of employment quota and more say on the economic and
financial matters of the EAC, if they were to seal a give-and-take deal.
“This will make it easy for countries
paying more to explain to the tax payers and members of the legislatures why
they must contribute disproportionately than other members” Ms Mapunjo
explained in an exclusive interview.
The EAC Council of Ministers report
shows that Tanzania was of the view that the Secretariat did not sufficiently
address the directive of the Council to develop a comprehensive paper that
explores all possible options of financing mechanism.
In addition, Tanzania proposed that the
comprehensive paper, apart from exploring fully various options of financing
mechanisms, should also include the entire range of the principle of equity--
as opposed to equality -- in other contributions and other areas.
Dar further demanded the secretariat to
identify areas of the Treat that will need to be changed to accommodate the new
principle.
“It is the view of Tanzania that this
paper has to be completed to form a basis for decision making” the report reads
in part.
Tanzania proposed that the principle of
financial solidarity has to be modified so that the principle of equity, as
opposed to equality, can be extended to other dimensions of the EAC.
“The principle of equity should be
extended to the size of population of countries in allocating employment quota
so that countries with larger population gets correspondingly larger quota”
reads the report.
Currently, the EAC use quota system in
which partner states share community jobs equally irrespective of their
population and contribution to the bloc’s finances.
At the end, Kenya and Tanzania demanded
the Secretariat to provide an analysis of all the financing options and their
implications.
They also required the Partner States
to consult stakeholders in their respective countries on the financing
mechanisms options and report to the council of Ministers in August 2014.
Burundi, Rwanda and Uganda were of the
view that there is need for the Council to discuss and agree on the principles
of alternative financing mechanisms and further details on the modus operandi
to be considered later.
Rwanda prefers the hybrid contribution
based on 40 percent contribution from Partner States and 60 percent from
collections of one percent on the value of imports from outside the EAC.
Burundi insisted that the financing
modalities would take into account the principle of equity and the principle of
solidarity.
The EAC deputy secretary general, in
charge of Finance and Administration, Mr Jean Claude Nsengiyumva, argues that
partner states should understand that overdependence on development partners
whose support is, the investment driven, does not augur well for the regional
integration.
Mr Nsengiyumva said that with the EAC
expansion due to concurrent implementation of the three pillars of integration
of customs union, common market and monetary union, the current financing
mechanism was not sustainable.
The EAC statistics show that from the
fiscal year 2007/8 to 2011/12 the regional budget has substantially increased
from $23.91 million to $124.3 million, but out of this, partner states’
contribution increased from $13.78 million to $33.67 million.
To make the matters worse, there have
been ceilings in contributions and delays in remission of funds from partner
states.
As a result, the development partners’
contributions soared significantly from $6.13 million to $90.33 during the
period under review.
In 2o13/14 fiscal year, the EAC total
budget was pegged to over $140 million, but out of this, partner states
contributed just over $37.2 million with the rest coming from external
development partners.
This, experts say, poses a risk for EAC
integration due to unpredictability and unsustainability of earmarked donor
funding.
“We are fooling ourselves with the
current financing mechanism. Its is high time the partner states embrace the
proposed one percent levy of the value of imports as a more predictable source
of financing for EAC secretariat, organs and institutions, as well as community
wide-socio-economic-projects” he stressed.
Following, the fiasco the EAC heads of
the 12th states Summit directed the council of ministers to study
all feasible sustainable financing options and report to the 16th
ordinary summit in November 2014.
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