Saturday, July 11, 2009

Rwanda formally joins East African customs union

By Kezio-Musoke David - July 10 2009

Rwanda has formally joined the East African Community (EAC) Customs Union with officials in Kigali, saying the country has already set up measures to compete favourably with the region’s economic giants.

The union will pave way lower prices, as goods from member states are now duty free.

It is also intended to boost economic cooperation between the newcomers and other EAC members that include Kenya, Tanzania, Uganda and Burundi.

Intra-EAC trade from 2004 has grown by about 40 per cent, and the joining of Rwanda and Burundi further enlarges the market size with a population of 120 million people and a combined gross domestic product of around $60 billion.

“This large economic region can only be meaningful if it is more than a simple aggregation of neighbouring countries, but an integrated market with production, investment and trade linkages,” said Peter Kiguta, the director general customs and trade EAC.

Rwanda had already started the implementation of a three-band common external tariff (CET) structure where raw materials and capital goods are zero-rated, intermediate goods and finished goods attract a 10 per cent and 25 per cent tax respectively.

EAC officials say the CET structure is meant to promote industrialisation in the region by minimising the cost of production and cushioning local manufacturers against cheaper imports and counterfeits.

Rwanda Prime Minister Bernard Makuza said that the expansion of the customs union was a landmark achievement which to Rwandans brings a sense of pride to the country’s integration efforts.

“Contrary to belief that the customs union would negatively affect the economies of the partner states in terms of revenue erosion and competitiveness, major benefits have accrued to the region in terms of increased trade and customs revenue,” he said.

“It is on this strength that Rwanda would like to reiterate support to all the processes that will result in us reaping benefits from the customs union,”

adding that Rwanda will provide the Community the necessary support and environment for business to flourish and the economy to grow.

The official function of joining the customs union was held on 6th July at the Kigali Serena Hotel.

Rwanda and Burundi enforced the EAC Customs Union Protocol on July 1st 2009. Both countries launched the union in simultaneously function on Monday.

Rwanda has also implemented the EAC Customs Management Act 2004 that harmonises the legal, administration and operations of customs in the partner states.

“The uniform law on customs enhances trade facilitation through simplified procedures and documentation,” said Mr Kiguta.

The protocol on the establishment of customs union came into force on the January 1st 2005 in the three founding partner states of Tanzania, Kenya and Uganda.

Trade freely
The implementation of the customs union has been steady and it is expected that the region will have a single customs union territory come January 2010.

With its main aim being the uniform application of customs procedures and trade documentation in the region, the implementation of the customs union also ensures elimination of internal tariffs which enables partner states to trade freely amongst themselves.

The commencement of the customs union in Rwanda and Burundi will also enlarge the market of the region and provides incentive for increased production and trade by the private sector.

Rwanda’s Minister of EAC Affairs, Monique Mukaruliza, said that the protocol also recognises the vulnerability of some of the economies in the region and the negative effects that may arise in the course of implementation of the customs union.

There are already fears about the future of Rwanda’s already crippled manufacturing industries. Manufacturers in the country say Kigali needs to strike a balance between promoting local firms and ensuring that consumer prices come down.

The minister said to mitigate this, inbuilt safeguard mechanisms can be applied in order to cushion industries that may face threat in the customs union.

Rwanda is one of the EAC members that has put in place mechanisms to protect its strategic sectors such as agriculture with import duty rates that are above the 25 per rate, said Mr Kiguta.