Tuesday, December 7, 2010

East Africa: Comesa Ministers to Rule on Kenya's Export Disputes

George Omondi, 6 December 2010, Business Daily

Regional Cabinet ministers will this week deliver a final ruling on Kenya's long-running trade disputes with her trading partners as exporters exude confidence the decision will break the stalemate that has stunted growth.

The council of ministers from 19 countries that trade under the Common Market for Eastern and Southern Africa (Comesa) begins the 29th meeting in Lusaka, Zambia today to review progress in implementing the bloc's programmes.

They are expected to receive and rule on the findings of the technical committees Comesa Secretariat appointed months ago to investigate claims of discriminatory practices against Kenyan goods in some member states.

Most of these disputes erupted this year, starting with Zambia's ban on long-life milk to protect her industries and her imposition of duty on palm-based cooking fats, saying Kenya does not grow palm tree.

Malawi imposed excise duty on cooking oils and soaps while Egypt applied a 45 per cent rule on local value addition against Comesa's threshold of 35 per cent. Last year, Angola banned the sale of Kenyan bananas in her territory, citing the spread of the wilt disease.

Last week, the Kenya's Trade ministry declined to comment on the agenda of today's meeting but exporters were upbeat the ruling would break the stalemate.

"We are hopeful that this meeting will eventually resolve all the pending market access issues in the region", said Mr Jas Bedi, the chairman of the Kenya Association of Manufacturers, the industrialists' lobby. The decision of the council of ministers reached after reviewing the report of the verification committee is to be implemented within 60 days.

Kenyan exporters have written to the government to demand reciprocal application of the 45 per cent value addition threshold on Egyptian imports into Kenya which are still attracting the Comesa rate of 35 per cent.

"We are sure of a positive outcome because the local exporters have furnished the verification team with all the information they asked for in support of our position," said Mr Bedi, who is among the private sector players attending the Lusaka meeting.

Trade statistics indicate that Comesa is the single largest trade destination for Kenyan goods, accounting for Sh112.9 billion or 32 per cent of last year's exports against imports of only Sh25 billion.

Trade experts see the bloc which accounts for 69.5 per cent of the country's total exports to African countries as better growth pedal compared to European Union where preferential trade terms generated export worth Sh100.3 billion against total import bill of Sh171.9 billion.

"Kenya has a great opportunity to take advantage the seven per cent average growth rate of Comesa and southern African countries to develop new products and grow its export levels," Mr John Kashangaki, a director and consultant at Strategic Business Advisors said in Nairobi last week.

However, there is growing concern that trade disputes and non-tariff barriers are slowing, eroding gains of the Comesa free trade area. The government statistics show close reversal link between disputes and trade growth.

Last year, exports to Libya, Zimbabwe and Eritrea more than doubled while those to Madagascar, Mauritius and Burundi increased significantly by 68.5 per cent, 40 and 32.1 per cent respectively.

However, value of exports to Egypt dropped by 27.8 per cent, Angola by 21.9, Malawi 21.2 and Zambia by 12.1 per cent.

Non-tariff barriers

Early this year, the Comesa secretariat successfully resolved the standoff with Sudan which had imposed restrictions on the importation of galvanised steel pipes from Kenya.

Today's meeting is expected to discuss a draft regulation that Comesa secretariat developed recently proposing a penalty system on states that erect non-tariff barriers.

The region's ministers are also expected to agree on a harmonised system for industrial rebates and other exemptions currently applied haphazardly by member states.

This means Comesa could walk into the New Year with uniform policy for schemes like manufacturing under bond, industrial drawback, export processing, free port zones, VAT and duty remission schemes that are currently extended by member states.

"We have so many trade related issues to pursue at the Comesa meeting, some of which are not in the council's agenda," said Mr Bedi

The Kenya High Commission in Lusaka said it will be hosting a business forum immediately after the meeting to inform the business community in the two countries about the potential of doing business in Kenya under the new constitutional dispensation.