EABC STUDY ON IMPACT OF THE EAC CUSTOMS UNION ON BUSINESSES. Intergrated Development Consultants. Client: EABC Final Report, August 2008 Submitted By

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1 EABC STUDY ON IMPACT OF THE EAC CUSTOMS UNION ON BUSINESSES

2 EABC STUDY ON IMPACT OF THE EAC CUSTOMS UNION ON BUSINESSES Client: EABC Final Report, August 2008 Submitted By Intergrated Development Consultants South Gate Center Building (Magan Suites) Mkoma Road, P.O Box Nairobi Tel: August 2008

3 Table of Content page 1 INTRODUCTION 4 2 Methodology and Analytical Framework Methodology Analytical framework 6 3 AN OVERVIEW OF THE IMPLEMENTATION OF THE CUSTOMS UNION Extent of Implementation of the Customs Union 10 4 DOMESTIC PRODUCTION AND TRADE FLOW Domestic production chain Clients base for domestic production chain External factors impeding businesses from taking full advantage of the 13 EAC Customs Union Capacity utilization Trade flow chains Intra-EAC Export chain Import chain Predominant target market for exports 18 5 IMPLEMENTATION OF THE EAC CUSTOMS UNION Awareness of EAC Customs Union Information on EAC Customs Union Availability and content of information on EAC Customs Union Source of business information on EAC Customs Union Views on whether EAC Customs Union has been successfully implemented Relevance of the EAC Customs Union tariff structure and principles on 25 businesses Common External Tariff structure (CET) Elimination of intra EAC tariffs EAC common clearance procedures EAC Customs Union features with the most significant impact on businesses Usefulness of the principle of asymmetry to the business Awareness of the existence of duty drawback schemes Impact of the EAC CU implementation on businesses Overall benefit derived by companies from EAC free movement of goods among EAC members Expansion of business Business turnover Investments (capital investments) The most attractive aspects of EAC customs preferences to the businesses The least attractive/most problematic aspects of EAC customs union

4 5.6 Recommended measures to address non implementation of the EAC 33 Customs Union Reforms governments should undertake to compensate for losses 33 resulting from non-implementation of EAC customs union Proposed measures to government to guarantee full implementation of the EAC Customs Union Proposed measure to EAC to mitigate losses resulting from non implementation of EAC customs union Empowerment of EAC secretariat to strengthen regional integration Measures by the business community and lobby groups to hold 36 governments accountable for non-implementation of EAC customs union How the business community and lobby groups can hold EAC secretariat accountable for non-implementation of EAC customs union Trade remedies and the establishment of EAC Committee on Trade Remedies Expected effects of EAC Customs Union on Businesses in Burundi and 38 Rwanda 5.8 Harmonization EAC, SADC and COMESA Trade Regimes 39 6 NON TARIFF BARRIERS (NTBS) FACED BY BUSINESSES WHILE TRADING IN EAC Lack of common transit regime NTBs Awareness and Effectiveness of the Monitoring Mechanism Type of NTBS that affect businesses within the EAC region Effects of the NTBs on business operations Suggested remedial measures to mitigate the NTBs effects Awareness on existence of NTB monitoring mechanism and its effectiveness Notification of NTB for removal Business Communities views on how reforms on customs clearance procedures, infrastructure improvement, reduced subsidies and improved credit facilities would help address the main traditional NTBs. 7 conclusions and Recommendations 7.1 Conclusions 7.2 Recommendations

5 1 Introduction The East African Community (EAC) is an intergovernmental regional body comprising of Kenya, Burundi, Rwanda, Tanzania and Uganda whose agenda is to attain economic, social and political integration of East Africa. The key building blocks towards economic, social and political integration of the East African Community are clearly articulated in the Article 5 (2) of the Treaty which states that the. the Partner States undertake to establish among themselves and in accordance with the provisions of this Treaty, a Customs Union, a Common Market, subsequently a Monetary Union and ultimately a Political Federation in order to strengthen and regulate the industrial, commercial, infrastructural, cultural, social, political and other relations of the Partner States to the end that there shall be accelerated, harmonious and balanced development and sustained expansion of economic activities, the benefit of which shall be equally shared. The Treaty under Article 2(2) sets the Customs Union as the first transitional stage (entry point) of the integration process and as an integral part of the Community. The Treaty further provides under Article 75 for a Protocol on the Establishment of the East African Community Customs Union which was negotiated in four years and concluded in March The EAC Customs Union was launched on 1 st January Rwanda and Burundi joined the union in July 2007 and are expected to start implementing the provisions of the Customs Union with effect from January The overall goal of the EAC Customs Union (EAC CU) is to deepen the integration process through liberalization and promotion of intra-regional trade. Other indirect, howbeit crucial expectations of the customs union is promotion of efficiency in production in response to intra-region competition among businesses enhancement of domestic, cross border and foreign investment and promotion of industrial diversification and economic development. As implementation of the Customs Union progresses into its fourth year it is opportune time for business community to take stock of the effects this far. The business community needs a clear understanding on the effects of the EAC Customs Union in order to engage on issues geared towards enhancing the effectiveness of the EAC trade regime. It is in this context that EABC commissioned this study, through the funding from RTFP, with an aim of capturing empirical information on the experiences of business

6 community on the implementation of the Customs Union. Specific objectives, stipulated in the terms of reference, follows:-. a) To understand the level of awareness about the opportunities of implementation of the EAC CU b) To understand the expectations of the business community about the EAC CU including expectations about how it will be implemented c) To understand the facilitation needs of the business community in relation to the EAC CU d) To understand the challenges facing EAC exporters, producers and importers. It is envisaged that the output of the survey will provide vital inputs from the private sector which will enhance implementation of EAC Customs Union through corrective measures to mitigate existing challenges while maximizing successes.

7 2 Methodology and Analytical Framework 2.1 Methodology Field survey Questionnaires were adopted as the basic tool for capturing and collecting data for this survey. This was predetermined at the design stage by EABC which developed two sets of questionnaires. The first set, with questions relating to the effects of the Customs Union on intra-regional trade, targeted businesses in Kenya, Tanzania and Uganda where implementation of the CU is already taking place. Questions on the second set were formulated to capture perceptions of the customs union from businesses in Burundi and Rwanda where implementation is yet to begin (see annex 1 and 2). The criteria and selection of the sample firms entailed a three stages approach: - In the first stage, we identified and listed all sectors where intra-regional export is taking place from each Partner state. On the basis of this population, selection of the sample sectors was done based on volume of exports to the EAC, with cut mark placed on sectors accounting for 80% of exports and over. In the second stage, all the exporting firms, within the identified sectors, were listed to form the universe from which the sample businesses were drawn. In the third and final selection stage, a sample of firms was drawn from the universe based on the volume of their exports to the EAC in 2007 in the case of Kenya, Tanzania and Burundi; and information from export promotion agencies in the case of Rwanda and Uganda. Through this process, a total of 84 companies, drawn from 14 sectors, were picked for the survey. The size of this sample was influenced by the practical considerations of undertaking the survey within the set period of 15 days. The sampled sectors are summarized in the table below. Full lists and details appear in Annex 3 of this report.

8 Table 1.1: Sector coverage Burundi Kenya Rwanda Tanzania Uganda Sector Sector covered No. of sample firms Sector covered No. of sample firms Sector covered No. of sample firms Sector covered No. of sample firms Sector covered No of sample firms Food and Beverage Leather and Footwear Sector Motor vehicles and accessories Paper, paperboard and Stationery Petroleum, coal, rubber and plastic Construction (Cement) Pharmaceuticals, chemical paints and soaps Metals and Articles thereof, Metal and Non- Metallic Mineral Products Mining Hides and skin 2 Textile and clothing 2 1 2

9 Burundi Kenya Rwanda Tanzania Uganda Sector Sector covered No. of sample firms Sector covered No. of sample firms Sector covered No. of sample firms Sector covered No. of sample firms Sector covered No of sample firms Leather and footwear Fish TOTAL Questionnaires were sent to respondent firms in advance and thereafter appointments firmed up for purposes of completing the questionnaires through interactive sessions with the contact persons National and regional validation workshops The draft report was subjected to national and regional validation workshop held in the region between 28 th July and 25 th August Proceedings from the National and Regional Workshops were considered in the process of finalization of the study report. The reports of these workshops are annexed to this final study report as annex 4 (a) to (g). 2.2 Analytical framework Analytical framework of this study is drawn from the survey questionnaire. It provides the fabric for understanding opportunities imbedded in the implementation of the EAC Customs Union and challenges faced by businesses while trading under the Customs Union trade regime. It covers the following broad issues: - Production Domestic production chain External factors impeding the businesses from taking full advantage of the EAC Customs Union Capacity utilization Investments (capital investments)

10 Trade flow chain Export chain Import chain Implementation of the EAC Customs Union Awareness of the EAC CU (include elements of the EAC CU considered as most beneficial to businesses) Information about EAC CU Relevance of CET to the business Relevance of elimination of intra-eac tariffs EAC Common clearance procedure Usefulness of the principle of asymmetry to the business Most attractive aspects of EAC CU Least attractive aspects of EAC CU Changes on CET Effects of non implementation of EAC CU Use of trade remedies Awareness of duty drawback schemes Harmonization of EAC with SADC and COMESA Non Tariff Barriers faced by businesses while trading EAC Transit (lack of common transit) Others as per the analytical report

11 3 An Overview of the Implementation of the Customs Union 3.1 Extent of Implementation of the Customs Union Implementation of the EAC Customs Union is on course. The focus has been on implementation of the EAC CET, Internal Tariff elimination in accordance to the agreed road map, enforcement of the EAC Customs Management Act, the Rules of Origin, among others, as detailed below. Implementation of the Common External Tariffs The EAC CET is set according to category of goods, with raw materials and capital goods attracting a 0% rating, intermediate goods 10 % and finished goods 25% respectively. Exceptional rates, above maximum rate of 25%, apply on selected items (sensitive list) to protect production of such goods in the region. The list includes such goods as maize, rice, cement, cotton fabrics, and sugar, milk and diary products. The rates are published in the EAC CET HS 2007 tariff book and relevant EAC Gazette Notices. Elimination of Internal Tariffs. One of the features of a Customs Union zero internal tariffs on intra-regional trade among member states. To achieve this feature, EAC Partner states have adopted an asymmetrical tariff reduction programme for a transitional period of five years. The first round of tariff reduction was effected on January Consequently, tariff rates on four hundred and thirteen (413) Kenyan products into Uganda reduced from 10% in 2005 to 8% in Similar rates reduction on goods into Tanzania are reported in Table 3.1 Table 3.1: Tariff Rates Reductions on Kenyan Goods into Tanzania No. of Tariff lines (products) % 20% 15% 10% 15 20% 15% 10% 5% 20 15% 12% 9% 6% % 8% 6% 4% 112 5% 4% 3% 2% 54 3% 2% 1% 0% Development of EAC Rules of Origin (RoO).

12 Instruments for EAC RoO have already been developed. These include the Certificate of Origin and the Simplified Certificate of Origin whose implementation is commenced on 1 st July Enactment of EAC Customs Management Act 2004 The above Act forms one of the Customs laws of the community. It provides the institutional, operational and enforcement framework of customs. Elimination of non tariff barriers and Trade Facilitation Partner States have undertaken to remove all forms of Non Tariff Barriers (NTBs) to trade. These range from system based to infrastructural barriers. To attain this objective, EAC has developed a mechanism for elimination of NTBs. National monitoring committees have been constituted in all EAC countries in readiness for implementation of the mechanism. Harmonization and development of EAC standards As of 2006, about 600 standards had been harmonized and gazetted for uniform application in EAC. In addition, the Bureaus of Standards in Partner States recognize national quality marks and do not subject goods to further analysis. Adoption of the Competition Policy and Law To guarantee fair competition, EAC adopted a competition policy which prohibits any practice that adversely affects free trade. Further in 2006, an EAC Competition Act was enacted. However, the national competition laws and institutions will remain in effect while the EAC Competition law takes care of the intra regional trade.

13 4 Domestic Production and Trade Flow Chains 4.1 Domestic production chain An assessment of the effects of EAC Customs Union on the production value chain was done encompassing sourcing of inputs, clientele base and extent of capacity utilization. The results reveals tendency for companies to source inputs from either the domestic market or from the rest of the world with inputs from the two sources accounting for an average of 45% and 35% respectively. Inputs from the EAC trading block accounts for just 12% of the total in the production chain. This reflects opportunity for improvement of intra regional trade among the member states, a position which is underscored by the fact that most of the intraregional trade is in food and beverage, where EAC countries have a comparative advantage. Table 4.1: Source of input for domestic production chain Source % of inputs sourced from Domestic Economy EAC Europe Rest of the World Burundi Kenya Rwanda Tanzania[1] Uganda Weighted Average Clients base for domestic production chain In Kenya, distributors are the most significant clients for the domestic production chain handling almost 23% of the total output. The others in the order of significance are the supermarkets taking an estimated total of 16% while traders, businessmen and wholesalers tag along taking about 10% each. Others though not too significant include

14 manufacturers, agents and individuals handling about 7% each while government, NGOs, transporters and farmers handle a total of 3% each. In Tanzania, traders and manufacturers combined handle more than 50% of the total output from the production chain estimated at 30% and 20% respectively. Other clientele include supermarkets, NGOs, individuals, institutions and private companies handling output estimated at 10% each. In Uganda, individuals are the most important clients handling almost 37% of the output from the production chain. Traders and institutions follow taking approximately 16% and 11% of the output respectively. Manufacturers, distributors, supermarkets, wholesalers, and private companies lag behind with each handling an estimated 5% of the output. In Burundi, business people are the most significant clients for outputs from the domestic production chain accounting for about 60%. Other clientele include manufacturers and NGOs which handles 20% each. In Rwanda, on the other hand, supermarkets, distributors and farmers are the most important clients each handling about 22% of the production output. Other clients are the business people, manufacturers and cooperatives accounting for 11% each. This assessment reveals existence of a well established network of clientele that can be used in enhancing an uptake of output from the domestic production chain to the regional market and beyond. There is room for exploitation of the strong distributor network, which seems to be underutilized, as evidenced by the responses from the survey External factors impeding businesses from taking full advantage of the EAC Customs Union External factors hindering businesses from taking full advantage of the EAC Customs Union varied across all the five EAC countries. Electricity, fuel and transport cost tops these factors accounting for about 70% of total external factors. Table 4.2: Factor External factors hindering businesses from exploiting Opportunities in the EAC Customs Union. % share in total factors perceived as impeding business from exploiting opportunities in the EAC Customs Union Burundi Kenya Rwanda Tanzania Uganda

15 Electricity 33% 37% 46% 39% 35% Fuel 22% 22% 0% 15% 21% Infrastructure (road and rail) 9% 9% 0% 12% 18% Cost of transport 7% 7% 25% 4% 12% Other 29% 25% 29% 30% 14% Total 100% 100% 100% 100% 100% Capacity utilization Excess capacity is a major hindrance to competitiveness of businesses in the EAC region, with the level of severity varying widely across the states. The threat is more acute in Burundi and Rwanda, where 40% to 50% of companies reported operating at between 10% and 30% capacity. The problem is less severe in the other EAC states where businesses operate between 81% and 100% in Kenya, Uganda and Tanzania in that order. Factors exacerbating the excess capacity scenario are similar to the external factors identified in section above. Table 4.3: Capacity utilization % total respondent companies Capacity Utilization Burundi Kenya Rwanda Tanzania Uganda 10% 30% 40% 0% 50% 0% 8% 31% - 50% 10% 6% 8% 15% 8% 51% - 80% 40% 50% 25% 46% 53% 81% - 100% 10% 44% 17% 39% 31% 4.2 Trade flow chains Intra-EAC Export chain Results of the intra-eac export chain are based on responses from the sample companies that participated in the survey. According to these results, Kenya s export to EAC region is evenly distributed in Uganda, Tanzania and Rwanda estimated at 26% of the total. Kenya is the significant destination of Tanzania s exports estimated at 44%. Her exports to Uganda are much lower estimated at 28% of exports. On her part, Uganda s main export destination is Rwanda importing almost 36%, followed by Tanzania at 25% and Burundi at 21%. Tanzania s export to Rwanda and Burundi are even at 14%.

16 Further, the survey results show that Burundi s exports within the EAC region is skewed towards Rwanda at 58%. Her export to Kenya, Uganda and Tanzania are evenly distributed at 14 %. For Rwanda her main export destination in the region is Kenya at 56% with the rest of the countries receiving 11% each. Table 4.4: Intra-EAC export chain Destination Source EAC country: Figures are % share intra-eac exports from EAC country Burundi Kenya Rwanda Tanzania Uganda Burundi 22% 11% 14% 21% Kenya 14% 67% 44% 18% Rwanda 58% 26% 14% 36% Tanzania 14% 26% 11% 25% Uganda 14% 26% 11% 28% The clientele base for intra-eac export chain across include: distributors, wholesales/businesses, manufacturers, farmers, transporters, Governments, NGOs, among others. This is tabulated in the table below, which highlights the significance of these clients across the EAC countries. Table 4.5: Clientele base for intra-eac export chain Source EAC country: Figures are % share intra-eac Client for intra-eac export chain exports from Burundi Kenya Rwanda Tanzania Uganda Distributors 30% 25% Wholesalers/Supermarkets 14% 50% 10% Manufacturers 25% 8% 13% 9% Farmers 3% Transporters 3% Government 18% Institutions/Cooperatives/Auctions 50% 13% 18% Traders/Individuals 50% 42% 23% 45% NGOs 25% 13% UN Agencies 13% Total 100% 100% 100% 100% 100% Import chain

17 Businesses within the EAC region predominantly import from the rest of the world according to this survey s findings. Share of imports from this category ranges between 43% in Burundi to 75% in Tanzania. Europe is a significant source of imports for EAC countries, with the share in total imports ranging between 7% and 14%. Businesses reported significant imports from the EAC region too. Companies in Burundi, Rwanda and Uganda use considerable imports from the EAC region estimated at 43%, 32% and 22% in that order. Imports from Kenyan and Tanzanian businesses were rather low estimated at 6% and 5% of total imports, respectively. Imports from the COMESA region (non EAC countries) were reported by companies in Kenya and Rwanda while the rest of the EAC countries reported nil. SADC region (Non COMESA/EAC countries) was reported as a source of imports by companies in all the five EAC countries, with most of imports coming mainly from South Africa. Key importers under this economic block are Kenyan and Tanzanian businesses who reported imports at 18% and 17% respectively. Table 4.6: Source country Import chain % share of imports from source country Burundi Kenya Rwanda Tanzania Uganda EAC 43% 6% 32% 4% 22% COMESA 0% 8% 3% 0% 0% SADC (Non COMESA/EAC countries 7% 18% 7% 17% 4% Europe 7% 14% 7% 14% 11% Rest of the World 43% 54% 51% 75% 63% If the EAC Customs Union were to reverse the above trend in favour of intra-regionally sourced imports, it is imperative to understand factors behind decisions by companies when sourcing products from their preferred sources. The survey endeavoured to address this paradigm by seeking to establish critical factors buyers/importers consider when sourcing products In response, businesses pinned down product quality as the most important factor in deciding where to source imports. Cost of product was the second consideration while the others are summarized in the table below. Table 4.6: Critical factors for buyer/importer to source the products Critical factors for buyer/importer in sourcing of product EAC country: Figures are % share of the specific factor in total determinant factors in decision on souring of product Kenya Tanzania Uganda

18 Critical factors for buyer/importer in sourcing of product EAC country: Figures are % share of the specific factor in total determinant factors in decision on souring of product Kenya Tanzania Uganda Product quality 28% 26% 13% Availability of product 17% 18% Pre-inspection 3% 6% Security during shipping/transportation Proximity to the market/transport logistics 3% 6% 25% 62% Local taxes 3% 6% SPS (Veterinary/Health clearance/authorization) Availability of local financing (trade finance) 9% 6% 3% Cost of product 22% 6% 13% Import duty 6% 13% 6% Total 100% 100% 100% The above Import chain analysis shows huge potential for intra-regional trade. Extra regional imports, which in this case is defined as imports from outside the three economic blocks (EAC/COMESA/SADC) provides a proxy for this potential, which on average works to about 57%. It is apparent that regional market building should be a key preoccupation of for EABC and EAC. There are merits in pursuing strategy through the on going EAC/COMESA/SADC harmonization because, as can be seen from this analysis, businesses in the EAC region are actually trading right across the three regional blocks. Harmonization of trade and regulatory policies is one most critical factor to ensure that businesses in the region capture the market. Such a move will certainly stimulate investments as businesses respond to trade opportunities created by the EAC Customs Union trade regime. To turn to the side of the clientele base, EAC import chain is dominated by traders/distributors, as manufacturers take the second position. Other clients for the import chain vary from country to country and include transporters, individuals, agents, NGOs and cooperatives. The foregoing is captured in the following table.

19 Table 4.7: Clientele base for EAC import chain EAC country: Figures are % share imports from the specific Client for EAC import chain client Burundi Kenya Rwanda Tanzania Uganda Framers 18% Manufacturers 25% 18% 20% 50% Traders/Distributors 50% 46% 40% 50% 60% Transporters 9% Individuals 9% 20% Agents 20% NGOs 25% Cooperatives 20% Total 100% 100% 100% 100% 100% Predominant target market for exports The predominant export market for businesses in the EAC is the respective domestic market accounting for an average of 57% and ranging from 23% in Rwanda to 85% in Tanzania. Table 4.8: Business activities among respondent companies EAC country: Figures are % share of business activity in Business Activity total respondent companies business activities Burundi Kenya Rwanda Tanzania Uganda Domestic production chain 50% 74% 23% 54% 85% Intra-EAC export chain 10% 17% 77% 1 15% 7% Extra-EAC export chain 40% 9% 0% 31% 8% Total 100% 100% 100% 100% 100% This illustrates high tendency for companies in the region to focus production for domestic rather than export market. There is huge but latent export potential within the regional market which can be exploited by creating awareness among companies. 1 This figure includes extra-eac export chain.

20 5 IMPLEMENTATION OF THE EAC CUSTOMS UNION 5.1 Awareness of EAC Customs Union The level of awareness on the existence of the EAC customs union is quite high among the business community in the region. The level was reported at 100% in Uganda, 92% and 88% in Tanzania and Kenya in that order. However, level of awareness in Burundi and Rwanda is much lower estimated at 50% and 40% respectively. This underscores immediate need for an EAC Customs Union publicity and awareness program targeting businesses in the two countries. 5.2 Information on EAC Customs Union Availability and content of information on EAC Customs Union Responses on availability and content of information available to businesses on the Custom Union vary across the EAC partner States as table 5.1 depicts. Table 5.1: Availability and content of information on EAC Customs Union EAC country: Figures are % of respondent companies Form/type of information received indicating receipt of the specified information or having not received any information Burundi Kenya Rwanda Tanzania Uganda EAC Customs Management Regulation 25% 27% 25% Rules of Origin/Certification of Origin 11% 9% 19% CET 31% 9% 19% General Information on EAC Customs Union Implementation News Bulletin 6% Information on NTBs 3% 26% 6% 33% 19% Harmonization of seed treaty 27% How to join EAC 38%

21 Have not received any information 38% 67% 13% This analysis demonstrates that availability of information on EAC Customs Union instruments among businesses is rather low and at worst unavailable as brought out by some companies in Burundi, Rwanda and Uganda. This outcome heightens the need for EABC to come up with a strategy for outreach to the business community in the region. This awareness will stimulate the business community to take advantage of the regional integration Source of business information on EAC Customs Union The business community in the EAC region gets information on the Customs Union through different, howbeit varied sources as shown on the table below. Table 5.1: Source of information about EAC Customs Union Source of information on EAC Customs Union EAC country: Figures are % of respondent companies accessing the information on EAC CU from the identified source. Burundi Kenya Rwanda Tanzania Uganda Association of Manufacturers 2 45% 23% 50% EAC website/eac Secretariat 21% 25% 19% Business workshops/meetings on EAC 50% 7% 17% 13% Agents/Research interviews 7% 3% Media (Newspapers and Television) 50% 7% 33% 13% 8% Revenue Authorities 7% 32% 25% Distributors 3% Government 3% 25% EABC 14% Total 100% 100% 100% 100% 100% 2 (KAM in Kenya, UMA and PSFU in Uganda and CTI and TAM in Tanzania)

22 A further exploration on the ranking of the different sources of information in terms of importance to the business community yielded the following results shown on the following table. Table 5.2: Main sources of information on EAC Customs Union Source of information on EAC Burundi Kenya Rwanda Tanzania Uganda customs union Association of manufacturers 16% 25% 15% 0% 21% Internet 5% 12% 6% 23% 8% Newspapers 0% 11% 0% 12% 10% EAC secretariat 0% 9% 0% 4% 4% Revenue authorities 0% 9% 4% 4% 17% Radio 0% 2% 0% 8% 2% Television 0% 2% 0% 8% 2% Media 16% 0% 15% 0% 0% Customers 6% 3% 0% 8% 0% Workshops 11% 2% 0% 0% 0% Chamber of commerce 16% 5% 9% 0% 0% Ministry of trade 11% 0% 9% 0% 0% Ministry of regional development 11% 0% 0% 0% 0% Ministry of agriculture 0% 0% 11% 0% 0% Private sector Foundation 0% 0% 17% 0% 10% EABC 0% 2% 0% 4% 12% others 8% 18% 14% 29% 14% Total 100% 100% 100% 100% 100% In Kenya, the five most important sources of information in descending order are: Kenya Association of Manufacturers (KAM), internet, newspapers, EAC secretariat and Revenue Authority. In Burundi, Chamber of Commerce, Burundi Manufacturer Association, the media, Ministry of Trade, Ministry of Regional Development and workshops are the five most important sources in that order. In Uganda, Uganda Association of Manufacturers, Revenue Authority, East Africa Business Council and Private Sector Foundation were the five most important sources. Internet, newspapers, radio, television and customers were the important sources of information in Tanzania

23 while in Rwanda, private sector, media, association of manufacturers, ministry of trade and the chamber of commerce emerged as the most important source of information. Further investigation into the issues of preference on the source of information established the following result which could give guidance when developing a strategy for dissemination of information on the Customs Union. Table 5.3: Preferred way of obtaining information on EAC Customs Union Preferred way of obtaining information on EAC Customs Union EAC country: Figures are % of respondent which indicated the preferred way of obtaining information on EAC CU Burundi Kenya Rwanda Tanzania Uganda Association of Manufacturers 20% 21% 50% 10% 20% EAC website/ 13% 75% 15% 41% 46% Media (Newspapers and Television) 27% 13% 10% 8% 14% Business workshops/meetings on EAC 26% 8% 7% Revenue Authorities 8% EAC Secretariat 7% 4% 15% 8% Periodicals/handouts 33% 13% Government 7% 10% Total 100% 100% 100% 100% 100% To conclude the foregoing, it is noted that business associations have played a vital role in disseminating information on the Customs Union particularly in Kenya and Uganda, and to a lesser extent Tanzania. To this extent, strategies for enhancing information dissemination can build upon the success stories in Kenya and Uganda and should aim at strengthening dissemination capacities of the business associations there. Further, EAC should explore how to popularize its website as a source of information, especially because it transcends beyond organizations that are served by private sector associations. Dissemination of information could also be speeded up if respective governments played a more active role than is the case at the moment.

24 5.3 Views on whether EAC Customs Union has been successfully implemented One of the questions posed by the survey to respondent companies was: Whether the EAC Customs Union had been successfully implemented? The response was overwhelmingly in the affirmative rated at 79% for Kenya, 84% and 93% for Tanzania and Uganda, respectively. Table 5.4: Responses on whether EAC Customs Union has been successfully implemented. Response on the question whether the EAC Customs Union has been successfully implemented Figures are % of companies responding to the question on implementation of the Customs Union Kenya Tanzania Uganda Strongly Agree 54% 8% 13% Agree 25% 76% 80% Disagree 13% 8% 7% Strongly disagree 8% 8% 0% Total 100% 100% 100% The survey sought to obtain content to the above question by establishing awareness on the difference between intra-eac tariffs and CET for intra-regionally sourced products and extra-regionally sourced products. In Kenya 75% are aware while 25% are not. In Tanzania, 82% are aware while 18% are not aware. In Uganda the scenario is almost similar to that in Tanzania where 93% are aware and only 7% are not 5.4Relevance of the EAC Customs Union tariff structure and principles on businesses

25 5.4.1 Common External Tariff structure (CET) The question on relevance of EAC custom union s tariff structure and principles was posed to respondent and the following responses emerged. The CET structure is the most relevant Customs Union feature to businesses in the region, a position supported by 71% of respondents in Kenya, 55% and 77% in Tanzania and Uganda respectively. Attractive CET aspects to companies are: - zero tariff rating (raw material and capital goods), free movement of goods, enhanced market access and lower rates on raw material sourced locally. Table 5.5: Responses The relevance of CET to the businesses Responses on positive aspects of CET Responses in % Kenya Tanzania Uganda Zero tariff & free movement Improved market share Source material at a lower rate Protects markets Sub-total Responses on negative aspects of CET Not relevance Discourage business activities 6 Don t know 6 Negligible Other 9 8 Sub-total Total There is, therefore, overwhelming support for the EAC CET structure from the business community. The business community is not supportive of exceptions to full implementation of the CET, as illustrated by views expressed on the question:

26 Do you think that the changes in the CET allowing individual member countries to stay the implementation of the CET (i.e., to occasionally suspend implementation of CET for certain products) are useful or counterproductive? In Kenya, 50% of businesses think changes in CET are counterproductive, while 38% think it is useful. In Tanzania 21% think that this is useful while 57% thought this is counterproductive. In Uganda, 20 % think it is useful while 67% thought it is counterproductive. Reasons given in support of the argument that the changes to CET may be counter productive include: - Erosion of goodwill of the EAC Customs Union among businesses Creation uncertainty Undermine planning for production, which is currently premised on the existing CET Harm exports, if CET review raises duties of raw material/intermediate goods It is imperative that future CET reviews, provided for in the EAC customs Union Protocol, be carefully managed to take care of sensitivities raised by the business community. Such reviews should safeguard against uncertainties which if unchecked may lead to undermining of EAC Customs Union s goodwill. One way to achieve this is to allow for transitional periods after reviews to give companies time for production planning Elimination of intra EAC tariffs Elimination of intra-eac tariffs is very relevant to the regional business community, a position supported by 79% respondents in Kenya, 87% and 81% in Tanzania and Uganda following that order. Popular attributes includes increased trade and enhancement of market access within the EAC region. Table 5.6: Responses Business views on the relevance of the elimination of intra-eac tariffs Responses in % Kenya Tanzania Uganda Responses on positive aspects of CET increase in trade 50% 50% 55% market access rated 29% 37% 26% Sub-total 79% 87% 81% Responses on negative aspects of CET Punitive/not relevant 21% 13% 9% Total 100% 100% 100%

27 5.4.3 EAC common clearance procedures Companies responded overwhelmingly in support of EAC common clearance procedures with 82% in Kenya, 80% in Tanzania and 75% Uganda answering in the affirmative. Beneficial features include; speed and efficiency, enhancement of trade; and reduction of cost of doing business EAC Customs Union features with the most significant impact on Businesses Responses on the significance of EAC Customs union features (CET, elimination of internal tariffs and introduction of EAC Common Clearance Procedures) varied across the three EAC Countries. In Kenya, the most significant impact arises from internal tariff elimination, particularly the zero rating, followed by CET and EAC common customs clearance procedures. In Uganda, CET and EAC common clearance procedure were rated evenly at 36%, followed by internal tariff elimination. In Tanzania, CET was cited as having the highest impact at 50%, followed by the internal tariff elimination and EAC common clearance procedures at 29% and 21% respectively. Table 5.7: Responses Areas with the most significant impact on the businesses Responses in % Kenya Tanzania Uganda CET 32% 36% 50% Internal tariff elimination 42% 28% 29% EAC Common clearance procedure 26% 36% 21% Total 100% 100% 100% Despite slight differences in terms of significant of each feature among the states, impact on businesses was quite similar, highlighted as:- Enhanced market access and increased competitiveness Faster border clearance, which is expected to contribute to increased market share Increased economic activities Usefulness of the principle of asymmetry to the business

28 There is an overwhelming support for the principle of asymmetry among the business community in the region. In Kenya, 73% of businesses agree with the principle, while 27% do not. In Tanzania 67% support the principle while 33% are against it. Similar figures for Uganda are 75% for and 25% against. There is, however room for improving awareness of this principle as views from about 31% of Kenyan companies termed it as unfair, while 40% in Tanzania and 14% in Uganda felt that the principle had not being implemented Awareness of the existence of duty drawback schemes Awareness of the existence of duty drawback scheme is quite high in Tanzania and Uganda, where level of awareness was at 75% and 86% respectively. In Kenya, level of awareness was surprisingly very low at 32%. About 63%, 40% and 18% of the respondent companies in Kenya, Tanzania and Uganda, respectively reported having got refunds under the scheme. In view of the results in Uganda and Kenya, there is need for an awareness/education program on the duty drawback scheme encompassing all its features. It is also necessary to address the concern on the low level of refund, in keeping with the objective of the scheme, to enhance competitiveness of beneficiary companies. 5.5 Impact of the EAC CU implementation on businesses Overall benefit derived by companies from EAC free movement of goods among EAC members Free movement of goods within the EAC has been a major boost to businesses, a position supported by 77%, 73% and 46% of companies in Uganda, Kenya and Tanzania respectively. Businesses cited the following benefits derived from the free movement of goods: Goods move faster and more efficiently Reduced clearance requirements

29 Benefiting under the zero tariff regime Shorter lead times in supplying customers in the EAC Increased competition Expansion of business Companies reported expansion of businesses since the launch of EAC Customs Union in Business entities in Kenya reported about 86% business expansion since 2005, while in Tanzania and Uganda the same was reported at 78% and 60% respectively Business turnover Uganda has benefited most in terms of increase in export to the EAC region, a position supported by 48% of the surveyed companies. Kenya and Tanzania reported much lower figures estimated at 28% and 25% respectively. Intra-EAC trade activities, however, account for an insignificant proportion of companies annual turnover. In Kenya, Tanzania and Uganda, 74%, 71% and 83% of respondent companies reported intra-eac trade activities as accounting for 0% to 25% of their total annual turnover. Despite this position, 93%, 64% and 80% of companies in Kenya, Tanzania and Uganda, indicated EAC Customs Union as an important factor in the coming years in sustenance of their business operations. Annual turnover of respondent companies seems to be largely driven by domestic trade activities. In Kenya, Tanzania and Uganda, 91%, 65% and 86% of companies reported domestic trade activities as accounting for 51% to 100% of their total annual turnover. On the other hand, extra-eac trade activities were reported as having minimal effects on annual turnover of the respondent companies, as shown in the table below. Table 5.8: Annual business turnover dependent on intra-eac, extra-eac and domestic trade activities Per cent of business annual turnover which depends on Intra-EAC trade activities Responses in % Kenya Tanzania Uganda 0% to 25% 74% 71% 83% 26% to 50% 17% 22% 17% 51% to 100% 9% 7% 0%

30 Total 100% 100% 100% Per cent of business annual turnover which depends on Extra-EAC trade activities 0% to 25% 89% 56% 75% 26% to 50% 6% 0% 100% 51% to 100% 5% 44% 0% Total 100% 100% 100% Per cent of business annual turnover which depends on domestic trade activities 0% to 25% 9% 29% 14% 26% to 50% 0% 7% 0% 51% to 100% 91% 65% 86% Total 100% 100% 100% Given the liberal trade regime which EAC Customs Union has introduced in the region, a higher impact on business turnover would have been expected, especially in Kenya and Tanzania. In view of this theoretical expectation, this finding illustrates existence of unexploited intra-eac export potential at firm level. To unlock this potential, it is necessary for an analysis at product level to be commissioned to show the EAC market potential and to determine impediments and; devise strategies for businesses to apply in order to capture the market potential Investments The domestic market is the primary source of investment capital for all the EAC states with the exception of Uganda with 80%, 71%, 75% and 77% of total investment capital in Burundi, Kenya, Rwanda and Tanzania respectively, sourced locally. Table 5.8: Source of investment capital % total respondent companies Source Burundi Kenya Rwanda Tanzania Uganda Domestic versus external sourcing of investment capital Domestic 80% 71% 75% 36% 77%

31 External 20% 29% 25% 64% 23% EAC versus extra EAC sourcing of investment capital EAC 50% 96% 75% 93% 80% Extra EAC 50% 14% 25% 7% 20% Analysis of EAC versus Extra-EAC sourcing of investment capital, shows EAC region as the predominant source accounting for 50%, 96%, 75%, 93% and 80% of externally sourced investment capital in Burundi, Kenya, Rwanda, Tanzania and Uganda respectively. EAC Customs union has not had a major impact on intra-regional investments. Only companies operating in Kenya (33%) reported having been able to attract some capital from the region while those operating in Tanzania and Uganda had not. This position is further corroborated by the insignificant share of EAC as a source investment capital of the respondent companies. The financial markets in the EAC regional should therefore take this gap as an opportunity to stimulate production and trade development in the region The most attractive aspects of EAC customs preferences to the businesses The most attractive aspects of the EAC customs preferences are; elimination of intra-eac tariffs and CET, which combined accounted for 78% in Kenya, 82% and 90% in Tanzania and Uganda respectively. Table 5.10: Most attractive aspect of EAC customs preferences Aspect of the EAC Customs Union attractive to businesses Responses in % Kenya Tanzania Uganda Elimination of intra-eac tariffs 43% 36% 40% CET 35% 46% 50% EAC common customs clearance procedures 11% 18% 10% Removal of NTBs 11% Total 100% 100% 100%

32 5.5.6 The least attractive/most problematic aspects of EAC customs union Responses on aspects of the EAC Customs Union which businesses considered least attractive or problematic varied across the EAC partner States implementing the Customs Union. There was unanimity that NTBs were making the EAC Customs Union unattractive, a position cited by 25% of companies in Kenya and Tanzania and; 23% in Uganda. Table 5.11: The least attractive problematic aspect of EAC Customs Union The least attractive/most problematic aspects of EAC customs union Responses in % Kenya Tanzania Uganda Principal of asymmetry 10% 15% Non tariff barriers 25% 25% 23% Lack of common standards for the region 15% VAT & different tax regime in operation 5% 33% Long sensitive list 25% 8% CET/Import Duty 5% 17% 15% Application of rules & origin 15% 25% 8% EAC common custom clearance procedures 8% Others (Intra extra export chain, Lack of information) Total 100% 100% 100% 23% These findings are a pointer to the need for EAC to address concerns which the business entities have in regard to: EAC sensitive list Application of the EAC rules of origin, and The CET structure EABC may wish to explore this further in preparation for the review of the EAC trade regime as envisaged in the EAC Customs Union protocol, by year Recommended measures to address non implementation of the EAC Customs Union

33 5.6.1 Reforms governments should undertake to compensate for losses resulting from non-implementation of EAC customs union The business community proposed wide ranging measures to address losses resulting from non-implementation of the EAC Customs union. Specifically the following were proposed: - export compensation, review of tariffs, and provision of rebate/insurance among others as highlighted by the table. Table5.12: Proposed reforms to governments to address losses resulting from nonimplementation of the EAC Customs union Reforms to address losses resulting from non implementation of the EAC Customs Union Responses in % Kenya Tanzania Uganda Export compensation 42% 30% 14% Improvement in infrastructure 19% Review of EAC tariffs of concerns to businesses in the EAC region 8% 30% 14% Provision of rebate and insurance cover 23% 30% 43% Payment of interest/penalties 8% 15% Government enforcement of the agreed Customs Union measures 10% 14% Total 100% 100% 100% Proposed measures to government to guarantee full implementation of the EAC Customs Union The business community proposed the following measures to governments to guarantee full implementation of the Customs Union: implementation of the EAC Customs Union Protocol, Implementation of the NTB monitoring mechanism, elimination of the NTBs and harmonization of customs operations. Table 5.13: Proposed measures to governments to ensure full implementation of the EAC CU

34 Measures proposed by the respondent businesses on what the Government should do to ensure full implementation of the EAC CU Implementation of the Treaty (Customs Union Protocol) Removal of all tariff barriers elimination of intra-eac tariffs/liberalize intra-regional trade Implementation of NTB mechanism as a means of elimination of NTBs Harmonize Customs operations and strengthen Revenue Authorities Periodic reports on the performance of EAC Trade and Customs Union implementation Responses in % Kenya Tanzania Uganda 41% 18% 30% 18% 27% 27% 18% 10% 9% 37% 30% Sensitization of the stakeholders on EAC CU 30% Total 100% 100% 100% 5% Proposed measure to EAC to mitigate losses resulting from nonimplementation of EAC customs union The following measures were proposed to EAC Secretariat to mitigate losses arising from non implementation of the Customs Union:- Enforcement of the Customs Union Protocol, proposed by 24% and 14% businesses in Kenya and Tanzania respectively. Tracking and monitoring effectiveness of implementation of specific Customs Union requirement in collaboration with private sector. This measure was proposed by 35% and 14% businesses in Kenya and Tanzania respectively. Secure reforms in trade facilitation system to accommodate the changes foreseen in the EAC Customs Management Act, proposed by 18% and 29% businesses in Kenya and Tanzania respectively. Capacity building and empowerment of the public and private sector on matters of the EAC Customs Union implementation, proposed by 6%, 29% and 25% businesses in Kenya, Tanzania and Uganda respectively. Table 5.14: Proposed measures to EAC secretariat to mitigate losses arising from nonimplementation of EAC customs union Initiatives or interventions which the EAC secretariat should Responses in % undertake Kenya Tanzania Uganda Enforcement of Customs Union Law 24% 14% Track effectiveness of implementation of each Customs Union requirement working with the private sector to determine 35% 14%

35 Initiatives or interventions which the EAC secretariat should Responses in % undertake Kenya Tanzania Uganda losses/implied losses and use the finding to facilitate lobby for implementation of the specific requirement. Secure reforms in trade facilitation system to accommodate the changes foreseen in the EAC Customs Management Act 18% 29% Capacity building and empowerment of the public and private sector on matters of the EAC Customs Union implementation 6% 29% 25% Introduce penalties and sanctions 6% 75% Upgrade Secretariat to a Commission 6% Other 5% 14% Total 100% 100% 100% Empowerment of EAC secretariat to strengthen regional integration Businesses in the region perceive empowerment of EAC Secretariat as one of the strategies towards enforcement of EAC regional integration. Proposed empowerment measures included: - Power shift of some of the powers from governments to the secretariat, proposed by 44%, 70% 38% businesses in Kenya, Tanzania and Uganda, respectively Make the secretariat a commission with full funding and linked to private sector. This was a proposal from 17%, 13% businesses in Kenya and Uganda respectively Enhanced commitment from Partner States, which was proposed by 17% and 38% of respondent businesses in Kenya and Uganda, respectively Measures by the business community and lobby groups to hold governments accountable for non-implementation of EAC customs union. The following measures were proposed to hold governments accountable for non implementation of the EAC Customs Union: - Adoption of EAC harmonized standards, proposed by 13% and 10% of respondent companies in Kenya and Uganda, respectively Introduction of a legislation to deter non implementation of the Customs Union, proposed by 13% and 7% businesses in Kenya and Tanzania respectively. Demonstrate to governments strong correlation between private sector gains from implementation of Customs Union and economic development, proposed by 27%, 13% and 20% businesses in Kenya, Tanzania and Uganda respectively.

36 Quantify the loss of business opportunity, proposed by 13% of business opportunities in Kenya. Strengthen business associations and lobby groups to be proactive and petition governments in event of non implementation of the EAC Customs Union. This was proposed by 20% of respondent companies in Uganda How the business community and lobby groups can hold EAC secretariat accountable for non-implementation of EAC customs union. Proposals on how business communication and lobby groups could hold EAC Secretariat accountable for non implementation of the Customs Union came from businesses in Tanzania, where 33% of proposed issue based round-table with the private sector, while 33% proposed need for business community and lobby groups petitioning the governments to empower the Secretariat Trade remedies and the establishment of EAC Committee on Trade Remedies The survey revealed that in all the three countries implementing the EAC Customs Union Protocol, there were some companies which had requested for the application of trade remedies. In Kenya 30% of businesses had requested for the trade remedy, while in Tanzania and Uganda 63% and 40% of businesses had applied respectively. Request for application of trade remedies addresses the following threats: - Counterfeit goods Increase of duty on some products Countervailing measures on some brands and exports Dumping of sub standard goods in the market In Kenya and Uganda, none of the respondent companies had been subjected to application of trade remedies. In Tanzania, however, 40% of the respondent companies indicated having been subjected to application of trade remedies. The explanation given was that of anti-dumping of sub-standard goods into the market. Usefulness of EAC committee on Trade remedies In all the three countries, establishment of EAC committee to handle trade remedies was supported by all companies. Reasons given in support of this idea included: - Arbitrate trade dispute Imposition of strong penalties on counterfeit

37 Help protect market share Stop the dumping of the substandard goods 5.7 Expected effects of EAC Customs Union on Businesses in Burundi and Rwanda The survey sought to establish expectations from the business community on the envisaged effects of the EAC Customs Union in Rwanda and Burundi. This was accomplished by seeking views on various features of the EAC Customs Union. Results of this exercise are captured below under respective headings The relevance of the CET The EAC CET is expected to improve competitiveness and provide opportunity for importation of raw material and capital goods from outside the EAC, especially for products which are currently attracting import duty. In Burundi, 40% of those surveyed expected the EAC CET to encourage them to import from countries outside the EAC, while 60% indicated that the EAC CET will introduce competitiveness. In Rwanda, 33% of companies expects the EAC CET to stimulate importation from outside the EAC region, while the rest, 77% viewed the CET as being instrumental in enhancing competitiveness. Relevance of elimination of Intra-EAC tariffs to the Business. Among the key expectations from businesses in Rwanda and Burundi on elimination of intra-eac tariffs is: ease of circulation of products within the EAC and enlarged regional market for companies targeting the EAC market. In Burundi, 83% of companies expressed expectation that elimination of intra-eac tariffs will ease circulation of goods, while 17% were looking forward to duty relief. In Rwanda, 45 % of companies expect elimination of intra-eac tariffs to ease the circulation of products in the EAC, while 36% of the companies are looking forward to a lowering of production costs and increased competitiveness. An enlarged regional market is the dream of 11% of the respondent companies. Relevance of EAC common customs clearance procedures to the Business

38 The business community in the two countries has high expectation in regard to the introduction of EAC common clearance procedures. There are varying reasons adduced in support of this position. They include: - Transparency in customs clearance procedures Reduced time wastage Simplify export and port procedures 5.8 Harmonization EAC, SADC and COMESA Trade Regimes Harmonization of EAC, COMESA and SADC trade regime is highly recommended by the business community. In Kenya, 96% of companies supported this idea. In Tanzania and Uganda, the idea was given a nod by 93% and 80% respectively. Reasons behind this interest include; free trade between the three blocks, harmonization of documents, growth and expansion of the target regional market, among others. Table 5.15: Envisaged effects of harmonization of EAC, COMESA and SADC trade regimes Envisaged effects of harmonization of EAC, COMESA and SADC trade regimes Elimination of differences on various aspects of EAC, COMESA and SADC trade regimes amongst the partner states Responses in % Kenya Tanzania Uganda 25% 41% 35% Free trade across the three regional blocks 25% 43% 22% Growth & expansion of the market 25% 8% 36% Increased competition 25% 8% 7% Total 100% 100% 100%

39 NON TARIFF BARRIERS (NTBS) FACED BY BUSINESSES WHILE TRADING IN EAC 6.1 Lack of common transit regime Lack of a common transit regime is a major source of concern to the business community in the region. In Tanzania, all the respondent companies cited lack of a transit regime as a critical gap in deepening intra-regional trade. In Uganda and Kenya, 93 and 90% of the respondent companies also expressed similar sentiments. In Kenya, businesses felt that the establishment of common transit regime will save time and resources, a position supported by 27% of the business surveyed. Others (13%) felt that the establishment of the regime will level the playing ground for transporters leading to increase in sales. In Tanzania 21% of the respondents said that customs law are different in member countries while 14% said that lack of such regime has increased the cost of doing business. In Uganda 20% of businesses were of the view that such a regime would create a level playing ground which in turn would lead to increase in sales (13%). They feel that lack of transit procedures makes the cost of doing business high (13%). 6.2 NTBs Awareness and Effectiveness the Monitoring Mechanism Type of NTBS that affect businesses within the EAC region Businesses operating within the EAC region are well aware of NTBs that affect business their operations. These NTBs and their severity varied right across the five EAC Partner States. In Kenya, poor infrastructure, port congestion and high cost of doing business are the main challenges affecting businesses cited by over 46% of respondents. In Tanzania, port congestion and the customs clearance procedures were cited by over 46% of the respondents. Government bureaucracy and road blocks/weigh Bridge are the main challenges in Uganda. In Rwanda and Burundi, administrative procedures, delays at the port and border point, government regulation on exports and the customs clearance procedures are the main NTBS respectively. Table 6.1: Type of NTBS that affect businesses within the EAC region NTB Burundi Kenya Rwanda Tanzania Uganda

40 NTB Burundi Kenya Rwanda Tanzania Uganda Poor infrastructure 0% 23% 4% 9% 10% Port congestion 4% 15% 14% 23% 2% High cost of doing business Customs clearance procedures Weigh bridge and road blocks Administrative procedures at the border points 4% 8% 4% 5% 2% 9% 2% 0% 23% 7% 4% 0% 4% 5% 33% 22% 2% 21% 5% 2% Delay at border points 4% 0% 11% 0% 0% Government regulation on exports 9% 2% 0% 0% 2% Others 44% 48% 32% 30% 42% Total 100% 100% 100% 100% 100% Effects of the NTBs on business operations NTBs pose several challenges to the operations of businesses in the EAC. In Kenya 71% of businesses experience many negative effects due to NTBs. These include; escalation in operational cost, loss of market share, delay in clearance, increase in overhead cost and limits in company growth. In Tanzania, escalation of operational cost, delay in clearance and increase in overhead cost are the most significant effects of the NTBS rated by 72% of respondents. Delay in clearance and escalation in operational cost are the most negative effects of NTBs, a position supported by 75% of businesses interviewed, in Uganda. In Rwanda, delays in delivery time and clearance are most significant effects alluded to by 52% of businesses. In Burundi, delay in delivery time, administrative costs and delay in clearance are cited as significant at 67%. Table 6.2: Effects of the NTBs on business operations NTB effects Burundi Kenya Rwanda Tanzania Uganda Escalates operational cost 0% 22% 0% 33% 30% Loss of market share 0% 19% 0% 13% 4% Delay in clearance 27% 11% 20% 17% 45% Increase in overhead expenses 7% 11% 4% 21% 6%

41 Limits growth of the company 0% 8% 4% 4% 0% Delay in delivery time 23% 3% 32% 8% 6% Many administrative cost 17% 0% 0% 0% 0% Others 26% 26% 40% 4% 9% Total 100% 100% 100% 100% 100% Suggested remedial measures to mitigate the NTBs effects Several measures were suggested to address the negative effects of NTBS. Significant measures suggested by business people in Kenya were; creation of a strong political will, improvement in infrastructure, reduction in tax for goods, adoption of common terms and conditions and harmonization of the clearance procedures. These views were supported by 53% of the survey respondents. In Tanzania, 50% of businesses cited improvement in infrastructure; and, harmonization of transit regime as most critical measures to address negative effects of NTBS. Remedial measures suggested by responding businesses in Uganda were, the need for elimination of road blocks, improvement in customs clearance, harmonization of the transit regime and the improvement in infrastructure were cited by 72% of businesses. In Burundi, introduction of one border clearance post and training of customs officials were the measures given to mitigate the negative effects of NTBs, while in Rwanda 29% of businesses suggested introduction of a common border clearance and port efficiency as necessary measures. Table 6.3: Suggested remedial measures to mitigate the NTBs effects Remedial measure Burundi Kenya Rwanda Tanzania Uganda Political will 0% 13% 0% 7% 0% Improve infrastructure 4% 8% 4% 21% 10% Adopt common terms and conditions 0% 8% 0% 7% 0% Reduce tax on goods 0% 8% 0% 0% 3% Harmonize clearance procedures within the EAC 0% 8% 0% 0% 21% Enforce the law 0% 5% 0% 7% 0% Harmonize transit regime 0% 5% 4% 0% 15% Capacity building 13% 5% 4% 29% 0%

42 Remedial measure Burundi Kenya Rwanda Tanzania Uganda Good governance 0% 5% 0% 7% 5% Reduce electricity charges 0% 5% 4% 0% 0% Eliminate road blocks 4% 5% 4% 0% 26% Have a common clearance border post 17% 0% 21% 0% 0% Improve port efficiency 4% 0% 4% 0% 3% Adopt EU system of cargo clearance4% 0% 8% 0% 0% Others 54% 25% 22% 26% 17% Total 100% 100% 100% 100% 100% Awareness on existence of NTB monitoring mechanism and its effectiveness In recognition of the adverse effects that NTBs had on intra-regional trade in the EAC, the EAC Partner States have launched NTB monitoring mechanism. The survey sought to establish awareness of this mechanism among respondent business companies. The findings indicate that an overwhelming number of businesses in the region are not aware of the mechanism. In Kenya, 82% of the respondents were unaware; while in Tanzania and Uganda 81% and 53% of the respondent companies, respectively, were unaware. In Burundi and Rwanda, all respondents supported the idea of an NTB monitoring mechanism, in response to the survey question on their view on the need for NTB monitoring mechanism. Effectiveness of the mechanism was rated as slow, judging by responses from respondent companies. In Kenya, 67% of the respondents said the monitoring mechanism is very slow with 33% saying it is moderate. In Tanzania, 40% said it is not effective, 20% said it is slow; another 20% said it is moderate with a similar percentage saying it is fast. In the case of companies operating in Uganda, 29% said it is effective 57% said it is not effective with 14 per cent saying it is fast Notification of NTB for removal In Kenya, 35% of businesses had already reported NTBs to the Government, while in Tanzania and Uganda, 42% and 54% of had notified respective authorities on NTBs that

43 needed removal. In Burundi and Rwanda, 50% and 46% of the respondent companies also reported having notified their respective governments on the negative NTBs. In virtually all cases, the results of these notifications were not conclusive because majority of the cases were left in abeyance. In Kenya, 67% said the response was not conclusive, while in Tanzania and Uganda, 50% and 57% respectively also reported the process as having been left hanging. In Burundi, all the surveyed companies gave the view that the system of notification is useful but required improvement. Rwanda s case was different from all the rest of the EAC countries, as 89% reported the system as being useful Business Communities views on how reforms on customs clearance procedures, infrastructure improvement, reduced subsidies and improved credit facilities would help address the main traditional NTBs. i) Customs reform to improve export procedures can help address traditional NTBs. Customs reforms will help address delays experienced at the border points, ease clearance process (through simplification of customs procedures), help in the rationalization of the roles of trade facilitation institutions (primarily, Customs, Ports Authorities, and Bureau of Standards), reduced transaction costs and enhance competitiveness of business. The table below gives businesses views on these issues from different parts of the region. Table 6.4: Effects of customs reform in addressing main traditional NTBs How customs reform might help address main traditional NTB Response in % Burundi Kenya Rwanda Tanzania Uganda Faster clearance at border points 23% 33% 68% 8% 17% Simplification and harmonization of customs procedures 11% 36% Liberalization of intra-regional trade 38% 11% 32% 8% Computerization of customs clearance process Synchronization between Revenue and Ports Authorities, and Standards Bureaus 11% 17% 11% 8% Simplification of export procedures 21% 8% 66% Averting of bureaucracy 8%

44 Reduction in transaction costs associated with customs clearance of goods Training seminars on customs clearance procedures 8% 8% Make it easy to comply with rules 8% Trigger increase in production 8% Increase in returns 8% Increase competitiveness between businesses 16% Total 100% 100% 100% 100% 100% 8% ii) Infrastructure reform The salient contribution of infrastructure reform to resolving traditional NTBs vary across the EAC countries, as expected. These include reduction in overhead cost, freight costs and cost of doing business and improved delivery time, among others. Table 6.5: How Infrastructure reform might help address main traditional NTB How Infrastructure reform Response in % might help address main traditional NTBs faced by Burundi Kenya Rwanda Tanzania Uganda businesses Reduction in overhead cost 0% 5% 23% 20% 0% Reduction in freight costs 17% 40% 24% 0% I0% Reduced cost of doing business 0% 20% 0% 0% 30% Improved delivery time 67% 15% 23% 20% 60% Improvement on roads 0% 10% 23% 40% 0% Vehicle axle load to be uniform in all EAC Partner states 17% 10% 0% 20% 0% Total 100% 100% 100% 100% 100% iii) Reduction of the costs of shipment Reduction in shipment cost is anticipated to lead to reduced production costs, increased profits, lower prices of goods among other benefits, as listed in the table below. The key challenge is to determine how shipment costs can be reduced. For intra-regional trade,

45 improved road, rail and oil/gas pipeline network will encourage more players in the transport sector. This would trigger competition and reduced prices. Table 6.6: Reduction of the costs of shipment How reduction or subsidizing Response in % the costs of shipment might help address main traditional NTBs faced by businesses Burundi Kenya Rwanda Tanzania Uganda Reduction in production cost 20% 10% 29% 0% 0% Increased profits 20% 10% 29% 0% 20% Lower prices of goods 60% 20% 0% 0% 0% Reduction in shipping cost 0% 0% 29% 0% 0% Reduction in cost of inputs 0% 10% 13% 0% 20% Reduction of freight cost 0% 20% 0% 50% 10% Enhance cross border trade 0% 20% 0% 0% 10% Import substitution 0% 10% 0% 25% 0% Reduction of bonds and insurance 0% 0% 0% 25% 30% Increase efficiency 0% 0% 0% 0% 10% Total 100% 100% 100% 100% 100% iv) Improved export credit facilities and financial services Reforms in the financial sector, leading to improved export credit facilities and financial services, will trigger reduction in production costs in Rwanda and Burundi according to 60% and 50% of the respondent companies, respectively. In Kenya, Uganda and Tanzania, the expected impact of financial reforms is expansion of capacity and operations. This underscores financial sector reform as one on the key focal areas where EABC needs to focus in search for strategies and policies to increase intra-eac trade. Table 6.7: Improved export credit facilities and financial services How improved export credit Response in % facilities and financial services will address main traditional Burundi Kenya Rwanda Tanzania Uganda NTBs faced by businesses Reduction in production cost 50% 0% 60% 50% 20%

46 Promote exports 50% 33% 20% 0% 0% Expand capacity and operations 0% 67% 20% 50% 80% Total 100% 100% 100% 100% 100%

47 7.0 CONCLUSION AND RECOMMENDATIONS 7.1 Conclusion i) Domestic production chain a) Source of input for domestic production chain Domestic product chain tends to rely on domestic and extra EAC market for inputs. Inputs from the EAC trading block accounts for just 15% of the total input of the domestic production chain. This reflects opportunity for improvement of intra regional trade among the member states. b) External factors impeding businesses from taking full advantage of the EAC Customs Union External factors hindering businesses from taking full advantage of the EAC Customs Union varied across all the five EAC countries. Electricity, fuel and transport cost tops these factors accounting for about 70% of total external factors. c) Capacity utilization Excess capacity is a major hindrance to competitiveness of businesses in the EAC region, with the level of severity varying widely across the Partner States. The threat is more acute in Burundi and Rwanda, where 40% to 50% of companies reported operating at between 10% and 30% capacity. The problem is less severe in the other EAC states where businesses operate at between 81% and 100% in Kenya, Uganda and Tanzania in that order. ii) Trade flow chains a) Intra-EAC Export chain Results of respondent companies intra-eac exports show dependence on EAC market ranging between 14% (Tanzania s exports to Rwanda and Burundi) and 58% (Burundi companies exports to Rwanda. b) Import chain Businesses within the EAC region predominantly import from the rest of the world according to this survey s findings. Share of imports from this category ranges between 43% in Burundi to 75% in Tanzania. Europe is a significant source of imports for EAC countries, with the share in total imports ranging between 7% and 14%. Businesses reported significant imports from the EAC region too. Companies in Burundi, Rwanda and Uganda use considerable imports from the EAC region estimated at 43%, 32% and 22% in that order. Imports from Kenyan and Tanzanian businesses were rather low estimated at 6% and 5% of total imports, respectively.

48 These results indicate potential for companies in the EAC region to exploit intra-eac market opportunities as a destination for exports and source of inputs. iii) Implementation of the EAC Customs Union The level of awareness on the existence of the EAC customs union is quite high among the business community in the region. The level was reported at 100% in Uganda, 92% and 88% of the respondent companies in Tanzania and Kenya in that order. However, level of awareness in Burundi and Rwanda is much lower estimated at 50% and 40% respectively. This underscores immediate need for an EAC Customs Union publicity and awareness program targeting businesses in the two countries. Availability of information on EAC Customs Union instruments among businesses is rather low and at worst unavailable as brought out by some companies in Burundi, Rwanda and Uganda. This outcome heightens the need for EABC to come up with a strategy for outreach to the business community in the region. This awareness will stimulate the business community to take advantage of the regional integration. The response on whether the EAC Customs Union had been successfully implemented was overwhelmingly in the affirmative among 79%, 84% and 93% of respondent companies in Kenya, Tanzania and Uganda, respectively. The business community viewed all the features (CET, elimination of the internal tariffs, Common customs clearance system) of the EAC Customs Union to be relevant. There is an overwhelming support for the principle of asymmetry among the business community in the region. This is evidenced by 73%, 67% and 75% of respondent companies in Kenya, Tanzania and Uganda, respectively. There is, however room for improving awareness of this principle as views from about 31% of Kenyan companies termed it as unfair, while 40% in Tanzania and 14% in Uganda felt that the principle had not being implemented. iv) Impact of the EAC CU implementation on businesses Free movement of goods within the EAC has been a major boost to businesses, a position supported by 77%, 73% and 46% of companies in Uganda, Kenya and Tanzania respectively. Other benefits include: - a) Expansion of business Companies reported expansion of businesses since the launch of EAC Customs Union in b) Business turnover

49 Annual turnover of respondent companies seems to be largely driven by domestic trade activities. In Kenya, Tanzania and Uganda, 91%, 65% and 86% of companies reported domestic trade activities as accounting for 51% to 100% of their total annual turnover. Given the liberal trade regime which EAC Customs Union has introduced in the region, a higher impact on business turnover would have been expected, especially in Kenya and Tanzania. This finding illustrates existence of unexploited intra-eac export potential at firm level. c) Investments The domestic market is the primary source of investment capital for all the EAC states with the exception of Uganda with 80%, 71%, 75% and 77% of total investment capital in Burundi, Kenya, Rwanda and Tanzania respectively, sourced locally. EAC Customs union has not had a major impact on intra-regional investments. The financial markets in the EAC regional should therefore take this gap as an opportunity to stimulate production and trade development in the region. 7.2 Recommendations a) Enhance awareness of EAC Customs Union through: Program for publicity of EAC Customs Union Training on EAC Customs Union trade instruments and regulatory requirements a) Integration of the domestic production chain into the EAC market In order to facilitate exploitation of the opportunities for enhanced intra-eac trade building on the EAC Customs Union, there is urgent need to integrate domestic production chains in to the EAC market. The following strategies may need to be explored by EABC i) Identification of products with intra-eac trade potential and development of a network of buyers and suppliers. The starting point should be EABC member organizations. ii) Mapping of trade and regulatory requirements at national and regional level for each of the products. iii) Mainstreaming any policy/regulatory requirement which may be deemed as inhibiting intra-eac trade for the identified products into EAC policy making organs. iv) Initiate EABC/EAC periodic roundtable to monitor exploitation of the EAC market potential. b) Development of EAC infrastructure Private sector to participate in EAC infrastructure development program focusing on energy, road, rail network, sea Port, air connectivity and oil pipelines.

50 c) Capacity utilization EAC industrial development strategy, should, among other things pick on companies experiencing excess capacity and using EAC market as king pin, devise measures for enhancing utilization of capacity. d) Harmonization EAC, SADC and COMESA Trade Regimes Fast track the harmonization process for the three Trading Blocs namely EAC, SADC and COMESA to address the concerns of multiple membership in accordance with Section 112 of EAC Customs Management Act,2004. e) Operationalize the EAC Customs Union monitoring and evaluation system EAC Secretariat in collaboration with EABC to operationalize the monitoring and evaluation mechanism for tracking implementation of EAC Customs Union. f) EAC NTB Monitoring Mechanism Hasten implementation of the mechanism for identification, monitoring and elimination of Non-Tariff Barriers at the National level. It should be driven by EAC Secretariat in collaboration with EABC. Embark on capacity building for National Monitoring Committees on NTBs g) Investment Capital Financial market in the EAC region needs to respond to the EAC business community s need for investment capital, which is at the moment sourced from domestic markets and financial markets outside the EAC. A clear strategy is needed, building on current initiatives and challenges. EABC, in collaboration with the EAC Secretariat and the financial sector, should consider coming up with such a strategy. h) Recommended measures to address non implementation of the EAC Customs i) Empowerment of EAC secretariat to strengthen regional integration Businesses in the region perceive empowerment of EAC Secretariat as one of the strategies towards enforcement of EAC regional integration. Proposed empowerment measures included: - Power shift of some of the powers from governments to the secretariat, proposed by 44%, 70% 38% businesses in Kenya, Tanzania and Uganda, respectively Make the secretariat a commission with full funding and linked to private sector. This was a proposal from 17%, 13% businesses in Kenya and Uganda respectively Enhanced commitment from Partner States, which was proposed by 17% and 38% of respondent businesses in Kenya and Uganda, respectively.

51 ii) Measures by the business community and lobby groups to hold governments accountable for non-implementation of EAC customs union. Private Sector to be facilitated to participate in the negotiations of EAC to make sure that their interests are taken on board especially in the EAC Common Market. EABC to follow up decisions of Council which affects businesses in the EAC region. (i) Further Work EAC Secretariat and/or EABC to carry out a comprehensive study on the impact of the EAC Customs Union to address gaps in the current study taking into account the provision of the EAC Customs Union Protocol. EAC Secretariat and EABC to come up with time bound action plan for implementation of recommendations. EABC to support in capacity building for Private Sector Business Associations in Burundi.

52 ANNEX 1 East African Business Council ASSESSMENT OF THE IMPLEMENTATION OF THE EAC CUSTOMS UNION Questionnaire for EAC Business Entities Kenya, Tanzania and Uganda Preamble: The EAC Customs Union was established in January Implementation of the Customs Union has started, with some successes and challenges for businesses in the region. The EAC Customs Union protocol mandates the Council of Ministers to ensure that the protocol implementation fulfils its objectives. The EABC as a stakeholder is undertaking this survey to get empirical information on the experiences of the business community in relation to the EAC Customs Union implementation, to forward this to the Council through EAC Secretariat. The objectives of this survey are two-fold: a) to understand opportunities of implementation of the EAC CU and b) to understand the challenges facing EAC exporters, producers and importers under EAC. It is envisaged that this will influence implementation in such a way corrective measures are put in place to mitigate the challenges while successes are maximized.

53 Section 0: Introduction - Profile of Your Company 1). Name of the Company: 2). Job title/position of respondent in the Company: 3). 4). Phone: 5). Physical address: 6). Describe your company s activity chain in each of the following categories [Indicate N/A if firm is not involved in any of the categories listed below]: 6.1). Domestic production chain ( source of inputs, types of clients, year when firm started this line of business): 6.2). Intra- EAC Export chain ( export destinations, types of clients, year when firm started this line of business): 6.3). Extra- EAC Export chain (export destinations, types of clients, year when firm started this line of business): 6.4). Importation chain ( source of imports, types of clients, year when started this line of business):

54 6.4.1). Which of the four activities you have described above predominates your business? [encircle one] intra- EAC export / extra- EAC export / domestic production / Import 7). From your description above (ref to Question 6), are there any critical elements of your operations (excluding NTBs) that are outside your control and are the responsibility of the Government or other entities (such as fuel, electricity, etc)? [please elaborate]: 8). Describe how your total imports have changed since January 2005 [ increasing/decreasing trends, major changes in import source, etc]: 9). Is your company aware of the existence of EAC Customs Union trade preference? [encircle one] Yes / No (if No, skip to Question 10) 9.1). What EAC Customs Union trade preferences is your company currently benefiting from? [Please elaborate]: 10). Is there external capital (i.e., capital coming from outside the borders of your country) invested in your company? [encircle one]: Yes / No [If no, skip to Question 11] 10.1). If yes, approximately what percentage of the company s total capital is external capital from the EAC region? % 10.2). Approximately what percentage of the company s total capital is external capital from outside the EAC region? % 10.3). Has your company been able to attract external capital from EAC region since January 2005 (when EAC protocol was established)? 10.4). Has your company been able to attract external capital from the outside EAC region since January 2005 (when EAC protocol was established)?

55 11). Currently, what is your company s estimated capacity utilization? % [please note that the expected response is as a percentage]. Section I: Assessing the Level of Implementation of EAC Customs Union and the Cost of Non Implementation 12). There are various elements of the EAC Customs Union protocol, such as the Common External Tariff (CET), elimination of intra-eac tariffs and other charges, a customs management Act that underpins common customs clearance procedures, etc. Please describe the relevance of each of the following to your business: 12.1). The CET 12.2). Elimination of intra EAC tariffs 12.3). EAC common customs clearance procedures 12.4). Other (specify): 13). Please state which of the areas described above has the most significant impact on your business and why? 13.1). Most significant impact: 13.2). Why: 14). The EAC Customs Union which provides for among others; the adoption of a Common External Tariff (CET), removal of intra-eac tariffs, application of rules of

56 origin etc, has been successfully implemented. Do you agree with this statement? [encircle one] a) Strongly agree b) Agree c) Disagree d) Strongly disagree e) Other (please specify) 15). Has the application of the principle of asymmetry, resulting in the application of different internal tariffs among EAC countries based on the level of trade development of each country been useful to your firm [Please elaborate]: 16). What information on EAC Customs Union implementation has been made available to you? [ describe]: 17). How did your company obtain this information (ref Question 16) on EAC Customs Union implementation? 18). Rank the five main sources of information on EAC Customs Union implementation in descending order of information usefulness, i.e., starting with the source that in your view provides the most useful information and ending with the one that offers the least useful information. 18.1). 18.2). 18.3). 18.4). 18.5).

57 19). How would you prefer to obtain information on the implementation of the EAC Customs Union? 20). The present EAC legislation does not provide for a common transit regime (i.e., a common regime for managing transit activities, e.g., common insurance bonding of goods in transit). Do you think this is critical gap? [Please elaborate] : 21). What is the impact of EAC Customs Union implementation on your business in terms of turnover, how would you describe the impact it has had? 22). What measures, in your view, should the Government put in place to ensure full implementation of EAC Customs Union? [Please elaborate]: 23). What are the most attractive aspects of EAC Customs Union preferences to your business? [please explain]: 24). What is the least attractive/ most problematic part of the EAC Customs Union to your business? (e.g specific implementation problems, etc) [ describe]: 25). Do you think that the changes in the CET allowing individual member countries to stay the implementation of the CET (i.e., to occasionally suspend implementation of CET for certain products) are useful or counterproductive? [encircle one]: Useful / Counterproductive 25.1). Please elaborate:

58 26). In your view, is there need to harmonize the EAC, COMESA and SADC trade regimes? ( Elaborate ) 27). Are you aware of the existence of duty drawbacks under the EAC Customs Union? [encircle one] Yes / No (if no, skip to Question 28) 27.1). If yes, do you get duty refunds under the duty drawback system? Yes / No (if no, skip to Question 28) ). And if Yes, how long does it take to get these duty drawbacks? 28). What are the implications of non-implementation of the EAC Customs Union and how would you describe the impact on your business in terms of costs?

59 ANNEX 2 East African Business Council ASSESSMENT OF THE IMPLEMENTATION OF THE EAC CUSTOMS UNION Preamble: Questionnaire for EAC Business Entities Burundi and Rwanda The EAC Customs Union was launched in January Implementation of the Customs Union commenced immediately in the EAC Partner States, with some successes and challenges for businesses in the region. Burundi and Rwanda have recently joined the EAC Customs Union and are in the process of preparing to implement the provisions of the EAC Customs Union protocol. As the two countries prepare for implementation, it is imperative that an assessment of the preparedness of the business community is done in order to ensure that they are able to reap the benefits of the EAC Customs Union. The EABC as a stakeholder is undertaking this survey to get empirical information on the awareness, expectations and facilitation-needs of the business community Burundi and Rwanda in relation to the EAC Customs Union implementation, to forward this to the Council through EAC Secretariat. The objectives of this survey are three-fold: a) to understand the level of awareness about the opportunities of implementation of the EAC Customs Union, b) to understand the expectations of the business community about the EAC Customs Union, including expectations about how it will be implemented in the country, and c) to understand what the facilitation needs of the business community are in relation to the forthcoming implementation of the EAC Customs Union. It is envisaged that this will influence implementation in such a way that corrective measures are put in place to mitigate any potential challenges while potential successes are maximized.

60 Section 0: Introduction - Profile of Your Company 29). Name of the Company: 30). Job title/position of respondent in the Company: 31). 32). Phone: 33). Physical address: 34). Please tell me about your company s activity chain in each of the following categories [Indicate N/A if firm is not involved in any of the categories listed below]: 34.1). Domestic production chain (probe for source of inputs, types of clients, year when firm started this line of business): 34.2). Intra-export chain (probe for export destinations, types of clients, year when firm started this line of business): 34.3). Extra-export chain (probe for export destinations, types of clients, year when firm started this line of business): 34.4). Importation chain (probe for source of imports, types of clients, year when started this line of business):

61 34.4.1). Which of the four activities you have described above predominates your business? [encircle one] intra-export / extra-export / domestic production / Import 35). From your description above (ref to Question 6), are there any critical elements of your operations (excluding NTBs) that are outside your control and are the responsibility of the Government or other entities (such as fuel, electricity, etc)? [please elaborate]: 36). Is your company aware of the existence of EAC Customs Union trade preference? [encircle one] Yes / No (if No, skip to Question 9) 36.1). What EAC Customs Union trade preferences is your company currently benefiting from? [Please elaborate]: 37). Is there external capital (i.e., capital coming from outside the borders of your country) invested in your company? [encircle one]: Yes / No [If no, skip to Question 10] 37.1). If yes, approximately what percentage of the company s total capital is external capital from the EAC region? % 37.2). Approximately what percentage of the company s total capital is external capital from outside the EAC region? % 38). Currently, what is your company s estimated capacity utilization? % [please note that the expected response is as a percentage]. Section I: Awareness about EAC Customs Union and the Possible Opportunities 39). There are various elements of the EAC Customs Union protocol, such as the Common External Tariff (CET), elimination of intra-regional tariffs and other

62 charges, a customs management Act that underpins common customs clearance procedures, etc. What do you anticipate will be the relevance of each of the following to your business?: 39.1). The CET 39.2). Elimination of intra regional tariffs 39.3). EAC common customs clearance procedures 40). Please state which of the areas described above would probably have the most significant impact on your business and why? 40.1). Most significant impact: 40.2). Why: 41). What information on EAC Customs Union implementation has been made available to you? [please describe as generally or as specifically as possible]: 42). How did your company obtain this information (ref Question 13) on EAC Customs Union implementation?

63 43). Please rank the five main source of information on EAC Customs Union implementation in descending order of information usefulness, i.e., starting with the source that in your view provides the most useful information and ending with the one that offers the least useful information. 43.1). 43.2). 43.3). 43.4). 43.5). 44). What are your preferences on how you should obtain information on the implementation of the EAC Customs Union? Section II: NTBs and their Elimination 45). What kind of NTBs affect your business operations and how? [Please list the kind of NTBs and for each NTB, explain how it affects your operations and how it can be mitigated]. 45.1). a) NTB 1: b) How this affects business operations: c) Please suggest remedial measures: 45.2). a) NTB 2: b) How this affects business operations:

64 c) Please suggest remedial measures: 45.3). a) NTB 3: b) How this affects business operations: c) Please suggest remedial measures: 45.4). a) NTB 4: b) How this affects business operations: c) Please suggest remedial measures: 45.5). a) NTB 5: b) How this affects business operations:

65 c) Please suggest remedial measures: 46). Do you think that a system of notification of NTBs (i.e., a monitoring mechanism) could be useful to remove NTBs? [Please elaborate]: 47). Have you tried to contact your government authorities to remove the NTB? [encircle one]: Yes / No (if No, skip to Question 31) 47.1). If yes, please explain what the result of this attempt was: 48). If the Government or trade partner countries were to offer the kinds of initiatives or trade reforms listed below, how might this help address the main traditional NTB challenges you face? 48.1). Customs reform to improve export procedures (e.g., more information of changes in export procedure, etc) [please elaborate]: 48.2). Infrastructure improvements like better roads, airport, ports [please elaborate]: 48.3). Reduce the costs of shipment [please elaborate]:

66 48.4). Improve export credit facilities and financial services in the country [please elaborate]: 48.5). Other (pleas specify: ) [please elaborate]: END

67 49). In the case where there is no implementation of the EAC Customs Union, what initiatives or trade reforms should the Governments undertake to compensate for losses associated with non-implementation? [elaborate ]: 50). In the case where there is no implementation of the EAC Customs Union, what kind of initiatives or intervention should the EAC Secretariat undertake to mitigate the losses associated with non-implementation? [elaborate ]: 51). Estimate the total annual losses associated with the non-implementation of the EAC Customs Union (since 2005) if any. 51.1). If any, please explain. 52). Describe other measures that your government could put in place to address the issue of non-implementation of the EAC Customs Union : 53). In your view how can the EAC Secretariat be empowered to enforce EAC regional integration, and ensure that EAC Member States implement their commitments under the EAC Customs Union? 54). In your view, how can the business community and lobby groups hold Governments accountable for the implementation of the EAC Customs Union?

68 55). In your view, how can the business community and lobby groups hold EAC Secretariat accountable for the implementation of the EAC Customs Union? Section II: NTBs and their Elimination 56). What kind of NTBs affect your business operations and how? [Please list the kind of NTBs and for each NTB, explain how it affects your operations and how it can be mitigated]. 56.1). a) NTB 1: b) How this affects business operations: c) Please suggest remedial measures: 56.2). a) NTB 2: b) How this affects business operations: c) Please suggest remedial measures: 56.3). a) NTB 3: b) How this affects business operations:

69 c) Please suggest remedial measures: 56.4). a) NTB 4: b) How this affects business operations: c) Please suggest remedial measures: 56.5). a) NTB 5: b) How this affects business operations: c) Please suggest remedial measures: 57). The EAC has established a mechanism for identification, removal and monitoring of NTBs. Are you aware of the existence of the mechanism? Yes ( ) No ( ) 58). How effective has the mechanism been in removing the NTBs? 59). Have you reported any NTB to your government authorities or business representatives for removal? [encircle one]: Yes / No (if No, skip to Question 40)

70 59.1). If yes, describe the outcome: 60). If the Government or partner states were to undertake the reforms listed below, how might they help address the main traditional NTB challenges you face? 60.1). Customs reform to improve export procedures (e.g., more information of changes in export procedure, etc) [please elaborate]: 60.2). Infrastructure improvements like better roads, airport, ports [please elaborate]: 60.3). Reduce the costs of shipment [please elaborate]: 60.4). Improve export credit facilities and financial services in the country [please elaborate]: 60.5). Other (specify: ) [elaborate]:

71 Section III Part 1: General Questions on Tariff preferences and implementation of the EAC Customs Union 61). Are you benefiting from EAC free movement of goods among EAC Member States? [please elaborate]:

72 62). As an approximate proportion of your annual turnover, how much of your business depends on each of the following: ). Intra-EAC trade activities: % ). Extra-EAC trade activities (e.g., with EU, DRC, USA, etc): % ). Domestic trade activities: % ). Other (please Specify: ): % 63). Is free intra-eac trade an important factor in sustaining your company s business operations (i.e. decisions to continue producing/exporting to your particular export markets and/or importing from your current sources)? [encircle one]: a) Yes, most important b) Yes, but only mildly important c) No, not important (i.e., not a factor at all) d) Do not know / cannot say e) Other [please specify]: 64). Explain what other factors are critical for your buyer/importer to actually source your specific products? [Elaborate]: 65). Are you aware of the difference between the tariffs that apply to your products relative to what would be applied on goods from other (non-eac) countries? [encircle one]: Yes / No 65.1). Does the difference between the tariffs applied to your products and those applied on goods from other (non-eac) countries have an impact on your competitiveness? [Encircle one]: a) Yes, to a great extent b) Yes, but to a very limited extent c) It depends on the extent of difference [please elaborate]: d) No, not at all. Section IV: Trade Remedies and Establishment of EAC Committee on Trade Remedies

73 66). Has your company ever requested the application of a trade remedy (e.g., antidumping, safeguard, countervailing duty) against imports threatening your business, etc? [Explain] 67). Has your company ever been subjected to the application of a trade remedy (antidumping, safeguard, countervailing duty against imports threatening your business, etc)? [Please explain]

74 68). In your view, to what extent will the establishment of the EAC committee handling these issues be useful for EAC businessmen seeking protection from unfair trade practices, and increase imports? [Please elaborate]: END

75

76 Annex 3 (a) Annex 3(a).1 Kenya List of Sampled Sectors 1. Food and Beverage Sector 2. Leather and Footwear Sector 3. Metal and Allied Sector 4. Motor vehicles and accessories 5. Paper and paperboard and Stationery 6. Plastic and Rubber 7. Cement 8. Chemical and Allied, Sector 9. Metals and Articles thereof, 10. Metal and Non-Metallic Mineral Products 11. Construction (cement) Selection was based on the contribution of various products to Kenya s exports to the EAC as illustrated in the table below. Kenya Exports to EAC 2006 HS Description Share in total exports % Cumulative share in total Value in USD Portland cement (excl. white) 42,240, Transformer oil 41,243, Other medicaments 20,784, Sacks and bags (incl. cones) of polymers of ethylene 18,693, Carboys, bottles, flasks, jars, & other glass containers 12,989, Other cooking oil of palm oil 12,143, Other beer made from malt 12,113, Other salt & pure sodium chloride; sea water 11,684, Trailers and semi-trailers, nes 11,149, Other, corrugated, otherwise plated or coated with zinc 9,743, Cigarretes, containing tobacco 9,543, Rolled iron/steel, width >=600mm,painted,varnished,or coated with PLASTICS 9,395, Sugar confectionery (incl. white chocolate), not containing cocoa, nes 9,339, Footwear with upper straps/thongs plugged into soles, of rubber or plastics 9,287, Cartons, boxes and cases, of corrugated 1 38

77 Description Share in HS2002 Value in USD total exports % Cumulative share in total paper or paperboard 8,334, Other flat rolled products of iron or nonalloy steel 7,658, Chewing gum 7,387, Blankets (excl. electric blankets), etc, of synthetic fibres 6,131, Margarine (excl. liquid) 5,877, New pneumatic tyres, of rubber of a kind used on motor cars 5,773, Soap and organic surface-active products in bars, etc, for toilet use 5,203, Crown corks of base metal 4,905, Primary cells and primary batteries, manganese dioxide 4,832, Iron/steel tubes, riveted, >406.4mm external diameter 4,761, Tableware and kitchenware of plastics 4,459, Washing and cleaning preparations, put up for retail sale 4,396, Sacks and bags, including cones of paper, paperboard, nes 4,235, Polishes, creams and similar preparations for footwear or leather 4,047, Sacks and bags of other plastics 3,815, Iron/steel line pipe, spirally welded, circular x-section,>406.4mm ext.diam 3,748, Printed or illustrated postcards; printed cards bearing greetings, etc 3,731, Sacks and bags, for packing goods, of polyethylene/polypropylene strip nes 3,726, Ball-point pens 3,634, Flat/cold-rolled iron/steel, in coils, width >=600mm, < 0.5mm thick 3,560, Other surface active preparations, washing preparations and cleaning preparations 3,337, Preparations for use on the hair, nes 3,258, Unbleached kraftliner, uncoated, in rolls or sheets 3,231, Other tobacco, partly or wholly stemmed/stripped 3,087, Maize (corn) starch 3,081, Exercise-books 0 56

78 HS Description Share in total exports % Cumulative share in total Value in USD 2,983,657 Silicates of sodium (excl. metasilicates) 2,822, Other carboys, bottles, flasks and similar articles of plastics 2,785, Table, kitchen or other household articles and parts thereof, of aluminium 2,783, Gates/frames for lifts; spiral chutes & gravity conveyors, of iron/steel 2,758, Other articles for the conveyance or packaging of goods of plastics 2,753, Yarn, with >=85% synthetic staple fibres, put up for retail sale 2,658, Other, welded, of circular cross-section, of iron or non-alloy steel 2,600, Household and toilet articles of plastics, nes 2,575, Wood tar oils; wood creosote; wood naphtha..., etc 2,477, Polyethylene having a specific gravity <0.94, in primary forms 2,443, Not containing added sugar or sweetening matter 2,436, Carbon Dioxide 2,378, Beauty, make-up, skin-care (incl. suntan), nes 2,377, Footwear covering the ankle but not covering the knee 2,364, Petroleum jelly 2,323, Wood tar oils; wood creosote; wood naphtha..., etc 2,275, Wood tar oils; wood creosote; wood naphtha..., etc 2,240, Paints and varnishes, in a non-aqueous medium - based on acrylicor vinyl polymers 2,218, Cane or beet sugar, in solid form, nes 2,200, Other carbonates, peroxocarbonates 2,199, Sports footwear, with rubber or plastic soles and textile uppers 2,194, Shawls, scarves, mufflers, mantillas, veils, etc, of synthetic fibres 2,142, Boxes,cases,crates,& similar articles of plastics for conveyance or pack...of goods. 2,142, Other aluminium plates, sheets and strip of aluminium alloys, 2,117,

79 HS Description Share in total exports % Cumulative share in total Value in USD Soap and organic surface-active products in bars, etc, nes 2,063, Medicaments of other antibiotics, not for retail sale 2,054, Vegetable fats and oils and their fractions 2,047, Malt not roasted 2,005, Bars, rods and profiles of aluminium, not alloyed 1,955, Watch movements, complete and assembled, nes 1,939, Parts thereof (excl inners) 1,915, Prepared baking powders 1,889, Packing containers, including record sleeves, of paper..., nes 1,874, Other uncoated fluting paper 1,791, Other light oils and preparations 1,784, Glucose and glucose syrup, containing <20% fructose 1,780, Other public type vehicles 1,759, Printed polymers ethylene not reinforced... etc 1,712, Rolled iron/steel,width>=600mm,plated or coated with aluminium-zinc alloys 1,711, Co-axial cable and co-axial electric conductors 1,678, Laminated blocks, etc, of other plastics for electrical insulations of other plastics 1,602, Footwear with rubber... soles, leather uppers, not covering the ankle 1,557, T-shirts, singlets and other vests, of cotton, knitted or crocheted 1,545, Maize seed ,527, Other vehicles, not mechanically propelled 1,484, Sweet buiscuts ,469, Mixtures of juices, unfermented, not containing added spirit 1,457, Baths, shower-baths,sinks and washbasins, of plastics 1,430, Trade advertising material, commercial catalogues and the like 1,429, Clock movements, nes, electrically 0 73

80 Description Share in HS2002 Value in USD total exports % Cumulative share in total operated 1,411, Bricks, blocks, tiles... of siliceous fossil meals or earths 1,408, Winding wire of copper 1,406, Other aluminium plates, sheets and strip of aluminium alloys, not alloyed 1,374, Preparations for infant use, for retail sale, of flour, etc 1,339, Protein concentrates and textured protein substances 1,321, Table, kitchen or household articles... of iron or steel, enamelled 1,260, Sausages and similar products; food preparations based on these products 1,236, Stoppers, lids, caps and other closures of plastics 1,228, Newsprint in rolls or sheets 1,227, Other electric conductors for a voltage not exceeding 1000v 1,225, Plywood of bamboo 1,222, Other, welded, of circular cross-section, of other alloy steel 1,168, Flat rolled iron/steel,width<600mm,painted,varnishe d or COATED WITH PLASTIC 1,152, Tanks,casks,drums,cans,boxes and similar containers of any material,=>50l 1,142, Other printed matter 1,117, Other paper/paperboard weighing >=40g/m} but =< 150g/m} in rolls 1,105, Paints and varnishes, in a non-aqueous medium, nes 1,061, Hydraulic lime 1,049, Non-electric lamps and lighting fittings 1,046, Other printed matter 1,040, Seamless iron/steel tubes/pipes/profiles, circular, nes 1,027, Chocolate, etc, containing cocoa, not in blocks, slabs or bars, nes 1,018, Maize (Excluding Seed) 1,014, Mattresses of cellular rubber or plastics 1,011, Other blankets and traveling rugs, nes 0 77

81 HS Description Share in total exports % Cumulative share in total Value in USD 986,906 Nails, tacks, drawing pins, corrugated nails... of iron or steel 943, Limestone flux; limestone and other calcareous stone 941, Dentifrices 934, Other Aluminium structures and parts of structures 932, Roasted malt 914, Other glass ampoules 910, Crisp bread 906, Angles/shapes/sections of iron/steel, not further worked than hot-rolled nes 906, Lead-acid of a kind used for starting piston engines 905, Iron or steel wool, pot scourers, scouring or polishing pads, gloves 905, Bitumen and asphalt; natural asphaltites and asphaltic rocks 902, Soap in other forms, nes 897, Other electric conductors for a voltage not exceeding 1000v 890, Tube or pipe fittings of iron or steel (excl. stainless), nes 875, Corrugated paper and paperboard, whether or not perforated 873, Iron/steel bars and rods, hot-rolled, hotdrawn or hot extruded, nes 870, Glues based on starches, or on dextrins or other modified starches 866, Other food preparations, nes 858, Other tobacco, not stemmed/stripped 856, Other with compression-ignition internal combustion piston engine exc 10 tonnes< 20 tonnes 832, Sulphates of aluminium Butanes, liquefied Other 823, , ,099, Grand Total 623,559,

82 Annex 3(a).2 Burundi List of Sampled Sectors 1. Tea 2. Sugar 3. Tobacco industry 4. Hides and skins 5. Mining Selection was based on the contribution of various products to Burundi s exports to the EAC as illustrated in the table below. Burundi Exports to EAC 2006 HS Description Value in USD Share in total exports % Cumulative share in total exports to EAC Unwrought gold (incl. gold plated with platinum), non-monetary 8,937, Black tea fermented/ partly fermented, flavoured or not, in packings of >=3KG 2,318, Black tea fermented/ partly fermented, flavoured or not, in packings of >=3KG 1,714, Other ores and concentrates, nes 1,477, Of goats or kids 1,046, Cigarretes, containing tobacco 834, Ashes and residues containing mainly nickel 492, Raw cane sugar, in solid form 463, Flue-cured tobacco, Burley, not stemmed/stripped 307, Whole hides & skins =<8kg dried,=<10kg dry salted or =<16kg fresh wet salted or , Other 1,002, Grand 18,809,

83 Annex 3(a).3 Rwanda List of Sampled Sectors 1. coffee 2. tea 3. horticulture 4. Mining 5. Agro-processing industry 6. Hides and skins Selection was based on the contribution of various products to Tanzania s exports to the EAC as illustrated in the table below. Rwanda s exports to the EAC in 2006 HS2002 Commodity description Value in USD Share in total exports in % Cumulative share in total exports Black tea fermented/ partly fermented, flavoured or not, in packings of <=3KG 12,981, Black tea fermented/ partly fermented, flavoured or not, in packings of >=3KG 12,040, Vegetable saps and extracts of pyrethrum or of the roots of plants containing rotenone 1,909, Kidney seed beans, shelled for sowing 1,051, Robusta coffee in beans or seeds, stripped of their skins 502, Tin ores and concentrates 341, Chromium ores and concentrates 250, Ashes and residues containing mainly cobalt 249, Other hides and skins, fresh or preserved, not tanned, parchment-dressed or further , Crushing or grinding machines for earth, stone, ores, etc 209, Maize (Excluding Seed) 189, Copra 174, Other 1,431, Grand Total 32,415,

84 Annex 3(a).3 Uganda List of Sampled Sectors 1. Foods and Beverages 2. Textiles and Clothing 3. The Leather and Footwear sub-sector 4. The timber, paper and paper products 5. Pharmaceuticals, chemicals, paints and soaps 6. Cement, ceramics and bricks 7. Steel and steel products Selection was based on the contribution of various products to Tanzania s exports to the EAC as illustrated in the table below. Uganda Exports to EAC 2006 HS2002 USD Share in total exports % Black tea fermented/ partly fermented, flavoured or not, in Cumulative share in total exports in % packings of >=3KG 20,784, Vegetable fats and oils and their fractions 8,532, Maize seed 8,478, Other, corrugated, otherwise plated or coated with zinc 6,954, Black tea fermented/ partly fermented, flavoured or not, in packings of <=3KG 5,877, Electrical energy 5,053, Maize (Excluding Seed) 4,232, Other, welded, of circular crosssection,of other alloy steel 4,144, Other dried beans, shelled, nes 3,235, Other tobacco, partly or wholly stemmed/stripped 2,638, Iron/steel bars & rods,hotrolled,twisted/with deformtns from rolling proc. 2,475, Portland cement (excl. white) 2,193, Plywood of bamboo 1,825, Exercise-books 1,449, Beauty, make-up, skin-care (incl. suntan), nes 1,367, Other cooking oil of palm oil 1,343, Broken rice 1,329, Cotton, not carded or combed 1,224, Other wheat and meslin 1,130, Angles/shapes/sections of iron/steel,not furthr worked than hot-rolled nes 1,092,

85 HS2002 USD Share in total exports % Cumulative share in total exports in % Brans, sharps and other residues of wheat 870, Other beans, dried, shelled 860, Sacks and bags,for packing goods,of polyethylene/polypropylene strip nes 849, Raw cane sugar, in solid form 836, Other coffee, roasted 784, Washing and cleaning preparations, put up for retail sale 768, Traige 766, T-shirts, singlets and other vests, of cotton, knitted or crocheted 752, Soap in other forms, nes 706, Paints and varnishes, in a nonaqueous medium, nes 681, Soap and organic surface-active products in bars, etc, nes 677, Boxes,cases,crates,& similar articles of plastics for conveyance or pack...of goods. 662, Sweet buiscuts 649, Other tubes/pipe/hollow profiles, of iron or steel, nes 630, Cigarretes,containing tobacco 611, Soya beans, whether or not broken 604, Grand Total Other of a cylinder capacity excceding 1500cc but not exceeding 3000cc 588, Other flat rolled products of iron or non-alloy steel 538, Printed plain cotton weave, with >=85% cotton, >100g/m2 529, Other with compression-ignition internal combustion piston engine exc 10 tonnes< 20 tonnes 509, Other 17,581, Collections and collector's pieces of zoological... interest 116,822,124

86 Annex 3(a).1 Tanzania List of Sampled Sectors The following sectors were identified on the basis of the significance of their exports to the EAC market. 1. Textile sector 2. Food and beverages 3. Petroleum, Coal, Rubber, Plastic, and Chemical Products 4. Fish sector 5. Metal and Non-Metallic Mineral Products 6. Mining 7. Construction 8. Paper and Paper Products Selection was based on the contribution of various products to Tanzania s exports to the EAC as illustrated in the table below. Tanzania Exports to EAC region 2007 HSCODE HS DESC FOB Value US$2007 Cumulative share in total exports % Household and toilet articles of plastics, 28,058,281 nes Table salt 23,977, Black tea fermented/partly 22,523,697 fermented,flavoured or not,in packings of >=3kg Petroleum jelly 9,596, Wheat or meslin flour 7,975, Palm olein, RBD 6,875, Wood wool; wood flour 6,172, Fresh or chilled fish fillets 4,981, MOSQUITO NETS 4,376, Other fertilizers, nes 4,293, Wheat or meslin flour 3,424, Unbleached kraftliner, uncoated, in rolls or 2,774,075 sheets Articles of wood, nes 2,486, Portland cement (excl. white) 2,314, Sacks and bags (incl. cones) of other plastics (excl. ethylene) 2,108, Electric conductors, nes, for a voltage <=80 V, not fitted with connectors 2,060, Maize (excl. seed) 2,026, Maize seed 1,875, Sacks and bags, used for packing goods, of man-made textile fibres, nes Unbleached sack kraft paper, uncoated, in rolls or sheets 1,752,941 1,738,

87 HSCODE HS DESC FOB Value US$2007 Cumulative share in total % exports Semi-milled or wholly milled rice 1,650, Flat/cold-rolled iron/steel, in coils, width >=600mm, < 0.5mm thick 1,632, Other 1,550, Other, Fish fresh or chilled 1,472, Other 1,435, Dried fish, not smoked (excl. cod) 1,385, Diammonium hydrogenorthophosphate (diammonium phosphate) 1,116, Ingots of iron and non-alloy steel, nes 1,111, Frozen fish fillets 1,110, Wood in the rough..., treated with paint, stains, creosote, etc 1,106, OTHER 1,037, Knitted or crocheted furnishing articles, nes 949, Cotton, carded or combed 886, Polyethylene terephthalate, in primary forms 883, Other antibiotics, nes 857, Natural gas, liquefied 815, Other fertilizers, nes 793, CONIFEROUS WOOD SAWN OR CHIPPED LENGTHWISE, SLICED OR PEELED, >6MM THICK 789, Twine, cordage, rope and cables, of sisal, etc, of the genus agave, nes 783, Oil-cake and other solid residues of cotton seeds 754, SACKS AND BAGS,FOR PACKING GOODS,OF POLYETHYLENE/POLYPROPYLENE STRIP NES 707, Other 681, SACKS AND BAGS,FOR PACKING GOODS,OF POLYETHYLENE/POLYPROPYLENE STRIP NES 681, Sacks and bags, used for packing goods, of man-made textile fibres, nes 651, Mineral or chemical fertilizers with nitrogen, phosphorus and potassium 637, Parts of plants, without flowers or buds, for ornamental purposes 636, Semi-milled or wholly milled rice 627, Of reptiles:tanned or crust hides and skins of other animals, without w:o 613, Urea 606, Twine, cordage, rope and cables, of sisal, 590,

88 HSCODE HS DESC FOB Value US$2007 Cumulative share in total exports % etc, of the genus agave, nes Tubes, pipes and hollow profiles, riveted, 573,288 of iron or steel, nes Iron/steel bars and rods, hot-rolled, hotdrawn 568,864 or hot extruded, nes Flours meals and pellets of fish,fit for 538,131 human consumption Diammonium hydrogenorthophosphate 524,039 (diammonium phosphate) Manioc, fresh or dried, chilled or frozen 487, Unbleached cotton fabrics, with >=85% 486,937 cotton, >=200g/m2, nes T-shirts, singlets and other vests, of cotton, 481,360 knitted or crocheted Inductors, nes 478, Wheat or meslin flour 462, Oil-cake and other solid residues of cotton 453,579 seeds Sunflower seeds 452, Frozen fish meat (excl. fillets) 449, Others 30,051, Total 205,957,

89 Annex 3(b) Annex 3(b).1: KENYA: List of sampled firms which were covered in the survey COMPANY FILLED BY TELEPHONE SECTOR 1. Farmers' Choice Ltd - Ms. Purity Karau Export Manager 2. Kapa Oil Refineries Ltd - Mr. Nitin/Samir DIRECTOR 3. Mastermind Tobacco Ltd - Fred Mutegi Miriti SHIPPING OFFICER 4. Bata Shoe Co. Ltd Ltd - Mr. Wilfred Wanjui Export Manager 5. Steelmakers Ltd Mr. James Muringe Adm & Export Manager 6. Cooper Motor Corporation Ltd 7. Twiga Stationers and Printers Ltd 8. Kenpoly Manufacturers Ltd 9. REGAL PHARMACEUTICALS LTD 10. East African Portland Cement Co. Ltd - Mr. A. I. Musotsi Company Secretary Mr. Kumar S. Iyer General Manager , , Kahawa, off Kamiti Road, Nairobi /823894, Main Mombasa Road, Nairobi / , Mombasa Road , Limuru / , Mombasa Road, Nairobi , Lusaka Road, Nairobi , Bamburi Road, Nairobi Mr. Dipak Shah , Lunga Lunga Road, Nairobi Dr. Rohin Managing Director Mr. Eric Furaha Asst. Export Officer Unilever Kenya Ltd Ms. Zainah Kageche SM, Inbound Logistics 12. Karachiwalla (NBI) Ltd - Mr. Minish H. Shah Financial Controller , Baba Dogo Road, Nairobi , Athi River , Commercial Street, Nairobi , Bamburi Road, off Enterprice Road, Nairobi Food and Beverage Sector Food and Beverage Sector Food and Beverage Sector Leather and Footware Sector Metal and Allied Sector Motor vehicles and accessories Paper and paperboard and Stationery Plastic and Rubber Pharmaceuticals Ltd Cement Chemical and Allied, Sector Metals and Articles thereof,

90 13. Kenya Breweries Ltd Mr. Stanley Njoroge Group Tax Manager 14. Brookside Dairy Ltd. 15. Export Trading Commodity Mr. David Heath General Manager Mr. Pradip Patel/ Wainaina Kungu 16. Tetra Pak Ltd., Mr. Dan Kipsang Logistic Manager 17. Cadbuary Kenya Ltd., 18. Nestle Foods Kenya Ltd., Mr. Bernard Kavoo Procurement Officer Mr. Joseph Samanayo Export Officer 19. Kaluworks Ltd., Mrs. Maimuna Bishar Export Manager 20. Crown Industries Ltd., Mr. Chetan Shah Manager 21. Dodhia Packaging Mr. Gabriel Gichia Asst. Marketing Manager 22 Elys Chemical Industries 23. Mabati Rolling Mills 24. Athi River Mining Ltd Mr. Bravin Bhimani Export Manager. Asst. Judy Atieno Mr. Stephen B. Ndege Manager, Trade Strategic Affair Robert N. Gathuka Imports/Exports Executive / , Off Thika Road / , Ruiru, Kenya , Woodland Hurlingham, Nairobi , Enterprise Road, Industrial Area , Ol Kalou Road off Nanyuki Road, Nairobi /7/8, Pate Road, Off Enterprise Road, Nairobi , Kitui Road, Ofdf Kampala Road, Nairobi /1, Hema House, Enterprise Road, Nairobi , Kampala Road, Industrial Area, Nairobi /4/5/7/7/8/9/10, Road B off Enterprise Road, nairobi , Old Mombasa Road, Nairobi / , Rhino House, Chiromo Road, Nairobi Food and Beverage Sector Food and beverage Food and beverage Paper and paper products Food and beverage Food and beverage Metals and Articles thereof, chemicals and chemical products Paper and paper products chemicals and chemical products Metal and Non- Metallic Mineral Products Cement

91 Annex 3(b).2: Burundi: List of sampled firms which were covered in the survey Tea and Coffee 1. Sonicoff 2. Bera Café Burundi BECABU 3. C&A Business. 4. COPROTRA 5. Office du Thé du Burundi «OTB». Sugar 6. Société Sucrière du Mosso SOSUMO : Cigarettes containing tobacco 7. Burundi Tobacco Company BTC. Minerais de Tungstène et leurs concentrés 8. SECOMIB : no interview, appointments were cancelled many times. 9. WOLFRAM : no interview, appointment was cancelled because they were beasy Hides and skins 10. Rushato 11. Afritan Manufacturing companies 12. DIMAC s.a 13. UPC : Usine de Produits en Coton.

92 Annex 3(b).3: Uganda: List of sampled firms which were covered in the survey ANNEX 1: LIST OF COMPANIES SELECTED COMPANY ADDRESS SECTOR 1. Southern Range Nyanza Limited 35 Yusuf Lule Road, Njeru Township, Jinja P. O. Box 1743 Jinja, Tel , Fax: / , Textile Fabric and other Textile products Surveyed Yes 2. Picfare Industries Limited 35 Yusuf Lule Road, Njeru Township Jinja, P.O. Box 1743 Jinja, Tel , Fax: / , Exercise Books and other Paper Products Yes 3. Shumuk Aluminium Industries Limited 24 Mukabya Road Uganda, P. O. Box 6552 Kampala, Tel , Fax: , Aluminum saucepans, circles, household products Yes 4. Rwenzori Beverage Company Limited 403/404 Nakawa Ind. Area, P.O Box Kampala, Tel , Fax: , Mineral water, plastic bottles, jars, jerrycans, etc Yes 5. Britannia Allied Industries Limited 40 M247B Ntinda Industrial Area, P.O. Box 7518 Kampala, Tel: , Fax: Biscuits, Confectionery, Beverages Yes 6. Bata Shoe Company Uganda Limited 9-95, 5 th Street, Industrial Area, P. O. Box 422 Kampala, Tel: , Fax: , [email protected] Shoes, soles, and straps. Yes 7. Sembule Steel Mills Plot 1, Off Masaka Road, Nalukolongo, P. O. Box Kampala, Tel.: Tel: , Fax: , [email protected] Expanded metal, barbed wire, iron bars, BRC, chainlinks, welding electrodes, wire nails, hollow sections roofing sheets, fencing staples, wire mesh (etc, metal/steel products) Yes 8. AK Plastics (U) Ltd 7, Old Portbell Road, Tel: / Household and Industrial Plastics Yes

93 9. Mukwano Industries Limited Fax: , Website: 30 Mukwano Road, P. O. Box 2671 Kampala, Tel.: /6, Fax: / /250917, Tile Centre 91/93, 6th Street, Industrial Area, P.O. Box 4009 Kampala, Tel: / / /4 Fax: Laundry soap, Nomi detergent powder, fruit drops sweets, toilet soap(yeyo), vegetable cooking oil & fats, plastic products and liquid detergents Aluminium doors profiles, strips, trimedge, etc Yes Yes 11. Bakhresa Grain Milling (U) Limited Kazinga Bweyogerere, P. O. Box Kampala, Tel , Fax: Wheat flour & Wheat brand Yes 12. Makss Packaging Industries Limited 41 Mukabya Close, Nakawa Industrial Area, P. O. Box Kampala, Tel.: /5/6/8, Fax: Corrugated Cartons Yes 13. Uganda Fishnet Manufacturers Ltd 5 th Street, Industrial Area, P. O. Box 3025 K la, Tel , E- mail: [email protected] Fishnets Yes 14. Crestfoam Ltd Plot 464 Ntinda Road, P. O. Box 6475 K la, Tel.: , [email protected] Foam products Yes 15. Kampala Jellistone Suppliers Plot 259, Sir Albert Cook Road, Nateete, Wakaliga P. O. Box Kampala Tel , [email protected] Soluble coffee and charcoal brackets Yes

94 Annex 3(b).4: Rwanda: List of sampled firms which were covered in the survey No Company Name 1 AGROCOFFE E Contact address KIGALI, [email protected] o.rw 2 CAFERWA KIGALI, , [email protected] 3 FLORIS KIGALI, , [email protected] 4 RWANDA Kigali, , METALS [email protected] 5 URWIBUTSO RUHENGERI, , [email protected] 6 Rwanda KIGALI, , Leather [email protected] Industry(lydie Kalisa OTF 7 Mineral Supply Africa KIGALI, , [email protected] m 8 COPIMAR KIGALI, , [email protected] 9 SORWATHE BYUMBA, [email protected] 10 OCIRTHE KIGALI, [email protected] or [email protected] 11 OCIRCAFE KIGALI, , [email protected] 12 SORWATOM KIGALI, [email protected] 13 INYANGE KIGALI, , [email protected] 14 SHEKIRA RUHENGERI, , ENTERPRISE [email protected] 15 IKIREZI(essent KIGALI, , ial oils) [email protected] 16 COOPAC RUBAVU, , [email protected] or [email protected] 17 ENAS KIBUNGO, , [email protected] Sector of activities Coffee production Coffee production 9 Fruits, vegetables and flowers Mining Agro processing 13 Leather processing 41 Mineral processing and export Mining 26 Tea processing and export 9 Export and certification of tea 9 Coffee processing and certification Tomate paste Dairy processing Cassaval leaves 7 Essential oils Coffee processing Coffee processing and export

95 Annex 1(b).4: Tanzania: List of sampled firms which were covered in the survey Textile sector 1. A to Z Food and beverages 2. Tanzania Breweries 3. BAJABER PACKING - PEMBE FLOUR MILLS 4. UNILEVER TEA COMPANY 5. EXPORT TRADING 6. SAID SALIM BAKHRESSA-FOUR MILLING 7. TANZANIA TEA BLEANDERS Petroleum, Coal, Rubber, Plastic, and Chemical Products 8. SOMOCHEM LIMITED 9. ORYX OIL LIMITED 10. MUKWANO INDUSTRIES TANZANIA 11. Chapa Meli Fish sector 12. TANZANIA FISH PROCESSORS & CO Metal and Non-Metallic Mineral Products 13. EAST AFRICA CABLES TANZANIA Mining 14. NYANZA MINES Construction 15. MBEYA CEMENT Paper and Paper Products 16. MUFINDI PAPER MILLS

96 ANNEX 4 (a) 3 REGIONAL VALIDATION WORKSHOP FOR EABC STUDY ON THE IMPACT OF EAC CUSTOMS UNION ON THE BUSINESS COMMUNITY AND FOR THE CROSS-BORDER SURVEY SUMMARY OF THE KEY RECOMMENDATIONS On this 25 th day of August, 2008, East African Business Council (EABC) held a Regional Validation Workshop for the study on the impact of EAC Customs Union on the Business Community at Ngurdoto Mountain Lodge, ARUSHA in the UNITED REPUBLIC OF TANZANIA. After various presentations and deliberations were made, the following recommendations were agreed upon: Report on the Impact of the EAC Customs Union on Business community: 1. Enhance awareness of EAC Customs Union; (i) Program for publicity of EAC Customs Union (ii) Training on EAC Customs Union trade instruments and regulatory requirements 2. EAC Secretariat in collaboration with EABC to operationalize the monitoring and evaluation mechanism for tracking implementation of EAC Customs Union. 3. EAC NTB Monitoring Mechanism (i) Hasten implementation of the mechanism for identification, monitoring and elimination of Non-Tariff Barriers at the National level. It should be driven by EAC Secretariat in collaboration with EABC. (ii) Capacity building for National Monitoring Committees on NTBs. 4. Private sector to participate in EAC infrastructure development program focusing on energy, road, rail network, sea Port, air connectivity and oil pipelines. 5. Integration of the domestic production chain into the EAC market 3 Regional and National workshops (annex 4 (a) to (g) were prepared by EABC Rapporteurs as a record of the workshop proceedings. They are annexed to this report verbatim. Their observations and recommendations have been reflected in the final report to the extent possible.

97 The following strategies shall be explored by EABC (i) Identification of products with intra-eac trade potential and development of a network of buyers and suppliers. The starting point should be EABC member organizations. (ii) Mapping of trade and regulatory requirements at national and regional level for each of the products. (iii) Mainstreaming any policy/regulatory requirement which may be deemed as inhibiting intra-eac trade for the identified products into EAC policy making organs. (iv) Initiate EABC/EAC periodic roundtable to monitor exploitation of the EAC market potential. 6. Fast track the harmonization process for the three Trading Blocs namely EAC, SADC and COMESA to address the concerns of multiple membership in accordance with Section 112 of EAC Customs Management Act, Investment Capital EABC, in collaboration with the EAC Secretariat and the financial sector, to consider coming up with strategies on intra-regional investment capital in support of regional integration agenda. 8. Private Sector to be facilitated to participate in the negotiations of EAC to make sure that their interests are taken on board especially in the EAC Common Market. 9. EABC to follow up decisions of Council which affects businesses in the EAC region. Report on the Cross-Border Surveys: 1. Establish one-stop border posts in all EAC borders. 2. Implement 24 hours /7 days border operations across EAC border stations. 3. Benchmark duration of customs and immigration clearance with best practices. 4. Strengthening regulatory capacity of Maritime organizations to look into terms and conditions (e.g. Surcharges, charges, etc) by Maritime Transport Service Providers with a view to rationalize them. 5. Partner States to provide adequate Infrastructure services at border stations. 6. Sanitary and Phytosanitary inspections Deploy SPS officials in all borders to cover animal and plant health inspections as

98 a strategy towards enhancing intra-regional trade in agricultural produce. SPS Authorities should explore possibility for greater collaboration through one stop SPS office which could be manned by one country on behalf of the other, especially where EAC standards are in existence. 7. Standards Deploy Standards Officers in all border stations as a strategy for implementation of the EAC standards and enhancing promotion EAC as a source of high quality products in support for intra-regional trade Bureaus of standards should explore possibility for greater collaboration through one stop standards office which could be manned by one country on behalf of the other, especially where EAC standards are in existence. Further work 1. EAC Secretariat and/or EABC to carry out a comprehensive study on the impact of the EAC Customs Union to address gaps in the current study taking into account the provision of the EAC Customs Union Protocol. 2. EAC Secretariat and EABC to come up with time bound action plan for implementation of recommendations. 3. EABC to support in capacity building for Private Sector Business Associations in Burundi.

99 Annex 4 (b) Tanzania (Zanzibar) National Validation Workshop On this day of 28 th July 2008, at the Zanzibar Resort Hotel, the members of the business community did validate the EABC Studies on Effects of the EAC Customs Union & Border Survey Study and recommended as follows: Awareness on issues related to Customs Union and the opportunities thereof be carried out in Zanzibar Both studies carried out need to include Zanzibar since she has been left out and yet given its peculiarity. Care to be taken on negotiations of Common Market given the difficult realized in the Customs Union implementation process. Need to harmonize customs regulations to avoid difficulties for the business community while transacting business. There is need to catalogue the current NTB s being faced Tanzania mainland and Zanzibar with the view of removing them and smoothen business between Zanzibar and Tanzania mainland. There is need for EABC to support the Zanzibar business community to be able to be competitive when the transition period of the Customs Union is completed in by There is need to develop the Zanzibar port to be able to function more efficiently and support not only Zanzibar but also the whole region. Others: Need for the private sector to work together in Zanzibar to be able to them gain a stronger voice in their effort for the PPP EABC to change logo Need study on import and export of services Need to include Zanzibar on Business Climate Index survey EABC needs to consider to change a tariff structure to attract membership.

100 Annex 4 (c) Tanzania (Dar es Salaam) National Validation Workshop On the 30 th July 2008, the Business Community in Tanzania, met to discuss and validate the EABC studies on impact of Customs Union implementation & Border Surveys at the Moevenpick Hotel, Dar es- Salaam. After the presentation and discussion the following were agreed: 1. There is need to increase the Awareness of EAC Customs Union and the opportunities offered by the EAC Integration process. 2. EABC need to broaden and deepen the study to include not only the companies doing business in the region but also those not exporting with the view of finding out why they do not do the export in the region. Other areas to include survey on the service sector like at Airports and tourism and other border positions. 3. There is Need to rollout the pilot project of the one border post at Malaba since indications show that the one border concept is improving the trade facilitation at Malaba. 4. There is Need for the business community to exploit the use of simplified border documents introduced under EAC Customs Management Act and issued by TCCIA. 5. The use of the EAC Passport need to be popularised and made available for use and Partner States should take a lead 6. There is need to harmonise the Tanzania handling of the issues of standards to be consistent with the spirit of the EAC SQMT ACT EABC and her members need to focus on the Business Development Services to help develop firms to be able to enter and expand in the business. 8. There is a need for Borders and ports to be opened for 24 hours a day, 7 days a week with the view of helping reducing congestions and also improve trade facilitation.

101 Annex 4 (d) KENYA NATIONAL EAST AFRICA BUSINESS COUNCIL (EABC) VALIDATION WORKSHOP FOR THE TWO STUDIES ON THE EFFECT OF EAC CUSTOMS UNION AND CROSS BORDER TRADE ON BUSINESS COMMUNITY, HELD AT THE GRAND REGENCY HOTEL, AUGUST 1, 2008, NAIROBI KENYA. SUMMARY OF KEY ISSUES: 1. Constraining Terms of Reference deterred the able Consultant from covering other aspects of Customs Union, although he had gone out of his way to determine losers and Winners from Kenya and made some interesting observation relating to Kenya s performance and possible action points for Kenya in exploiting the EAC CET tariff reduction. In future there is need for wider consultations. 2. Study findings to be presented to the Cabinet Sub Committee on Finance. 3. Strengthening of the National Monitoring Committee Critical in addressing of the NTBs which was limited by weakness of the National Monitoring Committee (NMC). Participation and involvement of the Police and Revenue Authorities in the NMC recommended. 4. Current Regulatory framework especially for the Sensitive Products for some products in the region are inhibiting trade. Rigorous Procedures not facilitating trade i.e Trade of Milk, agricultural produce in the region 5. Permanent road blocks need to be removed, immediately. 6. Capacity utilization of Kenya cited at 81%-100% deemed too high in comparison to previous study conducted earlier by Kenya Association of Manufacturers, hence need to verify. 7. Need to review the EAC Customs Management Act. There is urgent need to review the contradiction between the EAC Customs Management Act and which stipulates lodgment of documents within 24 hours after docking of ships and not 24 hours before as is stipulated in Customs Act of Kenya and Tanzania. Cited as causing delays at the ports. 8. There is need to harmonize working hours at the Border Posts. Rwanda/Uganda border where due to time differential (Rwanda 1 hour behind) resulted to different closing and opening times. 9. Ports and Border Posts should operate 24 hours, seven days

102 10. Need to determine other components that affect Customs Union Implementation 11. Kenya needs to ascertain products whose tariffs have come down in Tanzania (Tariff Reduction) and explore the opportunities. 12. Bond Cancellation: Current Bond cancellation procedures lengthy, costly and ties resources. Makes the region uncompetitive. Goods from S.A able to reach EAC market even before goods from Kisumu, Kenya reaches Uganda. 13. Study questionnaire limiting and could - not determine whether the Customs Union had resulted to trade going up or not - not determine how many firms had been started because of the Customs Union - how many firms/businesses had been closed down because of Customs Union. 14. Need to determine and list/profile the other NTB s constituting 40% cited in the report 15. Delays at border posts; o Need to examine the causes of delay i.e why it takes 2 days to clear 16. Customs Procedures: o Need to examine the impact and status of Automation and harmonization if any at the Border Posts o Need to determine the business activities at Non Mans Land between the country boundaries. 17. Derogation: mechanism should be put in place to ensure that derogation does not hurt business. Though discussed and agreed by EAC Council of Ministers, there is need for the Council of Ministers to be considerate of the impact and consider expert advices. 19: Some of the Study findings to be implemented under the Government of Kenya s Private Sector Development Strategy whose one components deals with Trade Facilitations. 20. Respect for EAC Council of Ministers resolutions and EAC Treaty.

103 1. OPENING REMARKS: 1.1 WELCOME The participants were welcomed to the workshop by Ms. Betty Maina, Chief Executive Kenya Association of Manufacturers, who had co-organized the workshop in consultation with the EABC Secretariat. The Chief Executive gave a background of the objectives of the workshop, namely; - validate the study report commissioned by the EABC to identify the impact of the Customs Union and Cross Border Business on the Community REMARKS: EABC VICE CHAIR:- MR. KELI KIILU Informed the meeting on the activities, roles and objectives of EABC - Improvement of business environment in the Region by lobbying and advocating for policy s that result to improvement of business environment and opposing regulations and policy s that hurt businesses. - EABC undertakes surveys that informs their identifies the needs of the Business Community, advocacy and lobbying e.i Business Index`Surveys. - Monitoring implementation of EAC Customs Union and identifying issues that need to make EAC integration efficient and effective. - That EABC had attained an observer status in the EAC meetings and that proposal to have EABC be the communication channel for the Private Sector at the EAC was almost complete. This would result to all private sector issues being channeled to EAC through EABC. - EABC had organized an Energy conference in November A similar conference to be held in November This is in cognizance of the Challenges facing energy sector in the region Mr. N. wa KARANJA, EAC. - Addressing of the NTBs was hampered by weakness of the National Monitoring Committee (NMC). Called for the participation and involvement of the Police and Revenue Authorities in the NMC. - Some Problems facing the business at the Border posts did not require financial input but goodwill. -. Permanent road blocks needed to be removed - Rigorous Procedures not facilitating trade i.e Trade of Milk in the region - Rules of origin forms for the Small business had been simplified (goods less than USD 500) - No need to negotiate market access than block it through NTB s and rigorous procedures.

104 - Commended that existing relations between EABC and EAC 1.4. REMARKS: CHIEF GUEST: MR. DAVID NALO, PERMANENT SECRETARY, MINISTERY OF EAC, KENYA. - Relayed the apology of the Hon. Minister who could not be available, and that of the Assistant who though having been around to officiate, had to leave to attend an emergency. - Gave an overview of the World Trade and Africa s share in the Export Trade. Lamented that Africa share in the export had declined from 30% in 2006 to 20% while there was increases of Exports from Latin America and Asia during the same period. - Explained Challenges facing Africa s economic growth: o Unfavourable business environment o Infrastructure: Poor, costly and unavailable. o Lack of research and development resulting to export of unprocessed products - From the study it was possible to deduce that Kenyan export to the region had declined at the inception of the Customs Union. This could be attributed to the implementation of the CET. - Kenya s investment in the region was on the increase. - Commended the study findings and urged for constructive honest engagement between the Private Sector and Governments from informed positions 1.5. PRESENTATION ON IMPACT OF CUSTOMS UNION FINDINGS: MR. BERNARD KAGIRA, CONSULTANT. - Gave an overview of the Study Methodology. Areas of coverage, and Number of Firms. o Production Chain, Trade Flow, Impact of Customs Union and NTB o 83 companies had been surveyed. 23 in Kenya - Governments had stayed on course in the implementation of the Customs Union and reduction of the Tariffs - Uganda and Tanzania had increased their Trade in the region in Kenya needed to ascertain products whose tariffs have come down in Tanzania (Tariff Reduction) and explore market opportunities. - Production Chain: Not integrated into the EAC market o There exist a problem of excess capacity o External Factors:- Electricity, Fuel and Transport impact negatively on business in the region. - Awareness of Customs Union o High Awareness o Availability and content of Customs very low. Limited knowledge on Rules of Origin and Duty Draw backs.

105 o Made the business environment predictable. o Impact positive, ranging from 46% in Tanzania to 77% in Uganda o Turnover low o Company expansion plans not pegged on the EAC Customs Union - Regional Capital Markets not developed. Borrowing is from domestic Markets. RECOMMENDATIONS: - Create awareness on the Customs Union. Education on customs union instruments necessary. - Integration of domestic production chain into the EAC market important. - There is need to identify lead products per country - Identify products with Intra-EAC trade potential - Mapping of Trade and Regulatory requirement - Initiate EABC/EAC periodic roundtable to monitor, explore and exploitation of the EAC market potential. - Regulatory framework for some products inhibiting trade - Need to empower EAC Secretariat 1.6 PRESENTATION ON IMPACT OF CROSS BORDER TRADE FINDINGS: BY MR. BERNARD KAGIRA, CONSULTANT. - Twelve border posts had been covered respondents had been interviewed - Sharing of information amongst customs officials lacking but critical. - SPS officers limited at border posts. Between 1-0 in other countries except in Kenya. This resulted to no trade for products requiring certifications - Infrastructure at border posts lacking: Problems with inspection, parking - There is need develop standards for infrastructure requirement - Unrecorded trade declining, problems at Malaba, Namanga Kenya and Tanzania - Customs Documentation still pose problems. Customs clearance takes an average of 115 Minutes to clear, SSP an average of 96 Minutes. - Clearing Agents used by large firms. - NTBs. Extortion at all border posts exist. RECOMMENDATIONS: - Sharing of information amongst border posts important - Need to establish regional Standards Body - On Non-Tariff Barriers, need to develop human capacity and provision of equipment. 1.7 DISCUSSANTS: CUSTOMS UNION BY REM OGANA, TRADE CONSULTANT - Commended the Study Reports Findings

106 - Cited limiting, Constraining Terms of Reference deterring the able Consultant - Study confined to few members who are members of EABC and in Export Business - Need to survey large constituency including even those companies not in export business to determine why they are not exploiting the EAC market. - Survey concentrated on Food and Beverage - Capacity Utilization: Capacity utilization of Kenya s companies surveyed, cited at 81%- 100% deemed too high in comparison to previous study conducted earlier by Kenya Association of Manufacturers, hence the need to verify. - Study questionnaire limiting and could o not determine whether the Customs Union had resulted to trade going up or not or during and as result of the Customs Union. o not determine how many firms had been started because of the Customs Union o how many firms/businesses had been closed down because of Customs Union. o it was difficult to determine that Investment had gone up - The consultant need to determine and list what are the other components of NTB s constituting 40% - Awareness should be undertaken by Government, EAC and not restricted to EABC. RECOMMENDATIONS - Need to determine other components that affect Customs Union Implementation 1.8 DISCUSSANT: IMPACT OF CROSS BORDER ON BUSINESS: MR. GILBERT LANGAT, CHIEF EXECUTIVE SHIPPERS COUNCIL: - Study TOR restricted to Transport and Logistics - Appropriate respondents surveyed. - Delays at border posts; o Need to examine the causes of delay i.e why it takes 2 days to clear - Cross Border Traders undertake own clearing, since using clearing agents increase costs. - Customs Procedures: o Need to examine the impact and status of Automation at the Border Posts

107 o Need to determine the business activities at Non Mans Land between the country boundaries. o Cited lack of furniture, crowding at Border Posts - Border Posts Infrastructure, called for Government Financing noting that donor funding did not address Border and Around the Border posts Infrastructure. RECOMMENDATION - Institute: One stop border post One window at the Border Posts - Harmonize licensing requirements - Reduce Trade Facilitation Costs costing the business 40-50% - Identify Areas of Delay at the Border Posts 1.9 PRESENTATION: KENYA PORTS AUTHORITY: MR. ALEX`KABUNGA - Informed meeting of the World Bank Funded Project: Port Community Based System (PCBS) aimed at reducing and enhancing efficiency amongst trade facilitating agencies by introducing a National Single Window Electronic Platform. The system ones implemented would reduce clearance of cargo at Ports and Airports (entry Point) i.e at Mombasa Port from 11 days four hours to 3 days. - Current Risk Management Subjective: To be improved upon the implementation of the PCBS - Challenges: o Legal Framework o Telecommunications - Cited contradiction between the EAC Customs Management Act and which stipulates lodgment of documents within 24 hours after docking of ships and not 24 hours before as is stipulated in Customs Act of Kenya and Tanzania. This had caused enormous challenges and delay at the port. USD 50 Million being wasted annually due to the delay. RECOMMENDATIONS: - Need to review the EAC Customs Management Act. - Need to harmonize working hours at the Border Posts. Rwanda/Uganda border where due to time differential (Rwanda 1 hour behind) resulted to different closing and opening times. - Ports and Borders should operate 24 hours, seven days

108 2. PLENARY DISCUSSIONS/COMMENTS/CARRYING THE PROCESS FORWARD: a) DISSEMINATION: Mr. David Nalo, Permanent Secretary, Ministry of EAC, committed to have the study findings presented to the Cabinet Sub Committee on Finance. b) TOR: In future share and involve many stakeholders in developing c) NTBs: Develop institutional capacities to monitor and address d) UTILIZATION OF CAPACITY: Concern raised over the current transport regulations which currently deters trucks from carrying cargo on their return journeys. Impact on capacities and raises costs of transhipment e) BOND CANCELLATION: Current Bond cancellation procedures lengthy and ties resources. Makes the region uncompetitive. Goods from S.A able to reach EAC market even before goods from Kisumu, Kenya reaches Uganda. f) RISK MANAGEMENT: Companies with long standing repute of many years having to undergo stringent risk management process, need to be reviewed. g) CLEARING AGENTS: To become professionals (atleast Diploma holders). Business urged to undertake and follow right procedures. h) LIMITATIONS/SENSITIVE PRODUCTS: Current regulations especially on sensitive products deterring intra-regional trade. There is need to un-pack protectionsist regulatory framework to facilitate trade i.e in fruits and vegetables, milk and sensitive products. i) AWARENESS: Need to create awareness on EAC development. Council Resolutions. Failure to follow Council Directives decried. j) PROTOCOL: Need to respect EAC Protocols and Council Resolutions. k) NTB s Over valuing of clearance documents, Rules of Origin cited as being used as NTB s. There is need to map and profile all NTB s and coordinate their removal. l) TRANSPORT: Transport costs grossly affecting business m) DEROGATION: mechanism needs to be put in place to compensate business for resultant loss i.e importation of vehicles by Tanzania and Uganda meant lost business for GM of Kenya; though discussed and agreed by council of Ministers

109 needed to be considerate of the impact. Makes planning difficult. Decisions seemed to be made for specific companies and not sectors. n) SECRETARIAT: Has no executive powers, examine possibility of empowering EAC Secretariat to ensure implementation of Council Decisions without delay. Ceding some state powers to SECRETARIAT. o) EABC: EABC to play a lead role in articulating private sector concerns p) PREVIOUS WORKSHOP: Status of the implementation of previous recommendations of a Workshop organized by Export Promotion Council was sought. 3. CLOSING REMARKS: 3.1 EABC CHIEF EXECUTIVE: MR. CHARLES MBOGORI - Thanked participants for attending - Commended Kenya Association of Manufactures - Confirmed implementation of the Study Findings - Affirmed that the Customs Union was on-course, albeit slow and facing some challenges - Informed meeting of forth coming Conference on Illicit Trade - Notified meeting of EABC s role in HIV/AIDS - Informed meeting of EABC s autonomy, roles and objectives - Enumerated the existing close working relations between EABC and the various Governments as is evident in the participation by Ministers and Permanent Secretaries at EABC meetings and foras. - Next Study to cover Ports and Airport - Findings of the Study to be implemented and not put on the bookshelf. 3.2 WAY FORWARD: The EABC Chief Executive provided the following road map: - Validation workshops on the study to be held in other countries and a regional workshop to be held in Arusha, Tanzania on August 25, 2008 drawing 12 participants from each country. 3.3 CLOSING REMARKS: MR. CHACHA, SECRETARY, DEPARTMENT OF EXTERNAL TRADE, OFFICE OF THE DEPUTY PRIME MINISTER AND MINISTER FOR TRADE. - Noted EABC s vision which was similar to the Ministry s - Acknowledged importance of the Study and confirmed Ministry s association with the Study and its findings. Ministry to undertake implementation of the Study findings - Despite constraints government is keen to improve business environment.

110 - Reported that Trade facilitation was one of the components under the Private Sector Development Strategy, through which some of the recommendations would be implemented. - Implored on the consultant to reconcile the report with the reality on the ground - Called for the harmonization of the working hours at the border posts - Applauded the concept of the Single Window - Implored upon council of Ministers to consider implication of their decisions such as derogation based on expert opinions from the EAC Secretariat amongst others - Called upon the collaboration of trade facilitating agencies to improve transit of goods - Directed participants to study a JICA report on Opportunities within East Africa Community

111 Annex 4(e) UGANDA REPORT OF THE PROCEEDINGS OF THE VALIDATION WORKSHOP ON THE EAST AFRICAN BUSINESS COUNCIL STUDIES ON THE IMPACT OF THE EAST AFRICAN COMMUNITY CUSTOMS UNION ON THE BUSINESS COMMUNITY 1. Introduction The Validation Workshop for the East African Business Council (EABC) Customs Union impact studies was held on the 4 th of August, 2008 at the Kampala Sheraton Hotel, Uganda. It was jointly hosted by the EABC Secretariat and the Uganda National Chamber of Chamber of Commerce and Industry (UNCCI).Preceding the workshop was the commissioning of two studies by the EABC to take stock of the effects of the Customs Union on the business community so as to engage on issues geared towards enhancing its implementation whilst mitigating its adverse effects. The validation workshop was intended to offer an opportunity to selected stakeholders to confirm whether the findings of the studies were an accurate reflection of the effects of the Customs Union on the business community. The workshop attendance was drawn from the private sector, business membership organizations (BMOs) and the public sector. The attendance list in its entirety is at appendix A. In his opening remarks, Mr.Kassim Omar, UNCCI s First Vice-President welcomed participants to the workshop. He commended the EABC for the continued effort and investment in research geared at promoting the private sector and the regional economies. He observed that the EABC and its membership had done their part in highlighting critical issues inhibiting the growth of the private sector and that it was high time other stakeholders such as governments took cognisance of this and implemented the recommendations made. He concluded by expressing the hope that the outcome of the workshops deliberations will contribute to the fast-tracking of the integration of the East African Community. On behalf of the EABC, Dr.Nelson Githinji, a member of the EABC Board of Directors, welcomed participants to the workshop. He underlined the fact that the EABC has a primary role in ensuring the creation of policies that enable the business sector become more profitable and enhances the possibility of attractive returns on investment. He revealed that as part of the EABC s policy advocacy mandate, work was underway to identify issues for lobbying in the banking sector while the Annual Business Climate Index was another output of such efforts. He pointed out that energy was a key issue affecting the competitiveness of industries in the East African Community(EAC).To contribute towards the resolving of this situation and as a followup measure to the Energy Conference organised by the EABC in September of 2007, he announced that they intend to host a renewable energy forum in November of 2008 whose participation would be drawn industry regulators, renewable energy companies, financiers and donors with the objective of enhancing locally financed short term energy projects within limited time spans. His remarks also touched on the objectives of the study and the validation workshop as seeking to generate evidence that would be used by the EABC in its advocating for measures to maximise the successes of and mitigation of the challenges to the Customs Union. He concluded by expressing EABC s gratitude to the Government of Uganda and the EAC for the support extended to the private sector as well as the Regional Trade Facilitation Programme(RFTP) and the United Kingdom s Department for International Development(DFID)

112 for sponsoring the validation workshops.lastly,he thanked UNCCI for their input in organising the workshop. On behalf of the EAC, Mr.Fredrick Owiti, principal economist at the EAC in charge of investment promotion and private sector development underlined the importance of the private sector with regard to employment creation, wealth creation and tax revenues. He revealed that mainstreaming of the private sector within the EAC s programmes and projects is underway and guided by the Private Sector Development Strategy and that the strategy was due for revision to cater for the entry of Rwanda and Burundi into the EAC.In addition, he disclosed that plans are afoot to brand EAC for investment promotion purposes and that this had been reaffirmed by the investment summit recently held in Rwanda. He further disclosed that an investment promotion campaign targeting Europe would be held in Novemeber, 2008.On the progress of economic integration, he stated that the common market which would enable movement of factors of production and reduce the cost of doing business was the target stage. He concluded by congratulating the new Board of Directors of the EABC and called for greater collaboration between the EAC and EABC. 2. Presentation of Draft Study Reports on the Customs Union Impact Mr. Bernard Kagiira of Integrated Development Consultants presented the two draft reports commissioned by the EABC as part of taking stock of the implementation of the East African Community Customs Union and its effects on the business sector Draft Study Report on the Effects of East African Community Customs Union (EACCU) In recognition of the fact that the implementation of the EAC Customs Union was entering its fourth year, the EABC felt that the time was ripe to take stock of the implementation and the effects on the business community. To that end, a study on the effects of the customs union was commissioned. The objectives of this study are: e) To understand the level of awareness about the opportunities of implementation of the EAC CU f) To understand the expectations of the business community from the EAC Customs Union g) To understand the facilitation needs of the business community in relation to the EAC CU h) To understand the challenges facing EAC exporters, producers and importers. The findings and recommendations of this study as presented to the workshop are presented below: Study Findings. The findings of the Study in summary form are presented below: Inputs from the EAC account for 15% of the domestic production chain revealing scope for enhanced intra-regional trade. On the external factors hindering businesses from taking full advantage of the EACCU,electricity,fuel and transport costs ranked highest accounting fro an estimated 70% of total external factors Existence of excess capacity as a major hindrance to trade in the region with the situation being more grave in Rwanda and Burundi as compared to Uganda, Kenya and Tanzania. This illustrated by the finding that 40-50% of firms in the former operate at between 10-30% while in the latter they range from 81%to 100%.

113 On intra-region exports, the findings present a mixed picture with Kenya as the exception having its exports evenly distributed between Uganda, Tanzania and Rwanda at an estimated 26% of total On regional imports, the study finds that the bulk of member states imports are from outside of the region with Europe as a significant source of imports On awareness of the EACCU,the study found that the level of awareness is quite high in the founding member states of Kenya, Uganda and Tanzania as compared to the later entrants Burundi and Rwanda. On the availability and content of information on the EACCU, the study found that this was low and, in some cases, unavailable. On sources of business information on the EACCU, associacions of manufacturers ranked highest followed by the EAC website and secretariat, workshops and seminars and the media. On whether the EACCU had been successfully implemented, the majority of respondents in Kenya,Uganda and Tanzania took the affirmative view On the impact of the EACCU on business, the study found that in varying degrees member states had experienced enhanced free movement of goods, business expansion and increased business turnover. However, implementation of the EACCU had not significantly impacted on intra-regional investments as domestic sources remained predominant. On the attractiveness of the EACCU preferences, the study found that elimination of intra- EAC tariff and the Common External Tariff (CET) to be the most attractive features while Non-Tariff Barriers, the EAC sensitive list, application of EAC rules of origin and the CET structure were found to be the least attractive features Study Recommendations Below is a summary of the recommendations made by the Study on the Effects of the Customs Union: To enhance awareness of the EACCU, publicity needs to be stepped particularly in Rwanda and Burundi. In addition, the content of publicity needs to be revised to enhance access by the business community and other stakeholders On the integration of domestic production chain into the EAC market, several recommendations are made. They include iidentification of products with intra-eac trade potential and development of a network of buyers and suppliers, mapping of trade and regulatory requirements at national and regional level for each of the products, mainstreaming any policy/regulatory requirement which may be deemed as inhibiting intra-eac trade for the identified products into EAC policy making organs and initiation of EABC/EAC periodic roundtables to monitor exploitation of the EAC market potential. Development of EAC infrastructure to offset some of the external factor costs identified by the study On excess capacity, the study recommends that the EAC Industrial Development Strategy among other things identifies companies in such situations and devises measures to help them improve on capacity utilisation in the framework of the EAC market Harmonisation of EAC,SADC and Comesa Trade regimes to eliminate the present differences Enhancing the awareness of the NTB monitoring mechanism EABC,EAC and the regional financial sector need to devise measures to enhance intra-regional investments On measures to address non-implementation of the customs union, export compensation, review of tariffs, and provision of rebate/insurance, among others, are proposed.

114 On measures to guarantee full implementation, the report recommends implementation of the EAC Customs Union Protocol, implementation of the NTB monitoring mechanism, elimination of the NTBs and harmonization of customs operations. On mitigation of losses resulting from non-implementation of the EACCU, the report proposed eenforcement of the Customs Union Protocol, tracking and monitoring effectiveness of implementation of specific Customs Union requirement in collaboration with private sector, securing of reforms in trade facilitation system to accommodate the changes foreseen in the EAC Customs Management Act and capacity building and empowerment of the public and private sector on matters of the EAC Customs Union implementation. On the empowerment of the EAC Secretariat to strengthen regional integration, the report proposes transfer of some powers from governments to the secretariat, ugpgrading of the secretariat to commission status with full funding and greater commitment by the partner states. On the business community and lobby groups holding governments accountable for nonimplementation of EAC Customs union, the report proposes aadoption of EAC harmonized standards, introduction of legislation to deter non-implementation of the Customs Union, demonstrate to governments strong correlation between private sector gains from implementation of Customs Union and economic development, quantify the loss of business opportunity and strengthen business associations and lobby groups to be proactive and petition governments in event of non implementation of the EAC Customs Union Border Survey Study The Border Survey Study was commissioned by the EABC with the aim of identifying challenges faced by the business community when transiting through the EAC borders and the opportunities to address them. The study was, in part, motivated by the need to validate the findings of the study on the effects of the customs union with specific regard to NTBs Findings of the Study. The scope of the study covered 12 border posts including 2 ports and its findings are abridged below: On customs and trade processes, a total of 524,461 customs were made for the year 2007 translating into exports worth US$2,011,943,898 and imports worth US$ 13,389,733,691.In terms of headcount, 234 customs officials were deployed to man the 12 border posts. In addition, further analysis of the data obtained revealed a positive correlation between the number of customs officials and number of customs declarations On immigration, the study identified discrepancies between the number of exitees and entrees and yet the two parameters should tally on either end of the border posts. In addition, no correlation was observed between the data on exitees and entrees on the one hand and the number of immigration officials on the other. In as far as sanitary and phytosanitary (SPS) aspects are concerned, all border posts with exception of two had SPS officials. However, some border posts had one official and by implication either plant or animal health would go unattended at such border posts as it is unlikely that the one official would be qualified in both disciplines thus risking transmission of diseases across the borders. In addition, the Study found that only half the border posts had a health official on station. On standards, the findings are that not all border posts have Bureau of Standards officers on station with the exception of Kenya On security, the finding was that this matter is taken rather seriously and adequate measures are in place at the majority of the border posts

115 On infrastructure, the survey revealed that half of the border posts have adequate inspections bays while 58% of the parking bays are in a sorry state. The survey further reveals that most sections of roads serving border points are in good shape. In as far as availability of other essential services and with particular regard to banks and filling stations, the survey found that only half of the border posts had such facilities. In terms of trade flow across the borders, the survey found that a substantial amount of trade was being carried out as manifested in the value of exports and imports that stood at US$ US$2,011,943,898 and US$13,389,733,691 respectively in 2007.However, an equally substantial amount of unrecorded trade estimated at US$31,600,000 was also going on over the same period. In as far as trade facilitation is concerned, the survey found that immigration documents were widely available and the duration required to secure them fairly short while the perception of their cost was that it is standard. The survey further found that customs declaration forms were widely available and in use by most truck drivers.however, a section of traders was not making use of the declaration forms citing complexity. On customs clearance duration, on average it take a truck 115 minutes, 44 minutes for traders and 45 minutes for clearing agents. In terms of police, SPS authorities and Bureaus of Standards clearance, on average truckers require 96 minutes, traders need 109 minutes and clearing agents 117 minutes. On clearing agents, the survey found that their use was prevalent and their charges depended on factors such as volume of goods, variety of goods, etc.the survey recorded several complaints against clearing agents including surcharges occasioned by the delay in clearance of goods, intentional delays in the clearance of goods, misplacement of client documents and high charges for their services. On Non-Tariff Barriers (NTBs), the survey recorded various complaints from truck drivers ranging from police checks and barriers, to delays at border points and understaffing of customs. More importantly, the survey revealed the absence of a formal NTB monitoring mechanism confirmed by the strong support by respondents for the establishment of such a mechanism Reccomendations. The Border Survey Study makes the following recommendations: On immigration, the study recommends greater collaboration between immigration officials on shared border points to iron out discrepancies between in the data on entrees and exitees.it further recommends the rationalisation of staffing levels as a measure to enhance efficiency and the benchmarking of clearance durations with the most efficient border posts. On customs, the survey recommends benchmarking against the most efficient customs points and the sharing lessons to enhance performance. In addition, it recommends the simplification of custom forms and the EAC Certificate of Origin On sanitary and phytosanitary inspections, the survey recommends the posting of SPS officials at all border posts to address both plant and animal health as a measure of enhancing intra-regional agricultural trade. On standards, the posting of Bureau of Standard officers at border posts is recommended. In addition, the study urges the Bureaus of Standards to explore the possibility of establishing jointly manned offices.

116 The study recommends the revamping of infrastructure at border points in terms of buildings,roads,inspection bays and parking bays as well as other facilities such as banks and filling stations On Non-Tariff Barriers (NTBs),the report recommends the implementation of the EAC NTB monitoring mechanism. 3. Reactions by Participants Following the presentation of the two Study Reports by the Consultants, the presentations were discussed by Mr. John Sempebwa and Mr. Charles Kareeba representing the Private Sector Foundation Uganda (PSFU) and the Uganda Freight Forwarders Association (UFFA) respectively. Additional reactions to the consultant s presentation were drawn from the cross section of participants. Below is an abridged version of the reactions by both the discussants and the rest of participants: 3.1. Draft Study Report on the Effects of East African Community Customs Union (EACCU) Participants observed that the sample size of the study was rather limited and as a result expressed reservation on the conclusions drawn. They called for the expansion of the sample size to generate more representative findings.however, the consultants clarified that despite the limited sample size the results were still statistically significant as the sampling had focused on companies that account for 60-70% of intra-regional trade. Participants expressed dissatisfaction with the scope of the study and demanded an explanation on the criteria employed in distributing the survey s sample between partner states. In response, the consultants clarified that the scope of the study was shaped by the terms of reference(tors) and resource constraints while the distribution of the survey s sample amongst the partner states was guided by the principle of asymmetry. On capacity utilisation, participants noted that the figures used to draw conclusions on this parameter were static. They observed that a time series approach would have been more beneficial in terms of assessing the impact of the customs union on capacity utilisation. Participants confirmed the finding that associations of manufacturers are a key source of information on the customs union.however, they noted this was to be expected since manufacturers dominated the survey sample.additionally, they indicated a willingness to learn about other good sources of information on the customs union. On the finding by the study that implementation of the EACCU was proceeding well, participants expressed reservations on this revelation citing the prevalent NTBs with particular regard to the trade relations between Uganda and Kenya. To that end, they pinpointed the failure to implement the EAC NTB mechanism as a significant shortcoming.relatedly, they called on Kenya to do more to dismantle NTBs inhibiting trade with Uganda. On the recommendation by the study to upgrade the EAC Secretariat to a commission on grounds that this development would result into greater effectiveness as result of increased funding and greater decision-making scope, participant reactions were mixed. Some were opposed to citing the Secretariat s lack of results to justify such an action while others supported the recommendation using the same argument to justify their views. Participants expressed strong support to the recommendation by the study to harmonise trade regimes in the various and overlapping regional integration blocks. They observed that Uganda was most disadvantaged by the variations in the tax regimes and as a result the country s attractiveness as an investment destination is negatively affected, the country

117 becomes a dumping ground for cheap goods and some businesses are forced to relocate elsewhere. The recommendation by the report to build the capacity of business associations in as far as information on the customs union is concerned was welcomed by participants. They expressed confidence that this measure would enhance access to information on crossborder trade. A call was made for a deeper analysis of the effects of the customs union with various justifications for this. Some indicated that evidence points to productivity variations within companies located in various partner states and relocation of some businesses post implementation of the EACCU.Others questioned the analytical framework arguing that trade creation, input costs, business survival, and foreign direct investment would be the parameters to focus on. Lastly, participants called for more regular and planned studies as opposed to the current manner which they perceive to be adhoc.in response, the consultants proposed the development of templates as a relatively inexpensive measure to address this concern 3.2. Border Survey Study The reactions of participants to the above survey s findings include: On the list of NTBs identified by the survey, participants expressed frustration with the lack of progress as the same NTBs have been cited in at least 6 previous reports. They underlined the need to decisively address them. To that end, they proposed the simplification of the presently complex procedures and processes within an agreed timeframe. A section of participants expressed the view that corruption at the border posts had not been sufficiently addressed by the report Some of the participants drew the attention of the workshop to the causal relationship between delays at border posts and poor infrastructure to HIV/AIDS infection rates in border towns and hence emphasised the need to address the twin problems. Participants made a call for the decisive handling of the personnel-generated constraints to trade in the customs management area. Participants disputed the figures in the report on use of clearing agents which implied that some goods were being cleared by individual traders since the use of clearing agents is mandatory. Infrastructure improvement was pinpointed as critical to trade facilitation and movement across borders. Advocacy capacity and collaboration between business associations was identified as critical to the dismantling of NTBs Participants overwhelmingly supported the recommendation by the study that the EAC NTB mechanism be implemented. Relatedly, the consultants introduced an additional dimension by proposing a value-chain approach to the elimination of NTBs Nomination of Uganda s Representatives to the Regional Validation Workshop Participants were informed that a regional validation workshop is due to be held in Arusha, Tanzania to distil the views of the business community on the two studies into an East African position. They were further informed that the EABC had set aside resources to fund participation of 15 people to represent Uganda. Participants were then invited to nominate the 15 representatives. The following individuals and institutions were nominated: 1. Mr. Charles Kareeba Uganda Freight Forwarders Association 2. Mr.B.I.S.Rwabwogo Mukwanao Group

118 3. Mr. Jim Kabeho 4. Mr.Kassim Omar Uganda National Chamber of Commerce and Industry 5. Mr. Richard Wabwire Coca-Cola 6. Private Sector Foundation Uganda 7. Ministry of Works and Transport 8. Ministry of East African Community Affairs 9. Uganda Manufacturers Association 10. Ministry of Finance Planning and Economic Development 11. Uganda Revenue Authority 12. Ministry of Foreign Affairs 13. Ministry of Tourism Trade and Industry 14. Britannia Industries. Following the nomination of representatives to the regional validation workshop, Mr.Kassim Omar, UNCCI s 1 ST Vice-President by way of closing remarks conveyed gratitude to the EABC, the consultants and participants for the success of the workshop and pledged UNCCI s readiness to work with other private sector institutions to advance the interests of the business community in a more cohesive manner.

119 Annex 4 (f) Rwanda National Validation Workshop Dissemination Workshop to Validate EABC Draft Reports to Analyze the Impact of the EA Customs Union to the Business Community Venue: Novotel Umubano Hotel The 06 th of August 2008 Opening Remarks and Welcome by the Host (Vice President, PSF, Mbundu, Faustin) 1. Agree to choose a team to do the way forward from Rwanda (John Bosco) 2. We are now very involved in East African Community with EABC. 3. As we are harmonizing our position in the EAC we are not just following what is already there. We are bringing something to the table. 4. The goal is to have an information exchange from all sides. Remarks by Private Sector Owiti, Fredrik 1. We are moving towards more PS as apposed to the GoR. 2. Impressed by Rwanda joining the EAC. 3. The new treaty of the community has given the Private Sector a huge roll and they are now mainstreaming in the community. 4. Highlights form the investment conference that took place in Rwanda. 5. Goal is to eliminate barriers form investors in EA no matter where you land. 6. Harmonize investment codes in EA (immediate plan) by next year hopefully 7. Common Market (workshop in Nairobi) implemented in the next two years followed by monetary union. 8. EAC strategy for private sector (synergy among the EAC) 9. expectation of Business council to play significant roll in EAC to improve business environment for business community Remarks by EABC Dr. Nelson Githinji 1. They have launched an important study to promote Private sector development. 2. Primary roll for enabling policies that support environment to promote business sector for business opportunity. 3. Working in Banking sector to identify issues for lobbying a. Annual Business Climate Index i. Progress of non tariff barriers ii. Improvement in transport iii. Access to finance iv. Energy (big area of non competitiveness) 1. high price

120 2. unreliable 3. poor quality b. Energy conference in Sept 2007 (EAC and Afrika Verein) i. Development of renewable energy to mitigate energy crisis 1. ex: solar, energy from waste and bio energy, wind, co-generation, mini and micro hydro, bio-fuels, and geothermals. c. Nov 2008 EABC to host Renewable Energy Forum with all energy stakeholders 4. Two studies: Analyze impact EAC customs union a. Increase level of awareness about the opportunities of implementation Customs Union b. Expectations c. Needs d. Challenges of EAC exporters, producers, and importers 5. evaluate draft findings and analyze them 6. validation wkshop in each five member state th of Aug in Arusha a. Come up with regional challenges and problems for mtg with 9 volunteers 8. Regional integration goal for EAC with support of EABC Statement by the Chief Guest Prudence Sebahizi 1. RIC leading negotiations 2. PS drives economic development 3. Main challenge that hinder Interregional trade a. Non tariff barriers (NTB) i. Anthem of EAC ii. Top of challenges iii. Customs union protocol agreement to impose them /2005 was when they were supposed to be eliminating them iv. Monitoring mechanism (set up in all five states) v. Even though slow but community is willing for solution to enforce implementations- hopefully by next year they will be gone 4. common market can only happen with cooperation customs union 5. must remove trade barriers Presentation of the Draft Report on the Effects of the EAC Customs Union on Business 1. represents Integrated Development Consultants

121 2. spoke on background of structure of the customs union including the common external tariff and internal tariff elimination. 3. There is a reduction in tariff and goal is to move to 0% tariff 4. There is strong evidence that there is a strong move towards elimination 5. The 3 wk study included structured interviews (avg of 16 companies in each state) 6. analytical framework what survey captured a. production, trade flow chain, implementation of EAC CU and Impact or benefits of EAC CU implementation on businesses. 6. in all states there is a general increase in movement of intra imports 7. We are loosing from extra imports because we have limited intra imports for ex. In milk products and cooking oil in other words we are missing opportunities 8. in Production Chain we are only sourcing about 12% from EAC and again we are missing opportunities. 9. Electricity, Fuel, and Transport cost account for external factors costs 10. we are not working at full capacity 11. there is high awareness of customs union in Kenya, TZ, and UG but not in Rwanda and Burundi 12. We are missing information and details about CU 13. Kenyan companies do not feel there is full fairness in principle of asymmetry. 14. In terms of Impact a. Co s said there is free movement and expansion of business, although there is no direct link to the CU b. Most said that the turnover is not directly linked to the EAC CU c. Low duty drawbacks d. Most impact would be in Rwanda and Burundi 15. Some NTB impacts negatively on businesses including poor infrastructure and customs clearance procedures. 16. Recommendations: a. Enhance awareness b. Integration of the domestic production chain into the EAC market i. Ex. Mapping of trade and regulatory requirements at national and regional level for each products and mainstreaming policies (lots of work to be done in those areas) ii. Monitoring and evaluations are key c. Dev t of EAC infracture (not individual country but for region) d. Capacity utilization e. Ongoing Harmonization EAC, SADC and COMESA Trade Regimes f. Awareness on existence of NTB monitoring mechanism and make sure they are working for the business community g. Awareness on Duty Drawbacks Schemes

122 h. Respond to EAC region need for Investment Capital (source for itself) i. Measures to address non implementation of the EAC Customs j. Must be commitment from all member states k. Must make sure that gov ts are accountable for nonimplementation of customs union. Important to have legislation for gov t that do not follow through. And awareness of gains from each country of loss of business opportunity. Presentation on the Border Survey Study 1. Study included 12 border posts and 2 ports and targeted borer traders, truck drivers, and clearing agents. Also the cross border government officials. 2. Analytical framework 3. Institutional Capacity i. Value of exports 2bn ii. Value of imports 13bn iii. Exitees and entrees were about equal in terms of immigration iv. SPS (plants and animals) some borders don t have the necessary staff 4. Staff: no staff to inspect standards 5. infrastructure i. improvement in state of buildings and inspection bays and road network are all in good conditions ii. the parking bays are in horrible state 6. There is about 31mn of unrecorded trade 7. Immigration papers and clearance does not take long or is very expensive. 8. Customs a. Most prefer clearing agents b. Types of NTB i. Poor roads, high taxes, delays by police, inadequate computerized borders, forged docs, no banking facilities, etc ii. There is no formal NTB monitoring services 9. Recommendations a. Immigration collaboration to prevent discrepancy b. Customs; sharing of information and introducing EAC? c. Sanitary and phytosanitary inspections d. Infrastructure at borders can be improved e. Fix inspection bays and construct parking bays f. Well maintained roads should be maintained g. Provide banking and filling stations. ADR clearing and foreign companies in Rwanda

123 1. awareness level of companies in Rwanda a. relevant and important to increase capacity b. level of awareness of freight forwarding industry in Rwanda is low and lots need to be done. c. How do we get info to the people l. They get more information in the original EAC countries m. Big gap in creating awareness. n. Issue of professionalism 17. capacity building awareness a. establish prof standards in clearing agency in Rwanda b. push it in the market c. build skills in trading companies d. we need harmonized best practices in Rwanda before we go to other countries i. awareness ii. establish adapt best practices iii. build skills and mgt iv. continue periodic research and advocacy v. establish regional networking e. resource mobilization needs to be improved f. address NKOB needs for they are not equal to the incumbent g. There needs to be less information asymmetry and communicate information to all member states. Plenary Discussions; freight forwarders have seen many achievements (Mr. Rusagara) 1. process of documents at borders in UG and RWA has improved hours services proposal 3. Licensing of clearing agent 4. Removal of road blocks achievement (RWA or regional) Challenges of freight forwarders o Container deposit and slow process o Shipping lines uncooperative (East African Shipping Council needs to engage in many of issues that deal with their mandate). o Container freight services are over charging o Poor road and repairing is expensive o Trucks are charged extra in Kenya whereas Kenyan trucks are not charged in Rwanda. o transit port license should be abolished o Freight forwarders code should be looked into and finding out who is responsible for problems such as briefcase persons. Custom s Issues o East African Customs Protocol has been ignored and we should have free circulation

124 o Committed to customs clearing Coffee Exporters o Issue with cost of production and quality assurance Production cost mostly agriculture. There is sensitive products Customize customs union o Raise awareness of union and common market o Proposes two day investment conference and discuss NTBs from the heads. o Building roads that are privatized and then maintained by private company and drivers pay for use o East African Private Sector Strategy revised to incorporate RWA and BRN EABC feedback o Membership Business in East Africa should form an org to pay the cost and they still have their voices heard. o Cost of production Energy efficiency will reduce the cost Karanja o Licensing is an issue and people from customs are working on those issues. o Changing money will be facilitated in customs o Monetary mechanism for NTB Issue GoR have not yet discussed this. Moses o Startup entrepreneurs What can EABC do for the business development issue for private sector? We need to deepen the issue of competitiveness. Way forward: o Comments are welcome Annex from ADR TRANSIT BOTTLENECKS FROM ARRIVAL VESSEL MSA TO DDP KIGALI 1- CONTAINER DEPOSIT AND DELAY IN REIMBURSEMENT OF GUARRANTEE DEPOSIT BY THE SHIPPING LINES AFTER RETURN OF THEIR CONTAINERS IN THE MOMBASA YARD. 2- G T L 3- HIGH CONTAINER DEMURRAGE CHARGES. 4- HIGH KPA STORAGE CHARGES.

125 5- DOUBLE STORAGE CHARGES BY BOTH KPA CFS AND CUSTOMS< IE> LATE DOCUMENTATION CHARGE AND CUSTOMS WAREHOUSE RENT. 6- TRANSIT HANDLING FEE BY MAERSKLINE. 7- LICENCING OF REPUTABLE CLEARING AGENTS AND ELIMINATION OF BRIEFCASE AGENTS. 8- CAPACITY BUILDING OF CUSTOMS AND CLEARING AGENTS. 9- EXTENSION OF TRANSIT TIME BY CUSTOMS,MSA. 10- CASH /BANK GUARRANTEE ON SOME CONSIGNMENTS.IN MSA 11- HELP US TO RECOVER CONTAINER DEMURRAGE PAID TO SHIPPING LINES FOR THE PERIOD KENYA GOVERNMENT WAS IN PROBLEMS. 12- POLICE ESCORT BY KENYA POLICE. 13- REMOVAL OF NON TARRIF BARRIERS ALONG THE NORTHERN CORRIDOR. 14- BORDER FEES. 15- TRANSIT PARKING YARDS IN UGANDA. 16- POWER FAILURE AT BOARDER STATIONS. 17- EXPORT BOND. 18- SEVERAL AXLE LOAD CONTROLS IN KENYA AND UGANDA. 19- BEREAUCRATIC DELAYS BY KPA 20- RESTRICTION PREVENTING RWANDESE REGISTERED TRUCKS FROM CARRYING GOODS DESTINED TO RWANDA AND ORIGINATING FROM KENYA. 21- RESTRICTION PREVENTING RWANDESE REGISTERED TRUCKS FROM LOADING EXPORTS DESTINED TO KENYA. 22- TRANSFER OF TRANSIT GOODS TO CFS OR ICD INCREASES THE COST. 23- RESTRICTION OF LOADING BULK CARGO IN MSA. 24- ESCORT OF GOODS FROM MALABA/BUSIA BOARDERS BY UGANDA CUSTOMS. 25- MAKE MALABA/BUSIA/GATUNA 24 HR OPERATION. 26- REMOVAL OF TRANSIT BOND SECURITIES AT MALABA/BUSIA AND GATUNA. 27- MUTUAL RECOGINATION OF TRANSIT LICENCES ISSUED BY THE RELEVANT AUTHORITIES OF A MEMBER STATE AND USE OF THE SAME IN THE TRANSPORTATION OF GOODS IN INTERSTATE TRADE. 28- PARKING FEES AT MAGERWA. 29- DELAYS IN ISSUANCE OF CARGO RECIEPTS AT MAJERWA. 30- LACK OF ENOUGH OFFLOADING EQUIPMENT AT MAGERWA. 31- PHISICAL VERIFACTION AT MAGERWA. 32- VERIFICATION BY RPD AND BEREAU OF STANDARDS.

126 Annex 4(g) Burundi National Validation Workshop Report REPORT ON THE VALIDATION WORKSHOP ON THE EABC STUDIES ON THE IMPACT OF THE CUSTOMS UNION ON THE BUSINESS COMMUNITIES HELD IN BUJUMBURA ON FRIDAY, 08 AUGUST 2008, AT NOVOTEL HOTEL. The key participants in that workshop were the EABC team, Honourable Minister of Trade, Industry and Tourism, the Burundian President of the Chamber of Commerce and Industry (CCIB) and some other business men or actors operating in the private sector. I. KEY PARTICIPANTS SPEECHES All the key participants above mentioned delivered and worked in a warm climate. The EABC s representative briefly reminded all the people who were present what is the EAC and what is the EABC. He stressed that the private sector is the key in the customs union, that in near future the EAC will have to discuss about the common currency so that country members should be recognized as East African Investors with the freedom of investing anywhere within the community. He also expressed the idea of having one President for the whole East African Community. He told people that there is another survey which is being carried out on The Business Climate Index 2008 for assessing how things are going within the EAC for encouraging the progress and denouncing wrong things. The President of the Burundian Chamber of Commerce and Industry expressed his happiness to be present and welcomed EABC and all other participants in the workshop and revealed that Burundian private sector is really aware of the advantages of the EAC but he mentioned that Burundi is a landlocked country that almost all Burundian goods come from either Tanzania or Kenya, that the distance is too long, that business men pay many high taxes and therefore he would like the quick implementation of the Customs Union policy without waiting for The Minister of Trade, Industry and Tourism wished a warm welcome to every participant in general and to the EABC representatives in particular and told people that Burundi Government encourages the success ot the EAC insofar as it will develop the private sector. She informed participants the Government appointed a Steeling Committee which will monitor and ensure the success of Customs Union, the removal of barriers and the implementation of EAC s standard way of working and incited the participants to suggest strategies so that the Customs Union can be a reality. She therefore opened the workshop officially. II. PRESENTATIONS EABC s representatives made two pertinent presentations on the two studies made in the five country members:

127 1-EABC STUDY ON EFFECTS OF THE EAC CUSTOMS UNION/ Executive Summary 2-EABC Border Survey Study Executive Summary In the first presentation, the E A B C s representative made rich and attractive presentations on the two studies above mentioned that EABC made. They expressed that the main objectives of the EAC is the liberalisation, the efficiency in production, the promotion of industry diversification, economic development, to name but a few examples. They said that the main reasons for the study was: 1. the assessment of the situation 2. to find out what business men think about the EAC 3. To know people expectations 4. to understand the facilitation needs 5. to know the challenges that investors are really encountering 6. to try to find out the solutions to challenges. 7. the level of people s awareness In the second presentation, the E A B C s representative was tageting the real situation at borders and found out that: 1. some borders have bad services 2. people find declaring goods complicated and cheat 3. getting immigration documents is not standard in the EAC 4. Trucks spend a lot of time at customs 5. clearing delays and corruption is frequent Findings and Recommendations In findings and recommendations the participants agreed on all recommendations but gave their own opinions and suggestions worth of being taken into consideration by the EAC: -Participants said that Burundi is undergoing a serious war since 15 years ago and can t compete well with other country members whose political situation is stable and therefore needs particular attention. The EAC should help Burundian industry to be at the same level as the other countries. They urged the EABC to be their ambessadors and to pleade for their cause. 1. EAC should help Burundi to reach quickly other country members. 1

128 2. EAC should reduce the transport costs due to long distances and many borders. 3. Customs officers must be trained about the standard way of working 4. Customs officers must know the real prices of commodities since the prices declared by business men are not true. 5. The norms area is still backward, there is a need to respond to those requirements at national and international level. 7. The whole EAC must have the same standard way of working as a whole body for the sake of conformity. 8. There is need of appropriate infrastructures with sophisticated equipments d at custom in order to fulfil the mission. 9. The capacity building of personnel within the whole EAC region is of paramount importance. 10. EAC should standardise roads transport and weighbridges for offering services of qualities. 11.There should be a monitoring team to ensure that what Presidents of country members is being implemented. In Conclusion, the EABC s representatives told participants who were present in the workshop that EABC will be Burundians ambassadors in EAC and informed them that the region is aware of Burundi s alarming situation and promised to do their best. They also mentioned that until now, while other EAC country members contribution is 4 millions US $, Burundi s contribution is only one million US $. In addition, they stressed that Burundi is still benefiting from many advantages such as air flight tickets and allowances from the EAC which are sent to Burundians when workshops are organised or any other kind of meeting. This illustrates that EAC country members want to help Burundi to go forward and reach other countries belonging to the EAC. REPORTED BY THEODORE MUREKE, Translator Interpreter 2