For EAC, Trade Still Out Ahead of Political Integration

For EAC, Trade Still Out Ahead of Political Integration

The recent buzz about Africa’s economic progress and potential has aroused long-overdue interest from investors. While the bullish mood is largely justified, it should not obscure the fact that many institutional, infrastructural and policy barriers limit the scope for transformational growth. One of the most serious is that African markets are not sufficiently open. African countries simply do not trade enough with each other. This has huge consequences for a continent where 15 countries are landlocked and where colonial-era boundaries have produced many small, resource-poor nations that are not economically viable by themselves.

Some African countries have begun to address this by allowing the freer movement of goods, capital, people and services within their region. Regional integration has the potential to unlock markets, provide economies of scale, increase competition among firms and attract more foreign direct investment. The most impressive progress to date has been made by the East African Community (EAC), a customs union and trading bloc comprising Kenya, Uganda, Tanzania, Rwanda and Burundi. The current EAC, formed in 2000, revives and expands an earlier attempt at regional integration that collapsed in 1977 amid political rivalries.

The plans are ambitious: The EAC’s leaders are aiming for a common market, a single currency called the East African shilling and, ultimately, federation into a single state. Later this month, a more modest but nonetheless significant milestone will be reached when the East African passport, launched in 2009, will be formally recognized as a valid document for travel outside, as well as inside, the EAC. A common tourist visa for the region is set to follow.

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