Rwanda a growing market

The Customs Union now in its 5th year of implementation has boosted regional trade, with many companies in the region now exporting and opening branches within the East African Community, trade reports from sister countries indicate.

Rwanda is emerging as a leading investment destination.

Dr. Maggie Kigozi , the Executive Director,Uganda Investment Authority, describes Rwanda as a "very important” market for her country because not only does it provide a huge market but also opens up other markets in Democratic Republic of Congo (DRC), Burundi and Zambia.

"We have found Rwanda very beneficial and through the several investment conferences that were held in Kigali last year, we were able to showcase our region’s potential. We were also able to showcase (Rwanda as) a successful member of the region. Rwanda is a good example of the successes that the region is capable of achieving,” she said.

In addition revenue performance for the entire five partner states has been performing above target since the customs union commenced. Equally the year to year growth has been significant over the period.

In 2007 the growth was 33 percent for Uganda, 32 percent for Kenya, 35 percent for Tanzania, 12 percent for Rwanda and 4 percent for Burundi.

Figures from the Uganda export promotions board show that intra-trade amongst the three partner states—Kenya, Uganda and Tanzania; implementing the Customs Union has been increasing, reaching 30 percent in 2007 from 2004.

Although Kenya maintains the biggest share of exports to other partner states, there has been a significant increase in exports from Tanzania and Uganda to Kenya reaching five fold in 2007 compared to 2004.

According to Ben Naturinda, the Deputy Executive Director of Uganda Export Promotion Board, regional trade is growing not only within East Africa but also with other regions.

He noted that Uganda’s export income had increased to about 34 per cent in 2007 within the Common Market for East and Southern Africa (COMESA) region compared to 28 per cent from the strong markets in the European Union.

However while economic integration is good for the region, deeper integration will have harsh consequences for the unprepared business community, trade experts warn.

This has already been witnessed among the original partner states of the community that have been implementing the customs union since 2005.

In Uganda several medium size factories have closed after being out competed by large firms carrying out the same business in Kenya. 

Despite such undesirable consequences, integration is an unstoppable global order. Although the tax rates under the Customs Union were reduced or removed, the continued increase in tax revenue can be explained by the high turnover in business and conducive trade regime created by the Customs Union.

This is contrary to fear that had been expressed before the Customs Union that revenues would decline. The investment flows in the region have been on steady increase with the biggest growth in terms of value being 245 per cent in 2006, the trade figures indicate.

This increase in investment projects resulted into job creation with significant increase of 30 per cent in 2007.

The EAC Customs Union is scheduled to enter full implementation in January 2010 after a transitional period of five years. 

While Rwanda and Burundi are expected to commence applying the Common External Tariff in July this year, the tariff elimination is now its 4th phase and is expected to reach zero in January 2010 thus creating a free tariff on all intra EAC trade. 

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