Creation of a monetary union of the East African Community (EAC) is a very delicate phase in the regional process of integration where all partners should avoid making mistakes, according to Tanzanian President Jakaya Kikwete.
“This is the defining and ultimate phase in the East African economic integration agenda because what comes after it is political federation,” Kikwete said at the opening of the third sitting of the East African Legislative Assembly (EALA) in Arusha, Tanzania.
Since realisation of the monetary union would herald conclusion of the EAC economic integration, Kikwete cautioned that mistakes in the fiscal union “could undermine all the many years of good work done and achieved in the process of building the Community”.
The president suggested that partner state officials negotiating and crafting the monetary union protocol should give themselves ample time and draw lessons from the experience of other regional economic communities, particularly the European Union.
“Our region is on an irreversible movement towards deeper integration and increased socio-economic prosperity. The unity of purpose and political will to forge ahead is ever greater than at any other moment in the history of the Community,” he observed.
The EAC Treaty, which came into force on 7 July, 2000, calls for a progressive approach to regional integration starting with the customs union, followed by the common market, the monetary union and finally the political federation.
The EAC Customs Union took off on 1 January, 2005, and became fully fledged on 1 January, 2010, while the Common Market Protocol came into force in July 2010.
Intra East African trade between 2005 and 2010 doubled from US$ 2.2 billion to US$ 4.1 billion. Foreign direct investment to the EAC countries increased from US$ 910 million in 2005 to US$ 1.72 billion in 2009.
Currently, the five EAC member countries – Kenya, Tanzania, Uganda, Rwanda and Burundi – are building one-stop border posts (OSBP) to facilitate clearance of goods across their common borders.
Though each partner state has taken measures to eliminate non-tariff barriers to regional trade, inadequate infrastructure, particularly roads, railways and energy are still blamed for the high cost of doing business in the region.
According to Kikwete, this impacts negatively on the competitiveness of the EAC region in relation to other regional and global markets.
The president urged member countries to double their efforts to implement previous decisions on solving the infrastructure challenge in East Africa.
In his view, the EAC partners should first focus on cross-border infrastructure development in order to facilitate trade and other interactions among people – railways, energy, ports and harbours, roads and ICT.
The next priority, Kikwete said, should be the implementation of the EAC Food Security and Climate Change Master Plan by giving due focus to sustainable agricultural production to ensure food security and environmental protection.