The Common Market for Eastern and Southern Africa (Comesa) has finally launched its controversial customs union that abolishes 85 percent of the tariffs on ICT and other products manufactured in the region.
However, some Comesa member countries -- including Uganda, Kenya and Rwanda, which form the East Africa Community -- said they have not yet agreed to join the customs union and still need more time to consult.
Critics say the customs union will allow the free flow of cheap ICT and other products to flood the market, and will negatively affect local manufacturing industries in the region.
Ugandan President Yoweri Museveni, who is the chairman of the East African Community, an economic bloc representing East African countries, said during the launch of the customs union earlier this week that individual member states have not discussed the customs union internally.
"The fact that the Eastern African Community is not yet ready to join the customs union does not stop others going ahead with it. We are not against the launch of the customs union," Museveni said.
Comesa is a regional economic bloc headquartered in Lusaka, Zambia, representing 20 countries in eastern and southern Africa including Zambia, Kenya, Uganda, Zimbabwe and Malawi.
The removal of tariffs is aimed at attracting investment in local ICT equipment manufacturing by regional and foreign companies currently exporting their products to the regional market, to promote competition.
The launch of the customs union had been put on hold since 2004 in order to give member countries enough time to consult each other on its potential benefits. Some member states, however, fear that joining the customs union will result in loss of tariffs collected from imported goods produced within the region. The countries also fear that accepting the customs union would mean a tough test of competitiveness that may force local industries to close.
Comesa has said it will compensate member states following the abolition of duty on imported products from the region. The money will come from Comesa funds.
Comesa also wants member countries to invest in local manufacturing industries in order to compete regionally as well as with countries outside the region, including South Africa.
By next year, Comesa officials have said, governments within the region will not have to depend on trade tax for their revenue because tariffs are being lowered. Instead, the countries should aim to generate revenue from taxes collected from workers.
Eritrea has already reduced tariffs by 80 percent while Ethiopia has also started reducing its tariffs in order to participate in the customs union, according to Comesa.
Numerous companies in the Comesa region already face barriers to competitiveness including limited capital, limited access to international lines of credit, slowing demand for goods and loss of skilled workers.
Trade in the Comesa region has remained flat in the past five years, largely as a result of supply-side constraint, poor infrastructure and poor communications due to a dilapidated infrastructure. By removing tariffs, Comesa hopes to increase trade among member countries and force local companies to restructure and improve their poor infrastructure and communications.
Zambian President Rupiah Banda said although the customs union will accelerate development and integration among member states, Zambia faces the difficulty of adjusting to challenges arising from the customs union such as loss of tax revenue.
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