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       Tuesday, July 25, 2006

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Rwanda Burundi East Africa Integration Key to Economic Development

By James Karuhanga
Senior Researcher
Great Lakes Centre for Strategic Studies

The issue of economic integration continues to occupy center-stage in the economic agendas of these two sister countries, and economic integration is imperative if Rwanda and Burundi are to succeed in meeting their development goals and becoming effective partners in the global economy.

Both Rwanda and Burundi realize that, among other things, their respective national markets are too small to provide the benefits of economies of scale and specialization. As previously reported by the Great Lakes Centre for Strategic Studies (GLCSS), Rwanda applied to join the regional bloc that now consists of Kenya, Tanzania and Uganda in 1996. Three years later, in 1999 Burundi also handed in its application for East African Community (EAC) membership. Negotiations on accession of Rwanda and Burundi into the regional bloc are now underway and the mood in the two countries is optimistic.

Arap Koech, the Chairperson of the Council of Ministers of the EAC recognized the fact that the two countries’ territories are indeed inseparable from the regional bloc.

“Partner States have traditionally shared many things in common with Rwanda and Burundi, including historical, cultural, trade and other beneficial ties”, Koech said during the 8 July launching of the high-level negotiations on the admission of Rwanda and Burundi into the EAC.

A report on the negotiations will be presented to the 12th Meeting of the EAC Council of Ministers scheduled for 21-25 August 2006. EAC Secretary-General Ambassador Mwapachu said that by incorporating Rwanda and Burundi, the EAC regional bloc would unleash a human and physical resource base and potential that will spur and bolster sub-regional economic competitiveness.

The enlarged economic bloc would constitute a viable regional powerhouse able to respond to and muster the challenges posed by globalization," added Ambassador Mwapachu. The envisaged enlargement is expected to turn the EAC into a five-nation regional economic integration bloc with a combined population of about 115 million people.

In a press conference held in Kigali this week, Mary Baine the Commissioner General of Rwanda Revenue Authority (RRA), pointed out that, “Rwanda and Burundi’s accession will mean an increase in business opportunities for regional industries and commercial activities, and free movement of their people across the five borders.” In actual sense, Rwanda is already actively participating in some of the EAC projects and programmes.

In February 2004, the EAC and Rwanda signed a Memorandum of Understanding (MOU) to facilitate the efficient management and sustainable development of the Lake Victoria basin and its natural resources, poverty reduction and environment protection.
The Lake Victoria catchment area covers 193,000 sq. km in Uganda, Kenya and Tanzania as well as parts of Rwanda and Burundi. This area, invariably described as the Lake Victoria Basin and the East African Lake Region, is the size of an average African country with a population of over 30 million and a gross economic product in the order of US$ 5 billion.

An assessment of resource potential in the basin indicates that there are numerous potentials for investment. The basin boasts a potential market of 84.1 million people within the EAC and with strategic connection to other parts of the Great lakes region. The intra and interstate connectivity through road, rail, air and water makes the region ideal for investment in terms of strategic links with other parts of the world.

Ambassador Richard Sezibera, President Kagame’s Special Envoy in the Great Lakes region and Rwanda’s Technical Team leader in the formal high-level negotiations with the regional bloc believes Rwanda stands to benefit from wide and deepened co-operation in the EAC when it finally joins.

“Co-operation will among other things extend into political, economic and social fields of our mutual benefit and to this extent there shall be established a Customs Union as the entry point of the Community, a common market, a monetary union and ultimately a political federation of the East African States,” added Sezibera.

Rwanda and Burundi also stand to benefit from various areas of co-operation between partner states on their admission. The regional co-operation and integration envisaged in the EAC is wide ranging, involving co-operation in political, economic, social and cultural fields, research, technology and skills development, defense, security and legal affairs for mutual and equitable development in the region.

‘’One of our greatest benefits in joining the regional bloc will be the maintenance of peace, security and stability within our countries,’’ emphasized Sezibera. EAC countries emphasize co-operation in the priority areas of transport and
communication, trade and industry, security, immigration and the promotion of investment in the region.

Whereas regional co-operation is necessary and indispensable to sustainable development, peace and security are a precondition to, indeed the starting point of regional integration and development according to Koech, the experience with regional co-operation shows that so long as countries are co-operating among themselves in pursuit of economic development, they will have neither reason nor cause to resort to conflict among themselves.

“We are looking beyond our borders for sustainable development and regional integration. Rwanda is an active member of and the Chair for COMESA and we are looking forward to joining the East African Community,” the Rwandan Ambassador to Uganda Kamali Karegesa stated his country’s position during Uganda’s last Liberation Day celebrations in Kampala.

The ambassador’s statement unmasks the fact that there are several issues to contend with when looking at Rwanda and Burundi’s accession into the EAC. For example, Rwanda is very optimistic about joining the EAC, a bloc with a Customs Union (CU). However, Rwanda is also a member of the Common Market for Eastern and Southern Africa (COMESA), and according to the regional bloc’s trade regulations; a country is not allowed to belong to two different CUs.

Some economists argue that multiple or overlapping membership among Regional Economic Communities (RECs) is a hindrance to integration since, among other things, it introduces duplication of effort. It also has a bearing on costs and benefits particularly of deeper integration. Membership in more than one CU is technically impossible. As most RECs in the region wish to move to a Customs Union, member states with multiple membership will have to strike the balance of the costs and benefits of belonging to one or another CU.

Chief among other reasons causing the lack of progress in regional integration has also been the unwillingness by governments to surrender their sovereignty of macroeconomic policy making to a regional authority. Governments find it difficult to face potential consumption costs that may arise by importing from a high cost member country, accept unequal distribution of gains and losses that may follow after integration, and discontinue existing economic ties with non-members when joining a new bloc. Macroeconomic instability and the lack of strong and sustainable political commitment are also on the list. However, there is a new momentum to invigorate the integration of the two countries.

Another important issue is lost revenue from trade tariffs, which will be reduced in CUs. According to Baine, variations in initial condition will not present a problem as the EAC countries themselves are not very far ahead in terms of development. The RRA Commissioner General said, ‘’Competition from relatively more industrialized countries such as Kenya is an issue we cannot entirely ignore but it is again no cause for us (Rwanda) to worry.’’

Other studies indicate the necessity of regional economic integration. Alemayehu Geda and Haile Kibret, in Regional Economic Integration in Africa: A Review of Problems and Prospects with a Case Study of COMESA, see the regional integration as ”an economic survival strategy aimed at combating marginalization from the global economy’’.

The Great Lakes Centre for Strategic Studies is a London-based think tank.

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posted by GLCSS at 5:02 AM  


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