SEZs and Regional Integration:Considerations for EAC Countries

Jean-Paul Gauthier

Dep. Sec. General, WEPZA; MD, Locus Economica LLC

AFZA Convention 2011, Dar es Salaam

The Few EAC-level SEZ Rules

EAC SEZ Law Approval: Obligation in Article 32 of the EAC Customs Protocol for the EAC Council to “approve the establishment of… special economic arrangements” before a member state is authorized to enact SEZ legislation

Implicit Customs Requirements: Definitions of Customs Territory, Import, Export, Home Use, and Origin require careful scrutiny

Requirements for Zone Operators: Requirement in the EAC Customs Management Act that that zone operators provide equipment, including “just weights, scales, measures and other facilities,” and personnel, to the competent customs authorities, for metrology purposes

Export Requirements for Zone Users: EPZ (but not FP or SEZ!) exporters are subject to the 80 percent export requirement imposed by Art. 25(3) of the EAC Customs Protocol

These requirements are likely all currently ignored

EAC-Level Framework Effectiveness Challenges

Absence of penalties for non-implementation

Absence of EAC Secretariat or EAC organs legal executive authority to enforce EAC programmes

Apparent lack of commitment of Member-States to implement EAC decisions

Apparent resistance of high-level Member-State bureaucrats to implement EAC decisions

Delays in Protocol ratifications

Lack of implementation strategies, plans and timelines

Technocratic practice of harmonising national positions rather than defining regional requirements under Art. 71 of the Treaty

Delays in decision-making created by travel schedules of Council of Ministers members, and resulting lack of quorum

Lack of dissemination of decisions to operatives for implementation

Source: EAC Report of the Committee on Fast Tracking East African Federation (Nov. 2004)

EAC Harmonisation Requirements affecting SEZs

Partner States, through national legislation, are responsible for the following:

Harmonisation of Employment Policies in EA and Harmonisation of Labour Legislation in EA studies commissioned by Secretariat to inform CM negotiations

2003/2004 Harmonisation of Issuance of Entry and Work Permit Procedures recommendations of Sectoral Committee to Council

Fiscal harmonisation under Budget Consultations

Model Investment Code and Rationalization of investment incentives

Establishment of uniform transport and telecommunication policies

Harmonisation of norms for the construction, maintenance, and integration of roads, railways, airports, pipelines and ports

EAC Customs Union Protocol Harmonisation Requirements

Elimination of all internal tariffs and non-tariff and technical trade barriers

Facilitation of customs cooperation, including streamlined border crossings for goods, services, and capital, the simplification of customs documentation and procedures, and the implementation of country-of-origin rules

EAC Still Unharmonised and Hampered by NTBs

Wide differences in the business environment (as evidenced by the gap in the Doing Business Index – from Rwanda at 67 to Burundi at 176) mean that investors face difficulties in operating across the EAC

Non-Tariff Barriers:

Goods to Uganda cannot be pre-cleared before arrival at an Inland Container Depot (ICD)

Emerging phyto-sanitary restrictions

non-standard axle charges along the Northern Corridor

Source: IFC (June 2011)

Conclusions

While this will vary from one REC to another, relatively little is provided for as regards SEZs under the EAC approach to regionalization (Freeports as defined, and EPZs, are not SEZs)

In certain respects, this is not a bad thing; it simplifies and streamlines the legislative and regulatory processes

But it does open the market up to “jurisdiction shopping” –would it not be good to talk on a regional level about comparative advantage and standards?

And it does not enable the EAC to capture the potential of EDCs –would it also not be good to have a regional framework for this?