Agreement on free movement of service providers enhances economic integration in East Africa

Cooks, accountants and other services-sector workers in East Africa will soon be able to easily work across national borders in the region after approval of a position developed by the East African Business Council (EABC) with assistance from ITC.

‘This is a major milestone for businesses in the East African Community (EAC), creating new opportunities,’ said Andrew Luzze, EABC’s executive director. ‘Once implemented, the measure will also contribute significantly to the competitiveness of EAC services companies, which will as a result be able to compete more successfully in markets outside East Africa as well.’

The governments of Kenya, Tanzania, Uganda, Rwanda and Burundi had committed to phasing in services trade liberalization measures between 2010 and 2015, in line with the EAC’s Common Market Protocol. However, much of the market-opening has effectively been thwarted by differences among member countries on the ability of service providers from elsewhere in the EAC to work in their countries. ‘Without the temporary movement of people between countries, many services cannot be provided,’ Luzze explained.

As EAC member countries could not overcome the deadlock, services integration has progressed more slowly than anticipated. While services trade growth has been impressive, there is a lot of unrealized potential, according to Angela Becaty, a services trade expert based in Tanzania.

Currently, companies from within the EAC often cannot fulfill contracts they win in neighbouring countries, because of cumbersome rules for bringing their workers across borders, Becaty said. A Ugandan engineering firm, for instance, recently won a bid to construct a bridge near the border in Tanzania but was subject to prohibitive fees when bringing its workers and engineers to the construction site, she added.

“The measure will also contribute significantly to the competitiveness of EAC services companies, which will as a result be able to compete more successfully in markets outside East Africa as well.”
                                 Andrew Luzze, Executive Director, East African Business Council

ITC, in tandem with development partners including the German Agency for International Cooperation (GIZ) and the Africa Capacity Building Foundation, provides assistance to the EAC on implementing services trade opening in line with the original intention. While GIZ had been assisting the EAC Secretariat, ITC worked with the EABC, the apex body of private sector business associations in the region, on building the business case for integration.  

The position paper tabled by the EABC, backed up with advocacy in all the countries at the national level, carried the day and swayed various EAC committees and eventually the Council of Ministers. They agreed to modifications to the Common Market Protocol that would explicitly clarify the rights of service providers to work across the EAC. As a next step, the countries will start formal negotiations to have this reflected in the treaty, indicated Adrian Njau, trade economist at the EABC.

Public-private dialogue

During the advocacy campaign the EABC, with support from ITC, organized a regional public-private dialogue followed by national consultations in member countries. To better articulate business concerns in a unified voice, the EABC engaged private sector stakeholders to gauge their priorities. EABC and ITC also organized trainings to help the business community understand how trade negotiations were conducted and how the private sector could influence the process. The training activities revealed there had been very little consultation at the national level between the public and private sectors, reported Ben Czapnik, ITC project manager.

‘Furthermore, the business community had not seen the link between these negotiations and their ability to do business throughout the region,’ he said.

Once they understood the potential impact of the changes, the business community began lobbying for them. 

  ‘The EAC treaty clearly stipulates that the integration process should be driven by the private sector, and that the agreements entered into should benefit the private sector,’ Czapnik said. ‘This is now happening.’

Supporting the business sector voice
in policy making

Public-private dialogue is the cornerstone of ITC’s approach to trade policy formulation. In order for trade policy to be effective and bring the desired benefits to exporters, public and private sector representatives must work in coordination at the sector, country and regional levels. ITC supports developing countries in creating platforms for this dialogue and in facilitating the engagement of the private sector in various policy areas affecting trade. These include export strategy formulation, accession to the World Trade Organization (WTO), trade facilitation and regional integration.

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