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EAC integration journey: So far, so good.

figure By PETER MUNYAbr Regional integration ranks among the most beneficial policies pursued by Kenya and its neighbours.By creating one large market, pooling resources and influence, East Africa is able to punch way above the weight of individual members.

A bigger market is better placed to create jobs and prosperity. It is also more attractive to external investment.

The East African Community (EAC) has travelled further down this road than many people realise. On all four fronts mdash creation of a customs union, common market, monetary union and a political federation mdash progress has been made, albeit, of course, amid challenges.

The challenges are, however, tackled in an atmosphere of amity, mutual respect and trust.ONE MARKETA customs union has existed in East Africa since 2005. Tanzania, Uganda, Rwanda, Kenya, Burundi and South Sudan have agreed to trade freely without charging goods and services originating from these countries any taxes and all goods entering their markets are charged a standard duty, the common external tariff.

This, effectively, creates one market.Subsequent to the customs union, which became fully fledged in 2010, is the common market mdash in force for eight years.

This allows the movement of goods, labour and capital and citizens to travel, work and live anywhere in the community. Member states do not move at the same speed but they do not have to mdash so long as they are committed and moving in the same direction.

Kenya has opened its doors to all East Africans, setting an example to the rest of the community. It believes that an inflow of talent, energy and investment is good for everyone.

FISCAL STRUCTURESWork on the third step, a monetary union, is ongoing and will culminate in one currency for the region. The East African Legislative Assembly (Eala) has passed a law creating a monetary institute mdash made up of the central bank governors of member states mdash which will devise the method for fusing the fiscal and monetary structures of the countries and define the rules of the integration.

On the political front, the heads of state have authorised the Council of Ministers to set up a committee of experts to draft a constitution for the region with a view to creating an East African confederation mdash a loose political arrangement but a step closer to full federation.TAX REGIMEIntegration has, so far, been a rewarding learning experience.

But because member states have such a strong base, they confront issues where there are differences of interests and resolve them. For example, a review of the common external tariffs is under way.

This is because too many exceptions have been allowed, which defeats the purpose of common external taxes. Members priorities have also changed and development strategies have evolved so, tax regime changes are required.

In some cases, national thinking has changed about which industries are strategic and whose raw materials deserve special tax treatment. Such issues take time and careful deliberations to resolve.

RICH OPPORTUNITIESAnother area of debate, which some might view as slow, is the harmonisation of laws. For example, some members charge 18 per cent value added tax and others 16 per cent.

Those who charge less are reluctant to increase as it would raise costs for industry and prices for citizens. Those who charge more want to protect revenues so that the government can continue to offer services to the people.

EACs reliance on national structures to assimilate and implement regional laws is also being debated. The alternative dynamic has been the European Union (EU) model, where the European Parliament makes over-arching laws that supersede national ones.

Kenyans ought to become part of these debates so that they can participate in creating an East Africa that suits everyone. They must also exploit the regions rich opportunities for trade, travel and friendship.

Mr Munya is Cabinet Secretary, East African Community and Northern Corridor Development.
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Publication:Daily Nation, Kenya (Nairobi, Kenya)
Geographic Code:6KENY
Date:May 20, 2018
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