East Africa can become a global and intra-regional trade hub but only if it dismantles all trade barriers in the region, according to researchers at the UK-based Barclays Bank plc.
The researchers note that improving Customs clearance procedures, facilitating greater cross-border co-operation, eliminating both tariff and non-tariff barriers and increasing investment in infrastructure such as roads, railway, ports, airports and energy could transform the prospects for the region’s trade.
“East Africa benefits most from relatively strong border administration and a fast-growing regional market,” they say.
In their Barclays Africa Trade Index (2015) report, the researchers say many countries in Africa have taken some positive steps to boost trade by harmonizing regulations along transport corridors, reducing stay times at the ports and delays associated with Customs control points and coordinating Customs processes across regional economic communities.
The Barclays Africa Trade Index was commissioned by Barclays Bank Plc to compare and rank 31 sub-Saharan African countries based on their attractiveness for cross-border trade. The researchers sampled the largest countries in the region in terms of population size and national wealth (gross domestic product).
According to the report, the appearance of Tanzania and Ethiopia among the top 10 performing countries on the overall index affirms the potential of East Africa as a promising hub for international trade.
The report says many governments are also lowering tariff and other non-tariff barriers, pursuing a pro-business reform agenda and addressing the skills gap through better health, education and training services.
The report notes that while East Africa displays some positive aspect of trade openness, weak transport infrastructure still presents a formidable barrier to trade.
“The common view is that sub-Saharan Africa continues to suffer from a significant transport and energy infrastructure gap to the detriment of its international and intra-regional trade potential,” says the report.
Air transport is an underdeveloped sector across the region, which is reflected in low international and intra-African route availability and relatively high airfares.
It is argued that air transport can act as a catalyst for trade and exchange of goods and services.
Although intra-regional trade has taken prominence in sub-Saharan Africa, the region still lags far behind other regions, according to the report.
Intra-regional exports have grown by 16 per cent annually from 2004 to 2013 but these trade flows only account for around 17 per cent of total trade flows in sub-Saharan Africa. This compares unfavorably with other regions such as Europe (66 per cent), Asia (48 per cent), North America (32 per cent) and Latin America (20 per cent).
According to the African Development Bank (AfDB), informal cross-border trade contributes between 30 and 40 per cent of the intra-SADC trade (mainly foodstuffs) and could be higher at 40-50 per cent of total intra-regional trade in the EAC.
According to the report, regional free trade areas are more effective in eliminating intra-regional tariff and non-tariff barriers, while a more collective approach to international trade policy is emerging aimed at securing market access and improving international competitiveness.(The East African)
Source: The East African
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