Monday, August 27, 2012

Rio +20 Summit failed us on global environmental governance

The Rio+20 Summit reneged on an opportunity to bring environmental protection to centre stage of global policy. One of the items on the Rio +20 summit was a proposal to turn the United Nations Environment Programme (UNEP) into a fully fledged agency of the UN. However, when the issue came up for discussion, the world once again shied away from taking a firm stand but instead chose the compromise route of dealing with funding issues currently bedevilling the premier global environmental body.
Observers say the current fragmented nature of environmental governance is one of the reasons why environmental policy has failed to claim its rightful place at the dinner table of global policy. While its sister bodies such as the World Health Organisation, the World Trade Organisation, are sitting comfortably at the dinner table guiding global policy as it relates to health and trade respectively, UNEP is suffering an identity with its offshoots such CBD, IPCC, UNFCC, among others claiming a share in the global environmental policy.
A cocktail of actors in global environmental policy arena, have left the field with too many actors but with no meaningful results. None of them has the necessary clout to influence global environmental policy in the way WHO and WTO have done in their respective fields.
For instance WHO policy guidelines to a large extent inform ministry of health policies across the globe. WTOs General Agreement on Trade and Tariffs (GATT) forms the bedrock of most international trade agreements. However, international environmental policy is still treated as a gentleman’s club where the influence of UNEP and its off shots are limited to an advisory role.
UNEP was formed 40 years ago to champion the global environmental policy. But as years went by with increasing complexity of environmental problems, many more small environmental bodies were formed. Today we have a whole host of international bodies each claiming space in the crowded arena of global environmental policy. Currently there are close to 500 multi-lateral agreements on environment which would require a strong steward. Unfortunately this does not appear to be a priority for world leaders.
While some critics point to the in efficiency of UNEP to tackle some of the World’s challenging environmental problems as some of the reasons they are reluctant to grant the organisation a full status as an agency of the UN, denying it power simply worsens the situation. At the current trend of events various environmental agreements will continue to be violated with reckless abandon. It also demonstrates the lop-sided nature of international agreements. International environmental are developed nations especially the United States and emerging economies such as Brazil, China, and India, have been reluctant to show commitment. This partly due to lack of clear leadership on global environmental policy.
As full-fledged UN agency, UNEP would assume the commanding role in driving global environment policy that clearly lacks a leader. Integrating activities of other environmental bodies into UNEPprogrammes, the body would be able to harness the fragmented activities into coherent programmes. As the summit was called with so much fanfare to chart the next decade of environment, it left us with no real leader for global environmental policy.

Friday, August 27, 2010

EAC Competition Law could spur cross-border investments

EAST African Community is currently integrating at a pace faster than any other Regional Economic Community in Africa, today। On July 1, 2010, EAC became the first Regional Economic Community in Africa to begin the process of implementing a Common Market and is on course to become a Monetary Union in 2012.

The region has also witnessed a series of mergers and acquisitions as firms seek to break into new markets। However, all these activities are taking place in absence of functional laws regulating competition.

Experts define Competition Law as laws that promote or maintain market competition by regulating anti-competitive conduct. Basically, it is believed that monopolies or firms with very large market share can easily abuse their market dominance by engaging such activities as price fixing, sharing of markets, reducing quality of product, among others, to the detriment of consumers.

In 2004, the East African Community Council of Ministers adopted East African Competitions Policy subsequently the East African Legislative Assembly enacted the East African Competitions Act in 2006. The Act seeks, among others, to promote fair trade and ensure consumer welfare and to establish the East African Community Competition Authority.

Although the EAC Competition Act was enacted in 2006, it has not been in use. Operationalisation of the Act will require EAC Partner States to have in place National Competition laws and institutions.

Currently, only Kenya and Tanzania have fully functioning National competitions laws and institutions। Burundi recently enacted a Competitions Act and is in the process of establishing the responsible institution while Uganda and Rwanda are also at different stages of enacting their own competition laws. National competition laws are necessary in sense that National competitions commissions are expected to enforce some of the provisions within the EAC Competitions Act.

However, the coming into force of EAC Common Market has revealed a legal gap regarding regulating firms with cross-border investments। National competition laws and regulations have a jurisdiction limited to national borders which leaves a question on how to regulate companies whose activities have cross-border effects.

It is for this reason that EAC Secretariat is now looking to operartionalise the East African Competitions Act, 2006।The Act contains several provisions to deal with competition issues such as mergers and acquisitions, Counterfeits and other Intellectual Property Rights Violations Act, Abuse of Market dominance, and prohibits Partner States Subsidies, among others.

The Act also prescribes punitive measures for violators of the law। The European Union as well as other regions have enacted competition laws that regulate firm’s activities that have Cross Border effects. The last decade has seen an increase in the number of enacted Competition Laws as more countries embrace competition laws as way for the future.

However, EAC is still lagging behind with only Kenya and Tanzania with functioning competition laws in place while the rest of EAC partner States are at different stages of enacting the laws। Absence of competition laws in other EAC Partner States appears to have curtailed efforts by EAC Secretariat to operationalise the EAC Competitions Act, 2006.

The central importance of Competition Law is that it lays down rules for fair competition where small and big firms co-exist in a market controlled by market forces। It gives consumers an opportunity to choose goods and services in an open market at a price and quality that fit the consumer’s needs and fosters opportunity for business by ensuring a level playing field. In absence of competition law, big firms can easily drive small firms out of the market through abuse of dominance such as predatory pricing, while exploiting consumers through price fixing as a result of cartels.

It is therefore important that EAC Partner States support operationalisation of EAC Competition ACT, 2006 and that Uganda, Rwanda, and Burundi expedite the establishment of national competition authorities to supplement the workings of the regional authority.

Thursday, October 08, 2009

Service industry to benefit from the East Africa Common Market

A meeting of the Multi-Sectoral Council of the East African Community (EAC) held in Kampala on September 25th 2009 adopted the Draft EAC Common Market Protocol together with eight annexes.

The annexes to the Draft Common Market Protocol contain legal provisions on free movement of persons, removal of restrictions on the free movement of workers, right of residence, right of establishment, mutual recognition of academic and professional qualifications, free movement of capital, trade in services, and safeguard measures within EAC.

Concluding the negotiations of the annexes to the Common Market Protocol is a significant step in the integration process of the EAC considered the most successful regional economic community in Africa today.

While the East African Customs Union, which came into force in January 2005 with progressive elimination of restrictions to free movement of goods across EAC until January 2010, allows free movement of goods within EAC, the Common Market goes a step further to extend this liberal approach to free movement to labour and other services.

Most notable is the fact that the draft Common Market protocol spells out liberalization of Trade in services, which will open up one of the fastest growing sectors in the region. Unlike the manufacturing and agricultural sectors that have been developing since the days of industrial revolution in Europe and the Stone Age era, the services sector was until recently relatively undeveloped.

Most people scarcely appreciated the industry’s potential contribution to national and regional economic development. However, recent developments have turned it into the fastest growing sectors to such an extent that economists can no longer ignore its contribution to Gross Domestic Product (GDP).

Trade in services is broad and ranges from the simplest functions of cleaner at your office through the more developed functions of information and communications technologies to less understood functions of a broker in capital markets. It contains combines diverse sub-sectors of which some can easily be overlooked at the expense of the more dynamic ones such as Information and Communication Technology (ICT).

The current trend in ICT, the advent of internet has given rise to Business Process Outsourcing (BPO), increased demand for professional services, ushering in a new era that could perhaps take us to the next revolution—the services revolution। Today, on overage, the services sector contributes more 50 per cent of GDP of EAC Partner States and is growing at about 10 per cent annually.

It is this industry that stands to benefit most from the East African Common Market through removal of restrictions on movement of workers, free movement of capital, mutual recognition of academic and professional qualifications, and liberalizing trade in services—annexes that pre-occupied negotiating teams with undertones of a possible deadlock।

Now that the negotiating teams have finally reached consensus on how to move forward regarding the East African Common Market, it is incumbent upon players in the services sector to take provisions of the protocol from paper to practice. And this can only be achieved through building coalitions considering that most of the players in the sector are either micro or Small and Medium Scale Enterprises.

From soldiers in a battle field to siblings in a family, human beings have since time immemorial built coalitions with the aim of achieving a common goal; lending credence to the adage of strength in numbers.

A coalition of service industry can help identify policy reforms to be addressed as governments move to further liberalize services in line with the Common Market.

The draft Common Market protocol indentifies financial services, tourism, education, communication, transport, distribution and business services sectors as some of the sectors to be liberalized while Partners States will continue negotiations to progressively liberalize other sub-sectors in the services industry after the protocol comes into force on July 1, 2010.

EAC is also involved in protracted negotiations with the European Commission for liberalization of trade in services under the Economic Partnership Agreements.

While negotiations can be quite challenging, experience has shown that implementation often proves an even bigger task. That is why participants at a two-day meeting in Kampala, last week, which drew players from different sub-sectors of the service industry, were unanimous on the need for a regional services coalition to address such challenges as lack of national policies on Trade in Services, among others.

Friday, August 14, 2009

Supporting private sector investment in energy sector will improve energy situation in East Africa

East Africa is going through one of the worst power crises in its history with the latest victim, Kenya, frantically making calls for increased investments in alternative power sources.

The crisis, which hit Uganda hard in 2006, appears to be spreading like a wildfire across the region with fears that it could further make the region less competitive in terms of the cost of doing business.

The regional already has some of the highest power tariffs and any further tariff increments will simply drive high the cost of doing business. Power tariffs in East Africa are 5 to 10 times higher than in Egypt or South Africa.

This coupled with high transport costs for land locked countries such as Uganda, Rwanda, and Burundi, the current power shortage threatens to reverse the gains made through trade liberalization.

Ugandans, for instance, have always relied on Kenya for the bulk of manufactured products since the collapse of Uganda’s manufacturing sector in the 1970s. Even when electricity tariffs rose to unprecedented levels, prices for manufactured goods were kept at bay thanks to imports from Kenya where tariffs were still relatively low.

However, recent changes in Kenya are likely to have further ramification on Ugandan consumers।

There are fears that with reduced power supply, Kenya might be forced to venture into expensive alternative sources of energy with drastic increase in tariffs.
Even as the region struggles to meet the ever-increasing demand, investments in the energy sector are still dominated by the public sector that often struggles to meet the required demand.

So why has private sector investment into the energy sector remained dismal despite spiraling demand for electricity? First, energy projects require huge capital requirements with long-term return on investment। This makes investing in the sector unattractive for medium-scale investors. It then leaves such investments in the hands of large investors who often demand certainty in terms of prices and market for power they produce. Certainty in a sense that, a private company is investing in a mass consumption good where the government is bound to intervene any time to protect its “citizens’ interests”.

Unfortunately such policies predictable that can guarantee return on investment are rare in East Africa. As such, investments in the energy sector remain highly risky.

It is therefore important that governments in the region revise their energy policies to reflect policy predictability and guaranteed return on investment।

For instance, Aggreko and Electromax have made huge investment into Uganda’s thermal power production simply because of attractive power purchase agreements where the government of Uganda offered a guaranteed return on investment and a predictable project wind-up.

If such policies are extended to other areas of the sector, they will go a long way in promoting private sector investments in the energy sector। There, for instance, a number of alternative energy projects that the private sector may be interested in provided government’s guarantee purchase of power produced.

In June, participants at the East African Energy Conference organized by the East African Business Council in Dar es Salaam, Tanzania asked governments to develop model Power Purchase Agreements for small projects to reduce time spent negotiating with regulators and policy makers in an effort to sell power to national grids।

As East Africa continues to grapple with power shortage a meaningful public-private partnership that goes beyond just catering for the interests of large investors and premised on good return for the private sector will perhaps solve the current conundrum।

Friday, August 07, 2009

Diary Industry offers Ugandans competitive advantage

That yet another Ugandan Dairy company: Jesa has begun curving inroads into the regional market clearly demonstrates the competitiveness building up in Uganda’s diary sector.
Jesa Dairy recently passed the hazard analysis and critical control test in what is seen as a step to assert its presence in the regional मार्केट।

Ugandan milk processors continue to make forays into regional market dominated by Kenyan firms that dwarf their Ugandan counterparts in terms of experience and technological output in what is seen as is testimony that the Uganda’s competitive advantage in this regard is unrivalled।

It further underlines the benefits the Customs Union has brought to some sectors of the economy even as the manufacturing sector is still faced with high production costs especially arising from transport and electricity costs।

But more importantly it is a testimony to the growth of Uganda’s Dairy industry that was virtually non-existent before 1995। The industry was previously shambolic with good percentage of milk produced going to waste.

However, the deliberate government effort to encourage investment in the erstwhile underexploited industry with emphasis on value addition has seen the industry grow by leaps and bounds to become the flagship of Ugandan products in the region.
While other Ugandan manufacturers are struggling to break ground in the regional markets, Ugandan milk processors are enjoying favourable presence on supermarket shelves in countries such as Tanzania, Kenya, and Rwanda।

Actually I haven’t seen any Ugandan product with more ubiquitous presence on Supermarket shelves in Tanzania, Kenya, and Rwanda than Uganda milk products. Don’t forget that Ugandan dairy processors have done little to market these products in the regional markets.
The mere presence of Ugandan milk products in such markets has itself marketed them beyond their national boundaries। However, this calls for a more aggressive approach to market the products beyond regional borders.

While marketing would improve on market share, the government needs to constantly engage other EAC Partner States to create a better business environment in the region.
Trade in EAC is currently besieged with Non-Tariff Barriers (NTB) which have quickly become an obstacle to trade। These barriers oftentimes present themselves in form of protectionist measures such as standards, police roadblocks, business registration, customs and administration procedures.

Sameer Agriculture is currently has in the past had problems exporting powdered milk Kenya because of such न्त्ब्स

Although, there are NTB National Monitoring Committees established in each of the 5 Partner States to coordinate the monitoring and removal of NTBs, the Committees have not been effective due to lack of technical capacity to facilitate reporting and removal of NTBs.
In a recent study done by the East African Business Council, NTB’s ranked highest among the list of barriers to doing business in the region। It is therefore important that governments remain committed to eliminating such barriers to trade.

Milk producers in Uganda will become the eventual winners in the regional market once such barriers are eliminates.

Thursday, May 07, 2009

Why EAC Summit adopted new principle

The buzz in the media suggests that the tenth EAC Heads of State Summit was a letdown for its failure to sign the draft common market protocol ahead of its implementation in January 2010।

While the signing was extended to give negotiating teams more time to complete annexes to the protocol, the disappointment seems to be borne on the fact that the presidents did not come out strongly on Tanzania, the country opposed to right of land ownership, right of residence, and use of national identity cards as travel documents।

However, what such people seem to forget is that by choosing to take the principle of variable geometry, the summit set a precedent for future negations.

The summit agreed in principle that Kenya, Uganda, Rwanda, and Burundi can go ahead with use of national Identity Cards as travel documents when traveling within the region.

However, this rule will not apply in Tanzania and to Tanzanian Citizens since their government could not reciprocate in equal measure.

Known as the principle of variable geometry, it allows states that are ready to go ahead with implementation of agreed clauses without necessarily bulldozing parties that are reluctant to cede their sovereign interests.

The principle came up in February when the EAC Council of Ministers formally sought the opinion of the East African Court of Justice (EACJ) on the interpretation of the EAC Treaty in regard to the principle of variable geometry.

Justice Johnson Busingye of EACJ thus ruled that the principle should be applied to guide the regional integration process, setting the stage for the decisions taken at the Summit.

The give-and-take scenario will perhaps dispel selfish interests in the negotiations unless a country is sure enough that it has more to gain in adopting a particular stance.

Although hidden in diplomatic lingua, the EAC Presidents applied this principle when they announced that Kenya, Uganda, Rwanda, and Burundi will go ahead with the implementation of some of the contentious parts of the protocol.
This therefore protects Tanzania’s sovereign interests without actually compromising the spirit of integration.

It is also a move away from the consensus principle that has been often times bogged down EAC negotiations.
The principle of variable geometry was at the heart of European Union integration process and was also used in the adopting the Euro as currency for EU member states. It is therefore important that we learn from history.

Friday, March 06, 2009

Private sector in East Africa ready to discard the old development model

Chief Executive Officers, Central Bank Governors and financial experts, last week, met in Arusha, Tanzania to seek solutions to the surging global financial crisis.

The meeting, the first of its kind in the region, uncovered the growing need for developing countries to seek home-grown solutions to local problems.

Developing nations have always been quick to take as gospel truth the prescriptions of international aid agencies with little regard for domestic solutions.

This perhaps partly explains why the development model espoused by the supposed development experts and international aid has failed to lift Sub Saharan Africa out of the poverty trap.

After years of pumping huge sums of money in development aid, the region is yet to record growth at household level that donors envisage.

While some policies such as liberalization have opened up African markets and in the process created competition, many more have failed that donors are now re-thinking their development model in favour of more home-grown solutions.

The historical gathering of finance ministers, central bank governors, and chief executive officers of leading East African companies shows that indeed the region has developed local capacity to come up with solutions to problems afflicting them.

The meeting convened under the auspices of East African Business Council was notable for absence of rhetoric, and complaints that characterize such gatherings. It was more of a “lets get down to work” as shown in the final draft communiqué issued at the end of the meeting.

The communiqué, whose recommendations will feed into national and regional negotiations and partly inform the private sector requests ahead of the June budgets, is a tool kit for both the private sector and regional governments in dealing with the current global financial crisis.

The meeting also showed that when brought together the private sector can drive the Integration process in East Africa quite faster than the bureaucracy and selfish interests that seem to characterize government negotiations.

But, more importantly the private sector in East Africa, for the first time, came together to seek solutions to a problem that would ordinarily be perceived to be beyond their comprehension.

It was a bold testament to International Monetary Fund (IMF) and other donor agencies that the private sector in the region has developed the capacity to stare crisis in face and come up with local solutions.

In the face of the current global financial crisis, it was indeed time to get down to work.