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.