SEZs and Regional Integration: Considerations for EAC Countries Jean-Paul Gauthier Dep. Sec. General, WEPZA; MD, Locus Economica LLC AFZA Convention 2011, Dar es Salaam

The Few EAC-level SEZ Rules EAC SEZ Law Approval: Obligation in Article 32 of the EAC Customs Protocol for the EAC Council to “approve the establishment of… special economic arrangements” before a member state is authorized to enact SEZ legislation Implicit Customs Requirements: Definitions of Customs Territory, Import, Export, Home Use, and Origin require careful scrutiny Requirements for Zone Operators: Requirement in the EAC Customs Management Act that that zone operators provide equipment, including “just weights, scales, measures and other facilities,” and personnel, to the competent customs authorities, for metrology purposes Export Requirements for Zone Users: EPZ (but not FP or SEZ!) exporters are subject to the 80 percent export requirement imposed by Art. 25(3) of the EAC Customs Protocol These requirements are likely all currently ignored

EAC-Level Framework Effectiveness Challenges Absence of penalties for non-implementation Absence of EAC Secretariat or EAC organs legal executive authority to enforce EAC programmes Apparent lack of commitment of Member-States to implement EAC decisions Apparent resistance of high-level Member-State bureaucrats to implement EAC decisions Delays in Protocol ratifications Lack of implementation strategies, plans and timelines Technocratic practice of harmonising national positions rather than defining regional requirements under Art. 71 of the Treaty Delays in decision-making created by travel schedules of Council of Ministers members, and resulting lack of quorum Lack of dissemination of decisions to operatives for implementation Source: EAC Report of the Committee on Fast Tracking East African Federation (Nov. 2004)

EAC Harmonisation Requirements affecting SEZs Partner States, through national legislation, are responsible for the following: Harmonisation of Employment Policies in EA and Harmonisation of Labour Legislation in EA studies commissioned by Secretariat to inform CM negotiations 2003/2004 Harmonisation of Issuance of Entry and Work Permit Procedures recommendations of Sectoral Committee to Council Fiscal harmonisation under Budget Consultations Model Investment Code and Rationalization of investment incentives Establishment of uniform transport and telecommunication policies Harmonisation of norms for the construction, maintenance, and integration of roads, railways, airports, pipelines and ports

EAC Customs Union Protocol Harmonisation Requirements Elimination of all internal tariffs and non-tariff and technical trade barriers Facilitation of customs cooperation, including streamlined border crossings for goods, services, and capital, the simplification of customs documentation and procedures, and the implementation of country-of-origin rules

EAC Still Unharmonised and Hampered by NTBs Wide differences in the business environment (as evidenced by the gap in the Doing Business Index – from Rwanda at 67 to Burundi at 176) mean that investors face difficulties in operating across the EAC Non-Tariff Barriers: Goods to Uganda cannot be pre-cleared before arrival at an Inland Container Depot (ICD) Emerging phyto-sanitary restrictions non-standard axle charges along the Northern Corridor Source: IFC (June 2011)

Conclusions While this will vary from one REC to another, relatively little is provided for as regards SEZs under the EAC approach to regionalization (Freeports as defined, and EPZs, are not SEZs) In certain respects, this is not a bad thing; it simplifies and streamlines the legislative and regulatory processes But it does open the market up to “jurisdiction shopping” –would it not be good to talk on a regional level about comparative advantage and standards? And it does not enable the EAC to capture the potential of EDCs –would it also not be good to have a regional framework for this?