Oil prices continue to rise (now past $102 per barrel and almost £1.10 per litre in some of London's pumps) and that is now a problem everywhere because in addition to concerns about global economic slowdown, we now need to add on inflation-concerns. Things are also not going well in the US with foreclosures almost doubling from a yr ago. It means that consumer spending will remain subdued. The market for credit derivatives of any kind is dead is a dodo probably according to the head of UK FSA. Thanks to rating agencies and over-generous pay-package. Hector, stick to bureaucracy because you clearly don't understand the mentality of investment bankers, if they can't make it, they'll invent it. Money I'm talking about.
I know there is such a saying as "while in Rome do as the Romans do", but it's a worry how many Kenyans in the Diaspora are passing away like the natives- either horribly or alone. Finally, wikileaks lives on at -lakini its sad to note that Kenyans are carrying their asinine rumour-mongering there too.
Before the current disaster, I was a skeptical East African and Central province investor. No more. Macharia Gaitho is one of the few balanced (which apparently makes him pro-PNU) columnists around.
Showing posts with label East Africa. Show all posts
Showing posts with label East Africa. Show all posts
Thursday, February 28, 2008
Monday, June 04, 2007
Is an East African Community viable or achievable?
The analysis is primarily based on what has occurred so far and what is envisaged and will evaluate EAC on LE PEST context.
Economics: Theory says that by coming together and lowering customs, you increase trade between the countries. By allowing free movement of labour, you’ll essentially get lower labour costs as the labour pool increases. There will a bigger market for the companies within and externally attractive and giving EAC some clout. Bigger means economies of scale in terms of pooling of resources and know how. Against this, note that all 3 countries suffer from extreme infrastructure dilapidation, underdeveloped and unequal economy growth rates and markets; have no real manufacturing bases either for value-adding activities on local resources or FDI-related. As for the reduction customs duties and free movement of labour, it’s possible as Nation Media would tell you to have non-monetary trade barriers. You could also add into the mix:
Taxation- there is a move towards harmonising this starting with VAT, however corporate and personal taxes are bigger more complicated pieces.
Monetary policy-important because it does impact interest rate which in turn impact exchange rate and inflation. Having a common currency will test monetary policy.
The donkey/horse analogy: Will Kenya (being the larger economy), have to slow down its pace so that Ug/TZ can catch up? Germany’s re-unification and subsequent 10yr recession is a prime example of what happens when you merge two unequal economies
If an EAC entity is ever to work, then the economics has to work and should probably be the litmus of a future EAC.
Political: A political union would probably go as far as the East Africa Assembly has gone i.e. a talking shop that is far removed from the realities on the ground. It should however lessen the tribal politicking that we have in Kenya and to some extent in Ug.
This piece is probably the most difficult to envisage because our politics are in dire straits in all 3 countries. In TZ and Kenya, democracy is skin deep and even shallower in Ug. Thus a union will effectively be merging problem political entities.
Social: Do we share commonalities that can bind us together? We all speak (to various degrees) Swahili and are neighbours. And erm, that’s probably it. Anecdotally, at university, we had a mixture of the 3 main nations and really got on well with Ug-ians. It probably helped that many had been to Nai and had generally travelled. The other point is that many Ugandans and Kenyans are well educated with a grasp of external issues that many not be as present in TZ.
Technology: As with general infrastructure, there is a lot of potential ala underdevelopment. The good thing, all the countries face the same challnges and can hopefully develop common solutions. this is however capital intensive.
Legal: TZ, Kenya and Ug share legal systems inherited from a common colonial master and these have with few exceptions, remained broadly the same. Rwanda amended its Belgian inherited constitution in 2003 and now has a constitution that is context specific i.e. tailor-made for Rwanda especially the innovative Gacaca Courts. Burundi is operating a transitional constitution that marries its Belgian with customary laws as well as forward-looking amendments such as 30% inclusion of women in the legislature. Given these backgrounds, it’s a sure bet that a new constitution would have to be written initially maintain national vetoes. Cue more banana and orange campaigns.
Environmental: The major cities in all 5 countries would become magnets for the various countries populous that will no doubt be looking for greener pastures. Given the chronic lack of planning in Nai, Kala, TZ (the benefit of the move from Dar to Dodoma is still unknown) means more slums are likely and general pressure on resources (especially social amenities). And who will oversee NEMA-type activities?
Bottom-line: Two wrongs don’t make a right. If there is going to be a successful EAC entity, let’s develop it piece by piece starting with closer economy integration alongside the technology/legal aspects and build up to the political piece over time.
Economics: Theory says that by coming together and lowering customs, you increase trade between the countries. By allowing free movement of labour, you’ll essentially get lower labour costs as the labour pool increases. There will a bigger market for the companies within and externally attractive and giving EAC some clout. Bigger means economies of scale in terms of pooling of resources and know how. Against this, note that all 3 countries suffer from extreme infrastructure dilapidation, underdeveloped and unequal economy growth rates and markets; have no real manufacturing bases either for value-adding activities on local resources or FDI-related. As for the reduction customs duties and free movement of labour, it’s possible as Nation Media would tell you to have non-monetary trade barriers. You could also add into the mix:
Taxation- there is a move towards harmonising this starting with VAT, however corporate and personal taxes are bigger more complicated pieces.
Monetary policy-important because it does impact interest rate which in turn impact exchange rate and inflation. Having a common currency will test monetary policy.
The donkey/horse analogy: Will Kenya (being the larger economy), have to slow down its pace so that Ug/TZ can catch up? Germany’s re-unification and subsequent 10yr recession is a prime example of what happens when you merge two unequal economies
If an EAC entity is ever to work, then the economics has to work and should probably be the litmus of a future EAC.
Political: A political union would probably go as far as the East Africa Assembly has gone i.e. a talking shop that is far removed from the realities on the ground. It should however lessen the tribal politicking that we have in Kenya and to some extent in Ug.
This piece is probably the most difficult to envisage because our politics are in dire straits in all 3 countries. In TZ and Kenya, democracy is skin deep and even shallower in Ug. Thus a union will effectively be merging problem political entities.
Social: Do we share commonalities that can bind us together? We all speak (to various degrees) Swahili and are neighbours. And erm, that’s probably it. Anecdotally, at university, we had a mixture of the 3 main nations and really got on well with Ug-ians. It probably helped that many had been to Nai and had generally travelled. The other point is that many Ugandans and Kenyans are well educated with a grasp of external issues that many not be as present in TZ.
Technology: As with general infrastructure, there is a lot of potential ala underdevelopment. The good thing, all the countries face the same challnges and can hopefully develop common solutions. this is however capital intensive.
Legal: TZ, Kenya and Ug share legal systems inherited from a common colonial master and these have with few exceptions, remained broadly the same. Rwanda amended its Belgian inherited constitution in 2003 and now has a constitution that is context specific i.e. tailor-made for Rwanda especially the innovative Gacaca Courts. Burundi is operating a transitional constitution that marries its Belgian with customary laws as well as forward-looking amendments such as 30% inclusion of women in the legislature. Given these backgrounds, it’s a sure bet that a new constitution would have to be written initially maintain national vetoes. Cue more banana and orange campaigns.
Environmental: The major cities in all 5 countries would become magnets for the various countries populous that will no doubt be looking for greener pastures. Given the chronic lack of planning in Nai, Kala, TZ (the benefit of the move from Dar to Dodoma is still unknown) means more slums are likely and general pressure on resources (especially social amenities). And who will oversee NEMA-type activities?
Bottom-line: Two wrongs don’t make a right. If there is going to be a successful EAC entity, let’s develop it piece by piece starting with closer economy integration alongside the technology/legal aspects and build up to the political piece over time.
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