BY JANE WACHIRA
The world is experiencing phenomenal political and economic restructuring; the year 2016 will go down in history as one when humanity changed the order of doing business in the sense of how people carried out their political and economic affairs. The highlight of economic changes that may be termed as unconventional will be Brexit, the bold move by Britain to withdraw from the European Union in the name of autonomy and, to crown it, US election of controversial businessman Donald Trump as President in the name of democracy. At a time when the political and economic arenas of the world seem to be so active one cannot help but notice how stagnant our regional bloc, the East African Community (EAC) is. Why does the EAC refuse to come of age?
Theories pertinent to regional integration attempt to explore the most optimal way of implementing the process of integration. Theories of economic integration are mainly interested in what would produce the most beneficial outcome in economic terms, while those of political integration allude to a political ideology that supports establishment of a political life. Europe’s regional blocs exhibit characteristics’ of classical political integration while those in Africa were started mainly for economic integration.
The new EAC established in 1999 comprises of Kenya, Tanzania, Uganda, Rwanda, Burundi and South Sudan and has its slogan as ‘One people, one destiny’. It, however, appears that partner states are striving to realize neither. Relations among the partner states’ peoples appear to be dwindling by the day. As for a common destiny, member states are all headed for different directions. The Community has four pillars; the Customs Union, Common Market, Monetary Union and a political federation. There has been extensive progress on the first two including succinct normative and institutional framework however, there is has been no incentive to realize the latter two.
Although there has been progressive integration in relation to the Customs Union and the Common Market, there are extensive challenges and hindrances when it comes to their application in the member states. They include; corruption, Political instability and lack of political goodwill, where Tanzania’s dragging of her feet has often come to question.
Monetary union
The Monetary Union maybe a long shot seeing that the values of our currencies differ extensively, not to mention the challenge that will arise in harmonizing fiscal and monetary policies. The Economic and Monetary Union (EMU) was a major step in the integration of EU. It involved the coordination of economic and fiscal policies, a common monetary policy, and a common currency, the Euro. Whilst all 28 EU member states take part in the economic Union, some countries have taken integration further and adopted the Euro; together they make up the euro zone.
The Euro currency was a great factor that led to the Greek debt crises; economists have argued that the real root cause of the crises was the decision to unite a diverse group of European countries into a single currency. Control over the supply of currency is one of the most important tools of economic stabilization any country has. The problem was that Europe’s various countries had different economies and different economic situations. It was impossible to make monetary policy that’s equally appropriate for Greece and Germany, and since it was larger (Germany), the European Central Bank wounded up doing what’s right for Germany, a decision that meant that Greece was perpetually stuck with an inappropriate monetary policy and disastrous consequences for the Greek economy.
In theory this would have been fixed with a much deeper form of economic integration that would continually send vast sums of money from richer European countries to poorer ones. Germany opposed a quick bailout of Greece, during the Greek debt crisis, citing the Maastricht treaty, which states that there will be no bilateral assistance for other economies. Greece could not make an independent monetary decision.
This Compared to the case of Egypt which is not party to a monetary union; where Economists and bankers welcomed the Central Bank of Egypt’s decision to adopt a more flexible exchange rate policy after a sharp devaluation of the Egyptian Pound as much – needed measures to address a foreign currency crunch. The CBE decided to adopt a more flexible exchange rate regime that better reflects the underlying forces of supply and demand and, in turn, lead to greater transparency and foreign exchange liquidity through attracting greater investments and the correction of asset prices.
The statement came on the heels of an exceptional auction in which the CBE sold $198 million to local banks, allowing the Egyptian Pound to depreciate by over 14% of its value to EGP 8.85 against the US dollar. Following this, the International Monetary Fund’s executive board approved Egypt’s request for a $12bn facility after the country met its requirements to implement tough measures to revive its floundering economy. The bailout would help Egypt restore macroeconomic stability and promote inclusive growth.
This phenomenon has also been witnessed in Zimbabwe where in 2006, the governor of the Reserve bank of Zimbabwe announced that the government had printed ZW$20.5 trillion in order to buy foreign currency to pay off IMF arrears. These are steps Greece could not take as it was affiliated to a monetary union. Such are issues the EAC could address were it to form a monetary union.
Political federation
One of the strongest arguments for Brexit was probably that the EU threatened Britain’s sovereignty, it was noted that over the past few decades, a series of EU treaties had shifted a growing amount of power from individual member states to the central EU bureaucracy in Brussels. On subjects where the EU has been granted authority such as competition policy, agriculture, and copyright and patent law, the EU rules overrides national laws.
Political federation is the fourth step in the EAC integration process after the Customs Union, Common Market and Monetary Union protocols. In 2011, a team of experts released a report titled; “Addressing the Fears, Concerns and challenges of the East African Federation” among the five countries. According to the report, which was based on political, economic, cultural and social concerns of citizens from all partner states, concerns were raised about differences in land tenure systems of partner states and loss of land due to free movement and rights of establishment within the bloc.
Experts have found transforming EAC into a political federation to be unrealistic. It may be achievable in the future but not at the moment.
Challenges facing the EAC
In September 2016 Kenya and Rwanda had signed the EAC-EU Economic Partnership Agreement (EPA) in Brussels to secure access to the European Union market while Tanzania and Uganda stayed out of the deal. The deal was pursuant to the EAC Council decision to sign the trade agreement with the EU.
Kenya – Tanzania tourism row in 2015 elicited mistrust, suspicion and delicate relationship between the two. This year Uganda chose to reroute its oil exports through Tanzania after a report found the country was a cheaper and more secure option than Kenya. There’s a clear lack of cooperation among partner states
The EAC has a vision 2050 where it aims to realize the principles set out by partner states such as energy, agriculture and food security, trade and development among others. Partner states too have set such visions to envisage the realization of the community’s vision; Burundi vision 2025, Kenya vision 2030, Rwanda vision 2020, Tanzania vision 2025 and Uganda vision 2040. The million-dollar question, however is, are the relevant countries working towards achieving those visions?
The case of Brexit can be assertively said to be one of benevolent hegemony. While it has benefits, it also has disadvantages. It is constant however that, Britain benefited in its membership in the EU; it leaves the EU a stronger and more competitive economy. This scenario can be likened to that of colonialism in Africa, although the natives were disposed of their lands and sovereignty they were left at independence with solid political, economic and education structures. Or the case of hero Honda partnership in India, Hero an Indian motor company at its break away from Honda of Japan was left a stronger entity and better competitor at the global economy. The EAC is far from this phase, where economies of its partner states are so well integrated that a breakaway would be taken positively.
