Struggling With Formal and Informal Trade Barriers
Ever been stuck on the Nairobi-Nakuru highway for hours on end? have you ever wondered why basic consumer goods are so expensive in Kigali, Bujumbura and Kampla? Or have you ever wondered why the exports from the Eastern Africa countries tend to be so un-spectaculary uncompetitive in international market? Well may be you have, may be you haven’t, but a new study by the Eastern Africa Policy Centre might just answer your questions. That long lane of trucks you find at Maraikani, Mlolongo weighbridges or the arduous bureaucratic border crossing processes might have something to with the high cost of consumer goods and the utter uncompetitiveness of Eastern Africa Exports in the global economy.
A new study by the Eastern Africa Policy Centre titled ‘Struggling With Formal and Informal Trade Barriers‘ unearths an enfeebling set of factors in road transport and logistics that make intra and inter-regional trade quite a difficult affair. According to the research, despite recent economic growth in the East African Community (EAC), freedom to trade across borders remains stifled. The main trade barriers are extraneous transportation costs, particularly caused by corruption, bureaucratic time delays, and poor border infrastructure. If costs do not decrease soon, East African GDP growth will stall.
Because road transportation is significantly more expensive than shipping and air transport, only 23 percent of the EAC’s total exports and 10 percent of total imports are intra-regional. To transport a 20-ton container from Mombasa to Nairobi costs $1,300, while a similar container from Mombasa to Kampala and Kigali costs $3,400 and $6,500 respectively. This is more than double the $1,200 one would incur to ship the same goods from Japan to Mombasa
High road transportation costs are most likely the result of low logistical efficiency, which is a function of customs procedures, infrastructure, quality of services, and wait times. Among 160 countries tracked by the World Bank in 2013, EAC countries ranked in the bottom 60 in the Logistic Performance Index (LPI), significantly lower than advanced economies. Bureaucracy and excessive government intervention over the years have been at the root of the poor logistical performance. It is estimated that improving the EAC’s logistical performance by 50 percent could bring about a 15 percent increase in trade and a 5 percent growth in GDP.
Please Download the Research here