New Database on Trade in Services

A new services database has been developed and it may be an interesting tool for policy makers. I-TIP Services is a joint initiative of the World Trade Organization and the World Bank. It is a set of linked databases that provides information on Members' commitments under the WTO's General Agreement on Trade in Services (GATS), services commitments in Regional Trade Agreements (RTAs), applied measures in services, and services statistics.

In its four modules (GATS, RTA Commitments, Applied Regimes, and Statistics), the integrated database permits searches by Member, sector, agreement, or source of information.

To access the database click here.

Tanzania's Labour Laws and the EAC

According to sources, the Association of Tanzania Employers (ATE) has disagreed with President Jakaya Kikwete’s position on closing the labour market to other East African nationals. ATE executive director Aggrey Mlimuka said freely allowing skills to flow in will expand the economy, which in turn will create more jobs.

Delivering a speech to the National Assembly recently, President Kikwete said Tanzania’s stand against opening up its labour market in accordance to the East African Common Market Protocol is among the reasons why the country is being sidelined by other member states. The EAC Common Market Protocol was adopted and signed on November 20, 2009, by member Heads of State, and entered into force on July 1, 2010, officially allowing for free movement of labour. Recent World Bank findings show that East Africa would benefit greatly from free trans-border flows of labour, as they would allow for a more efficient allocation of skills that are relatively scarce in some partner states as well as provide employment to idle skill resources in others.

Mr Mlimuka said it was wrong for Tanzania to close the labour market wholesale. He suggested that Tanzania review its laws to allow foreigners to work in the country and complement the weak local labour force. He said Tanzania could stipulate that the foreign worker have a local person understudying them during the contractual period. That way, the local labour force would become competitive across the region. 

It is important to note that the cost of a work permit in Tanzania is $2,000, Zanzibar $150, Burundi charges 30 per cent of the salary; in Kenya, Rwanda and Uganda the permits are issued free of charge to East African nationals.

According to other sources, an ongoing crackdown on EAC immigrants in Tanzania is fueling fresh doubts about the country’s commitment to the East African Community as Tanzania and its partners within the bloc continue to pull in different directions on regional integration.

According to a study titled An Assessment of the Implementation of the EAC Common Market Protocol Commitments on the Free Movement of Workers commissioned by the East African Business Council (EABC) and the East African Employers’ Organisation, Tanzania’s work permit regulations emphasize immigration control measures instead of work related requirements. According to ATE, the cost of work permits and the complicated procedure for their approval are the biggest impediments to free movement of workers into Tanzania. The EABC study reveals that East Africa is facing a middle-level skills vacuum. In Tanzania, for example, middle-level professionals account for only 12 per cent of the total number of professionals in engineering and just six per cent in accounting. According to the Study, "the figures for accounting seem particularly low if compared with Kenya, where accounting technicians exceed the number of qualified accountants by a factor of four. In Tanzania, qualified accountants exceed accounting technicians by a factor of 16,” the research reveals. This means that in Tanzania, for every 16 qualified accountants there is only one accounting technician, the opposite of the normal pyramidal labour structure in a modern economy. In addition, according to the Study, there is a shortage of mid-level skills in most of the EAC.

Last month, the Tanzanian government said it would not waive work permit fees for East Africans seeking jobs in the country until some of the laws to do with immigration, capital flows and security have been assessed and revised.

Kenya's Sugar Sector and COMESA Safeguards

According to sources, Kenya’s sugar sector faces a gloomy future as the end of the COMESA safeguards beckons.

In March 2004, the government requested a four-year cover that was granted with conditions from the Common Market for Eastern and Southern Africa (COMESA) council of ministers. However, Kenya is yet to meet any of the conditions, and the government now indicates it will be seeking another extension when the current one ends March 2014.

Agriculture secretary Felix Koskei says the government is keen on an extension of the protection. “We will explain to COMESA why we need an extension; we understand that we have exhausted our limits, but we still have the reasons to be given one more extension,” says Mr Koskei.

Kenya has exhausted the required allowance for the extensions as put in place by the COMESA treaty, and it is not clear whether the window will be extended.  The cover came into effect in 2003 and Kenya was given a four-year waiver that would see the importation of duty-free sugar from the COMESA market regulated. Kenya got extensions in 2007 and in 2011. Initially, the treaty would provide for a maximum of eight years, however, the waiver in December 2007 was amended to avoid contravening COMESA Trade Remedy Regulation which provide for a maximum eight years for the application of safeguards under the bloc’s terms.  COMESA reviewed the regulations to be in tandem with the World Trade Organisation’s agreement on safeguards which provides for a total of 10 years for developing economies.

A former chairman with the Kenya Sugar Board (KSB) and currently a director at the agency says political will shall override the COMESA treaty on the protection.  “At the end of the day, political will shall prevail over the treaty; each member country has own interest of protecting their sugar sectors which provides a source of livelihood for more than a million people,” says Mr Saulo Busolo.  Kenya is considered a large-scale consumer of industrial sugar, used in making cakes, sweets and pharmaceutical products, which are later sold within COMESA.  Mr Busolo says Kenyan consumers are paying exorbitant prices for sugar as a result of shielding the local manufacturers from increased competition from neighboring African nations.  “Consumers are parting with high prices in buying sugar compared to other African countries such as Mauritius,” he said, adding that Kenyans were paying more than two times the world average. Mauritius exports all the locally produced sugar and imports cheap sugar from the COMESA market to sell it to its citizens cheaply, he said. 

A World Bank report on Kenya released last week says the protection measures have contributed to making Kenya a high-cost sugar producer, hurting the consumer.The high cost of producing sugar in Kenya is attributed to high cost of farm inputs. Kenya’s average production cost stands at $950 per metric tonne compared to regional countries like Malawi where the cost is as low as $350 per metric tonne.  When the safeguards were granted Kenya was asked to, among other conditions, come up with a formula for paying farmers and sell the State-owned millers. Some of the State millers are Miwani, Muhoroni, Awendo-based Sony, Nzoia, and Chemelil. Currently, the payment is based on a farmer’s supplies and the industry average. According to the COMESA safeguards, the payment would be quality-based judged by sucrose content, not the bulk. The KSB, the industry watchdog, says a pilot is running in Sony and Nzoia. The impending sale of the millers has been delayed for years, the Cabinet having given it a nod in 2010. But it could not take off, partly because there was no law and having the Privatization Commission in place also took a while.

Critics and reviewers, however, have voted overwhelmingly for the sale of the former giants to inject efficiency backed by new investment, talent, and limited political interference.  Before the window closed in the first four years of the first extension, all these millers had a combined debt of Sh50 billion, one of the factors that delayed their sale.  The minister has blamed the delay in privatization on the last Parliament, that, he says, did not give the government the go-ahead. “Parliament did not give the Treasury the privatization go-ahead that would have started early this year,” said Mr Koskei. 

The government negotiated for the COMESA lifeline to allow the importation of 200,000 tonnes to meet the country’s deficit, whose total annual consumption stands at 700,000 tonnes against the local production of 500,000 tonnes.This comes even as the regulator has warned that it will cancel the licences of the sugar factories that would not comply with the sugar policy that requires all the millers to have more than one income generating project. The policy, to be implemented in the next 24 months by the KSB is aimed at protecting the local sugar industry from collapsing in the weight of cheap sugar once the COMESA window closes. KSB chief executive officer Rosemary M’kok says that the 24-month window period is enough time for all the sugar factories to have complied with the requirement. “The factories that would not have complied with our policy will definitely have their licences cancelled as KSB will not renew them,” Ms M’kok said. It would be mandatory for all the millers to produce sugar, ethanol and electricity as a different source of generating income, instead of relying on sugar alone.