Political instability, trade barriers will stifle regional growth, experts warn

 Political stability, fewer trade barriers and infrastructure development will be needed to help drive regional growth in East Africa, new reports from the World Trade Organization (WTO) and shipping company Maersk Line, have revealed.

“To improve trade volumes in our region, the East African economies need to attract more foreign investments, which can only happen if we continue to work towards removing trade barriers and providing a conducive environment for business in general and industrialization specifically,” said Steve Felder, Managing Director at Maersk Line Eastern Africa.

Felder points to two key infrastructure development projects that will aid in attracting investors.

He noted that the advent of the second container terminal in Mombasa has eliminated congestion within the port, and productivity has improved.

The construction of the Standard Gauge Railway linking Mombasa and Nairobi, for which more than 75 per cent of civil works have been completed on the first phase of the KSH 420 billion project, with over 235km of track already laid. Rail has huge potential to reduce the cost of logistics, decongest roads and reduce carbon emissions.

Felder also points to the positive development recorded by the World Bank’s Doing Business index where the region has seen major improvements, for instance with Kenya ranking within the global top 100 easiest countries to do business with for the first time.

“We want to acknowledge the improvements made, and we need to continue to improve the ease of doing business to enhance our region’s business activity and trade and hereby create growth.”

Some of the factors that can lay a damper on the trade in the region are major events like the elections in Kenya in August 2017 which can have a direct impact on trade in the region. Historically there is a slowdown of up to 20 per cent in imports starting around 3 months prior to the election date, and only picking up once the situation stabilizes. Also, exports are expected to come under further strain next year, when the impact becomes clear of the lack of an Economic Partnership Agreement (EPA) between the East African countries and Europe.

“As per our estimates, the East African trade will contract by 4 per cent in 2017 with imports declining by 5% and exports declining by 2 per cent. Northern Corridor is set to out-perform the Central Corridor in both import and export segment again,” said Felder.

 

 

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