EA growth constrained, report says

May 24, 2010
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, NAIROBI, Kenya, May 24 – A report released by the World Bank and International Finance Corporation shows that regional integration and economic growth in East Africa are constrained.

The Doing Business 2010 Report has ranked the region 116th out of 183 countries due to disconnected markets, high transportation costs, and a poor regulatory environment for businesses.

Speaking during the launch on Monday, the report’s co-author Sylvia Solf said the East African Community was likely to improve its ranking if member states borrow best practices from one another while improving on the barriers that continue to hamper economic development.

“The big question should be how can we work together to lift our average economy from 116 and improve the local environment for our local entrepreneurs,” Ms Solf said.

The study shows that the region has the potential to achieve 12th place if individual countries adopted best practices.

Ms Solf said unless there was uniformity in practices, the East African Community would find it hard to attract investors.

Poor roads, expensive electricity, bureaucratic procedures at borders and limited access to finance are some of the factors impacting on the ability of businesses to be competitive and on the price people pay for goods in shops.

Countries are ranked using 10 basic indicators ranging from ease of starting a business, employing workers, registering property to easing of accessing credit.

Other categories include protecting indicators, taxes, trading across borders, enforcing contracts, construction permits and winding down a business.

Of the five East African nations, Rwanda is at the forefront of improving its investment attractiveness and leads the pack, ranked 67 in the world. (Kenya is at position 95, Uganda 112, Tanzania 131 and Burundi 176).  

The five countries however, create complexities in other areas of business that hamper overall economic development.

For example, Rwanda ranks last in terms of the time and cost of liquidating a business, and securing a construction permit is so complex in Tanzania (ranked 178th) that it takes 32 steps and 328 days at a cost approximately 33 times per capita income.

East African Community Secretary General Juma Mwapachu said improving the investment climate could be achieved in as little as two years if all member States worked together with a common agenda.

“The EAC is proud that a number of initiatives are underway geared towards improving the business environment and broader investment reforms,” Mr Mwapachu said.

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