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The East African Community’s regional economic integration efforts are starting to pay off – here’s why to take note

By ISS Blog Bliss 12 December 202226 December 2024 2560 views

Good news about Africa always seems to travel slowly. The East African Community has successfully been pushing for regional economic integration in East Africa, but not everyone has gotten wind of it. ISS researchers Peter van Bergeijk and Binyam Demena in their recently published book called ‘Trade and Investment in East Africa’ show how the EAC’s many successes and failures can provide several opportunities – and lessons – for the Netherlands and other countries seeking to further strengthen regional economic integration.

For the past few years, the seven member states of the East African Community (EAC) – the Democratic Republic of the Congo (DRC), Burundi, Kenya, Rwanda, South Sudan, Uganda, and Tanzania – have been working hard on furthering regional economic integration. The group of countries recognize the importance of foreign trade and investment (FTI) for their economic development and have started to reap the benefits: Kenya and Tanzania have already been reclassified as Middle Income Countries (MICs) by the World Bank.

Yet not much is known about these efforts in the Netherlands. Our recently published book, Trade and Investment in East Africa, is an attempt to showcase the EAC’s efforts by analysing these developments, identifying possible bottlenecks, and thereby also outlining perspectives that are important for the Dutch trade and development policy. We summarise some of book’s the key takeaways below to show why countries seeking to improve their regional economic integration should take note of the book.

Increased trade bring benefits, but it’s no free lunch

Economically, the EAC is a remarkable success. Africa is a patchwork of overlapping regional organizations that are all working towards economic integration, which is somewhat inevitable (just as the Netherlands is a member both of the EU and the Benelux). This leads to inconsistency and inefficiency in trade between countries but, as one of the studies in the book shows, the EAC suffers relatively little from this.

One possible reason for its success could be its sectoral productivity. In the book chapter, the authors using microdata on firms show that sectoral productivity patterns differ between EAC members: the countries differ in their strengths and weaknesses (what economists call their comparative advantage). Because of the different comparative advantages, it pays to specialize in what you are good at, also to increase intra-regional trade. Uganda can specialize in food where it has a comparative advantage and in the same vein we find different candidates for different countries: Kenya can specialize in furniture, Rwanda in non-metallic manufacturing, and Tanzania in printing and publishing.

That fertile base for specialization and increased trade is good news because the export premium (the higher productivity of internationally operating firms) is substantial for EAC member states and greater than the average for sub-Saharan countries. Higher productivity can be translated into higher per capita income, which is considered necessary for economic growth. Incidentally, this is not a free lunch and requires related policies (training, income support), because amongst the high-productivity winners there are also clear losers in low-productivity sectors.

More investment, less bureaucratic red tape needed

Beyond dealing with those sectors that are lagging, the area faces several policy challenges. The book contains some five case studies[1] that reveal some of the main challenges, which include a lack of institutional support and private sector investments. Many sectors, such as rice farming, seaweed fishing and leather production, lack investments by firms that can help these countries position themselves higher up in international value chains. State institutions on the other hand are important both for ensuring the quality of export products and for funding research and development into product-specific improvements.

Another challenge relates to a lack of investment by firms in primary sectors. For example, while Tanzania is one of the largest regional exporters of live cattle, its lack of formal slaughterhouses and leather processing facilities prevents it from expanding its leather production sector. As a result, it needs to import shoes and other simple leather products, and the upscaling of the sector is hardly possible.

When it comes to trade with the EAC region, the main bottlenecks are related to difficulties getting import and export products across borders without delay. One study contained in the book reveals bottlenecks that impede trade both within and outside of the EAC. The challenges include inadequate (air)port management and excessive bureaucratic red tape, which are compounded by the lack of a one-stop-shop approach; in principle, these are factors that could be resolved without having to make major financial investments but require a change in practices and training to implement newly developed systems.

Offering aid in addition to trade

The Dutch Ministry of Foreign Trade and Development Cooperation can learn several things from the EAC in doing trade and investment better. One important finding that can be considered in the Netherlands is that trade cannot work without a certain amount of aid. An empirical study by Sylvanus Afesorgbor of European trade with the African, Caribbean and Pacific countries with which Europe has a special development aid relationship shows that trade promotion appears to lead to economic development only if it is complemented by development aid. One reason is that additional policies are necessary to help individuals that work in sectors with low productivity that lose due to international specialization.

However, the similarities have been somewhat overlooked. From this perspective alone, it is unfortunate that the Dutch Ministry of Foreign Trade and Development Cooperation’s new strategic policy paper, ‘Doen waar Nederland goed is in’ (‘Do what the Netherlands does best’), does not consider the EAC as an economic community of nations. While some individual EAC countries are mentioned, the emphasis is on the Netherlands’ long-standing foreign policy strategy focused on the Horn of Africa.

This leaves the opportunities that lie in the EAC out of the policy picture. For example, the Netherlands can play an important role in helping the EAC address the logistical challenges hampering trade, in particular with regard to (air)port management. It also has much to offer African policy makers through its own regional economic integration experiences, from Benelux to the EU. Moreover, several large Dutch companies also have a foothold in Tanzania, which illustrates that this is already recognized as an interesting market.

Our book brings together economists from the Global South that provide a relevant multidimensional analysis of how sensible policies can be designed that move trade and development in the same direction.

[1] The case studies are a comparative analysis of the leather industry by Fauzul Muna, a survey of common bean smallholder farmers in Arusha by Eliaza Mkuna, an econometric analysis of Tanzanian horticultural export by William Georde, a survey of the seaweed sector in Zanzibar by Wahida Makame, and a structured review of cross-border cooperatives in the EAC by Gerard Dushimimana.

Opinions expressed in Bliss posts reflect solely the views of the author of the post in question.

About the authors:

Peter van Bergeijk is Professor of International Economic Relations and Macroeconomics at the Hague-based Institute of Social Studies at Erasmus University (ISS); one of the leading educational and research institutes in the field of development cooperation in Europe.

Binyam Afewerk Demena is an empirical economist with expertise across economic disciplines focusing on the area of development, environment, and health. He is an Assistant professor the Hague-based Institute of Social Studies at Erasmus University (ISS).

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How unified resistance efforts within and across borders can help restore democracy in Myanmar

By ISS Blog Bliss 13 July 202113 January 2025 2421 views

The coup d’état that took place in Myanmar in February this year led to a global outcry as the junta took over the country’s government. But despite massive and enduring citizen-led protests and strong criticism by the international community with accompanying punitive measures, the junta remains in power and continues to arrest and kill citizens. Seohee Kwak in this article argues that resolving the situation requires the Burmese public and foreign actors to work together more concretely and coherently.

Photo: February 8, 2021. REUTERS/Stringer-0u

More than four months have passed since a coup d’état took place in Myanmar on 1 February 2021. The political legitimacy of the junta that staged the coup has been challenged by not only millions of protesting citizens, but also by the international community. For instance, the Association of Southeast Asian Nations (ASEAN) had meetings with junta leaders on 24 April, reaching a so-called five-point consensus which includes the cessation of violence and arrangements for dialogues for a peaceful solution. However, little progress has been made since then, and the military still practices violent repression against the people. By 5 July 2021, more than 6,500 people have been arrested and 892 people have been killed by the junta forces. The number of casualties and detained or arrested people is still on the rise.

Are internal or external pressures insufficient to put an end to this crisis? This article shows that independent actions by citizens from Myanmar and the international community are less likely to have a substantive effect and that collaboration may produce better outcomes.

Can Burmese citizens stop the violence?

Burmese citizens have taken individual and collective political action rather than choosing to submit to the junta, but they have neither the opportunity to hold the junta to account, nor the political leverage to make the junta yield to democratic principles. The military regime currently maintains control by force with uneven and illegitimate power. However, for the junta leaders, political legitimacy in the eyes of citizens is not currently a top priority, and it therefore does not fear retaliation by citizens through voting in future elections.

As heavy repression has continued, more people have started to resort to more direct confrontation. Pro-democracy and self-defense forces have been formed across the country, and armed resistance movements against the junta have resulted in casualties for the military and the police. Due to the pre-coup oppression of ethnic and religious minority groups lasting decades, armed conflicts between the military and civilian rebel groups have become more intense in several regions where these minorities reside, bringing the country to the brink of a humanitarian emergency. For instance, more than 100,000 inhabitants in Kayah State have had to flee due to military attacks and airstrikes.

Can foreign actors reverse the situation?

Foreign actors have also opposed the junta, but have not been very successful so far due to their fragmented actions. The months-long condemnation of the junta by the international community has reached a point of saturation, and more tangible measures have been implemented:

The World Bank and the Asian Development Bank froze their project fund disbursements and implementations in opposition to the junta.
Japan, another leading donor to Myanmar, placed development assistance on hold.
On 18 June, the United Nations General Assembly adopted a resolution calling for a moratorium on arms transfers to Myanmar.
On 21 June, the European Union announced another round of sanctions, mainly travel bans and an asset freeze against key junta leaders and organisations connected with the coup.
And in addition to punitive measures by bilateral and multilateral actors, the private sector has also mobilised. International firms, particularly those linked to oil and gas that are key sources of revenue for Myanmar, have suspended dividend payments by a joint venture to the state-owned Myanmar Oil and Gas Enterprise (MOGE) with which the military has allegedly close links.

Foreign actors that are key partners to Myanmar are resorting to a wide range of measures to attempt to sway the junta; these include dialogues, tightened conditions for foreign aid, the freezing of investments, resource/trades embargoes. Yet these actors are not unified. For example, China, despite condemning the current situation, is seemingly calling for stability for strategic and not moral reasons. Similarly, the Beijing-led Asian Infrastructure Investment Bank seems to focus more on how the coup is affecting its own interests and less on the consequences of this form of government for Burmese citizens. And Russia formally refuses to condemn the coup, stating the need to maintain its strategic links with Myanmar. External pressures are therefore fragmented and incoherent.

Unity for greater political leverage

Myanmar’s protesters and foreign actors need to act together to create greater political leverage. Without this, it is very likely that public protests and other forms of resistance will result in ongoing violent repression. Stronger networks with links to international organisations and concrete assistance to the Myanmar citizens fighting for democracy would resonate more strongly with the junta leaders to the extent that they would be hard to ignore. For instance, the provision of technical or financial assistance to Myanmar civil society organisations or groups of activists could encourage them to continue their activities and strengthen their capacities during such a political crisis. At the same time, foreign actors also need to work together more effectively to make a greater impact. When foreign actors shut financial and political doors to the military regime, a key for success is to ensure that there is no other door open for the junta to sneak through. It is not easy, but to prevent further violence and to restore democracy in Myanmar, unity is needed both between Burmese civilians and foreign actors, and among foreign actors.

Opinions expressed in Bliss posts reflect solely the views of the author of the post in question.

About the author:

Seohee Kwak is a PhD candidate at the International Institute of Social Studies (ISS), Erasmus University Rotterdam (EUR). With a geographical interest in the Southeast and East Asian regions, her academic interests include political rights/freedom, political action, public protest, state repression, and state-society relations.

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