Reforms, reforms, reforms: the most important benefit of RSS membership in EAC

BY AGGREY TISA SABUNI,

AGGREY TISA SABUNI, former Minister of Finance and current presidential advisor of economic affairs(Photo: supplied)

AGGREY TISA SABUNI, former Minister of Finance and current presidential advisor of economic affairs(Photo: supplied)

April 23, 2016(Nyamilepedia) —– A lot has been said and written about the potential benefits and costs of South Sudan’s membership in the East African Community (EAC). While most of it has been quite informative, educative and useful, there still remains enormous need for more public enlightenment on the issue.

Reforms are likely to be the most important single benefit from South Sudan’s membership in the EAC.

The word reform is used here to mean putting government systems and operations into a new and improved form; or to amend or correct a defective condition. The treaty establishing the EAC, together with its various protocols, laws and Memoranda of Understandings, contain principles, tenets, requirements and obligations that make it a must for member states to conduct their respective public affairs according to internationally recognized best practices.

In the case of South Sudan, it means carrying out extensive and wide ranging reforms right across the board.

This in turn means instituting improvements in institutional structures and set-ups as well as professional and technical performances.

In practical terms it means improvements in institutional effectiveness and efficiencies, in recruitment practices in the public service, in budgeting and budget execution, in procurement practices, in revenue collection and administration, in investment policies and practices, leading to actual investment, production and export, in rule of law and legal practices.

These reforms are also quite consistent with the reforms that are clearly spelt out in various chapters of the Agreement for the Resolution of the Crisis in South Sudan (ARCISS).

In short, membership in EAC for RSS will henceforth mean that the country will never be the same again.

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The EAC integration process is important for South Sudan. Currently, the EAC is the most advanced Regional Bloc on the African Continent. memberships in the East African Community is akin to membership in the European Union (EU) as it entails the establishment of a Customs Union, Common Market and a Monetary Union as well as work towards establishing an “ever closer Union”. As such it is going to be the largest single reform process that the Government of South Sudan has so far committed to undertake.

South Sudan’s membership in the EAC is likely to provide concrete benefits to the country and the Region as a whole. The deep regional integration programmes that South Sudan shall undertake in the years to come are likely to enhance overall EAC competitiveness which will lead to higher economic growth, employment creation and poverty reduction. South Sudan’s membership in the EAC has also important implications for the country’s trade and economic relations with the European Union. By virtue of being a member of the EAC, South Sudan will also be a member of the EU-EAC Economic Partnership Agreement.

2. The Process of South Sudan’s EAC Integration

Since independence, South Sudan has made considerable efforts to participate in the global economy by applying for membership in numerous international and regional bodies. In 2011-12, South Sudan applied for membership of the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA) and African Development Bank. It is already a member of the African Union, the World Bank and the IMF and seeks to obtain observer status at the World Trade Organization (WTO).

Membership in the EAC is a natural step for South Sudan. The country is landlocked, geographically close to the EAC, has large trade links and significant export potential with this regional bloc. EAC is particularly important as a transit route for South Sudan, as nearly all imports and non-oil exports transit through the EAC.

Prior to joining the EAC, South Sudan was the only country in Africa that was not a part of any regional integration schemes or the WTO. As such, the country is at the very beginning of its journey to integrate globally and more remains to be done for South Sudan to be an integral part of the world’s trading system. Nevertheless, South Sudan’s membership in the East African Community is a key step in this regard.

There are numerous benefits of South Sudan’s membership in the Regional Bloc. Such membership will make it much easier and cheaper to trade with South Sudan and in the process strengthening regional economies, enhancing economic growth and leading to a significant degree of poverty reduction due to trade creation. Lower trade costs, in turn, can improve South Sudan’s food security as food costs will reduce while availability will increase.

Regional Integration may entail short-term costs for South Sudan. Currently, tariffs are lower in South Sudan than in EAC, hence there might be some degree of trade diversion and increase in costs of imports for selected goods. This will need to be carefully managed by the Government to contain these costs. In the long-run, however, efficiency gains related to the extensive EAC trade facilitation programme and preferential trade that are likely to outweigh the short-tern costs. All these will be driven by reforms.

The young country of South Sudan stands to benefit from the EAC membership by harmonizing Government programs and structures to these of the EAC. Such harmonization is likely to take place on many levels including in:

  • Coordination of Trade Relations and Customs;
  • Coordination in technical, sanitary and phyto-sanitary standards;
  • Coordination of Transport Policies and Infrastructure Development;
  • Coordination in Security and Defences;
  • Coordination of Social and Tax Policies;
  • Coordination in Agriculture and Food Security;

The list of EAC work areas is long. In all these areas South Sudan stands to gain from co-operation, harmonization and information exchange. South Sudan is only now setting up its regulatory frameworks. EAC will support the creation of best practice legal framework in South Sudan.

Furthermore, South Sudan will be seen as a “credible” and safer place to invest. EAC will make it much easier and cheaper for South Sudan’s firms to export their products and services to the region.

Cross-border development programming in the area of trade and transit infrastructure as well as cross-border health and education programmes can support a gradual increase in trust. Once again the EAC has been on the forefront in Africa in terms of developing such programmes.

It is also important to add that never before – in the world’s economic history – has an oil-dependent economy engaged in such an advanced regional integration scheme with more diversified economies.

Never before have countries at a relatively low level of economic development gone as far as negotiating liberalization of labour, capital, services as well as common currency and political integration. Also, never before has a country of only four years joined a regional integration scheme that is so advanced. The East African Community is at the forefront of regional integration in Africa and beyond. It is considered to be Africa’s most integrated region.

Overall this uniqueness provides another reason for the integration process to be carefully managed. It requires numerous trainings, technical analyses, policies and strategies for the process to reap full benefits. Given South Sudan’s limited previous experience with regional integration, Technical Assistance will be essential.

3. South Sudan’s participation in the EAC-EU Economic Partnership Agreement

Since 2004 the European Commission has been negotiating the Economic Partnership Agreements with the East African Community. Currently, the Agreement is in its final stages of completion. The final EPA text is with EU Council, which is to decide on the signature. The Agreement establishes a Free Trade Area between the EU and the EAC. As part of the EAC South Sudan will also be a part of the EPA as all countries within a Customs Union must have identical external tariffs. Article 50 of the EU-EAC EPA notes that: “Any new Partner State of the EAC shall accede to this Agreement from the date of its accession to the EAC”. As a result, during the negotiations process, South Sudan committed to sign the EPA once an EAC member state. It is important to note that South Sudan is likely to become a part of the EPA and by extension a member of EU – EAC Free Trade Area through a non-standard route which will involve no actual negotiations for the Agreement. As a result nobody in the Government of South Sudan has any significant exposure to the EPA-related issues in the same way that other EAC country governments had during the negotiations. GRSS negotiators had not been involved is drafting and shaping the agreement in any way. As a result, there is significant lacuna in the knowledge of the Agreement by all stakeholders in South Sudan.

The aim of the EPAs is to ultimately contribute, through trade and investment, to sustainable development and poverty reduction. The Agreement provides scope for wide-ranging trade co-operation on areas such as sanitary norms and other standards. It also creates joint institutions that monitor the implementation of the agreements and address trade issues in a cooperative way. The Agreement is designed to be a driver of change that will help kick-start reform and contribute to good economic governance.

Once in force the EPA may have the following effects in South Sudan:

  • Enhance EU exports of goods and services to South Sudan and strengthen protection to EU investors;
  • Provide a framework for EU capacity-building on trade and economy issues in RSS; and
  • Outline EU-EAC South Sudan’s areas of cooperation in Trade in Goods, Trade Facilitation, Fisheries, Agriculture, Economic and Development Cooperation.

Furthermore, the EPA also mandates the Parties to conclude an Agreement on issues such as Services, Competition policy, transparency in public procurement, Investment and private sector development by 2021.

According to the EPA the EU will immediately provide 100% duty-free quota-free access to the EAC. EAC will liberalize 82.6% tariff lines. In the case of South Sudan this means that in late 2019 it will apply EAC CET and liberalize 65% of tariff lines. The reminder of liberalization will take 10-15 year period.

The EPA also creates EU-EAC Institutions tasked with overseeing the implementation of the Agreement. These are: EPA Council, Committee of Senior Officials and EPA Consultative Committee. Any disputes shall be decided through a consultation, mediation, arbitration process and there is an established dispute settlement procedure. As such the agreement contains relevant features to be legally enforceable.

It is important to add that the EPA stems from a long-term relation that EU has with African, Pacific and Caribbean (ACP) states under the Cotonou Agreement signed in 2000. The latter agreement provides the framework for EU partnership with ACP countries and, as such, defines our relation in a range of areas including development assistance, trade relations and political dialogue. Accession to Cotonou is necessary to access EU development funds including EU-funded regional envelopes for regional infrastructure projects; and concessional loans from the European Investment Bank.

The EPA Agreement complements and supersedes the Cotonou Agreement but only in the Area of Trade Relations. As South Sudan is not a party to the latter Agreement, there is at present no Agreement regulating EU-South Sudan relations in the areas of development assistance and political dialogue. As a result EU development funding for South Sudan is constrained until the Cotonou agreement is signed and ratified. In particular ratification is necessary to access EU development funds for the period 2014-2020 (the 11th funding cycle of the European Development Fund (EDF). Ratification of the Cotonou agreement would enable South Sudan to benefit from EUAfrica Infrastructure Trust Fund, concessional loans from the European Investment Bank, EU global funds on health, financial instruments on trade and higher education mobility programmes.

4. EAC and EPA Memberships as a Reform Agenda for South Sudan

South Sudan’s membership in the EAC and to a slightly smaller extent the EPA should be viewed as the Government’s legally binding commitment to implement business friendly policies, improve governance and external accountability. EAC and EPA rules and regulations impose discipline on domestic policies. The Region’s rules support positive policy changes by allowing the Government to implement the policies without bearing full political responsibility as many of the reforms are externally mandated by the Regional Bloc. The private sector and the people of South Sudan should gain from internationally agreed and enforced rules because of increased credibility, predictability and continuity of policies.

Overall, South Sudan may gain by shared regional administrative capacity. Pooling regional administrative capacities can allow states to develop institutional capabilities they could not manage on their own. There are already good examples of shared courts or shared central banking capacity in Africa and South Sudan will become a part of the East African Court of Justice as part of the EAC. While these initiatives take time to establish, the EAC has gone further than other RECs in Africa in achieving that. The initiatives can supplement difficult national institutional transformations and may merit assistance from regional and international development institutions. It is important to add that by improving government efficiency, EAC membership has the capacity to support the people of South Sudan by alleviating poverty and contributing towards economic development.

To summarise, South Sudan’s prospective membership in the Regional Bloc can strengthen institutional capacity in South Sudan as well as provide a “lock-in” mechanism for policy making and reform in the country. In this sense, membership in the EAC can become a commitment device for reform particularly relevant for states with weak domestic commitments and institutional capacity.

Furthermore, South Sudan’s membership in the EAC may contribute positively to the on-going peace process. Independent assessments provide evidence that EAC membership can support not only a stronger economy but also lasting peace in South Sudan. A recent Overseas Development Institute’s research paper entitled: “Exiting the cycle of conflict in South Sudan: Diversifying trade for sustained and inclusive prosperity” places EAC Membership as an important ingredient of attaining sustainable peace and development in South Sudan.

The research analysis argues that:

“Unless South Sudan’s economy is transformed it is difficult to imagine the emergence of long-term peace and shared prosperity. Investing now in productive capacity would allow South Sudan to create a broad and inclusive economy. Trade (if effectively leveraged) will provide access to capital (investment), technology, and know-how. Without peace, sustained and inclusive economic development cannot take root. And without economic development, peace and prosperity rest on unstable foundations. It is important to recognise that peace and economic development are interconnected, and that only by investing in both will long-term prosperity be secured. In the absence of adequate investment in productive capacity South Sudan has found it difficult to exit the cycle of conflict”.

In addition, accession to the EAC may also create a web of positive interactions and interdependency with the Region. This will build trust and make the likelihood of internal and external conflict less likely.

5. Implementation of EAC Commitments and Reforms

It is critical to note that benefits from memberships in the EAC and the EU-EAC EPA may only materialize in full, if the Government of South Sudan will have the necessary technical capabilities and in-depth knowledge as to how to implement them. This is not an easy task. As already mentioned, the process among others will entail the establishment of the following:

EAC Customs Union:

This protocol requires:

Implementation of the Common External Tariff (CET)

  • Implementation of the EAC Customs Management Act (EAC CMA)
  • Harmonization of customs procedures and customs regulations.
  • Enforcement of EAC Rules of Origin
  • Removal of Non-Tariff Barriers (time-bound, legally binding process)
  • Implementation of Single Customs Territory
  • Creation and maintenance of Interconnectivity of Customs
  • Establishment and operation of One-Stop Border Post
  • Establishment and operation of Electronic Tracking System.

EAC Common Market;

This protocol requires:

  • Mutual recognition of professional qualifications;
  • Removal of Barriers on movement of capital
  • Free movement of labour and services
  • Working toward establishment of a Monetary Union by 2024;
  • Harmonization of South Sudan’s laws with the EAC; and
  • Implementation of numerous integration projects in a wide range of areas such as health, education, governance, peace and security.

South Sudan will also have to join, contribute and co-operate with numerous EAC Institutions such as:

  • The East African Court of Justice which has jurisdiction over the Treaty of Establishment of EAC and its fundamental principles of good governance, human rights, democracy, the rule of law, accountability, transparency, social justice etc.
  • The East African Legislative Assembly;
  • The East African Development Bank;
  • Civil Aviation Security and Oversight Agency;
  • Inter- University Council of East Africa;
  • EAC Health Research Commission.

This will require exceptional level of effort. Given the complexity of the EAC reform package the Government’s implementation of EAC Laws, Projects and Programmes shall be done in stages:

Phase 1: Creation and Strengthening of Government Institutions/Structures for EAC Protocols Implementation; Comprehensive Capacity Development Programme for these key structures.

In this stage GRSS shall create relevant structures necessary for the implementation of EAC body of regulation including Protocols, Acts, Regulations and Institutions and Structures. These structures include:

  • South Sudan’s Ministry of EAC Affairs;
  • Relevant Ministries who must assign additional staff as focal points and operating officers for the implementation of EAC Provisions.
  • The South Sudan Customs Services to create a special Coordination Unit for Implementation of the Customs Union Protocol.

In addition, in this phase, the newly created Ministry of EAC Affairs shall spearhead and co-ordinate a National Programme to create capacity for implementation of EAC Provisions and to increase the knowledge and profile of EAC in South Sudan.

Phase 2: Analysis, Planning, Designing and Initiating the implementation of Protocols, Projects and Programmes in quick -win manner.

Detailed Implementation Roadmaps for individual Ministries and Commissions shall be finalized in this stage (more than a dozen of the Implementation Roadmaps have already been developed with support from an EU-Funded Project). The Implementation Roadmaps shall also become a part of the Ministry of EAC Affairs Development Strategy 2017-2022. A key part of the EAC Implementation Strategy for South Sudan shall be the implementation of the EAC – EPA.

Phase 3: Implementation of EAC Protocols, Projects and Programmes

Government Ministries and Commissions in South Sudan commence execution of Implementations Roadmaps in line with the developed Strategy

Concluding, South Sudan’s EAC Accession is a great opportunity for the country. If EAC reforms are implemented well they will have the capacity to contribute positively to peace and stability, economic development and governance. But it is also a challenge as the breadth and complexity of reforms is very large. It is, therefore, critical for South Sudan to receive technical assistance in the difficult process of implementing all EAC and EU-EAC EPA reforms. It is the effective and efficient implementation of these reforms that will create the required socio-political and security stability in the country and on the ground. This in turn will provide the basis for economic investment, leading to production, exchange and wealth creation. Peace and stability will be the final outcome. This is a doable proposition.

The author, AGGREY TISA SABUNI, is a former Minister of Finance and Economic affairs who currently advises president Salva Kiir on economic affairs.


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