By:
Mohamed Abdurrahman Mohamed
Monday July 25, 2022
The Opportunities and Challenges. Part (1)
Since March 2012, the
Federal Republic of Somalia has been seeking membership in the East African
Community (EAC) bloc. The Transitional Federal Government of Somalia (TFG) made
the first official request for accession. However, in December 2012, the summit
- the bloc’s highest body - considered the application and asked the council of
ministers to conduct a verification exercise, but admission was delayed in
2015. Another attempt was made in 2019, and again it was declined during the 21st
Ordinary Summit of the EAC Heads of State in February 2021, which noted that the
verification process for Somalia’s admission to the EAC had not been
undertaken. The repeated delay can be attributed to several factors, including
political, security, and economic reasons, as well as a lack of backing and
support among the bloc’s member states. In particular, the latest decline was
primarily political.
Regardless, the new
administration of the FGS has shown determination towards accession to the
bloc. In the last week, the president of Somalia, H.E. HSM, attended the 22nd
ordinary summit of EAC heads of state as a guest and expressed Somalia’s
willingness to be part of the community, and the membership application was
submitted for the third time. Though currently, observers believe Somalia has
the backing of one of its neighbors, which is a founding member of the regional
bloc, and thus the expectation of acceptance is high since the recently
concluded summit directed the council of ministers to expeditiously fast-track
the verification exercise for the admission of Somalia and report the findings
to the 23rd meeting of the summit.
The EAC is one of the
most successful regional integrations on the African continent. Despite the
shortcomings, the community has made tremendous progress towards economic integration
in the region, which is a prelude to the African common market. The economic
performance of the partner states is evidence of that. Before the emergence of
COVID-19, they experienced a steady growth rate of over 6% per annum from 2015
to 2019, except for South Sudan. Similarly, the bloc has already established a
customs union with most goods and services traded duty-free between member
states and agreed on common external tariffs with third countries. Further, the
22nd summit reaffirmed the commitment of member states to implement
the EAC Common Market Protocol - which was approved back in 2010 - to
facilitate the free movement of the labour force, goods, services, and capital
in the region. Presently, some progress has been achieved in this regard,
despite existing constraints. Nationals of member states, for instance, do not
require visas to travel to the other EAC partner states, and the East Africa
One-Network Area and inter-operator roaming agreements enable residents to use
their local mobile phone numbers in other member countries, even sometimes without
incurring roaming charges. In addition, the adaptation of the EAC e-passport is ongoing, with
Uganda becoming the first nation to fully shift to the new passport.
Principally,
Somalia’s admission to the EAC bloc can bring a lot of opportunities to the
country and vice versa. It means, inter alia, businesses have access to
regional and international markets, including COMESA, AfCFTA, WTO, and perhaps
the EU and US markets in the near future since the EAC negotiates with these
trade partners on behalf of all member countries. On top of that, Somalia will
gain new opportunities for institutional improvements, structural
transformation, technological upgrading, and human capital development. But,
these significant benefits come with a price because regional integration
provides an opportunity for states with similar levels of development to trade
and derive mutual benefits from the gains of trade. However, if a small country
joins a regional bloc comprising relatively established and industrialized
countries without having proper policies and plans to safeguard the local market,
inevitably that nation will suffer from large amounts of products imported from
partner states. Therefore, Somalia needs to assess both the potential opportunities
and challenges of the membership in EAC to reap the maximum benefits from the
integration upon the accession to the bloc.
In this context,
mutual interest is one of the decisive factors for admission into this regional
bloc. Potential members should have something to contribute to the community,
hence those who bring significant potential - regardless of their political and
security situations - are highly welcomed and most likely to be accepted by all
partner states, as in the case of both South Sudan, for its vast oil and gas
resources and the potential for infrastructure connectivity, and the Democratic
Republic of Congo (DRC), which comes with high-value minerals (estimated to be
worth USD 24 trillion), vast arable land, water resources, and a large
population.
Similarly, Somalia is
endowed with enormous natural resource wealth, a strategic location, and some
of Africa’s most entrepreneurial people. However, despite existing challenges,
negative stereotypes about the country are rife and pervasive, and sometimes hamper
development opportunities for Somalia, i.e. delays in admission to regional and
international multilateral agreements. This issue can be tackled by changing
the narrative and adjusting the prevailing image of the country through
marketing “the new Somalia” brand among nations to ensure that a perspective
shift in the international and regional perception of Somalia is
achieved.
Generally, regional
integration has both advantages and disadvantages. It boosts trade and
investment, generates economies of scale, enhances competitiveness, promotes
peace and security, and improves the bargaining power of low-income countries
in bilateral or multilateral negotiations. This, in turn, motivates the
business community in the member states to trade and invest within the bloc because
of the lack of tariffs or regulations and that will generate enormous
employment opportunities and see businesses thrive across the region. In
contrast, member states will encounter some loss of national sovereignty and
tariff revenues besides trade diversion. Most importantly though, is the
concern that if the economy of the potential partner state is not sufficiently
developed to compete with other member states, that country could become a
“dumping ground”. Hence, many questions have been raised about how the benefits
of economic integration may be distributed and the extent to which low-income
countries can capture development gains, whilst many economists believe that
relatively well-developed economies in the EAC bloc, for example, are the
biggest beneficiaries of the integration, at the expense of others within the
community, because they sell mainly industrial goods.
Nevertheless,
business leaders are far more positive than economists about the benefits of
EAC integration. The customs union is a positive step towards building a common
market, as well as the wider integration with COMESA is an added advantage.
Thus, big businesses conceive long-term benefits in a progressively expanding
East African regional market. It is against this backdrop that Somalia should
devise evidence-based policies that inform decisions regarding regional
integration with EAC to harness the opportunities that come with the accession
of this enormous market and capture the highest economic gains for the benefit
of all its citizens. This can be achieved through diagnostic assessments and
evaluations to identify the aggregate welfare benefits or losses that Somalia
gets from the membership of this regional integration.
The article aims to
explore the role of regional integration on the economic development of partner
states and assess the potential gains and losses that Somalia can attain from
being a part of the EAC bloc. The piece concludes with evidence-based
recommendations to assist policymakers in setting Somalia’s strategic
priorities towards the membership of EAC and how the country can benefit from
the inter-trade with other member states by addressing both the challenges and
opportunities that lie ahead.
Mohamed
Abdurrahman Mohamed, Ph.D. candidate & Economic Analyst
[email protected]