Non Tariff Barriers Killing Business

Published on 16th August 2005

Non-Tariff Barriers (NTBs) do exist and are affecting business operations in the region in a significant way, the Business Climate Index (BCI) Survey for East Africa 2005 says.

The existence of NTB was widely acknowledged by the business enterprises in the region as well as within the government departments, the survey by the East African Business Council (EABC) released in May in Kampala noted.

Mr. Busso van Alvensleben, an advisor of EABC presenting the key findings revealed: \"Overall, both businesses and governments in the East African states consider the administration of duty and taxes a major obstacle followed closely by corruption. The third ranked NTB is customs administration, this is followed by transiting and police checks.\"

“There is not much variation between countries. However, in Kenya, the government considers customs as only a moderate obstacle while the business sector perceives this as a major barrier. In Uganda, the impact of barriers relating to transiting stood out compared to the other two countries, possibly reflecting its land locked position,” Van Alvensleben said.

With respect to trans-border crossing, survey respondents reported that transaction procedures on average take between two to three hours. The first comprehensive survey on the conditions of doing business in East Africa shows that business registration and licensing is normally completed within a week. Uganda experiences a relatively higher level of delays considering that one quarter of the enterprises indicated it takes more than two weeks to complete the registration and licensing formalities.

In regard to roadblocks, weighbridges and standards, the majority of businesses in East Africa do not regard these three sets of NTBs as constituting serious obstacles. In relative terms, Kenyan businesses appear to be more affected by these NTBs than the other two east African states, especially in respect to police roadblocks and weighbridges.

Perceptions by the business sector about how the business climate had improved in the past year, as measured by the optimism index, were low in Kenya and reasonably high in Tanzania and Uganda. The improvement index in Kenya was found to be largely dampened by concerns over security, infrastructure and corruption. The findings indicate positive perceptions about the future.

Having identified the existence of NTBs, the study suggests that what needs to be done is to revisit the rationale for their existence and find ways of removing them without foregoing the benefits for which they were designed, where such benefits can be shown to exist. It recommends that a mechanism for monitoring and removal of NTBs be established to facilitate collaboration between the governments and the business community in removing the obstacles and improving the business climate.

The objectives of the BCI were to provide evidence on non-tariff barriers affecting day-to-day business, monitor the business climate in East Africa on a continuous basis, create a powerful public relations instrument for the benefit of EABC, and engage corporations, the public sector and the media into a continuous dialogue on business conditions in East Africa. It was founded by GTZ under the Support of Regional Business Organizations in East Africa (SRBO-EA) project. It covered 584 companies operating in the East Africa region of which 195 were from Kenya, 140 from Tanzania and 249 from Uganda plus 62 government ministries, departments and agencies. The overall response rate was 78 per cent (business response being 77 per cent and government 82 per cent). 84 per cent of the respondents were at the levels of senior and top management. The respondents in the manufacturing sector accounted for 63 per cent, services 14 per cent, trading 13 per cent, agriculture two per cent, construction 1 per cent and others 7 per cent.

The field surveys were conducted by the Uganda Manufacturers Association (UMA) and the Private Sector Foundation of Uganda (PSFU), Kenya Association of Manufacturers (KAM) and Confederation of Tanzania Industries (CTI) in their respective countries.

The interstate trade shows that overall 53 per cent of East African enterprises export and 39 per cent have operations in the other East African states. Exports account for 24 per cent of their total output, and 40 per cent of these exports go to the other East African states.

The former chairman of EABC, Mr. Hirji Shah said that NTBs include barriers, which are not based on tariffs per se but still substantially impede business transactions. Such barriers relate to customs, immigration, administrative procedures and regulations, licenses and any other obstacles. \"A substantial number of NTBs, which distort intra-regional trade, remains to be eliminated. The incidence of corruption is still high at the borders crossing, the licensing procedures are still lengthy and bureaucratic, the police checks are still frequent and cases of harassments are increasingly being reported yet the border crossing are still being levied. These are just but a handful of the barriers,\" Shah observed.

Mr. Shah is optimistic that these obstacles will be over with time and cooperation. Launching the report, the minister of tourism, trade and industry, Daudi Migereko noted that NTBs are costly and serious impediments to doing business. Some studies have indicated that NTBs constitute up to 40 per cent of costs of business. Migereko indicated that, most of the NTBs are caused by the action or inaction of Governments at the behest of the private sector hence the private sector has to work hand in hand with the Governments to remove or at least reduce the NTBs.


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