The East African Business Council is cautioning the bloc against allowing export processing zone investors to fully access the regional market, saying such a move would be against the Customs Union Protocol.

Kenya has asked the East African Community to remove restrictions on investors in the EPZs so that they can sell 100 per cent of their products in the regional market.

Currently, the EPZ producers are allowed to sell 20 per cent of their total annual production in the EAC, which Nairobi says has compelled some investors to withdraw their multimillion-dollar investments.

But business people are cautioning against this move.

“The partner states should discuss the issue and come up with an EAC administrative mechanism that will control market distortion, otherwise it will be seen as interfering with the EAC market,” said EABC membership development manager Lilian Awinja.

Articles 25 and 29 of the EAC Customs Union Protocol provide that investors in EPZs get total duty relief on imported materials used directly in the production of goods for export outside the region.

The idea is to accelerate development, promote and facilitate export-oriented investments in the region, and produce competitive export goods to attract foreign direct investment.

The regime provides that the goods benefiting from export promotion schemes should primarily be for export and in case they are sold in the Customs territory, they should attract full duties under the EAC common external tariff (CET).

The sale of goods in the Customs territory should be authorised only by a competent authority and is limited to only 20 per cent of total annual production.

But Kenya’s recommendations to the Sectoral Council on Trade, Industry, Finance and Investment was to consider enhancing domestic market access thresholds for EPZ firms in the EAC from the current 20 per cent to 100 per cent of annual production. It said that such products would be subject to all taxes, duties and levies as per CET plus a surcharge.

Kenya said that due to the 20 per cent sales limit in the EAC market, between 2010 and 2012, 26 EPZ firms withdrew their investments from the country, adding that others are considering leaving.

Kenya stands to lose $449 million’s worth of investments, $112 million’s worth of sales in the EAC markets, $164 million in terms of domestic expenditure (cost of sourcing of raw materials and services) and 14,330 jobs.

But Burundi, Rwanda, Uganda and Tanzania said that the EPZs, by their nature, should serve the export drive as provided for in the Customs Union Protocol.

The protocol separates EPZ and Special Economic Zone (SEZ) sche

Source: The East African

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