NAIROBI – A trading bloc of East African economies are making it easier for businesses to work, but performance among the five varies widely and reforms are needed to boost trade and investment, the World Bank said on Thursday.
The East African Community (EAC) ranks on average 117th of 185 economies in the world, where the No. 1 slot is considered the easiest place to set up and run a business, the report by the bank and its International Finance Corporation unit said.
But the 2012 rankings mask disparities among the five. Rwanda, rising swiftly up the table as it has rebuilt from the 1994 genocide, was ranked 52. Burundi has improved but is still at 159 and Kenya, the biggest economy of the five, is ranked 121.
East African nations have been growing fast in recent years, with Rwanda one of the strongest performers. Its economy expanded about 8 percent in 2012. Kenya's economy grew by an estimated 4.5 to 5 percent last year.
With a combined gross domestic product of $84.7 billion, the bloc has drawn investors to manufacturing, telecoms and energy sectors following oil and gas finds in Uganda, Kenya, Uganda and Tanzania that could fuel a hydrocarbons boom.
But executives and entrepreneurs across the region grumble about obstacles hindering their work, including bureaucratic hurdles related to exporting or importing goods and lengthy procedures that stifle the creation of new firms.
"Improving the investment climate in the EAC is therefore an essential ingredient for successful integration – the foundation for expanding business activity, boosting competitiveness, spurring growth and, ultimately, supporting human development," according to the report.
The region's leaders, including newly elected Kenyan President Uhuru Kenyatta, have pledged to work further towards improving trade and other ties between the group. And the report highlights progress in a range of areas supporting businesses.
Regulatory changes across the community have already reduced the average time to start a business by 31 percent between 2005 and 2012 by cutting the steps required, the report said.
In Rwanda, a new business can be set up in just three days, although that extends to 32 and 33 days in Kenya and Uganda, respectively. In Tanzania it is 26 days, while a new one-stop shop set up in Burundi has cut the time there to 8 days from 13.
"In the East African Community (EAC), Rwanda continues to make it easiest to start a business – and it is the only low- income economy ranking among the top 10 globally on the ease of starting a business," the report said.
Though weak in terms of the global average, the five east African economies have stronger legal institutions for enforcing contracts, protecting investors and resolving insolvency on average than elsewhere in Sub-Saharan Africa, the report said.
The report details a range of areas affecting small and medium-sized businesses including starting up, obtaining construction permits, securing electricity, registering property, obtaining credit, paying taxes and cross-border trade.
"More and broader regulatory reforms, however, will be required for the EAC to significantly increase its share of trade and investment," the report said.
It said this included strengthening cooperation between business regulators and adopting common and improved standards for laws and regulation. (Reuters)
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