Somalia’s Entry into the EAC Should Boost Tanzania’s Trade Relation

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After almost a decade of negotiations, The Federal Republic of Somalia was finally declared an official East African Community (EAC) member on 4th March 2024 at the EAC headquarters in Arusha, Tanzania. The new member is joining the community as the bloc’s 8th partner State Somalia’s recent ratification of the Treaty of Accession signed between Somalia’s President Hassan Sheikh Mohamud and the EAC’s Secretary General, Dr Peter Mathuki to join the EAC marks a significant milestone, not just for the nation itself, but for the entire EAC.

The decision for Somalia integration holds immense potential to transform cross-border trade within the region, fostering economic growth and shared prosperity. Besides, the struggle for Somalia to acquire membership is dealing with terrorism, sabotage and violent extremism from armed groups such as Al-Shabab that have made her suffer for so long with their efforts being unable to silence the guns.

The EAC possesses a combined market of over 300 million people and a gross domestic product (GDP) exceeding $300 billion, which is significant for promoting intra-region trade. Somalia’s entrance adds 17 million people to the market and a strategic coastline of over 1,800 miles, accessing new trade routes to the landlocked countries and facilitating access to the Saudi Arabian Peninsula, a potential market for trading.

A World Bank Study in 2018 estimated that a genuine and deeper trade integration within the EAC could increase intra-regional trade by up to 80%, highlighting the immense potential for economic growth.

Also, read How Tshisekedi Victory in DRC Will Make or Break EAC.

Unlocking Somalia’s Strategic Advantage

Somalia’s long coastline presents a unique opportunity for a country to become a vital trade and logistics hub, connecting East Africa to the Middle East and beyond. Investments in port infrastructure and streamlined customs procedures can make Somalia a gateway for the efficient movement of goods.

This could significantly reduce transportation costs for EAC members, making them more competitive in the global market. Meanwhile, Somalia possesses vast untapped resources, including minerals, livestock, petroleum and fertile agricultural land. Joining the EAC provides Somali trade with preferential access to a wider market, allowing them to scale production and attract foreign investment.

This will create jobs, boost imports and exports, and generate foreign revenue, ultimately contributing to the country’s development and promoting regional trade integration.

Tanzania Can Boost Trade With Somalia

According to EOC World, during 2022, Tanzania had a large net trade with Somalia in the exports of Chemical Products ($565k), Foodstuffs ($307k), and Mineral Products ($95.3k), while Somalia had a large net trade with Tanzania in the exports of Animal Products ($27.2k), Foodstuffs ($1.68k), and Textiles ($1.13k).

This year, bilateral trade by-products between Tanzania and Somalia resulted in Tanzania exporting $1.07M to Somalia. The main products exported from Tanzania to Somalia were Beauty Products ($561k), Fruit Juice ($200k), and Flavored Water ($107k). During the last 25 years, Tanzania’s exports to Somalia have increased at an annualized rate of 13.5%, from $44.9k in 1997 to $1.07M in 2022.

Somalia exported $30k to Tanzania. The main products exported from Somalia to Tanzania were Crustaceans ($27.2k), Processed Crustaceans ($1.68k), and Scarves ($1.13k). During the last 27 years, Somalia’s exports to Tanzania have decreased at an annualized rate of 2.23%, from $52.8k in 1995 to $30k in 2022.

Data from The Observatory of Economic Complexity (OEC) World

This indicates increasing demand for Tanzanian products in Somalia and presents an opportunity for further expansion. This suggests a need for efforts to revitalize trade relations and stimulate Somali exports to Tanzania.

Streamlining trade procedures and reducing bureaucratic hurdles can enhance the ease of doing business between Tanzania and Somalia. Simplified customs processes and efficient logistics infrastructure can lower transaction costs and encourage more trade.

Tanzania can support Somali exporters through trade promotion initiatives, capacity-building programs, and market access facilitation. Assisting Somali businesses in meeting quality standards and accessing Tanzanian markets can stimulate export growth. Strengthening diplomatic ties and bilateral cooperation frameworks can create an enabling environment for trade expansion.

Regular dialogues between governments, trade delegations, and business forums can foster mutual understanding and collaboration in trade-related matters.

Challenges and Considerations

However, integrating Somalia into the EAC’s established trade regime comes with challenges. Somalia’s infrastructure development lags behind that of the preceding EAC members. Reliable transportation networks, power grids and communication systems are crucial for smooth cross-border trade.

The EAC and its member states should prioritize infrastructure investments in Somalia to facilitate the seamless movement of goods and services. Moreover, Somalia’s past struggles with piracy and maritime insecurity pose a risk to regional trade in the aspects of peace and security. The EAC and international partners should collaborate with the Somali government to enhance maritime security measures and ensure safe passage for trade vessels.

Policy Recommendations for a Successful Integration

In addition to the solutions to the challenges facing Somalia, the following policy recommendations supplement to ensure a smooth and successful integration of Somalia into the EAC cooperation:

The EAC and its development partners should prioritize investments in infrastructure projects in Somalia, and in this event, Tanzania can chip in to look for differential investment potentials. The region should specifically invest in port development, road networks and digital connectivity.

The EAC can integrate the Program for Infrastructure Development in Africa (PIDA) to extend Somalia’s relevant infrastructure and facilitate the efficient movement of goods and services within the region.

Harmonization of trade regulation between Somalia and the EAC will bring mutual benefits. Streamlining customs procedures, simplifying trade documentation, enhancing standards compliance and ensuring regulatory coherence across all EAC member states will reduce transaction costs and maximize trade flows.

Somalia should immediately create the constitutionally mandated Judicial Service Commission necessary for making federal courts functionally independent as required by the treaty. The independent commission will be responsible for implementing the treaty to ensure smooth operation with other states in the region.

Capacity building and technical assistance to the newcomer, Somalia, will further the trade to profit margins: The EAC secretariat and its member states should offer technical assistance and capacity-building programs to Somalia businessmen and government officials to familiarize them with EAC trade rules, dispute settlement mechanisms, and best practices in international trade and raise their performance in regional trade.

Addressing non-tariff barriers such as lengthy bureaucratic procedures and sanitary measures significantly impeding trade. The EAC should work hand-in-hand with Somalia to identify and address these barriers to facilitate smooth trade flows and make Somalia secure a prolonged period of implementation of the region’s customs union like other member states.

Conclusively, Somalia’s integration into the EAC presents an extraordinary opportunity for regional economic growth, diversification and shared prosperity in the journey of regional economic development. However, translating this potential into reality requires an inclusive strategic approach.

By addressing security concerns, investing in infrastructure development, executing sound trade policies and addressing non-tariff barriers, the EAC can ensure profitable cross-border trade and unlock the full potential of regional integration. Somalia’s entry should be viewed not as an endpoint but as a new beginning in the region’s journey towards a more prosperous and interconnected future.

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