From Africa Recovery, Vol.12#1 (August 1998), page 37

Business moves more freely in COMESA

As road transit regimes are liberalized and harmonized

By Mildred Mulenga

Since transport costs are a major trade barrier and erode the competitive edge of many African countries, the Common Market for Eastern and Southern Africa (COMESA) is seeking to lower them by liberalizing and harmonizing transport regimes. This process also aims to reduce various bottlenecks.

COMESA -- expected to establish a free trade area by the year 2000 and a customs union by 2004 -- has made substantial progress in simplifying, modernizing and harmonizing customs and transit procedures, thus facilitating and improving transport and trade. Business people and road haulers are now operating more freely. This has helped to bring down transport costs and make headway towards a free trade area.

While other factors, such as the reduction of trade tariffs and customs duties have contributed to an increase in intra-COMESA and third-party trade, the harmonized transit regimes also have played a crucial role, enhancing profits and economic growth among the 20 member countries. Trade among COMESA countries was worth $2.7 bn in 1997, compared to $834 mn 12 years ago. COMESA's annual growth of trade with third parties averaged 7.1 per cent and economic growth reached 4.5 per cent in 1997, the highest recorded over the last 10 years.

The harmonization of the transit regimes, however, so far has not worked perfectly. This was highlighted last year when Zambian Vice-President Godfrey Miyanda, while opening a COMESA meeting in Lusaka where it is headquartered, made a familiar appeal: "There is need for all member states to implement decisions on these issues. There should be no defaulters."

A number of states have had difficulties implementing some of the COMESA programmes. However, efforts have been made to create efficient and harmonized transport and communications regimes. COMESA Assistant Secretary-General for Programmes Sindiso Ngwenya emphasizes that harmonization is essential for the creation of a single and liberalized market. "A fully free trade area and a customs union entails the harmonization of the socio-economic and technical regulations on transport and communication."

So far, the programme has focused on road transport. For although COMESA has a network of 28,510 km of railway lines, up to 80 per cent of the goods in COMESA are transported by road. The countries are linked to one another through a road network consisting of approximately 561,000 km of classified roads.

During the past 12 years, these countries have developed comprehensive transit regimes designed to facilitate the inter-state movements of goods and passengers. Mr. Ngwenya says the returns derived from the harmonized transit regimes have reduced transport costs for COMESA businessmen and road haulers by an average of 20 per cent.

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BOX 1:

 Steps toward a uniform system

COMESA has instituted several measures to simplify and liberalize trade in the Common Market. Some of the more far-reaching measures involving transport regimes include:

Uniform rates for road transit charges. Prior to the introduction of uniform road transit charges in July 1991, road haulers were subjected to a multiplicity of road charges and licenses. The uniform rates have introduced stability and predictability in transport costs and resulted in lower road user charges.

Yellow Card. This is a compulsory motor third-party liability insurance scheme. It facilitates smooth movement of motor vehicles in the region, encourages freer movement of people and goods, promotes the development of trade and tourism between member states, and establishes a common system for the settlement of claims arising from inter-state motor vehicle accidents. The Yellow Card is less expensive than third-party motor insurance cover purchased at borders. For example, a Yellow Card for a truck between Harare and Nairobi costs about $70 per year. In the absence of the card, insurance would cost $350.

COMESA carrier license. This was introduced in 1992 to replace road service permits required from haulers operating across borders. Road haulers have benefited from the introduction of the license because this has resulted in the liberalization and deregulation of the regional trucking industry. The liberalization has resulted in competitive freight rates.

Harmonized axle load limits. This facilitates uniform axle load enforcement and exchange of information on violators of axle load limits.

COMESA customs document. Introduced in September 1996, this has replaced 13 different documents. It reduces documentation costs by an estimated 25 per cent and reduces delays at border crossings. In addition, it makes it difficult to fake entries because it is so much easier to verify.

COMESA customs bond guarantee scheme. The scheme, introduced in October 1997, eliminates the avoidable administrative and financial costs that are associated with the current practice of nationally executed customs bonds for transit traffic. The scheme is intended to produce significant transport savings and contribute to trade efficiency by eliminating the current practice of customs bond guarantees executed in each transit country. Approximately $1.2 bn belonging to clearing and forwarding agents and transport operators is tied up in financial institutions for customs bond guarantees. The scheme would also result in quicker clearance of vehicles.

Advance Cargo Information System (ACIS). This management information system enhances performance, communications and exchange of information between transport operators and shippers on one hand and between modes of transport on the other hand. It has improved the passage of goods, port and road transit operations.

ASYCUDA-EUROTRACE. This is a computerized customs management and trade statistics system, introduced in 1993. It reduces the time taken to clear commercial consignments through customs -- in the past a major constraint to international trade -- and facilitates responses to specialized statistical queries.

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