The benefits of regional economic integration:a case study of the impact of the EAC on Kenya's trade, banking sector and stock market. 1990-2010
Drusilla, Shisia L
MetadataShow full item record
Regional economic integration is considered to be a solution to current issues facing many African countries as regards to trade. They are expected to encourage trade by providing larger markets, transfer of technological know how and encourage investment. The objective of this study was to establish whether East African Community member states and specifically Kenya have benefited from their membership in this Regional integration arrangement, in terms of trade and its financial instititutions, and what the impediments the country could be facing that could be hampering it from gaining and what could be done to remove these impediments. The study examines the back ground of the East African Community, its formation and the factors that led to its dissolution in 1977. The factors are; firstly relating to economic issues where inequality in gains and lack of an adequate compensation strictures are cited, Secondly administrative constraints where the organizational structure of the community and the attitudes of the leaders at the time affected its decision making process. And lastly, political factors which came about due to the differences in ideologies of the leaders and therefore the member states. The prioritising of national interest over the community's interests and fear of infringement of the member states sovereignty also added to the political differences amongst the member states. The study goes further to examine the intra EAC trade trends after its re establishment in 1999. The study finds that intra EAC trade has increased since the formation of the EAC as compared to its trade before its formation. On the downside however the study finds that the percentage of intra EAC trade to total trade is much lower than that the trade with the rest of the world. It also finds that Kenya's trade share in intra EAC trade is the largest and it has been consistently during the entire period however it has slightly declined toward 2009 to 2010, with the increase in trade of the other member states. Kenya's exports have also been much higher than its imports from the EAC, although its imports have been increasing. The study has shown that this could be attributed to Kenya being the largest economy in the EAC from a comparison of the members states' GDPs. The study has therefore indicated that the RIA is trade creating and has increased trade amongst its member states. The study has also examines the impact that the EAC has had on financial institutions. From the study, it has been seen that since its re launch, both international and local Kenyan banks have expanded within the region due to the increased need for financial services created by the increased trade. The capital markets share has also experienced a boost with Tanzania, Uganda and Rwanda establishing stock exchanges. However, the study indicates that the EAC has had a minimal impact in encouraging cross listing and investments across the region, with only Kenyan companies cross listed in the EAC member stock exchanges and minimal participation by East African Citizens and companies in the NSE. The study finally makes recommendations on harmonisation of trade policies with regards to documentations required for import and export, inspection standards and immigration procedures in order to further encourage and facilitate intra EAC trade. In addition to this, the study recommends more investment in manufacturing industries and infrastructure for Kenya to facilitate trade. Banking supervision policy harmonisation with possibilities of a issuance of East African Banking licences and even business licences is also recommended to encourage expansion of Banks across the region.