By: John Juac, Windsor, CANADA, APR/11/2016, SSN;
Over the past five years, South Sudan has made considerable efforts to participate in the global economy by applying for membership to strategic international and regional bodies, and some of those efforts have paid off. The new nation has now been admitted into the East African Community (EAC), a regional economic bloc consisting of Kenya, Uganda, Tanzania, Rwanda and Burundi, increasing the membership of the common market to six, with a population of 162 million people.
The recent 17th Ordinary EAC Heads of State Summit in Tanzanian capital, Arusha, resolved to admit South Sudan into the regional trading bloc, even though its domestic industries are still in embryonic stages of development. Becoming a member of a regional trading bloc portends many benefits.
Latest Developments: South Sudan will Thursday, April, 14/2016, officially become the sixth member of the East African Community (EAC) when it signs treaties to join the regional bloc. President Kiir of South Sudan and EAC chairman, President Mangufuli of Tanzania will sign the accession treaty in Dar es Salaam.
**The signing will set in motion South Sudan’s assimilation into the regional bloc that is currently at a common market stage.
**In line with the treaty, the country will be required to immediately open up its borders for exchange of goods as well as labour and capital.
**The formal entry of South Sudan is a boon to Kenyan firms such as banks, insurers, manufacturers and airlines. (DAILY NATION, NAIROBI)
As some have argued, Africa’s newest nation has made the application against a backdrop of envisaged economic benefits from trade and commerce that it hopes to gain from having access to a much larger market. It also expects to take advantage of the community’s existing infrastructure: airports, railways, land roads and seaports to improve its access to regional and global markets in order to increase trade.
In establishing the EAC, member countries sought to provide themselves with a structure that would enhance their ability to trade with each other, as well as participate more effectively in the global economy.
According to the EAC secretariat on its website, the primary objective of the EAC is to develop a signal market in East Africa anchored on free internal and external trade. This means that South Sudan’s eventual integration into the EAC will benefit not only South Sudan, but also the other members of the community.
In fact, South Sudan is endowed with a significant amount of natural resources, which include oil, minerals, water, forests, rich agricultural lands, and the Juba ruling elite has also indicated that it is interested in establishing the type of large-scale commercial farming that could turn the embattled nation into the breadbasket of the region.
Success of this ambitious project could help reduce the region’s dependence on food imports and significantly improve food security. Nevertheless, while integration looks appealing, it also comes with enormous costs.
For one thing, South Sudan is likely to lose revenue from tariffs imposed on imports from the EAC member-countries and its domestic producers would face significant competition from the EAC’s more experienced exporters. Most South Sudanese have expressed concerns about potential lost jobs, income, business and industry to the more developed nations of the EAC.
The literacy rate is only 27 per cent in South Sudan, compared to Kenya, Uganda and Tanzania at 87 per cent, 73 per cent and 72 per cent respectively. Furthermore, the EAC intends to eventually adopt a signal currency, harmonize fiscal and monetary policies, and ultimately evolve into a political federation.
What this implies for South Sudan is a loss of autonomy in such areas as the design and implementation of fiscal and monetary policies, as well as the ability to carry out other duties independently from all the other EAC member-countries.
The state officials have shrugged off all these concerns as silly. Joining the EAC has been a long-term plan for them, but South Sudan has not prepared itself to participate gainfully in the regional trading bloc. Unless the country provides itself with an internal peaceful environment that will facilitate trade, it is not likely to benefit from membership of the EAC.
In other words, the SPLM leadership has the challenge of implementing macroeconomic policies that support economic growth and creation of wealth. The macroeconomic conditions on the ground are perturbing path. With the shrinkage of the prices of oil exports in the world market, which accounts for as much 98 per cent of South Sudan’s budget revenue, the economic situation has worsen. The national currency has been depreciated, leading to expensive imports and spilling to high levels of domestic inflation.
The outcome is increased poverty levels and the daily struggle of the governments to maintain spending on critical areas such as the delivery of basic human services; the state of the South Sudanese economy depresses one.
In final analysis, the integration of South Sudan into a larger, more developed and complex market indeed poses a serious challenge to the country that is currently building an economy devastated by years of brutal civil war. The harmonization of fiscal, monetary and welfare policies could make it very difficult for South Sudan to undertake the types of policies target vulnerable South Sudanese citizens. Harmonization compels members to surrender authority over certain public policies.
Given that South Sudan is the poorest country in the community, membership may deprive it of the ability to solve problems unique to its economy. For example, the type of fiscal discipline required to achieve macroeconomic convergence in the EAC could be detrimental to efforts to strengthen South Sudan’s fragile economy. Since South Sudan is the weakest economy in an expanded EAC, it should be necessary for President Kiir and his followers to seek assistance from the community.
Otherwise, South Sudan must withdraw until a time when it is economically strong enough to become a member. The less developed South Sudan does not have chances against the more developed partner states in the regional trade-based on competitive advantage rather than a cooperative relationship. South Sudan must protect its vulnerable population, as well as develop domestic productive capacity in order to enhance the country’s ability to compete effectively.
Self-reliance is development from the inside-out, starting with needs at home. It is an approach which helps to minimize exchange with the outside but does not exclude it. Since few communities in South Sudan will ever achieve complete self-sufficiency, there will always be a need for some degree of trade with other communities in other countries. This is where collective self-reliance comes into play.
Collective self-reliance is a trading strategy which sets guidelines for what, when and how exchange can be arranged to avoid exploitation and unequal advantage of one partner over another. It is a strategy of exchange among equal partners for the purpose of building collective strength and wealth among a bloc of cooperating countries. It is now known and coming to be widely accepted that trade between unequal partners tend to benefit the stronger, bigger partner over the smaller, weaker one.
While in the short run a trade deal may seem like a good exchange for both partners, countless examples have shown that over time trade between rich and poor has led to dependency and greater impoverishment of the poorer party. It is what is known as the center-periphery dilemma, meaning that the more developed countries end up with a long-term advantage in the trade deal. For this reason, South Sudan needs to learn how to process its own materials to meet the needs of its people.
Where trade is necessary, it should be arranged to benefit all parties in the spirit of collective self-reliance. Collective self-reliance occurs through making trading alliances with parties at about the same level of development. The trade between the more developed and the less developed countries creates dependency of one upon the other, but the trade between equals for items which cannot be produced locally can help build collective strength through interdependence as opposed to dependence.
That was why the nations of the EAC, victims of global trade disparity, worked together to set up a trading bloc among themselves as a step toward collective self-reliance. The EAC has made significant progress toward integration during the last 12 years of it existence, and now a nation like South Sudan has joined the regional integration project when it is not at the same levels of development with those nations in the EAC. South Sudan stands not to benefit significantly from membership in the EAC and therefore must back off it
John Juac Deng