Transport Market Liberalisation in the Context of the Tripartite Free Trade Area

1. Transport Market Liberalisation in the Context of the Tripartite Free Trade Area Presented at the SADC Transport Sector Forum 11-13 September 2012 Durban, South Africa

2. Presentation coverage • Introduction • Brief on Experiences of RECs on Transport Market Lib • Tripartite FTA Focus on Transport Market Lib • Challenges likely to be encountered • Conclusions

3. Introduction The Tripartite Summit of October 2008, held in Kampala noted the critical relationship between trade and transport in accelerating economic development and regional integration. The Summit decided that the three RECs, COMESA, EAC and SADC should work together on infrastructure and services development as they anchor trade in the region. This covers road, rail, air, marine and inland water transport. It also emphasised the need to improve trade-related and transit transport facilitation measures especially along the various corridors to reduce time taken and associated costs to move goods across borders.

4. Introduction The transport sector is one of the key drivers of economic growth and regional integration. We cannot talk of trade without making reference to transport as the goods have to be transported from one place to the other or to get to the market. The availability of different modes of transport reflect themselves in the costs associated with transport. We cannot talk of reducing costs of doing business without improving the efficiency and effectiveness of the transport systems. Land locked countries in the region experience the highest cost of transportation for their exports and imports such that for some the transport cost when imputed into the cost of the product accounts for up to 40% of the cost of the product. The need to reduce costs of doing business as they relate to transport trade facilitation becomes central to WTO trade facilitation discussions.

5. Introduction Trade Facilitation initiatives hold out the promise of increasing trade and efficiency by reducing onerous trade-related costs. Transport related trade facilitation measures play a role in liberalising transport services and contribute to cost reduction. These costs include regulatory compliance costs, charges for trade related services, procedural delays, lack of predictability, and lost business opportunities. Trade facilitation measures would particularly benefit the region, where the inefficiencies are sometimes more costly to industries than are tariff barriers. The Tripartite response is not just dealing with the transport sector as part of services liberalisation but a critical component of overall trade cost saving measures for business. As we are all aware trade in service has been treated as part of the built-in agenda of the Tripartite Free Trade Area negotiations.

6. Brief on Experiences of RECs on Transport Market Lib Each of the three RECs COMESA, EAC and SADC have adopted different approaches to dealing with market liberalisation of the transport sector covering the different modes of transportation. An efficient transport sector is an integral element for development and facilitation of trade. Of importance to note is the fact that the share of cargo carried by rail in the Tripartite region has declined drastically in the last 10 or more years resulting in operating losses for railway companies. In COMESA, a lot of work has been undertaken aimed at improving the transportation system in the region and in so doing enhance regional trade. A Regional Transport Policy and Strategy was adopted by Ministers of Infrastructure in July 2011which is meant to support Member States put in place credible regulations and regulatory institutions that promote cost efficiency and effectiveness and regional integration through establishing a competitive environment for transport operators.

7. Brief on Experiences of RECs on Transport Market Lib: COMESA To facilitate trade and transit transport, and reduce the cost of doing business, COMESA has developed trade and transport facilitation instruments which seek to address constraints associated with lack of policy coherency, regulatory, administrative and procedural issues in and among member states. In doing so COMESA has developed instruments in each of the transport modes, namely road, railroad, maritime and inland water transport and air. While COMESA supports the raising for resources for road development and maintenance, it has developed instruments for facilitating trade such as: vehicle axel load limits, third party yellow card insurance system to facilitate cross-border truckers, etc.

8. Brief on Experiences of RECs on Transport Market Lib: COMESA Most Governments have faced major operational challenges on railways systems with mounting losses. To cut down on losses, many countries have signed concession agreements with single operators where the concessionaire is the sole operator. Experience so far in most concessions has been disappointing as railway operations have significantly deteriorated in overall efficiency and performance compared to the period prior to the concession. There are discussion on the revitalisation of the rail transport systems. The air transport liberalization programme in the COMESA is based on the Yamoussoukro Decision (YD) adopted by the African Union (AU) in 1999 and ratified in 2000. This is being implemented through Regulations. There is Tripartite activity in place. Substantial work is underway to improve maritime transport by focusing on ports efficiency and also improving inland water transport system. The liberalisation of transport services is also under negotiation as COMESA is undertaking services negotiations and transport is one of the priority sectors given its intrinsic linkage to trade and trade development.

9. Brief on Experiences of RECs on Transport Market Lib:EAC • The EAC Common Market Protocol in article 5, commits to “remove measures that restrict movement of services and service suppliers, harmonise standards to ensure acceptability of services traded” • In article 38 it furthers provides that “The Partner States undertake to evolve coordinated and harmonized transport policies to provide for adequate, reliable, safe and internationally competitive transport infrastructure modes and services for the development and consolidation of the Common Market.” • EAC adopts regulations to facilitate implementation of service liberalisation in: railway transport; maritime transport and port operations; pipeline transport; air transport; non – motorized transport; and multimodal transport and logistics. • EAC has also adopted the corridor approach in dealing with transport services liberalisation. • It should be noted that the same challenges affecting other RECs are experienced in EAC

10. Brief on Experiences of RECs on Transport Market Lib: SADC For SADC more details to be given under the study but just to point out the transport, communications and meteorology protocol provides for liberalisation of the various modes of transport: road, rail, air and ports. It also establishes regulatory institutions. The protocol on Tourism provides for movement of tourists n the region.

11. Tripartite FTA Focus on Transport Market Lib • The Tripartite level transport market liberalisation will build on the gains already made at REC level. Work is on-going on liberalisation of road transport to ensure more competition. Key issues under examination include:- • Harmonisation of third party insurance for vehicles; • standardisation of road levies or user charges; • common application of axel limits for trucks; • harmonised vehicle inspection and transport regulations including licencing systems; • immigration and visa formalities for drivers; • standard calibration and linkage of weighbridges.

12. Tripartite FTA Focus on Transport Market Lib • The concept of self-regulation for truckers and passenger transport operators is under examination. This will entail: • Enhancing quality regulation using transport regulations which set and maintain agreed standards by operator registration, grading and accreditation to encourage high levels of voluntary compliance • Reviewing and standardising all systems and processes so as to ensure effective transport regulation and inter-state coordination; • Standardising operator registration and licencing across the region; • Carrying out periodic compliance audits on accredited operators; • Simplification of road transport regulatory obligations and making them transparent; • Standardising vehicle overload control systems; • Developing multilateral transport agreements that facilitate market liberalisation.

13. Tripartite FTA Focus on Transport Market Lib: Rail • Rail transport remains one of the cheapest mode of transporting bulk goods but in the last 10-15 years use of rail transport has declined substantially. • The reduced use of rail has meant increased use of road transport. The inefficiency associated with rail and heavy losses, which became a burden on Governments is only but one reason for he decline in rail usage. • To resolve the problems, Governments have entered into concession agreements with private operators but these have equally proved difficult. • Efforts are underway to examine how the rail transport could be revived in the region and along the main corridors.

14. Tripartite FTA Focus on Transport Market Lib • With respect to air transport, the three RECs are cooperating I the implementation of the AU adopted Yamassoukro decision on liberalising air transport. In this respect the RECs: • Have established a Joint Competition Authority on Air Transport as directed by the first Tripartite Summit; • Have developed the Legal Framework for the JCA; • Developing the Organisational structure of JCA Secretariat, Business Plan and Budget; • In process of identifying a sustainable funding mechanism of the JCA; • Developing a Air Services Agreement (ASA) template that complies with the YD. • With respect to maritime transport, not much work has been done but a study is being commissioned to assist define what needs to be done.

15. Challenges likely to be encountered • Ability to reduce cross-border paper work; • Streamlining multiple inspections; • Repeated weighings en route • Police convoy escort systems • Repeated police stops • Transit permit conditions (only interstate operations) • Uncoordinated and continual changes and additional requirements by regulatory authorities; • Reducing the effects of local authority regulations and arbitrary application of regulations; • Effective enforcement of transport laws and regulations; • To convince Governments hat multilateral transport agreements can work equally as well as do the bilateral agreements; • Handling of cabbotage.

16. Conclusions • There is a lot more work need to be done to make headway in transport market liberalisation and requires a look at other areas that directly or indirectly affect the sector. • Customs and border management issues; • immigration procedures- non-standardised visa fees; cumbersome and duplicated immigration procedures especially for truckers; • quality inspection procedures- delays in inspection of vehicles, cumbersome and costly quality inspection procedures, unnecessary quality inspections (including of products certified by internationally accredited laboratories); • transiting procedures- Non-harmonised transport policies, laws, regulations and standards; • road blocks - police stop commercial vehicles at various points for no good reason; • Transport procedures (regional 3rd party insurance, overload controls, road user charges, self-regulated regional road transport management system, establishment of corridor management groups; • Substantial effort is being made at the Tripartite level on the simplification of trade documentation, formalities and procedures; standardisation and improvement of physical infrastructure and facilities; and the harmonisation of applicable laws and regulations

17. Conclusion As seen from the areas covered in this presentation, transport market liberalisation is part and parcel of trade facilitation. Our key objective is to reduce costs of trading and doing business and transport is a major cost source. The Tripartite seeks to achieve continuous operational improvements at border posts, along the corridors and to build formidable interface between business and public regulators in relation to reducing transaction costs. The solution to these challenges is rooted in our understanding of the logistics and supply chain management. We all yearn for improved transport and trading environment with less but better regulation and enhanced self regulation, integrated border management systems, simplicity, transparency, standardisation, fair and consistent enforcement, electronic exchange of data, pre-clearance and automation as we strive to improve cross border movement of goods and services

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