PS Karugu: We must deliberately deepen regional integration, develop ASALs

Kenya's exports to East African Community (EAC) partner states have climbed to Sh351.23 billion, reinforcing the region’s position as the country's largest market for manufactured goods.

At the same time, the government is pushing to remove trade barriers, cut transport costs, deepen digital integration and accelerate infrastructure projects while balancing its role in the development of the country's Arid and Semi-Arid Lands (ASALs).

Principal Secretary for East African Community Affairs and acting PS for ASALs and Regional Development Caroline Karugu spoke to the Star on Kenya's regional trade ambitions, the removal of Tanzania's Industrial Development Levy, progress toward a common East African market, the challenges slowing integration, and plans to unlock investment and economic opportunities in ASAL counties.

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Kenya has reported strong growth in trade with EAC partner states. What is driving this growth?

The East African Community remains Kenya's most important regional market. Our exports to EAC countries grew by about 15 per cent, rising from Sh305.88 billion in 2023 to Sh351.23 billion in 2025. Uganda remains our largest destination, followed by Tanzania and Rwanda.

This growth reflects deliberate efforts to deepen regional integration through implementation of the Customs Union and Common Market. We have reduced tariffs, tackled non-tariff barriers and invested in transport infrastructure that allows goods to move faster and more cheaply across borders. Ultimately this means more opportunities for Kenyan manufacturers, farmers, transporters and service providers.

What achievements have made the biggest difference for businesses over the past year?

Three stand out. First is the expansion of regional exports, which continues to support Kenya's manufacturing sector and create employment. Second is improved trade facilitation. One Stop Border Posts, Single Window Systems and the Simplified Trade Regime have significantly reduced delays, especially for small-scale traders. Third is the launch of the EAC Customs Bond, which will simplify customs procedures and reduce transport costs by allowing goods to move more efficiently across partner states while safeguarding customs revenue.

Tanzania recently removed the Industrial Development Levy on selected Kenyan products. How significant is this breakthrough?

It is a major milestone. Following sustained bilateral engagements, 49 Kenyan export products can now enter Tanzania without attracting the additional five to 10 per cent levy. Products such as steel, cement, furniture, ceramic tiles and road tractors immediately become more competitive in the Tanzanian market. We expect this decision, together with other trade facilitation measures agreed between Kenya and Tanzania, to significantly boost bilateral trade and potentially double trade volumes over time.

Businesses still complain about non-tariff barriers. Has meaningful progress been made?

Yes. During the past financial year, nine non-tariff barriers affecting regional trade were successfully resolved through EAC mechanisms. However, challenges remain. These include discriminatory excise duties imposed by Tanzania on products such as soaps, detergents, paints, confectionery and tobacco products, high import fees on milk and meat products, business entry charges affecting Kenyan traders and Uganda's excise duty on Kenyan furniture. Resolving these barriers remains a priority because eliminating unnecessary costs directly improves business competitiveness.

Investors often cite policy uncertainty across the region. What is Kenya doing to improve predictability?

Our responsibility is to ensure Kenya's laws and policies remain consistent with EAC commitments. We review proposed legislation for compliance with regional agreements and coordinate harmonisation of regulations with partner states.We also engage continuously with governments and the private sector to promote common standards on customs, taxation and investment. A predictable policy environment gives investors confidence to expand across East Africa.

Infrastructure remains central to regional integration. What progress has been made?

Infrastructure is one of the strongest enablers of regional trade. Projects progressing include the Malindi-Mombasa-Lunga Lunga corridor, which connects with Tanzania, improvements along the Nairobi-Rironi-Mau Summit-Kisumu corridor, and investments supporting maritime operations on Lake Victoria. We are also advancing studies and financing discussions for regional railway projects, including the Standard Gauge Railway extension toward Malaba which is underway. These projects lower transport costs, improve logistics efficiency and enhance competitiveness.

Kenya has promised uninterrupted cargo movement despite political activity ahead of elections. How will this be achieved?

We appreciate the importance of the Northern Corridor to the region. Measures include strengthening the Northern Corridor Transit Police Unit, improving coordination among security agencies and enhancing protection around key infrastructure such as the Port of Mombasa, Inland Container Depots, SGR facilities, fuel depots and border posts. Our commitment is to ensure uninterrupted movement of cargo regardless of the political environment. But at the end of the day, elections should never hurt the economic activities or livelihoods. We still have a country and a region thereafter so we urge for peace.

Transport costs remain high. What is being done to reduce the cost of moving goods from Mombasa to neighbouring countries?

Several reforms are already delivering results. We have rationalised weighbridge operations through high-speed weigh-in-motion technology, reducing unnecessary stops. Police checkpoints have been reduced from 27 to five gazetted checkpoints, greatly improving transit efficiency. Expansion of One Stop Border Posts, implementation of the Single Customs Territory and deployment of the Regional Electronic Cargo Tracking System have also shortened clearance times and reduced logistics costs.

Digital integration is becoming increasingly important. What progress has been made?

Digital transformation is becoming one of the strongest pillars of regional integration. The One Network Area has substantially reduced mobile roaming costs across participating countries, allowing East Africans to communicate more affordably while travelling.

Six of the eight partner states are already participating. The region has also strengthened the East African Payment System, expanded mobile money interoperability and implemented the EAC E-Commerce Strategy to improve digital trade. These initiatives support financial inclusion and create new opportunities for businesses, especially MSMEs.

Security challenges, particularly in eastern DRC and South Sudan continue to affect trade. How is this being addressed?

Peace and economic integration are inseparable. Conflict disrupts transport corridors, increases insurance costs, delays cargo, discourages investment and diverts resources toward humanitarian interventions. Despite these challenges, partner states continue working together through regional peace initiatives because lasting stability is essential for stronger trade and regional prosperity.

The East African Monetary Union was initially expected much earlier. Where does it stand today?

The commitment remains firm, but implementation has been adjusted to reflect economic realities.Partner states have agreed on a revised roadmap targeting a single currency by 2031. Important institutions are already being established, including the East African Monetary Institute and the East African Statistics Bureau. However, countries must first achieve stronger macroeconomic convergence on inflation, public debt, fiscal deficits and foreign reserves before introducing a common currency.

Kenya chaired the EAC until March this year. What leadership role did the country play?

Kenya focused on translating political commitments into practical implementation.We championed removal of non-tariff barriers, expansion of regional trade, improved transport connectivity and stronger cooperation on peace and security. Kenya also continued investing in strategic infrastructure supporting the Northern Corridor while promoting dialogue on regional stability.

Beyond EAC affairs, you are also the acting PS for ASALs and Regional Development. How do you plan to unlock economic opportunities in ASAL counties?

ASAL regions hold enormous untapped potential. Our focus is shifting from viewing these areas purely through the lens of humanitarian support toward positioning them as engines of economic growth. We are investing in climate-resilient agriculture, livestock value chains, water infrastructure, renewable energy and improved road connectivity to attract private investment.

We also want to support local enterprises, strengthen access to finance for women and youth and promote value addition so communities earn more from their resources instead of exporting raw products.Tourism, mining, green energy and cross-border trade also present significant opportunities that can transform livelihoods in ASAL counties.

Looking ahead, what are your top priorities for the 2026-27 financial year?

Our priorities are clear. We want to deepen implementation of the Customs Union and Common Market, increase intra-EAC trade, strengthen regional infrastructure, promote peace and security and accelerate digital transformation.

We will also support full integration of newer members such as Somalia and the Democratic Republic of Congo while strengthening EAC institutions and ensuring sustainable financing of regional programmes. At the same time, in ASAL regions we will continue driving investments that improve resilience, create jobs and unlock long-term economic opportunities.

Many ordinary East Africans still feel regional integration mainly benefits governments and large corporations. What would you tell them?

Regional integration is already changing lives at the grassroots. Small traders are benefiting from the Simplified Trade Regime through easier customs procedures and lower trading costs. Students increasingly enjoy equal tuition treatment across partner states, making higher education more accessible.

Manufacturers have access to a much larger regional market, while improved transport networks reduce business costs.As barriers continue to fall and infrastructure improves, more farmers, traders, young entrepreneurs and investors will directly benefit from a stronger, more integrated East African economy.