Business Case – ARD – Additional Support to TradeMark East Africa (Burundi)
Intervention Summary
Title: Additional Support to TradeMark East Africa (Burundi)
What support will the UK provide?
The UK will provide an additional £10 million for the programme to strengthen regional
integration and improve trade competitiveness in Burundi which is being implemented by
Trademark East Africa (TMEA). This will bring DFID’s overall direct contribution to the TMEA
Burundi programme to £16.5 million. The new resources will be used in particular to (a)
establish a permanent One Stop Border Post at the Kobero/Kabanga border between
Burundi and Tanzania (including infrastructure facilities and an integrated border
management system); (b) provide additional technical assistance to the Burundi Revenue
Authority to continue customs reform and increase revenue collection; (c) upgrade the
Burundi Bureau of Standards laboratories through the provision of new equipment for
product testing; (d) extend support for improving Burundi’s business environment by a
further 2 years until 2016; (e) support private sector and civil society advocacy to influence
and improve regional integration; and (f) improve the Burundi government’s ability to
implement EAC commitments and engage in ongoing regional integration processes.
This increased funding will be part of a wider expansion of DFID support for TMEA
programmes in other East African countries and across the region. This TMEA Burundi
business case is being submitted in parallel with the business case for a proposed £31m
scale-up in DFID’s support to TMEA’s Regional Programme, covering its regional support to
the East African Community as a whole. Other business cases for TMEA’s country scaleups in Kenya and Uganda have already been approved, and for Rwanda and Tanzania are
to come. The expansion reflects TMEA’s institutional strengths, the progress it has already
made in promoting regional integration and trade growth, and the opportunities that exist to
build on this momentum. In total these plans will involve DFID support to TMEA’s national
and regional programmes increasing from some £87m to around £204m over the BAR
period.
Why is UK support required?
Few countries have shown sustained growth or experienced a sustained reduction in poverty
levels without a significant growth in trade flows. In East Africa, trade levels have been
historically constrained by small market size and deep seated problems that have kept their
importing and exporting costs high. The East African Community was re-established in 1999
as a regional economic partnership to tackle the problem of small markets, provide a
framework within which member countries could collectively address their constraints on
trade, and strengthen East Africa’s trading relationships with other regions. DFID took the
lead in 2010 in creating TMEA as a purpose-built institution to work with the EAC and its
member states to strengthen regional integration and improve trade competitiveness. TMEA
now has established programmes in each EAC member state as well as a regional
programme, the latter including support to the EAC Secretariat itself.
In Burundi the UK, Belgium and the United States are already funding TMEA programmes
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that are improving revenue collection; making customs processes more efficient and
reducing customs delays; reducing red tape associated with business licensing and tax
administration; improving the business regulatory environment; improving the standard of
Burundi’s products so that more of them can be traded; helping the government meet its
regional integration commitments; and helping the private sector and civil society engage in
advocacy to improve Burundi’s integration and trade policies. DFID committed £6.5m to the
TMEA Burundi programme for these purposes in 2010.
However there is scope to significantly increase the impact of these interventions. In part this
can be done with supplementary investments that build on what has already been achieved.
At the same time a significant investment in new infrastructure will help strengthen Burundi’s
growing trade links with Tanzania. The construction of permanent, improved customs
facilities on the border with Tanzania will reduce transport costs by allowing traffic to cross
the border more quickly. This investment will not only improve Burundi’s trade
competitiveness but also help improve the trade competitiveness of its neighbours. The
proposed additional UK support is needed to enable TMEA in Burundi to invest in the border
post with Tanzania as well as invest in essential additions to its existing programme, as
specified above and in more detail in the Business Case.
The investments recommended are the result of a rigorous prioritisation by TMEA’s
Programme Investment Committee (on which DFID is represented). They are informed by
detailed technical, economic and political appraisals conducted by the qualified engineers
and infrastructure economists employed by TMEA. TMEA has calculated cost benefit
analyses for these projects, and reports returns in a variety of scenarios (reduced traffic
volumes, reduced trade flows, etc). Returns are robust. The internal rate of return for support
to the Burundi Revenue Authority is 55%. Improvements to Kobero border post are expected
to yield a more modest return of 11%.
TMEA will closely monitor the gender impact of its support. For example the disproportionate
number of women involved in informal cross-border trade, contrasted with their very limited
policy participation, heightens risks that women traders’ interests may be marginalised
during establishment of the EAC Common Market, particularly when coupled with socioeconomic and cultural factors surrounding ownership of property and access to finance.
TMEA is seeking to respond to these gender risks by implementing a gender mainstreaming
policy across TMEA, developing a toolkit to help TMEA staff understand how their work will
impact on women, and supporting civil society organisations which specifically work on
improving women’s ability to trade.
What are the expected results?
These new investments alongside TMEA’s existing programme will reduce transport times
along the northern corridor by 15% and increase Burundi’s exports by 10% above trend –
roughly double the benefits from TMEA’s existing commitments, and delivering an estimated
forty times greater benefits than costs (these benefits are region-wide and cannot be
precisely attributed to specific TMEA country or regional programmes; for example the
reduction in transport times in one country may result in part from interventions in another
country or a combination of countries).
Specific results by 2016 in Burundi will include:

Increase in total value of exports from Burundi to the rest of the world of more than
2
10% above the trend by 2016.

1 day reduction in time taken for Burundian cargo to transit other countries in the
region and through Burundi;

More than tripling of revenues collected by the Burundi Revenue Authority over five
years, to some 1100 billion Burundian francs by 2016.

Reduction in incidents of bribery when paying taxes in Burundi (the bribery index
level will reduce from 90.2 in 2010 to 25 in 2016, as measured by Transparency
International – by 2012 it had fallen to 35.7).

Further decrease in average border crossing time at Kobero border post (from 10
hours to under seven hours);

Reduction in average clearance time for imports at the commercial cargo clearance
office from between 24-168 hours to 2 hours (92% reduction);

At least 60% of all relevant domestic laws revised in line with EAC requirements.
These Burundi results will complement the results to be delivered from the separately funded
TMEA Regional Programme. The latter will deliver enactment of EAC-wide legislation and
regulations to operationalize the EAC Single Customs Territory; regional agreements on
mutual recognition of standards; removal of regional non-tariff barriers; and introduction of
new region-wide trade facilitation systems such as the proposed new regional customs bond
scheme (ASSET) which alone is estimated will deliver over $50m in annual savings for East
African businesses.
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List of Acronyms
AFTi
Africa Free Trade Initiative
ARD
African Regional Department
ASSET
Alternative System for Secure Transit
ASYCUDA
Automated System for Customs Data
BBN
Burundi Bureau of Standards (Bureau
Normalisation et Contrôle de la Qualité)
CSO
Civil Society Organisation
EAC
East African Community
GDP
Gross Domestic Product
ICAS
Investment Climate Advisory Service
IBM
Integrated Border Management
IRR
Internal Rate of Return
IT
Information Technology
MDG
Millennium Development Goal
MPACEA
Ministry to Presidency for East African Affairs
NOC
National Oversight Committee
NPV
Net Present Value
NTB
Non-tariff Barrier
OBR
Burundi Revenue Authority (Office Burundais de Recettes)
ODI
Overseas Development Institute
OSBP
One Stop Border Post
PIC
Programme Investment Committee
PAR
Project Appraisal Report
PPP
Public Private Partnership
PSO
Private Sector Organisation
RTA
Regional Trade Agreement
SCR
Strategic Climate Review
SME
Small and Medium sized Enterprise
TMEA
TradeMark East Africa
TRAC
TradeMark East Africa Challenge Fund
Burundais
de
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Strategic Case
A. Context and need for a DFID intervention
1.
The aim of this TMEA Burundi programme is to increase trade, growth and poverty
reduction in Burundi and other East Africa countries (Kenya, Rwanda, South Sudan,
Tanzania, and Uganda) through greater regional integration and trade competitiveness. This
Business Case should be read together with the TMEA Regional Business Case which is
being submitted in parallel.
East African regional integration
2.
There has been significant growth in East Africa’s exports in recent years 1 but the
region’s share of world exports still remains below 0.1%2. Small markets mean firms cannot
benefit from economies of scale and export costs are high – it costs East African countries
twice as much to trade than East Asia and developed countries. Transport costs in particular
are excessive – freight costs per kilometre in East Africa are more than 50% higher than in
the United States and Europe and add nearly 75% 3 to the price of exports from Uganda,
Burundi and Rwanda. The problem is not just one of distances – inefficient customs
processes, excessive bureaucracy and poor infrastructure all impose substantial transport
delays and significantly increase costs.
3.
Table 1 from the World Bank’s 2013 Doing Business Report illustrates the extent of
the challenge, which affects imports as well as exports. East African countries appear very
close to the bottom of international rankings both in terms of the particular challenge of
trading across borders as well as the more general ease of doing business.
Table 1: Ease of doing business in East Africa
Doing Business 2013 report
Burundi
Kenya
Rwanda
Tanzania
Uganda
Ease of Doing Business Rank
159
121
52
134
120
Trading Across Borders Rank
177
148
158
122
159
Documents to export (number)
10
8
8
6
7
Time to export (days)
32
26
29
18
33
Cost to export ($ per container)
2,965
2,255
3,245
1,040
3,050
Documents to import (number)
11
7
8
10
9
Time to import (days)
46
26
31
31
33
5,005
2,350
4,990
1,565
3,215
Cost to import ($ per container)
4.
The East African Community (EAC) was re-established in 1999 by Kenya, Tanzania
and Uganda to increase trade by overcoming the challenges of small market size, and to
strengthen regional political cohesion. Burundi and Rwanda subsequently joined in 2007.
5
South Sudan announced its intention to join in mid-2011. Together the EAC grouping of
states have a total population of around 130 million and GDP of $79.5 billion 4. They share
similar resources and trade profiles and in many respects also share a common history.
5.
Protocols have been signed to establish both a customs union (2004) and common
market (2010) to transform East Africa into a single, larger economy. The customs union is
moving closer to full implementation – only a few exemptions from the common external tariff
are still in place, although considerable work remains to remove non-tariff barriers and
implement a revenue sharing arrangement. The common market is scheduled to be fully
implemented in 2014, although this timing is likely to slip. The creation of a larger market will
allow producers and traders across the region to exploit economies of scale, increase
investment and accelerate the introduction of new technologies. It is also expected to
increase political stability and provide a focus for shared legislative and regulatory reform 5.
6.
Since the customs union protocol was signed, intra-EAC trade has increased
significantly - between 2006 and 2010 total intra-EAC trade grew by 135% as many of the
internal tariffs between EAC member states were removed 6. Total trade grew by 62% in the
same period and intra-EAC trade as a share of total trade grew by 7.8% to 11.38% 7. Partner
states have grown faster on average than the rest of sub-Saharan Africa - annual per capita
growth averaged 6.3% between 2005 and 20108.
7.
The relationship between trade, growth and poverty reduction is complex and the
evidence is difficult to interpret.9 This recent East African experience, however, illustrates the
general point that very few countries have grown over long periods of time or experienced a
sustained reduction in poverty without experiencing a large expansion of their trade 10.
Poverty reduction in broad terms has followed as a consequence of increases in income,
employment and government social expenditures. There are risks and opportunities,
however, for particular poor groups (and regions) as increased trade changes the profile of
livelihood possibilities. There are also different gender effects – women may benefit less
from increases in formal employment but benefit more from improved management of the
informal economy and informal trade where they predominate11.
Burundi and the EAC
8.
As a small, landlocked country Burundi continues to confront significant difficulties
and costs in trading. High trade costs, non-tariff barriers (NTBs), poor infrastructure and
utility networks (especially electricity), and underdeveloped services sectors limit Burundi’s
ability to attract FDI, develop competitive higher-value activities for export and pursue exportled growth. Lack of hard infrastructure and regulatory issues raise the costs of Burundi’s
isolation. The country lacks good roads, bridges, ships, railways, as well as energy,
communications, and water and sanitation infrastructure. The poor coverage and state of
infrastructure create costs in time and money that lower the return on investment, discourage
domestic and foreign investment, and constrain economic growth. High transport costs,
caused by poor infrastructure and inadequate policies, hinder internal trade and reduce
Burundi’s trade opportunities with East Africa and the world beyond12. Burundi’s GDP per
capita is $271 (World Bank Atlas, 2011).
9.
Burundi is the smallest economy in the EAC with a GDP of only US$ 1.6 billion but
has maintained a steady pace of growth since 2005 after a 13 year period of civil war.
Although GDP growth has been consistent (averaging 4% in the period 2002-2010), it
remains much lower than the 6.7% projected by the first national Poverty Reduction Strategy
6
(2006 – 2010)13. Burundi’s trade performance has not improved over recent years, and the
export-to-GDP ratio has decreased throughout 2005-2010, while the import-to-GDP ratio has
rapidly increased. The trade deficit has increased continually, reaching US$327 million in
2010 (20% of GDP). The resulting current account deficit has been partially financed by
increasing flows of foreign aid, but still averaged 17.7% of GDP between 2008 and 2010. 14
10.
The main reasons for Burundi’s poor export performance during the last decade are
that exports rely heavily on low value-added products15, the limited availability of essential
backbone services (roads, energy, information and communication technology) and skills,16
and the existence of significant barriers that affect trade and transaction costs both inside
and outside the country. Also, amongst all the EAC Partner States Burundi has been least
successful in diversifying its economy by increasing manufacturing production over the last
two decades. Membership of the EAC should provide diversification opportunities, including
in services, provided Burundi is well-placed to exploit them.17
11.
The EAC has become an increasingly important region for Burundi’s exports since
2001. Exports to EAC countries have increased from 10.9% of total exports in 2001-2003, to
13.6% in 2008-201018 although Burundi’s highly narrow export base has not significantly
changed over the last decade. Export earnings remain dependent on primary products predominantly coffee and tea, which together represented almost 70% of total exports in
2008-10. The EAC as a whole is currently the largest source of Burundi’s imports19.
12.
The EAC provides a framework in which Burundi is able to work in partnership with its
neighbours to address these issues and undoubtedly provides a strong additional motive for
Burundi’s membership alongside the advantages that should accrue from being part of a
larger market and a forum that can help secure greater political stability in the region. But
maximising the benefits of regional integration and making Burundi more competitive in
international trade also requires an effective approach to a number of key constraints over
which Burundi has more direct control.
13.
In the context of the EAC, Burundi merits special support. The EAC Treaty commits
Partner States to promote balanced regional development. Regional imbalances were a
significant factor in the dissolution of the former East Africa Community in the late 1970s. It is
important that as growth increases, disparities between countries should also reduce. EAC
economic growth is not a zero-sum game: the stronger and more competitive the EAC
economy as a whole, the better for all Partner States. But the benefits and costs of the single
market are not distributed evenly. Deliberate interventions must be made to promote growth
and reduce poverty in poorer countries, and contain costs arising from issues such as
congestion and over-population in richer countries.
Weaknesses and delays in transport, customs and clearance processes
14.
Inefficient customs and clearance processes alongside poor infrastructure at border
posts impose major delays and costs for both importers and exporters. For example, it takes
an average of 10 hours to pass through the key Kobero/Kabanga border crossing between
Burundi and Tanzania, through which 61% of all (overland) cargo for Burundi passes 20. In
addition, 80 percent of goods must then be transported to Bujumbura for customs formalities
and clearance, which themselves take several days.21 Burundi also has the lowest score in
Africa (and worldwide) in the World Bank’s 2012 Logistics Performance Index (LPI). Burundi
scores badly on all six dimensions covered by the LPI: customs, infrastructure, quality of
logistics services, international shipments, ability to track and trace shipments, and
7
timeliness22.
15.
Significant reforms have already been made in custom management resulting in
increased customs revenues, faster clearance at the Kobero border post, ability to clear
goods in any city across the country, and reduction in clearance time. Improvements in
customs management have had a positive impact on trade flows as a result of improved
commercial predictability and confidence, reduction in transaction costs, quicker clearance
and release times and reduced transit time23. However, significant problems remain at
border posts including very poor physical infrastructure which is unable to cope with
increasing traffic volumes, lack of coordination between the customs administration and
other key players such as immigration, and delays in the processing of customs declarations
and supporting documentation because of the inadequacies of customs IT systems.
Weakness of the Revenue Authority
16.
On joining the EAC in 2007, Burundi was mandated to set up a unified revenue
authority in line with EAC legislation. At the time, it operated a system inherited from the
colonial era, with revenue collection and administration shared by a number of different
government units that were inefficient and corrupt. When Burundi first featured in
Transparency International’s corruption index, the former Revenue Department of the
Ministry of Finance was judged the most corrupt institution in the region. In 2009, DFID
began supporting the Government of Burundi to reform the Office Burundais de Recettes
(OBR) to become a unified revenue authority which became operational in July 2010. Since
its creation the OBR has recorded impressive results in revenue collection, trade facilitation,
service delivery and capacity building. After only six months of operations, the OBR had
increased revenue collections by 20%. After its first full year in 2011, it achieved a further
increase of 30%24. The OBR has been at the forefront of an initiative led by Burundi’s
President to stamp out corruption nationally.
17.
Despite the substantial achievements of OBR, a number of challenges remain to
sustain progress, including improving communications and further simplifying the tax regime.
There has been strong resistance from taxpayers and citizens to the new OBR, resulting,
inter alia, in serious physical threats to top officials. OBR has also been associated in the
minds of some segments of the public with increases in the cost of living, exemplified in a
one-day national strike in April 2012. The communications function in OBR and in the
government as a whole has not been able yet to educate citizens effectively about the
positive contribution of OBR to government budgets, social sector spending, and national
development. Furthermore, there is more work to do to communicate to taxpayers the
improved level and speed of service, and the impact of simplified VAT and other tax regimes.
18.
Burundi has traditionally had a particularly complex tax regime (UNCTAD 2010).
According to the World Bank’s Doing Business survey (2012) businesses are required to
make 24 different payments per year, taking on average a total of 274 hours. Profits are
taxed at 46% (compared to 41% on average in the other EAC countries, but 57% in SubSaharan Africa). Multiple taxes and high tax rates are detrimental to private sector
development and investment, encourage tax evasion and informality and reduce the tax
base. In addition, a large and complex set of exemptions, mainly covering imports, are
perceived as inefficient and still have to be harmonized with EAC practices.25
Non-tariff barriers and product standards
19.
Government systems create a large number of non-tariff barriers to trade - about 70%
8
of products imported into Burundi are covered by five or more types of non-tariff barrier,
suggesting that economic operators face cumbersome multiple regulations. Regulatory
proliferation combined with a legacy of discretionary and opaque enforcement stifle entry into
and diversification of the Burundian economy26.
20.
It is estimated that currently NTBs could raise consumer prices across the board by
30-40%. At the same time NTBs also affect imports of intermediary goods and as a result
undermine the performance of the productive sector (e.g manufacturing, construction,
agriculture)27. The main types of NTBs that affect imports in Burundi include:

Customs and administrative entry and passage procedures (number and
effectiveness of institutions involved, arbitrary use of rules of origin, excessive
verification of transit cargo, etc.). Complex, opaque and country-specific rules
continue to add to monetary costs and loss of time. Unequal treatment according to
the country of origin of the goods and/or truck and opportunities for fraudulent
behaviour remain frequent. The largest proportion of NTBs that has been identified in
Burundi fall in this category.

Restrictive practices covering key services required by traders, including in the
operation of ports and internal container freight stations, the operation and number of
weighbridges and the imposition of a number of different axle load limits.

Distribution restrictions, including multiple police roadblocks causing delays and rent
extortion, prohibition on transportation of locally produced goods by returning trucks,
etc.

Other red tape including immigration and visa procedures, business registration and
sanitary and phyto-sanitary measures. The costs imposed by these NTBs, in order of
importance, include time wasted during transit and clearance before goods reach the
market, and the financial burden of bribes, followed by the cost of official payments,
and consequential lost business opportunities28.
21.
A mechanism for monitoring and eliminating these types of non-tariff barriers to trade
has been established by the EAC, but there are currently no sanctions in place to support its
enforcement.
22.
The harmonization of standards and technical regulations is a core element of
regional integration required by EAC law, and the development of numerous East African
Standards started before Burundi’s accession to the Community. Despite the good progress
made on this issue at the diplomatic level, the concrete implementation of this agenda since
2005 has been slow in all member countries. Burundi lags further behind EAC partners as
the national bureau of standards (Bureau Burundais de Normalisation et Contrôle de la
Qualité – BBN) does not have the necessary technical capacity and financial, human and
material resources to carry out its mission effectively and Burundian business operators still
have limited interest in standardization and quality assurance, due to the absence of
standards requirements for participation in the domestic market.29
Low capacity to negotiate and implement and monitor regional integration
agreements
23.
The Government of Burundi does not have a coherent strategy for regional integration
and no clear system exists to monitor and evaluate progress on the implementation of
9
regional protocols and decisions. Given budget constraints, which are more acute in Burundi
than in the other EAC member states, the Burundi delegation is often absent or not well
represented in regional negotiations. Burundi is also the only francophone country in the
EAC (now that Rwanda’s official language is English). Some senior officials do speak
English, but often not at the level required for in-depth negotiations.
24.
Burundi has started reforming its laws, regulations and policies in line with EAC
requirements, but is a long way from achieving complete harmonisation. Key sectors that are
not fully addressed yet are: immigration, trade, finance, investment, security, governance
and food security. Weak institutional capacity continues to undermine Burundi’s ability to
formulate and implement trade policy reforms. Lack of adequate human, financial and
technical resources in newly created institutions, such as the Ministry for EAC Affairs, but
also in older ones such as the Ministry of Commerce and Industry, largely prevent them from
operating efficiently. This capacity deficit reduces the country’s ability to abide by its
international and regional commitments, and reap the full benefits from increased integration.
Poor business environment
25.
One of the main causes for Burundi’s poor trade performances continues to be the
country’s unfavourable business environment (which amplifies the problems created by nontrade barriers as discussed above).Some of the problems originate in structural factors, such
as the country’s geographical isolation, weak infrastructure and poor human capital. In
addition, however, there is also a major regulatory dimension. A new legislative framework
for business is being developed (Investment Code, Commercial Code, Code for PublicPrivate companies, law on bankruptcy, competition etc) and as a consequence Burundi has
significantly improved its ranking against the World Bank “Ease of Doing Business” index
However, Burundi still ranks 159th out of 183 economies included in this index, and requires
substantial further reform to reduce the cost of compliance associated with enforcing
contracts, resolving insolvency, starting a business, protecting investors, registering property
and obtaining construction permits30.
Low capacity in PSO/CSO engagement at the national level
26.
The business community and civil society in Burundi lack awareness and capacity to
fully benefit from the opportunities of regional integration and to respond effectively to the
challenges it brings. Strengthening public-private dialogue has been a key objective of the
government since the early 2000s, but this dialogue has been historically very weak in
Burundi. Limited consultation and partnership with the private sector has tended to result in
poorly informed public sector decision-making that often fails to foresee the impact of
decisions on the private sector. Furthermore, many private sector actors are not informed of
beneficial reforms – such as the development of the Investment Code - and do not
understand how they might benefit from the new arrangements. Likewise, most economic
operators lack a sound understanding of the regional integration process underway and its
regulatory implications.
UK Policy
27.
Support for regional integration in Africa is an important priority for UK policy. The
2011 White Paper on trade identifies support for African trade and regional integration as
essential to promote growth and poverty reduction.31 DFID’s 2012-2015 Business Plan has
key commitments on regional trade, including a very specific target to cut by 30% the
average time taken for goods to cross international borders in at least five locations in
10
Eastern and Southern Africa.
28.
The UK’s strong support for integration in the Africa region is captured in the Africa
Free Trade Initiative (AFTi), which was launched by the Secretary of State for International
Development in February 2011. This initiative aims to build on the political momentum for
economic integration in Africa and to help create a coalition of public and private investors to
effectively overcome trade barriers. Major commitments have been made to help cut the red
tape that hinders trade, to improve regional infrastructure, and to support the reduction of
tariffs through the negotiation of a Tripartite Free Trade Area covering the EAC, alongside
two other African regional economic communities, COMESA and SADC.
29.
In its response to the International Development Committee’s report on the closure of
DFID’s bilateral aid programme in Burundi DFID committed to continue financial support for
Burundi through a number of channels, notably supporting Burundi’s integration into the East
African Community (EAC) through Trade Mark East Africa.32
Support for East African regional integration – TradeMark East Africa
30.
In this context DFID financial support for regional integration in East Africa has grown
substantially in recent years. TradeMark East Africa (TMEA), was launched by the UK
Parliamentary Under-Secretary of State for International Development in February 2011, with
Kenya’s Prime Minister Odinga, the President of Burundi, the EAC Secretary General, and
representatives of the other EAC community states, as a mechanism though which much of
this support has been provided.
31.
TMEA is a not for profit company that has been created specifically to design and
implement regional and national programmes to address obstacles to accelerating economic
integration and increasing East African trade. DFID played the lead role in TMEA’s
establishment. It has its headquarters in Nairobi with other offices in Arusha (where the EAC
has its headquarters), Bujumbura, Dar es Salaam, Juba, Kampala, and Kigali.
32.
TMEA’s ultimate objective is to increase trade. Its focus is on interventions to improve
regional infrastructure, transport and trade facilitation (including customs processing), the
effectiveness of national and regional institutions, and private sector and civil society
engagement in regional integration. Its mandate and structure are the result of a careful
analysis of regional challenges and typical development partner responses:


Decisions on regional issues such as quality standards must be made by all of the
relevant countries, and are often made in the context of EAC Secretariat processes.
Implementation, on the other hand, is always strictly a national matter. It is essential,
therefore, to work both with regional and national structures. Often aid allocations are
made on either a national or regional basis, and can be used only for national or
regional programmes, but not both.
Programmes funded from national aid budgets struggle to take into account the
positive impacts lying outside their national scope (eg improvements in Mombasa port
have a positive impact upon businesses in Uganda and Rwanda). But TMEA is able
to support improvements throughout the region, and is accountable for both regional
and national results. TMEA is thus set up to support those activities that will have the
greatest regional impact.
33.
As such TMEA offers a unique mechanism for coordinated programming across
regional and country programmes. With a mandate to work both regionally and nationally,
11
and to support dialogue and advocacy by private sector and civil society organisations, it
can:

promote a regional perspective in decisions about national investments, especially
along the transport corridors that link different countries (for example ensuring the
wider regional benefits of investments in key infrastructure such as ports are taken
into account in decision-making).

promote regional interventions to replace separate inefficient national systems (for
example in the management of customs bonds for transit traffic).

help ensure national policy and decisions are fully consistent with regional
commitments (for example on non-tariff barriers).

help the EAC design mechanisms that can be effective in enforcing EAC decisions at
country level.

develop common systems for monitoring national level implementation of EAC
decisions that can be easily aggregated.

ensure that national investments in cross border systems such as customs processing
are complementary, so that the benefits that follow from improvements in
administrative efficiency are maximised.

bring national administrations together to secure shared gains (for example by sharing
facilities and systems at border posts).

ensure a consistent approach to regional and national level capacity building (that
reflects the challenges in formulating and implementing EAC decisions).

work with the private sector and civil society at both regional and national level to
maximise the impact of their engagement.

help ensure a fair allocation of financial support between EAC partner states
(concerns about the distribution of benefits undermined the original EAC).

provide a focal point for pooling finance from a number of donors.
34.
Working in six East African countries, TMEA is able to prioritise its support, focusing
on those interventions that are most likely to support growth in exports. TMEA uses a formal
appraisal process that conforms to international best practice, makinguse of a number of
appraisal methods:

TMEA has commissioned its own system of appraising economic benefits. As part of
the expansion of TMEA’s planned investments, individual projects and the programme
as a whole have been assessed. As shown below in the appraisal case, where
possible the benefits from individual TMEA interventions are isolated and valued.

TMEA has commissioned evidence-based diagnostics of the Northern and Central
Corridors (including the spur which connects Juba in South Sudan), examining their
performance and present plans for removing impediments to efficient transport
12
logistics.

TMEA uses its in-house technical expertise to identify interventions based in part on
evidence of what has worked elsewhere. TMEA has good in-house capacity with, for
example, five employees working full time on border post improvements, five engaged
in designing single windows projects, and four supporting ports and other
infrastructure work.33

TMEA works closely with partners, ensuring that only activities with strong national
and regional ownership are supported. These links are complemented by close ties
with the EAC Secretariat in Arusha.

As described in the management case below, Project Appraisal Reports are prepared
and considered by TMEA’s senior management. National Oversight Committees
provide advice to the Programme Investment Committee (PIC) on work plans,
budgets and programme implementation. They consider projects with a value
between $1 mln and $10 mln. The PIC reviews and approves projects with budgets in
excess of $10 mln.

TMEA can and does decline to support projects that do not meet with the above
criteria (eg. support for monetary union in the EAC).
35.
DFID support for TMEA is provided through both country and regional aid allocations.
This helps to ensure better coordination between its national and regional programmes than
would be possible under a single centralised programme of support. It also helps ensure a
clear focus on specific national level constraints to regional integration and trade
competitiveness issues.
36.
DFID has so far committed a total of £144 million from regional and country aid
allocations for TMEA’s programmes. TMEA has also successfully attracted around £70
million from other donors – Belgium, Denmark, Netherlands, Sweden and USA.
37.
DFID’s present support for the TMEA Burundi programme comes from an allocation of
£6.5 million from DFID’s former bilateral programme, alongside £9.3 million from Belgium
and £0.6 million from USA.
Increased DFID Support for TMEA Burundi’s programme
38.
In the initial period following its establishment TMEA has focused on creating the
institutional framework required to implement its programmes including front line staffing,
accountable governance arrangements and appropriate systems for planning, monitoring
and evaluation34. Essential networks and partnerships have been created with key national
and regional stakeholders in the integration process. Substantial progress has also been
made in implementing programmes on the ground.
39.
TMEA Burundi was set up in 2010 to provide a significant and strategic response in
Burundi to the challenges of creating a fully operational customs union and making the
common market a reality. The programme draws on DFID’s earlier Fast Track support in
2009-2010, to help Burundi participate effectively in the implementation of the Customs
Union and Common Market in 2009/2010.
40.
An important Fast Track success has been setting up the OBR, critical to Burundi’s
13
effective participiation in the customs union. Prior to DFID’s intervention, Burundi has no
specialised tax administration. Revenue mobilisation was poor, processes were complex,
and customs clearance was slow and assessments sometime arbitrary. As a condition of
accession to the EAC, the Government of Burundi agreed to set up an autonomous revenue
authority, which DFID and subsequently TMEA have supported. The results have been
significant - every dollar invested through TMEA enables increases in revenue performance
equivalent to an eightfold return to the Government of Burundi’s budget. Increased revenues
have allowed, for the first time in its post-colonial history, the construction of a hospital, a
hydropower dam and a sharp increase in spending in agriculture (from less than 2% in 2010
to more than 11% in 2012).
41.
Its first two years of operation have highlighted TMEA’s enormous potential to impact
on regional integration and growth in East Africa – the 2011 and 2012 annual joint donor
reviews both reported positively on performance (especially compared to other regional trade
and integration programmes). At the same time forward planning based on detailed appraisal
of priorities at both regional and national level has highlighted that TMEA requires both larger
levels and greater certainty of funding to make the investments that are essential in the
medium term. Initial commitments in 2010 were clearly over optimistic about what could be
achieved and the scope of work necessary to achieve them. Since TMEA has become
operational:




Much new evidence has been generated: analysis of the Central and Northern
corridors, the need to focus on the single customs territory (including revenue
collection at the first point of entry, and revenue sharing agreements), the importance
of improving competitiveness, all have been highlighted through TMEA’s research and
analysis.
The TMEA strategy has been refined, with a clear logic chain linking activities, outputs
and outcomes. Critical overlaps with other donors have been identified, and work
dropped (ie TMEA is no longer supporting monetary union in the EAC). Gaps have
been identified, and new activities developed to fill those gaps (such as English
language training in Burundi).
Close links with partners have been formed, which have in some cases either allowed
TMEA to identify, or allowed TMEA to support, gaps and weaknesses. For example,
in Kenya, the opportunity to work with the Kenya Revenue Authority was not foreseen
at the time of the original design, but has arisen as a result of demonstrated success
by TMEA and the strong links formed between TMEA and the KRA. In Burundi, close
links have been established with the IMF, World Bank and EU on revenue reforms.
TMEA has developed a substantial in-house capacity to appraise projects, develop
budgets and set timetables. Much has been learned about the time and cost of
building infrastructure, including at Kobero border post.
42.
TMEA’s policy and oversight Programme Investment Committee (PIC), which includes
DFID and other donor representatives, has recommended a scaled up programme with an
overall budget up to $500 million (around £322 million) over the period 2010-2016, compared
to funding of around $330 million (around £213 million) that is currently committed. In making
this recommendation, the PIC focused on the need and opportunity to increase the scale of
TMEA’s interventions to achieve its high level targets for reducing the costs and increasing
the volume of East Africa trade. It has also taken into account provisional indications of the
availability of extra funds from DFID and other donors (see below). Table 2 shows the
budget disaggregated by country and regional programme and highlights present funding
14
gaps.
43.
The figures in Table 2 reflect the allocations at the time of the appraisal work done for
the Cost Benefit Analysis in 2012. Some of the funding gaps have since been addressed by
the scaled up funding already approved from the DFID Kenya and DFID Uganda country
programmes (see Table 3). TMEA has also reorganised its budget allocations by
responsibility centre in the latest TMEA Business Plan.
Table 2: TMEA budget and funding commitments 2010-2016
Programme
Current
commitment
($ million)
Recommended
operational
budget
Funding gap
($ million)
($ million)
Kenya
16.52
57.94
41.42
Uganda
21.66
69.32
47.66
Tanzania
36.74
49.15
12.41
Rwanda
25.25
33.01
7.76
Burundi
34.29
49.81
15.52
South Sudan
20.28
20.28
0
Regional infrastructure (including the border post
focused East African Transit Improvement
Programme)
46.74
79.76
33.02
Other core regional funding
62.32
105.75
43.43
Total
263.8
465.02
201.22
44.
DFID anticipated the case for scaling up support to TMEA in its Bilateral Aid Review
allocations. Additional funding was set aside in both country and regional operational plans
as part of this process. Table 3 shows the latest DFID committed funding and potential
additional funding. In total these potential additional resources will increase DFID’s
commitments to TMEA over the period 2010-2016 to £203.64 million. Alongside other donor
scale ups currently being processed, this will be sufficient to close TMEA’s funding gaps.
DFID’s share of total donor funding commitments to TMEA is expected to decrease from the
current level of 67% to 63% once all funds are secured.
45.
The commitment of additional DFID funds requires the approval of a number of
parallel business cases. This business case covers proposed additional funding for TMEA’s
Burundi country programme which will increase DFID’s commitment from £6.5 million to
£16.5 million, and the share of funding for the TMEA Burundi programme from 24% to 63%.
This is a significantly increased DFID share which reflects the very small pool of donor funds
available to Burundi at present, and the commitment made to the International Development
Committee on the closure of the DFID Burundi office that the UK would continue to support
15
Burundi through TMEA.
Table 3: TMEA Funding (£ million)
Committed funding
Provisional additional funding
TMEA programme
DFID
Other donors
DFID
Other donors
Kenya
30.45*
6.83
9.0
6.62
Uganda
37.2*
6.42
-
4.23
Tanzania
16.6
2.82
8.0
2.65
Rwanda
9.3
7.98
5.0
-
Burundi
6.5
9.90
10.0
-
South Sudan
7.09
-
-
4.41
East African Transit
Improvement Programme
30.0
-
-
-
Other core regional funding
6.5
35.88
28.0
30.58
143.64
69.83
60.00
48.49
Total
*Includes additional £26.7m and £29.7m recently approved by DFID Kenya & Uganda respectively.
B. Impact and Outcome that we expect to achieve
Impact statement
Increased trade in Burundi (contributing to sustained economic growth and poverty
reduction.
Outcome Statement
Increased trade competitiveness in Burundi to promote increased exports.
Key results by 2016:

Increase in total value of exports from Burundi to the rest of the world of more than
10% above the trend between by 2016.

1 day reduction in time taken for Burundian cargo to transit other countries in the
region and through Burundi.

More than tripling of revenues collected by the Burundi Revenue Authority over five
years, to some 1100 billion Burundian francs by 2016.

Reduction in incidents of bribery when paying taxes in Burundi (the bribery index
level will reduce from 90.2 in 2010 to 25 in 2016, as measured by Transparency
International).35

Further decrease in border crossing time at Kobero border post (from 10 hours to 7
16
hours).

Reduction in average clearance time for imports at the commercial cargo clearance
office from between 24-168 hours to 2 hours (92% reduction).

At least 60% of all relevant domestic laws are revised in keeping with EAC
requirements.

At least 1440 men and 660 women people improve English language skills.
The theory of change
46.
Figure 1 is an illustration of TMEA’s theory of change (a full explanation of the theory
of change is provided in Annex 1). At the higher end of the theory of change, it is proposed
that three necessary key ‘trade competitiveness’ elements contribute to increasing trade.
These elements are increased market access, enhanced trade environment and improved
product competitiveness. Increased trade is believed to contribute to increased economic
growth and subsequently reduced poverty. Economic growth and poverty reduction do not
appear explicitly in TMEA’s theory of change since they are very high in the logic hierarchy.
Increased trade is only one necessary element for increased economic growth and it would
be impossible to ascertain the extent of TMEA’s contributions to economic growth and
poverty reduction. However, the logic behind long term developmental impact is important:

If EAC Partner States (and South Sudan) are more competitive then trade will
increase;

If trade increases then this will contribute to increasing economic growth;

If economic growth increases, and if linked with supportive government policies, then
this will contribute to reducing poverty in the region.
17
Figure 1
Economic Growth
Poverty Reduction
Key to Figure 1
The boxes with solid borders are TMEA’s core areas whereas the boxes with the dashed borders are within
TMEA’s focus but less important, therefore non-core. The shade grey boxes are not within TMEA’s focus. (In
order to facilitate discussion around the boundaries of TMEA’s work, major outputs and outcomes that are
necessary to increase trade are included in the theory of change, even in cases where they are not a focus of
TMEA’s work).
The focus areas are also sequenced. In the period 2010 – 2016, the boxes with solid borders are very
important. For the period post-2014, TMEA is exploring the feasibility of transiting to an increased focus on
improved quality and price of products.
47.
The key elements of the results chain (or intervention logic) that will deliver the
expected outcome of increased trade and competitiveness in Burundi are presented in the
diagram above. This takes into account the links between the programmes managed by
18
TMEA Burundi and TMEA’s programming in other countries and regionally. A combination of
activities is contributing to the aim of increased trade in Burundi through deeper regional
integration and improved trade competitiveness. These consist of interventions that will (a)
reduce transport and trade-related costs along the northern transport corridor (including a
specific focus on strategic border posts and customs processes in Burundi); (b) facilitate
greater standards recognition, harmonisation and compliance (c) support increased
implementation of Burundi’s regional integration commitments, including building capacity for
key agencies to implement regional integration decisions; and (d) support the private sector
and civil society to positively influence regional integration policies and practices that
facilitate increased trade.
48.
The logframe which accompanies this business case was agreed with DFID prior to
the refinement of TMEA's theory of change. As such, it does not map directly onto the TOC.
During 2013, TMEA will refine the linkages between the logframe and the refined TOC for
agreement by the Programme Investment Committee.
49.
As noted in DFID's guidance, theories of change have no standardised format. There
is no limit on the number of elements and intermediate results that can be mapped out.
Theories of change and logframe approaches are mutually reinforcing, but do not
necessarily duplicate each other. In this case:

the impact statement is "increased trade in Burundi" - this is the topmost level of the
logframe, and is represented as "increased trade" in the TOC.

the outcome statement, "increased trade competitiveness in Burundi" is shown and
measured on the outcome level of the logframe. It is shown in the TOC as the
combined effect of increased market access and an enhanced trade environment.

the outputs do not uniquely map onto the theory of change. A table is provided in
Annex 2 showing which indicators measure which element of the theory of change.
Note that some indicators are cross-cutting in nature, and measure the contribution of
more than one element (such as indicators relating to private sector and civil society
organisations).
Assumptions
A number of assumptions underpin the expected result of “increased trade”, that:
50.

There are sufficient buyers who are willing to pay for East Africa’s improved quality
products and services;

The private sector uses the opportunities of increased affordable market access to
increase and/or expand the number and size of exporting firms;

The private sector increases the sophistication of exports;

The private sector has the capacity and will to utilise opportunities presented by an
enhanced trade environment.
51.
A number of assumptions underpin the simplified logic on the relationship between
“increased market access” and “trade”:
19

Current trade costs in East Africa are a deterrent for exporters and importers;

Reducing trade costs will make a significant contribution to increasing market access
for East African importers and exporters;

Transport prices are a major contributor to trade costs;

Indirect costs caused by delays are a major contributor to total transport prices;

TMEA has greater ability to influence the reduction of indirect costs as opposed to
direct costs, e.g. fuel, labour, truck operating costs;

East African transport logistics service providers will pass on costs savings brought
about by reducing delays to consumers of logistics services;

The East African logistics industry is competitive;

TMEA interventions will contribute to reducing transportation costs as will other
organisations’ interventions, i.e. World Bank, JICA, USAID;

Increases in other costs will not be more than any reduced indirect costs.
52.
A number of assumptions underpin the simplified logic on the relationship between
“enhanced trade environment” and “trade”:

Implementing the EAC regional trade agreements will contribute to enhancing the
trade environment in the region;

There is sufficient demand by partner state parliaments, public sector, private sector
and civil society organisations to drive the regional economic community agenda
forward;

Regional trade policies will be prioritised by partner states over national trade policies
and priorities
20
Appraisal Case
A. What are the feasible options that address the need set out in the Strategic case?
53.
There are two options, detailed below. Work on these options was initially part of the
Bilateral Aid Review in discussion with DFID country offices, and recognised in the approved
Operational Plan for ARD. The focus on TMEA as a delivery mechanism reflects a careful
analysis of regional challenges and the experience of previous development partner
responses.
54.
Alongside the two options examined below, a number of other potential options have
been considered and discarded. The discarded options are:
a. Providing more resources than are currently committed, but less than the
amount TMEA has identified as required for the programme to achieve the
objectives set. This would be inconsistent with the integrated design of TMEA’s
programme, and would leave a significant funding gap in the budget that the TMEA
Programme Investment Committee considers necessary for TMEA to realise its full
potential. While other donor funding could be solicited, there is a risk that this
exercise will distract senior management from a focus on implementation. There is
also the risk that, should further donor funding not be secured, TMEA will not have
the funds required to achieve the set objectives.
b. Providing an alternative programme of support through TMEA (eg. more focus
on a specific area such as infrastructure and less on private sector, or vice versa).
As mentioned above, the current TMEA strategy has evolved since TMEA’s
establishment in early 2011 through a process of research (eg. Corridor Diagnostic
Study, IDS papers, etc), consultation (stakeholder conferences), and reviews in
order to identify the key areas where TMEA can achieve the most cost effective
interventions to maximise impact and value for money. These have been reviewed
and agreed by the National Oversight Committees and overarching Programme
Investment Committee. Trying to “second guess” an alternative set of interventions
would be counter-productive in light of the significant amount of research and
analysis already undertaken. The evolution of TMEA’s current strategy has already
involved decisions to drop areas of work no longer considered critical for TMEA’s
core deliverables (eg. EA Monetary Union, border post work with DRC, TMEA
Fellowship Scheme).
c. Providing support for regional integration through implementation
mechanisms other than TMEA. This option would also be inconsistent with the
decisions that have already been made to use TMEA as the conduit for DFID
support for regional integration in East Africa. It would risk undermining TMEA’s
support from other development partners as a multi-donor project. It would fail to
take advantage of the significant institutional capacity, including technical
expertise, which has already been established within the TMEA framework. It
would fail to maximize the returns from resources already invested in TMEA, and
would slow up the rapid implementation process that TMEA offers.
d. Providing more resources than are identified under the current budget. This
was not considered an appropriate option at the time of preparation of this
business case. Following a design mission to assess future needs of the OBR in
21
late 2013/early 2014, there may be scope for further investment for the Revenue
Authority (OBR) reform programme and related border post infrastructure if DFID
wishes.
55.
There are two feasible options to deliver the intended outcome:
Option 1: Maintain support for TMEA’s Burundi programme at the levels agreed in
2010. This option will contribute towards a programme of support based on an overall budget
of $264 million for all TMEA activities, $34.29 million of which is for the Burundi programme.
56.
This option will concentrate funding on interventions that will:
a. improve processes for managing border traffic to complement the regional
investment TMEA is making in border post infrastructure (through investment in
integrated border management, automated customs processing systems, and
electronic cargo tracking), including provision of a new (pre-fabricated) office for
Burundi officials;
b. improve the domestic business environment, including support for domestic
taxation reforms;
c. improve the structure and functions of the Burundi Revenue Authority (OBR),
including support to increase revenue collection, renovate OBR physical
infrastructure, implement an organisational development plan, and implement
ASYCUDA World customs management IT system;
d. reduce the number of non-tariff barriers faced by Burundian exporters both in
Burundi and elsewhere in the EAC region;
e. capacity support to the Ministry for the East African Community (MPACEA) and
Ministry of Trade to improve the Burundi government’s ability to implement EAC
commitments and to engage in ongoing regional integration processes;
f. training and capacity support to the Burundi Bureau of Standards;
g. increase national support for regional integration and improve related policy in
critical areas through private sector and civil society advocacy;
h. increase capacity of private sector organisations to help members manage trade
processes and manage and improve product standards;
i.
directly help a small number of businesses to increase their exports in the EAC
region.
57.
The key beneficiaries and implementing agencies are the Revenue Authority (OBR),
Ministry of Trade, Ministry of Transport, Ministry of East African Community and key private
sector and civil society organisations (PSOs and CSOs) such as the Forum pour le
renforcement de la Société civile (FORSC) and Search for Common Ground (SFCG).
58.
TMEA Burundi predicts that the combined impact of the above interventions will
enable them to achieve a 7% reduction in transport times and a 5% increase in export growth
in Burundi (original targets were 15% and 5% respectively) - as well as make a significant
22
contribution to similar results in other EAC member states.
Option 2: High impact scale up to drive implementation of a fully-fledged EAC
Customs Union and increased regional trade. This option will contribute towards a
programme of support based on an overall budget of $465 million for all TMEA activities,
$49.81 million of which is for the Burundi programme.
59.
This option will allow TMEA to scale up the Burundi programme through significant
investment in “one stop” border post infrastructure, laboratories for standards testing, and
extension of some of the core reforms already started under Option 1.
60.
TMEA predicts that these additional investments will enable them to double Option 1
impact, achieve a 15% reduction in transport times and a 10% increase in export growth.
This additional reduction will be achieved through investments that will:
a. provide an additional 100 person months of technical assistance to OBR to
implement fiscal decentralisation, continue customs efficiency reforms, and design
and implement a VAT and other domestic tax laws;
b. establish a permanent one stop border post (at which all customs formalities will be
completed) at the Kobero/Kabanga border between Burundi and Tanzania,
including infrastructure facilities and integrated border management system.
Kobero currently has only prefabricated buildings, and lacks access to utilities,
modern parking yards, sanitary facilities, warehouses, etc. Kobero/Kabanga is the
main border crossing for goods coming into Burundi. Upgrading the border
crossing is also politically important, as it will be the only OSBP in Burundi.
c. upgrade the Burundi Bureau of Standards laboratories through the provision of
new equipment for product testing;
d. extend support through IFC for improving the business environment by a further 2
years until 2016, including to implement at least 15 business reforms in business
registration, construction permits, SME tax regime simplification etc;
e. provide scope for private sector and civil society advocacy to influence and
improve regional integration; and
f. expanding the successful elements of Option 1 support to MPACEA and Ministry of
Trade for engagement in ongoing regional integration processes that were clearly
underestimated in the original costings, but are considered critical to achieving the
full impact of the overall TMEA programme. Additional inputs include economic
analysis to support Burundi’s position in regional negotiations, developing evidence
on the impact of the common market, and support for a regional integration
strategy and for developing and implementing a regional integration
communications strategy.
61.
Under both Option 1 and Option 2 TMEA Burundi’s proposed investments will be
closely co-ordinated with TMEA investments regionally and in other countries to maximise
their impact as part of TMEA’s wider efforts. TMEA’s programmes will also be closely coordinated with other initiatives.
23
ASYCUDA World
ASYCUDA (Automated System for Customs Data) is a computer-based programme for
reforming customs administration. It aims at speeding up customs clearance through the
introduction of computerization and simplification of procedures and thus minimizing
administrative costs to the business community and OBR. It also aims at increasing customs
revenue by ensuring that all goods are declared, that duty/tax calculations are correct and
that duty/exemptions, preference regimes, etc. are correctly applied and managed.
Electronic Cargo Tracking
To limit the risk of revenue losses due to transit trade being diverted locally, customs
departments in the EAC have set up, or are in the process of setting up, sophisticated
systems to track transit cargo through their territories. The cargo tracking systems will use
electronic seals, which are tracked by satellites. Electronic cargo tracking will enable the
OBR to track and monitor movement of trucks, identify illegal diversion of goods, increase
truck turnaround time, improve government revenue, enhance transparency and transit times
and ensure safety of trucks and uninterrupted movement of goods within the region and the
neighbouring countries.
B. Assessing the strength of the evidence base for each feasible option
62.
In response to discussions on the evidence base, it was agreed that TMEA
commission an on-going review of evidence with the first report to be finalised in January
2013. This work has been undertaken for TMEA by the Institute of Development Studies
(IDS), and has resulted in new draft evidence review papers36. Information includes:
evidence on individual interventions in trade facilitation and regional integration; evidence on
growth effects of regional integration and trade; links between trade, growth, and poverty.
63.
The evidence review provides a starting point from which TMEA can begin to assess
the likely impact of its interventions. Overall the review confirms that, as has been discussed,
trade facilitation programmes are necessary, but may not be sufficient, to address poverty.
The review concludes that the extent of poverty and inclusion impact may depend on the
extent to which sectors that benefit from changes engage the poor; the impact they have in a
local context (i.e. the way in which a local supply chain is integrated into the sectors that will
benefit from change); the propensity for the changes to reduce consumer prices and/or
increase exports; and on the effects in the local labour market (e.g. whether earnings and
jobs numbers in the locality rise)
64.
The recent TMEA/IDS review papers conclude that evidence is ambiguous for some
interventions and outcomes are dependent on local circumstances. TMEA has embarked on
the process of testing the evidence base, and is committed to bringing further evidence to
bear on assessment of the impact of its work. Further detail on TMEA plans is provided in the
monitoring and evaluation section at the end of this business case.
65.
In Table 4 below the quality of evidence for each option is rated as strong, medium or
limited. The evidence is provided for each of the projects that TMEA is planning to implement
under each option and indicates the probability that each activity will achieve the desired
output.
24
Option
Evidence
rating
Option 1 Medium
Justification
Trade, growth and poverty (Impact level)
Systematic empirical analysis of the linkage between regional
integration, trade, and poverty is difficult in practice37, particularly as
translating the benefits of trade into poverty reduction often depends
upon complementary conditions such as education and healthcare
provision38.
However trade liberalisation has been observed to be accompanied
by reduced income inequality in low-income countries39.
And very few countries have grown over long periods of time or
experienced a sustained reduction in poverty without experiencing a
large expansion of their trade40.
The Society of International Development (2010) has calculated that
in Kenya a 1% in national income translates into a 0.59% change in
rural employment over the long-term, demonstrating that growth
benefits Kenya’s poorest groups.
Trade and growth (Impact level)
A number of studies support a correlation between openness to
trade, levels of trade and growth41 and there is evidence that growth
can be driven by the domestic multiplier effect from export
revenues.42
It is also argued that trade is associated with productivity gains and
increased long term growth as a result of technology transfer and
the impact of competition on incentives for learning and
innovation43.
However systematic analysis of the relationship between trade
liberalisation and growth is difficult because of the problems of
identifying causality and isolating impacts (for example in growth
regressions)44.
Regional integration and trade (Impact level)
The evidence linking regional integration with increased trade is
strong. According to an overview of the literature conducted by
IFPRI in 200945, empirical models overwhelmingly show that in
regional blocs aggregate trade creation dominates trade diversion.
The models also indicate that welfare for all members – both current
and potential – increases when regional trade areas expand. There
are even bigger welfare gains when models incorporate aspects of
“new trade theory” such as increasing returns, technology transfers,
trade externalities, and dynamic effects such as links between trade
liberalization, total factor productivity growth, and capital stock
accumulation.
Studies also suggest that regional trade has a better poverty focus
than other trade i.e. it comprises products that involve the poor more
25
directly.
Reduction in transport costs and increased trade (Outcome
level)
In a seminal 1999 study by Limao and Venables the impact of
transport cost reductions on trade flows was estimated. The study
finds that there is a high responsiveness of trade flows to reductions
in transport costs, with a 10% increase in transport costs typically
reducing trade volumes by 25%.46
A 2009 study by Portugal-Perez and Wilson finds that the gains for
African exporters from cutting trade costs half-way to the level of
Mauritius – the best performing African country in terms of trade
facilitation costs - has a greater effect on trade flows than a
substantial cut in tariff barriers. If, for example, Ethiopia cuts its
costs of trading a standardized container of goods half-way to the
level in Mauritius, this would be roughly equivalent to a 7.6% cut in
tariffs faced by Ethiopian exporters across all markets.
Hoekman and Nicata (2008) suggest that increasing logistics
performance (as measured by the LPI) to the middle-income
average could increase trade by about 15%. Reducing cost to trade
measured by the Doing Business in the same way would increase
exports by 7 percent. These effects are greater than those that may
originate from traditional trade barriers. Reducing tariffs by five
percent would increase trade by only six percent while reducing
tariff equivalent of non-tariff measures to 10 percent would result in
an eight percent trade gain.47
A 2013 report by the World Bank indicates that the combined effect
of maritime transport connectivity and logistics performance plays a
role similar to, or even greater than, geographical distance in
determining trade costs. The study concludes that reforms in areas
such as infrastructure, the regulation of core services sectors such
as maritime transport and logistics, and private sector development
can have significant benefits for countries in terms of lowering trade
costs. There is thus a strong role for the “technology” behind trade
transactions in driving trade costs around the world. 48
Reduction in transport time and costs (Outcome level)
A 2008 World Bank Study analysed transport costs and prices in
central, east, southern and west Africa. The authors’ concluded that
reduced transport costs in East Africa are likely to translate into a
reduction in transport prices due to the deregulated market
environment. Such measures bring benefits throughout the
economy, and can lead to a decrease in consumer prices49.
In a developed country context Hummels (2001) argues that faster
transport (shifting from shipping to air, and faster ships) has reduced
the tax equivalent of time costs for the United States from 32 per
cent to 9 per cent over the period 1950-98. Each day in travel is on
average worth 0.8 per cent of the value of manufactured goods,
26
equivalent to a 16-per cent ad-valorem tariff for the average-length
ocean shipment.50
Djankov, Freund and Pham (2008) used World Bank data and a
gravity model to test the impact of border delays. They found that for
each additional day that a product is delayed at the border trade is
reduced by more than 1%.51
Trade policy and regulatory reform – general (Output level)
A 2006 report by the World Bank calculated that $1 of aid directed
towards trade policy and regulatory reform, including trade
facilitation activities, yields a ‘rate of return’ of about US$697 in
additional trade52. Further, based on calculations about
effectiveness of aid for trade facilitation, the trade initiating effect of
$1 spent on measures directed towards trade policy and regulation
reform were estimated to be dramatically higher than the trade
creation from investments in the other areas of trade support
(economic infrastructure and trade development)53.
Increasing revenue collection (Output level)
TMEA’s support to Office Burundais de Recettes focuses on
rationalizing revenue processes to facilitate trade. There is good
evidence that a comprehensive programme of tax reform that
focuses both on tax administration processes and tax structures,
rates and compliance can have a significant impact on revenue
collection.
DFID has supported a process of organizational change at the
Rwanda Revenue Authority since its establishment in 1997. DFID
support to the RRA has been implemented in five phases. The first
two phases focused on the provision of advisory services relating to
the establishment of the RRA, and the subsequent three have
involved more substantial support to the strengthening of
organisational and human capacities. As a result, in the six years
between 1998 and 2003, the RRA has helped increase domestic
revenue generation from 9.5% to 13% of GDP. A case study
analyzing the transformation of RRA concluded that DFID support
made a major contribution to the success of the organisational
development process.54
Economies around the world have made paying taxes faster and
easier for businesses—such as by consolidating filings, reducing the
frequency of payments or offering electronic filing and payment 55.
Many have lowered tax rates. Some economies simplifying tax
payment and reducing rates have seen tax revenue rise56.
According to the 2012 Doing Business Report, firms in Burundi
make 24 tax payments a year, spend 274 hours a year filing,
preparing and paying taxes and pay total taxes amounting to 37.4%
of profit.57 Globally, Burundi stands at 125 in the ranking of 183
economies on the ease of paying taxes58.
Voluntary compliance and self-assessment have become popular
27
ways to efficiently administer a country’s tax system59. With high
rates of voluntary compliance, administrative costs are much lower
and so is the burden of compliance actions60. Self-assessment
systems generally make it possible to collect taxes earlier and
reduce the likelihood of disputes over tax assessments61. They also
reduce the discretionary powers of tax officials and opportunities for
corruption62.
Indonesia’s tax reform strategy in the 1980s has had a measurable
degree of success in meeting its stated objectives. In just three
years, non-oil revenues as a share of GDP rose by nearly 50%. This
success is largely attributable to the introduction of a VAT63.
Smaller businesses are more likely to engage in tax evasion
practices and either operate completely outside the tax net or hide a
certain part of their business transactions from the tax inspector64.
The risk of detection of such tax evasion practices can be rather
modest in countries with weak tax administration enforcement
capacity or a high level of corruption in the tax administration 65.
Operating in the informal economy negatively impacts society as a
whole, especially the compliant part of the business community66. It
also affects the growth potential of informal businesses67. Reforms
to foster private sector development and to support innovation and
growth, therefore, need to address and eliminate obstacles for small
business formalization68. The cumbersome tax system in most
countries, both on the policy and the administration side, is
considered as one of the top reasons for operating in the informal
economy69.
A serious challenge is that of corruption and illicit trade, which is
extremely high at most African border posts. As the transparency
and predictability of trade and business administrations are lacking,
most customs officers and companies/traders routinely find
themselves engaged in bribery acts and the under-declaration of
goods as means to “facilitate” payment.70 Efforts to curb corruption
and bribery will not only reduce trade costs but will also improve the
business enabling environment, encourage foreign and domestic
investments, and boost government revenues.71
For example, in Uganda, reforms to improve customs administration
and reduce corruption helped to increase customs revenue by 24%
between 2007 and 2008.72
Improving efficiency of customs processing (Output level)
There are no robust evaluations of the impact of specific
programmes that have improved custom processes. However, there
is anecdotal evidence that these improvements have reduced
clearance times73. There is also some quantitative evidence at the
country level suggesting a positive and robust impact on trade of
improvements in customs procedures74.
Specifically in relation to ASYCUDA (Automated System for
Customs Data) platforms there is some evidence that in general,
28
ASYCUDA++ has improved the collection, storage and
dissemination of data.75 A number of customs administrations that
have implemented the improved ASYCUDA World System can
attest to consequent improvements in the efficiency of customs and
time savings to the private sector. But no administration has yet
rigorously quantified impact.
For example, in the 1990s Uganda implemented ASYCUDA++. In
the ten-year period to 2002, revenue increased from 7.7% to 13.0%
of GDP 76.
Single Window (Output level)
49 economies around the world have so far implemented Single
Window systems of varying complexity for managing clearance
documentation.
Implementation of a Single Window system Mauritius (with 24 hour
availability) is estimated to have reduced average clearance time of
goods from 4 hours to around 15 minutes for non-litigious
declarations.
Senegal has transformed its paper-based trade practices to a
paperless Single Window trading environment, using careful change
management to facilitate such transition.77 The system now allows
traders to collect all the documents required before submitting their
declaration to customs in 0.5 day78.
In Tajikistan the number of forms required for declarations was
reduced from 13 to 7 following the introduction of a Single Window
and the time taken to get a 20-foot container to the nearest port was
reduced by one day.
In Singapore benefits from a Single Window have included the
elimination of data re-keying which previously took place at least
once in 60%-70% of cases, processing time savings of 45% and
manpower cost savings of 34%79.
A case study from the Philippines has also shown that the
implementation of a national Single Window has reduced the time it
takes traders to apply for and secure permits and licenses80.
In Kenya, the Kenya Trade Network Agency (KenTrade) calculates
that a Single Window system will save the economy $150 million
annually once implemented.
Electronic cargo tracking (Output level)
There is only a small amount of evidence on the effectiveness of
electronic cargo tracking systems in reducing transit cargo
delays.
Although not directly comparable to the investment proposed in
Burundi, an electronic transit monitoring and facilitation system
implemented in Jordan in 2009 has led to a significant reduction in
the cost of moving goods through Jordan as there is no longer a
requirement to travel in convoy81. Transit journey time has fallen by
29
more than 60%82. In addition the requirement to escort transit trucks
has been reduced by more than 90%, truck congestion at the
customs yard (where the trucks used to wait for the formation of a
convoy) has been eliminated, transit trade across Jordan has been
increased by more than 80%, and security has been enhanced with
more control over the trucks while they are in Jordan83.
Great benefits are further expected from an Alternative System for
Secure Transit (ASSET), a transit bond management system which
is an innovation in customs and bond guarantee processes and
cannot be compared to any other system currently in use in a similar
context.
Support to remove non-tariff barriers (Output level)
A relatively recent study in the East African Community has
highlighted the strong link between the removal of NTBs and
increased trade flows84.
The evidence on the impact of raised awareness and improved
transparency on the extent of NTBs is limited. The progress made in
the EAC may in part have been linked to the establishment of
reporting mechanisms and monitoring committees85 but the ‘moral
suasion’ approach86 has, to date, failed to yield significant progress
in removing many of the NTBs that are most costly.87.
In contrast there is strong evidence of the impact of more formal
legally binding mechanisms for removing NTBs (including the use of
sanctions) as practiced by the European Union88.
Improving the regulatory and tax environment for business
(Output level)
Many countries have seen a marked improvement in their
competitiveness as a result of business licensing reform. For
example Zambia’s Doing Business ranking improved from 100
(2009) to 90 (2010) as a result of business licensing reforms
Recent reforms that have lowered start-up costs in Madagascar,
Mauritius, and Mozambique have been associated with a positive
and visible impact on flows of foreign direct investment.89
The introduction of electronic records in the registration/licensing
process improves security, prevents potential loss of data and aids
transparency and information sharing9091. Electronic records make it
easier to introduce additional online services later92. Rwanda has
been able to introduce an integrated system for company
registration online which is free of charge (in comparison to costs of
$24 for paper-based company registration93.
Cumbersome tax systems are recognized as an important reason
for businesses operating in the informal sector94. At the same time
informality constrains business growth and has knock on effects on
enterprise that is compliant 95 96.
According to the 2012 Doing Business Report, Uganda has not
30
made paying taxes easier since 200997. Globally, Uganda stands at
93 in the ranking of 183 economies on the ease of paying taxes98. A
number of economies around the world have seen tax payments
increase as a result of simplifying tax payments and reducing
rates99. Reforms have included the consolidation of filings,
reductions in the frequency of payments and electronic filing and
payment100.
Voluntary compliance and self-assessment have also become
popular ways to improve the efficiency of tax administration101.
Voluntary compliance reduces administrative costs102. Selfassessment systems make it possible to collect taxes earlier and
reduce the likelihood of assessment disputes 103. They also reduce
the discretionary powers and opportunities for corruption104.
Support to national government (Output level)
Technical assistance provided by DFID to the Kenyan Ministry of
East African Community between May 2009 and August 2010, led
to the strengthening of its organisational structure, HR systems and
strategy and policy functions.
Elsewhere in the region experience also shows that capacity
building support to EAC ministries has enabled them to play a
critical role in coordinating a wide regional integration agenda. In
Uganda prior to TMEA support being provided in 2010, the EAC
ministry secured a score of 71% against achievement of targets in a
government wide performance review105. Following TMEA
interventions this score increased to 80% when a repeat survey was
conducted at the end of 2011.
Elsewhere in the East Africa region experience shows that capacity
building support to EAC ministries has enabled them to play a
critical role in co-ordinating a wide regional integration agenda
region.
Support to the private sector and civil society (Output level)
Evidence demonstrating the impact of support to private sector and
civil society organisations in the region is limited.
DFID has a number of regional programmes supporting civil society
organisations’ capacity to advocate for policy change in particular
areas. While there is evidence these have improved institutional
strength and the organisation of advocacy campaigns there is much
less evidence on the way, if at all civil society organisations’
advocacy has resulted in policy change106.
The evidence base covering the impact of support to strengthen
private sector organisations’ advocacy is a little stronger. An impact
assessment of the Business Environment Strengthening in
Tanzania programme in 2011 for example concluded that
investments in capacity development and research and advocacy
had a positive impact on the business environment. There is some
evidence that Business Advocacy Fund in Kenya has secured
31
similar effects.107 In Uganda support provided by TMEA to the
Private Sector Foundation enabled it to effectively stall a bill banning
polythene/carrier bag manufacture, which would adversely affect the
manufacturing industry.
Option 2 As
above +
Improve efficiency and effectiveness of cross-border
processing at border posts in Burundi (Output level)
Medium
Burundi will benefit from a One Stop Border Post at the KoberoKabanga border.
There are few complete and robust studies on the trade facilitation
impact of specific OSBP projects.
The OECD Aid for Trade Case Story for the Zambia-Zimbabwe
border post at Chirundu, however, shows that the streamlining and
harmonization of border procedures within an integrated border
management framework has reduced the average time to cross the
border from 67 hours in 2007 to 10.5 hours in 2011 108. Traffic
volume has increased by 48.7% during the same period and
average monthly revenue collections have increased from Zambian
Kwacha 102 billion to Zambian Kwacha 133 billion.109
Research on Integrated Border Management (IBM) alone highlights
the impact a well-implemented system can make in reducing
clearance delays and costs.
The IBM system in Mauritius for example has: reduced the
processing time for customs declarations from an average of four
hours to about 15 minutes; resulted in greater transparency of
procedures, elimination of paper returns, and improved productivity;
and offered significant improvements in financial efficiency and
profits.110
Harmonisation of standards and standards testing (Output level)
There is limited evidence on the impact of standards testing export
capacity. There is, however, strong evidence on the benefits from
harmonising regional product standards. A 2012 World Bank study
advocates the harmonisation of regional dairy standards in East
Africa as a method of increasing regional trade in dairy products,
improving technological capacity, and improving the quality of
products111 based on experience elsewhere. Within Mercosur, for
example, intra-regional exports in dairy products grew by 13.9%
between 1999 and 2000 as a result of a reduction in costs when
standards were harmonised. Harmonisation of standards had a
similar effect on intra-regional trade in a number of other areas
including cars and trucks, the food industry and cosmetics112.
What is the likely impact (positive and negative) on climate change and environment
for each feasible option?
Categorise as A, high potential risk / opportunity; B, medium / manageable potential risk / opportunity;
32
C, low / no risk / opportunity; or D, core contribution to a multilateral organisation.
Option
Climate change and environment risks and
impacts, Category (A, B, C, D)
Climate
change
and
environment
opportunities, Category (A, B, C, D)
1
C
C
2
B
B
66.
Both options 1 and 2 present a low direct risk to the environment and climate change
in their implementation. However the expected outcomes of TMEA’s interventions may have
second-order effects. A reduction in road transport times, for example, will in the first
instance reduce carbon emissions. But over a longer period it could also discourage the
exploitation of opportunities to use greener fuels and transport alternatives and lock the
region into a high-emissions growth path. Second order effects like this will be influenced by
a large number of factors including market dynamics, technological change and regulatory
frameworks. In practice risks are very difficult to determine in advance.
67.
Both Options 1 and 2 provide some opportunities for TMEA to contribute to climate
change mitigation in East Africa and to support work to improve the environment and natural
resource management – especially where TMEA is building physical infrastructure or
supporting governments to build.
68.
TMEA has completed a climate change scoping study. It sets out a climate risk
assessment tool. TMEA has screened all projects, and will further investigate the possible
negative impacts of a changing climate upon those most at risk. The scoping study also
estimates possible greenhouse gas emissions reductions which would follow on from
reduced ship and truck waiting times, and the shift in traffic from road to rail (though this
latter, if it occurs, is unlikely to be attributable to TMEA).
69.
Physical works supported by TMEA offer good opportunities to increase climate
resilience. The screening study suggests that greenhouse gas emissions are greatest at the
ports, with border posts being responsible for fewer emissions. Nevertheless, TMEA will
consider how to build climate resilience for border posts users and their communities.
TMEA’s scoping study identifies a number of prospective funding sources for such work,
including the UK’s International Climate Fund.
70.
In order to realise these possibilities, TMEA proposes to appoint a climate director.
This person would be responsible for scoping and developing projects for funding from the
International Climate Fund (or other similar funds).
33
C. BALANCE OF COSTS AND BENEFITS.
71. The table at Annex A describes both benefits that can be measured such as savings in
time, and those that are more difficult to quantify such as the impact of capacity building in
the regional secretariat or the effect of increased private sector and civil society influence on
policy. The table illustrates the incremental benefits of Option 2 over Option 1 in both
contexts.
Balance of costs and benefits
72.
The scope for formal cost benefit analysis to compare the options is constrained by
the extent to which economic benefits can be quantified. TMEA, however, has commissioned
work that has carried out quantitative analysis from three different perspectives:

cost benefit analysis of the Burundi programme as a whole, measuring the benefits on
the assumption that transport times fall by 7% or 15% (i.e. assuming that TMEA is
able to achieve the overall impact that is expected);

cost benefit analysis of individual interventions where economic benefits can be
isolated and quantified and compared with the costs of those interventions;

cost benefit analysis that compares the intervention benefits that can be isolated and
quantified with the overall costs of the Burundi programme.
73.
In each of these perspectives the main benefits that have been assessed are savings
in transport time that result from TMEA interventions and the associated increase in exports
as a result of improved competitiveness. The key assumptions are:

time savings will provide economic benefits of $450 per day. This is derived from
calculations made in 2010 of the cost of delay for shippers using the Northern
Corridor113

the cost elasticity of trade in East Africa is on average an estimated 1.4 so that
assuming transport costs are around one half of total costs a 1% reduction in transport
time will increase exports by approximately 0.7%114.

2.5% of the value of incremental export trade represents the profit generated from that
trade and therefore additional economic benefit115.

A discount rate of 10% per annum is applied, in common with all DFID Burundi
projects.
74.
All results are reported at the 80th percentile as opposed to typical CBAs which report
the mean outcome (i.e. the outcome met or exceeded 50% of the time). The results therefore
state the outcome met or exceeded 80% of time, a conservative approach which strengthens
TMEA’s confidence in the results.
Perspective 1: Cost - benefit analysis of the overall Burundi programme.
75.
Overall benefits of Option 1 and Option 2 will be:

Option 1 - TMEA’s activities will reduce transportation times by 7% along the main
corridors and the resulting fall in costs will on average induce 5% growth in exports
(above the trend) from the region.

Option 2 - TMEA’s activities will reduce transportation times by 15% along the main
34
corridors and the resulting fall in costs will on average induce a 10% growth in exports
(above the trend) from the region116.
76.
In both scenarios these benefits are region-wide and represent averages across
activities. As a result it is not possible to precisely attribute them to specific TMEA country or
regional programmes. For example the reduction in transport times in one country may result
in part from interventions in another country, or from interventions in a combination of
countries. In attributing impact to the specific interventions funded by the Burundi programme
TMEA’s analysis has therefore first calculated benefits for the full programme across the
region and then allocated them to the Burundi programme based on its share of total TMEA
costs.
77.
Costs in this analysis have in turn been taken from the Option 1 and Option 2 TMEA
budgets as follows:

Option 1 - programme costs stay at current levels without additional DFID funding.
Total resources for TMEA as a whole are $264 million, with $29.64 million budgeted
for Burundi.

Option 2 - programme costs with additional DFID funding increase to $465 million in
total, with $49.81 million budgeted for Burundi.
78.
The results from comparing the costs and benefits of the Burundi programme
calculated in this way are shown in Table 4. If TMEA achieves its expected overall impact on
transport times and exports, then both Options 1 and 2 offer very high returns. But the return
is greater under Option 2 (111%) than under Option 1 (98%).
Table 4: Cost Benefit analysis of the TMEA Burundi programme
NPV
IRR
B/C ratio
Total discounted
benefits ($ million)
Total discounted programme
costs ($ millions)
($ million)
Option 1
$977
98%
34.2
$1,007
$29
Option 2
$1,893
111%
41.0
$1,941
$47
79.
Sensitivity analysis that TMEA has carried out at the level of its full programme
(although not for Burundi alone) indicates that these results remain robust in the face of key
changes in underlying assumptions. In particular TMEA has estimated that under Option 1
even if the value of time savings falls as low as $3.14 per day the programme will still breakeven (ie will have a net present value of zero). Under Option 2 the programme will still break
even if the value of time savings falls as low as $2.15 per day.
Perspective 2: Cost benefit analysis of individual interventions
80.
There are two interventions in TMEA’s Burundi programme that can be quantitatively
assessed. These are:

Support to OBR to improve customs processes and revenue collection, through
improving both facilities and processes (focusing on customs revenue and reform,
rather than domestic taxation which TMEA will not cover);

The construction of a one stop border post at Kobero on the border with Tanzania
35
(Kabanga).
81.
Only the first of these interventions forms part of Option 1, and accounts for 87% of
Option 1 costs. In total the two interventions account for 68% of Option 2 costs and 49% of
the incremental costs of Option 2 compared with Option 1.
Improvements in OBR revenue collection
82.
In total the cost of TMEA’s planned investment in Office Burundais de Recettes (OBR)
is $25.45 million. This will have two major benefits, only one of which has been modelled.
83.
First, improvements to OBR’s customs operations will reduce the time needed to clear
goods. Currently, 80% of goods are cleared in Bujumbura, taking up to a week for clearance.
The majority of the remainder are cleared in in Kobero. The benefit from the reduced
clearance time at Kobero is assessed as part of the Kobero improvements below. Data on
the goods which are cleared in Bujumbura, the airport, Gitega, etc. are unreliable, and so no
benefits have been calculated.
84.
Second, OBR improvements will give rise to direct revenue generation for the
Government of Burundi117. The forecast revenue generation is used as a proxy for the
economic benefits expected to accrue from this project. In TMEA’s cost benefit analysis this
has been calculated from Burundi Revenue Authority time release data on the basis that:

baseline revenue collection in 2011 was BIF378 billion118;

the completion date for the majority of the work is 2014;

TMEA’s intervention will result in a 10% increase in revenue in 2015 and thereafter;

The variance between the counterfactual collection value and the collection value with
TMEA’s intervention will continue and both will grow at an average annual rate of 6%;
85.
The difference between the counterfactual and the intervention cases constitutes the
‘proxy’ benefit. Table 5 shows that, in this analytical framework taking the period to 2025,
TMEA’s proposed interventions at OBR will have an internal rate of return of 55%.
Table 5: Cost benefit analysis of OBR investments
Metric
Value
Net benefits (discounted)
$337m
IRR
55%
Improvements in border post facilities at Kobero
86.
The total cost of TMEA Burundi’s planned investment at Kobero border post is $6.05
million. This figure does not include the costs of a separate investment in one stop facilities
that is planned at Kabanga on the Tanzanian side of the border.
87.
The impact of the investment at Kobero will be the acceleration of the time it takes to
cross the border. Baseline crossing time at Kobero is 10 hours, but as traffic increases this
figure will increase by 4.9% annually without investment in improved facilities. TMEA has
estimated that improved infrastructure and the introduction of integrated border management
will reduce crossing times by 30%.
36
88.
The economic benefit of these time savings been calculated from the estimated
reduction in transport costs and increase in export trade using the assumptions that have
already been explained.
89.
Table 6 shows that in this analytical framework taking the period to 2025, TMEA’s
proposed investments in a one stop border post at Kobero have an internal rate of return of
11%119 This is an acceptable rate of return for a politically important project.
Table 6: Cost benefit analysis of Kobero one stop border post
Metric
Value
Net benefits (discounted)
$1.9m
IRR
11%
Choice of Option
90.
There are clear conclusions that can be drawn from both the narrative assessment of
TMEA’s programme costs and benefits at the beginning of this section and the quantitative
analysis above. These are:
91.

TMEA’s interventions in Burundi are well designed to address bottlenecks to regional
integration and improved trade competitiveness and to provide substantial benefits
(some of which can be quantified, some of which cannot).

Option 2 has substantial incremental benefits over Option 1.

At an aggregate level if TMEA’s evidence - based ex ante assessment of its overall
impact on transport times and export growth is correct both Option 1 and 2 will provide
a significant return on investment but the return on the funds invested in Option 2 will
be higher. This conclusion holds even in the face of major changes in underlying
assumptions (and importantly in the valuation of time savings).

The key individual investments that can be quantitatively appraised are all
economically viable. Two of these, the Kobero border post and the interventions at
OBR account for a majority of the incremental costs of Option 2 over Option 1.
These conclusions create a good case for Option 2 as the preferred choice.
Perspective 3: Comparing overall costs with quantifiable benefits of OBR and Kobero
alone
92.
This choice is underlined by a final piece of cost benefit analysis that compares the
overall costs of the Option 2 Burundi programme with the intervention benefits that can be
isolated and quantified in relation to the OBR and at the Kobero border post.
93.
Table 7 illustrates that in this context the overall Option 2 Burundi programme has an
internal rate of return 41.2% and a NPV of $186 million in the period to 2026. This represents
a return of over $4 for every dollar spent, without taking into account the benefits that cannot
be quantified.
37
Table 7: Cost benefit analysis of Option 2 comparing overall costs with quantifiable benefits
Metric
Value
Total benefits (discounted)
$244m
Total costs (discounted)
$58 million
NPV
$186 million
IRR
41.2%
B/C ratio
4.2
Payback year
2016
D. What measures can be used to assess Value for Money for the intervention?
94.
TMEA is currently refining its approach to assessing and ensuring value for money
from its interventions with support from external consultants (see Management Case). It
argues strongly however that its implementation processes have a value for money approach
at their heart, in particular as a result of:

ensuring wherever possible that contracts are awarded and finance provided on a
competitive basis (see Commercial Case);

using a wide range of sources to establish benchmarks against which the individual
elements of contracts and grants can be assessed and negotiated ; and

ensuring all forms of value that an intervention will deliver are taken into account in
decision making (including implementation speed).
Economy and Efficiency
95.
The main cost drivers of TMEA’s programme in Burundi are the costs of consultants
engaged in advisory and design services (especially in OBR), the costs of information
systems, and the costs of infrastructure work at Kobero border post.
96.
TMEA has established input benchmark prices (fee rates) for the provision of
consultancy services based on consultants’ years of experience which are summarised in
Table 8 below. Similarly benchmarks of $200 per night and $70 per night respectively have
been established for consultants’ accommodation and other costs (both in the region and
elsewhere). These guidelines provide a basis for monitoring the economy secured in the
deployment of consultants.
Table 8: TMEA consultancy fee rate guidelines
Years of experience
Daily rate $
2 years
300
2 - 4 years
400 - 500
38
4 – 6 years
600 - 650
6 - 8 years
700 - 750
8 - 11 years
800 - 850
11 - 15 years
900- 1000
15+ years
1000-1200
97.
Output benchmark prices have been used as the basis for budgeting in TMEA
intervention areas. Important output benchmark prices that have been used in the Burundi
programme are summarised in Table 9, alongside the benchmarks from which they have
been estimated.
Table 9: Output prices used in the Burundi programme and benchmarks from which they have
been estimated.
Output Area
Unit cost in Burundi budget 120
Unit cost from benchmarks
$5.0 million
$3.7 million – $6.7 million
$300,000
$500,000 per border post
Installation of ASYCUDA World customs
management system
$1,050,000 (part of first phase):
installation in Bujumbura and
Kobero
$1 million roll-out programme to
other borders
$3 million
Installation of Electronic Cargo Handling
System at OBR
Not yet planned
$1 - $20 million
Single window e-portals
Already in place
$40,000 - $90,000
Kobero Border Post Permanent
Construction
Installation of Integrated Border
Management at Kobero (including
hardware, software and training)
98.
TMEA report that benchmark unit costs are based on experience both within East
Africa and in other environments (although the source of these estimates has not been
verified in detail). They have been applied in the Burundi budget after taking into account
comparative project scale and specific aspects of the Burundian context. The benchmarks
and the unit costs used in budgeting together provide a guide for assessing the efficiency
with which actual outputs are achieved in practice. But TMEA has emphasised that unit
prices are very sensitive to the particular environment and, as the benchmark unit price
ranges illustrate, it is extremely difficult to standardise for a wide range of variables that
include timing; location; project scope; and project and contract type. The actual output
prices TMEA will pay crucially depend upon detailed design and the quality of the competitive
process through which implementation takes place. Efficiency also depends upon the time
period in which outputs are delivered.
99.
It is part of TMEA’s planned approach to improving its assessment of value for money
39
to consider how to better capture economy and efficiency metrics in the analysis of its
contracts and funding agreements, in way that comparisons can be effectively drawn
between different parts of its programme and with similar programmes in other environments
Effectiveness
100. The cost benefit analysis presented in Section C above assesses effectiveness in
terms of both savings in transport time as a result of TMEA Burundi’s interventions, the
consequent increase in export trade and the direct increase in revenue collection from
interventions at OBR. These measures provide, ex ante, a strong justification for Option 2
(providing benefits in the analysis of the whole Burundi programme which total $1,941 million
in constant prices through until 2026 - the equivalent of nearly 83% of Burundi’s GDP in
2011).
101. It follows that measuring the impact of TMEA Burundi’s interventions on transport time
in practice and relating these savings to project expenditure (for example in terms of cost per
unit of time saved) is essential to be able to judge value for money. This analysis will also
provide a basis for better future investment decisions. TMEA are currently considering how
best to collect information to make this assessment possible, including the possibility of
surveys of those intended to be the primary beneficiaries.
102. There are, however, important TMEA interventions where time savings are not the
primary objective and quantification of impact is difficult. This includes in particular TMEA’s
projects to strengthen the engagement of the private sector and civil society and to build the
capacity of government in leading the regional integration agenda. TMEA is also reviewing
how best to measure effectiveness in these contexts, although it is not clear there is a model
that has been established from similar interventions in other sectors.
E. Summary Value for Money Statement for the preferred option
103. In summary the proposed programme of additional finance for TMEA’s programmes in
Burundi will deliver value for money by:

investing in a “special purpose” organisation that is already developing a track record
and is uniquely placed to implement co-ordinated programmes both across East
Africa and within individual countries;

providing resources for programmes that “ex ante” analysis shows will have a very
high rate of return through their impact on Burundi’s trade competitiveness and
exports;

concentrating a high proportion of assistance on the OBR where customs duties can
be increased and border security enhanced, at the same time as reducing the burden
on the private sector.

focusing on the high time and cost savings that can be secured by improving the
efficiency of customs clearance processes, and removing non-tariff barriers to trade;

directly engaging in the key challenge of diversifying and expanding Burundi’s exports
through improving product standards, market linkages and the services available to
those engaged in trade;

ensuring investments that provide directly measurable trade competitiveness benefits
(especially from savings in transport time and costs benefits) are adequately
40
complemented and reinforced by key investments in the capacity of government, civil
society, and the private sector which are required to maximise the gains;

carefully monitoring the unit costs of delivering programme outputs to ensure they are
comparable with unit costs in other settings taking into account important contextual
factors;

carefully monitoring the results of investment in comparison with ex ante
expectations; and

working closely with other development partners.
Commercial Case
Indirect procurement
A. Why is the proposed funding mechanism/form of arrangement the right one for this
intervention, with this development partner?
104. The programme will be delivered through a Contribution Agreement with TMEA . This
choice of funding mechanism reflects the key considerations that:

the programme is too complex for DFID to contemplate contracting directly with
programme implementers;

TMEA has been established as a specific vehicle for the implementation of joint
donor support for regional integration in East Africa, working on a range of issues in a
co-ordinated way to maximise impact. It is recognised and supported by the EAC
secretariat and by all the EAC member states. As discussed here and in the Financial
and Management Cases it has established the systems and capacity needed to
deliver results in a way that provides accountability and value for money, and
effectively manages risk. It has also effectively established relationships with a range
of partners in government, the private sector and civil society.

Direct contracting of an alternative programme manager (or managers) by DFID
(following an OJEU competitive bidding process) would undermine the investment
already made in TMEA and the partnership between governments, donors, the
private sector and regional institutions on which it is based. The creation of a parallel
structure would be unlikely to deliver value for money. It would duplicate overhead
and management costs . It would also require the duplication of programme
implementation structures in a context in which making additional investments
through TMEA allows economies of scale to be fully exploited.
B. Value for money through procurement
105. Programme implementation will take place through a mix of procurement by TMEA
and procurement by partner agencies under the specific terms of TMEA grant agreements.
There are currently three grant agreements in TMEA’s Burundi programme with an
estimated total sterling value of just £68,000. There is no financial aid. Most procurement
under TMEA’s Burundi programme will fall within TMEA’s own procurement arrangements.
106.
Within TMEA’s procurement guidelines (see below) there is a requirement that
41
partners follow the standards set for direct procurement by TMEA where they undertake
procurement with TMEA funding on their own account. The Financial Case discusses in
more detail how TMEA manages fiduciary risk in partners’ operations including procurement.
The Management Case covers the grant agreement and memorandum of understanding
guidelines and requirements for financial and physical reporting linked to the release of
funds.
107. TMEA’s procurement guidelines are designed to ensure value for money through
detailed provisions that:

Follow international practice (drawing where appropriate on World Bank procurement
guidelines and the EU’s directive on public procurement).

Require the use of an open competitive bidding process for all large contracts
(defined as contracts expected to exceed $150,000).

Set out in detail the key elements of an effective open competition for large contracts
running in turn through the key processes - advertising to seek expressions of
interest; short listing, including the criteria to be used; the issuing of invitations to
tender; bid evaluation; contract negotiation and award; and the handling of
complaints. Bid evaluation is required to identify the “most economically
advantageous tender”, balancing price with other key technical considerations
including experience and track record.

Require the involvement of partners in bid assessment panels while maintaining
TMEA’s representation at a minimum of 50% (either directly or indirectly through
TMEA funded consultants).

Stipulate a restricted competitive bidding process as the norm for medium sized
contracts of between $40,000 and $150,000, again with detailed obligations covering
short listing, bidding, evaluation and contract award. Scope is provided in exceptional
circumstances for a waiver of competition by the Deputy Chief Executive Officer in
charge of corporate services, subject to a fair price declaration by the supplier.

Recommend a competitive bidding process for small contracts of less than $40,000,
but provide more scope for waiving competition below this threshold subject to an
obligation to secure value for money placed on the responsible TMEA director.

Recommend the use of framework contracts where it is clear that in a particular area
there is likely to be a requirement for consultancy services on a regular basis over a
significant period of time. The rules for competition between pre-qualified suppliers
within a framework depend on the size of contract using the same thresholds defined
elsewhere in the guidance. But no contracts exceeding $500,000 can be awarded
under a framework – in all circumstances contracts of this size must go to standard
open international competition. Framework contracts are currently being prepared for
TMEA’s work on programme evaluation and central corridor transport facilitation.
108. A central procurement directorate within the corporate services division manages all
TMEA procurement and takes responsibility for ensuring that partners undertaking
procurement on their own account meet TMEA standards for ensuring value for money. This
directorate has 4 fully qualified members of staff and in addition draws in short term support
from procurement interns when required to deal with peaks in work volume. A separate
tender committee comprising the Deputy Chief Executive Officer in charge of corporate
services and the Finance Director has responsibility for reviewing all procurement over
42
$150,000, to ensure that proper procedures have been followed prior to the award of a
contract.
109. The procurement directorate is able to draw on technical advice from staff within
TMEA’s implementation divisions. At the same time TMEA is conscious that in key areas and
where procurement contracts are large internal resources need to be supplemented by
specialist procurement support. For this reason Charles Kendall has been subcontracted as
procurement agents to undertake some procurement on TMEA’s behalf (for example the
purchase of testing equipment for national standards bureaus). Charles Kendall is a DFID
approved procurement agent and TMEA has been able to negotiate the same fee structure
used in their DFID business. In addition, if necessary, TMEA also access short term
technical support to advise on specialist procurement such as for information systems.
110. KPMG, as TMEA custodian, undertook an internal audit of TMEA’s procurement
process in 2011. Although the conclusions of this were largely satisfactory, a number of
recommendations were made to address delays that have meant in some cases
procurement has not taken place within agreed internal targets. These recommendations
have been acted upon. Maintaining comprehensive and up to date departmental and country
office procurement plans is recognised as a particular priority that needs careful monitoring.
Special procurement arrangements for the OBR
111. In a special arrangement TMEA has signed a Memorandum of Understanding with the
OBR which delegates day to day responsibility for preparing TMEA procurement to OBR’s
Commissioner General and its Tender Committee, supported by a TMEA funded
procurement expert. The arrangement also reflects concerns to limit TMEA staff exposure
to the security risks involved in maintaining frequent OBR work contacts. The OBR MoU
highlights the importance of adhering to TMEA procurement guidance (as set out above),
and TMEA retains the right to audit part or all of any procurement process overseen by OBR.
All contracts are signed and issued by TMEA, and TMEA make all payments.
Infrastructure procurement and Kobero border post
112. Procurement for the Kobero border post project will be handled within the OBR
procurement MoU.
113. Mechanisms will be established to ensure the process builds on TMEA’s growing
track record of procurement and construction of one stop border posts under the (regional)
East Africa Transit Improvement Programme (involving the competitive recruitment of
consulting design engineers and the subsequent contracting of civil engineers through
international tender).
114. TMEA’s infrastructure portfolio is expanding quickly and there is recognition that in
this context their procurement capacity needs to be strengthened. Adam Smith International
(ASI) has been contracted centrally in Nairobi to provide specialist advice in a short term
contract that will deliver:

standard procurement documents for the procurement and management of
consultants covering: the preparation of feasibility studies; provision of legal and
financial advice; project management; and civil works and the purchase of
equipment.
43

advice on the best policies and processes to follow in the procurement and
management of consultants delivering infrastructure services, including: advertising
prequalification, selection, negotiation and dispute resolution.

advice on how TMEA’s infrastructure procurement policies and procedures are
affected by national procurement rules (whether undertaking procurement directly or
providing resources for partners to procure).

recommendations on the staff and other resources required for TMEA to maximize
value for money and minimise risk associated with its infrastructure procurement
through to 2016.
115. Procurement for Kobero border post will proceed on the basis of a detailed
procurement plan that closely reflects both experience so far and the guidance from the ASI
review.
Financial Case
A. What are the costs, how are they profiled and how will you ensure accurate
forecasting?
116. Table 10 below shows the estimated costs of TMEA’s programme in Burundi between
2012 and 2016. Figures are in US dollars, the unit of currency TMEA uses for its financial
accounting. Expenditure over this period is expected to be $36.3 million which on top of the
$13.5 million already spent in 2010 and 2011 will bring total TMEA Burundi commitments to
$49.8 million. $13.5 million is programmed for OBR between 2012 and 2016 and a further $6
million for Kobero border post (excluding management, overheads and evaluation costs). A
more detailed breakdown of Table 10 is available (Quest doc 4056664).
117. These cost estimates reflect the detailed activities set out in TMEA’s draft Burundi
country strategy. Budgets have been calculated in part using standard unit costs for items
such as consultancies, travel and subsistence. Cost estimates for Kobero border post, new
information systems (including Asycuda World and electronic cargo tracking) and investment
in new standards testing equipment are based on experience elsewhere (taking into account
specific contextual factors).
118. TMEA’s budget separately identifies the costs of running TMEA’s Burundi office as
direct programme management expenditure. This budget line includes the costs for
monitoring and evaluation which is run centrally (calculated as 3% of total costs). In addition
TMEA’s Burundi budget makes provision for central TMEA overhead charges (covering the
costs of TMEA’s governance arrangements, financial management, human resource
management, procurement etc.) Overheads are calculated on the basis of 6% of total costs.
119. The expenditure profile shown in Table 10 was estimated in late-2012. It will need to
be updated as expenditure commitments are formally made.
44
Table 10: TMEA Burundi’s Programme Budget, 2012-2016 ($’000s)
Calendar Year
2012
2013
2014
2015
2016
Total
%
10,535
6,959
3,505
2,280
2,871
26,150
72
(8,672)
(512)
(1,060)
(4,407)
(1,000)
(1,052)
(1,000)
-
(1,731)
-
(13,463)
(5,971)
(38)
(16)
Improved Burundi implementation
of the regional integration agenda
787
575
330
100
-
1,792
5
Strengthened role of Burundi’s
private sector and civil society
705
200
190
180
-
1,275
4
Programme Management121
978
967
973
1,032
1,132
5,082
14
Central Overheads
765
512
294
211
236
2,018
6
13,770
9,213
5,292
3,803
4,239
36,317
100
Reduced transport and related
costs;
and
improved
trade
facilitation; including:
(OBR)
(Kobero Border Post)
Total
120. In 2010/11 and 2011/12 DFID provided a total of £6.5 million for TMEA’s Burundi
budget, fully disbursing an initial commitment made in 2010. Table 11 shows DFID’s
proposed additional contribution by financial year between 2012/13 and 2015/16. The £10
million additional expenditure proposed would bring DFID’s total commitment to TMEA
Burundi to £16.5 million. This represents an estimated 51% of all funding for TMEA Burundi
through to 2016, which also includes grants of approximately $18.5 million from Belgium and
$1million from USAID.
Table 11: Proposed DFID contribution to TMEA Burundi programme (£’000s)
UK Financial Year
2013/14
2014/15
2015/16
Total
Total Funding
4,000
4,000
2,000
10,000
121. DFID’s funding will be provided as an unearmarked contribution to a pooled donor
fund to maximise TMEA’s flexibility in managing its Burundi programme. Annual financial
statements, annual business plans and quarterly financial and progress reports will provide
the basis for regular updating of financial forecasts.
B. How will it be funded: capital/programme/admin?
122. DFID funding will be provided as £6.1m in RDel and £3.9m as CDel (for the
construction of Kobero border post). The funds are available in ARD’s operational plan.
123. DFID’s overall TMEA programme (including regional funding and funding for other
country programmes ) is overseen by ARD, including ARD’s Senior Growth, Trade and
Investment Adviser based in DFID’s offices in Dar es Salaam. The latter represents DFID in
TMEA’s over-arching Programme Investment Committee.
124. DFID’s country offices take the lead role in programme management for TMEA’s other
country programmes. However since the closure of DFID’s office in Bujumbura in 2012, the
lead in Burundi rests with Africa Regional Department. The A1 regional adviser based in Dar
es Salaam represents DFID on TMEA Burundi’s National Oversight Committee (see
45
Management Case).
C. How will funds be paid out?
125. ARD has fully disbursed its original £6.5m commitment to TMEA Burundi - in January
2011 (£2.5m.), September 2011 (£2m.), and January 2012 (£2m.).
126. To address the risk of DFID providing resources ahead of need, future payments will
be made on a quarterly basis. As at present, releases will depend upon a detailed
breakdown of estimated future costs against which the payment will be applied together with
a financial statement of the use of funds from the previous payment, including interest.
These financial breakdowns will link to TMEA Burundi’s annual business plans, financial
reports and reports of progress to the Programme Implementation Committee and to TMEA’s
annual audited accounts.
127. TMEA will in turn make funds available in accordance with the terms of its grant
agreements with partners, and the arrangements established for procurement under its own
contracts.
128.
All TMEA resources will be provided as grant funding.
D. What is the assessment of financial risk and fraud?
129. Financial risk and the risk of fraud are generally judged to be low (though see
reference to Kobero border post construction below). The reasons are:

TMEA’s financial management and procurement systems were designed with support
from KPMG in their role as Custodian for TMEA.

These systems have been reviewed by PwC in both 2010 and 2011 (as they have
been updated) and judged to be satisfactory. Implementation of the
recommendations made by PwC has been overseen by the Audit Committee of
TMEA’s Board of Directors and monitored by the Programme Implementation
Committee.

Ernst and Young act as TMEA’s external auditors. Annual audits have judged
TMEA’s accounts and systems to be satisfactory. Implementation of the
recommendations in Ernst and Young’s management letters is also overseen by the
Audit Committee of the Board of Directors and monitored by the Programme
Implementation Committee.

TMEA is considered compliant with DFID’s Due Diligence Framework. In line with
the guidance, a specific Due Diligence assessment is not required for continuation of
an existing programme.

KPMG, as Custodian, is responsible for day to day oversight of financial
management, internal audit, procurement and fiduciary risk.

This role includes the conduct of full Fiduciary Risk Assessments for any TMEA
public sector partner that requests financial aid. These assessments follow the
standardised methodology used by DFID (including the use of 8 good practice
principles and 15 benchmarks). Financial Aid is not provided where risk is judged to
be substantial or high until remedial action has been taken and the organisation
46
passes a follow up assessment. Financial Aid is provided where risks are viewed as
low or moderate only on the basis of mitigation measures designed to address any
weaknesses that have been identified. There are no cases of Financial Aid in TMEA’s
Burundi programme and there are not expected to be in the future.

KPMG also conducts a full Fiduciary Risk Assessment of private sector or civil
society organisations that request grant aid in excess of $1 million. Decisions follow
the same rules established for financial aid. Again there are no cases in TMEA’s
Burundi programme of grants in excess of $1 million and there are not expected to be
in the future.

For those partners receiving grant aid of less than $1 million TMEA’s rules provide for
KPMG to conduct detailed due diligence assessments. Due diligence assessments
also follow a standard methodology using interviews with key members of the
organisation, documentation review, and sample testing of internal controls to assess
fiduciary risk. Where fiduciary risk is judged to be high funding is not provided until
measures to address weaknesses have been implemented and tested in a follow up
assessment. Where risk is judged to be substantial, funding is linked to specific
mitigation measures which as a minimum will include actions to address
weaknesses, the capping of quarterly disbursements at $100,000 and detailed due
diligence and expenditure assessments of the first two payments. Continued funding
depends upon the outcome of these assessments and provision is made if necessary
for the re-imbursement of funds to TMEA. In cases where the initial due diligence
assessment judges fiduciary risk to be low or moderate funding is still likely to be
linked to the implementation of measures to strengthen financial systems.

Finally KPMG is responsible for carrying out a regular programme of internal audits.
Over the last year this has included internal audits of TMEA cash management and
procurement processes. In the period ahead the work scheduled includes value for
money audits of operational and administration expenses including travel.
Implementation of internal audit recommendations is again overseen by the Board of
Directors
130. TMEA is conscious that the impact of these provisions depends crucially on the way
in which they are implemented. In other TMEA country programmes there have been lapses
in the completion of due diligence assessments of potential civil society and private sector
recipients of grants which are now being rectified. In Burundi although grants currently total
just $105,000 to three recipients they are projected to increase and the risk involved in this
expansion will need to be carefully managed.
131. Recent DFID Internal Audit Department reports (DFID Rwanda and ARD) have
identified a perceived conflict of interest in KPMG’s role as both custodian and provider of
services to TMEA. While this risk was foreseen and mitigated in the original design by the
fact that the custodian contract must be reviewed and approved by the Programme
Investment Committee, steps are currently being taken to remove any potential conflict of
interest by clearly separating the two contractual roles.
132. The construction contract for Kobero border post will require close supervision.
Infrastructure contracts are well known to pose a high risk of corruption, but TMEA has
experience in the ongoing construction of four other one stop border posts within the East
Africa Transit Improvement Programme.
47
E. How will expenditure be monitored, reported, and accounted for?
133. An annual business plan and budget is prepared by TMEA Burundi and approved by
the Programme Investment Committee. The Programme Investment Committee will in turn
receive quarterly and annual reports of progress and expenditure (management accounts) to
provide the basis for monitoring spend against budget and assessing the reasons for any
variance. TMEA is currently finalising a new management information system that will allow
expenditure to be clearly linked to progress against outputs at programme level.
134. All TMEA’s funding agreements with partners make clear provision for regular
reporting on operational and financial progress, linked to the release of funds. Agreements
also make clear provision for the preparation of annual financial statements and audits.
Management Case
A. What are the Management Arrangements for implementing the intervention?
135. TMEA’s Burundi programme will be managed in accordance with TMEA’s constitution.
These arrangements will be captured in the contribution agreement under which DFID finance
is channelled. The key points are:

TMEA is a Kenyan incorporated not -for-profit company limited by guarantee with a
formal legal presence in each of the four other EAC partner states,

TMEA’s Programme Investment Committee (PIC) is responsible for high-level
supervision of all TMEA’s activities. The membership of the PIC consists of
representatives of donor investors122 together with a number of external stakeholders,
including the Secretary General of the EAC. All programmes are approved by the PIC,
as is the annual budget and business plan. The PIC meets quarterly.

A Custodian provides TMEA’s Board of Directors and in turn oversees all TMEA’s
fiduciary operations including financial management, audit, procurement, legal and tax
issues, and human resources. The duties of the Directors are governed by Kenyan law.
All decisions by Directors require a ‘’no objection’’ from the PIC. KPMG were appointed
as Custodians in 2009 (initially by DFID) and their contract currently runs until the end of
2013.

Legal advice has recently been contracted by TMEA at the request of donor investors
(especially DFID) to ascertain whether the Board and PIC can be combined in order to
streamline the decision making process. Consideration is being given to contracting a
professional Board to be appointed by donor investors as “members”. Donor investors
could either participate in the Board (subject to respective donor regulations on Board
membership) or participate at a programme and/or fiduciary committee level only.

Oversight Committees operate at both national and regional levels, in particular to
provide advice to the PIC on work plans, budgets and programme implementation.
These committees also meet quarterly and are composed of key partner implementing
institutions, private sector and civil society representatives, and representatives of
funding agencies. The Burundi National Oversight Committee is chaired by the Minister
48
at the Presidency in charge of East African Community Affairs, and in addition to the
funding partners includes representatives from the Ministry of Trade, Industry, Post and
Tourism (also at Ministerial level), the Ministry of Finance and Economic Development
Planning, the Ministry of Transport, Public Works and Infrastructure, the OBR, Burundi’s
Standards Bureau, the Agency for the Promotion of Investments, the Chamber of
Commerce, and the civil society forum. A number of donors not currently providing
funding attend as observers. TMEA’s Burundi Country Director acts as the secretariat

Additional consultation with key partners takes place six monthly in a Stakeholder
Forum organised around TMEA’s main work streams.

TMEA manages its day to day operations through an organisational structure which
includes both country level and regional operational teams and centralised support for
finance and human resource management, procurement, communications, and
monitoring and evaluation. Operational teams are able to share technical expertise.

The Burundi country programme team consists of a core of 7 staff including the country
director. It draws in particular on advice and support from teams implementing regional
programmes covering economic corridors, private sector and civil society advocacy, and
standards and non-tariff barriers to trade. The economic corridor team plays a
particularly important role in supporting the work of the country team with OBR and the
construction of the one stop border post at Kobero.

An over-arching Memorandum of Understanding with the Government of Burundi
provides the framework for TMEA Burundi’s relationship with its implementing partners.
This is essentially a facilitating agreement. Individual grant agreements set out the
detailed provisions covering the funding provided to individual private sector and civil
society organisations. A memorandum of understanding has been signed with OBR to
specifically cover OBR procurement arrangements (see Commercial Case).

TMEA’s model grant agreement provides for quarterly disbursements subject to receipt
of evidenced financial reports and satisfactory reports of progress. Additional
requirements may cover the need to address weaknesses identified in a pre-financing
due diligence assessment (see Financial Case). Financial reports must summarise
income and expenditure and explain any variances from the agreed budget. Progress
reports must explain activities and milestones reached and also cover any variations
from the work programme originally agreed. All grant agreements make provision for the
completion of a project completion report.
DFID’s management arrangements
136. Following the 2012 closure of DFID’s office in Bujumbura, Africa Division Directorate has
a watching brief for Burundi but this is expected to be light touch. DFID’s management of its
support for regional integration is shared between Africa Regional Department in London and
ARD’s Senior Growth, Trade and Investment Adviser based in Dar es Salaam (who has
oversight of DFID’s overall support for TMEA and represents DFID in the Programme
Investment Committee). In the absence of a DFID office the latter also represents DFID on the
Burundi NOC.
137. There is close collaboration with the FCO. The High Commissioner in Kigali, who is also
Ambassador to Burundi visits Bujumbura twice a month. The role of the Ambassador is
particularly important in working alongside EU colleagues (especially the EU Delegation) as
well as World Bank and IMF to maintain strong diplomatic dialogue with the Government on
49
support to OBR and economic reforms more widely.
B. What are the risks and how these will be managed?
Risk
Probability
Impact
Mitigating Action
Weak political and bureaucratic
commitment to regional integration
process and private sector
development
Low
High
Emphasis on delivery of tangible
benefits for business and society (e.g.
removal of non- tariff barriers)
demonstrates the programme’s payoffs.
Programme support to increase
advocacy and research capacity of
Burundian CSOs and PSOs strengthens
accountability.
Weak Burundian implementation of
EAC protocols and programmes
Medium
High
Programme support to MPACEA
increases capacity to implement and
oversee implementation of EAC
commitments.
Programme support to Burundian CSOs
and PSOs strengthens accountability
Vested interest groups undermine or
block implementation of regional
integration reforms especially
increased effectiveness and
independence of the OBR (including
through threats of violence to senior
personnel), and/or misuse of
additional revenues generated by
OBR
Medium
High
TMEA interventions, especially in OBR,
informed by detailed analysis of drivers
of change and political economy in key
sectors which is regularly reviewed and
updated
TMEA maintains close relationship with
FCO and draws in their support when
needed to help deal with OBR
challenges
TMEA helps DFID/FCO maintain strong
joint position on OBR challenges with
other donors especially EU members.
Contingency plan developed and
regularly updated that identifies TMEA’s
programme response to possible OBR
scenarios, including at one extreme the
circumstances under which support will
be withdrawn
Programme support to Burundian CSOs
50
and PSOs strengthens accountability.
National and regional instability
disrupts TMEA work programmes.
Medium
Medium
Wider DFID conflict prevention activities
(outside Burundi) reduce risk of regional
conflicts.
Contingency plan developed and
regularly updated that identifies TMEA’s
response to deteriorating
national/regional instability including the
circumstances under which support will
be completely withdrawn.
Programme interventions are poorly
implemented by TMEA and it’s
implementing partners.
Low
High
PIC (supported by the Burundi NOC)
effectively fulfils its responsibility to
ensure:

TMEA’s track record informs future
ambitions;

business plans realistic and fully
financed;

close monitoring of budgets and
progress against plans

monitoring is focused on results

remedial action is instituted
promptly.
C. What conditions apply (for financial aid only)?
N/A.
D. How will progress and results be monitored, measured and evaluated?
138. As highlighted in the Financial Case, TMEA has set aside 3% of programme costs to
cover central expenditure on monitoring and evaluation managed by TMEA’s Knowledge and
Results Director . This means that in total TMEA’s operational budgets make explicit provision
for $7.7 million of monitoring and evaluation expenditure over the full period 2010-2016. This
includes an allocation of around $1 million from the Burundi programme between 2012 and
2016. These figures do not include the time and other resources that are committed to
monitoring and evaluation at a decentralised level by individual projects and programme
managers.
139. A comprehensive M&E strategy123 integrates monitoring and evaluation throughout the
programme management cycle. TMEA’s approach follows the principles established by the
OECD-DAC. The Donor Committee for Enterprise Development “Standard for Measuring
Results in Private Sector Development” is being applied on some projects. Project and
programme level monitoring and evaluation plans are developed using a participatory approach
working closely with implementing partners.
140.
The key objectives of TMEA’s approach to monitoring, evaluation and learning are to:
51

make explicit how and why TMEA is doing what it is doing, and how this is expected to
contribute to long-term outcomes;

ensure TMEA has a clear story about what it would like to see change, and how and why
what TMEA and partners are doing is expected to contribute to these changes;

provide sufficient evidence to be able to explain what happened and estimate TMEA’s
contribution;

monitor the implementation of activities and outputs against plans and expenditure
against budgets;

analyse what works, and what does not, and provide relevant and timely information to
assist implementing partners and decision makers to adjust projects in response to
implementation issues.
141. All TMEA projects have a project monitoring plan which reflects a chain of expected
results (as summarised in programme log-frames). Monitoring plans are agreed between the
relevant programme director and the knowledge and results director, and in all cases cover
activities and outputs. In the case of larger projects such as TMEA’s support for OBR,
monitoring plans will also cover expected outcomes. Reporting against these plans is provided
quarterly with a system of traffic lights to assess expenditure against budget, the achievement
of outputs and, if included in the plan, the achievement of outcomes. This reporting is
synthesised and consolidated for TMEA senior management and the PIC. It provides the basis
for strategic decision including making adjustments to individual projects and wider
programming.
142. A management information system is in the final stages of development into which
reporting will be entered directly, simplifying the task of analysis as well as significantly
increasing its potential scope. The system is expected to be fully operational in time for
reporting in mid-2013. Senior management review and PIC meetings will subsequently be
better able to consider particular issues and themes as well as more general progress.
143.
TMEA’s evaluation plan, which is agreed by the PIC, makes provision for:

Thematic and project specific evaluations covering a sample of TMEA’s programme.
The purpose and scope of these is closely associated with need - for example to
understand why similar projects seem to have quite divergent outcomes or why there are
sharp differences between planned and actual performance.

Impact evaluation to help develop a better understanding of the impact of TMEA’s
projects and programmes over the long term (intended, unintended, positive and
negative). TMEA’s impact evaluation approach is currently being developed with support
from external consultants. The work programme will include both programmatic and
thematic evaluation.

Value for money evaluation to help TMEA better understand both: the value for money
(economy, efficiency and effectiveness) of its activities, projects and programmes funds;
and how well TMEA and its partners have integrated value for money considerations into
implementation. The approach to value for money evaluation is also currently being
developed with support from external consultants.
144. The detailed evaluation plan is reviewed annually to ensure it is responsive to changes
in TMEA’s portfolio and the issues flagged by programme monitoring.
52
145. A mid-term review of the support to the Revenue Authority (OBR) is currently ongoing.
Burundi programmes will also be covered by thematic evaluations which are anticipated in
areas such as TMEA’s support for improved standards, the removal of non-tariff barriers, and
the strengthening of national EAC ministries.
External Monitoring and Evaluation
146. Externally TMEA’s funding partners take it in turn to commission an annual programme
review which is organised centrally in Nairobi to cover TMEA’s programme in full (i.e. including
Burundi). In 2011 DFID coordinated this exercise on behalf of other PIC members, and
Denmark led the 2012 review.
147. DFID has recently agreed with other funding partners that it should lead a
comprehensive independent external evaluation process. In part this reflects concern that
TMEA’s approach to evaluation does not clearly meet the needs of all stakeholders. The
proposal for independent evaluation also captures concern that evaluation activities managed
by TMEA may not be seen to have the levels of impartiality required for international credibility.
148. DFID’s intention is that the independent evaluation will proceed in the context of a
strategic framework agreed with TMEA in which internal and external evaluation are clearly
complementary and do not involve duplication of effort or wasted resources. One option being
considered is to use DFID’s Global Evaluation Framework Agreement for contracting. Funds for
the external evaluation will be part of ARD’s scale up of TMEA’s Regional Programme.
Logframe
Quest No of logframe for this intervention: 4038203
53
ANNEX A
Option 1: Maintain support for TMEA Burundi’s programme at the levels agreed in 2010 (alongside investments TMEA is making across the East
Africa region) ($34 million)
Activities124
Output Benefits
Outcome Benefits
Support to increase revenue collection
and improve efficiency and effectiveness
of cross-border processing at border posts
in Burundi ($26 million) through:
 100% of large taxpayers compliant by end 2012
Increased trade competitiveness as a
result of:
 75% of registered small and medium taxpayers compliant by
end 2012
-
Implementing domestic tax reforms
 Stricter controls over petroleum products and exemptions
-
Renovating OBR buildings and improving
electricity supply
 3 laws drafted related to tax on direct income and tax
procedures.
-
Implementing an organisational
development plan for Office Burundais de
Recettes (OBR)
-
Training of staff
-
Conducting comprehensive
communications and anti-corruption
campaigns
-
Designing and building a prefabricated
administrative block at Kobero border post
-
Implementing ASYCUDA World customs
management IT system125
-
Implementing an electronic single window
for entering and approving customs
clearance documentation (using the
ASYCUDA World platform)126
-
Implementing ASSET transit bond
management system at the national level127
-
Implementing a transit cargo management
-
 VAT operational and VAT tax law updated
 Reduction in operation costs due to physical centralisation
and improved computer systems.
 OBR receives ISO certification for all departments by end
2013
Improved business environment,
including fiscal environment through:

Increase in revenue collection
from BIF301.2 bn (2009) to
BIF1100 bn in 2016

Reduction in incidents of bribery
when paying taxes in Burundi
(the bribery index level will
reduce from 90.2 in 2010 to 25
in 2016, as measured by
Transparency International128)
 Improved working conditions and career opportunities for
OBR staff.
-
50% reduction in time taken to pay
taxes.
 Training of staff in the following areas:
-
66% reduction in time taken for OBR
to register a taxpayer.
-
50% increase in domestic tax base of
registered taxpayers
-
Average of 1 day reduction in cargo
transit times by 2016
-
Faster customs operations at borders
including a 92% reduction in time to
clear goods from Burundi’s internal
container depot (depending on the
customs channel)

Leadership skills and SMART objectives: 50 staff

Management and follow up of audit cases and
reporting: 12 team leaders

Note taking and use of auditors notebooks: 40 auditors

Tax Audit Selection criteria and Audit Programme: 25
managers

Management of VAT refund claims: 4 team leaders

Practical (field based) audit training in the large
54
Option 1: Maintain support for TMEA Burundi’s programme at the levels agreed in 2010 (alongside investments TMEA is making across the East
Africa region) ($34 million)
Activities124
system
Output Benefits
Outcome Benefits
taxpayers office: 24 staff
 Improved taxpayer understanding on the rights and
obligations of taxpayers as well as how to comply with tax
laws through
 At least 2 workshops or seminars per month with at least 50
participants per session
 Temporary border post office will allow improved
administration of Burundi customs at Kobero border post
from 2013
 ASYCUDA World automated system for customs data
operational in major internal customs posts by 2013
 60% of all customs transactions completed using ASYCUDA
World and the electronic single window systems by 2013
 ASSET operational by end 2013
 Implementation of new electronic cargo tracking system that
allows Burundi trade to avoid border and other delays in
transit countries
 50% of transit traffic covered by this system by 2014
Support to remove non-tariff barriers ($0.7
million) through:
-
Developing a strategy for NTB removal
-
Establishing a baseline measurement of
NTBs within Burundi
-
Developing and implementing a monitoring
and reporting system for NTBs
-
Coordinating work of the NTB national
 Developed informed national monitoring position on the
content, impact and process to remove priority NTBs both in
Burundi and other EAC states
Increased trade competitiveness as a
result of fewer NTBs by 2016
 Work plan developed and implemented for the removal of
key NTBs in Burundi
55
Option 1: Maintain support for TMEA Burundi’s programme at the levels agreed in 2010 (alongside investments TMEA is making across the East
Africa region) ($34 million)
Activities124
Output Benefits
Outcome Benefits
 5 reforms in the areas of business registration and paying
taxes carried out.
Increased trade competitiveness as a
result of a better business climate
monitoring committee
Support to IFC ($1.7 million) for:
-
Supporting the World Bank Doing Business
reform process
Increasing public and private sector
understanding of the business environment
and reform process
 Limited improvement in Burundi’s World Bank Doing
Business report
Support to national government ($4.2
million) for :
Increased trade competitiveness as a
result of:
Ministry of Trade
 Census of business licences
-
Support for policy development
-
Increasing transparency of business
licence requirements
 Improved capacity for trade policy analysis and trade
negotiations in government
Ministry of East African Community
-
-
Developing economic analysis to support
Burundi’s position in regional negotiations
Developing evidence on the impact of the
single customs territory
Developing and implementing a monitoring
and evaluation framework for EAC
commitments related to Customs Union
Legal reform related to the implementation
of the Customs Union Protocol (MINEAC)
 Improved monitoring of compliance with detailed actions
required by customs union protocol
-
Government implementation of a
comprehensive regional integration
agenda
-
More effective Burundian
participation in regional and global
trade negotiations
-
Greater Burundi compliance with
detailed actions required by EAC
decisions including:
 Better harmonisation of Burundian laws and policies with the
customs union protocol
 Monitoring system in place for customs union protocol
implementation which is aligned to the East Africa Monitoring
System
 Information on status of implementation of EAC decisions
and agreements available to the general public
 At least 770 men and 330 women people improve English
language skills by at least 1 CEF proficiency level 129,

-
completion of 40% of specific
Burundi commitments by 2015
Strong private sector and public
understanding and support of
regional integration, including:

at least 50% of those surveyed
across government, the private
sector and the wider public
demonstrate a good
56
Option 1: Maintain support for TMEA Burundi’s programme at the levels agreed in 2010 (alongside investments TMEA is making across the East
Africa region) ($34 million)
Activities124
-
English language training for Ministry staff,
civil society and business and media
representatives
Output Benefits
including Assistant Ministers, Permanent Secretaries, upper
level civil society, and business and media representatives.
understanding of the EAC
 22 English teachers trained in TESOL
Support to the private sector and civil
society ($1.00 million) for:
 Media campaigns in English on Regional Integration and
Trade Facilitation
-
 1 Impact study on the impact of Regional Integration
(FORSC)
Advocacy research and campaigns through
newspapers and television outlets
Outcome Benefits
Stronger understanding by the wider
public of regional integration and trade
facilitation
 Work with small women traders across borders (Search for
Common Ground)
Support to improve the Bureau of
Standard’s (BBN’s) capacity to test
materials and standards within Burundi
(additional $0.4 million) through:
 Business plan 2013-2018 for BBN in place which covers
proximate analysis, physical analysis, mycotoxins in coffee,
vitamins, metal, additives, pesticides, alcohol, essential oil
and microbiology analysis.
-
 Memorandum of Understanding in place with Kenya Bureau
of Standards
Development of a memorandum of
understanding and national action/business
plan for the development of the laboratory
-
Training in quality and laboratory
management
-
Training in proximate analysis
-
Development of essential oils analysis
-
Study of analytical need in Burundi and
recommendations
-
Establishing a microbiology laboratory
-
Alignment of standards policy to EAC
Standards Act
 2 training workshops held for BBN staff
Increased trade competitiveness as:
-
Quality of products is improved in
line with regional and international
standards especially in areas where
product certification is introduced
Increased trade competitiveness as a
result of:
-
Tests being conducted at lower
direct cost to producers (up to 40%
reduction for coffee and essential
oils and 63% reduction for metals).
-
90% reduction in the average time
taken to conduct standards’ tests as
a consequence of testing taking
place in Burundi rather than in other
countries
-
a consequent reduction in capital
57
Option 1: Maintain support for TMEA Burundi’s programme at the levels agreed in 2010 (alongside investments TMEA is making across the East
Africa region) ($34 million)
Activities124
Output Benefits
Outcome Benefits
costs.
Option 2: Significantly increase DFID support to allow TMEA to expand its programmes in key areas (additional $15.8 million)
Activities
Output benefits
Outcome benefits
All activities under option 1 plus the following additional interventions
Support to increase revenue collection
(additional $2 million) for:
 Simplified and efficient processes (ICT) and
procedures to facilitate business growth.
Increased foreign direct investment in
Burundi
- Additional 100 person months of technical
assistance to implement fiscal
decentralisation, custom efficiency, design
and implement a VAT and other domestic
tax laws
 Simplification of VAT, excise and income tax
systems and harmonization across the region.
Reduction in time taken to carry out
business processes, including paying
taxes
Improve efficiency and effectiveness of
cross-border processing at Kobero
border post in Burundi (additional $6
million) through:
- Designing and building one stop border
post infrastructure at Kobero border post
 One Stop Border Post infrastructure built at
Kobero/Kabanga border. Infrastructure will
include offices for border agencies in addition to
customs (immigration, police), goods verification
shelter, interview rooms, parking yards,
warehouses, sanitary facilities, etc.
- Implementing an integrated border
management system at Kobero border
 More efficient border processes (IBM) at Kobero
border post
 Improve procedures in the custom departments
(Asycuda Phase 2, risk management, Single
Window)
Reduction in time taken to cross Kobero
border post by 30% by 2016
58
Option 2: Significantly increase DFID support to allow TMEA to expand its programmes in key areas (additional $15.8 million)
Activities
Output benefits
Outcome benefits
 Microbiology lab established to test food, water,
animal feed and fish
Increased trade competitiveness as:
post
Support to improve BBN’s capacity to test
materials and standards within Burundi
(additional $0.5 million) through:
- Development of a memorandum of
understanding and national
action/business plan for the development
of the laboratory
- Training in quality and laboratory
management
- Training in proximate analysis
- Development of essential oils analysis
- Study of analytical need in Burundi and
recommendations
- Establishing a microbiology laboratory
 BBN laboratories upgraded in particular through
the procurement and installation of over 47 types
of new testing equipment and upgrading of
current equipment
 BBN capacity increased to cover testing in
particular of coffee and essential oils.
 Legislation and regulation for standards, quality
assurance and SPS drafted to align with EAC
SQMT Act
 BBN ISO certified on quality and management
 34 different types of tests can be performed by
BBN.
- Alignment of standards policy to EAC
Standards Act
Increased trade competitiveness as a
result of:
- Tests being conducted at lower
direct cost to producers (up to 40%
reduction for coffee and essential
oils and 63% reduction for metals).
- 90% reduction in the average time
taken to conduct standards’ tests as
a consequence of testing taking
place in Burundi rather than
overseas
- a consequent reduction in capital
costs.
Additional support to IFC (additional $1
million) for:
 Additional improved ranking in World Bank Doing
Business reports
- Supporting implementation of the Doing
Business reform process
 15 reforms implemented in the areas of business
registration, obtaining construction permits,
getting electricity, registering property, paying
taxes, trading across borders and resolving
- Tax simplification
- Quality of products is improved in
line with regional and international
standards especially in areas where
product certification is introduced
Increased trade competitiveness as a
result of a better business climate
59
Option 2: Significantly increase DFID support to allow TMEA to expand its programmes in key areas (additional $15.8 million)
Activities
- Supporting implementation of the
Common Market Protocol
- Identifying bankable PPP projects in the
agribusiness sector
- Simplifying the fiscal environment for
SMEs
- Promoting agribusiness and tourism
sectors
Output benefits
Outcome benefits
insolvency.
 SME tax regime simplified and tax base
expanded to include SMEs;
 Alignment of tax incentives across the EAC
 10% reduction in time and cost to comply with tax
obligations
 Inventory of all commercial laws that need to be
harmonised under the common market protocol
completed
 A pipeline of feasible PPPs or private sector
investments in agribusiness is identified
 PPPs established for identified tourism projects
 Legislative and regulatory framework for tourism
improved
Additional funding to the Ministry of
Trade (additional $0.75 million) for:
- Further increasing transparency of
business licence requirements
- Formulating a private sector development
strategy
- Formulating a WTO engagement strategy
- Further support for policy development
- Support to improve donor coordination
 Private Sector Development strategy developed
 Improved capacity for trade policy analysis and
trade negotiations in government
Increased trade competitiveness as
result of Increased dialogue between
the stakeholders (donors, government
and private sector)
 Donors better organised because of monthly
meetings and implementation of aid policy.
 Establishing an Information Centre in the Ministry
of Trade
 Drafting the legal Framework for the Handicraft
Sector
60
Option 2: Significantly increase DFID support to allow TMEA to expand its programmes in key areas (additional $15.8 million)
Activities
Output benefits
Outcome benefits
Additional funding to the Ministry of East
African Community - (additional $3
million) for:

Better harmonisation of Burundian laws and
policies with the common market protocol – 40
have been identified as requiring attention

Improved awareness of the EAC common market
amongst the Burundian population
- At least 60% of all relevant domestic
laws related to the common market
are revised in keeping with EAC
requirements.
- Developing economic analysis to support
Burundi’s position in regional negotiations
- Developing evidence on the impact of the
common market

- Developing a regional integration strategy
and policy
Monitoring system in place for common market
protocol implementation which is aligned to the
East Africa Monitoring System
- Developing and implementing a regional
integration communications strategy

- Developing and implementing a
monitoring and evaluation framework for
EAC commitments related to common
market
Information on status of implementation of EAC
decisions and agreements available to the
general public

At least 1540 men and 660 women people
improve English language skills by at least 1
CEF proficiency level130, including Ministers,
Permanent Secretaries, upper level civil society,
and business and media representatives.

40 English teachers trained in TESOL

Ministry website has 75% increase in traffic

80% of actions outlined in the national strategy
for regional integration are implemented
- Legal reform related to the implementation
of the common market
- Additional English language training for
Ministry staff
Support to the private sector and civil
society (additional $0.75 million) for:
- Advocacy training
 At least 7 private sector and civil society
organisations trained in advocacy skills and able
to engage in EAC issues , including:
- Strong private sector and public
understanding and support of
regional integration, including:
 at least 50% of those surveyed
across government, the private
sector and the wider public
demonstrate a good
understanding of the EAC
- Increased trade competitiveness as
a result of:

Strong private sector and civil
61
Option 2: Significantly increase DFID support to allow TMEA to expand its programmes in key areas (additional $15.8 million)
Activities
Output benefits
- Developing EAC integration advocacy
strategies

AFAB: Association Fémines

ABADET: Association des Transportateurs
- Specific advocacy research and
campaigns

CFCIB: Federal Chamber of Commerce

FORSC: general platform of local NGO:
monitoring impact of Regional Integration

Olucome: monitoring of corruption in area of
trade
- Consultation between the government and
business community
- Capacity building in civil society
organisations
- Raising EAC awareness in the private
sector, civil society and the population as
a whole.
- Promoting specific private sector
organisation export diversification
activities, support to development of PPP,
particularly flowers, fruits, tourism,
professional services

ABUCO: consumers organisation, will work
on obstacles for cross-border trade (smallholders)

CAFOB: Informal women traders
Outcome benefits
society understanding of regional
trading opportunities including:
 50% increase in Federal
Chamber of Commerce
members’ knowledge of
opportunities provided by
EAC integration
 50% increase in Burundi
FORSC members’
knowledge of opportunities
provided by EAC integration

 Improved capacity of Burundi Chamber of
Commerce to lobby on tax and customs issues,
to assist tax compliance, including establishing a
web page to provide public information
Increased awareness of policy
makers and general public of
challenges facing the private
sector

 50% increases in public awareness of regional
integration disaggregated by target group and
gender
Stronger accountability of
government to general public on
the impact of regional integration

Increased public support for
regional integration.
 Four PSO/CSO advocacy programmes
completed
 Four PSO/CSO capacity building programmes on
regional integration completed
 Five media houses produce weekly programmes
to measure the impact of Regional Integration
and Trade Facilitation
62
Option 2: Significantly increase DFID support to allow TMEA to expand its programmes in key areas (additional $15.8 million)
Activities
Output benefits
Outcome benefits
Pipeline projects ($1.8 million):
Pipeline projects
TBD
- Logistics follow-up
-
- Industrialisation
- Single Customs Territory
- Trade in services
Asycuda Roll-out Programme (11 border posts)
– Project appraisal under development
- Competitiveness strategy implemented and
market development programme developed
- Alternative Central Corridor Study (Mombasa –
Arusha – Bujumbura) carried out
- Proposing a new structure for the Regulatory
Framework in Burundi
63
1
The value of merchandise exports has grown by more than 300% in East Africa since 2002 ((World
Bank, 2012d)
2
Around half the global average on a per capita basis.
3
(Nathan Associates, Inc., 2011)
4
(IMF, 2012)
5
(Huchet-Bourdon, Lipchitz & Rousson 2009), (World Bank 2012), (Acemoglu, Johnson & Robinson
2000), (Easterly & Levine 2003), (Rodrik, Subramanian & Trebbi 2004)
6
(EAC Secretariat 2012)
7
(EAC Secretariat 2012)
8
(SID, 2012)
9
(Srinivasan & Bhagwati 1999), (Frankel & Romer 1999), (Rodriguez & Rodrik 2000)
10
(Dollar & Kraay 2001), (OECD 2009), (ODI 2005)
11
(SID, 2012)
12
(EIF 2012)
13
CSLP2 19
14
Ibid
15
(EIF 2012) p56
16
(EIF 2012)p58
17
(EIF 2012)p57
18
(EIF 2012), p21.
19
(UN Comtrade n.d.)
20
We took as a proxy the volume of Burundi cargo handled through Dar, Mombasa and coming from
the Southern corridor, DTIS p97 and 102. From 2006 to 2010 Dar handled 61%, Mombasa 20% and
19% came through the Southern Corridor.
21
(EIF 2012) p107
22
(EIF 2012)p91
23
Review of the Impact of Trade Facilitation Instruments, p7
24
OBR Progress reports
25
(World Bank 2011b).
26
(EIF 2012)
27
(EIF 2012) p79
28
(EIF 2012)
29
(Yamuremye et al. 2011)
30
(EIF 2012) p33, (IFC 2012), p.2.
31
(UK Department for Business Innovation and Skills, 2011)
32
(International Development Committee 2012)
33
Key staff include: Infrastructure Director (George Wolf). Former investment banker with Citigroup
(USA), where he helped finance $15 billion of projects in power, water and transport sectors, and
worked at the World Bank’s Project Finance & Guarantees Group.
34
(Saana Consulting, 2012)
64
35
The aggregate corruption index includes indicators of likelihood, prevalence, impact of bribery,
share of bribe for each relevant public sector. The average values are combined into one indicator
which is scaled from 0 to 100 (100 being the most corrupt). For further details refer to Transparency
International’s East Africa Bribery Index Report 2012.
36
Review of the Impact of Trade Facilitation Instruments, Version 1-3 (draft) August 2012, IDS/Crown
Agents for TMEA; and Trade Integration in the East African Community, (draft) August 2012,
Gonzalez and Cirera, for TMEA
37
(Turner, Nguyen & Bird 2008)
38
(OECD 2009)
39
(Gourdon, Maystre & de Melo 2008)
40
(Dollar & Kraay 2001)
41
(Srinivasan & Bhagwati 1999), (Sachs & Warner 1995), (Frankel & Romer 1999)
42
(World Bank 2009)
43
(Huchet-Bourdon, Lipchitz & Rousson 2009)
44
(Harrison 1996), (Rodriguez & Rodrik 2000), (Srinivasan & Bhagwati 1999)
45
(Robinson & Thierfelder 1999)
46
(Limao & Venables 1999)
47
(Hoekman & Nicita 2008)
48
(World Bank 2013)
49
(Teravaninthron & Raballand 2008)
50
(Hummels & Schaur 2012)
51
(Djankov, Freund & Pham 2006)
52
(World Bank, 2009)
53
(Rippel 2012, p. 79).
54
(Land 2004)
55
(IFC/World Bank 2012, p. 72)
56
(IFC/World Bank 2012, p. 72).
57
(IFC/WB 2012)
58
(IFC/WB 2012)
59
(IFC/World Bank 2012, p. 58)
60
(IFC/World Bank 2012, p. 58).
61
(IFC/World Bank 2012, p. 58)
62
(IFC/World Bank 2012, p. 58)
63
(Khalilzadeh-Shirazi 1991)
64
(World Bank 2007, p. vii)
65
(World Bank 2007, p. vii)
66
(World Bank 2007, p. vii)
67
(World Bank 2007, p. vii)
68
(World Bank 2007, p. vii)
69
(World Bank 2007, p. vii)
65
70
(Ben Barka 2012)
71
(Ben Barka 2012)
72
(IFC/WB 2012, p. 60)
73
(Crown Agents & Institute of Development Studies 2012, p. 43)
74
(Crown Agents & Institute of Development Studies 2012, p. 44)
75
(Uganda Revenue Authority 2007, p. 35)
76
(Crown Agents & Institute of Development Studies 2012, p. 55).
77
United Nations Network of Experts for Paperless Trade in Asia and the Pacific (UNNExT), Brief
Number 5, January 2011, "Towards a Single Window Trading Environment"
78
(Diagne 2011, p. 7)
79
(Linington 2005, p. 9)
80
(Arvis et al. 2012, p. 20)
81
(Alfitiani 2010, p. 79).
82
(Alfitiani 2010, p. 79)
83
(Alfitiani 2010, p. 85)
84
(Crown Agents & Institute of Development Studies 2012, p. 43)
85
(Kirk 2012, p. 102).
86
As opposed to a legally binding approach with sanctions to enforce compliance, moral suasion
encourages compliance through establishing committees and other institutional structures (i.e.
technical expert groups) requiring dialogue, and the exchange of information.
87
(Kirk 2012, p. 102)
88
(Kirk 2012, p. 102)
89
(Mengistae 2012, p. 116)
90
(World Bank 2012b, p. 28)
91
(World Bank 2012b, p. 28)
92
(World Bank 2012b, p. 28)
93
(World Bank 2012b, p. 28)
94
(World Bank 2007, p. vii)
95
(World Bank 2007, p. vii)
96
(World Bank 2007, p. vii)
97
(IFC/World Bank 2012, p. 72)
98
(IFC/World Bank 2012, p. 72)
99
(IFC/World Bank 2012, p. 72).
100
(IFC/World Bank 2012, p. 72)
101
(IFC/World Bank 2012, p. 58)
102
(IFC/World Bank 2012, p. 58).
103
(IFC/World Bank 2012, p. 58)
104
(IFC/World Bank 2012, p. 58)
105
(GoU June 2010-July 2011) (GoU 2011/12)
106
(DFID 2010)
66
107
(BAF 2010), (DFID 2011)
108
(TMSA, 2011)
109
(TMSA, 2011)
110
(IDB 2010)
111
(World Bank 2012a)
112
(Aldaz-Carroll 2006)
113
CPCS Northern Corridor study (CPCS, 2010).
114
Limao & Venables, 1999 (see note v below)
115
UN COMTRADE data is used to generate a forecast of traffic and trade flows. Time series data or
forecasts for transit time/delay and transport costs baseline estimates data are taken from the
Corridor Diagnostic Study (Nathan Associates, Inc., 2011) and the CPCS Northern Corridor study
(CPCS, 2010). The counterfactual assumes regional average annual traffic growth of 4.9%. For a full
explanation of how intervention and counterfactual conditions were calculated refer to the TMEA Cost
Benefit Analysis Update for TMEA Programmes.
116
The targets have been arrived at through an estimation of the impact of TMEA activities along the
two main transport corridors. The forecasts were calculated using the data described previously and
making the following assumptions: cost elasticity of trade transport is 2.5 for landlocked countries
(30% of the EAC economy) and 1.0 for coastal countries (70% of the EAC economy) (Limao &
Venables, 1999) and 50% of transport costs are driven by time. All components of trade (including
exports) are assumed to be affected proportionally by exogenous factors. A 15% reduction in
transport time therefore yields, ceteris paribus, about a 10% increase in external trade, and a 7%
reduction in transport time yields about a 5% increase in external trade.
117
Strictly speaking, such revenue gains should not be considered as an economic benefit as the
collection of taxes represents a transfer payment within the economy. However, increased revenues
do give some indication of the efficiency gains expected to result from a more equitable and efficient
taxation system. Better revenue administration is likely to both reduce economic distortions ithint he
economy and to improve income distribution.
118
Note that the cost benefit analysis was complete before 2011 figures were available. In fact in
2011 BIF 437 billion were collected, as indicated in the logframe.
The baseline figures for border crossing were updated in 2012, after the completion of TMEA’s
CBA. The new baseline numbers have been used to calculate benefits.
119
120
These figures exclude TMEA programme management, overheads and monitoring and evaluation
121
TMEA is concerned that in practice some of the staff costs that it currently allocates to programme
management should be allocated to programme implementation since they reflect expenditure on
essential technical expertise that would otherwise need to be procured through consultancy contracts.
An exercise is currently underway to re-allocate some programme managements costs in this context.
122
Donor representatives currently comprise Denmark (Chair), UK (Vice Chair), Sweden and
Netherlands. Belgium has a right to membership (active contribution over £1m), but has chosen a
silent partnership with DFID.
123
TMEA (2011)
124
Costs are based on spending from 2010-2014
125
Customs Management Systems manage revenue authorities' customs department business
processes with the biggest functionalities being processing of import and export declarations, risk
management and selectivity, managing commodity valuations and transit bonds, etc.
126
National electronic single windows allows trade facilitation agencies to process trade documents
electronically. These agencies include bureaus of standards, sanitary and phytosanitary
organisations, tea and coffee boards etc. that issue export certificates in cross-border trade. A
national single window is established which these agencies are joined to electronically through
eportals and through which documents are submitted to the central single window system.
67
127
ASSET proposes that duties and taxes payable at the country of destination are assessed and
paid into an escrow-like facility before the start of the transit operation. This amount once paid will
serve as the guarantee to revenue authorities in transit countries and will serve as the duties and
taxes payable once the goods reach the intended destination.
128
The aggregate corruption index includes indicators of likelihood, prevalence, impact of bribery,
share of bribe for each relevant public sector. The average values are combined into one indicator
which is scaled from 0 to 100 (100 being the most corrupt). For further details refer to Transparency
International’s East Africa Bribery Index Report 2012.
129
CEF is Common European Framework which describes the levels of proficiency required by
existing standards, tests and examinations in order to facilitate comparisons between different
systems of qualifications. For this purpose the Council of Europe has developed a European
Framework with common reference levels.
130
CEF is Common European Framework which describes the levels of proficiency required by
existing standards, tests and examinations in order to facilitate comparisons between different
systems of qualifications. For this purpose the Council of Europe has developed a European
Framework with common reference levels.
68