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Cablegate: African Leaders Launch Continent's Largest Economic

VZCZCXRO3130
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMR RUEHRN RUEHROV
DE RUEHKM #1431/01 2980848
ZNR UUUUU ZZH
R 240848Z OCT 08
FM AMEMBASSY KAMPALA
TO RUEHC/SECSTATE WASHDC 0820
INFO RUCNIAD/IGAD COLLECTIVE
RUEHXR/RWANDA COLLECTIVE
RUCNSAD/SADC COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEHRC/USDA FAS WASHDC

UNCLAS SECTION 01 OF 02 KAMPALA 001431

STATE FOR AF/EPS POTASH AND DAVIDSON; EBB/TPP FOR LURIE
STATE PASS TO USTR FOR HAMILTON AND JACKSON
ALSO PASS TO USAID AFR/EA
TREASURY FOR VIRGINIA BRANDON

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: ECIN ETRD EINV ECON PGOV XA
SUBJECT: AFRICAN LEADERS LAUNCH CONTINENT'S LARGEST ECONOMIC
COMMUNITY

1. (SBU) Summary: The leaders of 26 African countries agreed in
Kampala on October 22 to begin work establishing a new economic
community to compete more effectively in the global economy. The
joint declaration of the First COMESA-EAC-SADC Tripartite Summit
calls for a merger of the three economic communities, making it the
largest trading bloc in Africa. The leaders established a task
force to conduct a six-month study to determine the mechanisms and
timing for the creation of a single economic entity in east and
southern Africa. International observers are taking a wait-and-see
attitude, but the African leaders present expressed optimism that
though there will be winners and losers, all members will benefit
over the long term from increased inter-regional trade and more
leverage in the global economy. Countries will be able to determine
when they join the merged community, which might help persuade
hesitant states to sign on at a later date. End Summary.

-----------------------
FROM CAIRO TO CAPE TOWN
-----------------------

2. (U) The 26 member states of the Common Market of East and
Southern Africa (COMESA), the East African Community (EAC), and the
Southern African Development Community (SADC) met in Kampala on
October 22 under the auspices of the first COMESA-EAC-SADC
Tripartite Conference. The African leaders' objective is to boost
trade and attract investment across Africa by creating one economic
union from three existing bodies with overlapping membership. A
communique issued at the summit stated the countries would work
"toward a merger into a single regional economic community with the
objective of fast tracking the attainment of the African economic
community." The three blocks represent countries from Cairo to Cape
Town with a combined population of 527 million and a total GDP of
$624 billion. Leaders pledged to begin work immediately.

3. (U) The community would include a free trade zone and customs
union, coordinate on high priority infrastructure, and develop joint
positions in the negotiation of free trade deals. Current COMESA
Chairperson and Kenyan President Mwai Kibaki stressed that the
agreement was "truly historic" because the summit was the first time
the three blocs had held a meeting to discuss wider economic
integration efforts. "By ourselves, our countries are not equipped
to compete at the global level," he said.

4. (U) The leaders believe that a merged economic community will
increase levels of international trade within Africa and harmonize
African interaction in the global economy. A task force will carry
out a six-month study of the merger mechanisms and develop a roadmap
for the integration. Observers at the meeting said an agreement
envisioned in the study would likely include a provision allowing
countries to join the economic union at their own speed, in a
process similar to that of the European Union in order to prevent
skeptics from slowing integration. The agreement would also include
coordinated development of infrastructure and aim to allow free
movement of labor between signatory countries.

5. (U) The merged community would develop harmonized positions
toward the World Trade Organization and other trade agreements. A
tripartite "Council of Ministers" will convene in one year to
determine the time-frame for implementation of the free trade zone.
Participants called on member states to speed development of joint
financial systems, capital markets, and commodity exchanges.
According to the declaration, the three blocs will work to remove
barriers from international air travel and build an inter-regional
broadband Internet network, making it less expensive to do business
within Africa. The three blocs also resolved to coordinate plans
for regional transport networks and energy infrastructure within 12
months.

---------------------------------
MULTIPLE, OVERLAPPING MEMBERSHIPS
---------------------------------

6. (U) The new body would remove confusion caused by countries'
current multiple and overlapping memberships in the three
organizations. The members of the three bodies are as follows:

-- The 19 countries of COMESA are Libya, Egypt, Sudan, Eritrea,
Ethiopia, Djibouti, Kenya, Uganda, the Democratic Republic of Congo,

KAMPALA 00001431 002 OF 002


Rwanda, Burundi, Zambia, Zimbabwe, Malawi, Swaziland, Mauritius,
Seychelles, Comoros, and Madagascar.

-- The five countries of the EAC are Kenya, Uganda, Tanzania,
Rwanda and Burundi.

-- The 14 states of the Free Trade Area (FTA) of the SADC are
Botswana, Lesotho, Madagascar, Malawi, Mauritius, Mozambique,
Namibia, South Africa, Swaziland, Tanzania, Zambia, Zimbabwe, Angola
and the Democratic Republic of the Congo (DRC).

----------------------
LEADERS HAIL AGREEMENT
----------------------

7. (U) The chairpersons of the three organizations hailed the
agreement. In his statement, Kenya's President Kibaki said that any
decision was "bound to have an effect on the entire continent,
broadening economic cooperation at the continental level." Current
EAC Chairperson and Rwandan President Paul Kagame added that
multiple and overlapping memberships in economic groups were
damaging competitiveness. "There is no doubt about the benefits of
further regional economic integration," he emphasized. Ugandan
President Yoweri Museveni put the agreement in historical context.
"The greatest enemy of Africa, the greatest source of weakness, has
been our disunity and low level of political and economic
integration," he argued. Other heads of state at the meeting were
South African President and Chairperson of the SADC Kgalema
Motlanthe; Tanzanian President and current African Union Chairman
Jakaya Kiwete; and Zimbabwean President Robert Mugabe. Of the heads
of state present at the opening ceremony, only Mugabe did not
speak.

-------
COMMENT
-------

8. (SBU) The lofty rhetoric at the meeting notwithstanding,
significant challenges remain for the three organizations to
harmonize the needs of members and move forward with this
initiative. International observers and delegates at the meeting
admitted progress would take time and noted the traditional
political challenges in getting such a diverse group of countries to
move forward together, including the fear of domination by larger
economies such as Egypt and South Africa. The consensus, however,
is that a larger economic union was needed and that the provisions
to allow a small group of countries to join first and pave the way
for skeptics to join at a later date were critical. This would
ensure that countries such as South Africa, which is allegedly
unhappy that it is not in a leadership position to shape the
initiative, cannot hold up progress by remaining outside the union.
End Comment.
BROWNING

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