Northern Actors in a South-South Setting: External Aid and East African Integration

Journal of Common Market Studies Volume XXI. No. 3 March 1983

Northern Actors in a South-South Setting: External Aid and East

African Integration THOMAS S. COX’

One of the more salient features of the third world political economy during the last two decades or so has been the proliferation of systems designed to strengthen horizontal links between developing countries. Many of these systems have attempted to promote outright economic integration - the European Economic Community often serving as the principal, i f not necessarily the most relevant, reference group.’ This has been done in the belief that increased integration can help accelerate the rate of development in a region or “subregion” while simultaneously facilitating the spread of the benefits of development more widely and equitably.

Most observers have stressed the difficulties experienced by integration schemes as the latter strive to translate articulated objectives into concrete results. High on almost everyone’s list of why such schemes go awry are the problems associated with a maldistribution of the benefits of integration, the “polarization” effects so often encountered wherever trade liberalization occurs, the weaknesses common to most integration secretariats combined with a general reluctance on the part of countries who may have only recently gained their independence to cede any authority from the national to the subregional or regional plane.

Economic Integration and the External Environment

Diagnoses of the ailments besetting integration systems assign considerable importance to the manner in which the overall external environment can affect integration through the formation of trade, investment and aid links

* Mr. Thomas S. Cox, a staff member of the United Nations Development Programme, researched this article whilst on a special leave of absence from UNDP as an International Affairs Fellow at the Council on Foreign Relations in New York from January 1979 to January 1980. The views expressed herein are entirelv his own and do not necessarily reflect those of the Organization to which he belongs

’ See on this point, Jeffrey B. Nugent, “The EEC as a Model for Regional Integration Among Developing Countries: Docs it Fit?” April 1982, unpublished.

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between a given system and a third party or parties in the developed world. Integration schemes must also contend with the establishment of parallel links between individual members of the scheme and an outside actor or actors. Although there has admittedly been some growth in south-south trade since the early 1970s, trade ties along south-north lines, reflecting patterns established under colonialism, continue to predominate. The emergence of preferential trading relationships between developing countries and the northern industrialized countries, most notably under the Lome conventions and the Generalized Scheme of Preferences (GSP), may help to perpetuate such patterns and to complicate integration efforts.

Some political economists stress the negative influences which transnational corporations (TNs) wield over integration schemes. Transnation- als may interfere with efforts by an integration group to allocate industries to different members of the system and to adopt collective controls over the transfer of technology and over the terms and conditions of foreign investment. Even in those cases where an integration scheme accords special prominence to trade liberalization as against, perhaps, the integration of production, “transnational enterprises often reap the major gains from liberalizing trade, and serve as mechanisms to both polarize the effects of these gains within the region and to transfer the benefits out of the region to the metropolitan economy through the channel of their vertical integration with the parent company.”2

All of the above having been said, the external environment need not necessarily be regarded as something which, ips0 facto, reduces the possibilities for third world integration. Certainly to the extent that the presence of integration and cooperation systems in developing countries has the effect of stimulating additional flows of resources from the north to the south in support of such systems, that environment, or at least one critical element of it, can be seen in a more favourable light.

Most integration schemes can be expected to require and solicit external aid. Particularly during the 1960s - a decade which may eventually come to be regarded as the halcyon days of the integration movement - the notion of “regionalizing” aid attracted many followers. From the donor’s standpoint, it was thought that the shifting of more and more aid from a country to a regional frame would help to check the trend towards excessive “scatterization” of country programmes. Some went so far as to

W. Andrew Axeline, Caribbean Integration, the Politics oJRegionalism, Nichols Publishing Company, New York, 1980, p. 24. See also Constantine V. Vaitsos, Measures Strengthening the Negotiafing Capacity of Governments in their Relations with Transnational Corporations: Regional Integration cumhersus Corporate Inte- gration, United Nations Centre on Transnational Corporations, n.d., p. 41. See moreover, J. N . Behrman, The Role of Multinational Companies in Latin America Integration, Lexington, Mass.: Lexington Books, 1972 and Steven Langdon and Lynn Mytclka, “Africa in the Changing World Economy,” in Africa in the 1980s: A Continent in Crisis, 1980s Project/Council on Foreign Relations, New York: McGraw-Hill Book Company, 1981, pp. 123-21 1.

EXTERNAL AID AND EAST AFRICAN INTEGRATION 285

proclaim the “catalytic” effect which aid might have on the pace, scope and content of integration. Still others suggested that the provision of aid would help reduce the cost of integration for the local partners in the integration scheme and thus render integration more palatable to those who were carefully weighing potential losses against potential gains.3

The East African ~ ~ r n r n u n ~ ~

Drawing upon the example of the East African Community, an integration scheme which operated from 1967 to 1977, we intend to examine a donor/ recipient relationship where external aid was used, perhaps more con- sciously by some than by others, to buttress local integration and cooperation sentiments. Careful attention will be paid, first of all, to the question of how the availability of external resources in various forms can demon- strably affect the nature of goal-setting within the integration scheme and, secondly, whether or not such resources can enhance the institutional capacity of the system to carry out the tasks assigned to it by its “shareholders”. The extent to which resources provided by the industrialized countries of the north can help accelerate the pace and depth of integration by assisting the system to move towards higher forms of integration, including the integration of production as opposed, simply, to trade liberalization, will also be reviewed. Finally the relationship between the availability of these resources and the ability of the system, in this case the East African Community, to deal successfully with the concerns of its least developed members, the so-called “distributional” issue, will be explored.

Our study of the interaction between a south-south integration system, international organizations and bilateral suppliers of resources uses as its organizing framework the thirteen or more years into which the Commun- ity’s life span can conveniently be divided. The first, or formation phase, dates from approximately mid- 1964. At that time, the strains being experienced by the East African common market and the impossibility of ensuring compliance with the Kampala Agreement of 1965 which sought to allocate certain industries on an East African basis triggered demands for a complete re-examination of the existing framework for integration in East Africa. Negotiations were subsequently initiated between Kenya, Uganda and Tanzania with a view to reversing the trend towards disintegration. These resulted in the appointment of a Commission on East African

See Lynn Mytelka, “Foreign Aid and Regional Integration: The UDEAC Case,” in Journal of Common Market Studies, Volume 12, Number 2, December, 1973, pp. 138-158. See also Susan Gitelson, “Can the U.N. Be an Effective Catalyst for Regional Integration? The Case of the East African Community” in Thc Journal of Dcucfoping A r m , Volume 8, Number 1, October 1973, pp. 65-82. Finally see Ira Sharkansky and Dennis L. Dresang, “International Assistance: Its Variety, Go-ordination, and Impact among Public Corporations in Kenya and the East African Community”, lntcrnational Organic- ation, Spring 1974, Volume 28, No. 2, pp. 207-231.

286 THOMAS S. COX

Cooperation followed by the signature in June 1967 of a treaty establishing the East African C ~ r n m u n i t y . ~

The coming into being of the East African Community in 1967 offered an unparalleled opportunity for a group of African governments to mobilize significant resource “additionalities,” that is resources above and beyond those already being received at the country level. The Community institu- tionalized the existing East African common market and provided for the establishment of an integration secretariat to be staffed by East African administrators, economists and other technicians. An altogether new institution came into being, the East African Development Bank, which was expected to mobilize both domestic and offshore resources for various projects. The Bank’s leading programme was to be skewed in favour of the least developed of the partner states, i.e. Tanzania and Uganda.

Formation of the East African Community coincided with a major effort under the leadership of the World Bank to promote consultative groups and aid consortia. The idea of forming such a group to consider the East African-wide requirements for development assistance simultaneously with the needs of individual members of the integration system seemed especially appealing. Supporters of a U.S. aid policy focusing primarily on the “regional” approach to development in Africa - the brainchild of Ambassador Edwards M. Korry - found much to applaud in the birth of the Community. I t was hoped that the Community’s appearance on the scene would offer a golden opportunity for all concerned to move away from an over-reliance upon what Mytelka terms the bilateral/bilateral model in the direction of “two-way multilateralism” and “bilateralism- muItilateralism”.”

The Community Consolidates

A period of L‘consolidation” in the life of the Community occurred between 1968 and 1971 and was intended to help the Community establish itself as a bona fide member of the integration club and thus acquire greater legitimacy vis-a-vis its shareholders, the African continent and the world at large. In order to facilitate the process of consolidation and acquisition of legitimacy the Community believed it desirable, indeed essential, to mobilize external resources. As a consequence the Community sought to culti- vate relationships with a whole host of extra-regional actors, most notably with Britain, the United States, the World Bank and the UN system of organizations.

External aid would be needed by the Community much in the way it was needed at the territorial level. In the case of individual member states the

’ Trea!v,/br h i i ~ t d f r i c m Coopration, Signrtl itt Kampala, Uganda, ,Julie 6 , 1967. ‘’ Mytclka, up. ri t . , p. 141.


availability of aid was considered as one of several means whereby newly installed govenments could provide for their populations and thus contri- bute to regime survival. The Community secretariats and the corporations created to manage the railways, the harbours and the post and telecommunications system - the lubricants, as it were, of trade liberalization - were equally concerned with survival. However, in this case, the concern was more with obtaining aid to enable the Community institutions to demonstrate to the member states that the former could do things effectively and efficiently, thereby helping to retain the members’ confidence in those institutions.

Aid to the East African Community assumed a variety of forms. There was above all a pressing need for trained personnel, mainly economists and planners, for the Arusha-based secretariats. This was especially true for the Common Market and Economic Affairs secretariat given its direct involvement in the further refinement of integration goals. In the face of a paucity of East African “integrationist-technocrats,” a situation arising from the reluctance of national governments to release their best people for Com- munity service and from the fact that this service held few attractions for those fresh out of university, the Community had little choice but to look to external sources to meet its requirements. Most donors, particularly the multilaterals and the private U.S. foundations, were more than willing to oblige. By 1970 a substantial number of expatriate advisers with differing skills and talents had taken up their assignments in Arusha.

The East African corporations, faced with the need to operate according to “commercial principles” and to replace outdated and dilapidated equipment sought a quick and sustained infusion of external technicians, managerial staff, and above all, capital. This would necessitate the preservation of the historical links between Britian and the East African common services, the development of relationships with new suppliers of both cash and personnel, and above all, the strengthening of ties with the World Bank, being by far the most important source of loans on concessional or semi-concessional terms. The corporations’ need for external partners was especially acute considering that the former constituted by far the most visible aspect of the Community’s activities and thus, perhaps, its most vulnerable. The support provided by outsiders, especially that forthcoming from the World Bank, might offer a buffer against demands by Nairobi and Dar es Salaam for the increased decentralization of the corporations.

The Community also launched an appeal for donor assistance to the common research organizations which had been bequeathed to East Africa by the colonial authorities at the time of independence. Most of these concerned themselves with basic and applied research in the industrial, agricultural, fisheries and health sectors. Again, however, owing to the lack of trained East African scientists and technicians and the competition between East African and country institutions for such qualified manpower

288 THOMAS S . COX

as did exist, the common research institutions, looked to donors for support.

Given the conditions of uncertainty under which most integration systems operate, these same systems can be expected to attach a special importance to the physical manifestations of their existence. In the Com- munity’s case the establishment of a “permanent” headquarters in Arusha to replace the quarters which it “rented” from the Tanzania government acquired tremendous symbolic importance. In a statement made by EAC representatives to a 1970 meeting of donors, the latter were called upon to align more closely their rhetoric with reality:

The move of the headquarters to Arusha is contained in the Treaty, to which the Partner States are committed. This is why the Partner States have agreed to make the local currency equivalent of $1 million available for the project. We have no doubt that you will take into account this seriousness of purpose on the part of the Partner States in assessing the extent to which you may cooperate with the East African Community. Many of your governments have given assurances for support of regional groupings in Africa. AS WE SEE I T , ONE OF T H E CHALLENGES OF T H E DECADE IS GOING TO BE T H E DEGREE TO WHICH THIS INTENTION IS MATCHED WITH PRACTICAL SUPPORT. (emphasis supplied)6

The Community assiduously courted several donors in the hope that the Arusha project might actually see the light of day. Both the World Bank and USAID expressed some initial interest and, during a visit to Nairobi by U S . Secretary of State William Rogers in February 1970, Washington as much as committed itself to participating in a consortia provided other donors contributed to the financing of the project.

Despite an apparent convergence of donor and Community perceptions during the period 1968 through 1970 which resulted in the mobilization of capital and technical assitance from a number of sources, the capacity of donors to affect collectively the integration process in ways deemed desirable by both sides remained very much circumscribed. The World Bank did proceed with plans for the formation of a Consultative Group for East Africa to consider the needs of the EAC concurrently with those of the partner states thereby, i t was hoped, ensuring the harmonization of regional with national activities. The first meeting ofthe consultative group was held in Paris in April 1968 with both EAC and country representatives in attendance.

The major donors used the occasion of the April 1968 meeting to stress what they regarded as the vital role to be played by the Community’s Economic Consultative and Planning Council in coordinating the planning

UNDP files, Nairobi, Kenya.

EXTERNAL AID AND EAST AFRICAN INTEGRATION 289 process in East Africa even if they recognized that planning would remain in the first instance a national prerogative. They also sought assurances that the production of certain primary commodities for local processing as well as of manufactured goods would, wherever feasible, continue to be organized on an East African basis.’ There was considerable apprehension on the part of donors that, in the absence of such coordination, they might find themselves having to assist economically unviable projects, either directly or perhaps through the East African Development Bank.

Efforts by the Consultative Group to promote a greater rationalization of aid flows to East Africa were nevertheless inhibited, perhaps even forestalled, by existing “vertical relationships” between donors and individual members of the Community. Britain, for historical reasons, remained Kenya’s principal supplier of aid well after Kenya’s independence in 1963. In the case of Tanzania, Sweden and other Nordic countries assumed this role following the general souring of relations between Britain and Tanzania over the Rhodesian UDI question.

The matter of sugar production offers a useful example of the primacy of the bilateraVbilatera1 model under certain conditions. Since the mid- 1950s Kenya had been investigating the possibility of developing a sugar industry in Mumias on the shores of Lake Victoria. The idea was pursued with heightened interest after independence and, following implementation of a pilot scheme, the government gave the go-ahead on the main project while reviving an earlier offer from the British government to provide finance. According to a recent study of British aid programme in Kenya the following then occurred:

Some reservations were felt about Mumias within the Overseas Development Ministry because of its effect on East African economic cooperation. At that time (1970) Kenya imported its sugar from Uganda which had some advantages as a sugar producer. At the price paid for Uganda sugar, the Mumias project did not have a very high projected rate of return and there seemed to be a case for leaving sugar production within the sister-state in the East African Community. The view did not prevail because it was clear that Kenya intended to go ahead with sugar production in any case. Any attempt at leverage would have failed and furthermore have been resented by the Kenyans. Finally there was the consideration that if Britian did not support the project some other donor would, and perhaps German management and equipment would be used.’

’ UNDP files, Nairobi, Kenya. ’ Gerard Holtham and Arthur Hazlewood, Aid and Inequality in Kenya, British Development Assistance to

K m y , London. Croom Helm in association with The Overseas Development Institute, 1976, pp. 147-148.

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Britain subsequently agreed to finance the Mumias scheme. Somewhat later the World Bank approved a loan to assist Tanzania to become “self-sufficient” in sugar production.

Because of their own reluctance to see the Economic Consultative and Planning Council delve too deeply into the planning process at the country level, the member states of the Community objected to suggestions by donors that the Council do just that. They also baulked at the idea of the Consultative Group exercising any responsibility for “coordinating” external aid flows to the Community and to themselves as individual recipients. Especially worrisome to the governments of Kenya, Tanzania and Uganda was the prospect that stepped-up regional aid might come at the expense of aid in support of their national development efforts. Their concerns in this respect seemed justified when, for example, USAID announced in 1968 that it intended to freeze future aid commitments to the three East African countries at the then existing levels while simultaneously increasing its commitments to “regional programme,” both within and outside the Com- munity f r a m e ~ o r k . ~ In early 1968 the Johnson administration despatched Vice-president Hubert Humphrey on a trip through Africa to “drum up support among Africans” for the “regional approach” i la Korry. Hum- phrey apparently told the Kenyans that if they wanted the “prize,” i.e. continued American aid, they would have to “regionalize.”’o For whatever reason or combination of reasons, subsequent meetings of the East African Consultative Group eschewed Community matters altogether, these being relegated to discussion by a “local” consultative group which first met in late 1968.

The major contributions of external aid to the integration process in East African during the Community’s period of consolidation can be summa- rized as follows. First of all, the mere fact that the Community managed to enter into a series of direct relationships with importance international actors did much to enhance the organization’s sense of self-worth. The psychological benefits bestowed on the Community proper and on its affiliates as a result of such relationships, even if these benefits cannot be quantified, should not be underestimated. Like so many other LDC integration schemes the Community began on a tentative note and its future quickly became clouded when, after 1968, Tanzania moved to embrace its own particular brand of African socialism while Kenya clung tenaciously to the capitalist path. Aid may have made it easier for the Community secretariats to, deal with such uncertainties and ambiguities.

Secondly, and despite the lack of a policy dialogue in the East African Consultative Group, aid played an invaluable role in providing the Com-

Agency for International Development, Program and Project Da ta , Presentation to rhe Congress, FY 196% Africa, May 1968.

l o Christian Science Monitor, 5 January, 1968.

EXTERNAL AID AND EAST AFRICAN INTEGRATION 29 1

munity with the wherewithal, in the form of planners and technicians, to further define its short, medium and longer-range objectives in certain limited areas. Through their collaborative efforts with East African nationals, these advisers helped initiate and conduct studies dealing with the harmonization of fiscal incentives, the adoption of regional industrial and transport policies as well as regional tourism and energy policies. Because of their expatriate origins and thus their lack of affiliation with a given partner state perspective, externally-financed advisers generally came to be regarded as “neutral” parties whenever sensitive integration issues were being discussed.

Thirdly, there can be little doubt that the capital assistance received by the Community corporations in the form of loans from the World Bank, the Canadian government and others did much to strengthen the Community at the critical moment of its birth and in the period of consolidation which immediately followed. In order to embark upon long overdue moderniz- ation programmes the corporations, as we have already said, desperately needed new equipment in the form of locomotives, microwave transmitters and cranes to load and unload ships in East Africa’s increasingly congested ports. Because of the availability of capital aid, some of it on highly favourable terms, the costs to the three member countries of acquiring this equipment was drastically reduced and the incentive for those same governments to preserve the corporations as East AfI-ican entities was concom- itan tly enhanced.

Turbulence and Changing Donor Perceptions

Integration systems in the third world tend to be highly vulnerable to regime changes. Unlike in Europe where public opinion plays a crucial role in determining the pace and scope of European integration, third world integration efforts, especially those in sub-Saharan Africa, are generally sustained by the actions of political elites. Thus whenever coups d’ktat or revolutions topple the governments of countries belonging to an integration scheme, the scheme’s future may be jeopardized. The new government may decide, for example, that ties with extra-regional actors should be given more weight than cooperation with neighbouring states especially where a particular neighbour is seen as having unduly associated itself with the discredited predecessor government.

The seizure of political power by the Ugandan army in February 1971 under the command of the then General Idi Amin seemed likely to bear out this proposition. Considering that the deposed Ugandan leader, Milton Obote, was given sanctuary by the Tanzania government a bilateral con- frontation between the two member states of the East African Community seemed all but inevitable. This, as Rothchild notes in his study of intra- East African bargaining processes, came on top of existing constraints on

292 THOMAS S. COX

integration including, but not limited to, “the centrifugal pulls of state sovereignty, the lack of value consensus, the presistence of negative remembrances and images, the relative weakness of the Community appar- atus and the complicated process of conflict management.”’ ’

The subsequent deterioration in Uganda/Tanzania relations which resulted in Tanzania backing for an abortive invasion of Uganda by a small band of sympathizers of the former Uganda government immoblized the Community’s day to day operations. Tanzania refused to recognize Ugan- dan nominees for senior Community and corporation posts and this led Uganda to retaliate by, for example, declaring the East African Minister for Finance and Administration, a Tanzanian, and the Tanzanian director- general of the East African Development Bank, persona non grata in Uganda. The Ugandan President also refused to sign the appropriations bill for the General Fund Services for 1971/1972, despite the fact that it had been approved by the East African Legislative Assembly. Almost unnoticed in all of this, however, was the appointment in June 1971 of a Kenyan, Charles Maina, as secretary-general in replacement of Z. H. K. Bigirwenkya whose term had expired. By the end of 1971, moreover, matters had pretty much resolved themselves largely through some adroit manoeuvring by the Kenyans including a dose of Kissinger-style shuttle diplomacy by the East African Minister for Common Market and Econ- omic Affairs, Robert Ouko (himself a Kenyan) and the personal intervention of Kenya’s President Jomo Kenyatta.

Although the Community had managed to weather the storm resulting from a deterioration in bilateral relations between two of its members, this was hardly a victory for East African integration. In fact the Community organization had really been little more than a helpless bystander to the events of 1971 and therefore had not necessarily emerged any the stronger owing to the success of various crisis management efforts. Side by side with the tensions generated by the overthrow of the Ugandan regime, one could also point to increased polarization between Kenya and Tanzania as Tanzania moved to eradicate certain forms of indigenous capitalism through nationalization while Kenya scarcely deviated from its own brand of what Crawford Young has termed “state-nurtured capitalism”. Tanza- nia also looked askance at statistics which revealed persistent Tanzanian trade deficits with Kenya even in the face of Tanzanian-imposed and Community-sanctioned “transfer taxes” on imports of certain Kenyan manufactured goods. Tanzania became more convinced than ever that the Community needed to pay greater attention to the “distributive” function and less to trade liberalization.

In spite of the events of 1971 - one might even go so far as to say

‘ I Donald Rothchild, “From Hegemony to Bargaining in East African Relations,” in Journal of African Studies, Berkeley: University of California Press, p. 408, n.d.

EXTERNAL AID A N D EAST AFRICAN INTEGRATION 293

because of those events - the Community launched a renewed drive for donor support. In recognition of the organization’s time of troubles and of the importance of external aid in helping the Community to cushion the blows to its legitimacy, donors continued to make positive noises about the Community’s prospects and to back these up with pledges of aid. A number of new donors, including some of the Scandinavian countries, appeared on the scene. Traditional donors such as the UNDP and USAID also spoke highly of the Community and at the same time tried to in- stitutionalize their relationship with Arusha along more traditional donor/ recipient lines. The AID “regionalists” in Nairobi nevertheless come to the view that an across-the-board application of the Korry doctrine was prob- ably unworkable owing to the adverse emotions which it aroused among East Africa governments. In other words, rather than indiscriminately assigning a regional label to practically everything that AID was doing in East Africa the agency would be better advised to concentrate its efforts on projects formally sanctioned by the East African Community.

In the middle of 1971 USAID opened a “Regional Development Office for East Africa” in Arusha to be concerned solely with East African Community programmes and projects. This action was accompanied by the preparation of a formal development assistance programme for the Community which identified core needs in such fields as management training and applied research aimed at accelerating food production. ‘The programme also urged U.S. assistance for the upgrading of the EAC’s capabilities in “economic research and technical areas where i t is charged with harmonizing regional and national interests.”” A second programme prepared in June 1972 observed “that became the EAC is a service organization performing tasks delegated to it by three independent governments, its performance is subject to intense public scrutiny,” and “success depends largely u on how well i t manages to carry out work on behalfof the partner

UNDP followed suit with the dedication in March 1972 of a “liaison office” also based in Arusha. There was even some talk in UNDP of establishing an “indicative planning figure” for the Community, similar to the planning targets established for all country recipients beginning in 1972. These developments together with a flurry of visits in late 1971 and early 1972 by donor agency officials, all of them offering assurances of continued support, provided the Community with a considerablc boost. Nevertheless perceptions on the part of donors and recipient as to what

states”.‘ 9

294 THOMAS S. COX

constituted “acceptable” levels of support for East African integration and cooperation began to move out of phase with one another.

Several examples may be used to illustrate the extent to which donors felt it necessary to set limits on the nature of their support to East African cooperation and integration. The first was the matter of the Arusha capital works project including the construction of the all-important permanent headquarters for the Community secretariats. In the case of this project the Community pressed for commitments of external aid to cover what would essentially be local as opposed to “offshore” costs.

Many donor agencies, be they multilaterial or bilateral, are generally prohibited from financing such costs. Hence the prospects for the Com- munity obtaining donor agreement on a Community headquarters project of the type originally proposed seemed dim. Nevertheless there remained some expectations that the World Bank, being a staunch banker of the Community corporations, might be in a position to waive its restrictions against financing local costs. In July 1972 the Community launched a renewed appeal for donor support. The USAID office in Arusha, recalling Secretary of State Rogers’ earlier pledge, urged acceptance of the Com- munity’s request.

In the final analysis the Bank found itself unable to finance the headquarters project simply because, in the words of one official familiar with the negotiations, “this was not the kind of thing which the Bank felt it could up port."'^ In any case, and this may have been the critical factor, the Bank had by 1973 begun to shift the central focus of its lending away from hard infrastructure projects in favour of projects thought to be of more direct benefit to the rural and urban poor. Construction of a modern office building and conference facility simply did not square with the new focus.

The same thing could be said for USAID which, following the passage of the Foreign Assistance Act of 1973, began to move in its own “new directions.” These, as is well known, stressed the basic human needs approach to development. Anything resembling a “prestige project” would, from that moment onward, face extremely rough going in terms of the extent to which it might elicit AID interest. Although the Community naturally did not view the construction of a headquarters in that vein, Washington apparently did. Still other donors, in the face of certain developments occuring in East Africa and particularly in Uganda after 1972, hesitated before contributing to the financing of a project which might well prove to be a white elephant. All was not lost, however. In June 1973 the Community reached agreement with an Italian company for a contractor-financed project at a non-concessionary rate of interest accompanied by a ten-year payback period. Still, the blow to the Community’s prestige resulting from the unwillingness of the major donors to become

l4 Interview with World Bank official, April, 1979.

EXTERNAL AID AND EAST AFRICAN INTEGRATION 295 involved in the headquarters project was considerable. ’The Community needed a “quick fix” and hoped to find one in the Arusha complex.

Aside from the failure of external financing to materialize for the headquarters project the Community and certain donors also parted company when it came to considering the role of outside agencies in setting research priorities, managing research institutions and determining the use to be made of research results. In late 1971 the Community issued guidelines for future donor-sponsored research. Arguing that international teams attached to Community research institutes had previously tended to work in quasi-isolation, the Community sought to reassert the authority of the institute directors and of the Community councils in setting research priorities.15 The issue came to a head when the Rockefeller Foundation proposed to establish an international centre for research on animal diseases. The proposal to set up such a centre stemmed from the Foundation’s long-standing support to similar international institutions elsewhere including those which had pioneered the development of high-yielding varieties of maize and other food crops. East Africa seemed a logical site for the centre. Livestock played a crucial role in the East African economy and donors were already assisting the Community’s East African Veterinary Research Organization (EAVRO) .

The Rockefeller Foundation’s interest in helping found an international laboratory to conduct applied research on animal diseases struck a respon- sive chord within Kenya. Kenya already hosted the EAVRO and with funds from Rockefeller, USAID and other donors had managed to create a strong veterinary medicine department at the University of Nairobi.

The laboratory’s sponsors envisaged an international centre in the fullest sense of the word. It would come under the control of no individual government or group of governments. It was certainly never the intention of the foundation and, later on, of the multi-donor Consultative Group on International Agricultural Research (CGIAR) that their assistance be used to train a cadre of East Africans who would eventually “take over” from expatriate scientists and technicians. That job belonged to the UNDP, AID and other donor agencies who through their programmes with the East African Community and with the member states individually had already committed substantial sums of money to institution-building projects.

Fearing that the creation of a Kenya-based international research laboratory concerned with animal diseases would undermine the work of the EAVRO and further compromise the Community’s role in applied research, the Community sought to inject itself into the negotiation and bargaining process. Whereas the contributors to what eventually became

l5 Guidelintsfor Negotiqtion o f a Memorandum of Understanding Between a Consortium of Donors and the East Afkaa. Communiu concerning Research on Animal Diseases, 16 November, 1971.

296 THOMAS S. COX

the International Laboratory for Research on Animal Diseases (ILRAD) quite rightly stressed the international (as distinct from regional or subregional) focus of the centre, the Community argued with equal vigour that this perception was not necessarily incompatible with Community involvement. Although the Community never envisaged a complete integration of ILRAD and EAVRO, it nevertheless pressed for an ILRAD board control- led by East Africans and subject to the overall policy guidance of the EAC Social and Research Council. In the end, however, compromise proved impossible and Kenya’s “gain” came to be perceived as the Community’s

Most of the current writing on third world integration efforts stresses the critical importance of the “distribution” function. This refers to the capacity of the integration system to deliver certain benefits to the least developed members of the scheme and, by so doing, help “counteract the effects of unequal gains and polarization resulting from a laissez-faire approach to freeing trade . . . ” 1 6 The measures to be adopted by what Mytelka and Axeline consider a “type 11” integration system may include the establishment of regional development banks, regional investment regimes and industrial allocation schemes. Indeed, for most if not all integration systems, “it is the distribution of industry that is the key indicator of equality as far as political leaders are concerned.” Not only does the industrial allocation question have a bearing upon intra-system resource distribution but in addition “employment and thus multiplier effects . . . are created by new industry” together with the prospect that “it in turn will serve to attract local skills, technology and infra~tructure.”’~

The East African Community certainly flirted with type I1 status when, under the terms of the treaty, an East African Development Bank came into being. Adoption of a rule which permitted Community members experiencing deficits in their intra-East Africa trade to impose “transfer taxes” on imports of manufactured goods from their neighbours also reflected the Community’s concern with compensating its weaker partners. With the memory of the ill-fated Kampala Agreement still present the Community hoped to adopt an industrial allocation scheme able to cater to Tanzania’s interests without simultaneously alienating Kenya.

In December 1970 the Community approached the British Overseas Development Ministry for assistance in designing an industrial allocation scheme and in early 1971 a team of consultants from Maxwell Stamp arrived in East Africa bearing the following terms of reference:

loss.” C L

l6 William Axeline, “Underdevelopment, dependence, and integration: the politics of regionalism in the Third World,” in Infernational Organization, Volume 31, No. 1 , Winter 1977, p. 94.

l 7 John Ravenhill, “Regional Integration and Development in Africa: Some Lessons from the East African Community,” Paper presented to the 20th Annual Convention of the International Studies Association, Toronto, March 21-24, 1979.


To identify multinational projects within the industrial sector, that is those which would require the market of all three Partner States to be viable; to determine the factors influencing the location of each possible project; to evaluate the broad consequences for each project on employment, investment, output and foreign exchange; to indicate possible alternative distributions of the projects between the Partner States.18

Maxwell Stamp completed field work in June 1971 and reported to the Community in September. It recommended establishment ofjointly-owned multinational production industries in the iron and steel, automotive (heavy vehicle assembly only), chemical and fertilizer sectors. Where intra- industry specialization was called for the “finishing plants (would be) ‘national’ industries servicing particular Partner State requirements, while hopefully purchasing their semi-manufactured input from the ‘East African industry’ in partner state X. “This assumed of course that “free trade between the Partner States (would) prevail for all trade within the classi- tied multinational industries and that no discriminating measures are introduced to frustrate inter-state trade for products manufactured in the Community.

For those projects which the consultants believed should get underway prior to 1975 Tanzania was regarded as the optimum location for six of these, Kenya for three and Uganda for only one. When it came to category “B” projects (recommended for implementation between 1976 and 1980) two out of three of the projects would be based in Tanzania with none being allocated to Uganda. This would give Tanzania a clear edge over the other two EAC member countries in numerical terms alone. Equally, if not more significant than the proposed distribution of the multinational industries, was the fact that the project with the greatest potential impact upon employment and with the most “gross foreign exchange added” would be established on the Tanzania coast. This was the proposed “integrated steel works” which would rely initially upon imported iron ore but eventually on the as yet to be exploited Liganga deposits in south-western Tanzania.

Touching as they did upon the most delicate of integration issues, the recommendation of the Maxwell Stamp study provoked heated debate within the East African Community. As might have been expected, Tanza- nia urged the Community to accept the recommendations as a basis for a future Community-sponsored industrial allocation scheme. Uganda at first equivocated and later on baulked altogether. In early 1972 Kenya

East Arrican community, Report on Multi-National Industries in the Iron and Steel, Automoti?~c, Chemical and Fertilizer Sectorr in the East African Communio, September 1971, Volume I , Summary and Recommendations, p. 1 .

298 THOMAS S . COX

informed her East African partners that she could not accept the recommendations.

Although Kenya never made her reservations public, she could clearly not countenance the kind of centrally-orchestrated industrialization programme envisaged by the Maxwell Stamp report. Having already agreed to such distributive measures as the transfer tax and the East African Development Bank, Kenya seemed unwilling to accept policies which might lead to a further weakening of the trade liberalization spirit of East African integration. Moreover, Kenya feared that undue emphasis upon regional industrial planning might act as a disincentive to outside investors who had previously favoured Kenya given its clear-cut infras- tructural and other advantages vis-84s Tanzania.

The failure of the East African Community to adopt even a limited industrial allocation system essentially brought the East African integration process to a standstill. Certainly after 1972 the opportunities for bringing external resources to bear upon the integration process and, in particular, upon the distribution issue, were similarly curtailed. Had the Maxwell Stamp report been accepted, even in part, there could well have been substantial follow-up involvement by both multilateral and bilateral suppliers of concessionary aid in establishing a series of multinational industries. Certainly the prospects for East Africa generating larger flows of World Bank Group resources, mainly those of the International Finance Corporation (IFC) in tandem perhaps with private investors, would have brightened considerably. For example, as of December 3 1, 1972, there had only been two IFC investments for projects which, because they were intended to eventually serve the wider East African market, could claim even an indirect kinship with East African integration. One IFC investment went for a Uganda textile factory in 1965 and the other for a Kenya pulp and paper plant in 1970.20

There still remained, of course, the East African Development Bank. The EADB had by the end of 1970 managed to approve participation in a total of 17 projects in Uganda, Kenya and Tanzania all whilst adhering to a formula requiring a greater volume of investment in the less well-off EAC member states. Nevertheless, and notwithstanding the considerable technical assistance which it received from the UNDP, the Ford Foundation and others, the EADB had been able to secure credit lines worth only $14.6 million by the end of 1972. Moreover, as of that date, only some $1 1.7 million of EADB resources had actually been disbursed - most of i t having been channeled to already established industries.21

*' United Nations Conterence on Trade and Development ( U N C l A D ) , Current Problems ofEconomic Integration, the Role of Multilateral Financial 1nslitution.r in Promoting Integmttotr among Developing Countries, United Nations, New York, 1975, p. 38.

Ibid. , p . 63.


Furthermore, and according to studies commissioned by UNCTAD, virtually none of the EADB commitments went to multinational projects involving joint ownership and providing direct benefits to all three EAC member states. 87% of the loans were essentially for “national projects located in a single country”, but which nevertheless entailed “the use of inputs and the provision of goods or services of interest to two or more countries.” The rest took the form of loans for “counterbalancing projects located in a single country and primiarily of interest to that country, but which are necessary to maintain a balance in the benefits derived from an integration scheme . . .” The UNCTAD study goes on to note that, given the absence of a truly multinational element in either of these latter two categories of integration projects, “the potential contribution of each . . . to the integration process is more subject to an ad hoc assessement than would be the case of projects in other categories.”22

Donor interest in the more ambitious aspects of the East African integration movement began to wane after 1972, Maxwell Stamp or no Maxwell Stamp. There were several reasons for this. First of all, the one donor, USAID, which more than any other had made the notion of “regionalism” the cornerstone of its bilateral development assistance policy, began to place less and less stock in the whole idea. The concept of regionalizing aid had never been wholeheartedly accepted by many AID administrators, particularly by those who worked in the field as opposed to Washington. They doubted its practicality and believed that its application often bordered on paternalism. In his book African Betrayal, Ambassador Charles Darlington expressed scepticism about the capacity of African regional groupings to serve as conduits of U.S. development assistance. As an alternative, Darlington urged the U.S. to re-emphasize the bilateral/ bilateral model on the grounds that “there is where the U.S. gets leverage. y’23

Congressional insistence in 1973 upon the adoption of a basic human needs stratgegy greatly reduced U.S. interest in supporting regional integration efforts. This was especially so where the primary objective of integration was to accelerate the rate of large-scale industrialization in countries which, in the opinion of some, should be paying greater attention to rural development, especially primary health care and food production. To be sure, whenever one could somehow marry regionalism with basic human needs, there might still be scope for external assistance to inter- country cooperation if not integration. Thus AID continued to support food crop research undertaken by the East African Agriculture and Fore- stry Research Organization (EAAFRO), the Conseil d’Entente Livestock

22 Ibid., pp. 18 and 64. 23 As quoted in Russell Warren Howe, Along the A f r c Shore, An historical review of two centuries of

US.-African relations, New York: Harper and Row, 1975, p. 172.

300 THOMAS S . COX

and Meat Community (which in any case lent AID funds mainly for national projects) and later on the programme of the Comitk Inter-ktats de Lutte contre la Skheresse dans le Sahel (C.I.L.S.S.) to combat the effects of the Sahelian drought.

We have already mentioned the shift in focus of the World Bank’s lending activities after 1973 following President McNamara’s call for an all-out war on poverty aimed at bringing the “bottom forty percent” of the world’s masses out of their state of absolute poverty. Apart from whatever effects such a policy shift may have had on the Bank’s decision not to support the Community headquarters project, Bank Group interest in financing integration projects, especially those likely to promote capital intensive industrialization with minimal effects upon the rural poor, declined.

In any case, support to integration projects had always been somewhat of a marginal activity for the World Bank. In the case of Bank involvement with the East African common services, the Bank required formal guarantees from the governments participating in these joint ventures and the difficulties of arranging such guarantees tended to inhibit Bank interest in integration projects. Indeed, according to the above-mentioned UNCTAD study, the Bank Group had, as of December 31, 1972, committed only $470 million for integration projects world-wide and this was equivalent to a mere 2.7% of its total commitment^.^^

Tactical Retreat

The inability of the East African Community to make any headway on the vexed industrial allocation question when combined with the assaults on the organization’s integrity occasioned by the events in Uganda marked the beginning of a period of “tactical retreat” for the Community. A draft five year plan covering projected capital and recurrent expenditures for the Community secretariats was shelved in early 1972 owing to disagreements between the EAC member states over matters pertaining to the allocation and distribution of Community resources for the research institutes. Because of continuing tensions between Tanzania and Uganda, the Community “Authority” - consisting of the three heads of state - could not convene. The Community bureaucracy, still fairly much in its infancy and heavily dependent upon donor support, could do little to halt the tendency towards drift.

While abandoning the pursuit of certain integration goals, the Community sought to preserve the Community secretariats, to maintain the common services in reasonable working order and to continue to sponsor various R and D activities while training East African nationals in

24 UNCTAD op ci t . , p. 39.


managerial and technical disciplines. I t was felt on both the Community and the donor side that external aid could make a considerable difference in terms of whether at least some of these functions might still be organized on an East African basis in anticipation of possibly better days to come.

The presence of a large number of external advisers in the Community secretriats during the “period of consolidation” had helped supply the secretariats with a modicum of cohesion. However, donor disenchantment with the longer-term prospects for East African integration when combined with the Community’s inability to make effective use of advisory services resulted in an exodus of advisers in 1973 and 1974. Pressure within the Community, or rather from member state governments, for “East Africanization” also contributed to a situation in which the Community presented fewer and fewer requests to outside agencies for assistance to the centre of the operation. Nevertheless the Community faced an increasingly difficult time in attracting qualified East Africans given, particularly for the Kenyans, the existence of a number of alternative employment paths.

As for the common services, there emerged a consensus on the part of both Community and donor officials that the disintegration of these services would prove disastrous for the Community. Apart from the fact that the corporations constituted the EAC’s “brick and mortar” in the sense that they made intra-East African transactions a practical reality, their activities touched upon the lives of most East Africans working the modern sector of the member state economies.

Both donors and the Community recognized that a certain amount of “decentralization” was desirable, if only from the standpoint of good management practices. Nevertheless, the survival of the corporations as East African-owned and operated entities would likely hinge upon the adoption of decentralization measures which allowed for the retention of headquarters units capable, as and when necessary, of asserting East African over individual member state needs and of servicing external debt.

From early 1974 onwards the authority of the corporations’ headquarters steadliy declined as pressures from decentralization mounted. Compounding these centrifugal tendencies was the problem of intra- corporation payments. More often than not the “regional” units failed to make the necessary transfers of cash to the headquarters or at least not in the required amounts. This led to delays in the payment of salaries and pensions, prevented the ordering of vital spare parts from both local and overseas suppliers and contributed to a sense of Community malaise.

The influence of the external environment could hardly be discounted. Foreign exchange reserves had dwindled owing to the shocks created by oil price increases from late 1973 onwards, increases in the price of imported capital goods and worsening, or at best, stable, prices for the primary commodities exported by the East African countries. Under these conditions member state governments inevitably felt compelled to conserve as

302 TIIOMAS S. COX

much foreign exchange as possible to protect their national interests even if this meant, in the process, violating the larger East African intere~t . ‘~

Nevertheless, without intra-corporation transfers there could simply be no debt service. If the situation was permitted to go unchecked, it could adversely affect the ability of individual EAC member states to continue to receive disbursements against external loans for national development projects, let alone to negotiate new loans and credits from the World Bank and elsewhere. As of 1971, the external public liabilities of the four Community corporations represented some 25% of East Africa’s total external liabilities.26

Confronted with the above realities, the World Bank felt i t had little choice but to try to help restore some sense of decorum in the affairs of the corporations, especially those of the Railways Corporation. The Community secretariats welcomed Bank “intervention” in the hope that such intervention might somehow help arrest a further erosion of their own capacity to inlfluence events and thus affect outcomes.

A series of meetings was arranged between Bank, Community and corporation officials in mid-1974 and these produced an agreement by the three partner states to inject substantial amounts of cash-most of it in the form of hard currencies - into the Railways Corporation by November 1974. A consensus was also reached on the appointment of a team of Canadian consultants “for an initial period of two years to assist the corporation in improving its financial, managerial and operational performance and to advise on how the corporation might be reorganized.”*’

If one accepted that integration goals could no longer to pursued and that the common services had reached a perilous state, the possibilities for continued donor/Community collaboration in other areas seemed definitely worth exploring. By mid-1974 a view began to emerge among a number of donors, notably UNDP and USAID, to the effect that support should be provided to those activities of an East African nature which were most likely to “outlive” the vicissitudes of the East African integration movement. A USAID programme document issued in late 1974, observed that “beset by real problems and revenue shortages, lacking the necessary executive leadership and a realistic mandate, the future of the Community seems in doubt.” Still, the report went on, “while the three East African countries have not been able to take full advantage of the benefits available from regional cooperation, they remain publicly committed to the success of the Community and continue to provide considerable resources, both human and material, for that purpose.” The report cautioned against a premature termination of AID’S assistance to the Community:

2 5 See also on this point Ravenhill, op. d., p. 16. 26 East African Community, Background to the Budgel, 1974/1975. ‘’ East African Community, Preis Release, “Partner States Agree on Shillings 150 million for the East

African Railways Corporation,” 30 July, 1974.


AID’S withdrawal will lend support to the general impression of a disintegrating Community in which investment of additional foreign assistance is futile. If the impression gains credence and the level of U.S. foreign assistance is seriously reduced, the failure of the Community would become a greater possibility than it is today. For this reason the withdrawal of our assistance has a potentially greater negative impact upon the future of the Community than the level of that assistance would indicate.

This having been said, however, facts were facts and AID therefore proposed to implement a new strategy designed to ensure that “its assistance to the EAC will benefit the people of East Africa and not be neutral- ized by the politically-created institutional problems now hindering the development of the Community.”28

The proposed new look in AID programmes with the East African Community was to incorporate a five-pronged strategy. First, U.S assistance would be offered only where it was in a position to equip the Community to respond more effectively to appeals from two or three member states for action by Arusha in identifying and helping to overcome a national development constraint. Second, projects whose impact was mainly confined to the Community organizations themselves would no longer qualify for assistance. Third, AID would insist upon being satisfied that the results of AID-financed projects with the Community would be made available to the “people.” In other words, the burden of proof was placed on the Community to demonstrate that the existence of a Community bureaucracy, side by side with three national bureaucracies, was not going to hinder the capacity of American assistance to affect the development process at the grass roots level. Fourth, AID expected project outputs to be such that “they will remain of value within East Africa even if the EAC undergoes radical change.” Finally, EAC requests would need to conform to the spirit, if not the letter, of the Foreign Assistance Act of 1973 as well as to complement more fully AID bilateral programmes in those countries, namely Kenya and Tanzania, where such programmes operated.*’ The above directives symbolized the abandonment by AID of support to the Community in the name of Korry-style “regionalism.”

Another multilateral donor, UNDP, also sought to adjust its assistance to reflect the changing circumstances in the life of the East African Com- munity. UNDP concluded that i t would emphasize institution-building projects concerned with human resourse development. Such projects can have a life of their own and thereby “outlive” the vagaries of integration sentiments. Indeed, by the end of 1974, the UNDP programme with the

2H USAID, Development As~zstanre Program. Regional Dcveloprnent Olticr fix East Africa, November

29 Ibid. 1974.

304 THOMAS S. COX

Community consisted almost entirely of such projects - these being the East African Civil Flying School project in Soroti, Uganda; a project with the Central Training School of the East African Post and Telecommunica- tions Corporation; one with the East African Institute for Meterological Training and Research and another with the East African Community Management Institute.

Those organizations, including several mentioned above, which were in the best position to put some distance between themselves and the formal Community bureaucracy seemed most suitable for continued support from UNDP and other agencies. Such organizations, it was thought, could usefully serve as focal points for informal communications between members of the East African Clite, thus enabling issues of inter-country cooperation to be addressed and bargains struck outside the more highly charged atmosphere prevailing elsewhere.

Disintegration

As 1974 drew to a close, the possibilities for a “creative partnership” between donors and the East African Commmunity began to fade rapidly. Efforts by the World Bank and other creditors to help restore order in the work of the corporations ultimately proved futile, especially as certain Community states began negotiating bilateral deals with overseas firms, thereby bypassing the corporations’ headquarters altogether. In January 1975 the Tanzanian government admitted to having purchased unilaterally over a million dollars worth of spare parts from Canadian suppliers in order to stave off a complete breakdown of the East African Railways Corporation’s operations in T a n ~ a n i a . ~ ’ In August 1975 a senior Kenyan official noted that talks would shortly begin “with governments . . . in Britain, Belgium and West Germany for the supply of equipment on credit terms for what in effect, if not name, will become Kenya railways, harbours and post and telecommunications.””’

Underlying all of the above was the fact that in the eyes of most of the East African regimes the Community structure, especially the corporations, had become an impediment to the former’s ease of access to external resources. Even on those occasions when the corporation machinery func- tioned reasonably smoothly - i.e. throughout the latter half of the 1960s and on into the early 1970s - the availability of outside resources in the form of loans which could then be converted into tangible physical assets often produced haggling within the corporations over who was going to get what, in what amounts and when. In other words, the prospect of substantial inflows of outside capital execerbated differences of perception by the

Daily Mews, Dar-es-Salaam, 3 February, 1975 arid Weekly Review, Nairobi, 15 February, 1975. 3 ’ Easi African Standard, 2 August, 1975.


Community’s shareholders over the way in which internal resources were being distributed (or maldistributed).

On the research front, things went from bad to worse. The Community secretariat concerned with research activities no longer wielded any authority over the scope and content of the research institutes’ work programmes. Transmission of research results from the East African to the country level became exceedingly difficult except, possibly, where an external donor was involved simultaneously at both levels - UNDP support to the East African Veterinary Research Organization for research on tick- borne diseases and to vaccine field trials sponsored by national projects being a prime example. Moreover, the tendency towards vertical bilateral relationships, noted elsewhere, appeared in the case of the research sector as well. National research institutions and departments gained in strength and sought access to increased flows of resources from donor countries interested in underwriting scientific research and development in developing countries. This was especially true with the fisheries sector once the need to exploit the resources of the “extended economic zones” (EEZs) became an urgent national priority.

Still clinging to the notion that more external aid might help it win what had rapidly become a kind of “race against time,” the Community organized a donors’ conference in mid- 1975. Nevertheless, despite the observa- tions of one Community representative to the effect that “it would be betraying the East African public if assistance to the Community were withheld because the organization is passing through a trying period’’ and that “this is exactly the moment we need all the help we can get to prove that the regional approach to development pays high dividends,” the Community’s renewed appeal for aid fell upon deaf ears.32 The disarray in the corporations, the underlying fragility to the Arusha secretariats and the increased tendency for member states to assert the primacy of their bilateral aid and other relationships with outside actors - all of rhese things made it extremely difficult for donors to accept the thesis that stepped-up aid to the EAC might tip the balance in the latter’s favour. Hence, and notwithstanding the Community’s best efforts, Community/ donor consultations in 1975 managed to produce only a handful of additional aid commitments, most of them in the form of extensions of existing commitments.

Although space does not permit more than a brief account of the Com- munity’s final days, several points need highlighting. Firstly there remained enough of a “political will” for the EAC countries to agree, in late 1975, on the appointment of a commission headed by William Demas of the Caribbean Development Bank. The Treaty Review Commission was

32 Address 6y a senior East African Community ofjcial on the occafion of the consultative meeting on technical assistance requirements, Nairobi, May 1975.

306 THOMAS S. COX

expected to review virtually all aspects of the Treaty for East African Co-operation in the perhaps somewhat mistaken belief that merely by tinkering with this or that clause one might salvage something.

Even if a number of East African leaders remained publicly committed to the survival of the Community, Tanzania’s Julius Nyerere summed it up best when he conceded in February 1976 that “what is going to come out of the current review of the East African Community . . . is the search for the highest common factor of commitment.” However, as Nyerere went on the observe, “the highest common factor is going to be the highest commitment of the least committed member of the c ~ m m u n i t y . ” ~ ~ Such a compromise might conceivably entail the preservation of the common research and training facilities provided, of course, a way could be found to successfully de-emphasize their Community connection.

Notwithstanding the above, events in East Africa had by 1976 assumed a dynamic of their own. Nothing could really be done to “save” the corporations as they continued on their downward slide, lurching from one liquid- ity crisis to the next. In recognition of the new realities, the World Bank in May 1976 adopted a formula under which each Community member became responsible for meeting its share of a given corporation’s debt service, such a share being derived from the net fixed assets held by that corporation in the member state’s territory.

Arusha found itself increasingly alienated, and therefore isolated, from the member states as most initiatives on development matters reverted entirely to the country level. Cases of absenteeism multiplied as job security could no longer be guaranteed and as secretariat staff began to seek employment elsewhere. The “common market” died on the vine, a victim of member state indifference and, occasionally, outright interference. The treaty review commission held its final session in November 1976 having succeeded only in agreeing to disagree.

The final break-up occurred in June 1977 when the Community partner states failed to reach agreement on an operating budget for the Commun- ity’s financial year, 1977/78. As a result, the General Fund Services including the Arusha secretariats and most of the research and training institutes ceased to function as East African-owned and -operated organizations on July 1, 1977. The only exceptions to this were the East African Manage- ment Institute and the East African Development Bank.34

33 The Weekly Review, Nairobi, 23 February, 1976. 34 For a useful and comprehensive account of some of the factors leading to the break-up of the East

African Community, see Christopher P. Potholm and Richard A. Friendland, eds., Integration and Disintegration in East Africa, Lanham (Md.) University Press of America, 1981. See also Arthur Hazlewood, “The End of the East African Community: What are the Lessons for Regional Integration Schemes” in Journal of Common Market Studies, Volume 18, Number 2, September 1979, pp. 4&58. Finally see Agrippah T. Mugamba, “Regional Organizations atid African Underdevelopment: the Collapse of the East African Community” in The Journal ufModern African Studies, Volume 16, Number 2 (1978), pp. 261-272.


Conclusion

The demise of the East African community brought to a conclusion an interesting experiment in collaboration between a group of outside agencies and one of the most promising of the post-colonial integration schemes,. Let it be remembered, first of all, that the Community/donor partnership was often paralleled by a similar partnership between donors and individual members of the Community. Both the quantitative and qualitative dimensions of these relationships in East Africa - i.e. the amount of the resource transfers involved and the often dramatic uses to which these resources were put (attacking urban poverty, bringing tracts of desert land into production through irrigation, etc.) - tended to overshadow the kind of one-on-one relationships which the Community had so assiduously cultivated with major donors. In other words, the closeness of, say, U.S. and British ties to Kenya in terms of aid, trade and investment, generally took precedence over the involvement of these same industrialized countries with the Community. The same applied to the interest of the Scandanavian countries, especially Sweden, in Tanzania. One could also mention the influence wielded by other extra-regional non-western actors, notably the Peoples’ Republic of China, which sought to buttress southern Africa, as opposed to East African, self-reliance through its support for the TANZAM railway linking Dar es Salaam and Lusaka.

It should also be remembered that perhaps only during the period 1968-1972 was the East African Community operating in anything approaching the fashion envisaged by the drafters of the Treaty for East African Co-operation. This clearly constituted a relatively brief time during which to observe the effects of external resources upon a fledgling LDC integration system. Hence such generalizations as one may wish to draw from the Community situation should be regarded as tentative and might usefully form the basis for a more rigorous examination based upon studies of similar and longer lasting integration systems.

What does seem to come through loud and clear, based upon the example of the Community, is that external aid can play a very useful role, both symbolically and substantively, during the initial years of an LDC integration system. In the course of the formative period of any integration movement the organization which embodies that effort will normally be engaged in what has been characterized as a “race against time.” In other words, the onus will have been placed on the integration scheme by its members to deliver certain “payoffs” as soon as possible. Whenever these payoffs are not, for one reason or another, forthcoming the member countries may be tempted to fall back upon policies of national autarky or, as is more often the case, to reassert their ties with outside actors to the exclusion of those with their immediate neighbours. The Community’s leaders seem to have clearly understood the importance of aid in this key

308 THOMAS S . COX

respect when they presented requests for assistance to the Arusha headquarters project and to the corporations which ran the common services. In both instances there was a perception of the need for visible proof that the Community stood for something.

Aid to the East African Community research and training institutes, however much these institutes may have been removed from the main- stream of East African cooperation and integration, certainly represented one of the most positive aspects of Community/donor collaboration. The Community’s demise notwithstanding, programmes and projects concerned with human resource development helped to foster a generation of administrators and technicians capable of discerning problems and of seeking solutions to those problems in a reasonably broad, non-parochial manner. Should the political climate in East Africa change once again and should some form of integration or cooperation scheme re-emerge-perhaps through a link-up with some of the southern Africa states as had been proposed during the late 1960s - this pool of “ex-Communityites” could conceivably form the nucleus of such a scheme. Over time, of course, the sense of being an East African as opposed to a Kenyan or a Tanzanian will undoubtedly fade if no institutional framework is provided within which these sentiments can flourish.

For external assistance to make an effective contribution to integration and cooperation ways and means must be found for aid to facilitate the distribution function. When it came to the Community the provision of economists and planners by the aid agencies undoubtedly helped define the issues at stake as with the Maxwell Stamp study on industrial location and a future East African industrial strategy. Once, however, the Community took the decision to shelve the study, the opportunities for aid to affect the distribution of resources on an intra-East African level quickly receded.

The East African Development Bank proved no answer to the problem either. The external resources placed at the Bank’s disposal were pitifully small - indeed far less than what was made available to national development banks in Kenya and Tanzania. Moreover, as we have seen, the Bank shied away from integration projects per se, preferring instead to take a minority position in what were essentially national industries. A more activist role by the World Bank and other international financial institutions in extolling the virtues of integration projects and similar joint ventures could help to encourage the regional development banks to move vigorously in a similar direction.

The emphasis since the early 1970s on the issue of “basic human needs” has heightened the consciousness of both developed country donors and developing country aid recipients to the matter of resource distribution within developing countries. These concerns parallel the longer-standing preoccupation of many third world integration systems with a reasonably equitable distribution of resources between the more and the less well

EXTERNAL. AID AND EAST AFRICAN INTEGRATION 309

endowed members of the system. In the case of resource distribution which is internal to a given country there has been a renewed stress on developing a country’s agricultural base as opposed to rapid industrialization. In contrast, most integration schemes in the developing world continue to perceive the matter of intra-scheme distribution primarily in terms of regimes for the allocation of new capital-intensive industries.

Given the current focus of many bilateral and multilateral aid programmes on basic human needs strategies, the extent to which these programmes include major support to south-south integration in the future may depend upon the willingness of integration secretariats to engage in non- traditional pursuits. Obviously domestic equity issues will remain first and foremost a prerogative of national governments. However, there is unques- tionably some scope for greater integration system involvement in, say, the agricultural sector, in ways which will not necessarily infringe upon state responsibilities. The East African Community initiated a considerable amount of work by way of applied research on food production and tried, unsuccessfully, to make some headway on the question of a more rational management of the fisheries stocks of Lake Victoria through the creation of a Lake Victoria Fisheries Commission. O n the whole, however, Commun- ity planners and economists, both local and expatriate, were generally more preoccupied with designing systems for the allocation of new capital- intensive industries, than with proposing the establishment of East African food security systems.

An especially interesting example of concern by an integration grouping with non-industrial and non-trade liberalization issues can be found in the case of CARICOM. In December 1975 the governments of the Caribbean region agreed to the establishment of the Caribbean Food Corporation (CFC) with the CFC in turn sponsoring an ambitious regional Food Plan. The Plan aims to help the Caribbean countries achieve a high degree of self-succiciency in the production of animal feed, fish products and fruits and vegetables. According to Axeline, the CFC “is an indication of the basic needs approach to development in Caribbean integration, and the heightened awareness of the importance of transforming agriculture for d e v e l ~ p m e n t . ” ~ ~ T o date the CFC has attracted significant amounts of aid - mainly in the form of technical assistance grants - from, among others, the OPEC Fund for International Development, the European Develop- ment Fund and the Inter-American Development Bank.

There is yet another area, that of intra-scheme payments, where external aid could make an important difference in the functioning of a particular integration scheme. We have shown how in the case of the East African Community the Community corporations rather quickly became focal points for inter-state tension rather than harmonization, mainly because of

35 Axeline, Caribbean Integration, the Polifics of Rqionalism, p. 129.

310 THOMAS S . COX

the difficulties encountered in making transfers of revenue from the periphery to the centre. Given the non-convertibility of most developing country currencies this situation is likely to continue to prevent many integration schemes from achieving a modicum of viability. External aid could be used to assist in underwriting regional and subregional clearing houses, thus facilitating trade expansion within the integration system and, where there are common services, enhancing the capacity of the latter to do the job for which they were initially created. In the case of Latin America a Brookings Institution study published in 1973 urged that, wherever this was acceptable to the Latin Americans, American aid should be used to help the region overcome “its fear of (the) possible shortrun costs” of integration. The United States might support a payments union which “could provide temporary credits to attenuate balance-of-payments deficits arising from the integration

The East African Community’s failure to initiate any major development projects in such fields as energy production, livestock development and tourism, despite some initial expectations to the contrary, undoubtedly had a negative influence on the flow of resources from the outside. Perhaps because they are usually more concerned with large-scale regional development projects than are the integration systems, “functionally-oriented” groupings such as the OMVS and the River Niger Authority in Africa quite often prove more attractive to donor agencies than do the integration secretariats. Multi-donor clubs, usually led by UNDP and the World Bank, have helped mobilize resources for these groups. Those integration secretariats seeking external financing might wish to emulate the success of the ‘Lfunctionals~’ by undertaking one or two major development projects and, wherever feasible, linking these to domestic equity considerations. Moreover, such projects, if they are promoted heavily and receive the strong political backing of the members of the integration system, may usefully serve as a counterweight to an excessive bilateralizing of aid delivery on the recipient side.37

The emergence of the oil-exporting developing countries as a major force in north-south relations has also led to demands by other sub-groups for the former to play a larger role in south-south relations. Although such aid as has materialized from the OPEC Fund for International Development and from other “official recyclers of OPEC surpluses” has largely gone for country programmes and projects, this would not seem to rule out future support to regional activities. Already, for example, the OPEC Fund is

3b Joseph Grunwald, Miguel S. Wionczek and Martin Conroy, Latin Amerzcan Economic Integration and U S . Policy, Washington, D.C. : The Brookings Institution, 1972, p. 155.

37 For example, the West African Economic Community (CEAO) will establish a Regional Centre for Research and Production on Solar Energy which will work in areas relating to village water supplies, irrigation and the drying and preservation of foudstuKs. The Centre has attracted assistance from the OPEC Fund, the World Bank, the African Development Bank, UNDP and others.


assisting a number of regional projects through co-financing arrangements with the UNDP. These include the previously mentioned Caribbean Food Plan with CARICOM, an alternative energy sources development project with the Central American governments and a regional fisheries project in the Red Sea and the Gulf of Aden. These, admittedly, constitute but a mere fraction of the OPEC Fund’s total transfers to the non-oil exporting developing countries. However, the existence of such projects suggests that wherever one can somehow combine an emphasis on, say, food production (of special interest to many of the OPEC countries) with economic cooperation and integration, it may prove possible to tap non-traditional sources of external finance to support the latter. This will, among other things, help reduce the dependence of south-south cooperation and integration groups upon the largesse of the industrialized north.

Efforts to channel external resources through integration secretariats and their affiliates mean, in effect, that an additional bureaucratic layer or middleman is imposed between the aid givers and the aid recipients. Wherever this intermediary is weak on the ground in the sense that it is understaffed, poorly managed and/or divorced from an effective policy- making authority - all three factors characterizing the East African Com- munity after 1972 - the integration system may quickly be seen by its members as an “obstacle” to the smooth delivery of outside resources. This, to a considerable extent, describes the way in which many of the Community’s member states came to regard the Arusha secretariats. Moreover, as we have shown, the regional branches of the Community corporations began to perceive the various corporation headquarters as an impediment to the receipt by those branches of external resources.

Through the provision of technical assistance combined with training, donor agencies can and should do as much as possible to strengthen the capacities of the integration secretariats to manage their affairs better. Only in this way can donors ensure that their backing of a particular regional institution will not be regarded by the recipient countries as contrary to the recipients’ interests.

As Mahbub Ul Haq observed the phenomenon which now goes under the heading of economic cooperation among developing countries or “south-south’’ relations is essentially a matter for the developing countries themselves. Recent gatherings of the Group of 77 have echoed the same theme. Haq goes on to note that if the third world is going to make ECDC a going concern then it “must be willing to pay for its collective self-reliance rather than turn helplessly to the North to finance even its own co- ~ p e r a t i o n . ” ~ ~ That having been said, our discussion of the East African Community has shown that external aid need not necessarily undercut

38 Mahbub U1 Haq, “Beyond the Slogan of South-South Cooperation,” in World Dcvclopmcnt, Volume 8, No. 10, October 1980, p. 751.

312 THOMAS S . COX

collective self-reliance anymore than a World Bank loan or an EEC ground undermines national self-reliance. Indeed where support to integration is to be provided from a mix of southern and northern countries and agencies - American, Canadian, Mexican and Venezuelan support to Caribbean regionalism being a case in point - this can only be to the good. O n the other hand, the new emphasis being given by some OECD countries (notably the United States under the Reagan administration) to “bilateralism” - apart from whatever effects it may have on the multi-lateral aid-giving organizations - may also diminish the prospects for further northern support to southern integration. Indeed, one observer of the American Administration’s highly-touted Caribbean Basin Initiative (CBI) has lamented the Administration’s decision “not to promote regional economic integration, an essential objective for the small economies in the Basin, as part of the program,” apparently owing to American displeasure over the Caribbean Development Bank’s willingness to grant a loan to Grenada.3g

’’ Robert Pastor, “Sinking in the Caribbean Basin”, in Foreign Affairs, Volume 60, No. 5, Summer 1982.

Documents

Northern Actors in a South-South Setting: External Aid and East African Integration