KENYA, TANZANIA CLASH OVER DRUG IMPORT TARIFFS

Tanzania's drug industry has further criticised Kenya's decision to remove import tariffs on pharmaceutical products. Kenya, Uganda and Tanzania together comprise the East African Community (EAC) customs union. The three countries had agreed to levy a 10% tariff on imported drugs, in order to stimulate domestic production in the region, which is home to roughly 90mn people.

Kenya had previously charged no tax on imported medicines, and the government decided to revert to this policy in April 2005, reportedly after heavy lobbying by local pharmaceutical interests. The Tanzanian Private Sector Foundation (TSPF) claims that investment in the country's drug sector totalled TZS20bn (US$17.71mn) in 2004. Tanzanian business groups are now considering suing Kenya for breaching customs rules.

The East African drug market is worth around US$300mn, although there are few domestic producers. Industry sources are also concerned that the removal of the 10% tax could lead to 'dumping' by low-cost Indian and Chinese exporters.

The EAC is planning to form a common market in 2007, with a monetary union scheduled for 2009. However, continual disagreements over tariff rates and other economic issues threaten to derail the plans.