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 African Business Network 33
Despite the relatively small size of East African economies and the low purchasing power of many citizens, motorcycles have a considerable market in East Africa. Kenya, Tanzania and Uganda rank among the top 40% global importers, with the majority of the bikes coming from India and China. This provides an opportunity for domestic  rms to produce and to compete with importers.
A considerable number of  rms started assembling motorcycles in East Africa. Businesses in Kenya and Tanzania have requested the tax waiver to start producing.
Under the waiver, manufacturers can import bike components (or more often ‘completely knocked down kits’, sets of components that can be assembled into a fully functioning bike) at 15% tari  rate (lower than the 25% these components would normally attract) and then assemble the bike in country.
The exemption is granted if producers source some bike parts domestically or within the region, thus encouraging the creation of linkages.
The question remains on whether the revenue forgone on completely knocked down kits could have been used to fund other projects that would have achieved other socially desirable outcomes – in other words, if a cost-bene t analysis of the
tax waiver has been conducted before its implementation. But in addition to the static gains and losses, the potential to learn and develop new skills needs to be considered.
Linda Calabrese is a senior research o cer at the Overseas Development Institute, based in London. She is a development economist with research interests in manufacturing, trade and competitiveness, and China-Africa relations. She is currently researching on the industrialisation prospects of the East African region.
Linda spent four years working in East Africa,  rst for the government of Uganda and then with the International Growth Centre (a UK-based research organisation) in Rwanda. Linda also lived and studied
in China and she is  uent in Mandarin Chinese. /linda-calabrese @lindacalab

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