Abstract

The study set out to evaluate the relationship between sectoral Aid for Trade (AfTS) and sectoral exports within East Africa – represented by the East African Community partner states including Burundi, Kenya, Rwanda, Tanzania and Uganda. The Estimation method used was the Seemingly Unrelated Regression Equation (SURE) model. The SURE estimation results show a positive significant relationship between AfTS and exports from the agriculture, manufacturing and services sectors in the East Africa Region, implying that the initiative has and continues to foster the growth of exports from the region. This relationship however is inelastic, implying that percentage increases in aid disbursed lead to smaller percentage increase in sectoral exports. The results also show a highly significant, positive and elastic relationship between value addition and exports. Other regressors like regulatory quality and corruption control also show a higher impact on exports than AFTS. This shows that while AfTS can contribute to improved export performance, improvements in value addition, the quality of the regulatory environment, and the level of corruption control are equally or even more important in facilitating export growth. From the correlation coefficients between the sectors, all the three sectors are positively correlated. It can also be seen that the greatest correlations exist between the manufacturing sector and the agriculture sector, which could be because the countries in the study –from East Africa are mainly agriculture exporters, with a lot of inputs feeding from the agriculture sectors to the manufacturing sectors.

Key words: Aid for trade, sectoral exports, seemingly unrelated regression model.