"I am happy to note that the customs union, which is the entry point of the integration process, comes into effect with the New Year," Kibaki said.

The East Africa Community (EAC) Customs Union treaty, which was signed last March, "will enable businessmen to freely access an enlarged market of over 90 million people and a combined GDP (gross domestic product) of 30 billion dollars," he added.

"It will also enable investors in the region to enjoy economies of scale and reduce costs of production. Furthermore, the union will enhance the competitiveness of our products in international markets," he added.

Presidents Kibaki, Yoweri Museveni of Uganda and Benjamin Mkapa of Tanzania signed the protocol on the Customs Union in the northern Tanzanian northern town of Arusha last March.

A common currency and bank are due to be installed before 2010.

The deal, which took four years to negotiate, calls for the elimination of duties on goods within the EAC, which is home to some 90 million people with an estimated annual market of some 90 billion dollars.

Concretely, Kenya will not levy duties on goods imported from Tanzania and Uganda, while duties on certain goods heading from Kenya to her two partners will fall from 10 percent to zero over five years.

On goods entering the EAC from outside, three tariff bands will be imposed, zero, 10 and 25 percent, depending on the nature of the shipment.

Next year, due to that tax harmonisation, Kenya will lose about 80 million dollars and Uganda 45 million, official statistics showed. But in the long term, rewards are expected in the form of increased regional trade and investment, according to officials in the three countries.