* Development assistance issues may soon be resolved
* Progress on giant African free trade bloc
DAR ES SALAAM, May 5 (Reuters) - East Africa's economic bloc of five nations is optimistic a trade deal with the European Union can soon be agreed, the secretary-general of the East African Community (EAC) said on Wednesday.
The EAC and the European Union have been at loggerheads for months over signing the so-called Economic Partnership Agreement (EPA), which was designed to replace preferential trade deals the World Trade Organisation has struck down.
EAC members Burundi, Kenya, Rwanda, Tanzania and Uganda initialled the EPA deal in 2007 and secured EU market access. But the countries have refused to sign the agreement, meaning there are no legally binding commitments.
The deal was meant to be signed last July, but the deadline passed due to haggling over trade and development issues.
"My understanding is that they are coming round to accommodating us as far as the development issues are concerned, so we see a very positive way forward in concluding the framework agreement," EAC Secretary-General Juma Mwapachu told Reuters.
The EU said in February it wanted a clear timetable for signing the deal, but Tanzania's trade minister said then the EAC would not budge unless Brussels gave firm commitments on development assistance, especially for infrastructure.
The EAC has a gross domestic product of $73.3 billion and a population of close to 127 million. It has a customs union, and a common market is due to take effect in July.
GRAND FREE TRADE ZONE
The region's biggest economy, Kenya, stands to lose most if the EU deal is not signed as it is excluded from the classification of a Least Developed Country.
The other four could still send goods to the EU under the Everything But Arms initiative. But Kenya has pledged to support its partners in pushing for the issues to be resolved.
Mwapachu also said there had been some progress on forming a giant African free trade zone linking the EAC, the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (Comesa).
"Everything is now documented on the grand free trade area, rules of origin and all those things. We are now trying to organise a tripartite summit," he said on the sidelines of the World Economic Forum in Tanzania.
Mwapachu said the summit would be held once the current chairs of the three blocs -- Tanzania, Democratic Republic of Congo and Zimbabwe -- had fixed a date and an announcement would be made at the meeting on the establishment of the area.
Last year, the three blocs agreed a roadmap for the zone, paving the way for a free trade area covering 26 countries, more than half a billion people and economies with a combined gross domestic product of $650 billion.
Many African leaders see greater regional economic integration as key to helping the world's poorest continent develop as it will open up huge markets and hopefully encourage more foreign direct investment.