East African Community Regional Integration: Private Investment Implications

Abstract

The objective of regional integration is the attainment of long-run economic growth for member countries. Private investments are decisive in attaining this objective, given the high dependence of EAC member states on state-owned investment. This has been attributed to the economic policies implemented by the government which favors state-owned investment. Further, existing empirical studies have been unable to determine whether trade liberalization advances or obstructs the accumulation of private and foreign investment. This study, assuming a random effect assumption, attempts to estimate the private investment model in EAC member states using the panel least squares technique for the period 1981-2015. The panel random effect regression result reveals that East African Community regional integration has had a significant impact on private investment build-up owing to the presence of third-country investors not currently established inside the EAC region. This study, therefore, recommends any policy agenda aimed at deepening regional integration through guaranteeing an appropriate business environment for enabling free movement of factors of production, population, and goods and services.