THE economy of the COMESA-EAC-SADC countries will be a target for global businesses after forming the region's Tripartite Free Trade Area (TFTA) agreement.
The objective of establishing the tripartite free trade area is to enhance market access, address the issue of multiple memberships and further the objectives of cooperation, harmonisation and coordination of policies among the three blocs.
Dr Amani Nthangu from the University of Dar es Salaam Business School said the agreement will boost the ability of these countries to attract global businesses and investments.
"More foreign direct investments into these countries are expected to increase that will help to meet their development goals," he said.
Dr Nthangu said target of each investor is to maximise returns and thus by establishing an industry in one country means will have the opportunity to sell in all these countries.
"The agreement gives investors market assurance to sell in the whole region thus boosting their trade and investments," he said.
Also, the agreement will enhance these countries' ability to mobilise capital using various financing models from different parts of the world. With the agreement, Dr Nthangu said these countries will have agreed on various terms meant for boosting businesses in the region.
For example, with the agreement some taxes will be lifted thus helping business people boost business flow and increase their earnings.
"The tripartite agreement is an important mechanism for trade creation intended to boost businesses among the member countries," he noted.
The agreement will have also to state the mechanism in which those outside the block are to be charged.
The University of Dar es Salaam Business School Prof Deusdedit Rwehumbiza said the tripartite agreement means a lot to business people.
"The agreement has created huge opportunity for businesses in the region by increasing the size of the market that will result into business expansion," he said.
With the tripartite agreement, Prof Rwehumbiza noted that there will be increased movement of labour particularly experts seeking for green pastures in other countries.
He said also that by coming together through the tripartite agreement, it is now possible to address various trade barriers and impediments.
However, Prof Rwehumbiza cautioned on the need for the member countries to develop mechanism for protecting their people from illegal businesses and goods.
Furthermore, he called on the need for conducting awareness campaigns to educate the public on how they can take advantage of this initiative for improved living standards.
An economist-cum-investment banker, Dr Hildebrand Shayo said the proposed tripartite agreements, which could incorporate COMESA, EAC and SADC if all proceeds according to plan, will profoundly impact the member states' economies.
"By opening sectors for investment and aligning policies for treating foreign investors, by harmonising general policy frameworks, including those for investment, in participating countries, by the direct and indirect effects of trade and investment liberalisation and market integration and by directly cooperating on investment projects at the regional level, this effort could ultimately result in increased foreign direct investment," he said.
The European Union (EU) and the North American Free Trade Agreement, two well-known and prosperous regional organisations, have demonstrated through their experience that regional economic integration significantly strengthens intraregional cross-border investment ties.
Dr Shayo said the EU's progressive development has also shown that it encourages industrial growth by pushing output to nations with lower labour costs and encouraging regional specialisation in some industries.
Regional cooperation results in reorganising, occasionally redirecting and creating new investments. By these regional economic blocs bringing together their visions, the whole process will bring together laws for investor treatment and open sectors to investment, with regional integration initiatives typically resulting in higher FDI.
"This can happen due to direct collaboration on investment projects at the regional level, the indirect influence of trade liberalisation and market integration and attempts to harmonise general policy frameworks in participating countries, especially for investment...protection and liberalisation," Dr Shayo said.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
The impacts will occur on permitting regional production reorganisation, including investments and divestitures, promoting investment by lowering transaction costs and perceived risk; and--most importantly--offering more investment options.
Regional integration also impacts FDI flows because transnational businesses (TNCs) in the region rationalise their production facilities to take advantage of the lower costs associated with intraregional commerce.
For instance, lower trade barriers enable some businesses to take advantage of economies of scale by concentrating their operations nationwide while serving larger regional markets. The process may result in higher FDI flows or investment diversion.
The kind and degree of market integration after the tripartite agreement will boost the national and regional industrial environments and the traits of the participating enterprises are some of the factors that affect the direction and intensity of these effects.
Nonetheless, the influence depends on how institutional configurations influence business choices about foreign operations and investments and given political will from member states.
