Foreign direct investment in the Med countries in 2008: Facing the crisis

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SURVEY N 3 / March 2009

Foreign direct investment towards Med countries in 2008:

Facing the crisis

Foreign direct investment in the Med

countries in 2008 Facing the crisis

S t u d y N 3

M a r c h 2 0 0 9

A N I M A I n v e s t m e n t N e t w o r k

Samir Abdelkrim / Pierre Henry

Foreign direct investment in the Med region in 2008

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References ThisreportwaspreparedbytheANIMAteamwithintheframeworkoftheInvest in Med contract. ANIMA Investment Network is a multicountryplatform supporting theeconomicdevelopmentof theMediterranean.Thenetwork brings together 70 or so Investment Promotion Agencies (IPA),internationalnetworksandplayers involved in the territorialdevelopmentoftheMediterraneanregion.TheobjectiveofANIMAistocontributetoabetterinvestmentandbusinessclimate and to thegrowth of capital flows into theMediterranean region.www.anima.coopISBN9782915719314 EAN9782915719314 ANIMAInvest in Med 2009. No part of this publication may bereproducedwithoutexpressauthorisation.AllrightsreservedCoverphotograph:Fotolia.com

Authors Pierre Henry, Samir Abdelkrim (in charge of the observatory, thepreparation and thewriting of this report), assistedbyBndictde SaintLaurent (editing, global review), Emmanuel Noutary (positioning), LocPendeliau,XiuguiZhang,Adeline Joanny andCatherine Pettenati for thedatacollection.AllbelongtotheANIMAteam. Warm thanks are extended to the business intelligence team of theFrenchAgencyforInternationalInvestments(AFII)whichassistedANIMAinthedetectionofcertainprojects. Thevarious InvestmentPromotionAgencies (IPA)of theMed regionand the French Economic Missions abroad for the supply of certaininformation. Neither ANIMA nor any of the partners involved may be heldresponsible for data supplied. Any error or lack of precision should besignalled to [email protected]. ANIMA is interested in your comments,complementaryinformationandupdates.Manythanks.

Foreign direct investments in the Med region in 2008

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Acronyms AFII:InvestinFranceAgency ANIMA: EuroMediterranean network of players for economic

development EU:EuropeanUnion(oftenreferredtoasEU15,orformermembers,E

U10,ornewmembersandEU27) FDI:ForeignDirectInvestment GDP:GrossDomesticProduct GNP:GrossNationalProduct ICT:InformationandCommunicationTechnologies IPA:InvestmentPromotionAgency Med13:Group of 13 neighbour countries of Europe, 9Mediterranean

PartnersCountries of the EU (Algeria, Egypt, Israel, Jordan, Lebanon,Morocco, Palestinian Authority, Syria, Tunisia), one country observer(Libya), 2 formerMEDA countries (MaltaandCyprus)who joined theUnioninMay2004,andonecountrytobecomeamember,Turkey.

Med10:thesamewithoutLibya,MaltaandCyprus(withTurkey) MENA:MiddleEastNorthAfrica=Med10+Mauritania,Libya,Sudan,

countriesoftheGCC+Yemen,Iran,Iraq,Afghanistan,Pakistan(attimesvariablegeometry)

MIPO:MediterraneanInvestmentProjectObservatory MPCs:MediterraneanPartnersCountryoftheEU R&D:ResearchandDevelopment SCSC:SoftwareandComputingServicesCompany UNCTAD:UnitedNationsConferenceonTradeandDevelopment WIR:WorldInvestmentReport(UNCTADreportonworldinvestment) WTO:WorldTradeOrganisation


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List of contents Preface:crisis,theopportunemoment.................................................7

Aglobalcontagion...........................................................................................7FDIcandobetter!.........................................................................................8

Positioning:theMediterranean,ananticrisisremedyforEurope.9Europeanenterpriseseekslowcostgrowthbuffers....................................9Inthefaceofrecession,theMedregiontrumpcards..................................10Tomakethewindfalllast,needforpublicauthoritysupport...................15

1.Synopsis:investment,1stvictimofthecrisis.................................17Afterarecordyearin2007,FDIplungesin2008.........................................17

Netdeclinein2008.....................................................................................................18Regionaldynamics:Turkeytakesthelead,MachrekandMaghrebslip..21

Maghreb:thehiddencostsofthelackofeconomicintegration.........................21Machrek:Egyptmarkstime,Lebanonpicksitselfup..........................................23

OriginoftheFDIflows:Europetakestheleadagain..................................25InvestmentsfromtheGulfStates:theswansong?................................................26Euromedintegrationcontinues................................................................................27

ProfileofforeigninvestorsintheMedregion..............................................29Typesofbusiness:preponderanceofmultinationals...........................................29InvestorsfromEurope,theGulfStatesandNorthAmerica:sectoralcompetitionandcomplementarity..........................................................................29Methodsofinstallation:grassrootscreationsandacquisitionsofexistingassetsrun50/50...........................................................................................................30

Sectors:BTPandenergystillinthelead,butmoremodestprojects.........30Targetinvestmentswithstronglocalspinoffs............................................34Honourslistforthelargestprojects...............................................................35

2.SectoralanalysisofFDIintheMedregion.....................................37Sectoralpanorama2008.............................................................................................37

Apronouncedimbalanceinthesectoraldistributionofprojects..............38SectoraldistributionofthestockofFDI20032008...............................................39

Jobscreationunderthesectoralmicroscope................................................39Focus:5keysectorsinthefaceofthecrisis..................................................41

Transportandlogistics..............................................................................................41


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Softwareservices,engineering&otherbusinessservices..................................44Mechanicalindustries...............................................................................................47Textile...........................................................................................................................51Electronicsindustry...................................................................................................53

3.Countryprofiles2008..........................................................................57Algeria:newchallengesinsight..............................................................................57Tunisia:prioritytoindustry.....................................................................................62Morocco:facinguptotheEuropeanslowdown...................................................57Egypt:prioritytoendogenousgrowth...................................................................64Libya:rebirthcontinues............................................................................................64Israel:investmentsinR&Dtoprepareforthepostcrisis...................................68Syria:returntograce.................................................................................................70Jordan:consolidatestrengths...................................................................................71Turkey:Europesworkshopentersazoneofturbulence....................................71Lebanon:businessispickingup..............................................................................74PalestinianAuthority:nogivingin!.......................................................................77Cyprus:fullsteamahead!.........................................................................................78Malta:hightechpropulsion.....................................................................................79

4.Annexes..................................................................................................80Annex1.Listofdetectedprojectsin2008(ANIMAMIPO).......................80Annex 2. Direct job creation announced, by sector (ANIMAMIPO2008)153Annex3.SectoraldistributionofFDIprojectsin2008(foreignshareingrossbudgetsasannounced&numberofprojects,ANIMAMIPO)........154Annex4.Origindestinationcrosstable200308(foreignshareingrossbudgetsasannounced,ANIMAMIPO)........................................................155Annex5.Methodology....................................................................................156

Approach.....................................................................................................................156Selectioncriteria.........................................................................................................157Recentmethodologicalchanges..............................................................................158Sectoralnomenclature...............................................................................................159

Preface: crisis, the opportune moment

ByBndictdeSaintLaurent,generaldelegateoftheANIMAnetwork A global contagion In2008,thecountriestotheSouthandEastoftheMediterraneanstartedtobe affected by theworld economic and financial crisis, a little later thanelsewhere and with a certain attenuation of its effects. The 13 countrieswhich border the Mediterranean and which are monitored by ANIMA(Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Palestinian Authority,Syria,Tunisia,plusTurkey,Libya,MaltaandCyprus) receiveda little lessthan 40 billion euros of foreign direct investment (FDI) in 2008 (35%),against61billionin2007and68billionin2006.Thenumberofprojects(778projects) only dropped by 6% the largest projects (except those in theenergy domain) and investments coming from the Gulf States being themostaffected.This isaworldwidesituation.AccordingtothefirstUNCTADestimations,(theUNCTADobserves theeffective flows,whereasANIMAworkson theannouncements fromcompanies), theoveralldrop inFDIwas22% in2008and should further accentuate in 2009. Second round effects are possible,with the drop in consumption in developed countries, the reduction inmigranttransfers,thedropincrudeoilincomeandmoredifficultaccesstocredit.A good number of projects, particularly in the automobile sector, havealreadybeen scaleddown (for example, theparticipationofNissan in theglobalplantatTangiersMednext toRenault),when theyhavenotpurelyand simply been cancelled (for example, in the real estate sector,projectscomingfromtheGulfStates).There remain,however,good reasons forhope.TheWorldBank forecastsgrowth of 3.9% in 2009 for the countries of the South and East of theMediterranean.Certainof themoreautarkiccountries,suchasAlgeria,areless exposed to the crisis.Cheaperoil and low inflationwillbenefitotherMed countries. Finally, for European industry, the Mediterranean oftenappearsasasolution,apossiblerecourseintermsofmarket,costcontrolor


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partnerships. Inanyevent, it is this latterobjective that the Invest inMedprogrammeisattacking.Incertainaspects, thecrisisalsohasasalutaryeffect. InGreek,, thecrisis, means the opportune moment. A certain speculative bubble isbursting in the tourismandhighendrealestatesectors. It isnow time forthecountriesconcernedtothinkofwaysofattractingmoresustainableandmoresociallyusefulprojects.FDI can do better! The South of the Mediterranean largely remains a weak and dominatedeconomicarea.Foreigninvestmenthasavitalcharacter,becauseofthelackofproductive capital and theneed for the transferofknowhow,but it isoftenuncontrolled(projectsacceptedas theyare,oftengigantic,short termvision,littleappropriation).Itcreateswealth,butisaccompaniedbylimitedredistribution,withinsufficienteconomicmultipliers(localspinoffs,valuechain) and too many polluting projects (real estate, chemicals...). TheMediterranean economic development model is very often of littlesatisfaction(subcontracting,masstourism, junkplants,braindrain)andcertainnewoperatorsshowlittleconcernforhumandevelopmentToo fewdirect jobsarecreatedbyFDIprojects (more than2milliondirectjobsin6yearsaccordingtoANIMAMIPOestimates,seefigure17infra,andthis figurewould seem tobedropping). Itperhaps corresponds to 3 or 4timesmore indirect jobs,when in reality theneed is to create 10 times asmany jobs (3 to 4 million jobs a year). It is therefore indispensible tocompleteFDI(92%emanatingfromlargecompanies)withprojectsproposedbySMEs,localandforeign.Thisinvolvestakinganinterestinthecreationofa wellrooted fabric of large, medium and small companies workingtogether, on an often transnational scale. This is the great industrialchallenge of the EuroMediterranean region, finding an original mode ofeconomic cooperationwhichwillbenefit the two shoresof theMediterraneanovertime.

Positioning: the Mediterranean, an anti-crisis remedy for Europe

ByEmmanuelNoutary,directoroftheInvestinMedprogrammeEuropean enterprise seeks low cost growth buffers Europeanbusinessesaredepressed.Thefinancialcrisisandtheanticipatedreinforcement of the measures of caution from the banks, promise themfifteen to eighteen difficult months: fewer sources of finance, or greaterdifficulties inmobilising it and at the same time, an already perceptibleshrinkingofdemand.TheEuropeanCommissionhasannouncedadeclineof1.8%for2009overthewholeoftheEuropeanUnion(1.9%fortheEuroarea),andatimidrecovery(+0.5%)in2010.AndthisistakingaccountoftherevivalplansimplementedbytheStatesthemselves.Theeffectsofthefinancialcrisisandtherecession ithasprovokedarenot,however,homogeneousthroughoutEurope(Figure1): Certain of the countries who recently joined the Union (Romania,

Bulgaria, Poland, Slovenia, Slovakia, Czech Republic, Cyprus andMalta) and have been bolstered by structural programmes have not(yet)built theirgrowthonhousehold indebtednessand thesupportofpublicauthorities.Whiletheywillnotescapeadeclineininvestment,asaresultofthebankingcrisis,theirconsumptionshouldtoalargeextentbemaintainedandtheirgrowthremainpositivein2009.1

Onthecontrary,thoselikelytobemostaffectedarethosewhichhave,in recent years, experienced growthmore based upon the real estateboomandhousehold indebtedness(Latvia,Estonia,Lithuania,Ireland,Spain,Luxemburg,Hungaryand theUnitedKingdom).Among them,onlyEstonia,LuxemburgandHungaryshouldrediscoversignificantlypositivegrowthin2010.

Between the two are to be found the majority of main Europeansuppliers to the Med countries (Germany, Belgium, France, Greece,Italy,Portugal)aswellasthenorthernEuropeancountriesandAustria.

1EuropeanCommission(InterimForecastJanuary2009).


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All should losebetween fourand fivepoints ingrowthbetween2008and 2009, but pick themselves up from 2010. The impact willneverthelessbeheavyoninvestment,asitwillonconsumption.

Figure1.PrivateconsumptiongrowthinEurope(in%)MainsuppliersofMedcountries 2008 2009 2010Germany 0.0% 0.8% 0.0%Belgium 0.9% 0.4% 0.3%Spain 0.4% 2.6% 0.0%France 1.1% 0.1% 0.3%Greece 2.4% 0.7% 0.7%Italy 0.4% 0.3% 0.7%Portugal 1.4% 0.2% 0.1%EuroZone 0.5% 0.1% 0.3%UE27 1% 0.4% 0.4%Source:EuropeanCommission(interimforecast,January2009)The sectors of consumptionwhichwill suffer initially are those segmentstraditionallyconsideredaslessofaprioritybyconsumers:thewholeofthetouristandleisureindustry,catering,clothing,householdequipment,hightech and communication products. More generally, a modification ofpurchasingbehaviour is tobe foreseen,withadecrease in thevalueof theshoppingbasketandanorientationtowardsthediscounters.ForEuropeanbusinesses, it isa trickyequation.Facedwith thedecline indemandontheirmarkets,theyhavetothinkoffindingnewoutlets.Atthesame time, the expected drop in profits and the financing difficultiesencounteredprevents large investments forexports.At the same time, thehunt for low prices further accentuates the pressure on profits, obligescompanies to increase competitiveness, and seek cheaper means ofproduction.In the face of recession, the Med region trump cards Inthisveryspecialcontext,thecountriesSouthoftheMediterraneanpresentacredibleproposalforEuropeanbusinesses:bothassolventgrowthbufferandcompetitiveproductioncosts,supportedbyabankingsystem thathasrather been spared from the crisis. In Germany, France, Italy or Spainespeciallywhoeachrepresentupto30%oftheimportsofthecountriesof


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theSouththecommercialhabitsmaycontributetoanopportunerelocationofbusinessestowardstheMedcountries.Of course, the Mediterranean countries will not be spared a certainslowdown,accompanied incertainsectorsby large job losses.Themajorityof the sectors subjected to external demand, the foremost ofwhich beingautomobilesubcontractingandthetextilesectorwillexperienceairpockets.Tourism also,verymuch linked toEuropeandemand, is starting to showsignsofa lossof steam.Butother sectors continue toprogress inexports,particularly in theexternalisationof support functions (computer services,customerrelationsmanagement,etc.).The structural environmentof the countriesof the region,manyofwhichhavetodaycommittedto importantreformssothattheireconomiesevolvetowardsagreateropening toprivate initiative, including foreign (seebox),placestheminafavourablepositiontoday: The rules imposedby the States on localbankshaveprevented them

frominvestinginstructuredproductswhichmasktoxicassets.Finally,thereproachmadetothesouthoftheMediterraneanfinancialsystems,which of being poorly connected to the rest of theworld, has todaybecome an asset. For theMed banking sector is in good health: thepercentageof thepopulationwithaccess tobanking isgrowing inallsegmentsof themarket,which furtherdistances theeffectsof thecashcrisis. The system therefore has the capacity to promote thedevelopmentofnationalandforeigncompanies.On theconditionthatitwantstoorthatissolicitedsotodobythepublicauthorities.

Unlikethatofotherdevelopingcountriesintheworld,thecurrenciesofthecountriesSouthof theMediterraneanare faringwell in the faceoftheEuro. Inayear, thecurrenciesof Jordan,EgyptandLebanonhaveappreciated by 10% to 13%, the Moroccan dirham by 3% and theAlgerianDinarby5%.Only inTunisia can therebeobserveda slightdepreciation of the Dinar, by 4%. The situation is far from thevertiginous slide of local currencies against the Euro observed inUkraine(29%),Romania(26%),PolandandRussia(20%),Hungary(17%),India(16%)orBrazil(13%).Hence,thelocalopportunitiesoftheMedcountriespresentasolvencythattheBRICcountries(Chinaapart)havelost.


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The localmarkets South of theMediterranean aredeveloping. In thisperiod, the public authorities in the area are intensifying evenmoretheireffortstocreatejobs,improvetheaverageincomeandthelevelofcompetence,and raise the living standardof thepopulations.Whileaslight slowdown is anticipated in 2009, growthwill remain sustainedandwilltakeupitscruisingspeedofnearly4%perannumonaveragefrom 2010 onwards. Private consumption remains dynamic, even in2009,whichmakes the region apossible area to absorb theEuropeansurpluseswhichfindithardtolocateoutlets.

Figure2.GDPandprivateconsumptiongrowthinafewMedcountries

CountryGDPGrowth(%) Privateconsumptiongrowth(%)2009 2010 2009 2010

Algeria 2.25% 5.2% 5.3% 5.0%Egypt 3.87% 3.87% 6.3% 5.0%Jordan 3.4% 2.9% 2.7% 2.5%Morocco 2.7% 3.8% 3.2% 4.2%Tunisia 2.84% 3.8% 3.6% 4.3%Source:EconomistIntelligenceUnitIn consequence, the opportunities which the Med countries offer wouldappeartobenumerous: Thedistributionandlogisticssectorstodaypresentformidablepotential

inthesecountries.Certainoperatorshavealreadytakentheirplaces,thelikes of WalMart or Metro in Egypt, to develop networks of largeshoppingcentres.Butthesectorisstilltobedevelopedthroughoutthearea as a whole. For 10 years, the Med countries have furthermoreconsiderably developed their transport infrastructure networks,whateverthemodeconsidered(+25%forthemainairports,+7%forthemainports,+60%forthemotorways).Despitethat,aqualitativehurdleremainstobeclearedforthesupplychainoperatorsandtheEuropeanshave interest in grasping this opportunity. Beyond access to animmediatemarket, theprospectofa revivalofworldconsumptiononthe20102011horizonisanextraargumenttotakeuppositionstodayinanareawhichwitnessesthepassagebetweenSuezandGibraltarof25to30%ofworldflowsofhighaddedvaluegoods(containers,oil).


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The building sectorwould seem to resist better in theMed countriesthan in Europe. Despite a few property bubbles which are simplywaiting to explode, in Marrakesh for example, and the massivecommitmentof theGulfStateswhichhavesuffered the full forceofthe financial crisis in this sector, many programmes in progressseemed tohavebeenmaintained.Newplayersare taking theirmarks(ashave theChinese for thepast10years); theneedsareso immense,especially in terms of theupgrading of the already existing stocks ofaccommodation.

Theconcentration, inconstantprogression,ofthepopulationstowardsthe towns and the coast means that everything that affects urbandevelopment,publicservicesandthecontrolofenergy,isamajorstakefor the countries of the area, including in terms of economicdevelopment.

The businesses in the Southnourish a localdemand forB2B serviceswhich is progressing strongly. European knowhow (from facilitymanagement tomarketing, not forgetting temporary employment andconsulting)beyondthefactoffindingwelcomeoutlets,willcontributetohelpingtheeconomiesoftheSouthclearaqualitative(specialisationoftasks)andquantitativehurdle(productivity).

Inapostcrisisworldeconomywhichwillprivilegesustainableresearchanddevelopment,theMedcountrieshavetheassetstotaketheirplacemoreasaproductionbaseforEurope(ifthelatterwantstoreconcileitsobjectives of reduction of its greenhouse effect emissions and theeconomicdevelopmentofitsneighbourhood)butalsoasalaboratoryofthe future on certain questions of universal interest (notably themanagementofwater).

Finally,theregionproducesa largenumberofengineersandstartupsinthedomainofthenewtechnologies.Mobiletelephonyisflourishinghereand thedevelopmentof the3Gcouldenable theregion toat lastplace itself in this sector, beyond the traditional relocations of thecustomer support centres.Ecommerce is in factbeingpushedby thepublicauthoritiesandgiven the low levelofdevelopmentof thecablenetworks,Mcommerce (ecommerce viamobile telephone),which isslow to develop in Europe could find pioneer markets in the Medcountriesandcompetenceintermsofapplicationdevelopment.Beyond


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this niche, a joint development of the logistics sector and the ICTswouldenabletheareatopositionitselfastherearbaseforthelargeecommerceoperatorsinEurope.

Figure3.Improvementinthebusinessclimatein2008:acontrastedsituationAn analysis of the economic policies introduced by the governments of the Medcountriesconfirmsoverall,thedeterminationoftheregiontomakeattractingFDIoneof the main levers of its development. But while the traditional champions ofeconomic opening continue to stoke the fires of reform (free trade area betweenTunisiaandtheEU,adoptionofalawfavouringthecreationofspecialneweconomicareasinJordan,reformsoftheoffshorecompaniesinLebanon,etc.),retreatstrategies,whilstisolated,raisetheirheadsagain: ThisisthecaseinAlgeriawhich,withtheadoptionofanewlawonFDI,wants

topush the foreigngroupsoperatingon its soil to reinvest locallypartof theprofitsmade(majorityshareof51%reservedforAlgeriansininvestmentprojectspromotedbyforeigners,obligationforforeignimportingbusinessestoassociatewithanAlgerianpartner,etc.);

In Libya, where foreign businesses fall over each other to lift the largeinfrastructurecontracts,somecontradictorysignalsaresenttotheoutsideworld.Hence, while promising to open further the banking sector to privatecompetition (after an initial wave in 2007), Tripoli regularly lets threats ofnationalisationoftheforeignoilcompaniespresentonitsterritoryfilterout.

The real surprise comes from Syria, which continues to emit stronger andstrongersignsofopeninguptoinvestors.Startingwiththeinaugurationingreatpomp of the first Stock Exchange in Damascus, in March 2009. Intent ondefinitively turning the page on the administered economy, Syria adopted itsfirstantitrustlawin2008,whichreinforcestheinterestsofprivateoperators.

TurkeycontinuestoalignitslegislationonEuropeancommunitylawandtoliberaliseandprivatisevitalsectors: In theenergysectorandpetrochemicals,productionanddistributionare in the

process of liberalisation: in addition to the privatisation of Petkim, thepetrochemicalgiant,severalnationalproducersofelectricityandgasdistributionnetworkshavepassedunder foreigncontrol, likePolatEnerji50%acquiredbytheFrenchEDF;

Several largeStatemonopolieshavebeensoldtotheprivatesector,suchasthetobaccoandalcoholmonopoly.

Afterseveralyearsofprohibition,foreigninvestorshavefinallybeenauthorisedtopurchaseland;

Intheaudiovisualsector,Parliamenthasauthorisedforeignerstoholdupto50%ofthecapitalinTurkishprivatemediaoperations,againstonly25%previously.


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To make the windfall last, need for public authority support To benefit from this economic situation,which is favourable to them, theMedcountrieswouldhaveevery interest inadoptinganoffensiveattitude.The Invest in Med programme will play its role in backing up regionalactionswhichmaybeabletobetakento: Exploit several sectors for which there exist strong industrial

complementaritiesbetween thesouthernshoreand thenorthernshore(from organic agriculture to aeronautics) and develop strategies ofselectiveattraction;

Incitefinancialinstitutionsandinvestorstoadoptcautiousmoreflexiblerules,soastofavourthedevelopmentofbusinessesintheircountry,aswellasforeignoperatorswhowishtoinvestinit;

From this day forward, prospect the European businesses who arelookingforbuffergrowthareasandincitethemtoinvestintheSouth;

Invest massively in professional training to accompany the sectorswhichare todaysufferinganddevelop localcompetence to faceup totheboom in thesectorsof the future,whichrepresent thereservoirofjobsfortheyearstocome.

1. Synopsis: investment, 1st victim of the crisis

After a record year in 2007, FDI plunges in 2008 Despitethefirstsignsof the internationalfinancialcrisis,visiblesinceJune2007, theworld flows of direct foreign investment in 2007 reached 1.833billionAmericandollars(lastcompletestatisticalseries),anhistoricalrecord.The flows aimed at developed economies of course remained largelydominant, but the FDI captured by thedevelopingworldhadpassed thesymbolicbarof500billiondollars(anincreaseof21%comparedwith2006).Figure4.FDI inflowsmeasuredbyUNCTAD forMed regionsandMed shareofworldFDI(inmillionUSD,UNCTADWIR)

17 164

32 027

5 860

0%

1%

2%

3%

4%

5%

05 000

10 00015 00020 00025 00030 00035 00040 00045 00050 000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Machreck Turkey + IsraelMaghreb Med share of world FDI

The Med2 region took full advantage of the global increase in foreigninvestmentobservedbetween2002and2006:in2006,theMedregionatlastreceived a share of world FDI which corresponded to its demographicimportance(4%).From2007however,despitethestabilityoftheincomingflowstoEgyptandaprogressionoftheFDIaimedattheMaghrebandTurkey,theMedshareofworld FDI fell below the bar of 4%: the flows of incoming FDI to theMachrek dipped,whereas those in the direction of Israel receded by onethird. 2Med10(9MPCs+Turkey),withoutLibya


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Net decline in 2008

In2008, thecrisisprofoundlyundermined thevery foundingprinciplesofinvestment,byplungingbusinessesintouncertainty: UNCTAD,which records themacroeconomic flows registered in the

externalaccountsofthecountries,thusestimatestheoveralldropofFDIin 2008 to be 21% (1.400 billion dollars), and forecasts an evenmoreheavilymarkeddeclinein2009.Theflowsaimedatdevelopedcountriesarelikelytohavedeclinedby33%!

According to partial national data produced byUNCTAD, theMed3regionshouldsufferonlyasmalldecline inFDIwellbelow theglobaldownward trend (9% only), thanks to the good resistance ofNorthAfricaandparticularlyEgypt(10.9billiondollarsin2008against11.6in2007).BesidesEgypt,theother2heavyweightsoftheregionaleconomy,TurkeyandIsrael,havebeenmoreheavilyaffected(26%inTurkey).

Figure5.200108FDIinflowsforeachMedcountries(millionUSD)UNCTADWIRfor20012007,estimatesfor20084Region/country 2001 2002 2003 2004 2005 2006 2007 2008Algeria 1196 1065 634 882 1081 1795 1665 7651Egypt 510 647 237 2157 5376 10043 11578 10900Israel 3562 1651 3901 2002 4881 14729 9998 4708Jordan 180 122 443 816 1774 3219 1835 2400Lebanon 1451 1336 2977 1993 2791 2739 2845 2200Morocco 2808 481 2314 895 1653 2450 2577 2400Palestine 19 9 18 49 47 19 21 275Syria 110 115 180 275 500 600 885 1563Tunisia 7242 2278 1283 1540 7281 3312 1618 1740Turkey 3352 1133 1751 2785 10031 19989 22029 16400Med10 20430 8837 13738 13394 35415 58895 55051 50315Libya 113 145 143 357 1038 2013 2541 4501 3Med10(9MPCs+Turkey),withoutLibya4The20012007figuresarefromdataactualisedretrospectively,in2008,byUNCTAD.Thefiguresfor2008areestimationspublishedatthebeginningof2009byUNCTADCNUCEDforEgypt,Jordan,Lebanon,MoroccoandTurkey,andANIMAestimationsforIsrael,Palestine,SyriaandLibya(ANIMAMIPOannualisedflows).The2008dataforAlgeria and Tunisia are estimations provided at the beginning of 2009 by theauthoritiesofthesecountries(ANDIforAlgeriaandtheMinistryoftheEconomyforTunisia).


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Country by country, the situation is highly contrasted (see Figure 5):UNCTAD, for example, announces increased flows of FDI into Jordan(+31%),whilethoserecordedbyLebanonarelikelytohavedropped(23%)5!The ANIMA6 network investment barometer produced using microeconomic data (see box: concerningmethodology), confirms these trends.Thenumberofprojects identifiedbyANIMAMIPOsuffersaslightdip in2008(6%),whereastheamountsannouncedshowasharpdrop(Figure6): Theaccumulatedgrossamountsofprojectsannouncedin2008declined

by38%,whichaugursbadlyforFDIinthefollowingyears; Theannualised flow for2008showsadropof37%, fallingwellbelow

the bar of the 40 billion euros, and after the bursting of a sort ofspeculative bubble, corresponding to the historical curve of theUNCTADflows.

Figure6.UNCTADandANIMAMIPOFDI inflowsandnumberofprojects forMed10(withoutLibya)

12145 10768

28466

4749640232

3438611160

14428

61771

131353

92674

57421

9786 12737

38631

6816556725

35547250325

657

755 770722

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600

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100002000030000400005000060000700008000090000

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2003 2004 2005 2006 2007 2008

FDIflow,UNCTAD m FDIplannedMIPO,mFDI/yearflow,MIPO,m Nb.ofprojects

5MEED,Gulfsufferssignificant fall in foreigndirect investment,Published:15February2009,WillHadfield6ANIMAMIPO Observatory, created at the beginning of 2003 to complement theEuropeanobservatoryofAFII


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In 2007, ANIMA did not see, in the slight consolidation which wasmeasurableatthatpoint,anyrealturnaroundinthetrend.Thedeepcausesof thegrowing infatuation for theMediterraneanobserved since 2004didnot in fact seem likely to disappear: petrodollars, commodity boom, realestate, building materials and tourism, rise in subcontracting for theEuropeanmarkets,thetakeoffofTurkey,awarenessofthepotentialoftheMed markets and the renewed interest given to the Euromed space ingeneral.In2008,ithastobepointedoutthatthisenvironmenthaschangedradically:collapse in thepriceofenergy,more limitedaccess tocredit (internationalfinancing of investment projects and commercial trade), drop in touristpatronage,burstingoftherealestatebubbleintheGulfStates,prospectofarecession on the developedmarkets, etc. The reasons for hoping that theconsiderableflowsofFDI in theregionwouldbemaintainedarehardly inshortsupply(seethePositioningarticleintheintroductionofthisreport).Figure7.TalkingofmethodologyEvenifdataproducedbytheMediterraneanInvestmentProjectObservatory(MIPO)oftheANIMAnetworkontheonehand,andbytheUNCTADontheotherhand,aimat measuring the same object foreign direct investment, their respectivemethodologies deeply differ: whereas the UNCTAD considers the capital inflowsoriginatedinforeigneconomiesinthebalanceofpaymentofeachcountry,theMIPOdata are based on the compilation of FDI projects announcements detected byANIMAseconomicintelligenceteamanditspartners.These FDI projects are registered in theMIPO databasewhenever their promoterscommunicateontheir launchingorvalidation,eventhoughtheprojectsare likelytobe implemented over several years. The ANIMAMIPO observatory thereforeprovidesanticipationdata,whichalsodifferfromUNCTADdatainsofarasitdoesnottake into account the source of the invested capital (reinvested earnings, local orforeign banking source, etc.).Only the foreign share in the total project budget ishoweverconsidered.Themultiplicationsince2005oflargescaleprojectstotallingbillionsofdollarsforcedANIMA to produce, apart from the total gross budget announced data, newstatistical series of annualised data. By introducing a new factor into the MIPOdatabase (number of years necessary to complete the project according to itspromoters), ANIMA became capable of providing good estimates of the amountseffectivelyinvestedduringtheconsideredyear.The interest of having those 2 types of FDIdata, gross and annualised, lies in thepossibility to put forward one or the other of the 2main indications provided by


21

ANIMAMIPO, this advanced indicator of FDI trends: barometer of investmentintentions (grossdeclaredamountsof theannouncedprojects),and forecast tool forrealFDIflowsmeasuredonagivenyear.Formoredetails,seethemethodologicalappendixattheendofthisreport.

Regional dynamics: Turkey takes the lead, Machrek and Maghreb slip According to theANIMAMIPO investment barometer, theMaghreb (196FDIprojects,or25%oftheregionin2008)andtheMachrek(282projectsor36%oftheregion)areinsharpdeclinein2008.OnlythegroupOtherMedcountriesisprogressing;TurkeyandIsraelcarvingoutthelionsshare,asinpreviousyears,withmorethan60%oftheFDIamountsbetweenthem(and304 FDI projects in 2008, 197 of which for Turkey alone). According toANIMAMIPO,TurkeyistheonlyMedcountrytoscorepoints.The intraMed investmentsprojects identifiedonlyreach842millioneurosin 2008, in free fall comparedwith 2007 (5.8 billion euros) and especially2006(8.2billioneuros).Figure8.EvolutionofFDI inflowsbysubregionofdestination(annualised flows,inmillioneuros,ANIMAMIPO20032008)Destination 2003 2004 2005 2006 2007 2008 TotalMachrek 1861 4658 11615 28558 27285 7280 81256Maghreb 6013 7251 7381 11821 15830 8018 56315OtherMed 1937 871 20474 28608 18261 24693 94844

Total 9810 12780 39471 68987 61376 39991 232415Maghreb: the hidden costs of the lack of economic integration

Intheirconcomitantdrop,theMaghrebcountriescameoutalittlelessbadlythan theMachrek in2008andattracted8billioneuros in2008,against7.3billionfortheMachrek.TheMaghrebattractednumerousprojects,mainlyEuropean, inenergy (53projects, representing 2.7billion euros),Building,PublicWorks Tourism(67projectsworth2.5billioneuros)andBankingInsurance (23projects for1.2billioneuros).The smoothedamountsof theseFDIannounced in2008areinsharpdecline(48.7%comparedwith2007).


22

Figure9.ThecostofthenonMaghreb() Whereas borders are opening everywhere and regional trade is developing,NorthAfrica isanexception.Asituationdenouncedby theSecretaryGeneralof theUMA (Arab Maghreb Union) himself in January 2008: estimating interMaghrebcommercial trade at 3.36% of the total trade of the area,HabibBenYahia invitedmemberstocomparethesefigureswiththe21%ofAsean,the19%ofMercosurandthe10.7%of theCEDEAO.For itspart, theWorldBankestimated in2006 that fulleconomicintegrationofthesubregionwouldprovideanimportantriseintheGDPofeachofthecountries,of24%,27%and34%,respectivelyforTunisia,MoroccoandAlgeria,between2005and2015.Onthecontrary,themissedoccasionsforunionareverycostly.Theexpertsandtheinstitutions denounce the cost of the nonMaghreb. As concerns the MoroccanMinisterof theEconomyandFinance,SalaheddineMezouar,who inDecember last,based on a study completed by his department of Studies and Financial Forecasts(DEPF) inOctober 2008, estimated the lostground at2.1billiondollarsper annum(980 million excluding hydrocarbons) in terms of commercial trade. Even morepessimistic,HabibBenYahiaestimates theblockageof the integrationprocesscosts2%oftheannualgrowthrateofeachcountry().From Maghreb: lesmilliards perdus de la dsunion by FazaGhozali, JeuneAfrique,17/02/2009Consideredasawhole,theMaghrebstandsoutforthereinforcementofitsportinfrastructures(newcontainerterminalsmanagedbyMaerskandPSAatTangiersMed,DPWorldwhichobtainedthemanagementoftheportsofAlgiersandJijel,thedevelopmentofthedeepwaterportofEnfidha).Moroccossharedroppedsharplyin2008,withonly95FDIprojectsdetectedby the MIPO observatory, against 149 in 2007. The Kingdom remainsattractive in tourism,banking and energy. InAlgeria, it isdifficult to saywhichofthecrisisorthenewregulationsaffectingforeigndirectinvestment(dating,itistruefromthe2ndpartoftheyear)istoblameforthedeclineinEuropean FDI in 2008 ( 50% comparedwith 2007, asmuch in amountsannounced as number of projects). The investors from the Gulf Statesnevertheless continue tomove theirpawns forward in theBayofAlgiers,notablywith theEmirates International InvestmentCompany and its realestateprojectDounyaParc.Tunisiafaresbetter,with2.3billiondollarsofFDIin2008(+57%)accordingtoFIPA,and100FDIprojectsdetectedbyANIMAMIPO.Industrywise,theorderbooksoftheTunisiansubcontractorshavebeenwellfilledin2008(11projectsforaeronauticsandautomobiles).


23

Figure10.MainFDIemittingregionstowardsMaghrebsince2003(in%ofannualiseddeclaredamounts,ANIMAMIPO200308)

EU27+EFTA46%

Gulf&otherMENA29%

USA/Canada11%

MED1011%

AsiaOceania3%

Machrek: Egypt marks time, Lebanon picks itself up

ThecoldshowerwhichfellonthestockexchangesandtheeconomiesoftheGulf States, led byDubai,was felt inCairo,Amman andDamascus.TheMachrek regiononly attracted 7.3billion eurosofFDI announced in 2008(18.2%of totalsmoothed flows),against27billion in2007 (44.4%)and28.5billionin2006(41%).Figure 11.Main FDI emitting regions towardsMachrek since 2003 (in % ofannualiseddeclaredamounts,ANIMAMIPO200308)

UE27+EFTA26%

Gulf&otherMENA55%

USA/Canada6%

MED106%

AsiaOceania7%

AccordingtoANIMAMIPO,Egypt,privilegedhuntinggroundofanumberof promoters from the Gulf States (Emaar, Qatari Diar, Damac), onlyattracted4.5billioneurosofforeignDirectInvestmentin2008,afterhaving


24

passedthebarof22billioneurosin2007.TwentytwoFDIprojectswenttoEnergy (above all natural gas, with for example the Italian Edison atAboukir),and13toFinancialServices(agoodnumberofacquisitionsbytheKuwaitis).Jordan resisted as well as it could with 37 projects (against 53 projectsdetectedin2007),especiallyinConstructionandInfrastructure(extensionoftheportofAqabafor5billiondollars,highriseofficeblocksinthecentreofAmman,agreatdealoflogistics).Syria managed to attract 38 FDI projects by continuing to liberalise itseconomyfollowingthemodelofitsLebaneseneighbour(openingofastockexchangeatDamascus,indepthreformofthebusinessenvironment).Inthefaceoftheexhaustionofitsoilreserves,Syriaisdoingallitcantobecomeanimportant tourist destination in theNear East (6 FDIprojects detected intourismin2008).TheeffectivenessoftheLebanesebankingsystemhasrevivedtheconfidenceofforeigninvestors,whocontributetoalargeextenttotherenewalofBeirut(thePhoeniciaVillageandAlSaifiCrownprojects,andalsoPlusTowers,atwintowerproject).Israel, Turkey: invest in the future

With 3.2 billion euros, Israel continues to capitalise on its capacities ofinnovation to attract new foreign investments: software and internet (28projects),medicines(6projects),aswellasbiotechnologies(348millioneurosofFDI).Theconsequencesof theglobalcrisis formany industriesmaycastdoubtsonseveralFDIprojectsattractedbyTurkeyin2008(195projectsdetectedin2008, that is 25% of the total for the Med region), in particular in theautomobile sector.But the country ispreparing for the futurebyopeningvast areas of its economy to private initiative and foreign investment, inparticularintheproductionanddistributionenergy.ThestakesforAnkarawillbetomaintaintheproductivityoftheindustrialtooltoremaincompetitiveontheinternationalmarketsandgothroughthecrisisinapositionofstrength.


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Figure12.IndividualFDIdataforMed13accordingtoANIMAMIPODestination Flow

2006Flow2007

Flow2008

Average3years Pop.2008

FDI/capita/yr

Israel 13850 4035 3253 7046 6426679 1096Malta 296 46 305 216 401880 536Cyprus 152 32 1081 421 788457 534Libya 374 4574 3059 2669 6036914 442

Lebanon 4425 279 270 1658 3921278 423Jordan 3235 2765 1209 2403 6053193 397Tunisia 3887 3329 1490 2902 10276158 282Turkey 14310 14148 20055 16171 71158647 227Egypt 15935 22204 4551 14230 80264543 177Syria 4674 2029 1062 2588 19314747 134Algeria 2280 5214 1989 3161 33333216 95Morocco 5280 2714 1480 3158 33757175 94

Palestinian.Auth. 289 8 187 161 3965443 41TotalMed10 68165 56725 35547 53479 275698330 194TotalMed13 68987 61376 39991 56785 275698330 206

Origin of the FDI flows: Europe takes the lead again TheinvestorsfromtheGulfStates,paralysedbythedryingupofcredit,arebeginningtorunoutofsteam(theannualisedamountsoftheprojectsissuedby the countries of the MENA7 group totalled 8.5 billion euros in 2008,against 22 billion euros in 2007). A new economic map is being drawn,whereEuropeistakinguptheleadingrole:chasedorovertakenbytheGulfStatesinrecentyears,theOldWorldtookitsplaceonceagainin2008astheleadingregionforissuingFDItotheMedcountries(41%).AzerbaijanbecamethemainissuerofFDIinTurkeyin2008asaresultofthehyperactivity of the public enterprise Socar,which, during the year 2008alone,with itspartnerspurchased51%of the formerTurkishpublicpetrochemical giant Petkim for 2 billion dollars, launched a 5 million dollarinvestment programme for this company and announced the project tocreatearefineryatAliaga(northofIzmir)inpartnershipwithanotherlocalpetrochemicalcompany,Turcas.Socarhasalsoacquired50%of thecapitaloftheTurkishconstructiongroupTekfenHolding.

7ExcludingMedcountries


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Figure13.MainFDIemitters intheMedregionin2008(annualised inflow2008forMed 13 inmillion euros, relativeweight in 2008 and 20032008 total, andprogressionbetween2007and2008,ANIMAMIPO)

Origin Projects08 Flow2008 %total08 0708 %total03081.Azerbaijan 4 5114 12.7% NC 1.8%2.UAE 66 4769 11.9% 66.1% 9.9%3.UK 55 4638 11.5% 15.8% 5.1%4.USA 113 4414 11.0% 1.9% 15.5%5.France 112 2733 6.8% 72.8% 7.9%6.Nederland 28 1837 4.6% 34.9% 2.5%7.India 23 1801 4.5% 125.6% 1.4%8.Germany 40 1512 3.8% 37.7% 2.2%9.Austria 7 1159 2.8% 143.5% 1.1%10.Kuwait 34 1135 2.8% 60.3% 4.8%11.Greece 13 1124 2.8% 38.5% 2.3%12.Spain 25 1075 2.6% 24.1% 2.7%13.Qatar 10 992 2.4% 26.9% 1.8%14.Russia 8 953 2.3% 316.6% 1.3%15.Italy 30 783 1.9% 39.6% 2.9%

Investments from the Gulf States: the swansong?

As in 2007, the United Arab Emirates are to be found among the maininvestors in theMed region.TheEmiratesannounced in2008projects thecumulative gross amounts of which totalled 16.8 billion euros; aconsiderableamount,oncesmoothed,takingaccountofthedurationofthecompletionoftheseprojects,comesdownto4.7billion(annualisedamount,i.e.probablyinvestedfrom2008).Three longtermrealestateprojects(PortaModaatTunis,Aqaba inJordanandDounyaParc inAlgiers) alone represent two thirds of this 17billion.Thepromotersof theseprojects (AbuDhabi InvestmentAuthority (ADIA)andGulfFinanceHouseinTunis,AlMaabaratAqabaandEIICinAlgiers)forecasttheendofthework in10,7and5yearsrespectively,butthecrisiswhichaffectingDubaiseverelyand therarityofcustomers for this typeofluxuryrealestateproductshouldatbestslowdowntheircompletionandatworstcompromiseit.Given the uncertainty which weighs heavily on a number of thesemegaprojects,theclassificationofthemain issuercountriesofFDI isbasedupontheannualisedamountdataproducedbyANIMAMIPO.


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AsfarastheGulfStatesareconcerned,innumberofprojects,theKuwaitisfollow theEmirateswith34projects,mainly inEgyptand Jordan.Only22Saudi investmentprojectshavebeendetected in2008against43projects in2007,mainly inEgyptand inAlgeria.As inpreviousyears, theGulfStateinvestors concentrate their attention on the real estate sector (4.2 billioneuros)andareespeciallypresent in theMachrek (theyareat theoriginof50%ofFDIflowsintendedforthisregionin2008).Euromed integration continues

Overtaken in2006by investors from theGulfStates,Europeanbusinesseshaveonceagainbeeninthedominantpositionsince2007:in2008theyareatthe origin of 16.3 billion euros of the FDI announced in theMed region(downhoweverby37%comparedwith2007)andhavecreated32,158newjobs(aboveallintheautomobileandaeronauticsindustries,manyintextilesalso).Figure14.Relative contributions of themainFDI emitting regions into theMedregion(Med13,in%ofannualiseddeclaredamounts,ANIMAMIPO20032008)

0%10%20%30%40%50%60%70%80%90%100%

2003 2004 2005 2006 2007 2008

AsiaOceania

MEDA10

USA/Canada

Gulf&otherMENA

EU27+AELE

Eight of the countries to be found in the Top 15 are members of theEuropeanUnion (36.8%of the flowsof theTop15with14.8billioneuros),withtheUnitedKingdominthelead(4.6billioneurosintotal,3.8billionofwhich toTurkey)andFrance,which remainsverypresent in theMaghreb(2.7 billion euros). With 1.8 billion euros, Dutch investors come in third


28

positionoftheEuropeanhonourslist(massivepresenceincommercialrealestateinTurkey).Bycumulating theamountsof theprojectsannounced for theperiod20032008, France calls the tune (with 24 billion euros), ahead of the UnitedKingdom(18billioneuros),Italy(7.2billioneuros),Spain(6.8billioneuros),theNetherlands(6.1billion)andGermany(5.2billion).North America (United States, Canada) represent 5 billion euros ofinvestmentprojectsin2008(12.5%ofthetotal),mainlyintheenergysector(1.2billioneurosaboveallinLibya,Tunisia,Egypt).TheAmericanoperatorsareespeciallypresentinIsrael(52projectscentredonthenewtechnologies)andinTurkey(26projects).With31billioneuros,theAsiaOceaniagroupcontinuestoprogress,pushedalongbyIndiawhichtotals1.8billioneurosin2008(hydrocarbonsinEgypt,automobileconstructioninTurkey).Figure15.FDIflowsbymainregionsoforiginanddestination(annualiseddeclaredamountsinbillioneuros,ANIMAMIPO200308)


29

Profile of foreign investors in the Med region

Types of business: preponderance of multinationals

TheSMEs areat theoriginofhardly 15%of theFDIprojectsdetectedbyMIPOover theperiod20032008.EuropeanSMEs together representmorethan 60%of theprojects from this total.TheSMEprojects areonlyworth7.5% of the total of jobs created by all types of investors and 5% of theamounts.Onthecontrary,themultinationalsissuenearly60%ofthegrossamountsofFDIandcreate57%ofthedirectemploymentforonly41.5%ofthenumberof projects recorded over 20032008. European multinationals are behindaround 50% of the projects; the rest roughly equally shared betweenmultinationalsfromNorthAmerica(USACanada)andMENA(mainlyfromtheGulfStates).Investors from Europe, the Gulf States and North America: sectoral competition and complementarity

InvestmentsfromtheGulfStatespresentaveryunbalancedsectoralprofile:with52%oftheamountsover200308(and26%oftheprojects)goingtotheConstruction and Transport sector, 19% to the Tourist sector and 10% toTelecoms. European projects are better spread projects: Energy, whichrepresentsthemaindestinationofEuropeanFDI, isworth it is true31%oftheamountsand11%ofthenumberofprojects.Butamongthefollowing5sectors in amounts, not one exceeds 1015% (Financial Services 15%,Telecoms 11%, CementGlassPaper 10%, Building, Public Works andTourism9%each).The particularity of American and Canadian FDI in the Mediterraneanconcerns in the first instance the size of the industrialprojects (excludinghydrocarbons):40%oftheamountsannounced,against20%forEuropeandhardly 7% for investors fromMENA. Energy only represents 23% of theamounts announced over 20032008, against 20% for the ElectronicComponents industry (Intel in Israel), and 14% for the Software andComputingServices.


30

Methods of installation: grassroots creations and acquisitions of existing assets run 50/50

Amongthedifferentmethodsofinstallationpossible,foreigninvestorsshowtheir preference in 2008 for grassroots creations (46% of the amountsannouncedfor27%ofthenumberofprojects).Theacquisitionsorstrategicprisesdeparticipationsinexistingassetsrepresentfortheirpart30%oftheprojectsand26%oftheamounts.Theprogressionintheamountsdevotedtobrownfieldprojectsencouraging(+100%overayear,toreach8.8billioneurosin 2008), even if it is due in good part to the renewal of the operatingconcession forhydrocarbons linked to ambitious investmentprogrammes.Beyondhydrocarbons and thedevelopmentprogrammes for the telecomsnetwork by the large world players present in the Mediterranean, theextensions of industrial sites remain too few in number (hardly 60projects/annum).Creationofsubsidiaries/branchestogetherhasreachedthebarof25%oftheprojectsidentifiedin2008,foronly7%oftheamounts.Sectors: BTP and energy still in the lead, but more modest projects On the face of it, few things have changed in 2008: as in 2007, Building,PublicWorksInfrastructuresandHydrocarbonsdominate the landscapeofforeign investment in the region. However, Building, Public Works andEnergyareamongthesectorswhichsuffermostfromthecrisis,alongwithFinancialServicesandBuildingmaterials (glass,cement).Telecoms,due tothenonattributionofnewlicencesormajorprivatisations,areawaitingthenewwaveofFDI.Among the sectorswhich areon the increase are tobeBusinessServices,Software,Aeronautics,ChemicalsandRetailDistribution.The average budget per FDI announced, in these 2 sectors which hadattracted a good number of megaprojects in 200607, declined howeverconsiderably,toreach176millioneurosintheBTPin2008(40%comparedwith2007),and149millioneurosintheenergysector(thatisanannualdropof almost 50%). The average budget per project, all sectors considered,mechanically follows the same path, to settle at 88million euros in 2008(against129millioneurosin2007).ThenumberofforeignprojectsannouncedinConstructionandTransportisindecline,premiseofacomingtoearthunderway,afteranumberofyearsof madness (more than 100 projects a year for 3 years), whereas thecumulativebudgetshavebeendividedby2 inoneyear (22.6billioneuros


31

gross in 2008). TheMaterials Industries (glass, cement, minerals, wood,paper)aresufferinginreturnfromthenewcautiousnessoftheleadersofthesectorwho from 2008 have preferred to cut down their new investmentprogrammes, even suspend certainprojects announced in the euphoria oftheboomof2007.EvenifalltheinvestmentsannouncedtodateinCementdonotreachfruition,thelocaldemandshouldsoonfindanequivalentoffer,even a surplus. Speculation over buildingmaterials should end once theshortageisover.Despitetheextremevolatilityofenergypricesandthemoderationinworlddemandasaresultoftheeconomicslowdown,thenumberandtheamountsofforeignprojectsannouncedinEnergyremainedhighin2008.Whetherthefruit of a certain effect of hysteria or the perspicacity of operators whogambleonarapidreboundintheprices,theupkeepofforeigninvestmentisvitaltoincreasethereservesandtheupstreamanddownstreamcapacitiesofthe Med countries who are well blessed with hydrocarbons. Watch thisspace:duringtheinternationalcallfortendersorganisedattheendof2008byAlgeria,only4explorationlicencesoutof16foundtakers.Inthesameway,thefutureofmanyofthelargeprojectsannouncedin20072008 in the Heavy Industries (metallurgy, chemicalsplasticsfertilisers)would today appear uncertain. The prospects for export (automobile,Building,PublicWorks,specialitychemicals)orforthelocalmarketswhichare still expanding (large infrastructure projects, local agriculture) lackclarity,andadded to thedifficultiesof financingprojectsheavy in capital,theyshouldoccasionpostponementsorcancellations.Metallurgyneverthelessattracted fifteenor soprojects in2008 (againstanaverageof5between20032006).Itremainstobedesiredthatthefinancialstranglehold of the international economy does not also counter theMediterranean chemicalboom (around 30projectsper annum since 2005,projectsworth7.6billioneurosin2008,aboveallintendedforTurkey).Thefertiliser sector, whose large actors are in the process of concentration,remains attractive: natural gas has become very cheap (used for theproductionofnitrogen),increasingmarginsasaresult.


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Figure16.NumberofprojectsandgrossdeclaredFDIamounts,bysector(ANIMAMIPO2008,inmillioneuros)

128

115

22

25

81

19

39

42

24

15

38

36

11

55

31

16

4

16

14

9

12

22

4

0 5000 10000 15000 20000 25000

PW,PPPs,logistics

Energy

Chemistry

Distribution

FinancialServices

Telecom

Tourism,catering

Glass,cement,minerals,wood,paper

Agrobusiness

Metallurgy

Consulting&services tocompanies

Automotive

Other

Softwareservices

Electr.Hardware

Drugs

Biotech

Electroniccomponents

Textile

Whitegoods&consumerelectr.

Mechanics&machinery

Aeronautical,naval&railwayequip.

Furnishing&houseware

Declaredamounts,M

Amount2008 Projects2008


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The global crisis has just hit manufacturing industries,with strong localspinoffs,withall itsmight, typically the caseof theautomobile industry.Theautomobilesectorhas,however,neverbeenasattractiveasin2008,andnot only in Turkey (thirty or so projects per annum since 2003, amountsclose to 800 million euros over 4 consecutive years). The installation ofassemblyplantsandsubcontractorsintheSouth(RenaultatTangiersMed,for example) should nevertheless continue. In a global environment ofpressure on costs, other industries (aeronautics, shipbuilding, railwayequipment),subjectedtothesameconstraintsofpricecompetitivenessandproximitytotheordergiversorthenewmarkets,arealsoheadingsouth.Theelectroniccomponentindustries,generalpublicelectronics,electrical&electronic equipment andmechanicalmachinery and equipment do notseemtomanagetoattractsignificantforeigninvestment(apartfromTurkeyand Israel), despite the obvious vocation of the Mediterranean as amanufacturing base for growing local markets and the coverage of theEuropeanmarketsatareducedcost.The textileclothing sector continues to attract an average of some fifteenprojects. In 2008, the agrofood industries attracted 1.7 billion euros, anaverage performance given the potential of the Mediterranean markets;performanceduemainlytotheacquisitionofprofitabletargetsinTurkey.The good news is to be found on the services side. Tourism, of coursecontinues itsdecline (fewnewprojectsannounced in2008),whichappearsreasonablegiventhestockofmegaprojectsannouncedinpreviousyears.Ofcourse, financial services and telecoms are still in pole position, andcontinuewithamoresilentrevolutionafter theamazingprojectsofrecentyears.Retaildistributionpursuesitsexpansionintheregion,despitesomemishits.However,therealnoveltyistobefoundinbusinessservices.Computerserviceshavethusbeenattractingaround50projectsperannumfor4years, in Israelbutnotonly: theyoungcomputerengineers from theMed countries are beginning to be appreciated for their real worth.Counselling& and other business services, from engineering and legalcounsellingtofacilitymanagement,notforgettingcallcentresandrecruitmentall profit from growing demand. Competition for exports will becometougher for call centres or the externalisation of certain support functions.Thedynamicsofthesectorrely,however,toalargeextentonlocalfactors,


34

linkedtothespreadofmodernbusinessmanagementtechniques,sourceofanunquenchabledemand.Target investments with strong local spin-offs It is tobe feared that themajorityofFDI inenergy,or inheavy industry,usingequipmentandaworkforcewhich is toa largeextent imported,andexportingproductswhichoftenhavebeenlittletransformed,provideslittlelocal addedvalue (beyond the annuity paid by the operator). Idem forcertainformsofrealestate(secondaryresidencesforthediasporas).Onthecontrary, light industry (generalpublicelectronics,automobile,agrofoods,etc.) or certain service activities (logistics, business services in particular),well integrated in theothersectors (but too littlerepresented inFDI),mayfairlylargelydemultiplyitseffectsintheeconomy.Figure17.Direct jobcreationpotentialpereachmillioneuros invested (ANIMAMIPO200308)Sector Av.job

creation/project

Totalnbofprojects200308

Totaljobs(est)8

Amounts9(mln)

Jobs /mln

Electr.consumergoods 665 40 26600 531 50Automotive 942 178 167676 4049 41Textile 471 117 55092 1464 38Consulting/otherservices 235 204 48034 1522 32Electr.&electronequipt. 208 173 35979 3829 9Agrofood 388 170 65895 7673 9Tourism,catering 1316 281 369862 48626 8Cement,minerals,paper 599 202 121047 19578 6Retail 472 103 48629 8184 6PW,transport,PPP 1320 489 645480 113860 6Metallurgy 438 63 27563 6066 5Softwareservices 161 223 35985 7986 5Other&nonspecified 208 47 9753 2170 4Financialservices 272 408 111032 33409 3

8The estimationsproposed for the totaldirect job creationshavebeenobtainedbymultiplying theaveragenumberofdirect jobscreatedper project (according to thepromoters announcements) by the total number of FDI projects recorded by theMIPOobservatoryovertheperiod20032008,accordingtothesector.9Theseareamountsannouncedbythepromotersoftheproject,aggregatedbysectorovertheperiod20032008.


35

Sector Av.jobcreation/project

Totalnbofprojects200308

Totaljobs(est)8

Amounts9(mln)

Jobs/mln

Drugs 75 90 6786 2177 3Aeronautical,naval,trainequipment

189 63 11883 4280 3

Electroniccomponents 339 77 26106 10790 2Machines&mechanics 116 53 6166 3759 2Biotechnologies 53 14 747 494 2Energy 227 425 96456 68211 1Chemistry,plasturgy,fertilisers

145 129 18705 14512 1

Telecom 255 114 29070 34725 1Allsectors 547 3681 2012972 397966 5

Honours list for the largest projects It is possible to consult the detailed base of the projects detected by theANIMAMIPobservatoryonwww.anima.coop.Toprovide aglimpse, thetablebelow setsout theprojectsannouncedwithavaluegreater thanonebillioneuros,whichareneithernecessarilythemostinterestingnorthemostsignificant10.Figure18.The15projectswithdeclaredbudgetsabove1billioneurosannouncedin20081. Tunisia.AbuDhabiInvestmentAuthority+GulfFinanceHouse(UAE).ADIH

tolaunchinTunisitsPortaModarealestateprojectlandplotsprovidedbyGulfFinanceHouse(4600m).

2. Turkey.SOCAR (Azerbaijan).Thecompany to investUSD5billion toenhancePetkims production capacity, a Turkish petrochemical company in which itholdsa51%stake(3417m).

3. Jordan.AlMaabar (UAE).Theconsortium to relocateAqabasport facilities tothesouthernpartofthecityanddevelopatourismmegaprojectforUSD5billionover7years(3288.7m).

10For thesegiganticprojects, theANIMAMIPOobservatoryhas taken intoaccountboththegrossamountannouncedandthedurationplannedtocompletetheproject,which enables it to have available, alonside the cumulative gross amounts,smoothed data over the number of years for the implementation of the project(often3to10yearsforrealestateprojects).


36

4. Algeria. Emirates International InvestmentCompany (UAE). The investmentcompanytoinvestUSD5bnover5yearstodevelopDounyaParc,amixeduseprojectintheGrandsVentsdistrictofAlgiers(3288.7m).

5. Libya.OccidentalPetroleum(USA).Thegrouptosignafull30yearagreementwithLibyasNOCandinvestUSD5bnovernext5yearsintriplingproductionofSirtebasinfields(3288.7m).

6. Tunisia.TernaReteElettricaNazionale(Italy).ThefirmengagedinelectricitytransportandSTEGtocreateaJVformanagingtheconstructionofapowerplantinElHaouria(2000m).

7. Turkey.IndianOilCorporation(India).ThegrouptosetupaJVforthecreationofnewCeyhanrefinery,inwhichENI,KazMunayGaz,localCalikandIOCwilleachhave26%(1826.32m).

8. Libya.RepsolYPF(Spain).AgreementwithLibyasNOCfortheextensionuntil2032 ofRepsoloperatedblocksNC115 andNC186 inMurzuqbasin, inwhichRespolholds40and32%(1710.1m).

9. Turkey.SOCAR(Azerbaijan).TheSocarTurcasInjazJVeventuallywinscontroloverstaterunchemicalsmakerPetkimforUSD2bn(1341.8m).

10. Egypt. Emaar Properties (UAE). The UAEs property developer to create aluxurious150roomresortand50privatevillasinMarassi(1217m).

11. Turkey.Tesco /Kipa (UK).Kipa, theTurkish retailchainboughtbyUKbasedgiantTescoin2003istocreate100newstoresby2013(1167m).

12. Turkey.BritishAmericanTobacco (UK).BritishAmericanTobacco towin theauction for Turkish cigarette maker Tekel thanks to a USD 1.72 billion bid(1131.3m).

13. Turkey.BCPartners/Moonlight(UK).LondonbasedbuyoutfirmBCPartnersto buy from Koc Holding a 51% stake of Migros Trk for TRY 1.98 billion(1066m).

14. Turkey. BC Partners / Moonlight (UK). The investment funds gathered inMoonlight,afterthebuyoutinFebruaryofa51%inTurkishsupermarketchainMIGROSTurk,touptheirstaketo97.9%(1023m).

15. Cyprus. Bouygues + CarnivalCosta Cruises + Amsterdam Harbour (Othercountry). The Zenon Consortium won the DBFO contract for the LarnacaSeafrontredevelopment,whose1stphaseconsists increatingacruiseportandmarina(1000m).

2. Sectoral analysis of FDI in the Med region

Sectoral panorama 200811

Theyear2008presentsfakesimilaritiestotheyear2007,wereitnotfortheclimateofuncertaintyweighingonthemajorityofsectors.The construction and energy sectors, which once again account for thelargest part of foreign direct investment in the Med region in 2008, areamong the sectors themostexposed,alongwith the financialservices, thetelecomsandthebuildingmaterials(glass,cement).Telecoms, as a result of the nonattribution of new licences or thepostponementofmajorprivatisations,arewaitingforthenextwaveofFDI.Among those sectors on the upswing, are to be found business services,software, aeronautics aswell as chemicals,which has been the subject ofconsequentialprojects,but concentratedonTurkey (more than60%of theamountsfor5projectsoutof22).Turkeyalsoattractstheessentialpartoftheinvestmentsinretail(90%oftheamountsand17projectsoutof25in2008).Figure19.DistributionofFDIbysector(ANIMAMIPO2008,nbofprojectsanddeclaredamounts,million)Sectors

Projects2008

Amounts2008

Variation0708

%2008

1 PW,PPPs,logistics 128 22611 47.0% 32.9%2 Energy 115 17153 25.3% 24.9%3 Chemistry 22 7588 216.2% 11.0%4 Distribution 25 3894 77.2% 5.7% 11Methodologicalpreliminary:soastobettermeasurethesectoraldynamicsofFDIintheMediterranean,theanalysestofollowwillconcentrateonthecumulativeamountsof gross FDI amounts announced by the promoters of projects during the yearconsidered,andnotontheannualisedflowsofFDI(amountannouncedduringyearndividedbythenumberofyearsplannedtocompletetheproject).

Foreign investments in the Med region in 2008

38

Sectors

Projects2008

Amounts2008

Variation0708

%2008

5 FinancialServices 81 3562 65.7% 5.2%6 Telecom 19 1981 46.7% 2.9%7 Tourism,catering 39 1977 8.6% 2.9%8 Cement,minerals,wood,paper 42 1935 80.8% 2.8%9 Agrobusiness 24 1687 47.5% 2.5%10 Metallurgy 15 1399 65.7% 2.0%11 Consulting&servicestocompanies 38 1062 436.7% 1.5%12 Automotive 36 664 30.6% 1.0%13 Other 11 630 42.7% 0.9%14 Softwareservices 55 535 30.3% 0.8%15 Electr.Hardware 31 481 37.0% 0.7%16 Drugs 16 373 32.4% 0.5%17 Biotech 4 349 402.4% 0.5%18 Electroniccomponents 16 330 30.4% 0.5%19 Textile 14 220 13.4% 0.3%20 Whitegoods&consumerelectr. 9 178 71.9% 0.3%21 Mechanics&machinery 12 90 74.6% 0.1%22 Aeronautical,naval&railwayequip. 22 39 102.3% 0.1%23 Furnishing&houseware 4 24 nc 0.0% Total2008 778 68763 36% 100%A pronounced imbalance in the sectoral distribution of projects TheconcentrationofFDIonafewsectorsisaccentuatingyearafteryear:thefirst5sectorsrepresent80%ofthetotalamountsannouncedin2008foronly54%ofthenumberofprojects(respectively76%and53%in2007).Figure20.StrongconcentrationofFDIinflowsonsomesectors(MIPO2008)Groupofsectors

Amount2008(mln) %oftotal2008

Nb.ofaggregatedprojects %oftotal2008

Top5 54 808 80% 418 54% Top12 65 513 95% 616 79%

Top 5 (in order): ConstructionTransportDelegated Services, Energy, ChemicalsPlasticsFertilisers,DistributionFinancialServicesTop 12: Idem +Telecom,Tourism,Glasscementmineralswoodpaper,AgroFood,Metallurgy,Engineering&BusinessServices,Automotive


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Sectoral distribution of the stock of FDI 2003-2008

ThestockofFDIprojectsdetectedbyANIMAover theperiod20032008 isverylargelydominatedbythesectorsofconstructiontransportPPP,energyandtourism.Figure21.AnnouncedFDIamountsbysector(ANIMAMIPO,200308,m)

Constructiontransport

17%Energy15%

Tourism8%

Telecom9%

Financialservices14%

Cement,minerals

8%

Others26%

Jobs creation under the sectoral microscope The jobs created per operation data is not available for all FDI projectsdetected by MIPO12: it should therefore be taken with precaution. Totaldirectemploymentcreationin2008recordedbyMIPOcontinuesitsdeclinecomparedwith the peak of the year 2006 (76,143 jobs announced in 2008against100,000in2006,and86,000in2007)13. The aggregation of the employment data over the period 20032008allowstobuildamoresignificantdatabase,fromwhichemergethesectorswhichshouldholdtheattentionofgovernmentsatthemomenttheydecideuponaselectiveFDItargetingstrategy.Inthefigurebelowaretobefound,in thegreywhitesquares,somekeysectors inaperiodofworldeconomicturbulence.

12Dataprovidedfor25%oftheprojectsin2008,andonly18%ofthecasesoutoftheperiod 200308. By taking into account the projects creating few jobs (subsidiaryrepresentation bureau, participation, privatisation), the estimated rate rises to 50%.Thehouseholdfurnishings&fittingsandbiotechnologiessectorsdonotappearduetothelackofasignificantsamplein2008.13Foraclassificationofthesectorscreatingthemostjobsin2008,refertoAnnex2.


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Figure 22. Job creationpotential by sectors,ANIMAMIPO 200308 (totalnb ofprojectsandaveragenumberofjobscreated14byproject)

1320

1316

942

665

599

472

471

438

388

339

272

255

235

227

208

208

189

161

145

116

75

53

0 100 200 300 400 500

PW,PPPs,logistics

Tourism,catering

Carmanufacturersorsuppliers

Whitegoods&consumerelectr.

Glass,cement,minerals,paper

Distribution

Textile

Metallurgy

Agrobusiness

Electroniccomponents

FinancialServices

Telecom

Consulting&servicesto companies

Energy

Electr.Hardware

Otherornotspecified

Aeronautical,naval&railwayequip.

Softwareservices

Chemistry,plasturgy, fertilizers

Mechanics&machinery

Drugs

Biotechnologies

Nbofprojects200308

Nbprojects Averagejobcreation

14Averagecalculatedsolelyonthebasisofprojectscomprisingthedirectemploymentdataasannouncedbythepromoters.


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Outsidethewelltroddenpaths(tourism,realestate),andcontrarytosectorswhich are highly capitalintensive but poor in local linkages (energy, forexample),thesearesectorswhichpresentboth: averifiedpowerofattractionintheMedregion(existingstockofFDIprojects); anda largepotentialtocreate jobscomparedwith thecapital invested(aboveallmanufacturingactivitiesorservices).Focus: 5 key sectors in the face of the crisis The 5 sectors which will be analysed in the following pages have beenchosen for they present a resistance or rebound potential in spite of theinternational economic crisis.These are activitieswhich are rather rich injobs (see figure22, Jobcreationpotentialbysector),andwhich find in theMediterranean host conditions which are favourable to their expansion,whethertheytargetlocaldemandorareexportoriented.Transport and logistics

Dealt with within the composite sector Construction, Public Works,Transport, Delegated Services of the ANIMAMIPO observatory, thecomponentTransportLogistics Infrastructures&Services isundergoingacompleterevolution.EvenifitstillonlyrepresentsamodestpartoftheFDIprojectsaimedatthesector(dominatedbyrealestate:highendresidential,seaside resorts, Americanstyle shopping centres, office blocks), with 35projects for nearly 6 billion euros in 2008 (against 50 projects in 2007), itnevertheless represents the most strategic element. Strategic, above all,because the transport and logistics activities are indispensible to thedevelopmentoftheremainderoftheeconomy.TheMediterranean is a logisticshubnot tobe overlooked,whosenaturalvocation is finallyable to express itself thanks to thenew toolswhich themassiveinvestments,publicaswellasprivate,ininfrastructures,areintheprocess of providing it. One step ahead or behind the progress of theinfrastructures, transport service providers (transport of persons,logisticians), are arriving in number, following their usual customers(automobile,retaildistribution,etc.),ortomakeupforalackoflocaloffersinmarketswheretherestillremainsalottodo.


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Ofcourse,theglobaleconomicslowdownisdepressingtheworldtransportmarket; thedecline in international tradeprovoking the collapseofprices(especiallyininternationalmaritimetransport,seeboxonCMACGM).TheMediterranean, which witnesses the passage of 30% of world maritimetraffic,willnotbespared: the frequentationrecordedby theSuezCanal inJanuary2009wasdown22%yearonyear, that is1,313shipsagainst1,690oneyearearlier.TheWTOremindsus that international trade isoneof themainvictimsofthe drying up of commercial finance which backs 90 % of trade. Thisunprecedentedcrisisshould,accordingtotheWTOcontinueinto201015.TheWorldBank for itspart, forecastsadeclineof2.1% inworld trade in2009(2.8 % according to the IMF). The drop in volumes exacerbates thecompetition between transport operators on the most mature markets,pushingsomeofthemtothrowinthetowel,asforexample,DeutschePostDHLinNorthAmerica.IntheMedregiononthecontrary,thereremainplacestobefilled:transportand logisticsoperatorsfromEurope(14projects in2008)andalsofrom theGulf(13projects,9ofwhichfortheUAE,mainlyintheMachrek,butalsoinAlgeria),aremovingin.In2008,alltheMedcountriesattractedlargeFDIprojects.TheopeningupofairtransporttoprivateinitiativeinSyriaforinstanceenabledtheKuwaitiAlAqeelahto launchPearlofSyria(Loloa),aprivateairlinecompanycreatedasajointventurewiththeSyriansShamHoldingandSyrianAir.Generallyspeaking, in terms of infrastructures, the port projects dominate(transhipment or land servicing ports). The 2 main projects are those ofDubaiPortsWorld,which tooka90%stake in thecompanymanaging theport of Sokhna in Egypt, and forecasts investing one billion euros over 3yearstodevelopit,whileitscompatriotAlMaabarwillcarryofftheUSD5billionBOTcontractconcerningtheextensionoftheportofAqabainJordan.InMorocco, thedevelopmentof terminals3and4of theportofTangiersMedfornearly7billiondirhamsbetweennowand2012hasbeenattributedtoconsortialedrespectivelybyPSASingaporeTerminalsandtheDaneA.P.

15 Les Echos, Le commerce international rsiste mal au marasme conomique, 26/02/09,interviewofPascalLamy,DirectoroftheWTO.


43

MollerMaersk. Those companies however recently expressed concernsregardingfeasibilityoftheprojectsintimesofcrisis.Following the exampleof theEuropean revivalplans,whichamongotherthings are countingon large infrastructureprojects,particularly transport,theSouthshouldmaintainitscoursedespitetheforeseeabledegradationinpublicaccounts.Ofcourse, the traffic forecastsonwhich the largeprojectsfor the creation or the extension of port infrastructures in the South arebasedshouldbereviseddownwards.But thedelay incurredwassuch (forexampleinthecaseoftheupgradingoftheAlgerianportsofDjendjenandAlgiersbyDPWorld)thattheworkcanbe justifiedasaminimumtocopewithpresentrequirementsanda fortioritoprepareforthefuture.Thelargerailprojects (freightandpassengers),airports (alreadywelladvanced)androad,even if sloweddown,should in themselvescreate theconditions fortheeconomicdevelopmentoftomorrow.On the services side, the logistic service providerswill find in the Southalmostvirginmarkets,and localpartnerswhohaveeverything togainbycontributing to the connection of their countries to the vital arteries ofregional andglobal trade.The expansion strategieswill firstlybenational(see, for example, the SwissKuehne&Nagelwhich is creating a 2000m2depot in a suburbofAlgiers todistributeLegrandproducts inAlgeriaorAramexproject inCairo),whilewaitingforregionaleconomic integrationtoprogress (SNCFGeodiswho isbankingonTangerMed,or theKuwaitiAgility in Aqabas special economic zone). Numerous factors, notablypolitical, but also industrial, make the Med countries in fact a group ofpartitioned markets, and prevent the large logistics operators fromdeployingtheirintegratedsystemsonaregionalscale.Figure23.Medmaritimetransportintheeyeofthestorm:thecaseofCMACGMCMACGM,the3rdshippingcompanyintheworldforcontainertransport,basedinMarseille, is adapting to the new world situation by banking especially on theMediterranean.Ourshipsremain90%to95%fullbetweenAsiaandEuropedeclareditsMD Jacques Saad, at the end of 2008.Thedecline in traffic in the SuezGulfonlyresults inaslightdrop forCMACGM;60of thegroupsshipshenceforthusing thecanaleverymonth,against65previously.Between2008and2011,theworldcontainershipfleetwillhaveincreasedby1.586ships,butCMACGMsaysthatithaspreparedforthesituationbycreatingnew linestosecurethesurplusvolumes, fromAsiadestined forEurope, theMediterranean,NorthernandWesternAfrica.At theendof2008, thegroup


44

even launched a new line, North EuropeMediterraneanOceania (NEMO) linkingOceaniatonorthernEuropebySuezandtheCMACGMhubatDamietta.Afterobtaininganewconcessionatthestartof2009fortheoperationandextensionoftheportofLattakia,inSyria,theCMACGMgrouphenceforthmanagesfiveterminalsaroundtheMediterraneanbasin.Itsregionalinvestmentprogrammeisambitious,inthe region of 200 million euros, and will concern as much transhipment ports(servicingNorthAfrica and theAdriatic fromMalta,Morocco, Portugal andWestAfricafromTangerandtheLevantfromtheEgyptianportofDamietta),astheportsservicing landbased targets (SouthernEurope fromMarseilleFos and Iraq and theLevantfromLattakia).TheportofTangiersMed,atthecrossroadsofthecontinents,has,accordingtoJacquesSaadagreatfutureservicingthewestcoastofAfrica,Americaandotherdestinations.Thegroupiscountingfinallyonthediversificationofitsoffertofaceuptothecrisis:therefrigeratedcontainertransportactivitywillbereinforced,soastoofferadoortodoor service,cruisingwillbe testedona small scale,while the transportof low costAsianautomobilesisbeingstudied:Yes,thetransportofnewcarsinterestsus,forChinaandIndiaarestartingtoexporttheseproductsandwewouldliketoparticipateinthisnewandpromisingmarket. Ifwewincontracts,weshall thencharterspecialistships carcarriers thenweshallhaveourownshipsconstructed,declaredJacquesSaad.

Software services, engineering & other business services

These 2 sectors of activity aredriven on by favourablewindsdespite thecrisis. The projects intended for the Engineering and Business Servicessegment,whichbetween2004and2006representedseveraltensofmillionsofeurosofforeigndirectinvestment,exceededthebarofonebillioneurosin2008,afterhaving reachedmore than200millioneuros in2007.Theseareconsiderable amounts for activitieswhich are very employmentintensive(often qualified), and relatively light in capital. Software services haveattractedaround50projectsperannumforthepast4years,inIsraelbutnotalone, providing jobs for young, well trained and inexpensive softwareengineersfromtheMedcountries.Thedemandforthistypeofserviceswillcontinue to increase in theMed region.Of course, the export competitionwillbecome stiffer, for call centresor theexternalisationof certain supportfunctions.Thedynamicsof theEngineering&BusinessServicessector is,however,based in part on local factors, an inexhaustible source of demand: theleading project of 2008, for example, concerned the acquisition by theMitsubishiconglomerateof45%ofthecapitalofIntercity,aTurkishleasing


45

and fleetmanagementcompany, inwhichare tobe investedUSD3billionover 4 years. The Maghreb continues to attract the biggest share of theprojects (20out of totalof 38),with ahigh level of attractiveness also forEgyptandTurkey.TheEuropeansarebehind60%oftheprojects(including16Frenchinvestmentprojects).Alsotobenotedin2008,theinvestmentsof: the Israeli, Gilon Investments which has purchased the TurkishcompanyEreteam,aspecialistinbusinessintelligence, andtheMoroccansiteRekrute.com,specialistintheonlinerecruitmentofexecutives,which is to setup in theElgazalaNursery inArianawithaviewtoofferitsservicesinTunisia.Beyond thearrivalofbigplayers inpublic relations,communication, legalcounselling,audit,certification,whichcontinues(Balms&CruzinTangiers,WPPMemacOgilvyandErnst&YounginAlgiers,RolandBergerStrategyConsultants inCasablanca,PublicisLeoBurnett inAmman, etc.), it is theprojectsinengineeringandhumanresourceswhichhavemultipliedin2008:8 HR projects (Convergys and Antal International in Egypt, BPI Group,Bayt.comandCoreManagementinMorocco,andtheAmericalKCSPrivateEquityfund,whichhasinIsraelbought51%oftheDanelmedicalpersonnelplacementagency),plusadozenorsoengineeringservicesorconsultancyprojects, someofwhichare in strategicniches for the region, inparticularenergy efficiency (location in Tunisia of the French company StrategEcoSolarEneovia inpartnershipwith the localBSB) and facilitymanagement(theAustralianGlobeWilliams International in Jordan, ina JVwithDaratJordanHoldings).Concerning the supply of offshore services, it is the growing presence ofemerging operators which is striking: alongside the French championTeleperformancewhichcontinuestoreinforceitspresenceinTunisia,weseethe IndianGenpact, specialist in the externalisation of support functions,open in Morocco a 1,000 position Frenchspeaking centre to develop itspresence in Europe, while the Argentine CubeCorp is creating a BPOplatform in Amman, hand in hand with the Accelerator TechnologyHoldingsfund.RegardingSoftwareservices,Tunisiastandsoutthisyear,inadditiontotheregionalchampion,Israel.Israel(ashasrecentlydoneTurkey,butonalesserscale) is attracting especially American projects for the acquisition of


46

softwareeditors,whileEgypt,TunisiaandMoroccoaremakingaspecialityofEuropeancomputerserviceprojects(Franceinthelead).Out of the 26 projects captured by Israel in 2008, 19 are acquisitions, thelargest among them being those of Fraud Sciences (online paymentsecurity)byEbayPaypalandDiligentTechnologies (editorofsoftware forthe restoration of critical data) by IBM.R&D is the other strong point ofIsrael,whichwasdemonstrated in 2008 by the installation of laboratoriesanddevelopmentcentresbySAP,EMCVMware,WindRiverSystemsandYahoo!forexample.Figure24.FDIboominsoftwareandITservicesinTunisiaover2008 SegulaTechnologies(France).Theengineeringandconsultinggrouptoacquire

the Tunisian assets of software services companyMapsys,whichwill becomeIGM/MapsysTunisie.

Tessi (France). The software publisher and integrator to create an affiliatespecialised in development and maintenance as well as in data copying andprocessing.

SITA /AISA (Switzerland).Theproviderof IT solutions toairlines&airportsteams upwith Tunisair&Medsoft to create theAISA JV to carry out the IToutsourcingofTunisair.

Sodifrance(France).ThesoftwareservicesprovidertosetupabranchinTunisia. IGE+XAO (France). The firm specialising in computer aided design (CAD) to

createanewlocalsubsidiary. Owliance (France). The BPO services provider to develop new activities in

information systems maintenance, validation, and development for FrenchinsurancebrokerSPB.

Gnitech (France). Gnitech clones its Toulouse IT branch (Gnigraph) inTunisia.

BillcomConsulting (UnitedArab Emirates). TheUAEbased expert in billingsoftwaresystemstosetupasubsidiaryinTunis.

Owliance(France).TheBPOservicesprovidertobuilda900positionsoffshorecustomerservicecentreinChotranaindustrialzonenearTunis.

eXoPlatformSAS (France).TheFrenchcollaborativesoftwareeditor toopenasubsidiaryinTunisiatodevelopitsbusinessinAfrica.

Micros/Fidelio(USA).Fidelio,aproviderofbusinessmanagementsoftwareforthe hospitality industry, to set up a subsidiary for development andmaintenance.

Aedian(France).TheinformationtechnologyconsultancyandservicescompanytocreateAexia,asubsidiary,inJVwiththelocalOxia.


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According to theAmerican firm IDC, theworld computing sector,whichwillbeworth1.44trilliondollarsin2009,isalreadyinsemistagnation.Thehardwaremarketwillbemoreheavilyimpactedbythedeclineinequipmentexpensesandwillshowadropof3.6%thisyear,saysJohnGantz,DirectorofResearch at IDC.On the other hand, although they have been reviseddownwards, the sales of software products and software services shouldprogressrespectivelyby3.3%and3.4%in200916.Mechanical industries

The automobile, aeronauticalnaval & railmaterials and machines &mechanicalequipment sectors are strategic for theMedeconomies.Theseare labourintensive activities, relatively well integrated in the localeconomicfabric(rawmaterials,parts,services),andwhichattimesinvolvereal technology transfers.The aeronautics and automobile industries, it istrue,are set tohita fewairpockets:worldair transportationwillalreadyhave lostmore than8billiondollars in2008according to the InternationalAirTransportAssociation (Iata)17, threatening theorderbooksof the largeairplane manufacturers, whereas the European automobile market, mainexportclientfortheMediterraneanautomobilesector,isnotlikelytopickupagain before 2010, at best (according to the estimations of the largeconstructors,itislikelytodeclinebyaround20to25%in2009,against15%fortheworldmarket).However, the causes of the increasing use of externalisation to subcontractorswhoarethemselvestendingtodeveloppartoftheirproductionoffshore,havenotdisappearedinspiteofthecrisis:theeuroremainsstrong,the pressure on production costs just as the imperative to rightsize theindustrialproductioncapacitieswillaccentuate.Politicalandsocialpressuresweighingheavilyon the largeordergivers intheirhomemarketsmayslowthismovementbutnotpreventit18:thesuccess

16LesEchos,Croissanceprochedezroen2009pourlesdpensesinformatiques,27/02/0917LesEchos,Letransportarienaperduplusde8milliardsdedollarsen2008,03/03/0918See, forexample, thesupportgrantedby theFrenchStrategic InvestmentFund tothe aeronautics subcontractor Daher, new owner of the Socata (exsubsidiary ofEADSinstallednotablyinMorocco),andwhichhasundertaken,ascompensation,toinvest inFrance (projectofaplant inNantes linked to the localAirbus cluster).Cf


48

ofthelowcostmodels(RenaultsLoganandSanderoforexample)inEuropeas in themarketsof theSouth,proves thatdemandarbitrates in favouroftheoffshoreplantsinthepainfulselectionwhichallautomobileconstructorsare forced to make in the face of overcapacity (estimated at 9.5 millionvehicles/annumbythefirmCSMWorldwideinEurope19).Considered as a whole, these three sectors (automobile constructors andequipmentmakers, aeronautical,naval, and rail equipment,machines andmechanicalequipment)represented70projects in2008 (against54 in2007,thatistosay7%ofthetotalofallsectorscombined),cumulativeamountsof800millioneurosofFDI,and25%of thedirect jobs identifiedbyMIPO in2008.AutomotiveTurkey, the only real integrated automobile complex in the region, hascontinued to attract the largerpart of the foreignprojects in the sector in2008 (18 out of 36), even if the national segment entered into stagnationduringthe2ndsemester2008,andispreparingforasevererecessionin2009.TheMaghrebtotals,however,13projects,against5forEgypt.TheEuropeanindustrials (with Germany in the lead) dominate, but we can see theirchallengers from the emerging world continue their installation in theMediterranean, so as to capture local market share and move closer toEuropeancustomers(TataMotorsandMahindra&MahindrainTurkey,theBrazilian bus manufacturer Marcopolo and the AvtoVazLada group inEgypt).ThemultiplicationofChineseassemblyprojects inAlgeriashould,however,cometoahaltwiththefreezingofallassemblyprojects imposedrecentlybytheAlgeriangovernment.DespitethewithdrawalofNissanfromtheproject,thegiantRenaultplantatTangiersMed, in Morocco, will certainly see the light of day, but withdelays, according to thedeclarationsof theFrench constructor.Presentingtheresultsofthegroup,on12February2009,inParis,CarlosGhosn,headofRenault,declared:WearepushingoffthecapacitiesofTangiers, forthemarketsare currently bad but we are not renouncing this project. Tangiers is a plant Daher est confort par le Fonds stratgique dinvestissement, by Aliette de Broqua,econostrum.fr,Wednesday04March200919EuropeenlargedtoRussiaandTurkey.


49

planned essentially around the Logan range with motorcars intended for theemerging countries andwe remain optimistic in the fact that these countrieswilltake off again once the crisis is over. The upholding of local and regionaldemand(includingtheAfricanmarkets)willbedecisivefortheautomobileprojectsintheSouth.Aeronautical,naval,railequipmentThe sector,despite stillmodestamounts, isbeginning tomakeaplace foritselfintheMediterranean industrial landscape: itattracted22FDIprojectsin 2008, against a dozen on average the previous years. The rail sectorattractedoneproject, in2008, thatofGeneralElectric,whichhas formedapartnershipwithTULOMSAS, thesoleTurkishconstructorof locomotives,toproduceGEmodelsforregionalexportatEskisehir.Navalconstructionisalsostartingtoemerge.Itis,however,aeronauticswhichsince2003hasattractedthemajorityoftheprojects.Afewprojectsannouncedin2008: In Turkey, the Airbus group is collaborating with Turkish Airspace

Industries on theA350 programme; the enginemanufacturer Pratt&Whitney isopeningamaintenance centre,whileStorkFokkerElmo isopeningacablingplantintheTaxfreezoneofIzmir.

TheMoroccanandTunisianclusterscontinue toattractEuropeansubcontractors. In Tunisia, the Italian light aircraft manufacturer StormAircraftAvionav is installing a 60 position production and assemblysiteatMateur,inthenorthofthecountry.

In Israel,GulfstreamAerospace, subsidiary of theAmericanGeneralDynamics which manufactures Gulfstream jets, is increasing itsproduction capacityofGalaxy, its Israel JVwith IAI,whichproducestheG200andG150atTelAviv.

Despitethecrisis,theaeronauticssectorshassomesunnydaysaheadofitintheMed region:Airbus announced, at thebegi

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Foreign direct investment in the Med countries in 2008: Facing the crisis

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