Foreign direct investment into MEDA in 2007: the switch

SURVEY N°1 / July 2008
Foreign direct investment
into MEDA in 2007
The switch
MED-AllianceInvestintheMediterranean

Foreign direct
investment into MEDA in
2007: the switch
S t u d y N ° 1
J u l y 2 0 0 8

A N I M A I n v e s t m e n t N e t w o r k
Pierre Henry/Samir Abdelkrim/
Bénédict de Saint-Laurent

Foreign investment into the MEDA region in 2007
3

References
This report was prepared by the ANIMA team within the framework of the
Invest in Med contract. ANIMA Investment Network is a multi‐country
platform supporting the economic development of the Mediterranean. The
network gathers around 40 governmental agencies and international
networks.
The objective of ANIMA is to contribute to a better investment and business
climate and to the growth of capital flows into the Mediterranean region.
www.anima.coop
ISBN   2‐915719‐34‐9 EAN 9782915719345
© ANIMA‐Invest in Med 2008. Reproduction prohibited without express
authorisation. All rights reserved
Authors
Pierre Henry, Samir Abdelkrim, Bénédict de Saint‐Laurent (ANIMA) for
the data‐gathering and the drafting.
The economic intelligence team of AFII assisted ANIMA and our cordial
thanks are especially due to Charlotte Danet, Dioline Dorvil, Fouad Hachani,
Yann Letessier, Nadeschda Musshafen, Emmanuelle Rausch, Julie Veaute.
The various MEDA Investment Promotion Agencies (IPA) and French
economic missions abroad for the supply of certain information.
ANIMA and its partners cannot be held responsible for the data
provided. Any error or inaccuracy should be communicated to
info@anima.coop.  ANIMA is interested in getting your feedback, comments,
further information and updates.

4
Acronyms
ANIMA: Euro‐Mediterranean Network of Investment Promotion
Agencies
AFII: Invest in France Agency
CEECs: Central and Eastern European Countries
EU: European Union (EU‐25, but frequent differentiation of EU‐15 –“old”
members‐ and EU‐12 – “new” members‐)
FDI: Foreign Direct Investment
GDP: Gross Domestic Product
GNP: Gross National Product
ICT: Information and Communication Technologies
IPA: Investment Promotion Agency
MEDA‐12: group of 12 partner countries of the EU: Algeria, Cyprus,
Egypt, Israel, Jordan, Lebanon, Malta, Morocco, Palestinian Authority,
Syria, Tunisia, Turkey (Malta and Cyprus are taken into account in the
study, but joined the Union in 2004)
MEDA‐10: the same without Malta and Cyprus
MENA: Middle East ‐ North Africa = MEDA‐10 + Mauritania, Libya,
Sudan, Gulf States + Yemen, Iran, Iraq, Afghanistan, Pakistan (sometimes
variable geometry)
MIPO: Mediterranean Investment Project Observatory
R&D: Research and Development
SCSC: Software and Computing Services Company
UNCTAD: United Nations Conference on Trade and Development
WIR: World Investment Report (report by UNCTAD on foreign
investment)
WTO: World Trade Organisation

5

Contents
FDI in MEDA, illustrating a shift in the global economic balance.8
1. Synopsis: more FDI projects than ever in 2007 .............................. 10
The new attractiveness of the Mediterranean................................................ 10
Consolidation in value in 2007, after 5 years of strong increase................. 11
Europe and the Gulf, 2 pillars of foreign investment in the
Mediterranean..................................................................................................... 14
Europe is back .............................................................................................................14
What explains this new Mediterranean tropism? .................................................15
Reforms start paying off ............................................................................................17
Modes of establishment: mainly acquisitions................................................ 18
Leading sectors: real estate and energy ahead .............................................. 19
Too few investments with strong spillovers ..........................................................22
The prize list of the largest FDI projects ......................................................... 22
Conclusion: how can MEDA achieve a lasting attractiveness? .................. 24
2. Euro‐Med integration or Euro‐Med‐Gulf triangle?....................... 25
Context: Dubai plays the troublemaker in the Barcelona process.............. 25
The Euromed integration, a necessary condition, but one of many, of
the takeoff of the MEDA region ....................................................................... 26
Presence of the Gulf in the Mediterranean: in search of economic rents
or healthy contribution in new blood?............................................................ 28
Gulf and Europe dominate foreign investment flows in the Mediterranean ...28
Competing or complementary investment strategies?.........................................29
Conclusion ........................................................................................................... 33
3. Sectoral analysis of FDI into MEDA................................................ 36
Boom of the equipment and processing industries ...................................... 36
2007 sectoral prize list ................................................................................................37
Reinforced concentration of FDI flows on some sectors.............................. 38
Sectoral distribution of 2003‐07 FDI projects .........................................................39
Relative constancy of the outperforming sectors .......................................... 40
Difficult digestion of the heaviest real estate investments ..................................40
Banking on the Mediterranean.................................................................................41
Tourism and telecoms await the next wave of FDI...............................................41

6
A very variable entry ticket depending on the sector .................................. 42
FDI, driving force for employment.................................................................. 44
Review by sector................................................................................................. 46
Public works, real estate, transport, delegated services.......................................46
Tourism, catering........................................................................................................49
Distribution, retail ......................................................................................................50
Energy...........................................................................................................................52
Industries of materials ...............................................................................................54
Electric, electronic and medical equipment, electronic components,
electronics ware...........................................................................................................57
Pharmaceutical industries and biotechnologies ....................................................58
Automotive, aeronautics, mechanics and machinery...........................................58
Services: Bank, insurance and other financial services.........................................62
Telecom & Internet operators ...................................................................................67
Data processing & software, Engineering & services to businesses...................68
Personal and domestic services, other services .....................................................71
4. Geography of foreign direct investments in MEDA..................... 72
The confirmed attractiveness of Machrek ...................................................... 72
Egypt and Turkey continue to fill the tank with FDI ................................... 73
Origin of the flows of FDI towards MEDA.................................................... 75
European investors back in the race................................................................ 75
Gulf investors set up camp ............................................................................... 76
Asian companies settle quietly......................................................................... 76
The intra‐MEDA integration process goes on ............................................... 78
Profile of the receiving countries for 2007...................................................... 79
Egypt: the Sphinx takes off! ......................................................................................79
Turkey, a new Euro‐Mediterranean tiger...............................................................80
Algeria eventually courted by foreign investors...................................................81
Israel: good economic records despite the decline in FDI....................................83
Jordan relies on Arab investors ................................................................................84
Syria: calling upon all people of goodwill..............................................................85
Lebanon: some projects gained in spite of the crisis.............................................87
Morocco: a determination which produces results...............................................88
Tunisia: immaterial investments and great property projects ............................90
The Libyan phoenix rises from its ashes.................................................................92
Malta, Cyprus and the Palestinian Territories.......................................................93

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5. Annexes ................................................................................................. 94
Annex 1. List of projects detected in 2007 (MIPO)........................................ 94
Annex 2. Origin‐destination cross table 2003‐07 ........................................... 153
Annex 3. Methodology ...................................................................................... 154
Approach......................................................................................................................154
Selection criteria..........................................................................................................155
Recent methodological changes ...............................................................................156
Index of figures and graphs.............................................................................. 158

FDI in MEDA, illustrating a shift
in the global economic balance
Data on foreign direct investment (FDI) in the MEDA region (Mediterranean
countries partners of the EU) 1 confirm the entry of the area in the economic
globalisation. In a global context of shifting dynamism between on the one
hand, developed countries, often in relative decline, following the example
of the United States or Europe, and on the other hand emerging countries,
whose growth seems insatiable, the Mediterranean follows the same
patterns:
Over the past few years, the interest of the northern shores (European)
of the Mediterranean in its southern neighbour has not grown
significantly. Even though European investments in MEDA in 2007
remain high (approximately 24 billion euros), a third of this FDI flow
comes from a single project (the purchase by Lafarge of the cement
factories of Egypt’s Orascom). Europe remains a significant partner in
two areas, the Maghreb and Turkey, but its positions are fragile in
Machreck. Europe chooses MEDA to locate projects that it cannot carry
out any more in an economically viable way on its own territory
(automotive, aeronautics, delocalization of services). European
champions also perceive the potential of the MEDA market: it is the case
of banks, tourism companies, or construction giants (Lafarge,
Italcementi, Spanish public works companies, etc). Lastly, another
recent study undertaken by ANIMA (Med Funds) shows that the
European share of the capital investment (private equity) injected in the
region is very weak (3%, against 22% for the United States and 22% for
the Gulf);
On the contrary, the South never seemed so eager to benefit from the
many Mediterranean opportunities. The MEDA operators themselves
are starting to invest in the other countries of their region (55 projects in

1 Algeria, Tunisia, Morocco, Egypt, Jordan, Lebanon, Palestine, Syria, Turkey, Israel +
Libya as an observer. Cyprus and Malta are since 2004 members of the EU.

9

2007, the first signs of regional industrial integration). All dynamic
emerging economies (and not only China and India) are represented in
a region whose resources are better valued now. The champions of the
South have a presentiment of the growing potential of MEDA as a
production platform for the future Euromed market. The Gulf, with a
third of the amounts to be invested, confirms, especially in the
Machreck, its role as an economic “big brother” who could become an
interesting partner of the historic godfather who is Europe.
The project of the Union for the Mediterranean comes at the right moment to
bring new energy to a Euro‐Mediterranean partnership which probably
lacked ambition and political support. Companies, the business community,
the civil society can perhaps make this integration process a success given
the difficulty of conceiving it only from a strictly political point of view. The
examination of the economic relations that this report allows confirms all the
hopes, all the stakes which one must legitimately place in a region that is a
key for the future of Europe and the world:
With a third of world merchandise flows transiting via Suez and
Gibraltar, the Mediterranean, located at the centre of the new global
logistics, has become an industrial battle field where champions of the
north and the south clash;
The region is asserting its vocation to become a dynamic production
platform of goods and service at the doors of Europe –being able
furthermore to profit from a privileged access to the funding coming
from the Gulf;
Over the past three years it has received a yearly amount of foreign
investment close to that of China and higher than that of India.

1. Synopsis: more FDI projects
than ever in 2007
The new attractiveness of the Mediterranean
According to UNCTAD figures, in 2006 MEDA countries had passed a
symbolic threshold by attracting more than 4.5% of the world flow of foreign
direct investment (Figure 1), that is to say, more than their share of the world
population (4%).
Figure 1. UNCTAD data on FDI inflow by regional subset of destination and
MEDA share of total world FDI (in million USD, UNCTAD‐WIR)
16 595
34 421
8 005
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
50 000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
0%
1%
2%
3%
4%
5%
Machrek Turkey + Israel
Maghreb MEDA share of world FDI

The Maghreb, Machrek and Turkey‐Israel have all benefited from this new
injection of capital, even if in fact the main economic and/or demographic
powers of the region (Turkey‐Israel on the one hand, Egypt for Machrek)
have enjoyed the most significant increases since 2004.

11

Consolidation in value in 2007, after 5 years of strong
increase
Whatever the source (UNCTAD‐WIR or ANIMA‐MIPO observatory), FDI
poured into MEDA slightly decreased in value in 2007, whereas the projects
have never been so numerous (more than 800):
According to the UNCTAD, which measures macroeconomic flows in
national accounts, FDI registered in the MEDA region was multiplied by 6 in
6 years. It went from ten billion USD in 2000 to about sixty in 2006. In 2007
however, the first estimates show a decline of 8 billion dollars (see Figure 2);
Figure 2. FDI inflows 2000‐07 for each MEDA country (million US, UNCTAD‐
WIR for 2000‐2006, estimate for 2007) 2
Reg./country 2000 2001 2002 2003 2004 2005 2006 2007
Algeria 438 1 196 1 065 634 882 1 081 1 795 6 000
Egypt 1 235 510 647 237 2 157 5 376 10 043 10 000
Israel 5 128 3 605 1 668 3 896 2 040 4 792 14 301 4 000
Jordan 815 138 74 436 651 1 532 3 121 3 000
Lebanon 964 1 451 1 336 2 977 1 993 2 751 2 794 2 100
Morocco 471 2 875 534 2 429 1 070 2 946 2 898 5 200
Palestine 62 19 9 18 49 47 38 NA
Syria 270 110 115 180 275 500 600 700
Tunisia 779 486 821 584 639 782 3 312 1 000
Turkey 982 3 352 1 137 1 752 2 883 9 803 20 120 19 400
MEDA 10 11 144 13 742 7 407 13 143 12 639 29 610 59 021 51 400
Libya 141 ‐113 145 143 357 1 038 1 734 4 400

According to ANIMA (MIPO Observatory, launched in 2003 as a
complement to a European observatory by Invest in France Agency),
which considers micro‐economic data (collection of individual projects

2 UNCTAD figures for 2007 are estimates published at the beginning of 2008 for
Egypt, Lebanon, Morocco, Tunisia and Turkey, while figures for Algeria, Israel,
Jordan, Palestine and Syria are estimates produced by ANIMA on the basis of official
declarations, data derived from MIPO or other sources.

12
advertised by the investors), announced FDI flows 3 regress in the same
proportion (Figure 3).
Figure 3. Total FDI inflows and number of projects for MEDA 10 (without Libya,
UNCTAD in million dollars, million euros for MIPO)
29 610
59 021
51 400
12 639
13 143
7 407
60 627
68 174
12 851
9 863
39 187
796
779
666
333
256
167
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
2002 2003 2004 2005 2006 2007
0
100
200
300
400
500
600
700
800
FDI flow, UNCTAD‐ US$m FDI flow, MIPO, €m Nb. of projects

This regression in value recorded by MIPO is due to several factors: change
in the euro‐dollar parity (a majority of the non‐European projects being
announced in US dollars, and registered in euros in the MIPO database),
deceleration in the rhythm of announcements of major real estate and
tourism projects; temporary stringency of operations of privatisation;
finally, reduction in the amounts devoted to the American M&A operations
in Israel.

3   MIPO takes into account investments announced in year x, when the investor (or
sometimes even the National Investment Commission) publicises or confirms a project
for implementation that will lead to payments or transfers in the same or following
years (year x + 1 etc.). The data provided by ANIMA‐MIPO is therefore forecast data.

13

Except in the case of an unforeseen shock, this consolidation should not
mark a reversal of trend. The major causes of the growing passion for the
Mediterranean observed since 2004 are indeed not ready to disappear:
abundance of petrodollars, proximity with Europe, economic takeoff of
Turkey, awareness of the potential of the MEDA market and new interest for
the Euromed region in general.
The Eastern part of the region receives the bigger share of these relatively
strong FDI flows. Turkey and Egypt are indeed the countries which attracted
the most significant flows of FDI in 2007. Egypt collects 80% of the FDI
directed towards the Machrek, against a little less than 60% on average the
previous years. As for the Maghreb, it is Algeria which is distinguished in
absolute terms.
Taking account of ʺsize of the marketʺ factors (GDP and population), the
countries where the impact of foreign investment is strongest are Jordan (455
euros per capita), Egypt (FDI forecast by MIPO accounts for 20% of real
GDP), Libya, or Tunisia (Figure 4).
Figure 4. FDI performance of MEDA country in relation to population and GDP 4
Year 2005 2006 2007
Pays Flow %pop %GDP Flow %pop %GDP Flow %pop %GDP
Algeria 4 133 127 76,3 2 476 75 42,8 5 317 160 95,3
Egypt 6 978 90 70,6 15 914 202 150,2 22 220 277 217,1
Israel 5 899 940 57,7 13 908 2 189 129,0 3 971 618 38,7
Jordan 1 129 196 124,1 3 235 548 337,6 2 754 455 300,5
Lebanon 643 168 39,9 3 322 858 198,8 279 71 17,8
Libya 418 72 11,8 359 61 9,5 4 439 735 123,1
Morocco 1 924 59 58,6 5 292 159 152,3 2 911 86 88,5
Syria 2 938 159 170,4 5 051 268 281,6 2 165 112 128,8
Tunisia 1 089 108 56,0 3 885 382 188,3 2 856 278 144,7
Turkey 14 032 201 70,9 14 283 203 67,8 17 997 253 89,5
MEDA 10 38 765 149 70,4 67 655 256 115,7 60 550 226 108,4
MEDA 13 39 605 148 66,3 68 533 252 108,0 65 067 236 107,3

4 FDI flow in million euros (ANIMA‐MIPO), ʺ%popʺ in euros per capita, and ʺ%GDPʺ
= FDI flow / real GDP * 1000. FDI Data come from MIPO; demographic data are
provided by the US Department of Commerce Census Bureau; GDP data are taken
from the World Development Indicators by the World Bank. MEDA 10 excludes
Libya; MEDA 13 includes Libya, Cyprus and Malta.

14
Europe and the Gulf, 2 pillars of foreign investment in the
Mediterranean
Europe is back
In a global context of macro‐economic shift between developed countries
and emergent countries, the Gulf confirms its interest in the region, but
Europe and France also make their return (due in particular to the
Lafarge/Orascom deal worth more than 12 billion USD).
European investments strongly increased in 2007 (+10 billion euros, 40% of
the total, against 24% in 2006), while North‐American investments, as
important in volume (number of projects) as over the past years, are this
year more modest projects (144 projects for 6.3 billion euros, against 20
billion in 2006). Intra‐MEDA operations experience a rather remarkable and
encouraging surge (55 projects).
Figure 5. Evolution of announced FDI flows to MEDA by region of origin
(ANIMA‐MIPO 2003‐07, in million euros and % of annual total)
0
5 000
10 000
15 000
20 000
25 000
30 000
2003 2004 2005 2006 2007
UE27 + EFTA Gulf & other MENA USA/Canada
MEDA‐10 Asia‐Oceania
35%
24%
34,4%
40%
44,4%
56,5
45,7%
21,1%

The presence of investors from Asia and other emergent economies, still
discreet for the moment, will become more and more noticeable in the years
to come: in 2007 companies from China, India, and Russia multiplied press
releases announcing great projects in energy, infrastructures or heavy
industries, mainly in Turkey, Egypt, Libya and Syria.

15

The Gulf and Europe are for the moment the 2 pillars of foreign investment
in the Mediterranean. These two regions weigh together 67% of the total
amounts announced over the last 5 years, and 66% of the number of projects.
The European investors’ share of the stock of projects announced since 2003
remains however dominant, with 48% of the total.
Figure 6. Total number of FDI projects per region of origin (MIPO 2003‐07)
MEDA‐10
6%
Others
3%
Gulf & other
MENA
17%
USA/Canada
18%
UE‐27 + EFTA
48%
Asia‐Oceania
8%

What explains this new Mediterranean tropism?
Three joint movements feed these flows of investment:
The boom of energy and raw materials, which causes a race for cheap
industrial inputs, and concerns mining and extraction industries as
much as the processing industries (chemicals, fertilisers, plastics,
metallurgy, cement, etc.);
The search for new driving forces of growth or gains in competitiveness
for mature industries in developed countries, or the search for a critical
size out of skimpy domestic markets (for Gulf companies for example,
in particular in telecoms, banking, etc). European companies (or those
active in Europe), large and small, are under the pressure of a strong
Euro, and forced by rigid (labour laws and costly social protection) and
shrinking labour markets (ageing population, political reluctance

16
against new mass immigration). Even if relocations are less frequent
than it seems, many companies will prefer locating new productive
capacities out of Europe (Renault‐Nissan in Tangier, or the aeronautics
industry (Figure 7). These investments aim at the satisfaction of external
needs (free trade agreements, free zones, etc.) as much as the
satisfaction of the local demand born of the increase in the local
purchasing power;
The third movement is the recycling of the commercial surpluses
(hydrocarbon incomes from the Gulf mainly) in residential, commercial
or tertiary real estate, in tourism infrastructures but also in industry
(metallurgy, fertilisers) or services (banks and telecoms). These
investments are frequently made by State holdings. They also concern
rising stars of the private sector of the Gulf, thanks to the funds easily
raised on domestic stock exchange places blessed with abundant
liquidity (see at the end of this chapter the list of the largest operations
announced in 2007).
These three movements contribute to the same effect: a new competition
between established multinationals and challengers of the emerging world,
often based in the Gulf, and which have large means to serve their
ambitions.
Figure 7. Case study: European aeronautics cluster facing a weak dollar
The French group Safran, whose aeronautics division includes the firms Messier‐
Dowty and Messier‐Bugatti (landing gears), Aircelle and Hispano‐Suiza (engines) and
Labinal (electric wiring), invoices in dollars and produces mainly in euros, like all the
European aeronautical industry. The fall of the American currency vis‐à‐vis the Euro
thus weighs considerably on its competitiveness, and forced it to accelerate the
redeployment of its production capacity in the dollar area: the objective is to
decrease by 2010 down from 55 to 45% the exposure of this branch to the dollar/Euro
exchange rate.
Whereas the personnel in Western Europe demands rises of wages and jobs creation,
the group has invested 50 million euros every year since 2006 in creating or
extending factories in Mexico, China, Morocco, India or Poland. ʺAlmost all our
factories are in the course of doubling in size, [… ] all our companies have a site in the
dollar area or in emerging countries and are able to transfer to it some activitiesʺ,
explains the group management ʺ[ In 2008 ] this new deployment will be operational,
and we will exploit these factories and saturate them. But if the drift of the dollar vis‐
à‐vis the Euro continues, we will transfer more activities ʺ.

17

In fact, the products manufactured offshore are ʺof the same complexity and of the
same quality as those from the European sitesʺ, which makes these new transfers all
the more feasible and thus probable.
As an Airbus subcontractor, Safran has no choice but to pass on its own suppliers
the pressure transmitted by the airframe manufacturers. Louis Gallois, head of
EADS, said publicly: ʺwe will increase the contents in dollars of our planes, in
particular by paying more and more our suppliers in dollars which gives them strong
incentives to do just like us ʺ. The equipment suppliers working in the Euro zone will
be paid in dollar, which forces them to prefer, among their French subcontractors,
ʺthose which developed out of Franceʺ.
Whereas job creations on the offshore sites amount to thousands, Safran will hire only
2000 people in France in 2008, a figure below that of the forecast retirements (around
2500‐3000).
Source: « Safran réagit à la hausse de lʹeuro en accélérant les délocalisations », Le Monde,
27/03/2008
Reforms start paying off
Following the example of Egypt, crowned 1st reforming country in the
world for 2006‐2007 by the Doing Business Report (World Bank‐IFC), the
MEDA countries have engaged in reforms aiming at opening their
economies, at supporting private/foreign initiative through better protection
of their interests, at entering the international competition by better
promoting their territories. Much remains to be done, but the response of the
market shows that the signal was received. Some measures taken in 2007:
Egypt is the 1st Arab and African country to have ratified (July 2007) the
OECD Declaration on international investment and multinational
corporations.
Syria implemented reforms recommended by the IMF, concerning the
independence of the central bank, the regulation of the financial sector
and the management of public finance.
The government of Algeria appears determined to encourage foreign
and domestic investment, by the adoption of a bill which includes
various measures of administrative simplification (setting up a business),
envisages a facilitated access to the tax incentives granted by the State,
redefines the role of the National Agency for the Development of
Investment (ANDI) and specifies its relationships to the tax and customs
authorities (respect of the customs exemptions and tax reductions

18
granted). The bill stipulates that certain investment projects will be able
to benefit from 20 year land concessions, renewable and convertible in
legal transfers.
In Turkey, a new investment promotion agency, the Investment Support
and Promotion Agency of Turkey (ISPAT) otherwise called Invest in
Turkey, officially took over the foreign investment department of the
Under‐Secretariat of the Treasury on October 24, 2007. The new agency
counts on an international representation network in 11 countries;
namely China, Germany, France, India, Israel, Italy, Japan, Russia, U.A.E,
UK and the USA. The government is meanwhile preparing the
liberalisation of the media and energy sector.
Libya and Spain signed a treaty of mutual protection of their
investments.
The government of Morocco engaged in a policy of corporate tax
reduction, whose rate is to be lowered from 35% to 30%.
Jordan and Syria signed bilateral trade agreements aiming at facilitating
their exchanges.
Cyprus and Malta benefited in 2007 from the prospect of the adoption of
the European single currency effective on January 1st 2008.
The government of Tunisia has decided to maintain until 2010 the tax
incentives in favour of exporting industries. In 2007, Tunisia also
prepared the completion of the free trade zone with the European Union
for industrial products.
Modes of establishment: mainly acquisitions
The distribution by type of projects in 2007 shows a rather weak proportion
of projects of production (creation, extension or delocalization of activity): a
third of the projects and amounts. Brownfield or extension projects hardly
reach 5% of the amounts (60 projects), whereas they represent in general a
consequent source of foreign investment in other regions of the world. 35%
of all projects have a financial dimension (acquisitions, privatisations), but
that represents about half (49.5%) of the invested amounts. The remainder of
the 2007 projects portfolio relates to the setting‐up of subsidiary company or
branches (15% of the number of projects, but not very significant amounts)

19

and to partnerships (joint‐venture, etc.) with approximately 16% of the
projects and amounts.
Leading sectors: real estate and energy ahead
Whereas banking was dominant in 2006, it is the sector of real estate and
transport which is the most attractive in 2007, while the energy sector
benefits from the strongest progression: +80% in value!
The average budget per project (all sectors) amounts to 129 million euros in
2007, against 168 in 2006, reflecting a significant fall of the number of very
large announced projects, while at the same time the number of projects (in
particular in real estate) is in progression.
The number of projects in the construction industry and transport
infrastructure has been strongly increasing since 2005 (more than 100
projects per annum for 2 years), while the announced amounts, even spread
over the envisaged duration of realization, passed from 9 billion euros in
2006 to more than 14 billion in 2007. Material industries (Glass, cement,
minerals, wood, and paper) fully benefit from this boom (63 projects and
almost 10 billion euros of FDI). The local offer of cement, a material which
suddenly became very expensive, has for a number of years been unable to
cope with this exponential demand: projects of creations or extensions of
cement factories have multiplied in all MEDA countries.
Foreign investors are solicited to increase the production of hydrocarbons in
the Mediterranean, in a global context of durable price hikes. Exploration,
extraction and transformation were the object in 2007 of spectacular FDI
projects announcements (86 projects), worth a total 12.6 billion euros
(around 7 billion in 2006), that is to say 20% of the total amounts invested
into MEDA in 2007.
Heavy industries (metallurgy, chemicals‐plastics‐fertilisers) enjoy this same
interest. FDI projects in these sectors aim either at addressing foreign
demand through exports (production of aluminium in Algeria or fertilisers
in Egypt and Jordan) or at satisfying local markets in rapid expansion (case
of Turkey for example). Metallurgy attracted about 30 projects (against 5 on
average the previous years), representing investments of several billion
euros for this year and the years to come, mainly in Algeria and Turkey.
Chemistry is becoming a regional strength (approximately 30 projects per
annum since 2005, FDI flows above 2 billion euros in 2007). The fertiliser

20
industry is also thriving, counting on significant local resources: abundant
phosphate (Morocco, Jordan, etc.) and cheap natural gas (employed for the
production of nitrogen). World demand is to remain high, thanks to the
growing needs of Asia.
Manufacturing industries with strong spill‐over effects, typically the case of
the automotive industry, have continued to attract many projects
(approximately thirty projects per annum since 2003 for the automotive
industry, with FDI flows close to 800 million euros over 3 consecutive years).
The installation of assembly factories in the South in general (Renault‐Nissan
in Tangier‐Med for instance), and not only in Turkey, which will also bring
in subcontractors, is a strong signal for other industries facing the same
competitive constraints (costs, dynamic supply‐chain). Subcontractors in the
aeronautics industry follow the same trend, while businesses in the sector of
electric, electronic & medical hardware, mechanics and machinery
maintain or increase their investments in the Mediterranean. Projects in
electronic ware (white goods, etc.) remain however a quasi‐monopoly of
Turkey, which confirms its manufacturing vocation for the European
markets in the eyes of the large manufacturers of electric household
appliances.
Textile‐clothing suffers from a strong deceleration, with only 8 projects this
year against 40 in 2006 and investments flows below 200 million euros.
Agro‐business attracts FDI projects worth more than one billion euros, a
good performance.
Regarding services, banking and insurance comes first (14% of the projects
in 2007 and 17% of the amounts), followed by telecoms (3.3 billion euros for
25 operations). Tourism marks a pause this year, needing time to digest the
mega‐projects announced the previous years.
The data processing and software sector has been attracting between 40 and
50 projects per annum for 3 years, with invested amounts in net retreat in
2007 compared to the year 2006, which was marked by large American
acquisitions in Israel. A new trend to be taken into account: the increased
visibility of Morocco and Tunisia.

21

Figure 8. Number of projects and FDI flows by sector in 2007 (MIPO, in €m)
127
86
115
63
29
30
49
37
28
13
29
34
10
18
11
49
15
8
47
7
1
3
25
0 5 000 10 000 15 000
PW, utilities, logistics
Energy
Banking & trade
Glass, minerals, wood
Telecom
Metallurgy
Chemicals
Tourism, catering
Distribution
Agro‐business
Other or not specified
Automotive
Electr. hardware
Transport equipment
Drugs
Electronic components
Software
Mechanics & machinery
Textile
Consulting & services
Electronic ware
Biotechnologies
Furnishing & houseware
FDI amount in €m
Nb. of 2007 projectsFDI Inflows

22
As for services to businesses (solicitors, facility management, call centres,
etc.), they are more dynamic than ever. The multiplication of the projects in
these sectors reflects as much the opening of local markets and the new
needs created by the presence of more foreign companies consuming
services in all kinds, than a strong demand for export (call centres, business
process outsourcing). MIPO registered 50 projects in 2007 (a figure in
constant progression since 2003), for amounts lower than 200 million euros
(services depend on human capital).
Too few investments with strong spillovers
It is to be feared that the majority of FDI projects in energy, using mainly
imported equipment and workers, and exporting products often little
processed, bring little local added value (apart from the revenue paid by the
operator). Idem for certain forms of real estate (second homes for the
diaspora). On the contrary, the light industries (agro‐business, mechanics,
house ware, etc.), well connected to the other sectors (but too little
represented in FDI patterns), can better spread the benefits of the foreign
investment into the rest of the economy.
The prize list of the largest FDI projects
It is possible to consult the detailed data on the projects detected by the
MIPO observatory on www.anima.coop. The figure below gives an
overview of the announced budgets above a billion euros, which are not
necessarily the most interesting nor the most significant. 5
Figure 9. Seventeen projects above 1 billion EUR announced in 2007
1. Libya. ENI (Italy) is to pay half of a joint investment programme with Libyaʹs
NOC worth 28 billion USD over 10 years (€10 816  mln).
2. Tunisia. Dubai Holding / Sama Dubai (United Arab Emirates) laid foundation
stone of Century City and Mediterranean Gate mega project in Tunisʹ southern
lake area, worth 14 billion USD over 15 years (€ 10 231 mln).
3. Egypt. Lafarge (France) buys Orascom Cement for USD 12.9 billion, including a
significant stake in Lafarge worth 4.1 bn USD (€ 6 431 mln).

5   Announced FDI, divided by the number of years of implementation of the project
(often 3 to 10 years for real estate projects).

23

4. Egypt. Damac (United Arab Emirates) to invest 30 EGP billion in a project in
New Cairo, the first phase being called Hyde Park (€4 072 mln).
5. Turkey. Socar (Azerbaidjan). The State Oil Company of Azerbaijan and Turkey’s
Turcas set up a JV for a 10 billion USD oil refinery project in Ceyhan (€3 727 mln).
6. Algeria. Emaar Properties (United Arab Emirates) to invest IN an ambitious
tourism project in Colonel Abbes, west of Algiers, to be developed on an area of
109 hectares (€2 923 mln).
7. Algeria. Mubadala Development + Dubal (United Arab Emirates). A JV formed
by Moubadala Development and Dubal to own 70% in a 5 billion USD
aluminium smelter project, while Sonatrach‐Sonelgaz will hold the rest (€2 558
mln).
8. Turkey. ING (Netherlands). Turkeyʹs Oyak Bank to be sold to Dutch ING Bank
for 2.673 billion USD (€1 953 mln).
9. Turkey. Indian Oil Corporation (IOC, India) has won the approval of Turkey’s
energy regulator for setting up a 4.9‐billion USD refinery in Ceyhan (€1 826 mln).
10. Egypt. Majid Al Futtaim (MAF) (United Arab Emirates) plans to invest 12.5
billion LE over the next 5 years for 12 new outlets for retail and commodity
distribution (€1 697 mln).
11. Libya. Petro‐Canada (Canada) to invest heavily in a joint investment programme
with NOC, worth 7 bn USD, in exploration projects in the Sirte Basin (€1 696
mln).
12. Turkey. National Bank of Greece (Ethniki, Greece). NBG’s total participation in
the share capital of Finansbank now amounts to 89.44%. (€1 646 mln).
13. Israel. MTS (International). The consortium, including Chinaʹs CCECC, Soares
da Costa and Siemens wins a BOT contract for the construction of the Tel Avivʹs
light train red line (€1 302 mln).
14. Turkey. Malaysia Airports Holdings (Malaysia). A consortium with Malaysia
Airports and Limak to spend 3.447 billion USD to build a new terminal and run
for 20 years the Sabiha Gokcen Airport (€1 259 mln).
15. Turkey. Fraport (Germany) will operate with other partners 3 terminals at
Antalya, Turkeyʹs second‐largest airport, thanks to a successful Euro 2.37 billion
bid (€1 209 mln).
16. Algeria. Total (France) to invest 51% of 3 billion USD to build and manage a
petrochemical plant in Arzew; Sonatrach investing the rest (€1 096 mln).
17. Egypt. Abraaj Capital (United Arab Emirates). The Dubai‐based investment
company takes control of Egyptian Fertilisers Company for 1.4 billion USD
(€1 023 mln).

24
Conclusion: how can MEDA achieve a lasting
attractiveness?
Beyond the encouraging achievements in direct investment towards MEDA
in 2007, what is at stake for ANIMA and its Mediterranean partners is to
find out how to better ʺrootʺ European or world companies in the Euromed
market and how to turn this market into a durable and profitable one. That
would involve:
1. making transactions safer (guarantee scheme, arbitrations, protection
of intellectual property etc.);
2. financing productive SME and industry in general ‐ and not only blue
chip companies and real estate (cf. proposals by ANIMA regarding a
scheme suiting emerging companies);
3. identifying and developing the principal markets and certain niches
(necessary work initiated by ANIMA through sectoral studies which
need to be refined and transformed into action plans);
4. transferring knowledge and technology towards the south,
5. fostering partnerships;
6. creating industrial groups or networks/clusters with regional vocation
(this report intends to highlight some of the existing ones);
7. defining mutually beneficial roles between the North and the South of
the Mediterranean‐ as opposed to shameful delocalization (approach
followed by European regions the likes of Lombardy or Catalonia, with a
mix of clusters specialising in the MEDA countries, of funds of support,
industrial policy etc.) ;
8. bringing back trust and increasing the attractiveness of the countries
and the territories.
These efforts will be continued and amplified within the framework of the
Invest in Med project, which ANIMA will start implementing with its
partners in 2008. Institutional changes ‐ SME agency, ʺnew neighbourhoodʺ
fund, development banks, institution providing guarantees, etc. will also be
necessary. ANIMA is convinced of the usefulness (including a symbolic one)
of these instruments, and of an approach in terms of ʺconcrete projectsʺ.

25

2. Euro-Med integration or
Euro-Med-Gulf triangle?
Investors from the Gulf have made many headlines in 2007: great projects in
real estate or tourism (projects of Emaar in Algeria), or large acquisitions
(privatisation of Al Watany Bank in Egypt in favour of National Bank of
Kuwait). Gulf investors earned a reputation as conquerors with deep
pockets, ready to overpay assets in order to capture revenues, monopolising
the best lands, fuelling real estate speculation and the inflation affecting
building materials. As in any caricature, this hardly flattering portrait
conceals a share of truth.
Their contribution to the development of the MEDA region is however more
positive than it appears at first sight: whereas the European Union invests
relatively little in its Mediterranean neighbours, the Gulf could bring to the
region the necessary capital to trigger a true takeoff. If the ongoing Euro‐
Mediterranean economic integration process is not sufficient to ensure the
development of the South, should we not imagine a larger framework of co‐
operation which would integrate the Gulf and its investors?
Context: Dubai plays the troublemaker in the Barcelona
process
The Barcelona process played a positive role in the increase in FDI flows, by
reinforcing the general attractiveness of the southern shore. The integration
of the Euro‐Mediterranean economic area is progressing however rather
slowly, and the companies from the Gulf, emerging countries, from China
and India engulfed this new intermediate market, well located, at the doors
of Europe.
This renewed interest is welcome, but it is not certain that it is enough. The
contribution of these new investors might be significant quantitatively, but
the quality of their projects is sometimes poor (weak multiplier effect,
limited repercussions), compared to the importance of the stakes: million of
durable jobs have to be created each year to simply maintain the current rate
of unemployment of young people.

26
The Euromed integration, a necessary condition, but one
of many, of the takeoff of the MEDA region
The macroeconomic data seem to indicate that Europe and its Mediterranean
neighbourhood entered one period of (weak) convergence since 2000. The
MEDA region enjoys each year a growth per capita which is higher of almost
1% than that of Europe. But with a GNP per capita of 6 209 USD in 2007
(MEDA average, in PPP), MEDA is on the level of Western Europe in the
Fifties, or Romania in 1975. Based on that difference, a simple calculation
indicates that MEDA countries would spend 157 years to catch up with
European living standards, while it took only 25 years to Greece and
Portugal to do it (cf. ʺBarcelone, processus inachevé ʺ, ANIMA 2008).
Barcelona certainly encouraged development of trade between the EU and
the Mediterranean partner countries. These ten countries represent from
now on 9 % of total external exports of the EU‐27 ‐ against 5% a few years
ago. The importance of Europe as commercial partner is very variable from
one MEDA country to another, in addition to being asymmetrical (great
commercial dependence of the MEDA region which represents an outlet of
less importance for the EU). The EU is thus a paramount commercial partner
for the Maghreb, while it weighs for only 3% of exports of Jordan. Intra‐
MEDA trade remains weak (5% of total trade in MEDA).
As regards FDI, the same asymmetry may be observed: if Europeans remain
the principal investors in the region, the proportion of European FDI
invested in the Mediterranean neighbourhood is very small compared to
that of the American flows in Mexico, or Japan in its Asian vicinity. The most
recent set of complete statistical series made available by the European
Commission (European Union Foreign Direct Investment Yearbook 2007)
show for example that the investments of EU Member States out of the
Union represented in 2005 less than one third of the total FDI emitted by the
Member States this year (172 billion euros on a total of 600 billion, that is
28% only). Among the receiving regions, Canada‐USA, Japan and EFTA
(Swiss, Norway, Iceland etc), received 72 of this 172 billion euros (42%). The
MEDA region came far behind: behind Asia, behind Latin America, behind
Central and Eastern Europe, with a share which culminates in 3%.
The first figures available for 2006 however show a considerable increase in
the outward FDI invested out of the EU, which would have reached 260,2
billion euros (+11% compared to 2005). MEDA share one in this total should

27

increase, insofar as Turkey would have collected alone nearly 4% of this
extra‐EU FDI, that is to say 10.5 billion EUR (Eurostat, EU Foreign Direct
Investment in 2006, April 2008).
Figure 10. Distribution of European FDI outside the EU, by block of destination (in
% of total extra‐EU FDI, European Union Direct Foreign Investment Yearbook
2007)
Region of destination 2001 2002 2003 2004 2005
Total Emerging: 34% 29% 26% 45% 36%
Incl. South‐East Asia 21% 14% 11% 19% 15%
Incl. Latin America 10% 8% 4% 14% 4%
Incl. MEDA 1% 3% 3% 3% 3%
Incl. Eastern Europe‐
Russia
2% 4% 8% 8% 13%
Others non‐EU6 66% 71% 74% 55% 64%

The development of trade and the progressive acceleration of European FDI
flows towards MEDA therefore appear insufficient to ensure the economic
takeoff of the MEDA countries. Among the external funding available,
migrants’ remittances, traditional development aid, or funds invested in the
private sector by the development banks (EIB‐FEMIP, World Bank‐IFC, etc.)
can be effective, but it is a FDI boom which appears necessary. Foreign direct
investment is a powerful vector of economic integration and sustainable
structural change.
Where will this additional investment effort come from? With the fresh
impulse brought by the French initiative of the Union for the Mediterranean,
the time of the assessment came for the Barcelona process: is it enough to
stick to a deepening of the economic relations between Europe and its
Mediterranean vicinity? Is it not necessary to integrate in the equation the
increasing interest expressed by another neighbour, that of the Gulf, for the
Mediterranean?

6 Others non‐EU: mainly EFTA, USA, Canada, Japan. The European Commission
makes a difference between these developed markets which get the most of external
EU FDI and the “emerging markets” which receive the remainder (South East Asia,
Latin America, Russia, MEDA and Eastern Europe).

28
Presence of the Gulf in the Mediterranean: in search of
economic rents or healthy contribution in new blood?
A great geographical, cultural and linguistic proximity forced North Africa,
Europe and the Middle East to weave a complex fabric of relations. Pending
the completion of physical infrastructure which will further strengthen this
proximity (power grids, telecommunications, pipelines, trans‐Maghreb
motorway, projects of a bridge between Egypt and Saudi Arabia and of a
tunnel under Gibraltar), and the advent of a great EuroMena free trade area
(Euromed free trade zone envisaged by the Barcelona process for 2010,
Agadir Agreement for intra‐MEDA trade, EU‐GCC Agreement of co‐
operation of 1988, Customs Union, Monetary Union and future Common
Market of the Gulf), foreign direct investments constitute a strong means to
bind these 3 blocks durably, while fostering the material convergence of
their economic interests.
Gulf and Europe dominate foreign investment flows in the
Mediterranean
Investors from the Gulf (GCC or the broader block ʺGulf‐MENAʺ with
Mauritania, Libya, Sudan, Yemen, Iran, Iraq, Afghanistan and Pakistan) had
surpassed Europe in 2006 as the main issuers of FDI into the MEDA region
(cf. Figure 5).
With the surge of European investments registered in 2007, and the net
decline in North American projects, the Gulf and Europe now seem to be the
2 pillars of foreign investment in the Mediterranean, respectively accounting
for 34 and 40% of the amounts announced in 2007 (18% of 2007 projects for
the Gulf and 47% for Europe). Over the 5 last years, the Gulf cumulates 30%
of the total of announced amounts, against 37% for Europe. These two
regions weigh thus together 67% of the total in announced amounts, and
66% of the number of projects.

29

Figure 11. Relative contributions of the main FDI‐emitting regions in MEDA
(% of annual flows, ANIMA‐MIPO 2003‐07)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2003 2004 2005 2006 2007
Asia‐Oceania
MEDA‐10
USA/Canada
Gulf & other
MENA
UE27 + EFTA

Competing or complementary investment strategies?
A certain geographical complementarity
Figure 12 shows that the principal FDI‐issuing regions in MEDA have
distinct preferences. These strong affinities are initially the product of
geography; the most significant flows being established between the closest
blocks (Europe‐Maghreb or Europe‐Turkey, Gulf‐Machrek). But physical
geography can be overcome or reinforced by cultural or historical affinities:
privileged business connections of the family and patrimonial capitalism of
the Gulf with Jordan, Lebanon, Syria or Egypt, intimate relations between
the Californian Silicon Valley and the Israeli Jordan Valley.
The complementarity of the principal investments flows is striking:
Europe invests especially in Turkey, in the Maghreb and in Egypt,
the Gulf mainly in Machrek,
the United States concentrates on Israel, and Canada on the Maghreb
and Egypt,
investors from Asia and other emerging economies (Russia, South
Africa, etc.) seize any opportunities in Machrek (Egypt and Syria), in
Turkey, and in Morocco.

30
Another phenomenon ought to be highlighted: the regular progression in
the number of intra‐MEDA FDI projects, with cumulated flows which
approach 10 billion euros over 5 years (2 billion euros in 2006, 2.5 in 2006
and more than 4 in 2007), for a total of 163 projects, including 55 for 2007
alone. The most significant flows are by far those from Egypt towards
Algeria (and also Turkey), from Jordan to Egypt, and from Lebanon to
Jordan and Egypt.
Figure 12. Map of the main FDI flows cumulated over 5 years, by region of origin
and destination (ANIMA‐MIPO, 2003‐07)
Source: MIPO
2003 to 2007
MAGHREB
€ 17,8 bn
OTHER MEDA*
€2,4bn
MACHREQ
€ 23,1
bn
€ 5,1
bn
€ 30 bn
€ 37,8
bn
€ 27,3bn
€ 10,3 bn
€ 5,2
bn
Europe
€ 71 bn
Asia &
emerging c.
€ 17,9 bn
Gulf &
MENA
€ 59,4
bn
€ 9,6 bn
€ 4,2bn
USA/Canada
€ 36,6 bn
€ 12
bn
Other MEDA*
=Turkey, Israel,
Cyprus, Malta

Individual preferences of Gulf investors
The United Arab Emirates are, among the GCC members, the main investors
in MEDA: 30.6 billion euros since 2003, that is, more than half of the GCC
total, and 183 projects. Saudi Arabia and Kuwait come second with, for each
of them, flows slightly above 11 billion and more than 100 projects. Bahrain
and Qatar are a notch below (2.3 and 2.9 billion euros and about 20 projects
each), while the Sultanate of Oman does not appear in the table below for
lack of projects.
As regards amounts invested, Egypt is the preferred destination of the UAE,
Kuwait and Qatar‐based investors, and the second most important

31

destination for Saudi companies. The latter indeed prefer Turkey, where
Saudi investors announced 8 significant projects in 2007: massive
investments by Oger in telecom and banking, acquisition of banks and food‐
processing industries. Investors from Bahrain are more interested in Jordan
and Morocco (Batelco owns Umniah Telecom in Jordan, real estate and
tourism projects by Gulf Finance House in these 2 countries).
Figure 13. FDI from the Gulf by country of origin and destination (ANIMA‐MIPO
2003‐07, ʺFlowʺ in million of euros and ʺNbʺ, number of projects)
Origin Bahrain Kuwait Qatar Saudi A. UAE Total
Destination Nb. Flow Nb. Flow Nb. Flow Nb. Flow Nb. Flow Nb. Flow
A. Palestin. 2 288 3 89 2 N.R 7 377
Algeria 1 73 6 2 081 13 425 10 1 132 31 3 711
Egypt 4 229 23 2 890 4 1 067 35 2 360 44 16 548 111 23 093
Jordan 10 1 497 18 1 359 4 710 12 1 211 35 1 588 80 6 365
Lebanon 1 N.R 13 478 10 493 19 1 040 43 2 010
Libya 1 N.R 1 55 1 N.R 5 138 8 192
Morocco 4 484 9 201 1 54 14 425 34 2 110 62 3 275
Syria 3 87 28 2 245 6 669 15 1 220 12 1 056 64 5 277
Tunisia 7 295 1 403 6 61 12 3 783 26 4 543
Turkey 7 1 116 1 N.R 12 4 983 10 3 277 30 9 375
Total 24 2 369 114 11 009 18 2 903 120 11 266 183 30 672 462 58 219

Greenfield projects often oversized
The projects by Gulf‐based investors in the Mediterranean are characterized
by their estimated budgets: the average budget is higher than 268 million
euros, against 70 for European projects. The average direct job creation per
project is of 171, against 95 for a European project, considering that the Gulf
and Europe are the principal foreign sources of job creation in the region.
The sustainability of these jobs is more difficult to judge, but it can be
assumed that part of the jobs created by Gulf investments might last only the
time of the realization of the facilities (real estate projects), while European
projects usually generate more sustainable jobs in services or industry.
The majority of the detected Gulf projects are launched by large private or
public holdings, but one can suppose that the rate of detection of projects is
weaker for the Gulf than for Europe, insofar as the Gulf business
environment is less conducive to transparency and publicity. A greater
number of the medium and small projects might therefore go unnoticed by

32
our MIPO observatory. Gulf SMEs are consequently seriously under‐
represented (less than 5% of detected Gulf projects over 2003‐07).
Gulf and Europe‐based investors are rather similar in the preference given to
projects known as ʺgreenfieldʺ (creation of new facilities, 35% of the number
of European projects over 5 years, and 40% of those of the Gulf), even if the
budgets differ: greenfield make only 20% of the amounts invested by Europe
in 5 years, and 53% for the Gulf. External growth (acquisition, including
privatisation), accounts for respectively 27 and 23% of the projects of Europe
and the Gulf, but represents more than 60% of the total of European flows
against less than 30% for the Gulf. These figures mean that investors from
the Gulf are not afraid to launch out in greenfield projects with significant
budgets, whereas European investors prefer to acquire existing companies
or units, including SMEs, to develop them.
Limited positive spillovers
One way of measuring the quality of an FDI project is to consider the
importance of direct and indirect local spillovers, in particular the multiplier
effect of the investment, i.e. the insertion of the project in the local chain of
value (customers, suppliers, subcontractors).
Concerning Gulf investments into MEDA, one can regret the very clear
preponderance of real estate, tourism and American‐style shopping malls
projects (53% of the total amounts, and 48% of the number of projects over
2003‐2007). Energy, heavy chemistry industry, cement and metallurgy
account for 13% of the total, while telecom and bank represent respectively
15%. This sectoral mix is the reflection of the model of unbalanced
development of the economies of the Gulf, in which consumer goods
industries and light industries are not very present.
The impact of the investments coming from the Gulf on the sectoral
distribution of the FDI projects in the MEDA region is very marked. The
correspondence between the favoured sectors of investments of Gulf‐based
companies and the first 10 sectors in value in 2007 (see Figure 8) is indeed
almost perfect.

33

Conclusion
About thirty private or public holdings are the source of the bulk of Gulf FDI
in the Mediterranean.
Saudi Arabia Kuwait Bahrain UAE Qatar
Savola
Bin Laden
National
Commercial
Bank (Alahli)
Al Rajhi
Dallah al
Baraka
Nesco
Oger
KIPCO
NBK
Global
Investment
House
M.A.
Kharafi
Zain
National
Industries
Group
(Noor)
Al Aqeelah
Ahli United
Bank
Gulf
Finance
House
Batelco
Aramex
Abraaj Capital
Damac
Dubai Holding
DP World
Majid al Futtaim
Emaar
Etisalat
Dubal
Gulf Finance House
Diar
Qtel

Some already are global brands, others aspire to it.
The champions of the Gulf have changed a great deal. They have attracted
CEOs and top executives from the greatest multinational companies (half of
the top management of Dubai Ports World is Anglo‐Saxon for example) and
their personnel is trained with the most modern management sciences. Their
investment strategies have been rationalized, and are now less related to
prestige and more to the profitability and long term expansion strategies.
The complementarity of European and Gulf investment flows in the
Southern Mediterranean area benefits all MEDA countries. Investments
coming from the Gulf usefully come to compensate for the lack of
enthusiasm of European companies, and can sometimes create beneficial
emulation.
The considerable means that the companies of the Gulf choose to invest in
sectors of rent however represent a risk which should not be
underestimated: the absorption capacity of the MEDA countries is limited,
and the many crowding‐out effects which affect many local operators feed
what could become resentment towards foreign interests. The rapid
urbanisation and the establishment of great polluting industrial facilities on
the Mediterranean littoral involve significant environmental risks.

34
Improving the quality of FDI is essential, and MEDA regulators are
responsible in the first place for defining limits and enforcing them. The
governments can maximize the local impacts of FDI by requiring
counterparts, in terms of local content, of sustainability, in return for the
preferential treatment which is often granted to Gulf champions (land at low
prices, etc). The unbalanced economic development which is taking place
also has its hidden costs, especially in those very fragile human
communities.
If there were a means of combining the financial resources of the Gulf and
European technology and know‐how, it would seem possible to meet the
social needs of MEDA countries in a mutually beneficial, and advantageous
triangular relationship.
Figure 14. The 20 most important projects of the Gulf in the MEDA region in 2007
(ANIMA‐MIPO, total budgets in million euros).
(More consultable projects on line on www.anima.coop )
1. Tunisia. Dubai Holding / Sama Dubai (UAE) laid foundation stone of Century
City and Mediterranean Gate mega project in Tunisʹ southern lake area, worth 14
billion USD over 15 years (€10 231 mln).
2. Egypt. Damac (UAE) to invest 30 billion EGP in a project in New Cairo, the first
phase being called Hyde Park (€4 072 mln).
3. Algeria. Emaar Properties (UAE) to invest in an ambitious tourism project in
Colonel Abbes, west of Algiers, to be developed on an area of 109 hectares
(€2 923 mln).
4. Algeria. Mubadala Development + Dubal (UAE). A JV formed by Moubadala
Development and Dubal to own 70% in a 5 billion USD aluminium smelter
project, while Sonatrach‐Sonelgaz will hold the rest (€2 558 mln).
5. Egypt. Majid Al Futtaim (UAE) plans to invest 12.5 billion LE over the next 5
years for 12 new outlets for retail and commodity distribution (€1 697 mln).
6. Egypt. Abraaj Capital (UAE). The Dubai‐based investment company takes
control of Egyptian Fertilisers Company for 1.4 billion USD (€1 023 mln).
7. Egypt. Barwa Real Estate (Qatar) purchased 1,980 feddans of land for 6.11 billion
EGP (€829 mln).
8. Egypt. Dubai Holding / Dubai Financial Group (UAE). The financial arm of
Dubai Holding to acquire for 1.1 billion USD a 25% stake in EFG‐Hermes (€804
mln).
9. Turkey. National Commercial Bank (Alahli) (Saudi Arabia) is to pay just over
1bn USD to acquire a 60% in Türkiye Finans Katılım Bankasi, a leading Islamic‐
style bank (€731 mln).

35

10. Egypt. Emaar Properties (UAE) to launch a new project, the 1 billion USD New
Cairo City residential community (€731 mln).
11. Egypt. National Bank of Kuwait (NBK) (Kuwait). After a successful bid for a
51% stake in Al Watany Bank, NBK eventually acquired a total 93.77% stake for
extra 2.5 bn EGP (€689 mln).
12. Egypt. Etisalat (UAE). The 66% owned Egyptian subsidiary of UAE’s Etisalat to
spend 1.4 billion USD over 3 years in developing its telecom infrastructure (€675
mln).
13. Egypt. Damac (UAE) paid 4.74 billion EGP for 1,500 feddans of land for future
real estate projects in Egypt (€643 mln).
14. Turkey. Dubai Holding / Sama Dubai (UAE). A branch of Dubai Holding buys
land In Istanbul and announces real estate projects totalling 5bn USD (€621 mln).
15. Morocco. Al Maabar / Reem (UAE). The Emirati consortium to launch Reem
Morocco, a local subsidiary in charge of its 6.5 billion MAD Atlas Garden project
in Marrakech (€586 mln).
16. Turkey. Oger / Turk Telecom‐Avea (Saudi Arabia). Mobile operator Avea,
controlled by Ogerʹs Turk Telekom, to invest heavily in its infrastructures thanks
to a 1.6 billion USD dollar syndicated loan (5€21 mln).
17. Egypt. Emaar Properties (UAE). The Emiratesʹ real estate developer to launch a
new project, a 700 million USD mix use project on the Cairo‐Alexandria Desert
Road (€512 mln).
18. Egypt. DP World (UAE) acquired a 90 % stake in Egyptian Container Handling
which owns 90% in Sokhna Port for 670 million USD (€490 mln).
19. Turkey. Abraaj Capital / Almond Holding (UAE). Almond Holding AS, a
subsidiary of Abraaj Capital Ltd, to acquire a 39.4% stake in Acibadem Saglik
Hizmetleri and Ticaret for 600 mln USD (€438 mln).
20. Syria. Al Aqeelah (Kuwait). Building of a low income housing area near
Damascus and development in Sayedah and Zeinab for 400 mln EUR (€400 mln).

3. Sectoral analysis of FDI into
MEDA
Before analyzing the projects announced in 2007, it is interesting to put in
perspective the data of this year within the frame of the 2003‐07 period.
Indeed since 2003, services to companies, industries of intermediate goods
and equipment goods are the main motors of the growing FDI flows
towards MEDA.
Boom of the equipment and processing industries
Whereas the region remains characterised by a certain industrial
underdevelopment, foreign investors are more and more interested in the
productive potential of Mediterranean economies which can count on a
young and abundant workforce, and cheap sources of energy.
The remarkable boom in FDI over the 2003‐2007 period is partly explained
by the multiplication of projects in the processing industries (energy‐
consuming industries such as hydrocarbon products, building materials,
metallurgy) and a qualitative improvement in the manufacturing projects.
Many companies, European in particular, see the interest for them to
increase the share entrusted to their Mediterranean neighbours in their value
chain.
Intermediate goods industries are the sectoral group which has experienced
the strongest progression over the period, as much in value (FDI flows), as
in the number of projects registered. FDI in consumer goods (furnishing and
houseware, textile, agro‐business) did not truly take off.
The attractiveness of services to businesses was confirmed in 2007, with a
total of 236 projects (212 in 2006) and announced amounts close to 15 billion
euros.
Personal and domestic services attract projects mainly in the distribution
and tourism sectors (also some investments in the private health sector and
media/entertainment, in Turkey above all).

37

Figure 15. FDI flows per sectoral subset over 2003‐07 (€m, ANIMA‐MIPO)
Services
to businesses
Intermediate
goods
Capital
goods
Personal
servicesConsumer
goods
0
5 000
10 000
15 000
20 000
25 000
30 000
2003 2004 2005 2006 2007
Services
to businesses
Intermediate
goods
Capital
goods
Personal
services
Consumer
goods

Services to businesses: telecom services, consulting and services to companies, data‐
processing‐software, bank‐insurance.
Personal and Domestic: tourism‐catering, health‐education‐others, trade‐distribution
Capital goods: automotive, construction‐public works, electric‐electronic hardware,
mechanics and machinery, aeronautical, naval & railway equipment
Intermediate goods: glass‐cement‐minerals‐wood‐paper, chemicals‐plastics‐fertilisers,
metallurgy, electronic components, hydrocarbon energy‐derivatives.
Consumer goods: agro‐business, furnishing‐houseware, electronic ware, drugs‐
cosmetics, textile‐clothing‐luxury
2007 sectoral prize list
The energy sector would come first without the strong appetite of foreign
investors for real estate and infrastructures projects. Whereas banking and
insurance dominated the landscape of foreign investment in MEDA in 2006,
it is the energy sector which experienced the strongest progression in 2007:
+80% in value!

38
Figure 16. Ranking per sector (MIPO 2007, number of projects and amounts in
€millions)
Sectors Projects
2007
% Total
2007
Flow
2007
% Total
2007
1 Construction, transport, utilities 127 15,2% 14 677 22,6%
2 Energy 86 10,3% 12 605 19,4%
3 Bank, insurance, other financial services 115 13,8% 10 958 16,8%
4 Glass, cement, minerals, wood, paper 63 7,6% 9 925 15,3%
5 Telecom & internet operators 25 3,0% 3 229 5,0%
6 Metallurgy & recycling of metals 29 3,5% 2 256 3,5%
7 Chemicals, plastics, fertilizers 30 3,6% 2 206 3,4%
8 Tourism, catering 49 5,9% 1 457 2,2%
9 Distribution 37 4,4% 1 274 2,0%
10 Agro‐business 28 3,4% 1 068 1,6%
11 Other or not specified 13 1,6% 909 1,4%
12 Car manufacturers or suppliers 29 3,5% 823 1,3%
13 Electric, electronic & medical hardware 34 4,1% 672 1,0%
14 Aeronautics, naval, rail equip. 10 1,2% 667 1,0%
15 Drugs 18 2,2% 544 0,8%
16 Electronic components 11 1,3% 486 0,7%
17 Data processing & software 49 5,9% 439 0,7%
18 Mechanics and machinery 15 1,8% 356 0,5%
19 Textile, clothing, luxury 8 1,0% 194 0,3%
20 Consulting and services to companies 47 5,6% 167 0,3%
21 Electronic ware 7 0,8% 87 0,1%
22 Biotechnologies 1 0,1% 69 0,1%
23 Furnishing and houseware 3 0,4% 0 0,0%
Total 2007 834 100,0% 65 067 100,0%

Reinforced concentration of FDI flows on some sectors
This year still, foreign investment in the region concentrated on a small
number of sectors, in services as in industry. The sectoral analysis of the data
provided by the MIPO observatory shows that this concentration was even
accentuated: the first five sectors in value (flow) account for 76% of total
announced amounts in 2007 for only 53% of the total number of projects
(respectively 65% and 51% in 2006).

39

Top 5 in value in 2007
Whereas the composition of the top 5 has been stable since 2005, cement
came to propel the sector ‘glass‐cement‐mineral‐wood‐paper’. In 2007,
foreign investment in this sector rose to historical heights with as
emblematic operation, the purchase by Lafarge of Egypt’s Orascom Cement.
This sector weighed nearly 10 billion euros in FDI inflows in 2007, against 3
the previous year.
Figure 17. Strong concentration of FDI flows on few sectors (MIPO 2007)
Perimeter
(sectors)
Aggregate 2007
(mln€)
% of total
2007
Aggregate nb.
projects 2007
% of total 2007
Top 5   51 394   79%   416   50%
Top 12   61 387   94%   631   76%
Top 5 (in the order): Public works‐real estate‐transport‐utilities, Energy, Bank‐insurance‐others
financial services, Glass‐cement‐mineral‐wood‐paper, Telecom & Internet Operators
Top 12: Idem + Metallurgy and recycling, Chemicals‐plastics‐fertilisers, Tourism‐catering,
Distribution, Agro‐business, Others (Personal services), Car manufacturers or suppliers
Sectoral distribution of 2003-07 FDI projects
The stock of announcements of FDI projects detected by ANIMA over the
2003‐07 period is made up essentially of 4 sectors, each one weighing
approximately 15% of the total amounts, plus 2 others weighing
approximately 8‐9%.
Figure 18. Total FDI by sector (ANIMA‐MIPO, 2003‐2007, €m)
Bank &
insurance
15%
Telcom &
internet
14%
Public works‐
real estate
14%
Cement,
minerals
8%
Tourism,
catering
9%
Others
25%
Energy
15%

40
The 17 other sectors scrutinised by MIPO also make 25% of the total
announced FDI inflows.
Relative constancy of the outperforming sectors
The most attractive sectors experienced spectacular progression, which is
rather welcome in a context of upgrade of the financial and physical
infrastructures and industrial clusters in the region.
Figure 19. Four rising stars in the Mediterranean
0 4 000 8 000 12 000 16 000
Glass, cement, minerals,
wood, paper
Bank & insurance
Energy
Public works, real estate,
transport, utilities
2003 2004 2005 2006 2007

Difficult digestion of the heaviest real estate investments
The importance of foreign investment in the construction‐public works and
real estate sectors can however cause interrogations regarding the
absorption capacity of MEDA countries.
The FDI boom in the construction‐public works sector would be healthier if
it came to renew and develop an often dilapidated and insufficient housing
stock. The promoters, often foreigners, seem to prefer increasing their offer
on the high end segment, which frequently targets foreign buyers. Part of
the population and professionals of the sector can then find itself suffering
from crowding out effects (availability of land, inflation of the prices and
restricted access to building materials and construction machinery).

41

The correlated boom in foreign and national investment in the building
materials sector is therefore more than welcome.
Banking on the Mediterranean
The penetration, still strong in 2007 after an exceptional year in 2006, of
foreign players in the banking and insurance sector is good news for all
Mediterranean economies. The many barriers which restrain the access to
funding are indeed often regarded as a major obstacle to general economic
development. The arrival of these new players contributes to increasing
competition, strengthening the branch networks and accelerating the
launching of new banking and insurance products. These FDI projects can
improve the conditions of development of a denser fabric of SMEs, after
decades of monopoly of the large public companies for access to the loans
allocated by the State Banks.
Tourism and telecoms await the next wave of FDI
New tourism projects remain abundant in the Mediterranean. However,
after the many mega‐projects of 2006, investors seem to have calmed down
and be launching more modest programmes.
Whereas in 2005 the estimated budget of the most significant tourism project
reached 2 billion euros (Dubai International Properties in Morocco), the
UAE‐based company Damac had revealed in 2006 a project on the Red Sea
envisaging an investment of approximately 13 billion euros over 10 years
(Gamsha Bay). In 2007, the most significant project detected by MIPO, that of
Spanish Urbagolf in Morocco, involves a mere 700 million euros (in Souiria
Laqdima, 30 km away from Safi).
Many mega‐projects announced the previous years will only start (except in
the event of a pure and simple abandonment) in the months and years to
come. The ANIMA‐MIPO observatory only takes into account, in its
analysis, annualized amounts of FDI, i.e. the forecast total budget of the
project, divided by the number of years (envisaged) of implementation.
As for telecoms, after 2 years of strong FDI inflows (projects worth about 10
billion euros announced each year in 2005 and 2006), the sector is going
through quieter times.

42
This might be only temporary, given the number of operations of
privatisation planned for 2008 and of the new telecom licences which will be
granted this same year.
Figure 20. Greater volatility in tourism and telecom
0 2 000 4 000 6 000 8 000 10 000 12 000
Telecom &
internet operators
Tourism, catering
2003 2004 2005 2006 2007

A very variable entry ticket depending on the sector
The invested amount is not always available7. This amount varied in 2007
from 4 million euros for a project in services to businesses to more than 300
million in energy, with 50 million for a tourism project. The average amount
(all sectors) is 129 million euros in 2007, against 168 in 2006. These figures
reflect a significant fall in the number of very large projects, while at the
same time the total number of projects is in progression from one year to

7  The forecast invested amount is available in a strict sense only in 56% of the cases
over the period 2003‐07. It is announced by the investors themselves, split with each
investor according to its relative participation and only for the foreign share in case of
partnership or joint‐venture. This amount must be considered as an approximation of
the amount actually invested once the operation is carried out. The average entry
ticket as calculated in figure 21 is obtained by dividing the total of the global
estimated budgets by the number of detected projects.

43

another. The 2003‐2007 average entry ticket (113 million EUR) is certainly
over‐estimated, given the difficulty of detecting the small projects.
Figure 21. Average investment per project depending on the sector (ANIMA‐MIPO
2003‐07, €mln)
Sectors 2005 2006 2007 2003‐07
Energy 108 182 334 184
Public works, real estate, transport, utilities 154 325 262 236
Metallurgy & recycling of metals 38 29 163 104
Glass, cement, minerals, wood, paper 80 90 163 112
Telecom & internet operators 588 352 162 341
Bank, insurance, other financial services 73 123 100 93
Chemicals, plastics, fertilizers 80 80 87 68
Other or not specified 14 37 79 40
Distribution 46 42 74 64
Biotechnologies 0 18 69 15
Aeronautical, naval & railway equipment 6 412 67 119
Electronic components 181 362 52 170
Tourism, catering 128 420 48 191
Car manufacturers or suppliers 28 25 42 26
Agro‐food business 16 111 41 41
Drugs 10 40 31 24
Textile, clothing, luxury 14 11 24 12
Mechanics and machinery 1 301 24 92
Electric, electronic & medical hardware 28 26 21 23
Electronic ware 35 0 15 10
Data processing & software 23 119 9 43
Consulting and services to companies 6 1 4 3
Furnishing and houseware 16 0 0 5
Total 90 168 129 113

44
FDI, driving force for employment
Even if the data ʺemployment created by the operationʺ is not always
available8, it is interesting to outline a ranking of the most creative sectors of
employment. Total direct job creation in 2007 is not as important as in 2006,
which was particularly rich in advertisements of construction mega‐projects
(80,000 jobs in 2007 against 130,000 in 2006).
Figure 22. Direct job creation per sector (MIPO 2007)
Sector Nb. projects 2007 Jobs created
Public works, real estate, transport, utilities 127 25 550
Car manufacturers or suppliers 29 17 710
Tourism, catering 49 14 426
Glass, cement, minerals, wood, paper 63 4 020
Consulting and services to companies 47 3 362
Distribution 37 3 200
Metallurgy & recycling of metals 29 2 030
Electric, electronic & medical hardware 34 1 816
Chemicals, plastics, fertilizers 30 1 490
Data processing & software 49 1 410
Bank, insurance, other financial services 115 1 365
Electronic components 11 625
Drugs 18 590
Aeronautical, naval & railway equipment 10 570
Telecom & internet operators 25 500
Agro‐business 28 307
Energy 86 200
Textile, clothing, luxury 8 100
Mechanics and machinery 15 40
Total 834 79 311


8 This data is only specified in 20% of the cases (MIPO 2003‐07). However, while
taking account of those projects creating little employment (subsidiary company or
representative office, acquisition of a holding, privatisation), this figure goes up to
50%. Four sectors do not appear in the table for lack of data: Biotechnologies,
Furnishing & houseware, Electronic ware, Other or not specified.

45

The aggregation of the ʺemploymentʺ data over 2003‐07 makes it possible to
constitute a significant database from which to draw some conclusions: the
sectors which create most jobs should receive due attention from the
governments when defining targets and priority sectors.
Figure 23. Average number of jobs created per project, according to the sectors
(ANIMA‐MIPO 2003‐ 07)
Sector Average job creation
1 Tourism, catering 448
2 Car manufacturers or suppliers 259
3 Textile, clothing, luxury 161
4 Electronic components 153
5 Public works, real estate, transport, utilities 128
6 Metallurgy & recycling of metals 127
7 Glass, cement, minerals, wood, paper 100
8 Consulting and services to companies 83
9 Telecom & internet operators 80
10 Aeronautical, naval & railway equipment 76
11 Electronic ware 75
12 Distribution 73
13 Agro‐business 71
14 Furnishing and houseware 67
15 Chemicals, plastics, fertilizers 47
16 Electric, electronic & medical hardware 32
17 Data processing & software 21
18 Biotechnologies 16
19 Drugs 15
20 Energy 14
21 Mechanics and machinery 14
22 Bank, insurance, other financial services 13
23 Other or not specified 1

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