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

MED-AllianceInvestintheMediterranean
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
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 brings together 70 or so Investment Promotion Agencies (IPA),
international networks and players involved in the territorial development
of the Mediterranean region.
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 978‐2‐915719‐31‐4 EAN 9782915719314
© ANIMA‐Invest in Med 2009. No part of this publication may be
reproduced without express authorisation. All rights reserved
Cover photograph: Fotolia.com
Authors
 Pierre Henry, Samir Abdelkrim (in charge of the observatory, the
preparation and the writing of this report), assisted by Bénédict de Saint‐
Laurent (editing, global review), Emmanuel Noutary (positioning), Loïc
Pendeliau, Xiugui Zhang, Adeline Joanny and Catherine Pettenati for the
data collection. All belong to the ANIMA team.
 Warm thanks are extended to the business intelligence team of the
French Agency for International Investments (AFII) which assisted ANIMA
in the detection of certain projects.
 The various Investment Promotion Agencies (IPA) of the Med region
and the French Economic Missions abroad for the supply of certain
information.
 Neither ANIMA nor any of the partners involved may be held
responsible for data supplied. Any error or lack of precision should be
signalled to info@anima.coop. ANIMA is interested in your comments,
complementary information and updates. Many thanks.

Foreign direct investments in the Med region in 2008
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Acronyms
 AFII: Invest in France Agency
 ANIMA: Euro‐Mediterranean network of players for economic
development
 EU: European Union (often referred to as EU‐15, or former members, E‐
U10, or new members and EU‐27)
 FDI: Foreign Direct Investment
 GDP: Gross Domestic Product
 GNP: Gross National Product
 ICT: Information and Communication Technologies
 IPA: Investment Promotion Agency
 Med‐13: Group of 13 neighbour countries of Europe, 9 Mediterranean
Partners Countries of the EU (Algeria, Egypt, Israel, Jordan, Lebanon,
Morocco, Palestinian Authority, Syria, Tunisia), one country observer
(Libya), 2 former MEDA countries (Malta and Cyprus) who joined the
Union in May 2004, and one country to become a member, Turkey.
 Med‐10: the same without Libya, Malta and Cyprus (with Turkey)
 MENA: Middle East ‐ North Africa = Med‐10 + Mauritania, Libya, Sudan,
countries of the GCC + Yemen, Iran, Iraq, Afghanistan, Pakistan (at times
variable geometry)
 MIPO: Mediterranean Investment Project Observatory
 MPCs: Mediterranean Partners Country of the EU
 R&D: Research and Development
 SCSC: Software and Computing Services Company
 UNCTAD: United Nations Conference on Trade and Development
 WIR: World Investment Report (UNCTAD report on world investment)
 WTO: World Trade Organisation


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List of contents
Preface: crisis, the opportune moment ................................................. 7
A global contagion ........................................................................................... 7
FDI… can do better! ......................................................................................... 8
Positioning: the Mediterranean, an anti‐crisis remedy for Europe . 9
European enterprise seeks low cost growth buffers .................................... 9
In the face of recession, the Med region trump cards .................................. 10
To make the windfall last, need for public authority support ................... 15
1. Synopsis: investment, 1st victim of the crisis ................................. 17
After a record year in 2007, FDI plunges in 2008 ......................................... 17
Net decline in 2008 ..................................................................................................... 18
Regional dynamics: Turkey takes the lead, Machrek and Maghreb slip .. 21
Maghreb: the hidden costs of the lack of economic integration ......................... 21
Machrek: Egypt marks time, Lebanon picks itself up .......................................... 23
Origin of the FDI flows: Europe takes the lead again.................................. 25
Investments from the Gulf States: the swansong? ................................................ 26
Euromed integration continues ................................................................................ 27
Profile of foreign investors in the Med region .............................................. 29
Types of business: preponderance of multinationals ........................................... 29
Investors from Europe, the Gulf States and North America: sectoral
competition and complementarity .......................................................................... 29
Methods of installation: grassroots creations and acquisitions of existing
assets run 50/50 ........................................................................................................... 30
Sectors: BTP and energy still in the lead, but more modest projects ......... 30
Target investments with strong local spin‐offs ............................................ 34
Honours list for the largest projects ............................................................... 35
2. Sectoral analysis of FDI in the Med region ..................................... 37
Sectoral panorama 2008 ............................................................................................. 37
A pronounced imbalance in the sectoral distribution of projects .............. 38
Sectoral distribution of the stock of FDI 2003‐2008 ............................................... 39
Jobs creation under the sectoral microscope ................................................ 39
Focus: 5 key sectors in the face of the crisis .................................................. 41
Transport and logistics .............................................................................................. 41

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Software services, engineering & other business services .................................. 44
Mechanical industries ............................................................................................... 47
Textile ........................................................................................................................... 51
Electronics industry ................................................................................................... 53
3. Country profiles‐2008 .......................................................................... 57
Algeria: new challenges in sight .............................................................................. 57
Tunisia: priority to industry ..................................................................................... 62
Morocco: facing up to the European slowdown ................................................... 57
Egypt: priority to endogenous growth ................................................................... 64
Libya: rebirth continues ............................................................................................ 64
Israel: investments in R&D to prepare for the post‐crisis ................................... 68
Syria: return to grace ................................................................................................. 70
Jordan: consolidate strengths ................................................................................... 71
Turkey: Europe’s workshop enters a zone of turbulence.................................... 71
Lebanon: business is picking up .............................................................................. 74
Palestinian Authority: no giving in! ....................................................................... 77
Cyprus: full steam ahead! ......................................................................................... 78
Malta: high tech propulsion ..................................................................................... 79
4. Annexes .................................................................................................. 80
Annex 1. List of detected projects in 2008 (ANIMA‐MIPO) ....................... 80
Annex 2. Direct job creation announced, by sector (ANIMA‐MIPO
2008) 153
Annex 3. Sectoral distribution of FDI projects in 2008 (foreign share in
gross budgets as announced & number of projects, ANIMA‐MIPO) ........ 154
Annex 4. Origin‐destination cross table 2003‐08 (foreign share in gross
budgets as announced, ANIMA‐MIPO) ........................................................ 155
Annex 5. Methodology .................................................................................... 156
Approach ..................................................................................................................... 156
Selection criteria ......................................................................................................... 157
Recent methodological changes .............................................................................. 158
Sectoral nomenclature ............................................................................................... 159

Preface: crisis, the opportune
moment
By Bénédict de Saint Laurent, general delegate of the ANIMA network
A global contagion
In 2008, the countries to the South and East of the Mediterranean started to
be affected by the world economic and financial crisis, a little later than
elsewhere and with a certain attenuation of its effects. The 13 countries
which border the Mediterranean and which are monitored by ANIMA
(Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Palestinian Authority,
Syria, Tunisia, plus Turkey, Libya, Malta and Cyprus) received a little less
than 40 billion euros of foreign direct investment (FDI) in 2008 (‐35%),
against 61 billion in 2007 and 68 billion in 2006. The number of projects (778
projects) only dropped by 6% ‐ the largest projects (except those in the
energy domain) and investments coming from the Gulf States being the
most affected.
This is a worldwide situation. According to the first UNCTAD estimations,
(the UNCTAD observes the effective flows, whereas ANIMA works on the
announcements from companies), the overall drop in FDI was 22% in 2008
and should further accentuate in 2009. Second round effects are possible,
with the drop in consumption in developed countries, the reduction in
migrant transfers, the drop in crude oil income and more difficult access to
credit.
A good number of projects, particularly in the automobile sector, have
already been scaled down (for example, the participation of Nissan in the
global plant at Tangiers‐Med next to Renault), when they have not purely
and simply been cancelled (for example, in the real estate sector, projects
coming from the Gulf States).
There remain, however, good reasons for hope. The World Bank forecasts
growth of 3.9% in 2009 for the countries of the South and East of the
Mediterranean. Certain of the more autarkic countries, such as Algeria, are
less exposed to the crisis. Cheaper oil and low inflation will benefit other
Med countries. Finally, for European industry, the Mediterranean often
appears as a solution, a possible recourse in terms of market, cost control or


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partnerships. In any event, it is this latter objective that the Invest in Med
programme is attacking.
In certain aspects, the crisis also has a salutary effect. In Greek, κρίσις, the
crisis, means ‘the opportune moment’. A certain speculative bubble is
bursting in the tourism and high‐end real estate sectors. It is now time for
the countries concerned to think of ways of attracting more sustainable and
more socially useful projects.
FDI… can do better!
The South of the Mediterranean largely remains a weak and dominated
economic area. Foreign investment has a vital character, because of the lack
of productive capital and the need for the transfer of know‐how, but it is
often uncontrolled (projects accepted as they are, often gigantic, short term
vision, little appropriation). It creates wealth, but is accompanied by limited
re‐distribution, with insufficient economic multipliers (local spin‐offs, value
chain) and too many polluting projects (real estate, chemicals...). The
Mediterranean economic development model is very often of little
satisfaction (sub‐contracting, mass tourism, junk plants, brain drain …) and
certain ‘new operators’ show little concern for human development…
Too few direct jobs are created by FDI projects (more than 2 million direct
jobs in 6 years according to ANIMA‐MIPO estimates, see figure 17 infra, and
this figure would seem to be dropping). It perhaps corresponds to 3 or 4
times more indirect jobs, when in reality the need is to create 10 times as
many jobs (3 to 4 million jobs a year). It is therefore indispensible to
complete FDI (92% emanating from large companies) with projects proposed
by SMEs, local and foreign. This involves taking an interest in the creation of
a well‐rooted fabric of large, medium and small companies working
together, on an often transnational scale. This is the great industrial
challenge of the Euro‐Mediterranean region, finding an original mode of
economic cooperation which will benefit the two shores of the Mediterranean over
time.

Positioning: the Mediterranean,
an anti-crisis remedy for Europe
By Emmanuel Noutary, director of the Invest in Med programme
European enterprise seeks low cost growth buffers
European businesses are depressed. The financial crisis and the anticipated
reinforcement of the measures of caution from the banks, promise them
fifteen to eighteen difficult months: fewer sources of finance, or greater
difficulties in mobilising it and at the same time, an already perceptible
shrinking of demand. The European Commission has announced a decline
of 1.8% for 2009 over the whole of the European Union (‐1.9% for the Euro
area), and a timid recovery (+0.5%) in 2010. And this is taking account of the
revival plans implemented by the States themselves.
The effects of the financial crisis and the recession it has provoked are not,
however, homogeneous throughout Europe (Figure 1):
 Certain of the countries who recently joined the Union (Romania,
Bulgaria, Poland, Slovenia, Slovakia, Czech Republic, Cyprus and
Malta) and have been bolstered by structural programmes have not
(yet) built their growth on household indebtedness and the support of
public authorities. While they will not escape a decline in investment, as
a result of the banking crisis, their consumption should to a large extent
be maintained and their growth remain positive in 2009.1
 On the contrary, those likely to be most affected are those which have,
in recent years, experienced growth more based upon the real estate
boom and household indebtedness (Latvia, Estonia, Lithuania, Ireland,
Spain, Luxemburg, Hungary and the United Kingdom). Among them,
only Estonia, Luxemburg and Hungary should rediscover significantly
positive growth in 2010.
 Between the two are to be found the majority of main European
suppliers to the Med countries (Germany, Belgium, France, Greece,
Italy, Portugal) as well as the northern European countries and Austria.

1 European Commission (Interim Forecast January 2009).


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All should lose between four and five points in growth between 2008
and 2009, but pick themselves up from 2010. The impact will
nevertheless be heavy on investment, as it will on consumption.
Figure 1. Private consumption growth in Europe (in %)
Main suppliers of Med countries 2008 2009 2010
Germany 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%
Euro Zone 0.5% ‐0.1% 0.3%
UE 27 1% ‐0.4% 0.4%
Source: European Commission (interim forecast, January 2009)
The sectors of consumption which will suffer initially are those segments
traditionally considered as less of a priority by consumers: the whole of the
tourist and leisure industry, catering, clothing, household equipment, high‐
tech and communication products. More generally, a modification of
purchasing behaviour is to be foreseen, with a decrease in the value of the
shopping basket and an orientation towards the discounters.
For European businesses, it is a tricky equation. Faced with the decline in
demand on their markets, they have to think of finding new outlets. At the
same time, the expected drop in profits and the financing difficulties
encountered prevents large investments for exports. At the same time, the
hunt for low prices further accentuates the pressure on profits, obliges
companies to increase competitiveness, and seek cheaper means of
production.
In the face of recession, the Med region trump cards
In this very special context, the countries South of the Mediterranean present
a credible proposal for European businesses: both as solvent growth buffer
and competitive production costs, supported by a banking system that has
rather been spared from the crisis. In Germany, France, Italy or Spain
especially ‐ who each represent up to 30% of the imports of the countries of

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the South – the commercial habits may contribute to an opportune relocation
of businesses towards the Med countries.
Of course, the Mediterranean countries will not be spared a certain
slowdown, accompanied in certain sectors by large job losses. The majority
of the sectors subjected to external demand, the foremost of which being
automobile sub‐contracting and the textile sector will experience air pockets.
Tourism also, very much linked to European demand, is starting to show
signs of a loss of steam. But other sectors continue to progress in exports,
particularly in the externalisation of support functions (computer services,
customer relations management, etc.).
The structural environment of the countries of the region, many of which
have today committed to important reforms so that their economies evolve
towards a greater opening to private initiative, including foreign (see box),
places them in a favourable position today:
 The rules imposed by the States on local banks have prevented them
from investing in structured products which mask ‘toxic’ assets. Finally,
the reproach made to the south of the Mediterranean financial systems,
which of being poorly connected to the rest of the world, has today
become an asset. For the Med banking sector is in good health: the
percentage of the population with access to banking is growing in all
segments of the market, which further distances the effects of the cash
crisis. The system therefore has the capacity to promote the
development of national and foreign companies. On the condition that
it wants to or that is solicited so to do by the public authorities.
 Unlike that of other developing countries in the world, the currencies of
the countries South of the Mediterranean are faring well in the face of
the Euro. In a year, the currencies of Jordan, Egypt and Lebanon have
appreciated by 10% to 13%, the Moroccan dirham by 3% and the
Algerian Dinar by 5%. Only in Tunisia can there be observed a slight
depreciation of the Dinar, by 4%. The situation is far from the
vertiginous slide of local currencies against the Euro observed in
Ukraine (‐29%), Romania (– 26%), Poland and Russia (‐20%), Hungary (‐
17%), India (‐16%) or Brazil (‐13%). Hence, the local opportunities of the
Med countries present a solvency that the BRIC countries (China apart)
have lost.


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 The local markets South of the Mediterranean are developing. In this
period, the public authorities in the area are intensifying even more
their efforts to create jobs, improve the average income and the level of
competence, and raise the living standard of the populations. While a
slight slowdown is anticipated in 2009, growth will remain sustained
and will take up its cruising speed of nearly 4% per annum on average
from 2010 onwards. Private consumption remains dynamic, even in
2009, which makes the region a possible area to absorb the European
surpluses which find it hard to locate outlets.
Figure 2. GDP and private consumption growth in a few Med countries

Country
GDP Growth (%) Private consumption growth (%)
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: Economist Intelligence Unit
In consequence, the opportunities which the Med countries offer would
appear to be numerous:
 The distribution and logistics sectors today present formidable potential
in these countries. Certain operators have already taken their places, the
likes of Wal‐Mart or Metro in Egypt, to develop networks of large
shopping centres. But the sector is still to be developed throughout the
area as a whole. For 10 years, the Med countries have furthermore
considerably developed their transport infrastructure networks,
whatever the mode considered (+25% for the main airports, +7% for the
main ports, +60% for the motorways). Despite that, a qualitative hurdle
remains to be cleared for the supply chain operators and the Europeans
have interest in grasping this opportunity. Beyond access to an
immediate market, the prospect of a revival of world consumption on
the 2010‐2011 horizon is an extra argument to take up positions today in
an area which witnesses the passage –between Suez and Gibraltar‐ of 25
to 30% of world flows of high added‐value goods (containers, oil).

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 The building sector would seem to resist better in the Med countries
than in Europe. Despite a few property bubbles which are simply
waiting to explode, in Marrakesh for example, and the massive
commitment of the Gulf States – which have suffered the full force of
the financial crisis ‐ in this sector, many programmes in progress
seemed to have been maintained. New players are taking their marks
(as have the Chinese for the past 10 years); the needs are so immense,
especially in terms of the upgrading of the already existing stocks of
accommodation.
 The concentration, in constant progression, of the populations towards
the towns and the coast means that everything that affects urban
development, public services and the control of energy, is a major stake
for the countries of the area, including in terms of economic
development.
 The businesses in the South nourish a local demand for B2B services
which is progressing strongly. European know‐how (from facility
management to marketing, not forgetting temporary employment and
consulting) beyond the fact of finding welcome outlets, will contribute
to helping the economies of the South clear a qualitative (specialisation
of tasks) and quantitative hurdle (productivity).
 In a post‐crisis world economy which will privilege sustainable research
and development, the Med countries have the assets to take their place
more as a production base for Europe (if the latter wants to reconcile its
objectives of reduction of its greenhouse effect emissions and the
economic development of its neighbourhood) but also as a laboratory of
the future on certain questions of universal interest (notably the
management of water).
 Finally, the region produces a large number of engineers and start‐ups
in the domain of the new technologies. Mobile telephony is flourishing
here and the development of the 3G could enable the region to at last
place itself in this sector, beyond the traditional relocations of the
customer support centres. E‐commerce is in fact being pushed by the
public authorities and given the low level of development of the cable
networks, M‐commerce (e‐commerce via mobile telephone), which is
slow to develop in Europe could find pioneer markets in the Med
countries and competence in terms of application development. Beyond


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this niche, a joint development of the logistics sector and the ICTs
would enable the area to position itself as the rear base for the large e‐
commerce operators in Europe.
Figure 3. Improvement in the business climate in 2008: a contrasted situation
An analysis of the economic policies introduced by the governments of the Med
countries confirms overall, the determination of the region to make attracting FDI one
of the main levers of its development. But while the traditional champions of
economic opening continue to stoke the fires of reform (free trade area between
Tunisia and the EU, adoption of a law favouring the creation of special new economic
areas in Jordan, reforms of the offshore companies in Lebanon, etc.), retreat strategies,
whilst isolated, raise their heads again:
 This is the case in Algeria which, with the adoption of a new law on FDI, wants
to push the foreign groups operating on its soil to re‐invest locally part of the
profits made (majority share of 51% reserved for Algerians in investment projects
promoted by foreigners, obligation for foreign importing businesses to associate
with an Algerian partner, etc.);
 In Libya, where foreign businesses fall over each other to lift the large
infrastructure contracts, some contradictory signals are sent to the outside world.
Hence, while promising to open further the banking sector to private
competition (after an initial wave in 2007), Tripoli regularly lets threats of
nationalisation of the foreign oil companies present on its territory filter out.
 The real surprise comes from Syria, which continues to emit stronger and
stronger signs of opening up to investors. Starting with the inauguration in great
pomp of the first Stock Exchange in Damascus, in March 2009. Intent on
definitively turning the page on the administered economy, Syria adopted its
first anti‐trust law in 2008, which reinforces the interests of private operators.
Turkey continues to align its legislation on European community law and to liberalise
and privatise vital sectors:
 In the energy sector and petrochemicals, production and distribution are in the
process of liberalisation: in addition to the privatisation of Petkim, the
petrochemical giant, several national producers of electricity and gas distribution
networks have passed under foreign control, like Polat Enerji 50% acquired by
the French EDF;
 Several large State monopolies have been sold to the private sector, such as the
tobacco and alcohol monopoly.
 After several years of prohibition, foreign investors have finally been authorised
to purchase land;
 In the audiovisual sector, Parliament has authorised foreigners to hold up to 50%
of the capital in Turkish private media operations, against only 25% 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, the
Med countries would have every interest in adopting an offensive attitude.
The Invest in Med programme will play its role in backing up regional
actions which may be able to be taken to:
 Exploit several sectors for which there exist strong industrial
complementarities between the southern shore and the northern shore
(from organic agriculture to aeronautics) and develop strategies of
selective attraction;
 Incite financial institutions and investors to adopt cautious more flexible
rules, so as to favour the development of businesses in their country, as
well as foreign operators who wish to invest in it;
 From this day forward, prospect the European businesses who are
looking for buffer growth areas and incite them to invest in the South;
 Invest massively in professional training to accompany the sectors
which are today suffering and develop local competence to face up to
the boom in the sectors of the future, which represent the reservoir of
jobs for the years to come.

1. Synopsis: investment, 1st
victim of the crisis
After a record year in 2007, FDI plunges in 2008
Despite the first signs of the international financial crisis, visible since June
2007, the world flows of direct foreign investment in 2007 reached 1.833
billion American dollars (last complete statistical series), an historical record.
The flows aimed at developed economies of course remained largely
dominant, but the FDI captured by the developing world had passed the
symbolic bar of 500 billion dollars (an increase of 21% compared with 2006).
Figure 4. FDI inflows measured by UNCTAD for Med regions and Med share of
world FDI (in million USD, UNCTAD‐WIR)
17 164
32 027
5 860
0%
1%
2%
3%
4%
5%
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
50 000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Machreck Turkey + Israel
Maghreb Med share of world FDI

The Med2 region took full advantage of the global increase in foreign
investment observed between 2002 and 2006: in 2006, the Med region at last
received a share of world FDI which corresponded to its demographic
importance (4%).
From 2007 however, despite the stability of the incoming flows to Egypt and
a progression of the FDI aimed at the Maghreb and Turkey, the Med share of
world FDI fell below the bar of 4%: the flows of incoming FDI to the
Machrek dipped, whereas those in the direction of Israel receded by one
third.

2 Med 10 (9 MPCs + Turkey), without Libya


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Net decline in 2008
In 2008, the crisis profoundly undermined the very founding principles of
investment, by plunging businesses into uncertainty:
 UNCTAD, which records the macro‐economic flows registered in the
external accounts of the countries, thus estimates the overall drop of FDI
in 2008 to be 21% (1.400 billion dollars), and forecasts an even more
heavily marked decline in 2009. The flows aimed at developed countries
are likely to have declined by 33%!
 According to partial national data produced by UNCTAD, the Med3
region should suffer only a small decline in FDI well below the global
downward trend (‐9% only), thanks to the good resistance of North
Africa  and particularly Egypt (10.9 billion dollars in 2008 against 11.6 in
2007). Besides Egypt, the other 2 heavyweights of the regional economy,
Turkey and Israel, have been more heavily affected (‐26% in Turkey).
Figure 5. 2001‐08 FDI inflows for each Med countries (million USD)
UNCTAD‐WIR for 2001‐2007, estimates for 20084
Region/country 2001 2002 2003 2004 2005 2006 2007 2008
Algeria 1 196 1 065 634 882 1 081 1 795 1 665 7 651
Egypt 510 647 237 2 157 5 376 10 043 11 578 10 900
Israel 3 562 1 651 3 901 2 002 4 881 14 729 9 998 4 708
Jordan 180 122 443 816 1 774 3 219 1 835 2 400
Lebanon 1 451 1 336 2 977 1 993 2 791 2 739 2 845 2 200
Morocco 2 808 481 2 314 895 1 653 2 450 2 577 2 400
Palestine 19 9 18 49 47 19 21 275
Syria 110 115 180 275 500 600 885 1 563
Tunisia 7242 2278 1283 1540 7281 3312 1 618 1 740
Turkey 3 352 1 133 1 751 2 785 10 031 19 989 22 029 16 400
Med 10 20 430 8 837 13 738 13 394 35 415 58 895 55 051 50 315
Libya ‐113 145 143 357 1 038 2 013 2 541 4 501

3 Med 10 (9 MPCs + Turkey), without Libya
4 The 2001‐2007 figures are from data actualised retrospectively, in 2008, by UNCTAD.
The figures for 2008 are estimations published at the beginning of 2009 by UNCTAD
CNUCED for Egypt, Jordan, Lebanon, Morocco and Turkey, and ANIMA estimations
for Israel, Palestine, Syria and Libya (ANIMA‐MIPO annualised flows). The 2008 data
for Algeria and Tunisia are estimations provided at the beginning of 2009 by the
authorities of these countries (ANDI for Algeria and the Ministry of the Economy for
Tunisia).

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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%), while those recorded by Lebanon are likely to have dropped (‐23%)5!
The ANIMA6 network investment barometer produced using micro‐
economic data (see box: concerning methodology), confirms these trends.
The number of projects identified by ANIMA‐MIPO suffers a slight dip in
2008 (–6%), whereas the amounts announced show a sharp drop (Figure 6):
 The accumulated gross amounts of projects announced in 2008 declined
by 38%, which augurs badly for FDI in the following years;
 The annualised flow for 2008 shows a drop of 37%, falling well below
the bar of the 40 billion euros, and after the bursting of a sort of
speculative bubble, corresponding to the historical curve of the
UNCTAD flows.
Figure 6. UNCTAD and ANIMA‐MIPO FDI inflows and number of projects for
Med 10 (without Libya)
12 145 10 768
28 466
47 496
40 232
34 386
11 160
14 428
61 771
131 353
92 674
57 421
9 786
12 737
38 631
68 165
56 725
35 547
250
325
657
755 770
722
0
100
200
300
400
500
600
700
800
900
1000
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
90 000
100 000
110 000
120 000
130 000
2003 2004 2005 2006 2007 2008
FDI flow, UNCTAD‐ €m FDI  planned MIPO, €m
FDI/year flow, MIPO, €m Nb. of projects


5 MEED, Gulf suffers significant fall in foreign direct investment, Published: 15 February
2009, Will Hadfield
6ANIMA‐MIPO Observatory, created at the beginning of 2003 to complement the
European  observatory of AFII


20

In 2007, ANIMA did not see, in the slight consolidation which was
measurable at that point, any real turnaround in the trend. The deep causes
of the growing infatuation for the Mediterranean observed since 2004 did
not in fact seem likely to disappear: petrodollars, commodity boom, real
estate, building materials and tourism, rise in sub‐contracting for the
European markets, the take‐off of Turkey, awareness of the potential of the
Med markets and the renewed interest given to the Euromed space in
general.
In 2008, it has to be pointed out that this environment has changed radically:
collapse in the price of energy, more limited access to credit (international
financing of investment projects and commercial trade), drop in tourist
patronage, bursting of the real estate bubble in the Gulf States, prospect of a
recession on the developed markets, etc. The reasons for hoping that the
considerable flows of FDI in the region would be maintained are hardly in
short supply (see the Positioning article in the introduction of this report).
Figure 7. Talking of methodology
Even if data produced by the Mediterranean Investment Project Observatory (MIPO)
of the ANIMA network on the one hand, and by the UNCTAD on the other hand, aim
at measuring the same object –foreign direct investment–, their respective
methodologies deeply differ: whereas the UNCTAD considers the capital inflows
originated in foreign economies in the balance of payment of each country, the MIPO
data are based on the compilation of FDI projects announcements detected by
ANIMA’s economic intelligence team and its partners.
These FDI projects are registered in the MIPO database whenever their promoters
communicate on their launching or validation, even though the projects are likely to
be implemented over several years. The ANIMA‐MIPO observatory therefore
provides anticipation data, which also differ from UNCTAD data insofar as it does not
take into account the source of the invested capital (reinvested earnings, local or
foreign banking source, etc.).Only the foreign share in the total project budget is
however considered.
The multiplication since 2005 of large‐scale projects totalling billions of dollars forced
ANIMA to produce, apart from the ‘total gross budget announced’ data, new
statistical series of ‘annualised’ data. By introducing a new factor into the MIPO
database (number of years necessary to complete the project according to its
promoters), ANIMA became capable of providing good estimates of the amounts
effectively invested during the considered year.
The interest of having those 2 types of FDI data, gross and annualised, lies in the
possibility to put forward one or the other of the 2 main indications provided by

21

ANIMA‐MIPO, this advanced indicator of FDI trends: barometer of investment
intentions (gross declared amounts of the announced projects), and forecast tool for
real FDI flows measured on a given year.
For more details, see the methodological appendix at the end of this report.
Regional dynamics: Turkey takes the lead, Machrek and
Maghreb slip
According to the ANIMA‐MIPO investment barometer, the Maghreb (196
FDI projects, or 25% of the region in 2008) and the Machrek (282 projects or
36% of the region) are in sharp decline in 2008. Only the group ‘‘Other Med
countries’ is progressing; Turkey and Israel carving out the lion’s share, as in
previous years, with more than 60% of the FDI amounts between them (and
304 FDI projects in 2008, 197 of which for Turkey alone). According to
ANIMA‐ MIPO, Turkey is the only Med country to score points.
The intra‐Med investments projects identified only reach 842 million euros
in 2008, in free fall compared with 2007 (5.8 billion euros) and especially
2006 (8.2 billion euros).
Figure 8. Evolution of FDI inflows by sub‐region of destination (annualised flows,
in million euros, ANIMA‐MIPO 2003‐2008)
Destination 2003 2004 2005 2006 2007 2008 Total
Machrek 1 861 4 658 11 615 28 558 27 285 7 280 81 256
Maghreb 6 013 7 251 7 381 11 821 15 830 8 018 56 315
Other Med 1 937 871 20 474 28 608 18 261 24 693 94 844
Total 9 810 12 780 39 471 68 987 61 376 39 991 232 415
Maghreb: the hidden costs of the lack of economic integration
In their concomitant drop, the Maghreb countries came out a little less badly
than the Machrek in 2008 and attracted 8 billion euros in 2008, against 7.3
billion for the Machrek.
The Maghreb attracted numerous projects, mainly European, in energy (53
projects, representing 2.7 billion euros), Building, Public Works ‐ Tourism
(67 projects worth 2.5 billion euros) and Banking‐Insurance (23 projects for
1.2 billion euros). The smoothed amounts of these FDI announced in 2008
are in sharp decline (‐48.7% compared with 2007).


22

Figure 9. The cost of the non‐Maghreb
(…) Whereas borders are opening everywhere and regional trade is developing,
North Africa is an exception. A situation denounced by the Secretary General of the
UMA (Arab Maghreb Union) himself in January 2008: estimating inter‐Maghreb
commercial trade at 3.36 % of the total trade of the area, Habib Ben Yahia invited
members to compare these figures with the 21 % of Asean, the 19 % of Mercosur and
the 10.7 % of the CEDEAO. For its part, the World Bank estimated in 2006 that full
economic integration of the sub‐region would provide an important rise in the GDP of
each of the countries, of 24 %, 27 % and 34 %, respectively for Tunisia, Morocco and
Algeria, between 2005 and 2015.
On the contrary, the missed occasions for union are very costly. The experts and the
institutions denounce ‘the cost of the non‐Maghreb’. As concerns the Moroccan
Minister of the Economy and Finance, Salaheddine Mezouar, who in December last,
based on a study completed by his department of Studies and Financial Forecasts
(DEPF) in October 2008, estimated the lost ground at 2.1 billion dollars per annum
(980 million excluding hydrocarbons) in terms of commercial trade. Even more
pessimistic, Habib Ben Yahia estimates the blockage of the integration process costs
2% of the annual growth rate of each country (…).
From ʹMaghreb: les milliards perdus de la désunion‘ by Faïza Ghozali, Jeune Afrique,
17/02/2009
Considered as a whole, the Maghreb stands out for the reinforcement of its
port infrastructures (new container terminals managed by Maersk and PSA
at Tangiers‐Med, DP World which obtained the management of the ports of
Algiers and Jijel, the development of the deep water port of Enfidha).
Morocco’s share dropped sharply in 2008, with only 95 FDI projects detected
by the MIPO observatory, against 149 in 2007. The Kingdom remains
attractive in tourism, banking and energy. In Algeria, it is difficult to say
which of the crisis or the new regulations affecting foreign direct investment
(dating, it is true from the 2nd part of the year) is to blame for the decline in
European FDI in 2008 (‐ 50% compared with 2007, as much in amounts
announced as number of projects). The investors from the Gulf States
nevertheless continue to move their pawns forward in the Bay of Algiers,
notably with the Emirates International Investment Company and its real
estate project ‘Dounya Parc’.
Tunisia fares better, with 2.3 billion dollars of FDI in 2008 (+57%) according
to FIPA, and 100 FDI projects detected by ANIMA‐MIPO. Industry‐wise, the
order books of the Tunisian sub‐contractors have been well filled in 2008 (11
projects for aeronautics and automobiles).

23

Figure 10. Main FDI emitting regions towards Maghreb since 2003 (in % of
annualised declared amounts, ANIMA‐MIPO 2003‐08)
EU‐27 + EFTA
46%
Gulf & other
MENA
29%
USA/Canada
11%
MED‐10
11%
Asia‐Oceania
3%

Machrek: Egypt marks time, Lebanon picks itself up
The cold shower which fell on the stock exchanges and the economies of the
Gulf States, led by Dubai, was felt in Cairo, Amman and Damascus. The
Machrek region only attracted 7.3 billion euros of FDI announced in 2008
(18.2% of total smoothed flows), against 27 billion in 2007 (44.4%) and 28.5
billion in 2006 (41%).
Figure 11. Main FDI emitting regions towards Machrek since 2003 (in % of
annualised declared amounts, ANIMA‐MIPO 2003‐08)
UE‐27 + EFTA
26%
Gulf & other
MENA
55%
USA/Canada
6%
MED‐10
6%
Asia‐Oceania
7%

According to ANIMA‐MIPO, Egypt, privileged hunting ground of a number
of promoters from the Gulf States (Emaar, Qatari Diar, Damac), only
attracted 4.5 billion euros of foreign Direct Investment in 2008, after having


24

passed the bar of 22 billion euros in 2007. Twenty two FDI projects went to
Energy (above all natural gas, with for example the Italian Edison at
Aboukir), and 13 to Financial Services (a good number of acquisitions by the
Kuwaitis).
Jordan resisted as well as it could with 37 projects (against 53 projects
detected in 2007), especially in Construction and Infrastructure (extension of
the port of Aqaba for 5 billion dollars, high rise office blocks in the centre of
Amman, a great deal of logistics).
Syria managed to attract 38 FDI projects by continuing to liberalise its
economy following the model of its Lebanese neighbour (opening of a stock
exchange at Damascus, in‐depth reform of the business environment). In the
face of the exhaustion of its oil reserves, Syria is doing all it can to become an
important tourist destination in the Near East (6 FDI projects detected in
tourism in 2008).
The effectiveness of the Lebanese banking system has revived the confidence
of foreign investors, who contribute to a large extent to the renewal of Beirut
(the Phoenicia Village and Al Saifi Crown projects, and also Plus Towers, a
twin tower project).
Israel, Turkey: invest in the future
With 3.2 billion euros, Israel continues to capitalise on its capacities of
innovation to attract new foreign investments: software and internet (28
projects), medicines (6 projects), as well as biotechnologies (348 million euros
of FDI).
The consequences of the global crisis for many industries may cast doubts
on several FDI projects attracted by Turkey in 2008 (195 projects detected in
2008, that is 25% of the total for the Med region), in particular in the
automobile sector. But the country is preparing for the future by opening
vast areas of its economy to private initiative and foreign investment, in
particular in the production and distribution energy.
The stakes for Ankara will be to maintain the productivity of the industrial
tool to remain competitive on the international markets and go through the
crisis in a position of strength.

25

Figure 12. Individual FDI data for Med 13 according to ANIMA‐MIPO
Destination
Flow
2006
Flow
2007
Flow
2008
Average
3 years
Pop. 2008
FDI /
capita / yr
Israel 13 850 4 035 3 253 7 046 6 426 679 1 096 €
Malta 296 46 305 216 401 880 536 €
Cyprus 152 32 1 081 421 788 457 534 €
Libya 374 4 574 3 059 2 669 6 036 914 442 €
Lebanon 4 425 279 270 1 658 3 921 278 423 €
Jordan 3 235 2 765 1 209 2 403 6 053 193 397 €
Tunisia 3 887 3 329 1 490 2 902 10 276 158 282 €
Turkey 14 310 14 148 20 055 16 171 71 158 647 227 €
Egypt 15 935 22 204 4 551 14 230 80 264 543 177 €
Syria 4 674 2 029 1 062 2 588 19 314 747 134 €
Algeria 2 280 5 214 1 989 3 161 33 333 216 95 €
Morocco 5 280 2 714 1 480 3 158 33 757 175 94 €
Palestinian. Auth. 289 8 187 161 3 965 443 41 €
Total Med‐10 68 165 56 725 35 547 53 479 275 698 330 194 €
Total Med‐13 68 987 61 376 39 991 56 785 275 698 330 206 €
Origin of the FDI flows: Europe takes the lead again
The investors from the Gulf States, paralysed by the drying up of credit, are
beginning to run out of steam (the annualised amounts of the projects issued
by 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,
where Europe is taking up the leading role: chased or overtaken by the Gulf
States in recent years, the Old World took its place once again in 2008 as the
leading region for issuing FDI to the Med countries (41%).
Azerbaijan became the main issuer of FDI in Turkey in 2008 as a result of the
hyperactivity of the public enterprise Socar, which, during the year 2008
alone, with its partners purchased 51% of the former Turkish public petro‐
chemical giant Petkim for 2 billion dollars, launched a 5 million dollar
investment programme for this company and announced the project to
create a refinery at Aliaga (north of Izmir) in partnership with another local
petrochemical company, Turcas. Socar has also acquired 50% of the capital
of the Turkish construction group Tekfen Holding.

7 Excluding Med countries


26

Figure 13. Main FDI emitters in the Med region in 2008 (annualised inflow 2008
for Med 13 in million euros, relative weight in 2008 and 2003‐2008 total, and
progression between 2007 and 2008, ANIMA‐MIPO)
Origin Projects 08 Flow 2008 % total 08 Δ 07‐08 % total 03‐08
1. Azerbaijan 4 5 114 12.7% NC 1.8%
2. UAE 66 4 769 11.9% ‐66.1% 9.9%
3. UK 55 4 638 11.5% ‐15.8% 5.1%
4. USA 113 4 414 11.0% 1.9% 15.5%
5. France 112 2 733 6.8% ‐72.8% 7.9%
6. Nederland 28 1 837 4.6% ‐34.9% 2.5%
7. India 23 1 801 4.5% 125.6% 1.4%
8. Germany 40 1 512 3.8% 37.7% 2.2%
9. Austria 7 1 159 2.8% 143.5% 1.1%
10. Kuwait 34 1 135 2.8% ‐60.3% 4.8%
11. Greece 13 1 124 2.8% ‐38.5% 2.3%
12. Spain 25 1 075 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 main
investors in the Med region. The Emirates announced in 2008 projects the
cumulative gross amounts of which totalled 16.8 billion euros; a
considerable amount, once smoothed, taking account of the duration of the
completion of these projects, comes down to 4.7 billion (annualised amount,
i.e. probably invested from 2008).
Three long‐term real estate projects (Porta Moda at Tunis, Aqaba in Jordan
and Dounya Parc in Algiers) alone represent two thirds of this 17 billion.
The promoters of these projects (Abu Dhabi Investment Authority (ADIA)
and Gulf Finance House in Tunis, Al Maabar at Aqaba and EIIC in Algiers)
forecast the end of the work in 10, 7 and 5 years respectively, but the crisis
which affecting Dubai severely and the rarity of customers for this type of
luxury real estate product should at best slow down their completion and at
worst compromise it.
Given the uncertainty which weighs heavily on a number of these
megaprojects, the classification of the main issuer countries of FDI is based
upon the ‘annualised amount’ data produced by ANIMA‐MIPO.

27

As far as the Gulf States are concerned, in number of projects, the Kuwaitis
follow the Emirates with 34 projects, mainly in Egypt and Jordan. Only 22
Saudi investment projects have been detected in 2008 against 43 projects in
2007, mainly in Egypt and in Algeria. As in previous years, the Gulf State
investors concentrate their attention on the real estate sector (4.2 billion
euros) and are especially present in the Machrek (they are at the origin of
50% of FDI flows intended for this region in 2008).
Euromed integration continues
Overtaken in 2006 by investors from the Gulf States, European businesses
have once again been in the dominant position since 2007: in 2008 they are at
the origin of 16.3 billion euros of the FDI announced in the Med region
(down however by 37% compared with 2007) and have created 32,158 new
jobs (above all in the automobile and aeronautics industries, many in textiles
also).
Figure 14. Relative contributions of the main FDI emitting regions into the Med
region (Med 13, in % of annualised declared amounts, ANIMA‐MIPO 2003‐2008)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2003 2004 2005 2006 2007 2008
Asia‐Oceania
MEDA‐10
USA/Canada
Gulf & other
MENA
EU‐27 + AELE

Eight of the countries to be found in the Top 15 are members of the
European Union (36.8% of the flows of the Top 15 with 14.8 billion euros),
with the United Kingdom in the lead (4.6 billion euros in total, 3.8 billion of
which to Turkey) and France, which remains very present in the Maghreb
(2.7 billion euros). With 1.8 billion euros, Dutch investors come in third


28

position of the European honours list (massive presence in commercial real
estate in Turkey).
By cumulating the amounts of the projects announced for the period 2003‐
2008, France calls the tune (with 24 billion euros), ahead of the United
Kingdom (18 billion euros), Italy (7.2 billion euros), Spain (6.8 billion euros),
the Netherlands (6.1 billion) and Germany (5.2 billion).
North America (United States, Canada) represent 5 billion euros of
investment projects in 2008 (12.5% of the total), mainly in the energy sector
(1.2 billion euros above all in Libya, Tunisia, Egypt). The American operators
are especially present in Israel (52 projects centred on the new technologies)
and in Turkey (26 projects).
With 31 billion euros, the Asia‐Oceania group continues to progress, pushed
along by India which totals 1.8 billion euros in 2008 (hydrocarbons in Egypt,
automobile construction in Turkey).
Figure 15. FDI flows by main regions of origin and destination (annualised declared
amounts in billion euros, ANIMA‐MIPO 2003‐08)

29

Profile of foreign investors in the Med region
Types of business: preponderance of multinationals
The SMEs are at the origin of hardly 15% of the FDI projects detected by
MIPO over the period 2003‐2008. European SMEs together represent more
than 60% of the projects from this total. The SME projects are only worth
7.5% of the total of jobs created by all types of investors and 5% of the
amounts.
On the contrary, the multinationals issue nearly 60% of the gross amounts of
FDI and create 57% of the direct employment for only 41.5% of the number
of projects recorded over 2003‐2008. European multinationals are behind
around 50% of the projects; the rest roughly equally shared between
multinationals from North America (USA‐Canada) and MENA (mainly from
the Gulf States).
Investors from Europe, the Gulf States and North America: sectoral
competition and complementarity
Investments from the Gulf States present a very unbalanced sectoral profile:
with 52% of the amounts over 2003‐08 (and 26% of the projects) going to the
Construction and Transport sector, 19% to the Tourist sector and 10% to
Telecoms. European projects are better spread projects: Energy, which
represents the main destination of European FDI, is worth it is true 31% of
the amounts and 11% of the number of projects. But among the following 5
sectors in amounts, not one exceeds 10‐15% (Financial Services 15%,
Telecoms 11%, Cement‐Glass‐Paper 10%, Building, Public Works and
Tourism 9% each).
The particularity of American and Canadian FDI in the Mediterranean
concerns in the first instance the size of the industrial projects (excluding
hydrocarbons): 40% of the amounts announced, against 20% for Europe and
hardly 7% for investors from MENA. Energy only represents 23% of the
amounts announced over 2003‐2008, against 20% for the Electronic
Components industry (Intel in Israel), and 14% for the Software and
Computing Services.


30

Methods of installation: grassroots creations and acquisitions of
existing assets run 50/50
Among the different methods of installation possible, foreign investors show
their preference in 2008 for grassroots creations (46% of the amounts
announced for 27% of the number of projects). The acquisitions or strategic
prises de participations in existing assets represent for their part 30% of the
projects and 26% of the amounts. The progression in the amounts devoted to
brownfield projects encouraging (+100% over a year, to reach 8.8 billion euros
in 2008), even if it is due in good part to the renewal of the operating
concession for hydrocarbons linked to ambitious investment programmes.
Beyond hydrocarbons and the development programmes for the telecoms
network by the large world players present in the Mediterranean, the
extensions of industrial sites remain too few in number (hardly 60
projects/annum). Creation of subsidiaries/branches together has reached the
bar of 25% of the projects identified in 2008, for only 7% of the amounts.
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,
Public Works‐Infrastructures and Hydrocarbons dominate the landscape of
foreign investment in the region. However, Building, Public Works and
Energy are among the sectors which suffer most from the crisis, along with
Financial Services and Building materials (glass, cement). Telecoms, due to
the non‐attribution of new licences or major privatisations, are awaiting the
new wave of FDI. Among the sectors which are on the increase are to be
Business Services, Software, Aeronautics, Chemicals and Retail Distribution.
The average budget per FDI announced, in these 2 sectors which had
attracted a good number of megaprojects in 2006‐07, declined however
considerably, to reach 176 million euros in the BTP in 2008 (‐40% compared
with 2007), and 149 million euros in the energy sector (that is an annual drop
of almost 50%). The average budget per project, all sectors considered,
mechanically follows the same path, to settle at 88 million euros in 2008
(against 129 million euros in 2007).
The number of foreign projects announced in Construction and Transport is
in decline, premise of a coming to earth underway, after a number of years
of madness (more than 100 projects a year for 3 years), whereas the
cumulative budgets have been divided by 2 in one year (22.6 billion euros

31

gross in 2008). The Materials Industries (glass, cement, minerals, wood,
paper) are suffering in return from the new cautiousness of the leaders of the
sector who from 2008 have preferred to cut down their new investment
programmes, even suspend certain projects announced in the euphoria of
the boom of 2007. Even if all the investments announced to date in Cement
do not reach fruition, the local demand should soon find an equivalent offer,
even a surplus. Speculation over building materials should end once the
shortage is over.
Despite the extreme volatility of energy prices and the moderation in world
demand as a result of the economic slowdown, the number and the amounts
of foreign projects announced in Energy remained high in 2008. Whether the
fruit of a certain effect of hysteria or the perspicacity of operators who
gamble on a rapid rebound in the prices, the upkeep of foreign investment is
vital to increase the reserves and the upstream and downstream capacities of
the Med countries who are well blessed with hydrocarbons. Watch this
space: during the international call for tenders organised at the end of 2008
by Algeria, only 4 exploration licences out of 16 found takers.
In the same way, the future of many of the large projects announced in 2007‐
2008 in the Heavy Industries (metallurgy, chemicals‐plastics‐fertilisers)
would today appear uncertain. The prospects for export (automobile,
Building, Public Works, speciality chemicals) or for the local markets which
are still expanding (large infrastructure projects, local agriculture) lack
clarity, and added to the difficulties of financing projects heavy in capital,
they should occasion postponements or cancellations.
Metallurgy nevertheless attracted fifteen or so projects in 2008 (against an
average of 5 between 2003‐ 2006). It remains to be desired that the financial
stranglehold of the international economy does not also counter the
Mediterranean chemical boom (around 30 projects per annum since 2005,
projects worth 7.6 billion euros in 2008, above all intended for Turkey). The
fertiliser sector, whose large actors are in the process of concentration,
remains attractive: natural gas has become very cheap (used for the
production of nitrogen), increasing margins as a result.


32

Figure 16. Number of projects and gross declared FDI amounts, by sector (ANIMA‐
MIPO 2008, in million euros)
128
115
22
25
81
19
39
42
24
15
38
36
11
55
31
16
4
16
14
9
12
22
4
0 5 000 10 000 15 000 20 000 25 000
PW, PPPs, logistics
Energy
Chemistry
Distribution
Financial Services
Telecom
Tourism, catering
Glass, cement, minerals, wood, paper
Agro‐business
Metallurgy
Consulting & services to companies
Automotive
Other
Software services
Electr. Hardware
Drugs
Biotech
Electronic components
Textile
White goods & consumer electr.
Mechanics & machinery
Aeronautical, naval & railway equip.
Furnishing & houseware
Declared amounts, M€
Amount 2008 Projects 2008

33

The global crisis has just hit manufacturing industries, with strong local
spin‐offs, with all its might, typically the case of the automobile industry.
The automobile sector has, however, never been as attractive as in 2008, and
not only in Turkey (thirty or so projects per annum since 2003, amounts
close to 800 million euros over 4 consecutive years). The installation of
assembly plants and sub‐contractors in the South (Renault at Tangiers‐Med,
for example) should nevertheless continue. In a global environment of
pressure on costs, other industries (aeronautics, ship‐building, railway
equipment), subjected to the same constraints of price competitiveness and
proximity to the order givers or the new markets, are also heading south.
The electronic component industries, general public electronics, electrical &
electronic equipment and mechanical machinery and equipment do not
seem to manage to attract significant foreign investment (apart from Turkey
and Israel), despite the obvious vocation of the Mediterranean as a
manufacturing base for growing local markets and the coverage of the
European markets at a reduced cost.
The textile‐clothing sector continues to attract an average of some fifteen
projects. In 2008, the agro‐food industries attracted 1.7 billion euros, an
average performance given the potential of the Mediterranean markets;
performance due mainly to the acquisition of profitable targets in Turkey.
The good news is to be found on the services side. Tourism, of course
continues its decline (few new projects announced in 2008), which appears
reasonable given the stock of megaprojects announced in previous years. Of
course, financial services and telecoms are still in pole position, and
continue with a more silent revolution after the amazing projects of recent
years. Retail distribution pursues its expansion in the region, despite some
mis‐hits.
However, the real novelty is to be found in business services.
Computer services have thus been attracting around 50 projects per annum
for 4 years, in Israel but not only: the young computer engineers from the
Med countries are beginning to be appreciated for their real worth.
Counselling & and other business services, from engineering and legal
counselling to facility management, not forgetting call centres and recruitment
all profit from growing demand. Competition for exports will become
tougher for call centres or the externalisation of certain support functions.
The dynamics of the sector rely, however, to a large extent on local factors,


34

linked to the spread of modern business management techniques, source of
an unquenchable demand.
Target investments with strong local spin-offs
It is to be feared that the majority of FDI in energy, or in heavy industry,
using equipment and a workforce which is to a large extent imported, and
exporting products which often have been little transformed, provides little
local added‐value (beyond the annuity paid by the operator). Idem for
certain forms of real estate (secondary residences for the diasporas). On the
contrary, light industry (general public electronics, automobile, agro‐foods,
etc.) or certain service activities (logistics, business services in particular),
well integrated in the other sectors (but too little represented in FDI), may
fairly largely demultiply its effects in the economy.
Figure 17. Direct job creation potential per each million euros invested (ANIMA‐
MIPO 2003‐08)
Sector Av.job
creation/
project
Total nb
of projects
2003‐08
Total
jobs (est)8
Amounts9
(mln €)
Jobs /
mln €
Electr. consumer goods 665 40 26 600 531 50
Automotive 942 178 167 676 4 049 41
Textile 471 117 55 092 1 464 38
Consulting/other services 235 204 48 034 1 522 32
Electr. & electron equipt. 208 173 35 979 3 829 9
Agrofood 388 170 65 895 7 673 9
Tourism, catering 1 316 281 369 862 48 626 8
Cement, minerals, paper 599 202 121 047 19 578 6
Retail 472 103 48 629 8 184 6
PW, transport, PPP 1 320 489 645 480 113 860 6
Metallurgy 438 63 27 563 6 066 5
Software services 161 223 35 985 7 986 5
Other & non specified 208 47 9 753 2 170 4
Financial services 272 408 111 032 33 409 3

8 The estimations proposed for the total direct job creations have been obtained by
multiplying the average number of direct jobs created per  project (according to the
promoters’ announcements) by the total number of FDI projects recorded by the
MIPO observatory over the period 2003‐2008, according to the sector.
9 These are amounts announced by the promoters of the project, aggregated by sector
over the period 2003‐2008.

35

Sector Av.job
creation/
project
Total nb
of projects
2003‐08
Total
jobs (est)8
Amounts9
(mln €)
Jobs /
mln €
Drugs 75 90 6 786 2 177 3
Aeronautical, naval, train
equipment
189 63 11 883 4 280 3
Electronic components 339 77 26 106 10 790 2
Machines & mechanics 116 53 6 166 3 759 2
Biotechnologies 53 14 747 494 2
Energy 227 425 96 456 68 211 1
Chemistry, plasturgy,
fertilisers
145 129 18 705 14 512 1
Telecom 255 114 29 070 34 725 1
All sectors 547 3 681 2 012 972 397 966 5
Honours list for the largest projects
It is possible to consult the detailed base of the projects detected by the
ANIMA‐MIP observatory on www.anima.coop. To provide a glimpse, the
table below sets out the projects announced with a value greater than one
billion euros, which are neither necessarily the most interesting nor the most
significant10.
Figure 18. The 15 projects with declared budgets above 1 billion euros announced in
2008
1. Tunisia. Abu Dhabi Investment Authority + Gulf Finance House (UAE). ADIH
to launch in Tunis its Porta Moda real estate project land plots provided by Gulf
Finance House (€4 600 m).
2. Turkey. SOCAR (Azerbaijan). The company to invest USD 5 billion to enhance
Petkimʹs production capacity, a Turkish petrochemical company in which it
holds a 51% stake (€3 417 m).
3. Jordan. Al Maabar (UAE). The consortium to relocate Aqabaʹs port facilities to
the southern part of the city and develop a tourism megaproject for USD 5 billion
over 7 years (€3 288.7 m).

10 For these gigantic projects, the ANIMA‐MIPO observatory has taken into account
both the gross amount announced and the duration planned to complete the project,
which enables it to have available, alonside the cumulative gross amounts,
‘smoothed” data over the number of years for the implementation of the project
(often 3 to 10 years for real estate projects).


36

4. Algeria. Emirates International Investment Company (UAE). The investment
company to invest USD 5 bn over 5 years to develop Dounya Parc, a mixed‐use
project in the Grands Vents district of Algiers (€3 288.7 m).
5. Libya. Occidental Petroleum (USA). The group to sign a full 30‐year agreement
with Libyaʹs NOC and invest USD5 bn over next 5 years in tripling production of
Sirte basin fields (€3 288.7 m).
6. Tunisia. Terna ‐ Rete Elettrica Nazionale (Italy). The firm engaged in electricity
transport and STEG to create a JV for managing the construction of a power plant
in El Haouria (€2 000 m).
7. Turkey. Indian Oil Corporation (India). The group to set up a JV for the creation
of new Ceyhan refinery, in which ENI, Kaz MunayGaz, local Calik and IOC will
each have 26% (€1 826.32 m).
8. Libya. Repsol‐YPF (Spain). Agreement with Libyaʹs NOC for the extension until
2032 of Repsol operated blocks NC115 and NC186 in Murzuq basin, in which
Respol holds 40 and 32% (€1 710.1 m).
9. Turkey. SOCAR (Azerbaijan). The Socar‐Turcas‐Injaz JV eventually wins control
over state‐run chemicals maker Petkim for USD 2 bn (€1 341.8 m).
10. Egypt. Emaar Properties (UAE). The UAEʹs property developer to create a
luxurious 150‐room resort and 50 private villas in Marassi (€1 217 m).
11. Turkey. Tesco / Kipa (UK). Kipa, the Turkish retail chain bought by UK‐based
giant Tesco in 2003 is to create 100 new stores by 2013 (€1 167 m).
12. Turkey. British American Tobacco (UK). British American Tobacco to win the
auction for Turkish cigarette maker Tekel thanks to a USD 1.72 billion bid
(€1 131.3 m).
13. Turkey. BC Partners / Moonlight (UK). London‐based buyout firm BC Partners
to buy from Koc Holding a 51% stake of Migros Türk for TRY 1.98 billion
(€1 066m).
14. Turkey. BC Partners / Moonlight (UK). The investment funds gathered in
Moonlight, after the buyout in February of a 51% in Turkish supermarket chain
MIGROS Turk, to up their stake to 97.9% (€1 023 m).
15. Cyprus. Bouygues + Carnival‐Costa Cruises + Amsterdam Harbour (Other
country). The Zenon Consortium won the DBFO contract for the Larnaca
Seafront redevelopment, whose 1st phase consists in creating a cruise port and
marina (€1 000 m).

2. Sectoral analysis of FDI in
the Med region
Sectoral panorama 200811
The year 2008 presents fake similarities to the year 2007, were it not for the
climate of uncertainty weighing on the majority of sectors.
The construction and energy sectors, which once again account for the
largest part of foreign direct investment in the Med region in 2008, are
among the sectors the most exposed, along with the financial services, the
telecoms and the building materials (glass, cement).
Telecoms, as a result of the non‐attribution of new licences or the
postponement of major privatisations, are waiting for the next wave of FDI.
Among those sectors on the upswing, are to be found business services,
software, aeronautics as well as chemicals, which has been the subject of
consequential projects, but concentrated on Turkey (more than 60% of the
amounts for 5 projects out of 22).
Turkey also attracts the essential part of the investments in retail (90% of the
amounts and 17 projects out of 25 in 2008).
Figure 19. Distribution of FDI by sector (ANIMA‐MIPO 2008, nb of projects and
declared amounts, million €)

Sectors
Projects
2008
Amounts
2008
Variation
07‐08
%
2008
1 PW, PPPs, logistics 128 22 611 ‐47.0% 32.9%
2 Energy 115 17 153 ‐25.3% 24.9%
3 Chemistry 22 7 588 216.2% 11.0%
4 Distribution 25 3 894 77.2% 5.7%

11 Methodological preliminary: so as to better measure the sectoral dynamics of FDI in
the Mediterranean, the analyses to follow will concentrate on the cumulative amounts
of gross FDI amounts announced by the promoters of projects during the year
considered, and not on the annualised flows of FDI (amount announced during year n
divided by the number of years planned to complete the project).

Foreign investments in the Med region in 2008

38

Sectors
Projects
2008
Amounts
2008
Variation
07‐08
%
2008
5 Financial Services 81 3 562 ‐65.7% 5.2%
6 Telecom 19 1 981 ‐46.7% 2.9%
7 Tourism, catering 39 1 977 ‐8.6% 2.9%
8 Cement, minerals, wood, paper 42 1 935 ‐80.8% 2.8%
9 Agro‐business 24 1 687 47.5% 2.5%
10 Metallurgy 15 1 399 ‐65.7% 2.0%
11 Consulting & services to companies 38 1 062 436.7% 1.5%
12 Automotive 36 664 ‐30.6% 1.0%
13 Other 11 630 ‐42.7% 0.9%
14 Software services 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 Electronic components 16 330 ‐30.4% 0.5%
19 Textile 14 220 13.4% 0.3%
20 White goods & consumer electr.   9 178 71.9% 0.3%
21 Mechanics & machinery 12 90 ‐74.6% 0.1%
22 Aeronautical, naval & railway equip. 22 39 102.3% 0.1%
23 Furnishing & houseware 4 24 nc 0.0%
Total 2008 778 68 763 ‐36% 100%

A pronounced imbalance in the sectoral distribution of
projects
The concentration of FDI on a few sectors is accentuating year after year: the
first 5 sectors represent 80% of the total amounts announced in 2008 for only
54% of the number of projects (respectively 76% and 53% in 2007).
Figure 20. Strong concentration of FDI inflows on some sectors (MIPO 2008)
Group of
sectors
Amount 2008
(€ mln)
% of total 2008
Nb. of aggregated
projects
% of total 2008
Top 5 54 808 80% 418 54%
Top 12 65 513 95% 616 79%
Top 5 (in order): Construction‐Transport‐Delegated Services, Energy, Chemicals‐Plastics‐
Fertilisers, Distribution Financial Services
Top 12: Idem + Telecom, Tourism, Glass‐cement‐minerals‐wood‐paper, Agro‐Food, Metallurgy,
Engineering & Business Services, Automotive

39

Sectoral distribution of the stock of FDI 2003-2008
The stock of FDI projects detected by ANIMA over the period 2003‐2008 is
very largely dominated by the sectors of construction‐transport‐PPP, energy
and tourism.
Figure 21. Announced FDI amounts by sector (ANIMA‐MIPO, 2003‐08, €m)
Construction‐
transport
17%
Energy
15%
Tourism
8%
Telecom
9%
Financial
services
14%
Cement,
minerals
8%
Others
26%

Jobs creation under the sectoral microscope
The ‘jobs created per operation’ data is not available for all FDI projects
detected by MIPO12: it should therefore be taken with precaution. Total
direct employment creation in 2008 recorded by MIPO continues its decline
compared with the peak of the year 2006 (76,143 jobs announced in 2008
against 100,000 in 2006, and 86,000 in 2007)13.
 The aggregation of the employment data over the period 2003‐2008
allows to build a more significant data base, from which emerge the sectors
which should hold the attention of governments at the moment they decide
upon a selective FDI targeting strategy. In the figure below are to be found,
in the grey‐white squares, some key sectors in a period of world economic
turbulence.

12 Data provided for 25% of the projects in 2008, and only 18% of the cases out of the
period 2003‐08. By taking into account the projects creating few jobs (subsidiary‐
representation bureau, participation, privatisation), the estimated rate rises to 50%.
The household furnishings & fittings and biotechnologies sectors do not appear due to
the lack of a significant sample in 2008.
13 For a classification of the sectors creating the most jobs in 2008, refer to Annex 2.


40

Figure 22. Job creation potential by sectors, ANIMA‐MIPO 2003‐08 (total nb of
projects and average number of jobs created 14 by project)
1 320
1 316
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
Car manufacturers or suppliers
White goods & consumer electr.
Glass, cement, minerals, paper
Distribution
Textile
Metallurgy
Agro‐business
Electronic components
Financial Services
Telecom
Consulting & services to companies
Energy
Electr. Hardware
Other or not specified
Aeronautical, naval & railway equip.
Software services
Chemistry, plasturgy, fertilizers
Mechanics & machinery
Drugs
Biotechnologies
Nb of projects 2003‐08
Nb projects Average job creation

14 Average calculated solely on the basis of projects comprising the direct employment
data as announced by the promoters.

41

Outside the well trodden paths (tourism, real estate), and contrary to sectors
which are highly capital‐intensive but poor in local linkages (energy, for
example), these are sectors which present both:
 a verified power of attraction in the Med region ( existing stock of FDI
projects);
 and a large potential to create jobs compared with the capital invested
(above all manufacturing activities or services).
Focus: 5 key sectors in the face of the crisis
The 5 sectors which will be analysed in the following pages have been
chosen for they present a resistance or rebound potential in spite of the
international economic crisis. These are activities which are rather rich in
jobs (see figure 22, Job creation potential by sector), and which find in the
Mediterranean host conditions which are favourable to their expansion,
whether they target local demand or are export‐oriented.
Transport and logistics
Dealt with within the composite sector ‘Construction, Public Works,
Transport, Delegated Services’ of the ANIMA‐MIPO observatory, the
component Transport‐ Logistics Infrastructures & Services is undergoing a
complete revolution. Even if it still only represents a modest part of the FDI
projects aimed at the sector (dominated by real estate: high end residential,
seaside resorts, American‐style shopping centres, office blocks), with 35
projects for nearly 6 billion euros in 2008 (against 50 projects in 2007), it
nevertheless represents the most strategic element. Strategic, above all,
because the transport and logistics activities are indispensible to the
development of the remainder of the economy.
The Mediterranean is a logistics hub not to be overlooked, whose natural
vocation is finally able to express itself thanks to the new tools which the
massive investments, public as well as private, in infrastructures, are in the
process of providing it. One step ahead or behind the progress of the
infrastructures, transport service providers (transport of persons,
logisticians), are arriving in number, following their usual customers
(automobile, retail distribution, etc.), or to make up for a lack of local offers
in markets where there still remains a lot to do.


42

Of course, the global economic slowdown is depressing the world transport
market; the decline in international trade provoking the collapse of prices
(especially in international maritime transport, see box on CMA‐CGM). The
Mediterranean, which witnesses the passage of 30% of world maritime
traffic, will not be spared: the frequentation recorded by the Suez Canal in
January 2009 was down 22% year‐on‐year, that is 1,313 ships against 1,690
one year earlier.
The WTO reminds us that international trade is one of the main victims of
‘the drying up of commercial financeʹ which backs ‘90 % of tradeʹ. This
‘unprecedented crisis’ should, according to the WTO continue into 201015. The
World Bank for its part, forecasts a decline of 2.1% in world trade in 2009
(2.8 % according to the IMF). The drop in volumes exacerbates the
competition between transport operators on the most mature markets,
pushing some of them to throw in the towel, as for example, Deutsche Post‐
DHL in North America.
In the Med region on the contrary, there remain places to be filled: transport
and logistics operators from Europe (14 projects in 2008) and also from the
Gulf (13 projects, 9 of which for the UAE, mainly in the Machrek, but also in
Algeria), are moving in.
In 2008, all the Med countries attracted large FDI projects. The opening up of
air transport to private initiative in Syria for instance enabled the Kuwaiti Al
Aqeelah to launch Pearl of Syria (Loloa), a private airline company created
as a joint venture with the Syrians Sham Holding and Syrian Air. Generally
speaking, in terms of infrastructures, the port projects dominate
(transhipment or land servicing ports). The 2 main projects are those of
Dubai Ports World, which took a 90% stake in the company managing the
port of Sokhna in Egypt, and forecasts investing one billion euros over 3
years to develop it, while its compatriot Al Maabar will carry off the USD 5
billion BOT contract concerning the extension of the port of Aqaba in Jordan.
In Morocco, the development of terminals 3 and 4 of the port of Tangiers‐
Med for nearly 7 billion dirhams between now and 2012 has been attributed
to consortia led respectively by PSA Singapore Terminals and the Dane A. P.

15 Les Echos, Le commerce international résiste mal au marasme économique, 26/02/09,
interview of Pascal Lamy, Director of the WTO.

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

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

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