Foreign Direct Investment in the Med: 392 projects implemented during the first semester 2010

According to a review of Foreign Direct Investment (FDI) and Partnerships in the Mediterranean countries during the first half of 2010, realized by the EU-funded project Invest in Med, there has been an increase in the number of FDI projects whereas the average size of investments shows a decrease.

The study reveals that there have been 392 projects implemented during the first semester 2010 against 532 for the whole year 2009, i.e. an increase of 47%. However, while an average of € 55.7 million was invested per project in 2009, projects implemented in the first semester of 2010 had an average budget of only €34.6 million, representing an FDI inflow of €13.6 billion in the first semester of 2010 against € 29.6 billion in 2009 and thus a drop of 8%. Partnerships, for their part, show strong growth:246 projects during the first semester of 2010 against 302 for the whole year 2009, i.e. a rise of 63%.

2010 is therefore consistent with the trends registered in 2009: reassured by the good economic forecasts for MED countries (Arab States should register a GDP growth of 4% in 2010 according to IMF); foreign companies boost their investment planning, but with more modest and less risky FDI projects. After the golden era of megaprojects in the telecoms, banking and real estate (2005-2007), and the financial and economic crisis (2008-2009), companies resume their investment projects but limit their size and pay more interest in partnerships to develop their activities in the region. This situation opens a window of opportunity for MED enterprises, which could benefit from a new scheme of added value sharing provided they could bring commercial, technical support and financial leveraging needed for the projects developed by their foreign partners.

One major modification however occurs during the first half of 2010: the origin of FDI inflows varies significantly, emerging countries becoming a new inescapable player for FDI in the MED countries.They bring 29% of FDI announced inflows during Semester 1 2010 (€3.9 billion), against 11% on average since 2003. China comes first in this group with a diversified portfolio of sectors (energy, distribution, real estate, automobile, water, etc.) benefitting to Egypt, Israel, Syria and Turkey.

Israel and Turkey, the more globalised economies in the region and hence more affected by the crisis, rebound rather substantially after a bad year 2009: an increase of 75% in number of FDI projects detected and 13% in FDI inflows, with respectively €1.5 and €4.5 billion during Semester 1 2010.

Mashreq also follows an encouraging trend: +40% in number of projects and €5.7 billion announced i.e. +14% in inflows compared to 2009. The strongest increases are for Lebanon, which attracts during Semester 1 2010 its 2009 total inflows, and Syria which attracts €2.2 billion during Semester 1 2010 against €0.9 billion for the whole year 2009.Partnerships also rise significantly in Mashreq countries, which catch up with the Maghreb countries by attracting a little more than a third of the total number of partnerships during Semester 1 2010.

The situation in Maghreb leads to less optimism however. The region has witnessed an increase of 29% in number of projects but 20% decrease of inflows during Semester 1 2010 compared with 2009. The €1.7 billion announced in a semester represents a very low level compared to the average amount of €8.8 billion per year since 2003. The decline reaches 60 to 80% for Algeria, Libya and Morocco, while Tunisia is an exception with a 3.5 fold increase of the FDI inflows.

Invest in Med is a Euro-Mediterranean Network of organizations, funded by the EU with a budget of €9 million, committed to investment promotion and trade facilitation, strengthening SME collaboration and exchange of best-practices. It aims to increase the abilities and efficiency of Mediterranean Investment Promotion Agencies (IPAs), thus enabling more foreign direct investment in the Mediterranean Partner Countries. This multi-country platform supports the economic development of the Mediterranean and reinforces cooperation between European and Mediterranean IPAs.