Christophe Saint-Martin/ Invest in France Agency

Euromediterranean Conference / Naples / 8-9 June 2006

Investment in the

Mediterranean : Balance and perspectives

ANIMARéseau Euroméditerranéen d’Agences de Promotion des InvestissementsEuromediterranean Network of Investment Promotion Agencies

ANIMA

June 2006 © ANIMA-AFII 2006 2

OverviewMain MEDA assets

Market and growth (320 million inhabitants in 2025) Proximity of EU +Association Agreements +2010 Free Trade Zone Moderate cost of labour (1/5th of EU average) Local resources & niches (from oil to brains…) The 20-35 year generation is a gold mine!

A growing interest, but investors still hesitant Fragmented Mediterranean market Mixed image -economy / geopolitics / culture Gaps (but improvements) in law enforcement, business attitude,

or technical obstacles (logistics, training…) MEDA often absent of the investor short list

Many opportunities do exist now Many ways of investing: JVs, privatisations, stakeholding,

overseas branches Local market, exports, off-shoring, services, infrastructure, R&D

ANIMA

June 2006 © ANIMA-AFII 2006 3

Comparative advantagesPer 1 000 people

16

294

28

301

58

117

209

24

30

13

52

73

256

158

230

160

376

46

320

78

314

0 100 200 300 400

Algeria

Cyprus

Egypt

Israel

Jordan

Lebanon

Malta

Morroco

Palestinian A.

Syria

Tunisia

Turkey

Czech Rep.

Hungary

Poland

Slovakia

Slovenia

China

Malaysia

Thailand

France

Internet users(ITU 2002)

Thousand US$ per year

2689

7718

1764

22123

2220

4272

3358

5412

6647

6102

4824

12235

1374

4593

1654

18756

0 5000 10000 15000 20000 25000

Algeria

Cyprus

Egypt

Israel

Jordan

Malta

Turkey

Czech Rep.

Hungary

Poland

Slovakia

Slovenia

China

Malaysia

Thailand

France

Industrial annual wages (ILO 1999-2003)

ANIMA

June 2006 © ANIMA-AFII 2006 4

A wind of changein the Mediterranean in

2005

According to our observatory (MIPO), 686 foreign investment projects announced or started in 2005

Growth trend: 232 projects in 2003 / 343 in 2004 / 686 in 2005

A total capital investment figure of over €40bn in 2005 !

The quality of new investments is promising Some strategic/ high profile/ high tech projects (R&D etc.) Projects coming from 50 different countries : mainly France

(152 projects), United States (106) and Emirates (41 projects)

Presence of major companies (Intel, BP, Danone, Shell, Coca-Cola…)

ANIMA

June 2006 © ANIMA-AFII 2006 5

More than 1,000 world companies

have recently invested in MEDASource: MIPO

ANIMA

June 2006 © ANIMA-AFII 2006 6

MIPO resultsEncouraging trend

Diversification of investors (Gulf, OECD, emerging countries…)

The main investors (FDI amounts) in MEDA are :

Saudi Arabia (€6.8 bn), United States (€6.3 bn) and the United Kingdom (€6.1 bn)

MEDA is becoming increasingly attractive

A wind of change The gap between MEDA and Central & Eastern Europe

seems to be closing MEDA recovery is an on-going process

ANIMA

June 2006 © ANIMA-AFII 2006 7

11 66010 150

6 147

43 948

19 844

7 974

686

341

233167

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

2002 2003 2004 2005

0

100

200

300

400

500

600

700

FDI flow, UNCTAD- US$m FDI flow, MIPO, €m Nb. of projects

FDI attraction, MEDA region

ANIMA

June 2006 © ANIMA-AFII 2006 8

A strong take-off in 2005

1 806

6 753

3 493

Algeria 93 projects

(2005) Energy, banks & services

477

2 504

8 922

Egypt101

projects (2005)

Energy, chemicals,

banks, tourism

16 895

582

2 712

Turkey73 projects (2005)Telecoms, automobile, banks, agri-food

3 225

4 261

2 430

Morocco 118 projects

(2005) Agri-food, industrial

sectors & ICT

1 153

131

5 922

Israel94 projects

(2005)Software,

electronics, banks

95217998

Tunisia78 projects

(2005)Energy,

telecom, textile

services 111

2 0271 244

Jordan46 projects (2005)Tourism, real estate, banks, software

2003 2004

2005FDI amount, €m, MIPO

Palestine Auth.5 projects (2005)Banks, ICT

Malta5 projects (2005)Drugs, logistics, banks

Cyprus7 projects (‘05)

Telecoms, services, agri-food

100434

2 982 Syria40 projects (‘05)Energy, tourism, banks, agri-foodLebanon

26 projects (‘05)Tourism, ICTreal estate

0 1408

414724731

ANIMA

June 2006 © ANIMA-AFII 2006 9

Why such an increase ?A number of sizeable investments in the energy sector (Algeria, Egypt, Tunisia, Syria etc.)Big real estate and/or tourism projects

Egypt, Jordan, Lebanon, Morocco, Syria… Originating in particular from the Gulf States

Several major privatisation operations, e. g. in Turkey

3 deals for Turk Telekom, Telsim & Turkcell = US$ 14 bn

The Arab investors (Gulf etc.) are shifting part of their investments from the Americas to MEDAComplete transformation of the banking sector

Opening of a number of agencies and takeover of banking networks by large European banks

And IPAs’ and ANIMA's efforts…

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June 2006 © ANIMA-AFII 2006 10

Donor & recipient countries in 2005

Further diversification in the origin of investors Europe still the major share of FDI input into MEDA (50% in

projects, 40% in capex) -North America stable at 18% Gulf States and other MENA countries on the rise (15% against

11% in 2004 and a mere 6.5% in 2003) Asia (6%) and intra-MEDA (5%) also growing

Recipient countries in 2005 Turkey takes the lead due to large deals in the telecom field Egypt – large projects in energy, banking and real estate Israel – remarkable number of technological investments Syria, Algeria, Morocco (€2 to 3 bn each, but different profiles) Small countries (Tunisia, Jordan, Lebanon) perform relatively well

ANIMA

June 2006 © ANIMA-AFII 2006 11

Announced FDI into MEDA Main cumulated flows, 2003 to 2005Source: MIPO

O-D flows over €0.5bn

Algeria

Cyprus

Egypt

Tunisia

Malta

Morocco

0.5

bn

2.6bn

1.7bn

8.9bn

8.1bn

1.2

bn

5.5

bn

2.7bn

7.1bn

3

.5bn

6.7bn

2

.1bn

5.4bn

1.0

bn

2.

5

bn

2.1bn

Europe37.2bn

Gulf & MENA23.8bn

Americas14.7bn

4.1b

n

Jordan

Asia & emerg.11.6bn

Israel

Syria

1

.4bn

3

.9bn

Turkey

0.7bn

0.9bn Lebanon

11.9bn

Palest. Auth.

1.6bn

1.8

bn

Intra

-MED

A

ANIMA

June 2006 © ANIMA-AFII 2006 12

Why is Europe concerned?The Euro-Med challenge: an increasing divide! The southern rim (‘MEDA’, 10 countries, 240 m pop.) needs to create 4 million jobs per year just to maintain its current unemployment rate

No jobs equals major risksThis challenge may be transformed into an opportunity:

A boost for local and regional development (40 million jobs mean 40 million consumers)

A new burst of growth for EU companies and societies looking for markets and growth

An obligation to develop reforms towards an investor-friendly environment

EU-15: EU-15: US$US$ 22,68922,689

MEDA-10: 2,360 MEDA-10: 2,360 US$US$

New New members-members-10: 10: US$5,373 US$5,373

GDP per capita 2002, World Bank

The biggest economic divide in the world!

ANIMA

June 2006 © ANIMA-AFII 2006 13

EU companies looking at MEDA as a growth

destination

Eastern Europe and China are becoming less attractive (costs, capacity saturation etc.)Big companies are better aware of the MEDA opportunities MEDA is closing its gap vs. Eastern Europe (46% of projects in 2005, vs. 28% in 2002)

Quotes from les Echos, 24/5/2006:

"Though tempting, the Chinese market remains complicated and expensive"

"I very highly disadvise China to SMEs without a real know-how and robust shoulders"

"Settling here has a price. You have to integrate the language, distance, culture, the relative value of contracts, regulations… "

"Start-ups have difficulties with Chinese wages in new technologies"

ANIMA

June 2006 © ANIMA-AFII 2006 14

Example of MedValleyPotential innovation hubs at the very gates of EuropeThousands of engineers & researchers !100 clusters, technoparks, R&D centres detected by ANIMA in the South

Algeria1 (5) Morocco

1 8

Tunisia1 (5) 8

Malta2 1

Spain17 16

Portugal5 5

France47 57

Italy17 51

Greece4 10

Turkey15 2

LibyaEgypt3 5 (40)

SyriaCyprus2 1

Israel2 26

Jordan1 1

Lebanon2

Palestine1 1

technopoles incubators & nurseries

Algeria1 (5) Morocco

1 8

Tunisia1 (5) 8

Malta2 1

Spain17 16

Portugal5 5

France47 57

Italy17 51

Greece4 10

Turkey15 2

LibyaEgypt3 5 (40)

SyriaCyprus2 1

Israel2 26

Jordan1 1

Lebanon2

Palestine1 1

technopoles incubators & nurseries

ANIMA

June 2006 © ANIMA-AFII 2006 15

A growing number of very large scale investments

Top capital investments announced in 20051. Oger (Saudi Arabia), telecomm. network, Turkey, $6.55 bn  

2. Vodafone (UK), telecomm. network, Turkey, $4.55 bn

3. Shell (Netherlands), energy, Turkey, $4.14 bn

4. Intel (United States), electronic components, Israel, $4 bn

5. Emaar Properties (UAE), real est./ public works, Egypt, $4 bn

6. Aref Investment (Kuwait), real est./ public works, Syria, $4 bn

7. Emaar Properties (UAE), real est./ public works, Syria, $3.9 bn

8. Telia Sonera (Sweden), telecomm. network, Turkey, $3.1 bn

9. Credit Line (Russia), energy, Syria, $2.7 bn

10. Apachi (United States), energy, Egypt, $2 bn

ANIMA

June 2006 © ANIMA-AFII 2006 16

Work in progress… Legal integration of the Mediterranean markets (Standards, Customs)

Via Euromed Market and Euromed Quality

Physical integration Via Euromed Transport

Creation of a legal framework (e.g. IP rights) Via ANIMA Investment Charter And other efforts - Doing Business (World Bank),

OECD

Networking and information sharing on potential markets and investors

SMILE and MIPO bases, UNIDO opportunities exchange, business forums, ANIMA web site

Improvement of the Mediterranean image for investors

E. g. annual ANIMA business summit with The Economist –or this event…

Boost

Investments into the

Mediterranean

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June 2006 © ANIMA-AFII 2006 17

Methodology : how to measure FDI performance?

Macro-economic approach: financial records (past) Method: national financial accounts (Central Bank) Why? worldwide coverage; long series; ‘objective’ data Limits: mixes portfolio and physical investment; not fitted

for regional/local agencies; only financial; only registered with official disbursement

Micro-economic approach: announcements (past + anticipation)

Method: detection of individual projects via IPA registration or economic intelligence (media, newsletters, internet)

Why? knowledge of projects; may include jobs Limits: estimation by default (depending on the net size);

based on declarations; mixes various types of info/ projects

ANIMA

June 2006 © ANIMA-AFII 2006 18

MIPO process

• FDI projects• Prospects

• Small projects (franchise, rep.

office)

InternetWebwatcher /

Monitoring of companies

Others sourcesNewsletters, events,

listings

Direct information

ANIMA team

RecordsIPAs & other

partners

Factiva economic newsflow (>15,000 news per day) Reuters -Dow Jones etc.Open databases e. g. Kompass, Google, etc.

Semantic

analysis

Selection of ± 1,000 news

and alerts per year for MEDA

MIPOMediterranean

Investment Project

Observatory

VigieInvest in France FDI data base on

30 European countries

Benchmarkinge. g. with East. Europe

ANIMA

June 2006 © ANIMA-AFII 2006 19

About MIPO: data collected on each

projectDate of the newsOrigin countryHost countryCompany or investorSector (23 sectors)Summary of the project (in Engl. & French)Type of project (greenfield, brownfield, JV etc.)Type of company (Transnational, major co., SME)

FDI amount in €m (known for 46% of projects)Jobs created (known for 16% of projects)

Detailed news One or several articles, source, web site,

informations on the company etc.

ANIMA

June 2006 © ANIMA-AFII 2006 20

Examples of MIPO outputs

ANIMA

June 2006 © ANIMA-AFII 2006 21

Thank you / Contact usCoordination (French desk) : Bénédict de Saint-Laurent, (AFII), France T : + 33 4 96 11 67 62 Mailto : bdsl@afii.fr

Italian desk: Raffaela Di Emidio, (ICE), Italie T : + 39 06 59 92 68 89 Mailto : r.diemidio@ice.it

Moroccan desk: Laïla Sbiti, Direction des Investissements, Ministère des Affaires Générales, des Affaires Economiques et de la Mise à Niveau de l’Economie, Maroc T : + 212 37 67 35 06 Mailto : lailas@invest.gov.ma

EuropeAid Co-operation Office : Fabian Verhoeven Mailto : fabian.verhoeven@cec.eu.int

ANIMA

June 2006 © ANIMA-AFII 2006 22

ReferencesThe MEDA region covers: Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, Palestinian Authority, Syria, Tunisia and Turkey

ANIMA - Euromed Network of Investment Promotion Agencies

Is a European-funded project devoted to helping MEDA acquire the tools and the strategies to attract foreign direct investment

The Invest in France Agency (AFII), assisted by ICE (Italy) and the Direction des Investissements (Morocco), runs the project

The MEDA Investment Agencies, the City of Marseille, the Euroméditerranée Agency and the Provence-Alpes-Côte d’Azur region also contribute

The Mediterranean Investment Project Observatory (MIPO) is a tool developed by ANIMA to monitor investment into the MEDA region and is available on line via the ANIMA website

www.animaweb.org