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European investors: Mediterranean Arab markets are considerable

Global Arab Network - David Morgan

Friday, 19 February 2010 16:09

Parliamentary_Assembly_of_the_Mediterranean-

The attractions of the Mediterranean Arab markets for European investors are considerable, says a new report.

The new guide highlighting options for investors in the Mediterranean region has recently been published by the European Union agency ANIMA Investment Network, a multi-country platform supporting the economic development of the Mediterranean.
The guidebook is the first step in a process of surveying and mapping of economic activities in the Mediterranean region, undertaken by the EU’s Invest in Med programme which is designed to help countries to better understand and compare themselves.
The ANIMA network gathers around 40 governmental agencies and international networks. Its remit is to contribute to a better investment and business climate and to the growth of capital flows into the Mediterranean region.
The main purpose is to provide foreign investors looking at the Southern Mediterranean countries benefiting from the Invest in Med programme, with an operational tool that would help them to answer specific questions, such as the following:What are the countries that wish to promote the development of enterprises in my sector?
What are the regions in which my business can grow?
What are the infrastructures, industrial or economic zones in which I am likely to find partners, sub-contractors, competitors?
What are the facilitating policies that affect me?
Whom to contact to activate them?
Users of the new guide are offered a choice between three gateways to access information:
-A captioned map per country that offers a view of the key sectors in that country and the main infrastructures and zones in which the economic development is taking place;
-For each country, there is a set of summary sheets on the industrial strategy, the country position vis-à-vis foreign investors, the sectors of specialisation by region;
-For 15 major sectors whose development is considered a priority by the Med countries, the list of countries where each of them is present and, for each country, a fact sheet on the challenges, opportunities, players and contacts for this sector.

Key Sectors in the Region
Promising investment opportunities exist in a broad range of key strategic sectors which the report outlines as follows:
Agriculture, Fishing and Agribusiness;
Energy, Water and Environment;
Marble & Stone
Minerals, Chemicals, Plastics & Fertilisers;
Life Sciences;
Textiles, Leather & Garments;
ICT and Business Process Outsourcing (BPO);
Electricals & Electronics;
Automotive & Mechanics;
Aeronautics;
Metal & Steel Industries;
Public Works, Transport & Logistics;
Banking, Insurance & Financial Services;
Retail;
Real Estate & Tourism.

International Positioning of the Med
The report characterises the regional market as one facing numerous challenges in its international positioning. On the one hand, the countries of the Mediterranean remain low-cost production destinations, and as such, they attract a large number of industrial activities with substantial needs in terms of human and energy resources. One the other hand, the countries continue to catch up with those of the Northern rim, notably in terms of infrastructure such as transportation, utilities, residential and commercial real estate.
Finally, it is clear that some sectors in the region are growing in all countries and that they are building a global position in a number of value chains such as agri-business, ICT, textiles, tourism, healthcare and logistics.
Infrastructure
The Med countries have been committed for several years to the implementation of infrastructure investment policies designed to facilitate their economic development. These include transport networks, upgrading of ports, creation of business and technological parks and developments of telecommunications.
Such investment programmes, often carried out by governments, have also been an opportunity for privatisation or concessions, which has introduced some major international and regional operators into the local markets with varying degrees of success.
This process of upgrading is still going on. In telecommunications, for example, where many licences have already been granted between 2002 and 2006, two licences were awarded in Jordan and Tunisia in 2009.
A qualitative leap has to be achieved in logistics and retail. It would be worthwhile for European investors to take a position in markets where: domestic transport infrastructure has well progressed thanks to public investment, local markets are often solvent and demand has continued to grow even during the global recession.
Above all, most countries have a demand for projects in the field of water management, waste treatment and housing development, particularly for social housing.

Competitive Destinations
The Med region does not intend to become the world’s factory. In fact, declining birth rates, the increasing number of young graduates and initiatives in favour of the education of people in countries that suffer from illiteracy, may bring about the economic convergence towards which the two rims of the Mediterranean are moving.
Consequently, the region would better position itself in providing activities with high added value rather than compete solely on reducing factor costs.
The report stresses that the Mediterranean countries remain competitive for European companies seeking to relocate productive activities in the vicinity of Europe for activities with high energy needs or for some activities that require a competitive and often specialised workforce.
This is the case in countries like Algeria and Syria which, through their own production of hydrocarbons, attract metallurgical and chemical industries which are highly energy intensive. The chemicals sector is also growing in countries with local raw materials such as Jordan and Morocco as is mining activities in Jordan.

Value Chains
Southern Mediterranean countries sometimes experience some difficulties in differentiating themselves from each other due to comparable market sizes and similar comparative advantages. However, in a certain number of sectors, a de fact positioning of the region relative to other regions of the world is becoming apparent. The development of these sectors, seem as priorities by each country, logically stems from the identity and location of the Mediterranean: these sector are agri-business, textiles, tourism and logistics as well as ICT.

Agri-business
The Southern rim of the Med enjoys important strengths to take a lead in the agri-business sector, starting with its excellent culinary reputation, in Lebanon, Morocco and Syria in particular.
Firstly, the region has significant producers such as Egypt, which is 8th in the world in terms of fruit and vegetable production, Morocco, where 60% of the population make a living from agriculture, and Syria, where agriculture represents 25% of GDP.
Increasingly, countries in the region are enhancing their added value by developing their processing industries; this is the case in Jordan, Tunisia, Morocco, Syria and Egypt. Likewise, countries like Egypt, Morocco and Lebanon are developing their packaging for export development.
Advanced technologies in the field of processing and irrigation are being adopted across the region. And land rental is beginning to expand for major operators.

Logistics hub
Several factors make the Southern rim increasingly essential in the supply chain for companies seeking to target the Euro-African region and the Middle East.
The first strength is the existence of raw materials, such as agricultural and fishing produce, minerals and hydrocarbons.
The region is also experiencing the transit of some 30% of the world’s container traffic between Port Said in Egypt and Gibraltar. In fact, the Med has a number of ports already well equipped to receive the largest vessels, namely Port Said, Tangiers, Malta, Enfidha and Cap Djinet in future. These have industrial zones adapted to suit processing industries, such as automotive, nearly.
Another positive factor is that the Southern Med countries possess domestic markets where demand is still growing, in contrast to some Northern rim countries.

ICT
The Med countries are important markets for the upgrading of SMEs in all areas of ICT, whether this is web, ERP or IP telephony. In general the markets are well treated by local and foreign players and are supported by government incentives.
In the ICT sector, the Med countries have already demonstrated their abilities to move forward. Low landline phone availability has been wiped off by the recent flood of mobile phones.
The region is now set to experience a technological leap over the wireless internet, Wimax-3G/4G. From East to West, the Southern rim of the Med is producing engineers and innovative start-ups.
Pioneer markets are emerging, as well as technological know-how tailored to the economic realities of those countries. Moreover the professionalization achieved in the main ports of the region, the opening of airspace and the expertise developed in relations with foreign customers makes the region a possible rear base for e-commerce operators in the Northern rim.
This is especially the case now that governments are embarking on incentive policies for e-commerce.
After the customer relations management centres of yesterday, today software and voice over IP, tomorrow’s mobile Internet and e-commerce, after tomorrow, the Med may be the pioneer of m-commerce (the electronic commerce on mobile devices?

Fashion and Textiles
Fashion and textiles are traditional strengths of the regional economies, but two areas are identified in the report as promising for development in coming years: first, medium and upmarket “fast fashion” where the short distance between the Southern Med and the European continent allows restocking in record time which the Asian competitors cannot beat; second, the technical textiles bound for new sectors developing in the region, such as textiles and gauze for pharmacy and textile packaging for logistics.

Specialised Tourism
The Med is one of the top tourism destinations in the world. Moreover, tourism is one of the main providers of foreign exchange for the Southern countries.
Today the industry is moving towards greater specialisation of products offered to global travellers.
The Med is responding to this change by greatly diversifying its offer: medical tourism in Tunisia, business tourism in Jordan, golf in Morocco, diving and nature in Egypt. These all depend on more skilled staff.
But the seaside tourism, the heritage or religious tourism still attract the bulk of visitors to the region. Large resorts have emerged or have been announced all around the Med coast, posing the issue of environmental compliance of these projects.
Domestic tourism, meanwhile, offers a new source of opportunities that could enable development of the hinterland, which is an important challenge for the Med countries.
In terms of heritage tourism, some new projects could also be developed possibly with foreign funding in order to develop networks based on the rehabilitation of each country’s historic heritage.
In future issues we will look at each of the Arab markets in this region.

Global Arab Network

This article appears in Arab-British Business, the bulletin of the Arab-British Chamber of Commerce.

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