Mediterranean Coproduction Observatory
Documents following up the figures of foreign direct investments (FDI) in the Mediterranean already exist. Nevertheless, with the introduction of these new dynamics, such as coproduction, it seems necessary to carry out analyses and ex-post qualitative studies on the current investment dynamics going on in the Mediterranean.
The detailed knowledge of these industrial and service strategies in the Mediterranean must enable to encourage the development of coproduction and to make more tangible the shared benefits of this model in the distribution of the value chain.
Therefore, the Mediterranean Coproduction Observatory has a mission of observation, follow-up, information and awareness with public authorities as well as northern and southern Mediterranean companies, especially on future-oriented industries.
The works of the Mediterranean Coproduction Observatory aim at:
• identifying the different types of investments that the Mediterranean region attracts: Greenfield and brownfield FDI, subcontracting, relocation, coproduction, financial investments especially via local investment funds, etc.;
• assessing, in several sectors, the imported share of exported products and the share of flows regarding trade towards third markets, especially Sub-Saharan Africa;
• understanding the partnerships between northern and southern company managers that lead to a profitable exchange benefiting both northern and southern economies (partnership promotion);
• identifying and analysing promising sectors for the development of coproduction in the Mediterranean;
• identifying the obstacles to overcome (capitals and people mobility, investment security...) to facilitate the progression of the most profitable investments for both shore of the Mediterranean.
The concept of coproduction, also known as “industrializing industry”, was inspired by the theory of the flying geese paradigm developed by the Japanese economist Kaname Akamatsu in the 1930’s, and taken over by other theories such as that of Heckscher-Ohlin-Samuelson or that of the multinational specialist Raymond Vernon. Several experiences illustrate this concept.
The first application came from Japan which, in the 1960’s, started broadening its industrial production system to its neighbours which were to become the “Dragons” (South Korea, Taiwan, Hong Kong and Singapore) and later on to the “Tigers” (Thailand, Malaysia, Vietnam and Philippines). In Europe, after the fall of the Berlin wall in 1989, German companies successfully colocalised part of their production in Central and Eastern European Countries (CEEC). From 1994, the NAFTA allowed the boom of the maquiladora industry, which boosted the industrial relations between the United States and Mexico.
Characteristics of coproduction
In spite of the regional divergences, these different experiences have something in common: the manufacturing abroad, by a contracting country, of industrial intermediate components with a high added value by a skilled but cheaper workforce and on the basis of a partnership.
Seen as a positive alternative to offshoring, coproduction relies on the sharing of the value chain and on a more balanced North/South, but also South/South, partnership.
Therefore, both sides benefit from coproduction: it produces compensation effects having a positive impact on employment and on the competitiveness of the contracting company. Admittedly, the contractor first substitutes foreign workforce to the national production. However, very quickly its cost and non-cost competitiveness increase, which enables the company to earn market shares, invest, and therefore create jobs. As for the manufacturing country, the most important benefits lie in technology transfers, training, workforce professionalisation and an improvement of the industrial sector level.
Definition of the concept
Therefore, the position of the Observatory boils down to defining coproduction as: Joint development of a value chain, integrating at least one southern actor, involving long-term investments.
This definition comprises 4 inseparable ideas that we had to convey in this context:
• development of a value chain, in order for coproduction to generate a locally added value and at each step of its cycle, and therefore for all stakeholders ;
• notion of partnership, rather than subcontracting, for a balanced sharing of benefits ;
• integration or at least presence of a southern partner. Therefore cooperation can either be South/South, South/North, or even North/South ;
• sustainable investments, involving long-term planning, implemented jointly with no intention of making “fast money” in the short term.
• documentary review of existing literature in terms of industrial strategies of the Euro-Mediterranean sample countries (Algeria, Egypt, Jordan, Lebanon, Morocco, Tunisia, Turkey and Germany, Spain, France, Italy);
• collection of quantitative data and production of homogeneous statistics to assess the trends in each country, depending on the origin of investments, on the size of companies and on the concerned activity sectors;
• interviews of company managers, public administrations and experts and microeconomic analysis of the different types of investments in order to:
• identify their impacts on the competitiveness of northern and southern companies (financial results, intra- and extra-regional increased market shares, etc.);
• analyse the simultaneous job creation in both the North and the South and the quality of the created jobs;
• produce recommendations to inform and raise awareness in public authorities and private operators on both shores of the Mediterranean to the necessity of implementing incentives to coproduction good practices.
In order to enhance trends and presently useful information, the Observatory reduced the sample to 11 countries.
• Among the 28 countries of the European Union (UE28), Germany, Spain, France and Italy will be considered and gathered under the label UE 4.
• Among the 12 Southern and Eastern Mediterranean Countries (SEMC12), Algeria, Egypt, Jordan, Lebanon, Morocco, Tunisia and Turkey were selected for the exercise SEMC 7.
Since the Observatory also aims to offer public authorities recommendations to remove obstacles to coproduction, IPEMED is willing to strengthen its reflection in 2017 with an extra study on “North African Industrialisation, from Morocco to Egypt”. This study will aim to raise awareness in European and North African political and economic decision-makers on the industrialisation potential of the area in partnership with Europe.
Led by IPEMED, the Mediterranean Observatory for Coproduction gathers, in addition to IPEMED founding members, different institutions that are convinced of the virtuous pattern entailed by coproduction and committed for its development in the Mediterranean.
These institutions are:
- Ile-de-France Regional Council;
- Paris – Ile-de-France Regional Chamber of Commerce and Industry;
- The Union for the Mediterranean
IPEMED can also rely on IPEMED Tunisia, a branch of the Observatory that is based in Tunis and chaired by Noureddine HAJJI, General Director of EY Tunisia.