Investment dynamics in Mediterranean countries : macroeconomic situation

Published : Thursday 16 July 2015 - Martin FLEURY, Jean-Philippe PAYET Cabinet R.M.D.A


In the North and in the South of the Mediterranean alike, the economic situation does not seem favourable to the implementation of new productive partnerships between countries undergoing diverse and complex economic and social issues. On the contrary, the latter generate deep economic tensions characterised by high unemployment rates, deflation risks, a decrease in household consumption, etc. 

Yet, for several years now, new economic dynamics are at work in order to promote at best the complementarities between the two shores of the Mediterranean. 

According to the former model, which still predominates in the region, there was a North-South complementarity, but it was limited to a traditional division of work, with Northern countries outsourcing production units in the South, employing an unskilled and low-added-value workforce. 

A new paradigm is setting up by relying on the main assets of the South, such as skilled and highly-skilled workforce, the presence of industrial partners well established on their respective markets, a strong infrastructure basis that keeps modernising, access to emerging markets in the Mediterranean and beyond, a dynamic youth and political regimes in transition that must focus on strengthening their economies. From then on, it is no longer about keeping activities requiring a high-skilled workforce in the North and relocating activities requiring a cheap and numerous workforce in the South. It is about combining the southern skilled workforce, cheaper than the northern one, with high added-value activities.  It is not about replacing skilled jobs in the North by skilled jobs in the South either. It is about integrating partners or localised activities in the South as part of a common growth project on the European market (500 million people) and on the broad emerging African market (2 billion people by 2050).   

Since its creation in 2006, IPEMED has been observing, identifying and analysing these new dynamics gathered under the terms “colocation” and “coproduction”. The Institute published several reports on the topic: 
Convergence en Méditerranée [Convergence in the Mediterranean] (Building the Mediterranean, IPEMED, Dec. 2010); 
Pour une stratégie euro-méditerranéenne de colocalisation [For a Euro-Mediterranean co-location strategy] (Studies & Analyses, IPEMED, Dec. 2012); 
Co-production in the Mediterranean: Examples et recommendations (Studies & Analyses, IPEMED, Nov. 2014). 

During the course of its works, IPEMED observed the high amount of diffuse statistical data regarding FDI in the Mediterranean, their origins and their evolutions. Yet, to this day, no global scientific study has been carried out on qualitative analyses and the strategies of investors, their behaviours, their expectations, or the obstacles and difficulties they are facing. Nevertheless, with the emergence of new dynamics such as coproduction, it seems necessary to carry out a work of ex post analysis and qualitative studies on investments made in the Mediterranean, in order to better understand and support this new model favouring the development of a sustainable, inclusive and lasting economy. 

Therefore, during its annual Forum held in Sousse, Tunisia, on 4 December 2014, IPEMED announced the launching of the Mediterranean Coproduction Observatory

Managed by IPEMED with the support of Bpifrance, the Mediterranean Coproduction Observatory aims at qualitatively analysing the strategies of Mediterranean investors, their behaviour, their expectations and the difficulties they are facing to integrate the local network. The Mediterranean Coproduction Observatory has a mission of observation, follow-up, information and awareness with Northern and Southern Mediterranean public authorities and companies, especially in future-oriented sectors. 

First publication of the Observatory, the report “Investment dynamics in the Mediterranean region: macroeconomic situation” examines the macroeconomic situation of seven southern and eastern Mediterranean countries (Algeria, Egypt, Jordan, Lebanon, Morocco, Tunisia and Turkey) as well as the investment dynamics operating in these countries, especially in cooperation with the four northern Mediterranean countries of the sample (Germany, Spain, France and Italy). 


Table of Contents

Introduction of Jean-Louis Guigou



1. Heavy trends and prospects of economic growth
Observation #1: SEMCs7 maintain a positive growth in spite of recent global and regional crises and prove relatively vulnerable to the European economic situation.
Observation #2: Growth in SEMCs7 remains insufficient to take up the economic and social challenges of sustainable development. 
Observation #3: The emergence of middle classes and the strategic position of SEMCs offer them promising perspectives.

2. Demography and employment
Observation #4: In the face of ageing Europe and the very young Sub-Saharan Africa, SEMCs12 represent a significant source of increasingly skilled workers.
Observation #5: In SEMCs7 unemployment remains high while the share of active population should increase significantly.

3. Financial relations
Observation #6: EU4 has important financial bonds with SEMCs7, especially in North Africa. However, they scarcely result in structuring and productive investments.

4. Trade and regional integration
Observation #7: In northern countries, regional integration is playing its role. SEMCs7 are still marginalised exportation partners.
Observation #8: Conversely, some southern countries highly depend on the EU for their exportations but infra-regional trade is at a standstill for lack of economic integration.
Observation #9: In SEMCs7, manufactured and mechanical products have progressively replaced agricultural products in terms of exportations, yet the technological sector remains backwards.            

5. Investment dynamics
Observation #10: FDIs are volatile on both shores. They are very sensitive to the international environment and to the perceived risk.
Observation #11: FDIs in the South do not produce sufficient added value.
Observation #12: Nevertheless, the actual risk seems overestimated, especially in SEMCs.

6. Competitiveness and coproduction
Observation #13: The reforms started in SEMCs rather converge towards EU standards. A complementarity can now be observed in terms of technology and access to markets.
Observation #14: In spite of continuous efforts, obstacles to the effective functioning of business must still be overcome to make of SEMCs7 real emerging countries.
Observation #15: In the meantime, competitiveness cluster strategies are emerging and helping reinforce the business environment.


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