Tom Blass
The turmoil that has beset the Middle East and north African political scene over the past two years has brought about a change in its investment mindset too, with many countries in the region looking to diversify their industrial output.
These are uncertain times for the Middle East and north Africa (MENA), and it is little wonder that this is reflected in FDI figures that show a significant drop in investment in the region – particularly in Arab Spring-affected countries such as Libya, Tunisia and Egypt.
But this belies another face of MENA industry; one that is committed to growth and to developing manufacturing capacity in a spectrum of sectors from food production, electronics, textiles – and even (and perhaps ironically) the production of solar energy components.
For the reality is that across the MENA region, governments are aware that they need to diversify their economies beyond services, tourism and hydrocarbons (where they have them) and develop a long-term industrial/manufacturing base. Only by so doing will they satisfy the expectations of their young and increasingly aspirational and well-educated populations.
A need to diversify
Investors taking a long term perspective also see the advantages of a region which, though in the throes of political change, is price competitive and boasts a highly able labour force.
Ania Thiemann, an economist with the Organisation for Economic Co-operation and Development’s Private Sector Development Division, says that all of the region’s transition economies – Morocco, Tunisia, Egypt and Jordan – are working hard to diversify their economies, and points to the Tangier Free Zone (TFZ) as case in point.
TFZ has already proved highly successful as an export processing zone, attracting more than €500,000-worth of investment into the processing of agri-foods, textiles, leather, metallurgy, chemicals and electronics.
And there is more on the cards. Due for completion of its first phase in 2014, Tanger Med Automotive Cluster is set to add additional capacity to the region’s industrial capacity, with a projected output of 400,000 locally manufactured Renault cars – a major step towards reducing high levels of local unemployment and the role of the black economy.
In the Gulf, governments are aware that they need to wean their revenues away from oil and to ensure greater local participation in the economy and workforce. One flagship project showing commitment to this set of imperatives is the Abu Dhabi government-funded Masdar initiative, which is investing heavily in the research and development and manufacture of renewable energy technology and equipment.
This kind of project is highly capital intensive, and requires long-term support. The project’s chairman, Ahmed Ali Al Sayegh, describes Masdar as a “key pillar in Abu Dhabi’s…broader vision towards sustainable economic development and diversification – and the fostering of knowledge-intensive industries.”
Renewable drive
Abu Dhabi is not the only example of a location in the MENA region looking at renewable energy as a source of capacity development and revenue generation. Other projects include the Ouarzazate 1 scheme in Morocco and the STEG project in Tunisia, both of which have received the backing of the World Bank’s Green Fund, which sees the economic, but also ultimately the environmental, benefits of investing in renewables in the MENA region.
In Dubai, there are also signs of a desire for diversification: in this case not from oil, but from the services and property boom that has driven the emirate’s extraordinary growth. Dubai World Central (DWC) – a huge government-backed ‘aerotropolis’, or logistics and trade hub, is set to become a major player in this field. In July, Swiss food company Nestlé signed a partnership agreement with DWC to build a 175,000-square-metre manufacturing facility for ‘nutrition, culinary and coffee products’, and created an additional 800 jobs in the process.
It is jobs such as these, and opportunities for skills development, that are badly needed throughout the region – and most especially in those countries that are still undergoing often painful political transition.
There are, of course, obstacles to investment, but while some investors will be cautious about doing business in the region, others will recognise that the forces of change behind MENA’s political transformations are those which will ultimately fuel economic growth and stimulate demand.
This article is sourced from fDi Magazine
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