Tenth Mediterranean Research Meeting Montecatini Terme, 25-28 March 2009 Finance and Economic Development in the Mediterranean What economic future for the Southern Mediterranean rim? The prime role of SMEs and their financing Bénédict de Saint-Laurent, ANIMA, Invest in Med Programme Who are we, ANIMA ? z Initially: A Euro-Mediterranean Network of Investment Promotion Agencies (2002-2006) z Nov. 2006: a Federation of 18 founding organisations (ANIMA Investment Network) z Now (March 2009): 67 organisations committed to the economic development of the Mediterranean z Goals } Promote the Mediterranean as an attractive destination for investors (web site, events, scoreboards etc.) } Seek opportunities for territories and investors (economic intelligence, etc.) } Advocate a stable, dynamic and fair business environment for investors and enterprises MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 2 A. Prospective overview of Med economy MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 3 Med? What does it mean? z 9 countries associated with EU z Malta and Cyprus joined EU-27 in 2004 z Turkey is now a candidate to EU z Libya is an observer In these slides, European Union Turkey is included in the Med region Turkey (‘Med-10’), sometimes Libya, Syria Tunisia Malta Cyprus Cyprus & Malta Lebanon Jordan (’Med-13’) Morocco Palestine Algeria Israel Libya Gulf Egypt countries MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 4 What MED future? z The “MED” region represents at the same time } A relatively weak economic partner for Europe } One of its best cards for a sustainable recovery… z MED is both a time bomb and a remarkable opportunity, with } A rapidly growing population } Huge social needs } Infrastructure and environmental challenges } Insufficient capital inflows } Almost unachievable job creation requirements z Med= a risk or an asset ? } Depending of Europe’s appetite for security vs. venture MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 5 North rim share (EU) Example: huge urban needs South rim share (Med) 80% z In 2025, 100 cities over 1 m pop. 70% 66% 71% z Of which, 75 in Med countries 60% 50% 40% 30% 34% 29% 20% 1950 1975 2000 2025 Shift in global Euro-Med population share: the Southern rim now hosts more inhabitants Map by M.Joannon and L.Tirone. Year 2000 data. Source: Geopolis data base MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 6 A still highly uncertain future z Some dream about a deeper integration } Both intra-Med and with Europe } Stronger economic links } A more balanced sharing of wealth } A real partnership } A true Union for the Mediterranean… z This scheme would imply } More public and private investment } Not really the current priority in the present crisis times z Other views } Europe will lack million workers in coming years, easily supplied by MED job seekers } The Northern rim is able to carry more dwellers than the Southern shore -limited in terms of space, water, facilities } Population relocation into the North, a solution? MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 7 The economic gap with Europe… z Northern rim } Old countries, comfortable income per capita (8 times higher than in South), limited growth, industry losing GDP per capita 2007, World Bank momentum, post-industrial society centred on qualitative issues z Southern rim EU-27 : } Young countries, needed strong US$ 34,502 growth, industrial and service capabilities, pressure of quantitative issues - infrastructure, unemployment, Med-10 : US$4,737 basic services to the population MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 8 A very slow convergence… z Despite recent changes (growth differential, lower birth rate), it would take 150 years at current pace for Med to level with EU EU/MED ratio for GDP EU/MED ratio for GDP per capita EU/MED ratio for population 20 18.0 15.8 15.0 13.1 14.3 13.8 13.2 15 12.6 11.1 9.8 10 8.22 6.53 7.68 7.47 7.28 6.96 5.22 6.26 5.55 5 4.15 3.02 2.67 2.40 2.19 2.01 0 1.87 1.84 1.82 1.80 1.78 1980 1985 1990 1995 2000 2005 2006 2007 2010 2013 (est.) (est.) MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 9 Med, a motor for 10 year change in GDP growth Euro-Med growth? Source: www.ers.usda.gov 6.0 9.9 1997 9.3 1997 2006 2.6 2.2 1.4 4.5 2006 3.3 EU 27 RUSSIA 2006 EURO-MED 8.0 ALENA 1997 CHINA 2006 4.5 5.3 5.5 1997 3.6 4.4 INDIA MEDA 10 2006 ASEAN 4.9 5.1 5.0 1997 2.7 SADC MERCOSUR MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 10 The ‘natural’ Med future (land use) Based on ANIMA’s observatories /current FDI trend z A few areas of excellence (capital cities, logistics and industrial poles, prime service locations) } Able to retain the best of Med activities and citizens z The outer circles of these metropoles } For “urban servants” living in difficult conditions z The “average” territory (suburbs, small cities) } For the growing middle class z Rural spaces either exploited (traditional villages, agrifood, plantations) or semi-abandoned (desert, mountains, reserves) z Numerous tourism enclaves exploited by abroad operators z A few “retention” zones (something like Gaza...) for population not entitled to reach Europe… z The Mediterranean sea } Partly exploited (logistics, off-shore, aquaculture, tourism) } Partly sanctuarised (reserves), but globally more polluted MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 11 Industrial gaps in Med countries z Weak industrial fabric } Productive system characterised mainly by small enterprises } Strong specialisation in low and mid-tech sectors ~Agrofood, textile/clothing/footwear, furniture, mechanics } Local industry lacks depth, integration and international size ~Except energy, petrochemicals, mining, agribusiness, real estate, tourism and some new sectors (ICT, off-shoring) z Few world-level metropolitan industrial clusters } Tanger-Med, Arzew, Southern Tunis, Alexandria, Istanbul MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 12 Med business in the global world z Few international companies } Champions: Orascom, hydrocarbons, construction holdings… z Obstacles in enterprise/SME development } Infrastructure, financing, trade barriers, red tape, poor internet service } Limited entrepreneurship, university-industry relationship } The formal sector is often a minority employer z Companies dominated by foreign partners /competitors } Mainly sub-contractors or assemblers } Absence in the most strategic segments of the value chain (branding, design, organisation of work, marketing, logistics, R&D, distribution etc.) MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 13 Result: a limited position in world trade z 2.6% of exports, vs. 4% of population } And this percentage includes energy! z High imbalance imports (covered at 78%) vs. exports } With the notable exception of Algeria z Fairly modest intra- Med trade Source Euromed Transport 2002 data In 2006, the Euro-Med trade } 4.5% of imports represented €205 bn (imports + /6.2% exports, to be exports), vs. €140 bn in 2002 or a compared with 45 growth of around 9% per year /49% with EU MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 14 Med, what industrial future? z Probably not the plant of the world } Except in a few sectors: eg. petrochemicals, metallurgy, fertilizers z Some niches with competitive advantages for Med } Container routes, reasonable labour cost Æ cars, electronics } Heritage, civilisation, sun & sea Æ tourism, healthcare } Proximity with Europe Æ garments, short fashion } Interest for farming, gardening Æ agribusiness, organic food } Etc. z But most of growth and jobs will come from mid-size activities… } Services and light industry } Direct jump into the knowledge economy? } ICT, education, R&D z … and from smart co-development with Europe MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 15 Med, an attractive positioning z The central segment of world trade } 30% of world maritime freight & containers } 25% of hydrocarbures Northern Europe Bursa z A central positioning for high Black Sea value goods Southern Europe Central Asia } Car, electronics, brown products, fashion etc. Middle America, z An attractive production East platform East North Africa coast } Affordable labour costs America West } Good logistics Tanger Malta East coast Port z At the doors of Europe and Med Freeport Asia Euro-Med future single market Saïd MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 16 Move towards another future? z Still possible z Made of millions of individual decisions z Implies a set of collective choices based on long-term rationality } Systematic preference for sustainable projects } Development of subsidiarity and local accountability } Commitment to sound regional co-operation } Priority to education and training } Real economic chances given to entrepreneurs, youth, women and diasporas z Awareness and intelligence will be determining to avoid wasting the sometimes limited available resources } For instance seashore space, for which urbanisation, logistics, tourism, agriculture are fiercely competing MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 17 Example of real estate and urban generation z Ambitious urban projects (metropoles) } Re-building of CBDs, new towns, technoparks etc. } Real estate: over-représented (Gulf, mid-tech…) z A dual space management } Dynamism for private or commercial small space (house, office) –high profitability, intensive care } Weakness of collective approach concerning the public wide space (urban planning, utilities, transport, maintenance,etc.) z Strong trend towards seashore concentration } Serious long term problems (land, traffic, water, soils, etc.) MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 18 The turn for Southern shore to be consumed? Source: Joannon/Tirone 2001 MRM 2009 © ANIMA-Invest in Med www.invest-in-med.eu 19 B.