Investment: Uncertainty casts a cloud over FDI - FT
The initial optimism surrounding the Middle East’s popular uprisings, which were sparked by political corruption and employment, has given way to mounting concerns over the political and legal uncertainty that has stymied more foreign investment, at least in the short term.
Source : https://www.marocafrik.com/english/Investment-Unce...
In an article in the Financial Times Abeer Alam reflects on the uncertain situations of countries facing challenges following the Arab Spring and their continued political instability and its effect on Foreign Direct Investment (FDI).
He notes that the drop in FDI in North African economies has been excaerbated by the continuing eurozone financial crisis which shows no sign of easing. This has resulted in an increased international cost of borrowing, restrictive credit rules and a liquidity crunch.The economies of North African countries are closely linked to Europe and they are now having to diversify their approach to foreign investment markets.
Egypt posted FDI outflows of $482.7m in 2011, compared with inflows of $6.4bn a year earlier due to persistant violent demonstrations and instability including strikes.Islamists are also viewed with suspicion such as Abdel Moneim Abol Fotouh'ssuggestions to cut energy subsidies by half to energy-intensive industries, and reassess FDI on the basis of technology transfer rather than job generation, has made some investors wary.
Investors are less concerned about a Muslim Brotherhood President because they think he will be able to work closely with the islamist dominated parliament the article says. Tourism has dropt in Egypt as elsewhere and officials are frightened of making decisions for which they maybe held responsible later .Real estate which was a big driver of investment and the Stock Exchange in Egypt is at a stand still because it was mired in corruption and official investigations are continuing.
However the fundementals of the Egyptian economy and its diversity remain in place and it is a large market of over 80 million people. It is not affected by the same instability as its neighbouring Libya which is trying to cope with militia and tribal armed clashes whilst to arrange for electionson 19 June. Gadaffi left Libya with no private sector and little infrastructure. Even oil exploration companies are now counting the cost of their exploration activities in Libya and Shell has halted its exploration operations because they are not economically viable.
Security is also a major worry for investors in Libya.
In both Egypt and Libya the absence of clear labour and taxation laws is also a disincentive for investors, and the
unwieldy administration and heavy bureaucarcy does not help. Frequent strikes also help to undermine the advantages of what were relatively cost effective marketplaces in terms of wages.Foreign investment is critical to job creation to stem an unemployment rate that hit 12.6 per cent in the first quarter of 2012 in Egypt.
About 3.4m working age people are unemployed, or 62,000 more than in the fourth quarter of last year, according to the Egyptian government.High unemployment among the young is a factor in all North African countries and as in the rest of the world it increases instability."Morocco may emerge as the winner of uncertainly in the Middle East. It is more stable and predictable than Egypt,’’ the article says
.
Analysts and investors note that Tunisia has clear taxation and labour laws and could be attractive to investors. But the small size of the market could prove a deterrent.
Libya’s chaotic transition and Algeria’s nationalist policies, which prompted the government to cancel or renegotiate contracts with foreigners, has made many investors wary. Whilst Algeria has the financial muscle at the moment it faces challenges as regards unemployment and housing which are straining its systems.
Whilst the desire to protect its economy from outside interference, given its history is understandable, it does not square with Algeria's frequent calls for foreign investment.
He notes that the drop in FDI in North African economies has been excaerbated by the continuing eurozone financial crisis which shows no sign of easing. This has resulted in an increased international cost of borrowing, restrictive credit rules and a liquidity crunch.The economies of North African countries are closely linked to Europe and they are now having to diversify their approach to foreign investment markets.
Egypt posted FDI outflows of $482.7m in 2011, compared with inflows of $6.4bn a year earlier due to persistant violent demonstrations and instability including strikes.Islamists are also viewed with suspicion such as Abdel Moneim Abol Fotouh'ssuggestions to cut energy subsidies by half to energy-intensive industries, and reassess FDI on the basis of technology transfer rather than job generation, has made some investors wary.
Investors are less concerned about a Muslim Brotherhood President because they think he will be able to work closely with the islamist dominated parliament the article says. Tourism has dropt in Egypt as elsewhere and officials are frightened of making decisions for which they maybe held responsible later .Real estate which was a big driver of investment and the Stock Exchange in Egypt is at a stand still because it was mired in corruption and official investigations are continuing.
However the fundementals of the Egyptian economy and its diversity remain in place and it is a large market of over 80 million people. It is not affected by the same instability as its neighbouring Libya which is trying to cope with militia and tribal armed clashes whilst to arrange for electionson 19 June. Gadaffi left Libya with no private sector and little infrastructure. Even oil exploration companies are now counting the cost of their exploration activities in Libya and Shell has halted its exploration operations because they are not economically viable.
Security is also a major worry for investors in Libya.
In both Egypt and Libya the absence of clear labour and taxation laws is also a disincentive for investors, and the
unwieldy administration and heavy bureaucarcy does not help. Frequent strikes also help to undermine the advantages of what were relatively cost effective marketplaces in terms of wages.Foreign investment is critical to job creation to stem an unemployment rate that hit 12.6 per cent in the first quarter of 2012 in Egypt.
About 3.4m working age people are unemployed, or 62,000 more than in the fourth quarter of last year, according to the Egyptian government.High unemployment among the young is a factor in all North African countries and as in the rest of the world it increases instability."Morocco may emerge as the winner of uncertainly in the Middle East. It is more stable and predictable than Egypt,’’ the article says
.
Analysts and investors note that Tunisia has clear taxation and labour laws and could be attractive to investors. But the small size of the market could prove a deterrent.
Libya’s chaotic transition and Algeria’s nationalist policies, which prompted the government to cancel or renegotiate contracts with foreigners, has made many investors wary. Whilst Algeria has the financial muscle at the moment it faces challenges as regards unemployment and housing which are straining its systems.
Whilst the desire to protect its economy from outside interference, given its history is understandable, it does not square with Algeria's frequent calls for foreign investment.
Source : https://www.marocafrik.com/english/Investment-Unce...