REVIVING INVESTMENT IN THE
MENA REGION
6 December 2011
Alexander Böhmer, Head, MENA-OECD Investment Programme
I. Investment decisions during transition periods
(1/2)
Factors impacting investment decisions during transition periods/
phases of instability :
Go/ No Go Issues •
•
•
High Concern
•
•
•
Standard Concern
•
•
•
Security: safety of employees
Security: ability to operate without external disruptions
Contract validity (especially with new governments) and
enforcement (legal mechanisms)
Expropriation
Capital transfer
Transparency of procurement decision and award processes
Likely return on investment
Future opportunities in country
Company’s comfort with type of project, operating
environment, and skill requirements
2
I. Investment decisions during transition periods
(2/2)
Sector differences matter
• Perceptions of risk vary strongly by
sector
• Some sectors – oil and minerals,
especially – are used to
challenging political environments
and security issues
• Other sectors with longer term
investment perspectives like
manufacturing and service sectors
are typically more fearful and riskaverse
 Special measures are required from host and home governments
to facilitate investment
3
II. Policy options for host governments (1/3)
 Host governments can mitigate certain risks perceived by investors
 Certain risks may be beyond reach (e.g., political turmoil)
Perceived Risk
Host Government Action
Security and
Political Risks
Guarantee security for operations
Enable involvement of guarantee agencies
Provide incentives
Contract Validity
and Enforcement
Adherence to BITs/ ICSID/ NY Convention
Clear contract terms
PPP law
4
II. Policy options for host governments (2/3)
Examples of recent measures taken by MENA countries to facilitate
investment :
Egypt
Creation of an Online Dispute Settlement Body by the General
Agency for Investment, in 2011
Morocco
Improvements in dealing with construction permits, protecting
investor’s rights and paying taxes, in 2011 (World Bank Doing
Business Report 2012)
Jordan
Strengthening of the legal framework for public private partnerships
(PPP) and promoting draft regulations to lower the cost of credit
information
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II. Policy options for host governments (3/3)
Perceived Risk
Expropriation and
Capital Movement
Transparency
Host Government Action
Explicit references in investment law
Referral to dispute resolution
mechanisms in contracts
BITs
Clear procedures (procurement,
licenses)
Clear contract terms
Dispute resolution mechanisms
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III. Policy options for home governments/
International Financial Institutions (1/2)
Perceived Risk
Inconvertibility and Transfer
Risk, Political Violence Risk,
Expropriation Risk, Breach of
Contract, Government Nonpayment
Risk of investing in
particular regions or
sectors
Government/ IFI Action
Consider improving
existing Guarantee/
Insurance offer (extended
risk coverage, fees,
extended country plafond)
Special investment funds
e.g.: MIGA’s MENA Trust
Fund
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III. Policy options for home governments/
International Financial Institutions (2/2)
Examples of measures by home governments/ IFIs to facilitate investment :
Bilateral
Investment
Assistance
• US support to investment in MENA through OPIC: USD 2 bn
• France support to Egypt and Tunisia: Immediate budgetary
support , a reinforcement of the guarantee systems for the benefit
of SMEs, and the development of key infrastructure projects
(USD 1,8 bn)
Multilateral
Development
Banks
G8 countries confirmed that Multilateral Development Banks
could provide USD 20 bn to support reform efforts in Egypt and
Tunisia over the 2011- 2013 period at the G8 Marseilles meeting
G8 Deauville
Partnership
Increased coordination and co-operation between IFIs from the
Partnership countries in the areas such as technical assistance
programmes and strengthened investment frameworks
New proposed
Instruments
Investment Security in the Mediterranean Region (ISMED)
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IV. Investment Security in the Mediterranean Region (ISMED):
Proposals for facilitating the implementation of long-term
infrastructure projects
Joint EC-OECD Support
Programme on legal security
assistance, insurance monitoring
and follow up of ISMED process
EC/ NIF window for
lowering guarantee
premium costs
Long-term
investments
lead by host states
and project
sponsors
MIGA or alternate qualified operator’s role
as facilitator in the guarantee and insurance
market
Extending actual
and encouraging
further risk-sharing
mechanisms
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