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Agrobusiness |
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Consumer goods |
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Automotive, aeronautical, subcontracting, mechanics |
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Public works, construction, water and environment |
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Information technology, electronics, telecoms |
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Pharmacy, health, chemistry, biotechnologies |
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Textile, garments |
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| SECTOR PERSPECTIVES
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SERVICES |
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Bank, financial insurance and other services |
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This sector is in full transformation in most MEDA countries, with a modernisation and an internationalisation of the banking networks, the implementation of insurance companies, the development of Islamic finance and the emergence of capital investment. |
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Services: |
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News of the sector |
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Investment Opportunities |
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Documents |
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Bank, financial insurance and other services |
This sector is in full transformation in most MEDA countries, with a modernisation and an internationalisation of the banking networks, the implementation of insurance companies, the development of Islamic finance and the emergence of capital investment.
In addition to these actors, other sources contribute to the funding of the MEDA economies:
- Domestic resources of course;
- Development aid organisations, and in particular EIB (but also the AfDB, AFD etc.) ;
- So-called "Arab" investors (petrodollars)
- The migrants, whose financial transfers are increasing. |
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The increasingly important role played by FDI in foreign revenues |
The direct foreign investment in the financial sector is very significant (18 billion euros listed by the MIPO-ANIMA observatory between 2003 and 2006, to compare with the 6 billion euros injected by the EIB over the same period).
The flow of banking FDI is nurtured by suggestions of a reform of the sector issued by the international institutions, especially the IMF. For example, in the case of Algeria, the IMF recommends the completion of the privatisation of the public banks, to make the monetary policy transparent and in compliance with international standards, and the modernisation of the systems and instruments of payment. The public banks represent 90% of bank assets, have a weak capacity of appreciation of industrial risks and are penalised by doubtful debts.
This situation creates opportunities for the large European and international bank networks, which are anticipating an opening of the MEDA market and are taking up positions to lend to industry, in an often more dynamic way than the banks on site.
What share of external foreign flows to the MEDA region does FDI account for? Capital inflows are growing sharply (Figure 4), whereas public aid for development has dropped to moderate levels. Other forms of income, however, are becoming increasingly important, including remittances (which have doubled in ten years), tourism earnings (which tripled from US $12.5 billion to US $42.7 billion between 1995 and 2005) and FDI (relatively lower initial levels but increasing rapidly). By 2006, for example, FDI (almost US $50 billion) could become the region’s primary source of foreign capital.
Main foreign revenue sources in the MEDA region
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US $ m
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Foreign direct investment
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Tourism earnings
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Remittances
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Public aid for development
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Total 1
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Year
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2005
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2005
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2004
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2004
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Source
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UNCTAD
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WTO
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World Bank
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World Bank
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Algeria
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1 081
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178
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2 460
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313
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3 959
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Egypt
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5 376
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6 851
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3 341
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1 458
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11 758
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Israel
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5 587
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1 900
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398
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479
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8 382
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Jordan
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1 532
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1 441
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2 288
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581
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5 065
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Lebanon
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2 573
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5 411
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5 723
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265
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9 588
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Morocco
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2 933
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4 617
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4 221
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706
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11 012
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Palestine A.
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-
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-
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692
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1 136
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1 828
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Syria
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500
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2 130
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855
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110
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3 250
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Tunisia
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782
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2 063
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804
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328
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3 450
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Turkey
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9 681
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18 152
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692
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257
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23 403
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MEDA-10
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30 045
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42 743
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18 133
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5 633
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96 553
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% 2004-2005
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31%
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44%
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19%
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6%
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100%
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MEDA-10 (earlier)
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8 942
(2003)
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24 797 (2003)
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13 700 (2003)
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9 235
(2002)
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56 673
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% 2003-2002
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16%
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44%
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24%
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16%
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100%
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1 This total should be interpreted with care as it represents data from different years (the most recent data compiled by ANIMA). Privatisation earnings are included in FDI.
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The project of creation of a Euro-mediterranean development bank |
Since the 70s and especially since the launch of the Euro-Mediterranean partnership in 1995, the EIB grants loans and subsidies to the MEDA countries. These contributions are in constant increase.
In October 2002, the Euro-Mediterranean Ministers of Finance inaugurated a new financial instrument: The Euro-Mediterranean Facility for Investment and Partnership (FEMIP). Financed on the own resources of the EIB and the budget of the EU, it was launched in order to give fresh impulse to the growth of MEDA countries (Mediterranean partners).
The FEMIP aims in particular developing the economic activity of the private sector and at facilitating the access of SME to funding. Considering the project of a customs union between the European Union and the MEDA countries planned for 2010, the FEMIP aims to support the processes of reform and privatisation of the economies of the Mediterranean countries.
Between October 2002 and December 2006, the Bank provided finance totalling nearly EUR 6 billion in support of investment projects in the region. The sum of EUR 8.7 billion is to be made available to the nine Mediterranean partner countries for the period 2007-2013. Financial support is directed towards private sector projects and also to public projects that help to create an enabling environment for the private sector to flourish.
Projects that can be financed under FEMIP can come from any of the eligible sectors:
- Energy –power generation, transmission and distribution, gas transmission and distribution, renewable energies;
- Transport and telecoms – airports, air transport, air traffic control, roads and highways, ports, bridges, telecoms;
- Environment – water supply and treatment, wastewater collection and treatment, solid waste disposal and treatment, pollution abatement, irrigation;
- Human and social capital – construction and equipment of hospitals, clinics and healthcare centres, construction and equipment of schools, technical and vocational colleges, social housing;
- Industry, tourism and services – industry and agro-industry, both large and small-scale (SME investments).
(source: EIB and ANIMA)
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The project of creation of a Euro-mediterranean development bank |
The European Commission, in a communication of February 27, 2002, submitted the project of an Euro-Mediterranean Development Bank, based on the BERD model (the European Bank for the rebuilding and the development created in 1990 to finance the transition in Eastern Europe), and which would be a subsidiary company of the EIB. It would receive the responsibility to continue the support granted by the EIB for investing in infrastructures, while strongly stimulating the development of the private sector. This solution has not been adopted so far by the European shareholders, who decided rather the reinforcement of the existing FEMIP. The project of creation of a bank remains however regularly on the agenda of the ECOFIN ministerial conference and were recently evoked within the framework of the project of Mediterranean Union. |
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Capital investment and funding of innovation in MEDA |
The financing of innovation is of course very different according to country:
• Israel is a singular case, a pioneer in matters of seed financing, thanks to the work accomplished by the Yozma Group and its foreign partners;
• The venture capital market is beginning to develop in a few other countries: Morocco, Turkey, Tunisia, and to a lesser extent, Egypt, Lebanon, Jordan;
• It is almost embryonic in Algeria, Syria and Palestine.
The business of the capital investment is much centred on the transformation of companies (move from a family structure to "modern" management, opening of the capital or sometimes IPO, LBO etc), whereas venture capital itself and technological projects are scarce, except in Israel. By excluding the latter country, which in these matters appears more like a European country as well as Cyprus and Malta, the market characteristics are hardly favourable to start-ups:
• In all these countries, to the risks inherent to young enterprises (technological risk, market risk, etc.), may be added the component of the country risk– this makes foreign and even domestic merchant banks more than wary (the latter often with little expertise in the high tech sectors);
• The low level development of the capital market is not linked to the lack of financial resources – in Algeria the merchant banks have large amounts of cash available, for example, but rather to the absence of systems of guarantee for the SMEs and micro-enterprises, especially those in the technological domain;
• The large financial operators (IFC, Proparco, CDC, international funds like Atlas, Apax, Partech, GE Capital, Advent, etc.) cream off the best « deals » on the high profitability sectors and the ones they know well (telecoms, software, pharmacy-biotech); these are often enterprises which are already operational, with relatively well guaranteed cash-flows;
• The real start-ups have much more difficulty in finding resources. Personal or family finances often make a contribution . The entrepreneurs reduce in this way their financial appetite. According to Marseille-Innovation, the amounts requested for seeding at the start-up auctions organised in Casablanca or in Tunis are 10 times smaller than similar calls for funds in Europe (15 to 30,000€ requested, against 150to 300,000€) ;
• Enterprise managers do not necessarily appreciate the constraints linked to the arrival of outside shareholders. They may prefer « quiet » family management, where there facilities are often written off, where their investment needs are low, to a « modern » capitalistic management even with a higher profitability and appreciation ;
• The exit difficulties obviously dissuade those incomers. The assets acquired are very rarely liquid. The exits through the introduction on the Stock Exchange are exceptional. In practice, a frequent solution for investors who want to recover their stake is to negotiate the sale of their shares to the founders of the enterprise – at the most attractive price …for the latter.
Despite these constraints, the market is evolving very rapidly. The EIB sets up new funds and instruments. A company such as Siparex (French N° 1 in private equity) made much to develop the business in Southern Mediterranean and created the Association Euromed Capital Forum whose ANIMA is cofounder besides.
The organs of management of the companies are opening up. The modernisation programmes and the perspective of the Euro-Med free trade area make everyone aware of the necessity of modernising. Foreign banks are setting up in the MEDA countries, certain targeting specifically enterprises (for example, Natexis Banques Populaires or Société Générale in Algeria). It is probable that more than 100 venture capital funds are operating in the MEDA region, plus 150 other funds and investment companies in Israel.
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Some MEDA investment funds |
Before 2006
- Actis (Egypt, Algeria etc.) : Capital ex CDC Partners, 2.8 billion US$
- Averroès Finances (MEDA): fund of funds (EIB, CDC-France, Proparco, Caisse d’Epargne Provence-Alpes-Corse, CDG Morocco), created in 2003, 29.5 million euros (administrative management by Viveris)
- EIB-Sonatrach (Algeria): Sigefi, 20 million euros
- Capital Morocco (Morocco): CDC, EIB etc, 25 million US$
- DZ-Invest (Algeria): ED-SME and Sofinance
- EFG-Hermes (Egypt): 4 investment funds in Egypt, 300 million US$
- Finalep (Algeria): investment company in Algeria
- The Maghreb Private Equity Fund: Tuninvest/BEI/others, 23.1 million dollars
- Moroccan Sindibad Fund (Morocco): CDG Development, CDC and EIB 5.5 million euros
- Lebanon Industry Fund (Lebanon): Middle East Capital Group and Siparex Services
- Moussahama (Morocco): CDG Morocco, 2 million euros
- SPPI (Tunisia): 1st SICAR created in Tunisia (a score of others), 7.6 million DT
- The Jordan Fund (Jordan): Foursan, 50 million US$
- Tuninvest (Tunisia, The Maghreb): 6 funds of private equity, 60 million US$
- Tunis Information Technology Funds (Tunisia): SICAR with IMBank
- Turkish Private Equity Fund I (Turkey): Turkven/IFC, 41 million US$
- Upline technologies (Morocco): CDG, 5 million euros
Launched since 2006 (inter alia):
- Altermed (Viveris, Marseille): € 100 million
- Kantara Fund (General Company Asset Management/BEI): € 120million, Maghreb, Egypt, Lebanon, Jordan
- Euromed (CCI Milan/SGR/BEI): €50 million (Maghreb and Egypt)
- The Maghreb Private Equity Fund II (Tuninvest/BEI/autres): €55 million (Maghreb)
- AfricInvest (Tuninvest): 35 € million (North Africa and the Sahel)
- Capital Olea (General Company Asset Managt./CA): €50 million (Morocco)
- Al-Numa (EIB, Instituto de Credito Oficial and Institute Catala de Finances, Caixa de Catalunya, Repsol, Caixa, Telefonica and Gas Natural, BMCE): €100 million
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