Politics tend to get in the way of FDI. Businesses like consistency and certainty; however, the 'science and art' of government can often bring change, an unwelcome distraction for investors who just want to get on with business.
Europe’s north African neighbours are going through some significant change at the moment. Out of the 11 north African countries that neighbour Europe, four have had or are having a revolution. One of these countries – Egypt – is a key economic player and future growth star, and another, Tunisia, is a top FDI performer for its size. It is topsy-turvy time for the investment promotion agencies (IPAs) set up to sell us the benefits of doing business on the shores of north Africa.
Immediate impacts on these countries have included expat workers leaving; rating agencies dropping credit ratings; some planned FDI projects being put on hold; and changes to the local decision-making capabilities. However, in the short to medium term, it is hoped that an improved business climate will result.
Europe has a big stake in this, accounting for half the region’s total FDI last year, by value. It needs to be a key partner going forward. It is interesting to note that Brazil, Russia, India and China are raising their investment interest in the north Africa region, with China being the fourth largest investor in 2010, and India and Russia close behind.
The Euro–north Africa relationship needs some rethinking to make sure Europe contributes sufficiently and effectively to support future economic development in the new regimes. This is a transitional time and stronger democracy, better social equality and fairer distribution of wealth will hopefully be to the fore. While it was 'easy money' being an IPA in the boring old predictable times, they now need to take the initiative and keep investors, both existing and future, in the loop with regard to changing events and emerging opportunities.
Douglas Clark is director of Location Connections, an FDI consultancy for smart companies and winning locations. Email: firstname.lastname@example.org