By IPS Correspondents
LISBON, Mar 7 2000 (IPS)

Regional development can only take place in a climate of peace and stability and this means Mediterranean countries have to reduce the amount of money spent on arms, former Israeli Prime Minister Shimon Peres said.

He was addressing an investment conference attended by representatives of the European Union (EU) and 12 countries and territories in the Euro-Mediterranean Partnership in Lisbon last week.

Peres, Israel’s current minister for regional development, spoke with passion of a regional ‘infrastructure for war, not for the economy’ and the need to reverse that equation.

“There is no point singing the praise of liberalisation and deregulation when peace and stability is absent,” he said.

“The problem for us is how close the Mediterranean will come to Europe (in its outlook)… the average expenditure on arms in the region is 10 percent (of gross domestic product, GDP), while in Europe this is two percent,” he said.

Organised by Tunisia and Portugal, the conference focussed on the gradual establishment of a trade area extending from Arctic Finland to North Africa and the Middle East by the year 2010.

Portugal holds the rotating presidency of the EU until the end of June.

The meeting agreed to increase lateral ties and promote stability in the South in order to attract investment from the North.

Under a process known as the Barcelona Declaration, the foreign ministers of the 15 EU member states and their Mediterranean partners – Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta, Morocco, Syria, Tunisia, Turkey and the Palestinian Authority – in 1995 agreed to a framework for increased ties.

The framework calls for political stability and security; economic and financial co-operation and social and cultural cooperation.

According to an analysis by the European Investment Bank (EIB), the EU’s financial arm, economic development of the Mediterranean area will depend on expanding and strengthening links with the EU.

Conference participants agreed that North-South co-operation in the Mediterranean region was well under way, but said that East- West co-operation had also to be strengthened.

The absence of an integrated regional market, especially horizontally, and the need for reform in taxation, administration, and other legal aspects of doing business in the Mediterranean region were also highlighted.

The EIB analysis said that laying the basis for balanced development – and peace – depended on greater economic integration.

A new survey, “Foreign Direct Investment in Africa: Performance and Potential,” conducted by the United Nation’s Committee for Trade and Development (UNCTAD) and the Paris-based International Chamber of Commerce (ICC) found that South Africa seen as the most attractive nations in Africa for foreign investors.

Egypt comes in second followed by Morocco, Tunisia, Cote d’Ivoire and Ghana.

Contrary to common perception, the survey found that Foreign Direct Investment (FDI) in Africa is no longer concentrated in natural resources.

Even in oil-exporting countries, services and manufacturing are key sectors for FDI. Tourism FDI represents the second largest FDI sector in Egypt, after manufacturing. Egypt is also attracting FDI in research and development related projects.

The survey showed that Morocco’s FDI receipts have increased five-fold in the past decade, to reach 1,1 billion US Dollars in 1997, most of it in manufacturing and services.

In recent years, the Mediterranean countries have implemented a variety of fiscal incentives, specifically aimed at foreign investors, via the promotion of fiscal incentives, via the provision of fiscal exemptions in strategic sectors, favourable treatment for exporting companies, the establishment of special development zones and other measures.

Still, FDI in the Mediterranean represents about two percent of the global figure.

French Finance Minister Christian Sautter, noting that global foreign direct investment had grown exponentially in Asia and Latin America, said that the economies of the Mediterranean region were performing ‘far below their potential’.

He said liberalisation of the market was the key to success. France will hold the 4th Euro-Mediterranean Conference (‘Barcelona IV’) this November in Marseilles, possibly at the heads-of-state level, Sautter said.

He stressed that the ‘Euro-Mediterranean’ partnership was (now) a priority for EU foreign policy.”

Fethi Merdassi, Tunisian Minister for Investment Co-operation and External Investment, underlined the importance of strengthening Euro-Mediterranean co-operation seen in the context of globalisation.

He said that ‘investment is of prime importance … an essential lever in development’ and that it was ‘essential to iron out disparities, eliminate certain inequities’ noting that GDP in the 15 EU member states was 12 times higher than in the partner countries.

Peter Zangel, director of the Middle East and South Mediterranean unit within the EU executive’s external relations branch, said relatively low levels of investment in the Mediterranean mainly stemmed from economy of scale issues.

He noted that the largest country in the region, Turkey, has a GDP that is only 15 percent bigger than Denmark’s, while the most populated country, Egypt, “has an economy of about half the size of Poland.”

“For an international investor… this is an important aspect to consider. This even more so, as there is little economic co- operation among the different Mediterranean partners and a lack of integration across the region,” said Zangel.

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