| The Maghreb populations of Algeria, Morocco, Tunisia and Libya collectively match Egypt’s, but these countries offer distinct opportunities for European investors and might soon be part of a new, French-led Mediterranean Union, says Justin Keay  If prizes were given for being misunderstood (indeed often ignored) by Europe’s business community, Algeria, Tunisia and Morocco would win gold, silver and bronze. Despite their proximity to Europe – Tangier, one of the Maghreb region’s most important cities, is less than 15 km from the Spanish mainland – for most Europeans, these countries might as well be thousands of miles away. At a pinch, Algeria might be vaguely associated with gas, but it’s probably better known for the Islamist terrorism that plagued it after the abortive 1992 elections (although much less of a threat, the Salafist Group for Preaching and Combat recently morphed into an Algerian franchise of al Qaeda). Morocco, by contrast, would be noted for its tourism and real estate potential (the main exports of phosphates and, even less competitively, textiles having little interest for most European companies), while Tunisia would also be known for tourism.
“Europe’s companies have generally viewed the region as a better risk than Africa or parts of Latin America, but without the huge potential of South-East Asia or even choice parts of Africa. There are also concerns about stagnant reform programmes and the skills base, which simply doesn’t compare to eastern Europe,” says George Joffe of Cambridge University’s Centre for International Studies. This indifference has been echoed by the EU, which despite repeated promises to make the region a priority has been more concerned with enlargement and integration – and, more recently, tackling an increasingly hostile Russia and an aggrieved Turkey. Any involvement has been aimed at reducing terrorism – a problem in Algeria and Morocco – and curbing migration, which has become a growing concern for Southern Europe.  “Europeans have been slow to realise the region’s potential, with non-French speakers wary and almost everyone confused by how to access the EU grants made available through the EU’s Barcelona Process,” says Michael Thomas, head of the Middle East Association, which leads regular trade missions from the UK.
Against the backdrop of Nicolas Sarkozy’s accession to the French presidency (see France reasserts itself, page 90), a growing desire for energy security and the promise of the region becoming an EU free trade area in 2012, however, perceptions are changing. “With Europe more interested, these countries seem to be on outreach, extolling their own virtues against those of their neighbours,” says Mohammed Shakeel of the Economist Intelligence Unit. Morocco and Tunisia remain attractive destinations for tourism and real estate developers, with favourable prices increasingly attracting investment from the Gulf States in particular; Tunisia’s more diversified economy is also likely to be a magnet for European SMEs looking for partnerships, particularly in the electronics and light manufacturing sectors.  Algeria is undoubtedly the most interesting, in part because of its immense gas wealth (reserves, at 162 trillion cubic feet, are Africa’s second-largest after Nigeria), which have attracted BP – the largest foreign investor – Norway’s Statoil, Italy’s ENI and Spain’s Repsol, all anticipating growing European demand for Algerian gas. Another factor is President Abdelaziz Bouteflika’s strategy of breaking with Algeria’s statist past: privatisation is planned in the banking, telecoms and power sectors, tourism is on the up, and the government has launched a major public works programme aimed at modernising infrastructure and reducing youth unemployment, which outside Algiers can reach 40%.
A further plus is improved neighbourliness, helped by Libya’s emergence from the diplomatic wilderness. Although the border between Algeria and Morocco remains sealed – due to Algiers’ support for the Polisario Front in the contested Western Sahara – and intra-Maghreb trade, in a typical year, is just 3% of total trade, in March the Arab Maghreb Union had its first meeting in 13 years. As well as promising to work together more closely, the five countries (Libya and Mauritania are also members) agreed to set up a new investment/ development bank to help fund intra-Maghreb projects. |
 Europe’s media noted President Nicolas Sarkozy’s first 100 days by focusing on his dynamism, in marked contrast to the timeworn lethargy of Jacques Chirac. Only the more perceptive noted that the new president has made the Maghreb region one of France’s key geopolitical and business priorities. Sarkozy chose to make his first official visits outside the EU to Algeria and Tunisia , while Morocco has cancelled its visit from the French president, miffed that Algiers was first on his itinerary. All three are to be visited (again in the case of Algeria and Tunisia) in the autumn, with energy security a key focus. France is to sign an agreement with Algeria offering nuclear energy expertise in exchange for access to Algeria’s plentiful gas supplies.
The president has also been focusing strongly on Libya. His wife Cecilia’s visit in late July to successfully negotiate the release of five Bulgarian nurses and a Palestinian doctor was linked by opponents to the subsequent signing of a French-Libyan agreement to cooperate on nuclear energy and other issues. Whatever the truth, observers say that some 51 years after France gave independence to Morocco and Tunisia and 45 after it rather more reluctantly let go of Algeria, French interest in the region is unbounded. Mindful that the EU plans to establish a free trade zone with many Maghreb countries (though not yet Libya) in 2012 – following on from association agreements signed between 2002 and 2003 – French companies in the energy, tourism and other sectors can be expected to follow the trail being blazed by Sarkozy. Integral to all this is Sarkozy’s plan for a Mediterranean Union (MU), bringing together the 16 countries bordering the Mediterranean but emphasising the Maghreb region. Critics say the plan amounts to little more than a revival of the now almost moribund Barcelona Process, launched with great fanfare by the EU 12 years ago to boost trading, energy and political relations with “neighbouring” Mediterranean countries. However, France is pushing for an early meeting and has suggested as the MU’s centrepiece a Mediterranean investment bank modelled on the European Investment Bank to promote and push major infrastructure and other investment projects. With France to hold the European presidency in the second half of 2008, the MU may soon be a subject on everybody’s lips. When the Corinthia Bab Africa, Libya’s first five-star hotel, opened in September, 2003, travel companies hoped the historic inauguration would encourage waves of tourists to trek to the remarkable Roman ruins at Leptis Magna and Sabratha and the country’s unspoiled Mediterranean beaches. Unfortunately, last year Libya attracted just 300,000 visitors; many tourists may have been discouraged by the fact that Libya is a dry country in more ways than one (alcohol is prohibited) and that beyond the Corinthia Hotel, facilities remain primitive. It is a safe bet that most of those that did travel to Libya were business people, with the oil majors leading the charge. “Twenty-odd years of sanctions and isolation means that in business terms, Libya is at rock bottom,” says the Economist Intelligence Unit’s Mohammed Shakeel. “Companies recognise the opportunities inherent in this situation.” President Muammar Gaddafi’s much-publicised opening up of his desert nation to the world – a move buoyed by the US and EU decision to restore full diplomatic relations back in 2004, and the recent release of seven foreigners detained for allegedly deliberately infecting hospital patients with HIV – created an almost feverish mood among energy companies. Little wonder: the US Energy Information Administration says Libya holds Africa’s largest proven oil reserves (41.5 billion barrels against Nigeria’s 36.2 billion and Algeria’s 12.3 billion) and its third-largest gas reserves (52.7 trillion cubic feet). Tripoli’s National Oil Company recently announced that it would like to see oil production capacity increase by some 40% by 2013, from 1.8 million barrels per day to three million. And that’s not all: oil research company Wood Mackenzie suggests that sanctions and under-investment have left the country “highly unexplored”. “Libya is very much the opportunity of the moment,” says George Joffe of the Centre for International Studies. The largest company to have seized that opportunity is BP, which in July unveiled a major €742m deal to commence exploration and production in Libya. Observers say the move – which marked BP’s return to Libya after a gap of 33 years – could eventually be worth billions; companies from Spain, Malta – which developed a special relationship with Libya in the 1970s and 1980s and is now cashing in on the desert nation’s return to respectability – and notably former colonial power Italy are also present, however. ENI is involved both in the Western Libyan Gas Project and Greenstream, both gas export projects, with the latter transporting natural gas to the Italian mainland via Sicily by means of an underwater pipeline. ENI has also proposed a pipeline linking Libya’s gas reserves to Egypt’s. Libya’s potential would be much greater if talk were translated into action. With one of Gaddafi’s sons, Saif al-Islam, pushing reform, US consultancies are currently advising on how to make the business environment more transparent and the economy more liberal, with financial reform seen as a priority. Privatisation is at the starting blocks with talk of sales of a state-run bank and mobile insurance company, but the bureaucracy remains oppressive and the judiciary centralised. “In two years’ time, Libya will be commemorating the 40th anniversary of the revolution. My guess is that as we approach this we will hear a lot more about ‘moving forward to the next stage’,” says Shakeel. |