During the last stop of her recent African tour IMF’s Managing Director Christine Lagarde attended the fifth regional conference of finance ministers and central bank governors of the Maghreb region in Nouakchott, Mauritania where she again called for more foreign direct investment (FDI) towards Africa, this time to the Maghreb.[1]

In her speech before the audience on 9 January 2013, Unleashing the Economic Potential of the Maghreb—the Role of Foreign Investment,[2] Ms. Lagarde had in mind the aftermath of the 2011 Arab Uprising, a social and political movement that was particularly intense in the region (especially in Libya and Tunisia), and the message sent by the population to their leaders to claim, as Ms. Lagarde said, “for greater dignity, greater opportunity, greater equity in economic life.”

Ms. Lagarde considered that “the Arab Awakening must also lead to a “private sector awakening” –unleashing the productive potential of the Maghrebian people and creating an environment that supports innovation, entrepreneurship, creativity, and jobs.” She then put FDI as a crucial element in order to arrive at that result: “Foreign direct investment is a vital part of this strategy. It can kickstart growth and set in train a virtuous circle of higher productivity, enhanced economic diversity, and greater resilience against external turmoil.”

Ms. Lagarde underlined that, although FDI flowing to the Maghreb has risen dramatically over the past decade (from $3bn a year in the early 2000s to $6.5bn in 2011 during the Uprising), investment is not diverse as most FDI came from Europe (80% for Tunisia, 60% for Morocco) and about 30% went to energy and mining. In addition, FDI represented a percentage of GDP lower than in other emerging regions of Asia, Latin America, and Europe.

She identified three ways to spur greater investment in the area:

a)       Greater integration, within the framework of the Arab Maghreb Union, by knocking down barriers to trade, allowing free flow of goods and services and creating a common set of trade and investment rules;

b)       Greater internationalization, for all kinds of local companies; and,

c)       Greater diversification, in sources of FDI (in particular from BRIC countries[3]) and sectors thereof (beyond natural resources).

As usual in her speeches, Ms. Lagarde recalled that the IMF will be ready to help Maghrebian countries succeed through:

i) advice “on how to secure stability, protect vulnerable people during the transition, and lay the basis for strong and inclusive growth;”

ii) loans (for example, to Jordan, Morocco and Yemen); and,

iii) capacity building (currently in Libya and Tunisia).

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