The document outlines key priorities for investment policy reforms in Middle Eastern and North African economies based on an analysis of trends and policies. The priorities are: 1) Improve clarity, consistency and transparency of investment rules. 2) Advance reforms to improve competition and private sector development. 3) Target investment policies to better serve sustainable development goals. 4) Strengthen good governance to deliver better investment outcomes. Reforms such as reducing restrictions, clarifying regulations, aligning incentives with goals, and coordinating agencies are recommended. The analysis and priorities aim to support investment-led recovery from COVID-19.
2. The MENA IPP in a nutshell
Objectives
- Provide a
comprehensive
picture of investment
policy in the region
- Offer policy
considerations and
reform priorities
- Support recovery
from Covid-19 crisis
Method
- Analytical work
based on OECD tools
- Regional policy
dialogues
- Capacity-building
seminars
Platforms
- EU-OECD
Programme on
Promoting
Investment in MED
- MENA-OECD
Competitiveness
Programme
Coverage
- Algeria
- Egypt
- Jordan
- Lebanon
- Libya
- Morocco
- Palestinian Authority
- Tunisia
3. In-depth review of trends and reforms across the
investment policy framework
Towards modernised
legislative frameworks
for investment
Investment promotion
and facilitation
strategies
Foreign investment
trends and sustainable
development benefits
Integrity for
sustainable
investment
Improving investment
in a context of fragility
Investment policy in
fragile contexts
Enhancing
connectivity through
infrastructure
investments
Towards smarter use
of investment
incentives
Enabling SME
linkages with foreign
firms in GVCs
Investment dispute
and management
Openness to FDI and
recent liberalisation
reforms
Promoting RBC as a
strategic choice
5. A diverse group with a common challenge: make
investment work for sustainable development
Source: OECD National Accounts, OECD FDI statistics database, The Conference Board Total Economy database, IMF World Economic Outlook, UNCTAD Statistics, and World Bank National Accounts.
-2
0
2
4
6
8
10
a. GDP growth rate
-3
-2
-1
0
1
2
3
4
5
6
7
b. Labour productivity growth rate
10
15
20
25
30
35
40
45
50
c. Exports of goods and services (% GDP)
0
1
2
3
4
5
6
7
d. Inward FDI flows (% GDP)
MENA Focus Economies Emerging and developing economies OECD
6. Further reforms are required to support a diversified,
competitive and rules-based private sector…
(b) Manufacturing as a % of total greenfield FDI
(a) Greenfield FDI by sector, 2013-2019 (% of total)
Source: OECD based on fDi Markets by the Financial Times
Real estate &
construction
26%
Mining & fuels
33%
Manufacturing
28%
Other services
13%
7. …and to increase the benefits of FDI to the economy
and society
Source: OECD based on World Bank Enterprise Surveys and fDi Markets by the Financial Times
(a) Are foreign firms more productive and pay higher
wages? (yes if score > 0)
(b) Jobs created per 1 million USD of greenfield
FDI (capital expenditure)
8. Harnessing the benefits of investment will be key to
the post-pandemic recovery in MENA economies
• In the first half of 2020, announced greenfield FDI dropped by 80% in MENA economies, as compared to the same period
last year.
• Manufacturing and infrastructure suffered the largest declines, with important adverse impact on potential job creation.
Source: OECD based on fDi Markets by the Financial Times
10. Priority 1:
Improve the clarity,
consistency and
transparency of
investment rules
Priority 2:
Advance reforms to
improve
competition and
private sector
development
Priority 3:
Target investment
policy to better
serve sustainable
development goals
Priority 4:
Strengthen good
governance to
deliver better
investment policy
Improve the investment climate and advance the
benefits of FDI: 4 priorities for MENA economies
11. Improve the clarity, consistency and transparency of
investment rules
• MENA governments have adopted numerous reforms to
improve investment-related legislation
• Revisions of legislation can, but do not always, improve
legal clarity
o Ensuring coherence across laws is essential to an attractive
investment climate
• Clarifying the regulatory framework for investment
would reduce opportunities for discretionary decisions
o Specificity in regulations helps reduce corruption and unfair
competition
• Governments could enhance efforts to curb corruption
across the investment process
Priority 1:
Improve the clarity,
consistency and
transparency of
investment rules
12. Advance reforms to improve competition and private
sector development
• Several MENA economies have adopted notable
liberalisation reforms to ease FDI restrictions
• But on average MENA economies impose more
statutory restrictions on foreign investors than OECD
and many non-OECD countries
• Reducing FDI restrictions in services could support
productivity gains from competition
o Key to advancing SME growth and participation in GVCs
• Wider pro-competition reforms would encourage
investors’ entry and growth
Priority 2:
Advance reforms to
improve
competition and
private sector
development
13. Advance reforms to improve competition and private
sector development
OECD average
NON-OECD average
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Libya
Algeria
Palestinian
Authority
Philippines
Indonesia
Algeria
(2020)
Russia
Malaysia
China
New
Zealand
Jordan
India
Saudi
Arabia
Lao
Pdr
Mexico
Tunisia
Iceland
Canada
Australia
Lebanon
Kyrgyz
Republic
Korea
Viet
Nam
Ukraine
Israel
Myanmar
Kazakhstan
Austria
Egypt
United
States
Brazil
Norway
Switzerland
Peru
Mongolia
Poland
Morocco
Turkey
Sweden
Chile
South
Africa
Cambodia
Japan
Italy
Slovak
Republic
Albania
France
Ireland
Serbia
Belgium
United
Kingdom
Croatia
Costa
Rica
Denmark
Greece
Argentina
Hungary
Bosnia
and
Herzegovina
Montenegro
Colombia
Germany
Macedonia,
FYR
Spain
Latvia
Lithuania
Armenia
Finland
Estonia
Netherlands
Czech
Republic
Romania
Slovenia
Portugal
Luxembourg
Kosovo*
OECD FDI Regulatory Restrictiveness Index (open=0; closed=1), 2018-19
14. Target investment policy to better serve sustainable
development goals
• All MENA economies seek to attract investment with a
high development impact, but more could be done to
ensure that policies support national goals
o Investment promotion strategies can help align policy across
government and track success
• Investment incentives should focus on achieving specific
spillovers
• Targeted policies and programmes can enhance SME-
MNE linkages in GVCs
• Strengthening responsible business conduct would help
advance sustainable development goals
Priority 3:
Target investment
policy to better
serve sustainable
development goals
15. Strengthen good governance to deliver better
investment policy
• MENA governments could clarify responsibilities and
strengthen co-ordination over investment policy,
promotion and facilitation to reduce overlaps and
conflicting objectives
• Strengthening inter-agency collaboration would deliver
better investment policies and services, including:
o Managing and preventing investment disputes
o Advancing integrity in investment
o Promoting investment at the sub-national level
• Further including the private sector and civil society in
government consultations will contribute to policy
legitimacy and effectiveness
• Good governance of investment policy requires
transparency and accountability
Priority 4:
Strengthen good
governance to
deliver better
investment policy