Japan External Trade Organization (JETRO)
(1) Middle East (Including North Africa): FDI Increases Due to Privatizations and Efforts to Attract Foreign Capital
The value of FDI in the Middle East was up 57% on the previous year in 1997. The two main reasons for this were the privatization of state-owned enterprises and positive efforts to improve investment environments and attract foreign capital. There were particularly large increases in investment in privatized enterprises of countries such as Israel and Morocco. Two countries that have been improving their investment environments in order to position themselves as bases for exports are Egypt, which set up in 1998 a special zone offering 20-year corporation tax deductions, and Tunisia, whose trade partnership with the EU went into effect in March that year. In Saudi Arabia, inward investment climbed because of the return of offshore Saudi capital. In Israel in 1998, concerns over falling FDI inflows led the government to temporarily halt its investment incentives rollback, which it had been carrying out since 1996 due to a serious escalation of the budget deficit. Investment in Israel in 1997 rose substantially thanks to an investment of some US$1.4 billion by the Arison Group (a group comprised mostly of U.S. investors) in privatized banks. Amid the political instability in Turkey, the government expanded its program of incentives for investment in science and technology and in small and medium-sized manufacturers, but FDI nevertheless decreased slightly.
Japanese FDI in the region in fiscal 1997 (according to statistics on investments notified to MOF) were worth US$560 million, up by a wide margin on the US$345 million invested in 1996. The main recipient economies were the United Arab Emirates, Qatar, Saudi Arabia and Turkey. There are high hopes in the Middle East that Japan will up its investment in the region, particularly in manufacturing in the Gulf states, which are the main suppliers of crude oil to Japan. The public and private sectors in Japan are working hard to promote investment in the region, as evidenced by the formation of joint ventures between Japanese and Saudi Arabian firms.
(2) Africa: Investment in South Africa Doubles
FDI in sub-Saharan Africa remained almost at the same level for three years from 1995 to 1997. There were, however, large changes in the destinations of investment, with FDI in South Africa doubling in 1997 to account for 37% of total investment in the region. Investment in petroleum and mineral producers such as Nigeria, Angola and Ghana continued, while there was a rise in investment in members of the East African Co-operation (EAC), such as Uganda and Tanzania. In addition to traditional investors such as the U.K. and France, strong contributions were made by the U.S. and-notwithstanding the freezing of some projects due to the Asian crisis-Asian countries such as Malaysia and China.
Favorable primary commodity prices for minerals, cash crops and petroleum supported steady growth in the region between 1994 and 1997, and government policies of deregulation and privatization of state-owned enterprises to harness private-sector initiative offer foreign investors market entry opportunities. Attempts are also being made to improve the investment environment within the framework of regional economic blocs by, for example, abolishing duties within blocs, harmonizing external tariffs, and issuing common currencies.
According to statistics on investments notified to MOF, there were 24 cases of Japanese FDI in sub-Saharan Africa in fiscal 1997, totaling US$317 million, down on the 40 investments worth US$430 million registered in the previous year. It is worth noting that though investment in South Africa was down 41% on the previous year to US$131 million, the country still accounted for 41.3% of sub-Saharan investment.
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Trends in FDI in the Middle
East and Africa (BOP Basis)
(Unit: US$ million)
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