MIDDLE EAST AND NORTH AFRICA INVESTMENT POLICY PERSPECTIVES.

253 Pages·2021·4.732 MB·English

by  OECD.

Middle East and North Africa
Investment Policy
Perspectives

Middle East and North Africa
Investment Policy
Perspectives
This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and
arguments employed herein do not necessarily reflect the official views of OECD member countries.
This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over
any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of
such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in
the West Bank under the terms of international law.
Note by Turkey
The information in this document with reference to “Cyprus” relates to the southern part of the Island. There is no single
authority representing both Turkish and Greek Cypriot people on the Island. Turkey recognises the Turkish Republic of
Northern Cyprus (TRNC). Until a lasting and equitable solution is found within the context of the United Nations, Turkey
shall preserve its position concerning the “Cyprus issue”.
Note by all the European Union Member States of the OECD and the European Union
The Republic of Cyprus is recognised by all members of the United Nations with the exception of Turkey. The
information in this document relates to the area under the effective control of the Government of the Republic of Cyprus.
Please cite this publication as:
OECD (2021), Middle East and North Africa Investment Policy Perspectives, OECD Publishing, Paris,
https://doi.org/10.1787/6d84ee94-en.
ISBN 978-92-64-83359-3 (print)
ISBN 978-92-64-47304-1 (pdf)
Photo credits: Cover © Swillklitch/iStock.com.
Corrigenda to publications may be found on line at: www.oecd.org/about/publishing/corrigenda.htm.
© OECD 2021
The use of this work, whether digital or print, is governed by the Terms and Conditions to be found at http://www.oecd.org/termsandconditions.
 3
Preface
As governments in the Middle East and North Africa (MENA) region – and across the globe – seek to
address the profound health, economic and social effects of the COVID-19 pandemic, many have
prioritised attracting and retaining investment as key to supporting the recovery. Indeed, improving the
investment climate has long been a priority for the region’s governments, recognising the developmental
benefits that foreign direct investment (FDI) can bring – from job creation, to productivity, to green growth.
To this end, many MENA governments have advanced meaningful reforms in the past decade, including
easing entry of foreign business and streamlining regulations for investors. Despite these developments,
MENA governments overall have been less successful than other emerging and developing economies at
leveraging investment to advance sustainable development.
Attracting investment in the MENA region – and harnessing its benefits – is needed now more than ever
with the COVID-19 pandemic exacerbating existing challenges and adding new ones. FDI flows have
dropped significantly across the globe, and the decline in the MENA region has been particularly acute.
Youth and overall unemployment – a key contributing factor to popular discontent – is higher today in many
MENA countries than it was in 2010, while conflict and insecurity continue to have damaging effects on
the wider region. In this context, any additional shocks can be devastating. While MENA governments
have begun ambitious efforts to improve the investment climate and respond to the pandemic, further
reforms are needed to make investment work for inclusion and sustainable development. This includes
addressing longstanding structural challenges through bold reforms of the private sector, improving
implementation of existing policies, and adopting new investment strategies to exploit opportunities arising
from a possible reorganisation of global value chains.
Based on original data and comparative analysis, Middle East and North Africa Investment Policy
Perspectives (MENA IPP) provides policymakers with a comprehensive picture of the investment climate
in Algeria, Egypt, Jordan, Lebanon, Libya, Morocco, the Palestinian Authority and Tunisia. The report
encourages MENA governments to consider further reforms with four overarching objectives in mind: (1)
improve the clarity, consistency and transparency of investment rules and procedures; (2) advance reforms
to boost competition and private sector development; (3) target investment policy and promotion to better
serve sustainable development goals; and (4) strengthen good governance and co-ordination to deliver
better investment policy.
MENA IPP also builds on the long-standing relationship of these economies and the OECD, notably
through the adherence of four countries – Egypt, Jordan, Morocco, and Tunisia – to the OECD Investment
Declaration; the support, expertise and exchanges developed under the EU-OECD Programme on
Promoting Investment in the Mediterranean; as well as the wider and long-term partnership in the
framework of the MENA-OECD Competitiveness Programme. Through these partnerships, MENA
governments have demonstrated commitment to addressing investment climate challenges and sharing
experiences on creative policy solutions.
As governments across the globe seek to recover from the unprecedented shocks of 2020, it is now
imperative that we continue to build partnerships and expertise in order to support each other and to
leverage investment for a resilient and inclusive recovery in the months and years ahead.
Angel Gurría
Secretary-General, OECD
MIDDLE EAST AND NORTH AFRICA INVESTMENT POLICY PERSPECTIVES © OECD 2021

 5
Foreword
Middle East and North Africa Investment Policy Perspectives (MENA IPP) highlights the considerable
progress in investment policy reforms made by governments in the region over the past decade. This
reform momentum needs to be sustained and deepened so that the benefits of investment can be shared
with society at large, particularly given the global health and economic upheaval provoked by the Covid-
19 pandemic. The publication takes stock of investment policy trends and reforms in Algeria, Egypt, Jordan,
Lebanon, Libya, Morocco, the Palestinian Authority, and Tunisia, drawing out common challenges and
offering suggestions for reform priorities. It considers several dimensions of the policy framework that affect
the investment climate, and places strong emphasis on how investment can help governments to improve
the lives of their citizens. The report serves as a point of reference for policymakers as they continue their
work to attract investment that advances inclusive and sustainable development.
MENA IPP draws on analytical work, regional dialogues and capacity-building seminars conducted under
the EU-OECD Programme on Promoting Investment in the Mediterranean. The Programme, which began
in 2016, has benefited from the active engagement of MENA governments and public institutions, private
sector organisations and civil society. The publication supports efforts to boost the quality and quantity of
investment in areas governments in the region have identified as a priority, using OECD instruments for
assessing the investment climate such as the Policy Framework for Investment, the Guidelines for
Multinational Enterprises and the FDI Qualities Indicators. It also builds on the wider long-term partnership
between the OECD and the MENA region within the MENA-OECD Competitiveness Programme, which
has promoted policy dialogue and advice on investment since 2005.
MENA IPP is a joint product of the OECD Directorate for Financial and Enterprise Affairs (DAF) and the
Global Relations Secretariat (GRS). It was prepared by a team led by Fares Al-Hussami and Sarah Marion
Dayan of the Investment Division (DAF) and Marie-Estelle Rey of the Middle East and Africa Division
(GRS), under the strategic guidance of Ana Novik, Head of the Investment Division, and Carlos Conde,
Head of the Middle East and Africa Division. The drafting team included Hélène François of the Investment
Division, Alin Horj, Jorge Galvez-Mendez, Mattia Tomay and Iris Monderer of the Middle East and North
Africa Division, Coralie Martin and Nicolas Hachez of the Responsible Business Conduct Centre (DAF),
Diane Pallez of the Anti-Corruption Division (DAF), Cushla Thompson of the Development Co-operation
Directorate, and Emilio Chiofalo, an external consultant.
The report benefited from valuable comments from members of the OECD Investment Committee,
participants at the Advisory Board of the EU-OECD Programme on Promoting Investment in the
Mediterranean and participants in the MENA-OECD Investment and Trade Working Group. Alexander
Böhmer, Head of South Asia and Southeast Asia Division (GRS), and Stephen Thomsen, Head of
Investment and Sustainable Development Unit (DAF), provided valuable comments and suggestions as
lead reviewers. Comments and inputs were also received from Alexandre de Crombrugghe, Emilie Kothe,
Fernando Mistura, Baxter Roberts, and Martin Wermelinger of the Investment Division, Alessandra Celani
of the Centre for Tax Policy and Tihana Bule, Benjamin Michel and Frédéric Wehrle of the Responsible
Business Conduct Centre. Nadia Kameleddine and Kany Ondzotto provided administrative assistance.
Edward Smiley prepared the report for publication.
MIDDLE EAST AND NORTH AFRICA INVESTMENT POLICY PERSPECTIVES © OECD 2021

 7
Table of contents
Preface 3
Foreword 5
Abbreviations and acronyms 13
Executive Summary 15
1 Overview and key policy messages 17
Introduction 18
A diverse group with a common challenge: make investment work for sustainable development 19
Investment policy priorities for the MENA region 24
Priority 1: Improve the clarity, consistency and transparency of investment-related rules and
procedures 24
Priority 2: Advance reforms to improve competition and private sector development 27
Priority 3: Target investment policy to better serve sustainable development objectives 29
Priority 4: Strengthen good governance and co-ordination to deliver better investment policy 32
References 34
Notes 36
2 Foreign investment trends and sustainable development benefits 39
Summary 40
Investment trends point to challenges ahead 40
Harnessing FDI for sustainable development 49
References 55
Notes 57
3 Towards modernised legislative frameworks for investment 59
Summary and policy considerations 60
Investment-law making is at the core of countries’ business regulatory environment 61
The overall regulatory environment matters as much as the investment legislation itself 64
Regional wave of investment law reforms 64
Protection of investors’ rights in domestic legislation of MENA economies 67
More room for reform through the gradual incorporation of investor obligations 69
References 70
Annex 3.A. MENA economies’ investment frameworks 71
MIDDLE EAST AND NORTH AFRICA INVESTMENT POLICY PERSPECTIVES © OECD 2021
8 
4 Openness to foreign investment and recent liberalisation reforms 73
Summary and policy considerations 74
FDI restrictions can inhibit investment and its economic benefits 75
MENA economies tend to be more restrictive than their peers 78
Several MENA governments have removed important FDI restrictions 82
References 84
Notes 86
5 Investment treaty policy and dispute settlement 87
Summary and policy considerations 88
MENA economies have concluded a significant number of international investment agreements 89
ISDS cases in the region raised in the last decade 94
Periods of crisis may increase ISDS risks 100
Proactive approaches to dispute prevention and management should be pursued 103
References 105
Notes 107
6 Investment promotion and facilitation strategies 109
Summary and policy considerations 110
Institutional choices and mandates 111
Strategic priorities and related resources 115
Investment promotion: strategies and implementing tools 117
Investment facilitation efforts and evolving priorities 119
Monitoring and evaluation 122
Promoting and facilitating investment in regions and provinces 123
References 126
Notes 128
7 Towards smarter use of investment incentives 129
Summary and policy considerations 130
Investment incentive instruments 131
Targeting of investment incentives 136
Discretion in awarding incentives 142
References 143
Notes 144
8 Enabling SME linkages with foreign firms in global value chains 145
Summary and policy considerations 146
SME internationalisation through GVCs and SME-MNE linkages 147
Improving investment and business environments for SME participation in GVCs 155
Policies and programmes for SME-MNE linkages in GVCs 157
References 164
Notes 167
9 Enhancing connectivity through infrastructure investment 169
Summary and policy considerations 170
Key infrastructure challenges affecting investment in the MENA region 171
The infrastructure gap in the MENA region 175
Establishing an enabling environment for investment in infrastructure 177
References 183
MIDDLE EAST AND NORTH AFRICA INVESTMENT POLICY PERSPECTIVES © OECD 2021