London - Latest numbers show foreign investors have steered
well clear of North Africa during the "Arab Spring" uprisings this
year, and there is little prospect of a swift return.
Data from Unctad, the United Nations' development agency,
suggests that foreign direct investment (FDI) in the region has all but dried
up.
Corporate decision-makers fear there are risks to ownership
of private sector companies, such as those apparently facing Chinese and
Russian oil companies in Libya.
Such direct inflows - as opposed to portfolio investment -
are often the lifeblood of emerging economies, taking various forms including
buying into existing businesses or starting up something completely new.
In a report issued in July, Unctad said there were only four
inward cross-border mergers and acquisitions in the region in the first five
months of this year as the uprisings were getting under way.
That compares with an average of around 20 for each full
year in the preceding six years. There was no value available for the four, but
inward M&A over the previous six years had an average annual value of about
$5bn.
In a similar vein, Unctad found that so-called greenfield
foreign direct investment to revolution-wracked Egypt fell by 80% in the first
four months of this year versus a year earlier.
Greenfield investment involves the creation of business
operations rather than simply M&A with existing firms.
"It could take months before confidence among investors
in (these) countries is restored," Unctad said.
Targets
Libya, the current focus of the uprising with rebels
pressing into the capital Tripoli, could be among the big immediate losers in
terms of FDI.
The Unctad data shows it to have been one of the largest
targets of FDI in the whole of Africa in recent years.
It attracted $3.8bn in all forms of FDI in 2010, the latest
year for which Unctad has data.
That puts it in a small group of plus-$3bn countries that
also comprises Egypt, Nigeria and Angola. Neighbours Egypt and Tunisia had
$6.3bn and $1.5bn in FDI, respectively.
Many analysts expect questions about stability in the
region, particularly Libya, to continue for some time.
Investment bank Nomura, for example, sees little prospect of
Libyan oil output returning to pre-crisis levels until 2013 at the earliest. At
the same time, the Libyan rebels' relations with the outside world could start
having an impact on investment.
Abdeljalil Mayouf, information manager at Libyan rebel oil
firm AGOCO, told Reuters On Monday that Russian and China, countries that
failed to back the rebels, could lose out in terms of business opportunities.
Unctad reckons, meanwhile, that while the uprisings are
hurting North Africa economically in the short run, they should eventually
foster benefits.
"In the long term, democratisation should result in
better governance and thus lead to a more sustainable growth of economic
activities, including FDI," it said.