Challenges for the EU's Mediterranean policy : the lack of foreign direct investment

Abstract

This work seeks to analyse the features that should constitute an investment climate favourable to attract foreign direct investment (FDI) into the Mediterranean Partner Countries (MPCs). It discusses how the Southern Mediterranean is underperforming in attracting FDI because of geographical, political, economic, social and cultural variables. One of the main obstacles is the political instability in the region. We consider how colonialism brought about a culture of dependence, poor governance and conflicts, which in tum had a negative impact on the region's economy. The economies of the MPCs are characterized by low productivity, economic growth and trade, lack of diversification, weak legal and regulatory framework, underdeveloped financial sector, infrastructure, and education. These variables manifest themselves as challenges to the European Union's (EU's) Mediterranean Policy, which is trying to improve mechanisms for external FDI and to the MPCs the national governments themselves which are trying to improve the investment climate from the inside through domestic reform. Our objective here has been to analyse whether both the EU and the national governments are turning challenges into opportunities. This work, whilst mainly focusing on the Mediterranean area countries (MEDA), considers the subject as from 1995 onwards, i.e. the year of the signing of the EuroMediterranean Partnership (EMP). However, a wider historical insight, which supports a comparative perspective, is also resorted to.