While Morocco and Tunisia have very strong FDI links to the EU, the US is the most important foreign investor in Egypt and Libya. From the EU?s perspective North Africa has not yet become a real magnet for FDI, as North Africa only receives a very small part of overall EU- 15 outward FDI. North Africa?s EU-FDI stock is almost twice that of the Gulf countries. But it is dwarfed by the EU-FDI stock in Central Eastern Europe (see chart 19), which is not surprising given that those countries are part of the EU. In terms of source countries, France, the UK and Spain are the most important European investors in North Africa (excl. Libya).

In Libya, Algeria and Egypt FDI flows primarily into the hydrocarbon sector. In Tunisia it is focused on the energy sector and the manufacturing industry, while in Morocco FDI flows into the tourism, real estate and industrial sectors. Strong economic growth prospects, demand for energy, further privatisations and improvements in the business environment will likely contribute to rising FDI inflows from the EU in the future.

Eoin Treacy's view While North African countries have been among some of the better performing markets over this year, particularly Tunisia. They are susceptible to the same liquidity issues previously mentioned that affect all small cap developing markets.