I Free & Special Economic Zones Summit, the Role of Logistics by Salvatore D'Alfonso, Union for the Mediterranean (UFM)
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The role of Logistics and Free & Special Economic Zones attracting FDI
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I Free & Special Economic Zones Summit, the Role of Logistics by Salvatore D'Alfonso, Union for the Mediterranean (UFM)
- 2. 2
- 3. Salvatore D`ALFONSO, Senior Project Manager, Transport and Urban Development Division “The role of Logistics and Free & Special Economic Zones attracting FDI” 1st edition of the Free & Special Economic Zones Summit 26th November 2014, Casa Llotja de Mar, Barcelona 3
- 4. The UfM in short | Facts & Figures 43 Countries 28 EU member states 15 partner countries Total Population > 800 Million Total GDP > 15 Trillion EUR 4
- 5. The UfM in short | Governance The co-presidency The UfM is chaired by a co-president from the EU and a co-president from the Mediterranean partner countries. The Senior Officials The work of the UfM is overseen and coordinated by the Senior Officials of the Foreign Affairs departments of the 43 partner countries, EU institutions and the League of Arab States. The Secretariat Based in Barcelona, it is led by a Secretary General, assisted by 6 Deputies Secretary General for the 6 areas of work. It is financed by the European Commission and countries’ contributions. 5
- 6. The UfM in short | Priority Areas 6 Water & Environment Business Development/ SMEs Climate Change Renewable Energy/ Energy Efficiency Higher Education and Mobility Civil Society and Women Empowerment Transport Sustainable Urban Development
- 7. The UfM in short | Objectives 1. Gather and promote regional, sub-regional, transnational projects, or national projects in the framework of regional strategies or initiatives. 2. Improve the socio-economic development, regional integration, sustainable development and the exchange of knowledge. 3. Work in synergy with other key stakeholders in the Euro-Mediterranean region Enhance cooperation and understanding between the two shores of the Mediterranean, through the implementation of concrete projects 7
- 8. UfM Projects | Project Lifecycle REGISTRATION ASSESSMENT LABELLING MONITORING PROMOTION 8 As of October 2014: 24 labelled projects, 10 out of 24 under implementation.
- 9. UfM Funding Strategy Strengthen relations with International & Bilateral Financial Institutions Financing of UfM Projects Develop long term private sector partnerships and strategic alliances Develop financing tools for projects which complement the existing offer 1 2 3 9
- 10. UfM labelled projects| Trans-Maghreb Motorway Completion of the central section of the trans-Maghreb Motorway Axis Secretariat of the Group of Transport Ministers of the Western Mediterranean (GTMO 5+5) Elimination of two missing links of 102 km in total will allow to manage a unique, seamless and homogeneous Motorway Corridor linking the major cities of Morocco, Algeria and Tunisia The entire population of the three Countries (80 M), logistics sector, trade, tourism, small and medium sized enterprises, large-scale distribution, ports February 2012 2013-2015 (studies) - 2015-2020 (works) EUR 670 M (EUR 600 M Tunisian section, EUR 70 M Moroccan section) Promoter Objective Beneficiaries UfM Label Duration Budget 10
- 11. UfM labelled projects | Jordan Railway Jordanian National Railway Promoter Objective Beneficiaries Duration Budget Ministry of Transport of Jordan Integrating the Jordan railway system with the regional network by establishing an effective rail connection with neighboring countries, Gulf Cooperation Council countries and Europe. Jordan and neighboring countries 2013-2020 EUR 2 bn 11
- 12. UfM labelled projects | Logismed-TA LOGISMED - Training Activities Promoter Objectives Beneficiaries UfM Label Launching Duration Budget Funding European Investment Bank Create an experienced workforce for the “LOGISMED”, the Mediterranean network of logistics platforms All MPCs for the spread of knowledge and the creation of logistics associations, and 5 specific Countries for the training action lines linked to the platforms of the network November 2011 17 June 2013 2013-2018 EUR 6.6M (includes Observatory and Coordination, as complementary activities) European Commission (EUR 3M), Deauville Partnership MENA Transition Fund (EUR 3.4M), MPCs (EUR 0,2M) 12
- 13. LOGISMED | Network of Platforms Tunisia: Feasibility Study on Djebel Oust logistics platform, aimed at defining the technical, environmental, economic, financial, marketing and organizational points, was concluded and Tunisian Government the government is planning the next steps together with EIB. Morocco: Market study and APS reports on the Logistics area of Zenata have been submitted by the Consultant to the Agence Marocaine de Développement de la Logistique (AMDL), and approved. The strategic position of Zenata located at the crossroads of the most important axes of the national transport network, will be enhanced by the creation of an efficient road connection of 24 km linking the port of Casablanca. Jordan: Ongoing finalization of the ToRs for a Feasibility Study for a Dry Port and Logistic Centre in Madounah area near Amman, after field mission with the Consultant. Egypt: Consensus on the site of the “6th October” as the priority site. 13
- 14. 16 5 Platforms and 10 MPCs concerned throughout the Mediterranean “European Logistics Association” certification Specific program for trainers Establishment of a first group of “white collars” Establishment of permanent training units for each platform 300 logistics professionals throughout the region 15 trainers per platform 100 to 200 managers per platform 200 to 400 workers per platform LOGISMED - TA| Direct Training Impact
- 15. Free Zones | The UfM MoS Initiative 19 The motorways of the sea represent a good way to develop positive synergies between logistics and free zones. A “Motorways of the Sea” UfM Initiative will be launched in 2015. There are on-going contacts with numerous stakeholders of the public and also private sector, in order to promote new maritime services that could effectively connect the ports of the Northern shore of the Mediterranean with the ports of the Southern and Eastern shore. Modelling TMN-T| Modelling scenarios Soft measures (2020-B): • Motorways of the Sea – implementing new lines with high quality standa and competitive costs Mersin-Taranto-Rades Civitavecchia-Palermo-Malta-Rades
- 16. Free Zones | The nexus with LOGISMED 20 The LOGISMED EIB initiative could receive considerable momentum from the development of free zones in the Mediterranean, with regard to the following key aspects: Location of free zones Employment SMEs Best Practices and Training Economic advantages Foreign Direct Investments MoS FDI
- 17. 21 • Location: it is opportune to make a connection between the most dynamic free zones and the highest performing ports. • Employment: free zones can play an important role, increasing employment and consequently increasing standards of living of the population. • Development of SMEs: free zones can be regarded as incubators for new small and medium sized companies. • Best Practices: free zones can provide services to the companies, in the form of “consultation” or “training courses” on best practices in modern methodologies of manufacturing, training and networking. • Advantages: a fundamental advantage of free zones is economic: more than 25 million units of direct employment are currently in free zones and the reduction of costs of products exchanged between the continents is often over 35%. Free Zones | The nexus with LOGISMED
- 18. 22 Free Zones | A core network of Mediterranean free zones
- 19. The evolution of FDI | FDI figures in the MPCs 23 Despite the exceptional situation due to the severe effects of this period of political transition combined with the European economic crisis, the Mediterranean region is showing a good capacity for resilience. The figures of 2012 are rather hopeful, 2012 is the fourth best year in the last decade, in amounts of foreign direct investment announced. Except Syria, all the Southern and Eastern Mediterranean countries are back to business in 2012, and most of them managed to increase their average foreign direct investment project size, which was in constant decline since 2006.
- 20. THANK YOU FOR YOUR ATTENTION TRANSPORT & URBAN DEVELOPMENT DIVISION Follow-us on: Salvatore D’Alfonso salvatore.dalfonso@ufmsecretariat.org www.UfMSecretariat.org @UfMSecretariat www.facebook.com/ufmsecretariat
Editor's Notes
- At the start of my talk, I would like to express my sincere thanks to the Association of Mediterranean Chambers of Commerce and to the Chamber of Commerce and Industry of Barcelona, for the kind invitation to attend this Session dedicated to the role of Logistics and Free & Special Economic Zones attracting FDI, in the framework of the First Free & Special Economic Zones Summit during the Mediterranean Week of Economic Leaders. My name is Salvatore D’Alfonso, I’m a Transport Engineer, and I’ve been working in the transport sector for over thirty years, of which three years as a Project Manager in the Transport and Urban Development Division of the Secretariat of the Union for the Mediterranean. The objective of my speech is to inform you about the mission of the Secretariat, pointing out the state of play of the key initiatives of the Transport Division, in order to highlight the nexus, complementarity and synergies of our initiatives in relation to the theme of Free and Special Economic Zones, which today was analysed in depth during the previous work sessions of this Summit.
- The Union for the Mediterranean was launched on 13th July 2008 at the Paris Summit as a continuation of the Euro-Med Partnership, the so-called Barcelona Process established in 1995. The Union is a multilateral partnership that encompasses 43 countries from Europe and the Mediterranean Basin: the 28 member states of the European Union plus 15 Mediterranean partner countries from North Africa, the Middle East and the Balkans. It constitutes a framework for political, economic and social relations between the European Union and the Southern and Eastern Mediterranean countries, a vector for economic growth and competitiveness in the region and a strategic nexus between Europe, Africa and the Middle East for new ideas and initiatives.
- The governance is based on equitable functioning and shared responsibility. Indeed, the UfM is chaired by 2 co-presidents, one from the North: the European Union, and a rotating one from the South: currently, Jordan. The Senior Officials, who represent the Foreign Affairs Departments of the 43 partner countries, EU institutions and the League of Arab States, serve as the governing board of the UfM and are mandated to deal with all aspects of UfM.
- The Secretariat, based here in Barcelona since March 2010, is led by a Secretary General, assisted by 6 Deputy Secretary Generals for several priority areas.
- The Secretariat received from the Senior Officials the mandate to enhance cooperation and integration in the Mediterranean through the implementation of concrete regional, sub-regional and transnational tangible projects. Projects can be proposed by national or regional authorities and institutions, private sector, international organizations and civil society organizations.
- The Secretariat carries out a proper assessment of project proposals. Specifically, the in-house expertise of each Division helps the promoters to improve the quality of the structure of the submitted projects, in order to increase its economic viability and bankability. Once the projects pass the internal assessment and evaluation they are presented to the Senior Officials to obtain a UfM label. The UfM label is attributed to projects, by a unanimous decision of those 43 member countries of the UfM. Once a project is labelled by the Senior Officials, it becomes a UfM project. Through the UfM label, the project promoter gains the support of 43 countries and this awareness and visibility helps him to further raise support and mobilize partners. The UfM Secretariat’s mandate allows it to overcome difficulties in regional initiatives and mobilize governments and stakeholders towards a project’s success, if need be. During 2013 and 2014 the UfM Ministerial Conferences, in the different priority areas, allowed the definition of the Policy Frameworks, contributing towards building a Mediterranean agenda over a wide range of fields. Also, long-term objectives and lines of action by sector have been established in line with governments’ priorities. As of October 2014, 24 projects were labelled, and 30 labelled projects are expected by the end of 2014. 10 projects out of 24 labelled projects are already under implementation. During 2015, the labelled projects will be accelerated and implemented and new initiatives will be identified in the framework of a geographically balanced action throughout the region.
- One of the main responsibilities of the Secretariat of the UfM is to support the project sponsors in efforts to fundraise. Since we are not a financial institution, our added value lies in the support we extend to promoters in developing financing plans to secure funds, in establishing a solid network of partners among donors, financial institutions and private sponsors and in approaching new potential partners. The UfM Secretariat acts as a one-stop shop through which project promoters gain access to a strong network of donors and financial institutions, from the Mediterranean region and beyond. While the promoter is the main “driver” of the project, the UfM plays a catalytic role in supporting the identification of the roadmap and implementation of fundraising for the project. The European Union and its institutions, in particular the European Investment Bank, and other International Financial Institutions, notably the European Bank for Reconstruction and Development, the World Bank, the African Development Bank and the Islamic Development Bank, several private funds such as INFRAMED and Med Confederation give their support to the UfM labeled projects. In the field of Transport, we are working in order to create a consultative Committee through which a general and healthy discussion could be ensured with a view to strengthening the possibilities of funding of the transport projects so important for the Mediterranean. Through this Committee the IFIs could focus on the financial aspects of transport projects in the region. The Committee will work to maximize benefits from existing financial instruments, including PPPs funding mechanisms and instruments to reduce the financial risks, with a view to facilitating the realization of projects. Moreover, a High-Level Conference will be held in Civitavecchia, the port of Rome, on 10th December 2014, aimed at providing a platform for dialogue for project promoters, donors and beneficiaries, to discuss how to mobilize and coordinate all potential partners towards the effective implementation of the Trans-Mediterranean Transport Network.
- Completion of the Central Section of the Trans-Maghreb Motorway. This is a project with a big political impact on the whole region. The Trans-Maghreb Motorway Axis will provide a link between the major cities of the five Maghreb countries, from Mauritania to Libya. The Central Section of the Motorway axis to be completed by the UfM is represented by the border connections between Morocco-Algeria and Algeria-Tunisia.
- Jordan National Railway Project (JNRP). The “Jordan National Railway Project” is a regional project with the objective to integrate the Jordan railway network with the regional network, by establishing an effective rail connection with neighbouring Countries, GCC Countries and Europe. The establishment of an efficient rail service at the Port of Aqaba also represents a key competitiveness factor for the extension of the commercial radius of action of the Port.
- LOGISMED-TA (Training Activities) is a 6 years program on logistics training in three to five Southern Mediterranean countries. It has many similarities and a great deal in common with free zones initiative in the Mediterranean. All MPCs for general training activities and 5 logistics platforms of the Euro-Mediterranean Logistics Network will benefit. European Commission and Deauville Partnership MENA Transition Fund are supporting the project with a contribution that covers the cost of 6.6 m Euros. It represents a “soft” component of the broader LOGISMED project, a European Investment Bank initiative, which proposes the establishment of a Euro-Mediterranean logistics platforms network, which covers all the South Mediterranean and the Middle East Countries, based on international standards for both the infrastructure and the quality of logistics services.
- The European Investment Bank, promoter of both LOGISMED and LOGISMED-TA initiatives, has funded four feasibility studies regarding the platforms of Egypt, Jordan, Morocco and Tunisia, which analyze technical, functional, environmental, financial, institutional and market elements related to the infrastructure.
- Two additional actions will accompany the LOGISMED-TA Project, namely the coordination between the platforms of the network and the creation of a Regional Observatory in the logistics sector. There is a close relationship between these two “soft” actions and Logismed-TA. Coordination actions allow, among others, to orient the training actions in relation to the progressive activation of logistics platforms in the network. The Regional Observatory would provide appropriate data on an on-going basis and, through an ex-post evaluation mechanism, allows for a follow-up on policies and the incorporation of timely modifications in the logistics strategies.
- The project will contribute to the creation of a market for high-skilled labour and to the improvement of social conditions in the region as a whole. Specifically…
- The UfM Secretariat will play a major role in the project management, focusing on the political promotion, helping the diffusion among the Ministries in the Countries The Transport and Urban Development Division will ensure: the compliance with the roadmap, costs, UfM criteria; the maintenance of a high quality of project performance in the field; coordination, at the regional and extra-regional level, with other projects and initiatives, in close collaboration with EC, EIB, WB, GTMO 5+5, EuroMed Forum.
- As I told before, I think LOGISMED-TA and MoS have many common traits with the initiatives aimed at developing free zones in the Mediterranean, because both of them develop soft components that we can find in the rationale of free zones. In particular, the services that free zones can provide to logistics companies, for instance the physical and administrative task involving imported products, specialist storage and computerized stock keeping, processing and finishing activities before re-export, if properly coordinated and integrated in the context of the broader activities of an intermodal platform or a port, can have a leverage effect on the growth of the trade volumes in the Mediterranean and on the gradual economic growth of the Mediterranean Partner Countries. In this regard, I would focus on the following key common aspects:
- Location of free zones and connections between free zones and ports and logistics platforms. Since transcontinental trade by volume is 98% by sea, it is opportune to make a connection between the most dynamic free zones and the highest performing ports. A transshipment port plays a leading role in a free zone and a free zone contributes more than 20% to the traffic of a port. These two activities are not only complementary, but also their association produces a multiplier effect for the activities of both. Employment: in crisis situations countries seek the best way to minimize losses and overcome difficulties; the free zones can play an important role, promoting the internationalization of the economy, introducing new technology and increasing employment and consequently increasing standards of living of the population. Now, more than 25 million units of direct employment are within the free zones. Development of small and medium-sized companies: the latest trend in free zones in terms of services is to attract foreign medium-sized companies for whom delocalization is challenging, because these investors often bring innovative technologies interesting for the receiving country. The free zones can be regarded as incubators for new small and medium sized companies. Benefits are reflected in financial terms, but, also, free zones provide to users assistance in the field of management, marketing, business planning and development, training and so on. Best practices in modern methodologies of manufacturing, training and networking: the establishment and operation of small and medium sized enterprises in free zones is often accompanied by problems regarding insufficient professional competence, under-developed managerial level of directors, lack of know-how and lack of modern technology and equipment. Since it is in the interest of the zone that companies do their business successfully within the zone, one of the main tasks, of common interest, is providing services of this kind to the companies, in the form of “consultation” or “training courses”. Advantages: a fundamental advantage of free zones is economic: more than 25 million units of direct employment are currently in free zones and the reduction of costs of products exchanged between the continents is often over 35%. If products are significantly processed within a free zone, they can be considered as made in the country that hosts the free zone, and following the free exchange agreements the reduction in custom taxes can constitute a substantial saving.
- As an example of a way to promote and develop this nexus, a new initiative of the World Federation of Free and Special Economic Zones (FEMOZA), with the support of UfM Secretariat, is to create a “core” network of Mediterranean exemplary free zones, in which to concentrate special resources with the aim to stimulate the establishment of small and medium-sized companies and to develop added value services as well as training, networking, etc. This “core network” could take advantage of the proximity of the LOGISMED network and, consequently, of the land and maritime connections of the TMN-T.
- Foreign Direct Investment: the main advantage for the country of a free zone is the development of Foreign Direct Investment. The increasing openness of economies and related competitiveness stimulate the growth of these investments. Companies are looking to access new markets, to increase their market share or to benefit from productive resources at the best possible cost-effective ratio. This is the offer of free zones. Commercial or service establishments are favored mainly by seeking a logistical advantage (service and / or cost), risk elimination and removal of administrative constraints to exports. Also a more competitive labor cost is an important bonus. Despite the exceptional situation due to the severe effects of this period of political transition combined with the European economic crisis, the Mediterranean region is showing a good capacity for resilience. The figures of 2012 are rather hopeful. 2012 was the fourth best year in the last decade, in amounts of foreign direct investment announced. Except Syria, all the Southern and Eastern Mediterranean countries were back to business in 2012, and most of them managed to increase their average foreign direct investment project size. And on this note of optimism I would like to conclude my presentation. Thank you for your time.